Common use of Collection of Mortgage Loan Payments Clause in Contracts

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage Loan. In the event the Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Servicer shall nonetheless make an Advance or shall cause the related Subservicer to make an advance to the same extent as if such installment were due, owing and delinquent and had not been deferred through liquidation of the Mortgaged Property; provided, however, that the obligation of the Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Servicer believes, in good faith, that such advances are not Nonrecoverable Advances. The Servicer shall pay the amount of any waived prepayment charge at the time of payoff if such prepayment charge was waived for a reason other than that specified in this Section 3.06(b). (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 Indenture Trustee a Note 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 Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, 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 or, with respect to the Subsequent Mortgage Loans, the Subsequent 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 5.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.15, 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 Indenture Trustee, and the Noteholders, 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 Notes. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, 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 Indenture 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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The Master 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 Servicing Agreement. Consistent with the foregoing, the Master 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 Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanBonds. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master 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 Master Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Master 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 Master 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 Master Servicer shall cause the related Subservicer to provide to the Indenture Trustee Master Servicer a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The Master Servicer shall provide to the Indenture Trustee and the Bond Insurer a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The Master Servicer shall establish a segregated account in the name of the Indenture Trustee (the “Collection Account”), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Master 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within two Business Days following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments and any prepayment charges, of or interest on the Mortgage Loans (including advances by a Subservicer) received by the Master Servicer directly from Mortgagors or from the respective Subservicer, net of any portion of the interest thereof retained by the Subservicer as subservicing fees; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Master Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Mortgage Loan 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 Mortgage Loan Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing Agreement; . provided, however, that with respect to each Due Period, the Master 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 Master Servicer need not deposit in the Collection Account fees (including annual fees or assumption fees) or late payment charges charges, payable by Mortgagors, each as further described in Section 5.153.15, 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 Master 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 Master 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 Owner Trustee, the Indenture Trustee, the Bond Insurer and the NoteholdersBondholders, as their interests may appear. The Master Servicer shall remit all Foreclosure Profits to the Collection Account, to the extent not payable to the related Subservicer. Funds in the Collection Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with with, the Master Servicer’s own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesBonds. All such investments Funds in the Collection Account shall be made invested solely in Eligible Investments at the direction of the Master Servicer, designated in the name of the Indenture Trustee Trustee, which shall mature not later than the Business Day next preceding the third Business Day prior to each Payment Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income and gain realized from any such investment shall be for the benefit of the Noteholders, provided, however, that income earned on Master Servicer or the related Subservicer. The amount of any losses incurred with respect to any such Eligible Investments investments shall be for deposited in the account of Collection Account by the Master Servicer. Such funds shall be invested at In the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained by event the Indenture Trustee uninvested. The assumes the responsibilities of the Master Servicer under this Servicing Agreement upon a Servicing Default under Section 6.01, the Indenture Trustee shall be obligated entitled to cover losses on such Eligible Investmentsreimburse itself for Advances pursuant to Sections 3.07(a)(v), (viii) and (ix) prior to reimbursement of the terminated Master Servicer or any successor Master Servicer. (e) The Master Servicer will require each Subservicer to hold all funds constituting collections on the Mortgage Loans, pending remittance thereof to the Master Servicer, in one or more accounts in the name of the Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee. 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 Master Servicer no later than one the eighteenth (18th) day of each month, commencing on the eighteenth (18th) day of the month next following the Closing Date, or if such eighteenth (18th) day is not a Business Day, the first Business Day following receipt thereof and the Servicer shall deposit into the Collection Account any immediately preceding such remittances received from any Subservicer within one Business Day following receipt by the Servicereighteenth (18th) day.

Collection of Mortgage Loan Payments. (a) The RMBS Master Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The RMBS Master 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 Servicing Agreement. Consistent with the foregoing, the RMBS Master 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 RMBS Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanNotes. In the event the RMBS Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the RMBS Master Servicer shall nonetheless make an a Monthly Advance or shall cause the related Subservicer to make an advance a Monthly 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 RMBS Master Servicer or the related Subservicer to make an a Monthly Advance shall apply only to the extent that the RMBS Master 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 RMBS Master 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 RMBS Master Servicer shall cause the related Subservicer to provide to the Indenture Trustee RMBS Master Servicer a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The RMBS Master Servicer shall provide to the Indenture Trustee a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The RMBS Master Servicer shall establish a segregated account in the name of the Indenture Trustee for the benefit of the Noteholders (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the RMBS Master 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within two Business Days forty-eight (48) hours following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments, of or interest on the Mortgage Loans (including advances by a Subservicer) received by the RMBS Master Servicer directly from Mortgagors or from the respective Subservicer; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the RMBS Master Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Mortgage Loan 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 Mortgage Loan 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 Monthly Advance and any Compensating Interest payments; and (vii) any other amounts received by the RMBS Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing Agreement; . provided, however, that with respect to each Due Period, the RMBS Master Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the RMBS Master 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 RMBS Master Servicer need not deposit in the Collection Account fees (including annual fees or assumption fees) or late payment charges charge and prepayment penalties, payable by Mortgagors, each as further described in Section 5.153.15, or amounts received by the Subservicer for the accounts of Mortgagors for application towards the payment of taxes, insurance premiums, assessments and similar items, which amounts shall be deposited in the related Servicing Account pursuant to Section 3.08. In the event any amount not required to be deposited in the Collection Account is so deposited, the RMBS Master 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 RMBS Master 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 Indenture Owner Trustee, the Indenture Trustee and the Noteholders, as their interests may appear. The RMBS Master Servicer shall remit all Foreclosure Profits to the Collection Account, to the extent not payable to the related Subservicer. Funds in the Collection Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with with, the RMBS Master Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the Notes. All such investments Funds in the Collection Account shall be made invested solely in Eligible Investments, designated in the name of the Indenture Trustee for the benefit of the Noteholders, provided, however, that which shall mature not later than the Business Day next preceding the RMBS Master Servicer Remittance Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income earned on and gain realized from any such Eligible Investments investment shall be for the account benefit of the RMBS Master Servicer or the related Subservicer. The amount of any losses incurred with respect to any such investments shall be deposited in the Collection Account by the RMBS Master Servicer. Such funds shall be invested at In the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained by event the Indenture Trustee uninvested. The assumes the responsibilities of the RMBS Master Servicer under this Servicing Agreement upon a Servicing Default under Section 6.01, the Indenture Trustee shall be obligated entitled to cover losses on such Eligible Investmentsreimburse itself for Monthly Advances pursuant to Sections 3.07(a)(v), (viii) and (ix) prior to reimbursement of the terminated RMBS Master Servicer or any successor RMBS Master Servicer. (e) The RMBS Master Servicer will require each Subservicer to hold all funds constituting collections on the Mortgage Loans, pending remittance thereof to the RMBS Master Servicer, in one or more accounts in the name of the Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee for the benefit of the Noteholders. The related 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.

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it Sub-Servicers with respect to the related Mortgage Loans in accordance with this AgreementAgreement and the related Sub-Servicing Agreements. (b) The Master Servicer shall make its reasonable best reasonable efforts to cause each Sub-Servicer to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans related Sub-Servicing Agreement and shall follow, and use its best reasonable efforts to cause Subservicers to follow, the Sub-Servicers will 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 a Sub-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 related Mortgage Loan and (ii) suspend or temporarily reduce or permit to be suspended or temporarily reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage Loan. In the event the a Sub-Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a related Mortgage Note, the related Sub-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; providedPROVIDED, howeverHOWEVER, that the obligation of the Sub-Servicer or the related Subservicer to make an a Monthly Advance shall apply only to the extent that the Sub-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 Indenture Trustee a Note 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 Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, 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 or, with respect to the Subsequent Mortgage Loans, the Subsequent 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 5.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.15, 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 Indenture Trustee, and the Noteholders, 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 Notes. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, 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 Indenture 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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The Master 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 Servicing Agreement. Consistent with the foregoing, the Master 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 Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanBonds. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master 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; providedPROVIDED, howeverHOWEVER, that the obligation of the Master Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Master 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 Master 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 Master Servicer shall cause the related Subservicer to provide to the Indenture Trustee Master Servicer a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The Master Servicer shall provide to the Indenture Trustee a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The Master Servicer shall establish a segregated account in the name of the Indenture Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Master 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within one Business Day (two Business Days if the Subservicer is Countrywide Home Loans Servicing LP or an affiliate) following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments, of or interest on the Mortgage Loans (including advances by a Subservicer) received by the Master Servicer directly from Mortgagors or from the respective Subservicer, net of any portion of the interest thereof retained by the Subservicer as subservicing fees; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Master Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Mortgage Loan Sale and Contribution 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 Mortgage Loan Sale and Contribution Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing Agreement; provided. PROVIDED, howeverHOWEVER, that with respect to each Due Period, the Master 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 5.15, 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 Indenture Trustee, and the Noteholders, 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 Notes. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, 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 Indenture 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 Indenture 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.Due

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The Master 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 Servicing Agreement. Consistent with the foregoing, the Master 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 Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanBonds. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master 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; providedPROVIDED, howeverHOWEVER, that the obligation of the Master Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Master 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 Master 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 Master Servicer shall cause the related Subservicer to provide to the Indenture Trustee Master Servicer a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The Master Servicer shall provide to the Indenture Trustee a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The Master Servicer shall establish a segregated account in the name of the Indenture Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Master 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within two Business Days following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments, of or interest on the Mortgage Loans (including advances by a Subservicer) received by the Master Servicer directly from Mortgagors or from the respective Subservicer, net of any portion of the interest thereof retained by the Subservicer as subservicing fees; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Master Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Mortgage Loan 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 Mortgage Loan Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing Agreement; provided. PROVIDED, howeverHOWEVER, that with respect to each Due Period, the Master 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 Master Servicer need not deposit in the Collection Account fees (including annual fees or assumption fees) or late payment charges charge and prepayment penalties, payable by Mortgagors, each as further described in Section 5.153.15, 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 Master 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 Master 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 Indenture Owner Trustee, the Indenture Trustee and the NoteholdersBondholders, 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 Notes. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, 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 Indenture 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 Indenture 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.may

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy 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 Indenture Trustee a Note 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 Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed NotesCertificates, Series 20[ ]-[ ]”, 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 or, with respect to the Subsequent Mortgage Loans, the Subsequent 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 SubservicerMortgagors; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Servicer pursuant to Section 5.183.18 or by the Converted Loan Purchaser, pursuant to Section 3.20; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.153.15, 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 Indenture Trustee, and the NoteholdersCertificateholders, 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 NotesCertificates. All such investments shall be made in the name of the Indenture Trustee for the benefit of the NoteholdersCertificateholders, 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 Indenture Trustee uninvested. The Servicer shall be obligated to cover losses on such Eligible InvestmentsInvestments immediately upon realization. (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 Indenture 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.

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 Servicing 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 Servicing 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanSecurities . 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 a Monthly Advance or shall cause the related Subservicer to make an advance a Monthly 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 a Monthly 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 Indenture Trustee Master Servicer and the Securities Administrator a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The Servicer shall provide to the Master Servicer a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The Servicer shall establish a segregated account (in the name of the Indenture Trustee for the benefit of the Securityholders(the “Collection Protected Account”), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within two 2 Business Days following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments and Prepayment Penalties, of or interest on the Mortgage Loans (including advances by a Subservicer) 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 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller Sponsor pursuant to the Mortgage Loan Purchase Agreement, Agreement and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Mortgage Loan 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 Monthly Advance and any Compensating Interest payments; and; (vii) any other amounts received by the Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Protected Account pursuant to this Servicing Agreement; (viii) the amount of any losses incurred by the Servicer with respect to the investment of funds in the Protected Account; and (ix) all prepayment penalties received by the Servicer directly from Mortgagors or from the respective Subservicer. 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 Protected Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Protected Account fees (including annual fees or assumption fees) or late payment charges charges, payable by Mortgagors, each as further described in Section 5.153.15, or amounts received by the Subservicer Servicer for the accounts of Mortgagors for application towards the payment of taxes, insurance premiums, assessments and similar items, which amounts shall be deposited in the related Servicing Account pursuant to Section 3.08. In the event any amount not required to be deposited in the Collection Protected Account is so deposited, the Servicer may at any time (prior to being terminated under this Agreement) withdraw such amount from the Collection Protected Account, any provision herein to the contrary notwithstanding. The Servicer shall keep records that accurately reflect the funds on deposit in the Collection Protected Account that have been identified by it as being attributable to the Mortgage Loans and shall hold all collections in the Collection Protected Account for the benefit of the Indenture Trustee, Securityholders. The Servicer shall be entitled to retain all Foreclosure Profits and shall not be obligated to deposit any Foreclosure Profits in the Noteholders, as their interests may appearProtected Account. Funds in the Collection Protected Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with 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 NotesSecurities . All such investments Funds in the Protected Account shall be made invested solely in Eligible Investments, designated in the name of the Indenture Trustee for the benefit of the NoteholdersSecurityholders, provided, however, that which shall mature not later than the Business Day next preceding the Servicer Remittance Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income earned on and gain realized from any such Eligible Investments investment shall be for the account of the Servicer. Such funds shall be invested at the written direction benefit of the Servicer or if the related Subservicer. The amount of any losses incurred with respect to any such investments shall be deposited in the Protected Account by the Servicer does not provide such written direction such funds shall be retained by on the Indenture Trustee uninvested. The Business Day prior to the Servicer shall be obligated to cover losses on such Eligible InvestmentsRemittance Date. (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 Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee for the benefit of the Securityholders. The related 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.

Collection of Mortgage Loan Payments. (a) The Master Servicer will make remittances itself or will coordinate and monitor remittances by Subservicers Sub-Servicers to it the Trustee with respect to the Mortgage Loans in accordance with this Agreement. (b) The Master Servicer shall make its reasonable 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 Sub-Servicers 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 foregoingforegoing and subject to the provisions of Section 3.06(d), the Master 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, (ii) amend a Forbearance Plan or Bankruptcy Plan to enable the Mortgagor to satisfy its obligations under the related Mortgage Loan and (iii) 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 any Mortgagor for a scheduled liquidation of delinquencies and with respect to Mortgage Loans which have defaulted or as to which default is reasonably foreseeable, take such other action, including, consistent with Sections 3.06(c) and 3.06(d), forgiving a portion of the Scheduled Principal Balance thereof. In the event the Master Servicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master Servicer shall nonetheless make a Monthly Advance or shall cause the related Sub-Servicer 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 Master Servicer to make a Monthly Advance shall apply only to the extent that the Master Servicer believes, in good faith, that such advances are not Nonrecoverable Advances. (c) Notwithstanding anything in this Agreement to the contrary, the Master Servicer may not make any advances of amounts coming due in the future with respect to a Mortgage Loan and the Master Servicer shall not permit (i) any modification with respect to any Mortgage Loan that would change the Mortgage Rate, reduce or increase the principal balance (except for reductions resulting from actual payments of principal) or change the final maturity date on such Mortgage Loan (other than, with respect to FHA Loans or VA Loans, as may be required by the FHA, HUD or the VA, as applicable, in connection with servicing regulations for such Mortgage Loans) or (ii) any modification, waiver or amendment of any term of any Mortgage Loan that would both (A) effect an exchange or reissuance of such Mortgage Loan under Section 1001 of the Code (or final, temporary or proposed Treasury regulations promulgated thereunder) and (B) cause REMIC I or REMIC II to fail to qualify as a REMIC under the Code or the imposition of any tax on "prohibited transactions" or "contributions after the startup date" under the REMIC Provisions. (d) Notwithstanding the foregoing, if the Mortgagor is in default with respect to the Mortgage Loan or such default is reasonably foreseeable, the Master Servicer may, in its discretion, modify certain terms of the related Mortgage Loan. Such modifications may include (i) a reduction in the Mortgage Rate of a Mortgage Loan (but in no event to lower than 7.5%), (ii) a recasting of the amortization schedule (based on a 30-year term) and/or an extension of the scheduled date of final payment on such Mortgage Loan (but in no event beyond the Assumed Final Distribution Date) and (iii) an increase or reduction in the Scheduled Principal Balance of such Mortgage Loan. In addition, the Master Servicer may in its discretion (i) waive or permit to be waived any late payment charge or 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, months or arrange or permit an arrangement with a Mortgagor for a scheduled schedule for the liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believesdelinquencies if, in the good faithfaith judgment of the Master Servicer, such action would minimize the losses that recoveries of Monthly Payments will might otherwise be maximized; provided further, however, experienced with respect to a Mortgage Loans insured by an MI PolicyLoan, or in the event that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any a payment of principal or interest, (d) lessen the lien priority or (e) extend the final maturity date of default with respect to a Mortgage Loan past 12 months after is reasonably foreseeable by the original maturity date on such Mortgage LoanMaster Servicer. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master Servicer shall nonetheless make an Advance or shall cause the related Subservicer continue to make an advance advances as required (to the same extent as if such installment were due, owing and delinquent and had not been deferred deferred) through liquidation of the Mortgaged Property; provided, however, that but the obligation of the Master Servicer or the related Subservicer to shall make an Advance shall apply such advances only to the extent that the Master Servicer believes, in good faith, that such advances are not Nonrecoverable Advances. The Servicer shall pay the amount of recoverable from future payments on 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)Mortgage Loan. (ce) Within five Business Days after the Master 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 Master Servicer shall provide to the Indenture Trustee a Note 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 Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, 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 or, with respect to the Subsequent Mortgage Loans, the Subsequent 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 5.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.15, 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 Indenture Trustee, and the Noteholders, 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 Notes. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, 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 Indenture 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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage Loan. In the event the Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Servicer shall nonetheless make an Advance or shall cause the related Subservicer to make an advance to the same extent as if such installment were due, owing and delinquent and had not been deferred through liquidation of the Mortgaged Property; provided, however, that the obligation of the Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Servicer believes, in good faith, that such advances are not Nonrecoverable Advances. The Servicer shall pay the amount of any waived prepayment charge at the time of payoff if such prepayment charge was waived for a reason other than that specified in this Section 3.06(b). (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 Indenture Trustee a Note 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 Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed NotesCertificates, Series 20[ ]-[ ]”, 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 or, with respect to the Subsequent Mortgage Loans, the Subsequent 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 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.153.15, 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 Indenture Trustee, and the NoteholdersCertificateholders, 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 NotesCertificates. All such investments shall be made in the name of the Indenture Trustee for the benefit of the NoteholdersCertificateholders, 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 Indenture 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 Indenture 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.

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 Servicing 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 Servicing 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanNotes. 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 a Monthly Advance or shall cause the related Subservicer to make an advance a Monthly 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 a Monthly 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 Indenture Trustee Master Servicer and the Securities Administrator a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The Servicer shall provide to the Master Servicer a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The Servicer shall establish a segregated account in the name of the Indenture Trustee for the benefit of the Noteholders (the “Collection Protected Account”), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within two 2 Business Days following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments and Prepayment Penalties, of or interest on the Mortgage Loans (including advances by a Subservicer) 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 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller Sponsor pursuant to the Mortgage Loan Purchase Agreement, Agreement and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Mortgage Loan 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 Monthly Advance and any Compensating Interest payments; and; (vii) any other amounts received by the Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Protected Account pursuant to this Servicing Agreement; (viii) the amount of any losses incurred by the Servicer with respect to the investment of funds in the Protected Account; and (ix) all prepayment penalties received by the Servicer directly from Mortgagors or from the respective Subservicer. 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 Protected Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Protected Account fees (including annual fees or assumption fees) or late payment charges charges, payable by Mortgagors, each as further described in Section 5.153.15, or amounts received by the Subservicer Servicer for the accounts of Mortgagors for application towards the payment of taxes, insurance premiums, assessments and similar items, which amounts shall be deposited in the related Servicing Account pursuant to Section 3.08. In the event any amount not required to be deposited in the Collection Protected Account is so deposited, the Servicer may at any time (prior to being terminated under this Agreement) withdraw such amount from the Collection Protected Account, any provision herein to the contrary notwithstanding. The Servicer shall keep records that accurately reflect the funds on deposit in the Collection Protected Account that have been identified by it as being attributable to the Mortgage Loans and shall hold all collections in the Collection Protected Account for the benefit of the Indenture Trustee, Noteholders. The Servicer shall be entitled to retain all Foreclosure Profits and shall not be obligated to deposit any Foreclosure Profits in the Noteholders, as their interests may appearProtected Account. Funds in the Collection Protected Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with 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 Notes. All such investments Funds in the Protected Account shall be made invested solely in Eligible Investments, designated in the name of the Indenture Trustee for the benefit of the Noteholders, provided, however, that which shall mature not later than the Business Day next preceding the Servicer Remittance Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income earned on and gain realized from any such Eligible Investments investment shall be for the account of the Servicer. Such funds shall be invested at the written direction benefit of the Servicer or if the related Subservicer. The amount of any losses incurred with respect to any such investments shall be deposited in the Protected Account by the Servicer does not provide such written direction such funds shall be retained by on the Indenture Trustee uninvested. The Business Day prior to the Servicer shall be obligated to cover losses on such Eligible InvestmentsRemittance Date. (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 Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee for the benefit of the Noteholders. The related 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.

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The Master 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 Servicing Agreement. Consistent with the foregoing, the Master 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 Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanBonds. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master 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 Master Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Master 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 Master 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 Master Servicer shall cause the related Subservicer to provide to the Indenture Trustee Master Servicer a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The Master Servicer shall provide to the Indenture Trustee a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The Master Servicer shall establish a segregated account in the name of the Indenture Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Master 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within two Business Days following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments, of or interest on the Mortgage Loans (including advances by a Subservicer) received by the Master Servicer directly from Mortgagors or from the respective Subservicer, net of any portion of the interest thereof retained by the Subservicer as subservicing fees; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Master Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Mortgage Loan Sale and Contribution 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 Mortgage Loan Sale and Contribution Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing Agreement; . provided, however, that with respect to each Due Period, the Master 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 Master Servicer need not deposit in the Collection Account fees (including annual fees or assumption fees) or late payment charges charge and prepayment penalties, payable by Mortgagors, each as further described in Section 5.153.15, 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 Master 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 Master 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 Indenture Owner Trustee, the Indenture Trustee and the NoteholdersBondholders, as their interests may appear. The Master Servicer shall remit all Foreclosure Profits to the Collection Account, to the extent not payable to the related Subservicer. Funds in the Collection Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with with, the Master Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesBonds. All such investments Funds in the Collection Account shall be made invested solely in Eligible Investments, designated in the name of the Indenture Trustee Trustee, which shall mature not later than the Business Day next preceding the third Business Day prior to each Payment Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income and gain realized from any such investment shall be for the benefit of the Noteholders, provided, however, that income earned on Master Servicer or the related Subservicer. The amount of any losses incurred with respect to any such Eligible Investments investments shall be for deposited in the account of Collection Account by the Master Servicer. Such funds shall be invested at In the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained by event the Indenture Trustee uninvested. The assumes the responsibilities of the Master Servicer under this Servicing Agreement upon a Servicing Default under Section 6.01, the Indenture Trustee shall be obligated entitled to cover losses on such Eligible Investmentsreimburse itself for Advances pursuant to Sections 3.07(a)(v), (viii) and (ix) prior to reimbursement of the terminated Master Servicer or any successor Master Servicer. (e) The Master Servicer will require each Subservicer to hold all funds constituting collections on the Mortgage Loans, pending remittance thereof to the Master Servicer, in one or more accounts in the name of the Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee. 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 Master Servicer no later than one the eighteenth (18th) day of each month, commencing on the eighteenth (18th) day of the month next following the Closing Date, or if such eighteenth (18th) day is not a Business Day, the first Business Day following receipt thereof and the Servicer shall deposit into the Collection Account any immediately preceding such remittances received from any Subservicer within one Business Day following receipt by the Servicereighteenth (18th) day.

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage Loan. In the event the Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Servicer shall nonetheless make an Advance or shall cause the related Subservicer to make an advance to the same extent as if such installment were due, owing and delinquent and had not been deferred through liquidation of the Mortgaged Property; provided, however, that the obligation of the Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Servicer believes, in good faith, that such advances are not Nonrecoverable Advances. The Servicer shall pay the amount of any waived prepayment charge at the time of payoff if such prepayment charge was waived for a reason other than that specified in this Section 3.06(b). (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 Indenture Trustee a Note 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, Deutsche Bank National AssociationTrust Company, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]2007-[ ]1, Home Equity Loan Asset-Backed NotesCertificates, Series 20[ ]2007-[ ]1”, in which the Servicer shall deposit or cause to be deposited any amounts representing payments on and any collections in respect of the Mortgage Loans received by it after the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off 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 5.183.19; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller Sponsor pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.153.15, 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 Indenture Trustee, and the NoteholdersCertificateholders, 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 NotesCertificates. All such investments shall be made in the name of the Indenture Trustee for the benefit of the NoteholdersCertificateholders, 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 Indenture 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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (cb) forgive any payment of principal or interest, (dc) lessen the lien priority or (ed) 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 Indenture Trustee a Note 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 in the name of the Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, 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 or, with respect to the Subsequent Mortgage Loans, the Subsequent 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 5.183.18 or by the Converted Loan Purchaser, pursuant to Section 3.20; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.153.15, 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 Indenture Trustee, and the NoteholdersCertificateholders, 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 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesCertificates. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, provided, however, that income 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 Indenture 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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers Sub- Servicers to it the Trustee with respect to the Mortgage Loans in accordance with this Agreement. (b) The Master Servicer shall make its reasonable 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 Sub-Servicers 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 Master Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage Loan. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master Servicer shall nonetheless make an a Monthly Advance or shall cause the related Subservicer Sub-Servicer 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 Master Servicer or the related Subservicer to make an a Monthly Advance shall apply only to the extent that the Master 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 Master 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 Master Servicer shall provide to the Indenture Trustee a Note 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 Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, 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 or, with respect to the Subsequent Mortgage Loans, the Subsequent 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 5.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.15, 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 Indenture Trustee, and the Noteholders, 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 Notes. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, 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 Indenture 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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The Master 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 Servicing Agreement. Consistent with the foregoing, the Master 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 Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanBonds. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master 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; providedPROVIDED, howeverHOWEVER, that the obligation of the Master Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Master 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 Master 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 Master Servicer shall cause the related Subservicer to provide to the Indenture Trustee Master Servicer a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The Master Servicer shall provide to the Indenture Trustee a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The Master Servicer shall establish a segregated account in the name of the Indenture Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Master 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within two Business Days following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments, of or interest on the Mortgage Loans (including advances by a Subservicer) received by the Master Servicer directly from Mortgagors or from the respective Subservicer, net of any portion of the interest thereof retained by the Subservicer as subservicing fees; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Master Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Mortgage Loan 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 Mortgage Loan Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing Agreement; provided. PROVIDED, howeverHOWEVER, that with respect to each Due Period, the Master 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 Master Servicer need not deposit in the Collection Account fees (including annual fees or assumption fees) or late payment charges charge and prepayment penalties, payable by Mortgagors, each as further described in Section 5.153.15, 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 Master 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 Master 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 Indenture Owner Trustee, the Indenture Trustee and the NoteholdersBondholders, as their interests may appear. The Master Servicer shall remit all Foreclosure Profits to the Collection Account, to the extent not payable to the related Subservicer. Funds in the Collection Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with with, the Master Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesBonds. All such investments Funds in the Collection Account shall be made invested solely in Eligible Investments at the direction of the Master Servicer, designated in the name of the Indenture Trustee Trustee, which shall mature not later than the Business Day next preceding the third Business Day prior to each Payment Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income and gain realized from any such investment shall be for the benefit of the Noteholders, provided, however, that income earned on Master Servicer or the related Subservicer. The amount of any losses incurred with respect to any such Eligible Investments investments shall be for deposited in the account of Collection Account by the Master Servicer. Such funds shall be invested at In the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained by event the Indenture Trustee uninvested. The assumes the responsibilities of the Master Servicer under this Servicing Agreement upon a Servicing Default under Section 6.01, the Indenture Trustee shall be obligated entitled to cover losses on such Eligible Investmentsreimburse itself for Advances pursuant to Sections 3.07(a)(v), (viii) and (ix) prior to reimbursement of the terminated Master Servicer or any successor Master Servicer. (e) The Master Servicer will require each Subservicer to hold all funds constituting collections on the Mortgage Loans, pending remittance thereof to the Master Servicer, in one or more accounts in the name of the Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee. 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 Master Servicer no later than one the eighteenth (18th) day of each month, commencing on the eighteenth (18th) day of the month next following the Closing Date, or if such eighteenth (18th) day is not a Business Day, the first Business Day following receipt thereof and the Servicer shall deposit into the Collection Account any immediately preceding such remittances received from any Subservicer within one Business Day following receipt by the Servicereighteenth (18th) day.

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage Loan. In the event the Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Servicer shall nonetheless make an Advance or shall cause the related Subservicer to make an advance to the same extent as if such installment were due, owing and delinquent and had not been deferred through liquidation of the Mortgaged Property; provided, however, that the obligation of the Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Servicer believes, in good faith, that such advances are not Nonrecoverable Advances. The Servicer shall pay the amount of any waived prepayment charge at the time of payoff if such prepayment charge was waived for a reason other than that specified in this Section 3.06(b5.06(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 Indenture Trustee a Note an Officer’s 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 Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]Trust, Series 2006-[ ]MTA1, Home Equity Loan Asset-Backed Notes, Series 20[ ]2006-[ ]MTA1”, 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 or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off Date (other than in respect of the payments referred to in the following paragraph) within two Business Days (or such longer period of time due to exception item processing) 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 5.185.19; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller Sponsor or the Seller, as applicable pursuant to the Purchase this Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Qualified Substitute Mortgage Loan pursuant to the Purchase this Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.15, 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 Indenture Trustee, and the Noteholders, 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 Notes. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, 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 Indenture 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 Indenture 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.

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 Servicing 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 Servicing 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 chargecharge (with the consent of the Bond Insurer), 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 and the Bond Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (cb) forgive any payment of principal or interest, (dc) lessen the lien priority or (ed) 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 (i) the Indenture Trustee Bond Administrator a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination.determination and (ii) the Bond Insurer and the Bond Administrator a Liquidation Report in the form attached hereto as Exhibit C. (d) The Servicer shall establish a segregated account in the name of the Indenture Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, 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 or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off 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 5.183.18 or by the Converted Loan Purchaser, pursuant to Section 3.20; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and; (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing 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 5.153.15, 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 Servicing 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 Owner Trustee, the Indenture Trustee, the Bondholders and the NoteholdersBond Insurer, 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 DateInvestments, but shall not be commingled with the Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesBonds. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, provided, however, that income 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 Indenture 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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The Master 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 Servicing Agreement. Consistent with the foregoing, the Master 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 Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanBonds. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master 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; providedPROVIDED, howeverHOWEVER, that the obligation of the Master Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Master 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 Master 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 Master Servicer shall cause the related Subservicer to provide to the Indenture Trustee Master Servicer a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The Master Servicer shall provide to the Indenture Trustee a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The Master Servicer shall establish a segregated account in the name of the Indenture Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Master 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within two Business Days following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments, of or interest on the Mortgage Loans (including advances by a Subservicer) received by the Master Servicer directly from Mortgagors or from the respective Subservicer, net of any portion of the interest thereof retained by the Subservicer as subservicing fees; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Master Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Mortgage Loan Sale and Contribution 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 Mortgage Loan Sale and Contribution Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing Agreement; provided. PROVIDED, howeverHOWEVER, that with respect to each Due Period, the Master 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 Master Servicer need not deposit in the Collection Account fees (including annual fees or assumption fees) or late payment charges charge and prepayment penalties, payable by Mortgagors, each as further described in Section 5.153.15, 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 Master Servicer may at any time (prior to being terminated under this Servicing Agreement) withdraw such amount from the Collection Account, any provision herein to the contrary notwithstanding. The Master 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 Indenture Owner Trustee, the Indenture Trustee and the NoteholdersBondholders, as their interests may appear. The Master Servicer shall remit all Foreclosure Profits to the Collection Account, to the extent not payable to the related Subservicer. Funds in the Collection Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with with, the Master Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesBonds. All such investments Funds in the Collection Account shall be made invested solely in Eligible Investments, designated in the name of the Indenture Trustee Trustee, which shall mature not later than the Business Day next preceding the third Business Day prior to each Payment Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income and gain realized from any such investment shall be for the benefit of the Noteholders, provided, however, that income earned on Master Servicer or the related Subservicer. The amount of any losses incurred with respect to any such Eligible Investments investments shall be for deposited in the account of Collection Account by the Master Servicer. Such funds shall be invested at In the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained by event the Indenture Trustee uninvested. The assumes the responsibilities of the Master Servicer under this Servicing Agreement upon a Servicing Default under Section 6.01, the Indenture Trustee shall be obligated entitled to cover losses on such Eligible Investmentsreimburse itself for Advances pursuant to Sections 3.07(a)(v), (viii) and (ix) prior to reimbursement of the terminated Master Servicer or any successor Master Servicer. (e) The Master Servicer will require each Subservicer to hold all funds constituting collections on the Mortgage Loans, pending remittance thereof to the Master Servicer, in one or more accounts in the name of the Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee. 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 Master Servicer no later than one the eighteenth (18th) day of each month, commencing on the eighteenth (18th) day of the month next following the Closing Date, or if such eighteenth (18th) day is not a Business Day, the first Business Day following receipt thereof and the Servicer shall deposit into the Collection Account any immediately preceding such remittances received from any Subservicer within one Business Day following receipt by the Servicereighteenth (18th) day.

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The Master 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 Servicing Agreement. Consistent with the foregoing, the Master 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 Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanBonds. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master 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, however that the obligation of the Master Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Master 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 Master 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 Master Servicer shall cause the related Subservicer to provide to the Indenture Trustee Master Servicer a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The Master Servicer shall provide to the Indenture Trustee a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The Master Servicer shall establish a segregated account in the name of the Indenture Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Master 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 or, with respect due subsequent to the Subsequent Mortgage Loans, the Subsequent Cut-Off Date (other than in respect of the payments referred to in the following paragraph) within two one Business Days Day following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments and prepayment charges thereon, of or interest on the Mortgage Loans (including advances by a Subservicer) received by the Master Servicer directly from Mortgagors or from the respective Subservicer, net of any portion of the interest thereof retained by the Subservicer as subservicing fees; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Master Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Mortgage Loan Sale and Contribution 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 Mortgage Loan Sale and Contribution Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing Agreement; . provided, however, that with respect to each Due Period, the Master 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 Master Servicer need not deposit in the Collection Account fees (including annual fees or assumption fees) or late payment charges charge penalties, payable by Mortgagors, each as further described in Section 5.153.15, 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 Master 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 Master 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 Indenture Owner Trustee, the Indenture Trustee and the NoteholdersBondholders, as their interests may appear. The Master Servicer shall remit all Foreclosure Profits to the Collection Account, to the extent not payable to the related Subservicer. Funds in the Collection Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with the Master Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesBonds. All such investments Funds in the Collection Account shall be made invested solely in Eligible Investments, designated in the name of the Indenture Trustee Trustee, which shall mature not later than the Business Day next preceding the third Business Day prior to each Payment Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income and gain realized from any such investment shall be for the benefit of the Noteholders, provided, however, that income earned on Master Servicer or the related Subservicer. The amount of any losses incurred with respect to any such Eligible Investments investments shall be for deposited in the account of Collection Account by the Master Servicer. Such funds shall be invested at In the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained by event the Indenture Trustee uninvested. The assumes the responsibilities of the Master Servicer under this Servicing Agreement upon a Servicing Default under Section 6.01, the Indenture Trustee shall be obligated entitled to cover losses on such Eligible Investmentsreimburse itself for Advances pursuant to Sections 3.07(a)(v), (viii) and (ix) prior to reimbursement of the terminated Master Servicer or any successor Master Servicer. (e) The Master Servicer will require each Subservicer to hold all funds constituting collections on the Mortgage Loans, pending remittance thereof to the Master Servicer, in one or more accounts in the name of the Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee. 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 Subservieer shall make remittances to the Master Servicer no later than one the eighteenth (18th) day of each month, commencing on the eighteenth (18th) day of the month next following the Closing Date, or if such eighteenth (18th) day is not a Business Day, the first Business Day following receipt thereof and the Servicer shall deposit into the Collection Account any immediately preceding such remittances received from any Subservicer within one Business Day following receipt by the Servicereighteenth (18th) day.

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The Master 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 Servicing Agreement. Consistent with the foregoing, the Master 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 Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanBonds. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master 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; providedPROVIDED, howeverHOWEVER, that the obligation of the Master Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Master 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 Master 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 Master Servicer shall provide to the Indenture Trustee a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. (d) The Master Servicer shall establish a segregated account in the name of the Indenture Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Master 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 or, with respect due subsequent to the Subsequent Mortgage Loans, the Subsequent Cut-Off Date (other than in respect of the payments referred to in the following paragraph) within two one Business Days Day following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal of or interest on the Mortgage Loans received by the Master Servicer directly from Mortgagors or from the respective Subservicer, net of any portion of the interest thereof retained by the Subservicer as subservicing fees; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Master Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Mortgage Loan Sale and Contribution 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 Mortgage Loan Sale and Contribution Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing Agreement; provided. PROVIDED, howeverHOWEVER, that with respect to each Due Period, the Master 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 Master Servicer need not deposit in the Collection Account fees (including annual fees or assumption fees) or late payment charges charge and prepayment penalties, payable by Mortgagors, each as further described in Section 5.153.15, 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 Master 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 Master 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 Owner Trustee, the Indenture Trustee, the Bondholders and the NoteholdersBond Insurer, as their interests may appear. The Master Servicer shall remit all Foreclosure Profits to the Collection Account. Funds in the Collection Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Date, but and shall not be commingled with the Master Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesBonds. All such investments Funds in the Collection Account shall be made invested solely in Eligible Investments, designated in the name of the Indenture Trustee Trustee, which shall mature not later than the Business Day next preceding the third Business Day prior to each Payment Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income and gain realized from any such investment shall be for the benefit of the Noteholders, provided, however, that income earned on Master Servicer or the related Subservicer. The amount of any losses incurred with respect to any such Eligible Investments investments shall be for deposited in the account of Collection Account by the Master Servicer. Such funds shall be invested at In the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained by event the Indenture Trustee uninvested. The assumes the responsibilities of the Master Servicer under this Servicing Agreement upon a Servicing Event of Default under Section 6.01, the Indenture Trustee shall be obligated entitled to cover losses on such Eligible Investmentsreimburse itself for Advances pursuant to Sections 3.07(a)(v), (viii) and (ix) prior to reimbursement of the terminated Master Servicer or any successor Master Servicer. (e) The Master Servicer will require each Subservicer to hold all funds constituting collections on the Mortgage Loans, pending remittance thereof to the Master Servicer, in one or more accounts in the name of the Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee. 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 Master Servicer no later than one the eighteenth (18th) day of each month, commencing on the eighteenth (18th) day of the month next following the Cut-off Date, or if such eighteenth (18th) day is not a Business Day, the first Business Day following receipt thereof and the Servicer shall deposit into the Collection Account any immediately preceding such remittances received from any Subservicer within one Business Day following receipt by the Servicereighteenth (18th) day.

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy 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 Indenture Trustee a Note 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 Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]2004-[ ]2, Home Equity Loan Asset-Backed NotesCertificates, Series 20[ ]2004-[ ]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 or, with respect to the Subsequent Mortgage Loans, the Subsequent 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 SubservicerMortgagors; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Servicer pursuant to Section 5.183.18 or by the Converted Loan Purchaser, pursuant to Section 3.20; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.153.15, 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 Indenture Trustee, and the NoteholdersCertificateholders, 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 NotesCertificates. All such investments shall be made in the name of the Indenture Trustee for the benefit of the NoteholdersCertificateholders, 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 Indenture Trustee uninvested. The Servicer shall be obligated to cover losses on such Eligible InvestmentsInvestments immediately upon realization. (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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (cb) forgive any payment of principal or interest, (dc) lessen the lien priority or (ed) 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 Indenture Trustee Certificate Administrator a Note 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 in the name of the Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, 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 or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off 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 5.183.18 or by the Converted Loan Purchaser, pursuant to Section 3.20; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.153.15, 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 Indenture Trustee, and the NoteholdersCertificateholders, 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 DateInvestments, but shall not be commingled with the Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesCertificates. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, provided, however, that income 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 Indenture 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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (cb) forgive any payment of principal or interest, (dc) lessen the lien priority or (ed) 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 Indenture Trustee Certificate Administrator a Note 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 in the name of the Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, 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 or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off 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 5.183.18 or by the Converted Loan Purchaser, pursuant to Section 3.20; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; . provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.153.15, 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 Indenture Trustee, and the NoteholdersCertificateholders, 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 DateInvestments, but shall not be commingled with the Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesCertificates. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, provided, however, that income 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 Indenture 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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage Loan. In the event the Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Servicer shall nonetheless make an Advance or shall cause the related Subservicer to make an advance to the same extent as if such installment were due, owing and delinquent and had not been deferred through liquidation of the Mortgaged Property; provided, however, that the obligation of the Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Servicer believes, in good faith, that such advances are not Nonrecoverable Advances. The Servicer shall pay the amount of any waived prepayment charge at the time of payoff if such prepayment charge was waived for a reason other than that specified in this Section 3.06(b). (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 Indenture Trustee a Note 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, Deutsche Bank National AssociationTrust Company, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]2006-[ ]6, Home Equity Loan Asset-Backed NotesCertificates, Series 20[ ]2006-[ ]6”, 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 applicable Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off 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 5.183.19; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller Sponsor pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.153.15, 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 Indenture Trustee, and the NoteholdersCertificateholders, 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 NotesCertificates. All such investments shall be made in the name of the Indenture Trustee for the benefit of the NoteholdersCertificateholders, 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 Indenture 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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The Master 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 Servicing Agreement. Consistent with the foregoing, the Master 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 Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanBonds. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master 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 Master Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Master 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 Master 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 Master Servicer shall provide to the Indenture Trustee a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. (d) The Master Servicer shall establish a segregated account in the name of the Indenture Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Master 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 or, with respect due subsequent to the Subsequent Mortgage Loans, the Subsequent respective Cut-Off Date (other than in respect of the payments referred to in the following paragraph) within two one Business Days Day following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments, of or interest on the Mortgage Loans (including advances by a Subservicer) received by the Master Servicer directly from Mortgagors or from the respective Subservicer, net of any portion of the interest thereof retained by the Subservicer as subservicing fees; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Master Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Mortgage Loan Sale and Contribution 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 Mortgage Loan Sale and Contribution Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing Agreement; . provided, however, that with respect to each Due Period, the Master 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 Master Servicer need not deposit in the Collection Account fees (including annual fees or assumption fees) or late payment charges charge and prepayment penalties, payable by Mortgagors, each as further described in Section 5.153.15, 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 Master 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 Master 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 Owner Trustee, the Indenture Trustee, the Bondholders and the NoteholdersBond Insurer, as their interests may appear. The Master Servicer shall remit all Foreclosure Profits to the Collection Account, to the extent not payable to the related Subservicer. Funds in the Collection Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with the Master Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesBonds. All such investments Funds in the Collection Account shall be made invested solely in Eligible Investments, designated in the name of the Indenture Trustee Trustee, which shall mature not later than the Business Day next preceding the third Business Day prior to each Payment Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income and gain realized from any such investment shall be for the benefit of the Noteholders, provided, however, that income earned on Master Servicer or the related Subservicer. The amount of any losses incurred with respect to any such Eligible Investments investments shall be for deposited in the account of Collection Account by the Master Servicer. Such funds shall be invested at In the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained by event the Indenture Trustee uninvested. The assumes the responsibilities of the Master Servicer under this Servicing Agreement upon a Servicing Default under Section 6.01, the Indenture Trustee shall be obligated entitled to cover losses on such Eligible Investmentsreimburse itself for Advances pursuant to Sections 3.07(a)(v), (viii) and (ix) prior to reimbursement of the terminated Master Servicer or any successor Master Servicer. (e) The Master Servicer will require each Subservicer to hold all funds constituting collections on the Mortgage Loans, pending remittance thereof to the Master Servicer, in one or more accounts in the name of the Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee. 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 Master Servicer no later than one the eighteenth (18th) day of each month, commencing on the eighteenth (18th) day of the month next following the Closing Date, or if such eighteenth (18th) day is not a Business Day, the first Business Day following receipt thereof and the Servicer shall deposit into the Collection Account any immediately preceding such remittances received from any Subservicer within one Business Day following receipt by the Servicereighteenth (18th) day.

Collection of Mortgage Loan Payments. (a) The RMBS Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this RMBS Servicing Agreement. (b) The RMBS 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 RMBS Servicing Agreement. Consistent with the foregoing, the RMBS 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 RMBS 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanNotes. In the event the RMBS Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the RMBS Servicer shall nonetheless make an a Monthly Advance or shall cause the related Subservicer to make an advance a Monthly 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 RMBS Servicer or the related Subservicer to make an a Monthly Advance shall apply only to the extent that the RMBS 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 RMBS 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 RMBS Servicer shall provide to the Indenture Trustee RMBS Master Servicer and the Securities Administrator a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The RMBS Servicer shall provide to the RMBS Master Servicer a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The RMBS Servicer shall establish a segregated account in the name of the Indenture Trustee for the benefit of the Noteholders (the “Collection Protected Account”), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the RMBS 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within two 2 Business Days following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments and Prepayment Penalties, of or interest on the Mortgage Loans (including advances by a Subservicer) received by the RMBS Servicer directly from Mortgagors or from the respective Subservicer; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the RMBS Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller Sponsor pursuant to the Mortgage Loan Purchase Agreement, Agreement and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Mortgage Loan 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 Monthly Advance and any Compensating Interest payments; and; (vii) any other amounts received by the RMBS Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Protected Account pursuant to this RMBS Servicing Agreement; (viii) the amount of any losses incurred by the RMBS Servicer with respect to the investment of funds in the Protected Account; and (ix) all prepayment penalties received by the RMBS Servicer directly from Mortgagors or from the respective Subservicer. provided, however, that with respect to each Due Period, the RMBS 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 Protected Account are exclusive, it being understood that, without limiting the generality of the foregoing, the RMBS Servicer need not deposit in the Collection Protected Account fees (including annual fees or assumption fees) or late payment charges charges, payable by Mortgagors, each as further described in Section 5.153.15, or amounts received by the Subservicer RMBS Servicer for the accounts of Mortgagors for application towards the payment of taxes, insurance premiums, assessments and similar items, which amounts shall be deposited in the related Servicing Account pursuant to Section 3.08. In the event any amount not required to be deposited in the Collection Protected Account is so deposited, the RMBS Servicer may at any time (prior to being terminated under this Agreement) withdraw such amount from the Collection Protected Account, any provision herein to the contrary notwithstanding. The RMBS Servicer shall keep records that accurately reflect the funds on deposit in the Collection Protected Account that have been identified by it as being attributable to the Mortgage Loans and shall hold all collections in the Collection Protected Account for the benefit of the Indenture Trustee, Noteholders. The RMBS Servicer shall be entitled to retain all Foreclosure Profits and shall not be obligated to deposit any Foreclosure Profits in the Noteholders, as their interests may appearProtected Account. Funds in the Collection Protected Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with with, the RMBS Servicer’s own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the Notes. All such investments Funds in the Protected Account shall be made invested solely in Eligible Investments, designated in the name of the Indenture Trustee for the benefit of the Noteholders, provided, however, that which shall mature not later than the Business Day next preceding the RMBS Servicer Remittance Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income earned on and gain realized from any such Eligible Investments investment shall be for the account benefit of the ServicerRMBS Servicer or the related Subservicer. Such funds The amount of any losses incurred with respect to any such investments shall be invested at deposited in the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained Protected Account by the Indenture Trustee uninvested. The RMBS Servicer shall be obligated on the Business Day prior to cover losses on such Eligible Investmentsthe RMBS Servicer Remittance Date. (e) The RMBS Servicer will require each Subservicer to hold all funds constituting collections on the Mortgage Loans, pending remittance thereof to the RMBS Servicer, in one or more accounts in the name of the Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee for the benefit of the Noteholders. The related 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.

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The Master 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 Servicing Agreement. Consistent with the foregoing, the Master 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 Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanBonds. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master 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 Master Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Master 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 Master 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 Master Servicer shall cause the related Subservicer to provide to the Indenture Trustee Master Servicer a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The Master Servicer shall provide to the Indenture Trustee a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The Master Servicer shall establish a segregated account in the name of the Indenture Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Master 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within two Business Days following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments, of or interest on the Mortgage Loans (including advances by a Subservicer) received by the Master Servicer directly from Mortgagors or from the respective Subservicer, net of any portion of the interest thereof retained by the Subservicer as subservicing fees; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Master Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Mortgage Loan 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 Mortgage Loan Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing Agreement; . provided, however, that with respect to each Due Period, the Master 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 Master Servicer need not deposit in the Collection Account fees (including annual fees or assumption fees) or late payment charges charge and prepayment penalties, payable by Mortgagors, each as further described in Section 5.153.15, 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 Master 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 Master 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 Indenture Owner Trustee, the Indenture Trustee and the NoteholdersBondholders, 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 Notes. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, 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 Indenture 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 Indenture 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.may

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The Master 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 Servicing Agreement. Consistent with the foregoing, the Master 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 Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanBonds. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master 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 Master Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Master 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 Master 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 Master Servicer shall cause the related Subservicer to provide to the Indenture Trustee Master Servicer a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The Master Servicer shall provide to the Indenture Trustee a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The Master Servicer shall establish a segregated account in the name of the Indenture Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Master 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within two Business Days following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments, of or interest on the Mortgage Loans (including advances by a Subservicer) received by the Master Servicer directly from Mortgagors or from the respective Subservicer, net of any portion of the interest thereof retained by the Subservicer as subservicing fees; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Master Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Mortgage Loan 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 Mortgage Loan Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing Agreement; . provided, however, that with respect to each Due Period, the Master 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 Master Servicer need not deposit in the Collection Account fees (including annual fees or assumption fees) or late payment charges charge and prepayment penalties, payable by Mortgagors, each as further described in Section 5.153.15, 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 Master 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 Master 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 Indenture Owner Trustee, the Indenture Trustee and the NoteholdersBondholders, as their interests may appear. The Master Servicer shall remit all Foreclosure Profits to the Collection Account, to the extent not payable to the related Subservicer. Funds in the Collection Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with with, the Master Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesBonds. All such investments Funds in the Collection Account shall be made invested solely in Eligible Investments, designated in the name of the Indenture Trustee Trustee, which shall mature not later than the Business Day next preceding the third Business Day prior to each Payment Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income and gain realized from any such investment shall be for the benefit of the Noteholders, provided, however, that income earned on Master Servicer or the related Subservicer. The amount of any losses incurred with respect to any such Eligible Investments investments shall be for deposited in the account of Collection Account by the Master Servicer. Such funds shall be invested at In the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained by event the Indenture Trustee uninvested. The assumes the responsibilities of the Master Servicer under this Servicing Agreement upon a Servicing Default under Section 6.01, the Indenture Trustee shall be obligated entitled to cover losses on such Eligible Investmentsreimburse itself for Advances pursuant to Sections 3.07(a)(v), (viii) and (ix) prior to reimbursement of the terminated Master Servicer or any successor Master Servicer. (e) The Master Servicer will require each Subservicer to hold all funds constituting collections on the Mortgage Loans, pending remittance thereof to the Master Servicer, in one or more accounts in the name of the Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee. 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 Master Servicer no later than one the eighteenth (18th) day of each month, commencing on the eighteenth (18th) day of the month next following the Closing Date, or if such eighteenth (18th) day is not a Business Day, the first Business Day following receipt thereof and the Servicer shall deposit into the Collection Account any immediately preceding such remittances received from any Subservicer within one Business Day following receipt by the Servicereighteenth (18th) day.

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (cb) forgive any payment of principal or interest, (dc) lessen the lien priority or (ed) 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 Indenture Trustee a Note 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 in the name of the Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, 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 or, with respect to the Subsequent Mortgage Loans, the Subsequent 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 5.183.18 or by the Converted Loan Purchaser, pursuant to Section 3.20; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.153.15, 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 Indenture Trustee, and the NoteholdersCertificateholders, 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 DateInvestments, but shall not be commingled with the Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesCertificates. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, provided, however, that income 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 Indenture 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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage Loan. In the event the Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Servicer shall nonetheless make an Advance or shall cause the related Subservicer to make an advance to the same extent as if such installment were due, owing and delinquent and had not been deferred through liquidation of the Mortgaged Property; provided, however, that the obligation of the Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Servicer believes, in good faith, that such advances are not Nonrecoverable Advances. The Servicer shall pay the amount of any waived prepayment charge at the time of payoff if such prepayment charge was waived for a reason other than that specified in this Section 3.06(b). (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 Indenture Trustee a Note 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 Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]2004-[ ]4, Home Equity Loan Asset-Backed NotesCertificates, Series 20[ ]2004-[ ]4”, 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 or, with respect to the Subsequent Mortgage Loans, the Subsequent 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 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.153.15, 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 Indenture Trustee, and the NoteholdersCertificateholders, 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 NotesCertificates. All such investments shall be made in the name of the Indenture Trustee for the benefit of the NoteholdersCertificateholders, 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 Indenture 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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The Master 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 Servicing Agreement. Consistent with the foregoing, the Master 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 Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanBonds. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master 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 Master Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Master 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 Master 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 Master Servicer shall cause the related Subservicer to provide to the Indenture Trustee Master Servicer a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The Master Servicer shall provide to the Indenture Trustee a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The Master Servicer shall establish a segregated account in the name of the Indenture Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Master 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within one Business Day (two Business Days if the Subservicer is Countrywide Home Loans Servicing LP or an affiliate) following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments, of or interest on the Mortgage Loans (including advances by a Subservicer) received by the Master Servicer directly from Mortgagors or from the respective Subservicer, net of any portion of the interest thereof retained by the Subservicer as subservicing fees; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Master Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Mortgage Loan Sale and Contribution 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 Mortgage Loan Sale and Contribution Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing Agreement; . provided, however, that with respect to each Due Period, the Master 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 Master Servicer need not deposit in the Collection Account fees (including annual fees or assumption fees) or late payment charges charge and prepayment penalties, payable by Mortgagors, each as further described in Section 5.153.15, 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 Master 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 Master 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 Owner Trustee, the Indenture Trustee, the Bond Insurer and the NoteholdersBondholders, as their interests may appear. The Master Servicer shall remit all Foreclosure Profits to the Collection Account, to the extent not payable to the related Subservicer. Funds in the Collection Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with with, the Master Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesBonds. All such investments Funds in the Collection Account shall be made invested solely in Eligible Investments, designated in the name of the Indenture Trustee Trustee, which shall mature not later than the Business Day next preceding the third Business Day prior to each Payment Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income and gain realized from any such investment shall be for the benefit of the Noteholders, provided, however, that income earned on Master Servicer or the related Subservicer. The amount of any losses incurred with respect to any such Eligible Investments investments shall be for deposited in the account of Collection Account by the Master Servicer. Such funds shall be invested at In the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained by event the Indenture Trustee uninvested. The assumes the responsibilities of the Master Servicer under this Servicing Agreement upon a Servicing Default under Section 6.01, the Indenture Trustee shall be obligated entitled to cover losses on such Eligible Investmentsreimburse itself for Advances pursuant to Sections 3.07(a)(v), (viii) and (ix) prior to reimbursement of the terminated Master Servicer or any successor Master Servicer. (e) The Master Servicer will require each Subservicer to hold all funds constituting collections on the Mortgage Loans, pending remittance thereof to the Master Servicer, in one or more accounts in the name of the Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee. 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 Master Servicer no later than one the eighteenth (18th) day of each month, commencing on the eighteenth (18th) day of the month next following the Closing Date, or if such eighteenth (18th) day is not a Business Day, the first Business Day following receipt thereof and the Servicer shall deposit into the Collection Account any immediately preceding such remittances received from any Subservicer within one Business Day following receipt by the Servicereighteenth (18th) day.

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 Servicing 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 Servicing 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanNotes. 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 a Monthly Advance or shall cause the related Subservicer to make an advance a Monthly 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 a Monthly 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 Indenture Trustee Master Servicer and the Securities Administrator a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The Servicer shall provide to the Master Servicer a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The Servicer shall establish a segregated account in the name of the Indenture Trustee for the benefit of the Noteholders (the “Collection Protected Account”), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within two Business Days 48 hours following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments, of or interest on the Mortgage Loans (including advances by a Subservicer) 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 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller Sponsor pursuant to the Mortgage Loan Purchase Agreement, Agreement and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Mortgage Loan 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 Monthly Advance and any Compensating Interest payments; and; (vii) any other amounts received by the Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Protected Account pursuant to this Servicing Agreement; (viii) the amount of any losses incurred by the Servicer with respect to the investment of funds in the Protected Account; and (ix) all prepayment penalties received by the Servicer directly from Mortgagors or from the respective Subservicer. 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 Protected Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Protected Account fees (including annual fees or assumption fees) or late payment charges charges, payable by Mortgagors, each as further described in Section 5.153.15, or amounts received by the Subservicer Servicer for the accounts of Mortgagors for application towards the payment of taxes, insurance premiums, assessments and similar items, which amounts shall be deposited in the related Servicing Account pursuant to Section 3.08. In the event any amount not required to be deposited in the Collection Protected Account is so deposited, the Servicer may at any time (prior to being terminated under this Agreement) withdraw such amount from the Collection Protected Account, any provision herein to the contrary notwithstanding. The Servicer shall keep records that accurately reflect the funds on deposit in the Collection Protected Account that have been identified by it as being attributable to the Mortgage Loans and shall hold all collections in the Collection Protected Account for the benefit of the Indenture Trustee, Noteholders. The Servicer shall be entitled to retain all Foreclosure Profits and shall not be obligated to deposit any Foreclosure Profits in the Noteholders, as their interests may appearProtected Account. Funds in the Collection Protected Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with 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 Notes. All such investments Funds in the Protected Account shall be made invested solely in Eligible Investments, designated in the name of the Indenture Trustee for the benefit of the Noteholders, provided, however, that which shall mature not later than the Business Day next preceding the Servicer Remittance Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income earned on and gain realized from any such Eligible Investments investment shall be for the account of the Servicer. Such funds shall be invested at the written direction benefit of the Servicer or if the related Subservicer. The amount of any losses incurred with respect to any such investments shall be deposited in the Protected Account by the Servicer does not provide such written direction such funds shall be retained by on the Indenture Trustee uninvested. The Business Day prior to the Servicer shall be obligated to cover losses on such Eligible InvestmentsRemittance Date. (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 Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee for the benefit of the Noteholders. The related 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.

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 Each Master Servicer shall make its reasonable best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the related Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, will 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 AgreementFNMA-approved servicers. Consistent with the foregoing, the a Master Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, charge or assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan fee and (ii) suspend or temporarily reduce or permit to be suspended or temporarily reduced regular monthly payments Scheduled Payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage Loan. In the event the a Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments Scheduled Payments due on a related Mortgage Note, the related Master Servicer shall nonetheless make an a Monthly 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 Master Servicer or the related Subservicer to make an a Monthly Advance shall apply only to the extent that the Master Servicer believes, in good faith, that such advances are Monthly Advance is not a 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)Advance. (cb) Within five Business Days after A Master Servicer may not make any advances of amounts due in the Servicer has determined that all amounts which it expects future with respect to recover from or on account of a Liquidated Mortgage Loan have been recovered that it master services and that no further Liquidation Proceeds will be received shall not permit, except as permitted in connection therewithSection 3.08(a), the Servicer shall provide (i) any modification with respect to the Indenture Trustee a Note of a Servicing Officer that such Mortgage Loan became a Liquidated that would change the Mortgage Interest Rate, reduce or increase the principal balance (except for reductions resulting from actual payments of principal) or change the final maturity date on such 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 Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, 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 or, with respect to the Subsequent Mortgage Loans, the Subsequent 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 any modification, waiver or amendment of any term of such Mortgage Loan that would both (A) effect an exchange or reissuance of such Mortgage Loan under Section 1001 of the Mortgage Loans purchased by Code (or final, temporary or proposed Treasury regulations promulgated thereunder) and (B) cause any Series REMIC to fail to qualify as a REMIC under the Servicer pursuant to Section 5.18; (iii) Net Liquidation Proceeds; (iv) all proceeds Code or the imposition of any Mortgage Loans repurchased by tax on "prohibited transactions" or "contributions after the Seller pursuant to startup date" under the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.15, 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 Indenture Trustee, and the Noteholders, 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 Notes. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, 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 Indenture Trustee uninvested. The Servicer shall be obligated to cover losses on such Eligible InvestmentsREMIC Provisions. (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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage Loan. In the event the Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Servicer shall nonetheless make an Advance or shall cause the related Subservicer to make an advance to the same extent as if such installment were due, owing and delinquent and had not been deferred through liquidation of the Mortgaged Property; provided, however, that the obligation of the Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Servicer believes, in good faith, that such advances are not Nonrecoverable Advances. The Servicer shall pay the amount of any waived prepayment charge at the time of payoff if such prepayment charge was waived for a reason other than that specified in this Section 3.06(b). (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 Indenture Trustee a Note 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 Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]2006-[ ]3, Home Equity Loan Asset-Backed NotesCertificates, Series 20[ ]2006-[ ]3”, 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 applicable Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off 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 5.183.19; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller Sponsor pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.153.15, 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 Indenture Trustee, and the NoteholdersCertificateholders, 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 NotesCertificates. All such investments shall be made in the name of the Indenture Trustee for the benefit of the NoteholdersCertificateholders, 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 Indenture 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 Indenture 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.

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 Master Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required called for under the terms and provisions of the Mortgage Loans and shall followshall, 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, follow such collection procedures as it follows with respect to mortgage loans comparable to the Mortgage Loans held in its own portfolio and serviced by the Master Servicer. Consistent with the foregoing, the Master Servicer or the related Subservicer may in its discretion (ia) 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 charge and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change subject to Section 3.01, only upon determining that the loan rate, (c) forgive any payment coverage of principal or interest, (d) lessen the lien priority or (e) extend the final maturity date of a such Mortgage Loan past 12 months after the original maturity date on such by any related Primary Mortgage Loan. In the event the Servicer or related Subservicer shall consent to the deferment of Insurance Policy will not be affected, extend the due dates for payments due on a Mortgage NoteNote for a period not greater than 365 days, but in no event beyond the maturity date of any Mortgage Loan. In the event of any such arrangement described in clause (b) of the preceding sentence, the Master Servicer shall nonetheless continue to make an Advance or shall cause timely Monthly Advances on the related Subservicer Mortgage Loan, pursuant to make an advance and in accordance with Section 5.04 of this Agreement (but subject to any limitations contained therein), during the scheduled period in accordance with the amortization schedule of such Mortgage Loan without modification thereof by reason of such arrangements. The Master Servicer covenants and agrees that the Master Servicer shall waive a Prepayment Charge only under the following circumstances: (i) such waiver would, in the reasonable judgement of the Master Servicer, maximize recovery of total proceeds taking into account the value of such Prepayment Charge and the related Mortgage Loan and, if such waiver is made in connection with a refinancing of the related Mortgage Loan, such refinancing is related to a default or a reasonably foreseeable default, or (ii) such waiver is otherwise required by applicable law or, upon the advice of counsel to the same extent as if such installment were dueMaster Servicer, owing and delinquent and had not been deferred through liquidation of would expose the Mortgaged Property; provided, however, that the obligation of the Master 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)liability under applicable law. (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 Indenture Trustee a Note of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. (db) The Master 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 Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”and maintain, in which its name on behalf of the Certificateholders, the Custodial Account. The Master Servicer shall deposit or cause to be deposited any amounts representing payments on and any collections in respect of into the Mortgage Loans received by it after the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off Date (other than in respect of the payments referred to in the following paragraph) Custodial Account within two Business Days following of receipt thereofby the Master Servicer, including or receipt from the Sub- Servicers except as otherwise specifically provided herein, the following payments and collections received or made by it subsequent to the Cut-off Date (without duplicationother than in respect of principal of and interest and any other payments on the Mortgage Loans due on or before the Cut-off Date): (i) all payments on account of principal or interest principal, including Principal Prepayments, on the Mortgage Loans received by the Servicer directly from Mortgagors or from the respective SubservicerLoans; (ii) the aggregate Repurchase Price all payments on account of interest on the Mortgage Loans purchased by Loans, including Prepayment Charges, less the Servicer pursuant to Section 5.18Servicing Fee and the Excess Servicing Fee; (iii) Net all Insurance Proceeds and Liquidation Proceeds, other than proceeds to be applied to the restoration or repair of the Mortgaged Property or released to the Mortgagor in accordance with the Master Servicer's normal servicing procedures, net of Liquidation Expenses, unpaid servicing compensation and unreimbursed Monthly Advances; (iv) any amount of any losses required to be deposited by the Master Servicer pursuant to Section 3.07(c) in connection with any losses on Eligible Investments; (v) any amounts required to be deposited by the Master Servicer pursuant to Section 3.11 hereof; (vi) all proceeds of any purchase by the Originator or the Master Servicer, as the case may be, of any Mortgage Loans repurchased by or property acquired in respect of the Seller Mortgage Loans pursuant to the Purchase AgreementSections 2.01, 2.02, 2.03, 2.04, 3.12 or 10.01 hereof and all Substitution Adjustment any Replacement Amounts required to be deposited in connection with the substitution of an Eligible Substitute Replacement Mortgage Loan Loans pursuant to the Purchase Agreement; (v) Insurance ProceedsSections 2.01, other than Net Liquidation Proceeds2.02, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments2.03, 2.04 or 3.12 hereof; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Custodial Account pursuant to this Agreement; providedAgreement including, however, that with respect to each Due Periodwithout limitation, 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 5.15, 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 Indenture Trustee, and the Noteholders, 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 Notes. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, 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 Indenture 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 Indenture 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 therein 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 3.13

Collection of Mortgage Loan Payments. (a) The RMBS Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The RMBS 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 Servicing Agreement. Consistent with the foregoing, the RMBS 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 RMBS 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanNotes. In the event the RMBS Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the RMBS Servicer shall nonetheless make an a Monthly Advance or shall cause the related Subservicer to make an advance a Monthly 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 RMBS Servicer or the related Subservicer to make an a Monthly Advance shall apply only to the extent that the RMBS 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 RMBS 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 RMBS Servicer shall provide to the Indenture Trustee RMBS Master Servicer and the Securities Administrator a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The RMBS Servicer shall provide to the RMBS Master Servicer a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The RMBS Servicer shall establish a segregated account in the name of the Indenture Trustee for the benefit of the Noteholders (the “Collection Protected Account”), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the RMBS 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within two Business Days 48 hours following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments, of or interest on the Mortgage Loans (including advances by a Subservicer) received by the RMBS Servicer directly from Mortgagors or from the respective Subservicer; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the RMBS Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Mortgage Loan Purchase Agreement, Agreement and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Mortgage Loan 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 Monthly Advance and any Compensating Interest payments; and; (vii) any other amounts received by the RMBS Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Protected Account pursuant to this Servicing Agreement; (viii) the amount of any losses incurred by the RMBS Servicer with respect to the investment of funds in the Protected Account; and (ix) all prepayment penalties received by the RMBS Servicer directly from Mortgagors or from the respective Subservicer. provided, however, that with respect to each Due Period, the RMBS 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 Protected Account are exclusive, it being understood that, without limiting the generality of the foregoing, the RMBS Servicer need not deposit in the Collection Protected Account fees (including annual fees or assumption fees) or late payment charges charges, payable by Mortgagors, each as further described in Section 5.153.15, or amounts received by the Subservicer RMBS Servicer for the accounts of Mortgagors for application towards the payment of taxes, insurance premiums, assessments and similar items, which amounts shall be deposited in the related Servicing Account pursuant to Section 3.08. In the event any amount not required to be deposited in the Collection Protected Account is so deposited, the RMBS Servicer may at any time (prior to being terminated under this Agreement) withdraw such amount from the Collection Protected Account, any provision herein to the contrary notwithstanding. The RMBS Servicer shall keep records that accurately reflect the funds on deposit in the Collection Protected Account that have been identified by it as being attributable to the Mortgage Loans and shall hold all collections in the Collection Protected Account for the benefit of the Indenture Trustee, Noteholders. The RMBS Servicer shall be entitled to retain all Foreclosure Profits and shall not be obligated to deposit any Foreclosure Profits in the Noteholders, as their interests may appearProtected Account. Funds in the Collection Protected Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with with, the RMBS Servicer’s own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the Notes. All such investments Funds in the Protected Account shall be made invested solely in Eligible Investments, designated in the name of the Indenture Trustee for the benefit of the Noteholders, provided, however, that which shall mature not later than the Business Day next preceding the RMBS Servicer Remittance Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income earned on and gain realized from any such Eligible Investments investment shall be for the account benefit of the ServicerRMBS Servicer or the related Subservicer. Such funds The amount of any losses incurred with respect to any such investments shall be invested at deposited in the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained Protected Account by the Indenture Trustee uninvested. The RMBS Servicer shall be obligated on the Business Day prior to cover losses on such Eligible Investmentsthe RMBS Servicer Remittance Date. (e) The RMBS Servicer will require each Subservicer to hold all funds constituting collections on the Mortgage Loans, pending remittance thereof to the RMBS Servicer, in one or more accounts in the name of the Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee for the benefit of the Noteholders. The related 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.

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The Master 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 Servicing Agreement. Consistent with the foregoing, the Master 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 Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanBonds. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master 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 Master Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Master 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 Master 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 Master Servicer shall cause the related Subservicer to provide to the Indenture Trustee Master Servicer a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The Master Servicer shall provide to the Indenture Trustee a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The Master Servicer shall establish a segregated account in the name of the Indenture Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Master 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within one Business Day (two Business Days if the Subservicer is Countrywide Home Loans Servicing LP or an affiliate) following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments, of or interest on the Mortgage Loans (including advances by a Subservicer) received by the Master Servicer directly from Mortgagors or from the respective Subservicer, net of any portion of the interest thereof retained by the Subservicer as subservicing fees; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Master Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Mortgage Loan Sale and Contribution 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 Mortgage Loan Sale and Contribution Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing Agreement; . provided, however, that with respect to each Due Period, the Master 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 5.15, 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 Indenture Trustee, and the Noteholders, 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 Notes. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, 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 Indenture 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 Indenture 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.Due

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage Loan. In the event the Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Servicer shall nonetheless make an Advance or shall cause the related Subservicer to make an advance to the same extent as if such installment were due, owing and delinquent and had not been deferred through liquidation of the Mortgaged Property; provided, however, that the obligation of the Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Servicer believes, in good faith, that such advances are not Nonrecoverable Advances. The Servicer shall pay the amount of any waived prepayment charge at the time of payoff if such prepayment charge was waived for a reason other than that specified in this Section 3.06(b). (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 Indenture Trustee a Note 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, Deutsche Bank National AssociationTrust Company, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]2007-[ ]2, Home Equity Loan Asset-Backed NotesCertificates, Series 20[ ]2007-[ ]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 or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off 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 5.183.19; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller Sponsor pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.153.15, 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 Indenture Trustee, and the NoteholdersCertificateholders, 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 NotesCertificates. All such investments shall be made in the name of the Indenture Trustee for the benefit of the NoteholdersCertificateholders, 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 Indenture 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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it or its designee, which shall be designated in writing to each Subservicer, with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The Master 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 Servicing Agreement. Consistent with the foregoing, the Master 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 Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanNotes. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master 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; providedPROVIDED, howeverHOWEVER, that the obligation of the Master Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Master 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 Promptly, but no later than twenty Business Days after the Master 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 Master Servicer shall provide to the Indenture Trustee a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. (d) The Master Servicer shall establish a segregated account in the name of the Indenture Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Master Servicer shall deposit or cause to be deposited any amounts representing payments on and any collections in respect of the Initial Mortgage Loans received by it subsequent to the Cut-off Date and interest due after the Cut-Off off Date but received prior to the Cut-off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within two Business Days following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal or and interest on the Mortgage Loans received by the Master Servicer directly from Mortgagors or from the respective Subservicer, net of any portion of the interest thereof retained by the Subservicer as Subservicing Fees; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Master Servicer pursuant to Section 5.183.16; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Mortgage Loan 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 Mortgage Loan 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 (viiv) any other amounts received by the Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are or the Indenture Trustee required to be deposited in the Collection Account pursuant to this Servicing Agreement; provided. PROVIDED, howeverHOWEVER, that with respect to each Due Collection Period, the Master Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Collection Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Master Servicer need not deposit in the Collection Account fees (including annual fees or assumption fees) or late payment charges charge and prepayment penalties, payable by Mortgagors, each as further described in Section 5.15, or amounts received by the Subservicer for the accounts of Mortgagors for application towards the payment of taxes, insurance premiums, assessments and similar items3.13. In the event any amount not required to be deposited in the Collection Account is so deposited, the Master 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 Master 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 Owner Trustee, the Indenture Trustee, and the Noteholders, as their interests may appear. The Master Servicer shall retain all Foreclosure Profits. 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 Master Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the Notes. All such investments Funds in the Collection Account shall be made invested solely in Eligible Investments, designated in the name of the Indenture Trustee Trustee, which shall mature not later than the Business Day next preceding the third Business Day prior to each Payment Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income and gain realized from any such investment shall be for the benefit of the Noteholders, provided, however, that income earned on Master Servicer. The amount of any losses incurred with respect to any such Eligible Investments investments shall be for deposited in 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 Collection Account by the Indenture Trustee uninvested. The Servicer shall be obligated to cover losses on such Eligible InvestmentsMaster Servicer. (e) The Master Servicer will require each Subservicer to hold all funds constituting collections on the Mortgage Loans, pending remittance thereof to the ServicerMaster Servicer or its designee, which shall be designated in writing to each Subservicer, in one or more accounts in the name of the Indenture Trustee meeting the requirements of an Eligible Account, invested in Eligible Investments, and such funds shall not be investedin the name of the Indenture Trustee. 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 Master Servicer no later than one the eighteenth (18th) day of each month, commencing on the eighteenth (18th) day of the month next following the Cut-off Date, or if such eighteenth (18th) day is not a Business Day, the first Business Day following receipt thereof and the Servicer shall deposit into the Collection Account any immediately succeeding such remittances received from any Subservicer within one Business Day following receipt by the Servicereighteenth (18th) day.

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (cb) forgive any payment of principal or interest, (dc) lessen the lien priority or (ed) 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 Indenture Trustee a Note 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 Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]2004-[ ]1, Home Equity Loan Asset-Backed NotesCertificates, Series 20[ ]2004-[ ]1”, in which the Servicer shall deposit or cause to be deposited any amounts representing payments on and any collections in respect of the Mortgage Loans received by it after the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent 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 5.183.18 or by the Converted Loan Purchaser, pursuant to Section 3.20; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.153.15, 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 Indenture Trustee, and the NoteholdersCertificateholders, 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 NotesCertificates. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, provided, however, that income 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 Indenture 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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (cb) forgive any payment of principal or interest, (dc) lessen the lien priority or (ed) 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 Indenture Trustee Certificate Administrator a Note 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 in the name of the Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, 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 or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off 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 5.183.18 or by the Converted Loan Purchaser, pursuant to Section 3.20; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and; (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; . provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.153.15, 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 Indenture Trustee, and the NoteholdersCertificateholders, 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 DateInvestments, but shall not be commingled with the Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesCertificates. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, provided, however, that income 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 Indenture 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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Master Servicer will make remittances itself or will coordinate and monitor remittances by Subservicers Sub-Servicers to it the Trustee with respect to the Mortgage Loans in accordance with this Agreement. (b) The Master Servicer shall make its reasonable 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 Sub-Servicers 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 foregoingforegoing and subject to the provisions of Section 3.06(d), the Master 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, (ii) amend the terms of a Forbearance Plan or Bankruptcy Plan to enable the Mortgagor to satisfy its obligations under the related Mortgage Loan and (iiiii) 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 any Mortgagor for a scheduled liquidation of delinquenciesdelinquencies and with respect to Mortgage Loans which have defaulted or as to which default is reasonably foreseeable, take such other action, including, consistent with Sections 3.06(c) and 3.06(d), forgiving a portion of the Scheduled Principal Balance thereof; provided, however, that the Servicer any such modification, waiver 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 extension for any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend the final maturity date of a Mortgage Loan past shall be permitted only once per 12 months after month period, not to exceed three times in the original maturity date on such aggregate, unless otherwise agreed to by the Controlling Insurer. No fixed rate Mortgage Loan may be modified to become an adjustable rate Mortgage Loan. In certain instances relating to Bankruptcy Mortgage Loans, court approval may be required for modifications. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master Servicer shall nonetheless make an a Monthly Advance or shall cause the related Subservicer Sub-Servicer to make an advance (to the same extent as if such installment were due, owing and delinquent and had not been deferred deferred) through liquidation of the Mortgaged Property; provided, however, that the obligation of the Master Servicer or the related Subservicer to make an a Monthly Advance shall apply only to the extent that the Master 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 Notwithstanding anything in this Agreement to the contrary, the Master Servicer has determined that all may not make any advances of amounts which it expects coming due in the future with respect to recover from or on account of a Liquidated Mortgage Loan have been recovered and the Master Servicer shall not permit (i) any modification with respect to any Mortgage Loan that no further Liquidation Proceeds will be received in connection therewithwould change the Mortgage Interest Rate, reduce or increase the principal balance (except for reductions resulting from actual payments of principal), change the lien priority, the Servicer shall provide to original combined loan-to-value ratio or change the Indenture Trustee a Note of a Servicing Officer that final maturity date on such Mortgage Loan became (other than, with respect to Bankruptcy Mortgage Loans, as may be required by a Liquidated bankruptcy court or with respect to FHA Loans or VA Loans, as may be required by the FHA, HUD or the VA, as applicable, in connection with servicing regulations for such Mortgage Loans) or (ii) any modification, waiver or amendment of any term of any Mortgage Loan as that would both (A) effect an exchange or reissuance of such Mortgage Loan under Section 1001 of the date Code (or final, temporary or proposed Treasury regulations promulgated thereunder) and (B) cause the Trust Fund to fail to qualify as a REMIC under the Code or the imposition of such determinationany tax on "prohibited transactions" or "contributions after the startup date" under the REMIC Provisions. (d) The Servicer shall establish a segregated account Notwithstanding the foregoing, if (i) if the “Collection Account”), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for Mortgagor is in default with respect to the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”or such default is, in which the judgment of the Master Servicer, reasonably foreseeable, or (ii) the Master Servicer shall deposit delivers to the Trustee and each Certificate Insurer an Opinion of Counsel from counsel that has a national reputation with respect to taxation of REMICs, that a modification of a Mortgage Loan will not result in the imposition of taxes on or cause disqualify, any REMIC formed hereunder, the Master Servicer may, in its discretion, modify certain terms of the related Mortgage Loan in order to be deposited maximize the ultimate proceeds of such Mortgage Loan. Such modifications may include: (A) amending any amounts representing payments on Mortgage Note to reduce the Mortgage Rate applicable thereto (but in no event to lower than 7.00% per annum) and (B) amending any collections Mortgage Note to extend the maturity thereof (but in respect no event beyond December 2033) and (C) amending any Mortgage Loan to increase or reduce the Scheduled Principal Balance thereof. No more than 5.0% of the Cut-off Date Scheduled Principal Balance of the Mortgage Loans received shall be modified by it after the Cut-Off Date orMaster Servicer without the consent of the Controlling Insurer; provided, further, that any modifications contemplated by clause (A) or (C) shall be conditioned upon (1) the Master Servicer having first completed its customary economic analysis with respect to the Subsequent related Mortgage LoansNote, which economic analysis the Subsequent Cut-Off Date Master Servicer shall deliver to each Certificate Insurer, upon request, and (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; (ii2) the aggregate Repurchase Price of related Mortgagor having made six consecutive payments at the Mortgage Loans purchased by the Servicer pursuant to Section 5.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.15, 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 (modified rate prior to such rate reduction 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 Indenture Trustee, and the Noteholders, 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 Notes. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, 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 Indenture Trustee uninvested. The Servicer shall be obligated to cover losses on such Eligible Investmentsdeemed effective. (e) The At the time that the Master Servicer will require each Subservicer to hold all funds constituting collections on provides the Mortgage Loans, pending remittance thereof Loan Summary and Remittance Report to the ServicerTrustee and the Certificate Insurers pursuant to Section 6.07(d), in one or more accounts the Master Servicer shall also provide to the Trustee and the Certificate Insurers a certificate of a Servicing Officer with respect to all Mortgage Loans that became Liquidated Mortgage Loans in the name of the Indenture 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 Servicerprior month.

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The Master 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 Servicing Agreement. Consistent with the foregoing, the Master 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 Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanBonds. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master 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 Master Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Master 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 Master 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 Master Servicer shall cause the related Subservicer to provide to the Indenture Trustee Master Servicer a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The Master Servicer shall provide to the Indenture Trustee a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The Master Servicer shall establish a segregated account in the name of the Indenture Trustee (the “Collection Account”), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Master 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within two Business Days following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments and any prepayment charges, of or interest on the Mortgage Loans (including advances by a Subservicer) received by the Master Servicer directly from Mortgagors or from the respective Subservicer, net of any portion of the interest thereof retained by the Subservicer as subservicing fees; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Master Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Mortgage Loan 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 Mortgage Loan Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing Agreement; . provided, however, that with respect to each Due Period, the Master 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 Master Servicer need not deposit in the Collection Account fees (including annual fees or assumption fees) or late payment charges charges, payable by Mortgagors, each as further described in Section 5.153.15, 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 Master 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 Master 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 Indenture Owner Trustee, the Indenture Trustee and the NoteholdersBondholders, as their interests may appear. The Master Servicer shall remit all Foreclosure Profits to the Collection Account, to the extent not payable to the related Subservicer. Funds in the Collection Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with with, the Master Servicer’s own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesBonds. All such investments Funds in the Collection Account shall be made invested solely in Eligible Investments at the direction of the Master Servicer, designated in the name of the Indenture Trustee Trustee, which shall mature not later than the Business Day next preceding the third Business Day prior to each Payment Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income and gain realized from any such investment shall be for the benefit of the Noteholders, provided, however, that income earned on Master Servicer or the related Subservicer. The amount of any losses incurred with respect to any such Eligible Investments investments shall be for deposited in the account of Collection Account by the Master Servicer. Such funds shall be invested at In the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained by event the Indenture Trustee uninvested. The assumes the responsibilities of the Master Servicer under this Servicing Agreement upon a Servicing Default under Section 6.01, the Indenture Trustee shall be obligated entitled to cover losses on such Eligible Investmentsreimburse itself for Advances pursuant to Sections 3.07(a)(v), (viii) and (ix) prior to reimbursement of the terminated Master Servicer or any successor Master Servicer. (e) The Master Servicer will require each Subservicer to hold all funds constituting collections on the Mortgage Loans, pending remittance thereof to the Master Servicer, in one or more accounts in the name of the Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee. 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 Master Servicer no later than one the eighteenth (18th) day of each month, commencing on the eighteenth (18th) day of the month next following the Closing Date, or if such eighteenth (18th) day is not a Business Day, the first Business Day following receipt thereof and the Servicer shall deposit into the Collection Account any immediately preceding such remittances received from any Subservicer within one Business Day following receipt by the Servicereighteenth (18th) day.

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage Loan. In the event the Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Servicer shall nonetheless make an Advance or shall cause the related Subservicer to make an advance to the same extent as if such installment were due, owing and delinquent and had not been deferred through liquidation of the Mortgaged Property; provided, however, that the obligation of the Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Servicer believes, in good faith, that such advances are not Nonrecoverable Advances. The Servicer shall pay the amount of any waived prepayment charge at the time of payoff if such prepayment charge was waived for a reason other than that specified in this Section 3.06(b). (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 Indenture Trustee a Note 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 Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]2005-[ ]2, Home Equity Loan Asset-Backed NotesCertificates, Series 20[ ]2005-[ ]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 or, with respect to the Subsequent Mortgage Loans, the Subsequent 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 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.153.15, 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 Indenture Trustee, and the NoteholdersCertificateholders, 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 NotesCertificates. All such investments shall be made in the name of the Indenture Trustee for the benefit of the NoteholdersCertificateholders, 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 Indenture 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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage Loan. In the event the Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Servicer shall nonetheless make an Advance or shall cause the related Subservicer to make an advance to the same extent as if such installment were due, owing and delinquent and had not been deferred through liquidation of the Mortgaged Property; provided, however, that the obligation of the Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Servicer believes, in good faith, that such advances are not Nonrecoverable Advances. The Servicer shall pay the amount of any waived prepayment charge at the time of payoff if such prepayment charge was waived for a reason other than that specified in this Section 3.06(b). (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 Indenture Trustee a Note 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 Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]2005-[ ]3, Home Equity Loan Asset-Backed NotesCertificates, Series 20[ ]2005-[ ]3”, 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 or, with respect to the Subsequent Mortgage Loans, the Subsequent 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 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.153.15, 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 Indenture Trustee, and the NoteholdersCertificateholders, 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 NotesCertificates. All such investments shall be made in the name of the Indenture Trustee for the benefit of the NoteholdersCertificateholders, 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 Indenture 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 Indenture 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.

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 Servicing 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 Servicing 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 Bond Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (cb) forgive any payment of principal or interest, (dc) lessen the lien priority or (ed) extend the final maturity date of a Mortgage Loan past 12 months after prior to the original final maturity date on such Mortgage Loanthe Bonds. 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 (i) the Indenture Trustee a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination.determination and (ii) the Bond Insurer and the Indenture Trustee a Liquidation Report in the form attached hereto as Exhibit C. (d) The Servicer shall establish a segregated account in the name of the Indenture Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, 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 or, with respect subsequent to the Subsequent Mortgage Loans, the Subsequent 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 of 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 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Mortgage Loan 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 Mortgage Loan Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing 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 5.153.15, 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 Owner Trustee, the Indenture Trustee, the Bondholders and the NoteholdersBond Insurer, 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 DateInvestments, but shall not be commingled with the Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesBonds. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, provided, however, that income 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 Indenture 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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The Master 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 Servicing Agreement. Consistent with the foregoing, the Master 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 Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanNotes. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master Servicer shall nonetheless make an a Monthly Advance or shall cause the related Subservicer to make an advance a Monthly 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 Master Servicer or the related Subservicer to make an a Monthly Advance shall apply only to the extent that the Master 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 Master 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 Master Servicer shall cause the related Subservicer to provide to the Indenture Trustee Master Servicer a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The Master Servicer shall provide to the Indenture Trustee a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The Master Servicer shall establish a segregated account in the name of the Indenture Trustee for the benefit of the Noteholders (the “Collection Account”), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Master 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within two one Business Days Day following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments, of or interest on the Mortgage Loans (including advances by a Subservicer) received by the Master Servicer directly from Mortgagors or from the respective Subservicer; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Master Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Mortgage Loan 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 Mortgage Loan 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 Monthly Advance and any Compensating Interest payments; and (vii) any other amounts received by the Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing Agreement; . provided, however, that with respect to each Due Period, the Master Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Master 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 Master Servicer need not deposit in the Collection Account fees (including annual fees or assumption fees) or late payment charges charge and prepayment penalties, payable by Mortgagors, each as further described in Section 5.153.15, or amounts received by the Subservicer for the accounts of Mortgagors for application towards the payment of taxes, insurance premiums, assessments and similar items, which amounts shall be deposited in the related Servicing Account pursuant to Section 3.08. In the event any amount not required to be deposited in the Collection Account is so deposited, the Master 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 Master 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 Indenture Owner Trustee, the Indenture Trustee and the Noteholders, as their interests may appear. The Master Servicer shall remit all Foreclosure Profits to the Collection Account, to the extent not payable to the related Subservicer. Funds in the Collection Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with with, the Master Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the Notes. All such investments Funds in the Collection Account shall be made invested solely in Eligible Investments, designated in the name of the Indenture Trustee for the benefit of the Noteholders, provided, however, that which shall mature not later than the Business Day next preceding the Master Servicer Remittance Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income earned on and gain realized from any such Eligible Investments investment shall be for the account benefit of the Master Servicer or the related Subservicer. The amount of any losses incurred with respect to any such investments shall be deposited in the Collection Account by the Master Servicer. Such funds shall be invested at In the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained by event the Indenture Trustee uninvested. The assumes the responsibilities of the Master Servicer under this Servicing Agreement upon a Servicing Default under Section 6.01, the Indenture Trustee shall be obligated entitled to cover losses on such Eligible Investmentsreimburse itself for Monthly Advances pursuant to Sections 3.07(a)(v), (viii) and (ix) prior to reimbursement of the terminated Master Servicer or any successor Master Servicer. (e) The Master Servicer will require each Subservicer to hold all funds constituting collections on the Mortgage Loans, pending remittance thereof to the Master Servicer, in one or more accounts in the name of the Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee for the benefit of the Noteholders. The related 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.

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 Servicing 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 Servicing 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanNotes. 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 a Monthly Advance or shall cause the related Subservicer to make an advance a Monthly 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 a Monthly 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 Indenture Trustee Master Servicer and the Securities Administrator a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The Servicer shall provide to the Master Servicer a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The Servicer shall establish a segregated account in the name of the Indenture Trustee for the benefit of the Noteholders (the “Collection Protected Account”), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within two Business Days 48 hours following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments, of or interest on the Mortgage Loans (including advances by a Subservicer) 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 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Mortgage Loan Purchase Agreement, Agreement and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Mortgage Loan 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 Monthly Advance and any Compensating Interest payments; and; (vii) any other amounts received by the Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Protected Account pursuant to this Servicing Agreement; (viii) the amount of any losses incurred by the Servicer with respect to the investment of funds in the Protected Account; and (ix) all prepayment penalties received by the Servicer directly from Mortgagors or from the respective Subservicer. 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 Protected Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Protected Account fees (including annual fees or assumption fees) or late payment charges charges, payable by Mortgagors, each as further described in Section 5.153.15, or amounts received by the Subservicer Servicer for the accounts of Mortgagors for application towards the payment of taxes, insurance premiums, assessments and similar items, which amounts shall be deposited in the related Servicing Account pursuant to Section 3.08. In the event any amount not required to be deposited in the Collection Protected Account is so deposited, the Servicer may at any time (prior to being terminated under this Agreement) withdraw such amount from the Collection Protected Account, any provision herein to the contrary notwithstanding. The Servicer shall keep records that accurately reflect the funds on deposit in the Collection Protected Account that have been identified by it as being attributable to the Mortgage Loans and shall hold all collections in the Collection Protected Account for the benefit of the Indenture Trustee, Noteholders. The Servicer shall be entitled to retain all Foreclosure Profits and shall not be obligated to deposit any Foreclosure Profits in the Noteholders, as their interests may appearProtected Account. Funds in the Collection Protected Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with 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 Notes. All such investments Funds in the Protected Account shall be made invested solely in Eligible Investments, designated in the name of the Indenture Trustee for the benefit of the Noteholders, provided, however, that which shall mature not later than the Business Day next preceding the Servicer Remittance Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income earned on and gain realized from any such Eligible Investments investment shall be for the account of the Servicer. Such funds shall be invested at the written direction benefit of the Servicer or if the related Subservicer. The amount of any losses incurred with respect to any such investments shall be deposited in the Protected Account by the Servicer does not provide such written direction such funds shall be retained by on the Indenture Trustee uninvested. The Business Day prior to the Servicer shall be obligated to cover losses on such Eligible InvestmentsRemittance Date. (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 Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee for the benefit of the Noteholders. The related 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.

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The Master 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 Servicing Agreement. Consistent with the foregoing, the Master 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 Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanBonds. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master 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 Master Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Master 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 Master 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 Master Servicer shall cause the related Subservicer to provide to the Indenture Trustee Master Servicer a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The Master Servicer shall provide to the Indenture Trustee a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The Master Servicer shall establish a segregated account in the name of the Indenture Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Master 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within two Business Days following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments, of or interest on the Mortgage Loans (including advances by a Subservicer) received by the Master Servicer directly from Mortgagors or from the respective Subservicer, net of any portion of the interest thereof retained by the Subservicer as subservicing fees; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Master Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Mortgage Loan 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 Mortgage Loan Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing Agreement; . provided, however, that with respect to each Due Period, the Master 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 Master Servicer need not deposit in the Collection Account fees (including annual fees or assumption fees) or late payment charges charge and prepayment penalties, payable by Mortgagors, each as further described in Section 5.153.15, 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 Master 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 Master 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 Indenture Owner Trustee, the Indenture Trustee and the NoteholdersBondholders, as their interests may appear. The Master Servicer shall remit all Foreclosure Profits to the Collection Account, to the extent not payable to the related Subservicer. Funds in the Collection Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with with, the Master Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesBonds. All such investments Funds in the Collection Account shall be made invested solely in Eligible Investments at the direction of the Master Servicer, designated in the name of the Indenture Trustee Trustee, which shall mature not later than the Business Day next preceding the third Business Day prior to each Payment Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income and gain realized from any such investment shall be for the benefit of the Noteholders, provided, however, that income earned on Master Servicer or the related Subservicer. The amount of any losses incurred with respect to any such Eligible Investments investments shall be for deposited in the account of Collection Account by the Master Servicer. Such funds shall be invested at In the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained by event the Indenture Trustee uninvested. The assumes the responsibilities of the Master Servicer under this Servicing Agreement upon a Servicing Default under Section 6.01, the Indenture Trustee shall be obligated entitled to cover losses on such Eligible Investmentsreimburse itself for Advances pursuant to Sections 3.07(a)(v), (viii) and (ix) prior to reimbursement of the terminated Master Servicer or any successor Master Servicer. (e) The Master Servicer will require each Subservicer to hold all funds constituting collections on the Mortgage Loans, pending remittance thereof to the Master Servicer, in one or more accounts in the name of the Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee. 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 Master Servicer no later than one the eighteenth (18th) day of each month, commencing on the eighteenth (18th) day of the month next following the Closing Date, or if such eighteenth (18th) day is not a Business Day, the first Business Day following receipt thereof and the Servicer shall deposit into the Collection Account any immediately preceding such remittances received from any Subservicer within one Business Day following receipt by the Servicereighteenth (18th) day.

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (cb) forgive any payment of principal or interest, (dc) lessen the lien priority or (ed) 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 Indenture Trustee Certificate Administrator a Note 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 in the name of the Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, 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 or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off 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 5.183.18 or by the Converted Loan Purchaser, pursuant to Section 3.20; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and; (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; . provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.153.15, 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 Indenture Trustee, and the NoteholdersCertificateholders, 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 DateInvestments, but shall not be commingled with the Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesCertificates. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, provided, however, that income 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 Indenture 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 Indenture 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 ServicerServicer into the Collection Account.

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (cb) forgive any payment of principal or interest, (dc) lessen the lien priority or (ed) 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 Indenture Trustee Certificate Administrator a Note 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 in the name of the Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, 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 or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off 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 5.183.18 or by the Converted Loan Purchaser, pursuant to Section 3.20; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and; (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; . provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.153.15, 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 Indenture Trustee, and the NoteholdersCertificateholders, 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 DateInvestments, but shall not be commingled with the Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesCertificates. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, provided, however, that income 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 Indenture 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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (cb) forgive any payment of principal or interest, (dc) lessen the lien priority or (ed) 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 Indenture Trustee a Note 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 Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, 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 or, with respect to the Subsequent Mortgage Loans, the Subsequent 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 5.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.15, 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 Indenture Trustee, and the Noteholders, 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 Notes. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, 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 Indenture 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 Indenture 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.for

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The Master 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 Servicing Agreement. Consistent with the foregoing, the Master 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 Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanBonds. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master 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; providedPROVIDED, howeverHOWEVER, that the obligation of the Master Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Master 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 Master 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 Master Servicer shall cause the related Subservicer to provide to the Indenture Trustee Master Servicer a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The Master Servicer shall provide to the Indenture Trustee and the Bond Insurer a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The Master Servicer shall establish a segregated account in the name of the Indenture Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Master 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within two Business Days following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments, of or interest on the Mortgage Loans (including advances by a Subservicer) received by the Master Servicer directly from Mortgagors or from the respective Subservicer, net of any portion of the interest thereof retained by the Subservicer as subservicing fees; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Master Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Mortgage Loan 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 Mortgage Loan Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing Agreement; provided. PROVIDED, howeverHOWEVER, that with respect to each Due Period, the Master 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 Master Servicer need not deposit in the Collection Account fees (including annual fees or assumption fees) or late payment charges charge and prepayment penalties, payable by Mortgagors, each as further described in Section 5.153.15, 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 Master 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 Indenture Trustee, and the Noteholders, 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 Notes. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, 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 Indenture 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 Indenture 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.The

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage Loan. In the event the Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Servicer shall nonetheless make an Advance or shall cause the related Subservicer to make an advance to the same extent as if such installment were due, owing and delinquent and had not been deferred through liquidation of the Mortgaged Property; provided, however, that the obligation of the Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Servicer believes, in good faith, that such advances are not Nonrecoverable Advances. The Servicer shall pay the amount of any waived prepayment charge at the time of payoff if such prepayment charge was waived for a reason other than that specified in this Section 3.06(b). (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 Indenture Trustee a Note 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 Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]2005-[ ]4, Home Equity Loan Asset-Backed NotesCertificates, Series 20[ ]2005-[ ]4”, 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 or, with respect to the Subsequent Mortgage Loans, the Subsequent 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 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.153.15, 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 Indenture Trustee, and the NoteholdersCertificateholders, 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 NotesCertificates. All such investments shall be made in the name of the Indenture Trustee for the benefit of the NoteholdersCertificateholders, 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 Indenture 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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The Master 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 Servicing Agreement. Consistent with the foregoing, the Master 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 Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanBonds. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master 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 Master Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Master 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 Master 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 Master Servicer shall cause the related Subservicer to provide to the Indenture Trustee Master Servicer a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The Master Servicer shall provide to the Indenture Trustee a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The Master Servicer shall establish a segregated account in the name of the Indenture Trustee (the “(Collection Account”(), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Master 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within two Business Days following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments, of or interest on the Mortgage Loans (including Advances by a Subservicer) received by the Master Servicer directly from Mortgagors or from the respective Subservicer, net of any portion of the interest thereof retained by the Subservicer as subservicing fees; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Master Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Mortgage Loan 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 Mortgage Loan Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing Agreement; . provided, however, that with respect to each Due Period, the Master 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 Master Servicer need not deposit in the Collection Account fees (including annual fees or assumption fees) or late payment charges charge and prepayment penalties, payable by Mortgagors, each as further described in Section 5.153.15, 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 Master 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 Master 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 Indenture Owner Trustee, the Indenture Trustee and the NoteholdersBondholders, as their interests may appear. The Master Servicer shall remit all Foreclosure Profits to the Collection Account, to the extent not payable to the related Subservicer. Funds in the Collection Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with with, the Servicer’s Master Servicer(s own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesBonds. All such investments Funds in the Collection Account shall be made invested solely in Eligible Investments at the direction of the Master Servicer, designated in the name of the Indenture Trustee Trustee, which shall mature not later than the Business Day next preceding the third Business Day prior to each Payment Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income and gain realized from any such investment shall be for the benefit of the Noteholders, provided, however, that income earned on Master Servicer or the related Subservicer. The amount of any losses incurred with respect to any such Eligible Investments investments shall be for deposited in the account of Collection Account by the Master Servicer. Such funds shall be invested at In the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained by event the Indenture Trustee uninvested. The assumes the responsibilities of the Master Servicer under this Servicing Agreement upon a Servicing Default under Section 6.01, the Indenture Trustee shall be obligated entitled to cover losses on such Eligible Investmentsreimburse itself for Advances pursuant to Sections 3.07(a)(v), (viii) and (ix) prior to reimbursement of the terminated Master Servicer or any successor Master Servicer. (e) The Master Servicer will require each Subservicer to hold all funds constituting collections on the Mortgage Loans, pending remittance thereof to the Master Servicer, in one or more accounts in the name of the Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee. 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 Master Servicer no later than one the eighteenth (18th) day of each month, commencing on the eighteenth (18th) day of the month next following the Closing Date, or if such eighteenth (18th) day is not a Business Day, the first Business Day following receipt thereof and the Servicer shall deposit into the Collection Account any immediately preceding such remittances received from any Subservicer within one Business Day following receipt by the Servicereighteenth (18th) day.

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The Master 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 Servicing Agreement. Consistent with the foregoing, the Master 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 Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanBonds. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master 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 Master Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Master 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 Master 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 Master Servicer shall cause the related Subservicer to provide to the Indenture Trustee Master Servicer a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The Master Servicer shall provide to the Indenture Trustee a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The Master Servicer shall establish a segregated account in the name of the Indenture Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Master 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within one Business Day (two Business Days if the Subservicer is Countrywide or an affiliate) following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments, of or interest on the Mortgage Loans (including advances by a Subservicer) received by the Master Servicer directly from Mortgagors or from the respective Subservicer, net of any portion of the interest thereof retained by the Subservicer as subservicing fees; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Master Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Mortgage Loan Sale and Contribution 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 Mortgage Loan Sale and Contribution Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing Agreement; . provided, however, that with respect to each Due Period, the Master 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 Master Servicer need not deposit in the Collection Account fees (including annual fees or assumption fees) or late payment charges charge and prepayment penalties, payable by Mortgagors, each as further described in Section 5.153.15, 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 Master 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 Master 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 Indenture Owner Trustee, the Indenture Trustee and the NoteholdersBondholders, as their interests may appear. The Master Servicer shall remit all Foreclosure Profits to the Collection Account, to the extent not payable to the related Subservicer. Funds in the Collection Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with with, the Master Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesBonds. All such investments Funds in the Collection Account shall be made invested solely in Eligible Investments, designated in the name of the Indenture Trustee Trustee, which shall mature not later than the Business Day next preceding the third Business Day prior to each Payment Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income and gain realized from any such investment shall be for the benefit of the Noteholders, provided, however, that income earned on Master Servicer or the related Subservicer. The amount of any losses incurred with respect to any such Eligible Investments investments shall be for deposited in the account of Collection Account by the Master Servicer. Such funds shall be invested at In the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained by event the Indenture Trustee uninvested. The assumes the responsibilities of the Master Servicer under this Servicing Agreement upon a Servicing Default under Section 6.01, the Indenture Trustee shall be obligated entitled to cover losses on such Eligible Investmentsreimburse itself for Advances pursuant to Sections 3.07(a)(v), (viii) and (ix) prior to reimbursement of the terminated Master Servicer or any successor Master Servicer. (e) The Master Servicer will require each Subservicer to hold all funds constituting collections on the Mortgage Loans, pending remittance thereof to the Master Servicer, in one or more accounts in the name of the Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee. 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 Master Servicer no later than one the eighteenth (18th) day of each month, commencing on the eighteenth (18th) day of the month next following the Closing Date, or if such eighteenth (18th) day is not a Business Day, the first Business Day following receipt thereof and the Servicer shall deposit into the Collection Account any immediately preceding such remittances received from any Subservicer within one Business Day following receipt by the Servicereighteenth (18th) day.

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 Servicing 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 Servicing 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 Bond Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (cb) forgive any payment of principal or interest, (dc) lessen the lien priority or (ed) extend the final maturity date of a Mortgage Loan past 12 months after prior to the original final maturity date on such Mortgage Loanthe Bonds. 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 (i) the Indenture Trustee a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination.determination and (ii) the Bond Insurer and the Indenture Trustee a Liquidation Report in the form attached hereto as Exhibit C. (d) The Servicer shall establish a segregated account in the name of the Indenture Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, 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 or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off 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 of 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 5.18Sections 3.18 or 3.20; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Mortgage Loan 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 Mortgage Loan Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts all payments received by from the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in CAP Provider under the Collection Account CAP Agreements or from ML&Co 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 ML&Co Guaranty pursuant 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 5.15, 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 Indenture Trustee, and the Noteholders, 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 Notes. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, 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 Indenture 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 Indenture 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.terms thereof; and

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage Loan. In the event the Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Servicer shall nonetheless make an Advance or shall cause the related Subservicer to make an advance to the same extent as if such installment were due, owing and delinquent and had not been deferred through liquidation of the Mortgaged Property; provided, however, that the obligation of the Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Servicer believes, in good faith, that such advances are not Nonrecoverable Advances. The Servicer shall pay the amount of any waived prepayment charge at the time of payoff if such prepayment charge was waived for a reason other than that specified in this Section 3.06(b). (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 Indenture Trustee a Note 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 Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]2004-[ ]3, Home Equity Loan Asset-Backed NotesCertificates, Series 20[ ]2004-[ ]3”, 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 or, with respect to the Subsequent Mortgage Loans, the Subsequent 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 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.153.15, 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 Indenture Trustee, and the NoteholdersCertificateholders, 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 NotesCertificates. All such investments shall be made in the name of the Indenture Trustee for the benefit of the NoteholdersCertificateholders, 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 Indenture 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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage Loan. In the event the Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Servicer shall nonetheless make an Advance or shall cause the related Subservicer to make an advance to the same extent as if such installment were due, owing and delinquent and had not been deferred through liquidation of the Mortgaged Property; provided, however, that the obligation of the Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Servicer believes, in good faith, that such advances are not Nonrecoverable Advances. The Servicer shall pay the amount of any waived prepayment charge at the time of payoff if such prepayment charge was waived for a reason other than that specified in this Section 3.06(b). (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 Indenture Trustee a Note 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, Deutsche Bank National AssociationTrust Company, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]2006-[ ]5, Home Equity Loan Asset-Backed NotesCertificates, Series 20[ ]2006-[ ]5”, 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 applicable Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off 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 5.183.19; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller Sponsor pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.153.15, 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 Indenture Trustee, and the NoteholdersCertificateholders, 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 NotesCertificates. All such investments shall be made in the name of the Indenture Trustee for the benefit of the NoteholdersCertificateholders, 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 Indenture 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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (cb) forgive any payment of principal or interest, (dc) lessen the lien priority or (ed) 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 Indenture Trustee Certificate Administrator a Note 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 in the name of the Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, 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 or, with respect to the Subsequent Mortgage Loans, the Subsequent 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 5.183.18 or by the Converted Loan Purchaser, pursuant to Section 3.20; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.153.15, 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 Indenture Trustee, and the NoteholdersCertificateholders, 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 DateInvestments, but shall not be commingled with the Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesCertificates. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, provided, however, that income 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 Indenture 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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Servicer RMBS Subservicer will coordinate and monitor remittances by Subservicers subservicers to it with respect to the Mortgage Loans in accordance with this RMBS Subservicing Agreement. (b) The Servicer RMBS Subservicer 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 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 RMBS Subservicing Agreement. Consistent with the foregoing, the Servicer RMBS Subservicer or the related Subservicer 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 RMBS Subservicer or the related Subservicer 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanNotes. In the event the Servicer RMBS Subservicer or related Subservicer subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Servicer RMBS Subservicer shall nonetheless make an a Monthly Advance or shall cause the related Subservicer subservicer to make an advance a Monthly 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 RMBS Subservicer or the related Subservicer subservicer to make an a Monthly Advance shall apply only to the extent that the Servicer RMBS Subservicer 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 RMBS Subservicer 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 RMBS Subservicer shall provide to the Indenture Trustee RMBS Servicer, the RMBS Master Servicer and the Securities Administrator a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The RMBS Subservicer shall provide to the RMBS Servicer and the RMBS Master Servicer a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The Servicer RMBS Subservicer shall establish a segregated account in the name of the Indenture Trustee for the benefit of the Noteholders (the “Collection Protected Account”), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Servicer RMBS Subservicer 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within two Business Days 48 hours following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments, of or interest on the Mortgage Loans (including advances by a subservicer) received by the Servicer RMBS Subservicer directly from Mortgagors or from the respective Subservicersubservicer; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Servicer pursuant to Section 5.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller 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; (viii) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (viiv) any Monthly Advance and any Compensating Interest payments; and; (viiv) any other amounts received by the ServicerRMBS Subservicer, including all Foreclosure Profitsany fees or penalties not retained by a subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Protected Account pursuant to this RMBS Subservicing Agreement; (vi) the amount of any losses incurred by the RMBS Subservicer with respect to the investment of funds in the Protected Account; and (vii) all prepayment penalties received by the RMBS Subservicer directly from Mortgagors or from the respective subservicer. provided, however, that with respect to each Due Period, the Servicer RMBS Subservicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Subservicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Protected Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer RMBS Subservicer need not deposit in the Collection Protected Account fees (including annual fees or assumption fees) or late payment charges charges, payable by Mortgagors, each as further described in Section 5.153.15, or amounts received by the RMBS Subservicer for the accounts of Mortgagors for application towards the payment of taxes, insurance premiums, assessments and similar items, which amounts shall be deposited in the related Servicing Account pursuant to Section 3.08. In the event any amount not required to be deposited in the Collection Protected Account is so deposited, the Servicer RMBS Subservicer may at any time (prior to being terminated under this Agreement) withdraw such amount from the Collection Protected Account, any provision herein to the contrary notwithstanding. The Servicer RMBS Subservicer shall keep records that accurately reflect the funds on deposit in the Collection Protected Account that have been identified by it as being attributable to the Mortgage Loans and shall hold all collections in the Collection Protected Account for the benefit of the Indenture Trustee, Noteholders. The RMBS Subservicer shall be entitled to retain all Foreclosure Profits and shall not be obligated to deposit any Foreclosure Profits in the Noteholders, as their interests may appearProtected Account. Funds in the Collection Protected Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with with, the ServicerRMBS Subservicer’s own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the Notes. All such investments Funds in the Protected Account shall be made invested solely in Eligible Investments, designated in the name of the Indenture Trustee for the benefit of the Noteholders, provided, however, that which shall mature not later than the Business Day next preceding the RMBS Subservicer Remittance Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income earned on and gain realized from any such Eligible Investments investment shall be for the account benefit of the ServicerRMBS Subservicer or the related subservicer. Such funds The amount of any losses incurred with respect to any such investments shall be invested at deposited in the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained Protected Account by the Indenture Trustee uninvested. The Servicer shall be obligated RMBS Subservicer on the Business Day prior to cover losses on such Eligible Investmentsthe RMBS Subservicer Remittance Date. (e) The Servicer RMBS Subservicer will require each Subservicer subservicer to hold all funds constituting collections on the Mortgage Loans, pending remittance thereof to the ServicerRMBS Subservicer, in one or more accounts in the name of the Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee for the benefit of the Noteholders. The Subservicer related 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.

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The Master 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 Servicing Agreement. Consistent with the foregoing, the Master 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 Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanNotes. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master Servicer shall nonetheless make an a Monthly Advance or shall cause the related Subservicer to make an advance a Monthly 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; providedPROVIDED, howeverHOWEVER, that the obligation of the Master Servicer or the related Subservicer to make an a Monthly Advance shall apply only to the extent that the Master 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 Master 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 Master Servicer shall cause the related Subservicer to provide to the Indenture Trustee Master Servicer a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The Master Servicer shall provide to the Indenture Trustee a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The Master Servicer shall establish a segregated account in the name of the Indenture Trustee for the benefit of the Noteholders (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Master 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within two one Business Days Day following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments, of or interest on the Mortgage Loans (including advances by a Subservicer) received by the Master Servicer directly from Mortgagors or from the respective Subservicer; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Master Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Mortgage Loan 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 Mortgage Loan 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 Monthly Advance and any Compensating Interest payments; and (vii) any other amounts received by the Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing Agreement; provided. PROVIDED, howeverHOWEVER, that with respect to each Due Period, the Master Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Master 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 Master Servicer need not deposit in the Collection Account fees (including annual fees or assumption fees) or late payment charges charge and prepayment penalties, payable by Mortgagors, each as further described in Section 5.153.15, or amounts received by the Subservicer for the accounts of Mortgagors for application towards the payment of taxes, insurance premiums, assessments and similar items, which amounts shall be deposited in the related Servicing Account pursuant to Section 3.08. In the event any amount not required to be deposited in the Collection Account is so deposited, the Master 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 Master 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 Indenture Owner Trustee, the Indenture Trustee and the Noteholders, as their interests may appear. The Master Servicer shall remit all Foreclosure Profits to the Collection Account, to the extent not payable to the related Subservicer. Funds in the Collection Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with with, the Master Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the Notes. All such investments Funds in the Collection Account shall be made invested solely in Eligible Investments, designated in the name of the Indenture Trustee for the benefit of the Noteholders, provided, however, that which shall mature not later than the Business Day next preceding the Master Servicer Remittance Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income earned on and gain realized from any such Eligible Investments investment shall be for the account benefit of the Master Servicer or the related Subservicer. The amount of any losses incurred with respect to any such investments shall be deposited in the Collection Account by the Master Servicer. Such funds shall be invested at In the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained by event the Indenture Trustee uninvested. The assumes the responsibilities of the Master Servicer under this Servicing Agreement upon a Servicing Default under Section 6.01, the Indenture Trustee shall be obligated entitled to cover losses on such Eligible Investmentsreimburse itself for Monthly Advances pursuant to Sections 3.07(a)(v), (viii) and (ix) prior to reimbursement of the terminated Master Servicer or any successor Master Servicer. (e) The Master Servicer will require each Subservicer to hold all funds constituting collections on the Mortgage Loans, pending remittance thereof to the Master Servicer, in one or more accounts in the name of the Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee for the benefit of the Noteholders. The related 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.

Collection of Mortgage Loan Payments. (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement. (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage Loan. In the event the Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Servicer shall nonetheless make an Advance or shall cause the related Subservicer to make an advance to the same extent as if such installment were due, owing and delinquent and had not been deferred through liquidation of the Mortgaged Property; provided, however, that the obligation of the Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Servicer believes, in good faith, that such advances are not Nonrecoverable Advances. The Servicer shall pay the amount of any waived prepayment charge at the time of payoff if such prepayment charge was waived for a reason other than that specified in this Section 3.06(b5.06(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 Indenture Trustee a Note an Officer’s 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 Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]Trust, Series 2006-[ ]1, Home Equity Loan Asset-Backed Notes, Series 20[ ]2006-[ ]1”, in which the Servicer shall deposit or cause to be deposited any amounts representing payments on and any collections in respect of the Mortgage Loans received by it after the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off Date (other than in respect of the payments referred to in the following paragraph) within two Business Days (or such longer period of time due to exception item processing) 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 5.185.19; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller Sponsor pursuant to the Purchase this Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Qualified Substitute Mortgage Loan pursuant to the Purchase this Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.15, 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 Indenture Trustee, and the Noteholders, 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 Notes. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, 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 Indenture 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 Indenture 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.

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The Master 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 Servicing Agreement. Consistent with the foregoing, the Master 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 Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanBonds. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master 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, however that the obligation of the Master Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Master 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 Master 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 Master Servicer shall cause the related Subservicer to provide to the Indenture Trustee Master Servicer a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The Master Servicer shall provide to the Indenture Trustee a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (d) The Master Servicer shall establish a segregated account in the name of the Indenture Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Master 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 or, with respect due subsequent to the Subsequent Mortgage Loans, the Subsequent Cut-Off Date (other than in respect of the payments referred to in the following paragraph) within two Business Days following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments and prepayment charges thereon, of or interest on the Mortgage Loans (including advances by a Subservicer) received by the Master Servicer directly from Mortgagors or from the respective Subservicer, net of any portion of the interest thereof retained by the Subservicer as subservicing fees; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Master Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Mortgage Loan Sale and Contribution 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 Mortgage Loan Sale and Contribution Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing Agreement; . provided, however, that with respect to each Due Period, the Master 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 Master Servicer need not deposit in the Collection Account fees (including annual fees or assumption fees) or late payment charges charge penalties, payable by Mortgagors, each as further described in Section 5.153.15, 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 Master 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 Master 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 Indenture Owner Trustee, the Indenture Trustee and the NoteholdersBondholders, as their interests may appear. The Master Servicer shall remit all Foreclosure Profits to the Collection Account, to the extent not payable to the related Subservicer. Funds in the Collection Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with the Master Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesBonds. All such investments Funds in the Collection Account shall be made invested solely in Eligible Investments, designated in the name of the Indenture Trustee Trustee, which shall mature not later than the Business Day next preceding the third Business Day prior to each Payment Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income and gain realized from any such investment shall be for the benefit of the Noteholders, provided, however, that income earned on Master Servicer or the related Subservicer. The amount of any losses incurred with respect to any such Eligible Investments investments shall be for deposited in the account of Collection Account by the Master Servicer. Such funds shall be invested at In the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained by event the Indenture Trustee uninvested. The assumes the responsibilities of the Master Servicer under this Servicing Agreement upon a Servicing Default under Section 6.01, the Indenture Trustee shall be obligated entitled to cover losses on such Eligible Investmentsreimburse itself for Advances pursuant to Sections 3.07(a)(v), (viii) and (ix) prior to reimbursement of the terminated Master Servicer or any successor Master Servicer. (e) The Master Servicer will require each Subservicer to hold all funds constituting collections on the Mortgage Loans, pending remittance thereof to the Master Servicer, in one or more accounts in the name of the Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee. 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 Master Servicer no later than one the eighteenth (18th) day of each month, commencing on the eighteenth (18th) day of the month next following the Closing Date, or if such eighteenth (18th) day is not a Business Day, the first Business Day following receipt thereof and the Servicer shall deposit into the Collection Account any immediately preceding such remittances received from any Subservicer within one Business Day following receipt by the Servicereighteenth (18th) day.

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (ba) The Master 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 Servicing Agreement. Consistent with the foregoing, the Master 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 Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanBonds. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master 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; providedPROVIDED, howeverHOWEVER, that the obligation of the Master Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Master 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). (cb) Within five Business Days after the Master 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 Master Servicer shall cause the related Subservicer to provide to the Indenture Trustee Master Servicer a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. The Master Servicer shall provide to the Indenture Trustee and the Bond Insurer a monthly summary of each Mortgage Loan that became a Liquidated Mortgage Loan. (dc) The Master Servicer shall establish a segregated account in the name of the Indenture Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Master 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 due subsequent to the Cut-Off Date or, with respect to the Subsequent Mortgage Loans, the Subsequent Cut-Off off Date (other than in respect of the payments referred to in the following paragraph) within two Business Days following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments, of or interest on the Mortgage Loans (including advances by a Subservicer) received by the Master Servicer directly from Mortgagors or from the respective Subservicer, net of any portion of the interest thereof retained by the Subservicer as subservicing fees; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Master Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Mortgage Loan 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 Mortgage Loan Purchase Agreement; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing Agreement; provided. PROVIDED, howeverHOWEVER, that with respect to each Due Period, the Master 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 Master Servicer need not deposit in the Collection Account fees (including annual fees or assumption fees) or late payment charges charge and prepayment penalties, payable by Mortgagors, each as further described in Section 5.153.15, 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 Master 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 Master 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 Owner Trustee, the Indenture Trustee, the Bond Insurer and the NoteholdersBondholders, as their interests may appear. The Master Servicer shall remit all Foreclosure Profits to the Collection Account, to the extent not payable to the related Subservicer. Funds in the Collection Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with with, the Master Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesBonds. All such investments Funds in the Collection Account shall be made invested solely in Eligible Investments at the direction of the Master Servicer, designated in the name of the Indenture Trustee Trustee, which shall mature not later than the Business Day next preceding the third Business Day prior to each Payment Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income and gain realized from any such investment shall be for the benefit of the Noteholders, provided, however, that income earned on Master Servicer or the related Subservicer. The amount of any losses incurred with respect to any such Eligible Investments investments shall be for deposited in the account of Collection Account by the Master Servicer. Such funds shall be invested at In the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained by event the Indenture Trustee uninvested. The assumes the responsibilities of the Master Servicer under this Servicing Agreement upon a Servicing Default under Section 6.01, the Indenture Trustee shall be obligated entitled to cover losses on such Eligible Investmentsreimburse itself for Advances pursuant to Sections 3.07(a)(v), (viii) and (ix) prior to reimbursement of the terminated Master Servicer or any successor Master Servicer. (ed) The Master Servicer will require each Subservicer to hold all funds constituting collections on the Mortgage Loans, pending remittance thereof to the Master Servicer, in one or more accounts in the name of the Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee. 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 Master Servicer no later than one the eighteenth (18th) day of each month, commencing on the eighteenth (18th) day of the month next following the Closing Date, or if such eighteenth (18th) day is not a Business Day, the first Business Day following receipt thereof and the Servicer shall deposit into the Collection Account any immediately preceding such remittances received from any Subservicer within one Business Day following receipt by the Servicereighteenth (18th) day.

Collection of Mortgage Loan Payments. (a) The Master Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Servicing Agreement. (b) The Master 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 Servicing Agreement. Consistent with the foregoing, the Master 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 Master 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 Monthly Payments may not without be suspended during the twelve months prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend to the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage LoanBonds. In the event the Master Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Master 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; providedPROVIDED, howeverHOWEVER, that the obligation of the Master Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Master 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 Master 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 Master Servicer shall provide to the Indenture Trustee a Note certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination. (d) The Master Servicer shall establish a segregated account in the name of the Indenture Trustee (the “"Collection Account”"), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 20[ ]-[ ], Home Equity Loan Asset-Backed Notes, Series 20[ ]-[ ]”, in which the Master 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 or, with respect due subsequent to the Subsequent Mortgage Loans, the Subsequent Cut-Off Date (other than in respect of the payments referred to in the following paragraph) within two one Business Days Day following receipt thereofthereof (or otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal principal, including Principal Prepayments, of or interest on the Mortgage Loans (including advances by a Subservicer) received by the Master Servicer directly from Mortgagors or from the respective Subservicer, net of any portion of the interest thereof retained by the Subservicer as subservicing fees; (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Master Servicer pursuant to Section 5.183.18; (iii) Net Liquidation Proceeds; (iv) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Mortgage Loan Sale and Contribution Agreement and the Subsequent Mortgage Loan Sale and Contribution Agreement, as applicable, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Mortgage Loan Sale and Contribution Agreement and the Subsequent Mortgage Loan Sale and Contribution Agreement, as applicable; (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; (vi) any Advance and any Compensating Interest payments; and (vii) any other amounts received by the Master Servicer, including all Foreclosure Profitsany fees or penalties not retained by a Subservicer, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Servicing Agreement; provided. PROVIDED, howeverHOWEVER, that with respect to each Due Period, the Master Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Subservicing 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 Master Servicer need not deposit in the Collection Account fees (including annual fees or assumption fees) or late payment charges charge and prepayment penalties, payable by Mortgagors, each as further described in Section 5.153.15, 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 Master 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 Master 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 Indenture Owner Trustee, the Indenture Trustee and the NoteholdersBondholders, as their interests may appear. The Master Servicer shall remit all Foreclosure Profits to the Collection Account, to the extent not payable to the related Subservicer. Funds in the Collection Account may not be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Datewith, but and shall not be commingled with the Master Servicer’s 's own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the NotesBonds. All such investments Funds in the Collection Account shall be made invested solely in Eligible Investments, designated in the name of the Indenture Trustee Trustee, which shall mature not later than the Business Day next preceding the third Business Day prior to each Payment Date next following the date of such investment and shall not be sold or disposed of prior to maturity. All income and gain realized from any such investment shall be for the benefit of the Noteholders, provided, however, that income earned on Master Servicer or the related Subservicer. The amount of any losses incurred with respect to any such Eligible Investments investments shall be for deposited in the account of Collection Account by the Master Servicer. Such funds shall be invested at In the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained by event the Indenture Trustee uninvested. The assumes the responsibilities of the Master Servicer under this Servicing Agreement upon a Servicing Default under Section 6.01, the Indenture Trustee shall be obligated entitled to cover losses on such Eligible Investmentsreimburse itself for Advances pursuant to Sections 3.07(a)(v), (viii) and (ix) prior to reimbursement of the terminated Master Servicer or any successor Master Servicer. (e) The Master Servicer will require each Subservicer to hold all funds constituting collections on the Mortgage Loans, pending remittance thereof to the Master Servicer, in one or more accounts in the name of the Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be investedinvested in Eligible Investments, and in the name of the Indenture Trustee. 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 Master Servicer no later than one the eighteenth (18th) day of each month, commencing on the eighteenth (18th) day of the month next following the Closing Date, or if such eighteenth (18th) day is not a Business Day, the first Business Day following receipt thereof and the Servicer shall deposit into the Collection Account any immediately preceding such remittances received from any Subservicer within one Business Day following receipt by the Servicereighteenth (18th) day.