Exhibit 4.2
Acknowledgement and Assignment
Agreement
This Acknowledgement and Assignment
Agreement is dated as of September 18, 2006 (this “
Agreement ”) and relates to NovaStar Mortgage Funding
Trust, Series 2005-3 (the “ Trust ”), which was
created pursuant to the Pooling and Servicing Agreement dated as of
September 1, 2005 (the “ Agreement ”) by
and among NovaStar Mortgage Funding Corporation, as Company (the
“ Company ”), NovaStar Mortgage, Inc., as
Servicer and as Seller (the “ Servicer ” and the
“ Seller ”), U.S. Bank National Association
(f/k/a Wachovia Bank, National Association) as Custodian (the
“ Custodian ”), J.P. Morgan Chase Bank, National
Association as Trustee (the “Trustee”) and J.P. Morgan
Trust Company, National Association, as Co-Trustee (the “
Co-Trustee ”) Capitalized terms used herein and not
otherwise defined herein shall have their respective meanings as
set forth in the Agreement.
Section 11.01(a), second, third
and fourth paragraphs, of the Agreement provide as
follows:
The Servicer may, at its option,
terminate this Agreement on any date on which the aggregate of the
Principal Balances of the Mortgage Loans on such date is equal to
or less than 10% of the Maximum Collateral Amount, by purchasing,
on the next succeeding Distribution Date, all of the outstanding
Mortgage Loans and REO Properties at a price equal to the greater
of the Principal Balance of the Mortgage Loans and REO Properties
or the market value of the Mortgage Loans and REO Properties, in
each case plus accrued and unpaid interest thereon at the weighted
average of the Mortgage Rates through the end of the Due Period
preceding the final Distribution Date plus unreimbursed Servicing
Advances, Advances, any unpaid Servicing Fees allocable to such
Mortgage Loans and REO Properties, any accrued and unpaid Available
Funds Cap Shortfall Amount and Available Funds Cap Carryforward
Amount (without duplication of amounts already paid) and any unpaid
amount due the Trustee, the Swap Counterparties, the Cap
Counterparties and the Custodian under this Agreement;
provided , however , that in no event shall such
price be less than the amount necessary to pay the sum of
(i) 100% of the aggregate Certificate Principal Balance of
e
