NovaStar Mortgage Funding Trust, Series 2005-1
Not Applicable.
Not Applicable.
None.
Not Applicable.
The Registrant is not aware of any material legal proceeding with          respect to, the Company, the Servicer, the Trustee, in each case if          applicable, as related to the Trust.
None.  PART II
Currently,   there  is   no  established   secondary   market  for  the          Certificates  known to  the  Registrant.  As of December 31, 2005,  the          number of  holders of each class of offered  certificates  was 62 based          on records  provided by The Depository Trust Company.
Not Applicable.
Not Applicable.
Not Applicable.
Not Applicable.
There was no change of accountants or disagreement with accountants on          any matter of accounting principles or practices or financial          disclosure.
Not Applicable.
Not Applicable.                                        -2-    PART III
Not Applicable.
Not Applicable.
Not Applicable.
No reportable transactions have occurred.
Not applicable.  PART IV
(a) The following documents are filed as part of this report:      (1)  Financial Statements:           Not Applicable.      (2)  Financial Statement Schedules:           Not Applicable.      (3)  Exhibits:           Rule 13a-14(a)/15d-14(a) Certification, filed as Exhibit 31.1 hereto.           Report of Independent Registered Public Accounting Firm          with Management Assertion, filed as Exhibit 99.1 hereto.           Annual Statement as to Compliance, filed as Exhibit 99.2 hereto.  (b)  The exhibits required to be filed by Registrant pursuant to Item 601 of      Regulation S-K are listed above and in the Exhibit Index that immediately      follows the signature page hereof.  (c)  Not Applicable.                                         -3-     SIGNATURE  Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange Act of 1934,  the  registrant  has duly  caused  this report to be signed on its behalf by the undersigned thereunto duly authorized.                               NovaStar Mortgage Funding Corporation                          By:  /s/  Gregory S. Metz                              -----------------------------                       Name:  Gregory S. Metz                      Title:  Senior Vice President                       Date:  March 29, 2006                                          -4-   SUPPLEMENTAL  INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT.  The  registrant  has not sent an annual report or proxy material to its security holders.  The registrant  will not be sending an annual report or proxy material to its security holders subsequent to the filing of this form.                                        -5-                                      EXHIBIT INDEX  Exhibit  Description  31.1     Rule 13a-14(a)/15d-14(a) Certification  99.1     Report of Independent Registered Public Accounting Firm          with Management Assertion           NovaStar Mortgage, Inc.  99.2     Annual Statement as to Compliance           NovaStar Mortgage, Inc.                                          -6-                                     Exhibit 31.1                  Annual Rule 13a-14(a)/15d-14(a) Certification                                   -----------                                  CERTIFICATION                  NovaStar Mortgage Funding Trust, Series 2005-1         NovaStar Home Equity Loan Asset-Backed Certificates, Series 2005-1                    I, Gregory S. Metz, certify that:  1.   I have reviewed  this annual  report on Form 10-K,  and all reports on Form      8-K  containing  distribution  and  servicing  reports  filed in respect of      periods  included  in the year  covered  by this  annual  report,  NovaStar      Mortgage   Funding   Trust,   Series  2005-1   NovaStar  Home  Equity  Loan      Asset-Backed Certificates, Series 2005-1 (the "Trust");  2.   Based on my knowledge,  the information in these reports, taken as a whole,      does not contain any untrue statement of a material fact or omit to state a      material  fact  necessary  to make  the  statements  made,  in light of the      circumstances  under which such  statements were made, not misleading as of      the last day of the period covered by this annual report;  3.   Based on my knowledge, the distribution information required to be prepared      by the Trustee based upon the servicing information required to be provided      by each Servicer  under the Pooling and Servicing  Agreement is included in      these reports;  4.   Based on my knowledge and upon the annual compliance statements included in      the report and required to be delivered to the Trustee in  accordance  with      the terms of the Pooling and Servicing  Agreement,  and except as disclosed      in the report, the Servicer has fulfilled its obligations under the Pooling      and Servicing Agreement; and  5.   The  reports  disclose  all  significant   deficiencies  relating  to  each      Servicer's  compliance with the minimum servicing  standards based, in each      case, upon the report provided by an independent public  accountant,  after      conducting  a review in  compliance  with the  Uniform  Single  Attestation      Program  for  Mortgage  Bankers  or  similar  standard  as set forth in the      Pooling and Servicing Agreement, that is included in these reports.  In giving the  certifications  above,  I have  reasonably  relied on information provided to me by the following  parties:  NovaStar  Mortgage,  Inc., as Seller, Wachovia Bank, N.A. as Custodian and JPMorgan Chase Bank, as Trustee.                           NovaStar Mortgage Funding Corporation                            By:  /s/  Gregory S. Metz                                -----------------------------                         Name:  Gregory S. Metz                        Title:  Senior Vice President                         Date:  March 29, 2006                                         -7-                                      EXHIBIT 99.1             Report of Independent Registered Public Accounting Firm                            with Management Assertion                                 ---------------   REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  To the Board of Directors of NovaStar Mortgage, Inc. and subsidiaries Kansas City, Missouri       We have examined  management's  assertion that NovaStar  Mortgage,  Inc. (a wholly  owned  subsidiary  of NovaStar  Financial,  Inc.) (the  "Company"),  has complied as of and for the year ended  December 31, 2005,  with its  established minimum servicing standards described in the accompanying Management's Assertion dated March 22, 2006.  Management is  responsible  for the Company's  compliance with those minimum  servicing  standards.  Our  responsibility  is to express an opinion on management's  assertion about the Company's  compliance  based on our examination.       Our  examination  was conducted in accordance  with  attestation  standards established  by the  American  Institute  of Certified  Public  Accountants,  as adopted by the  Public  Company  Accounting  Oversight  Board and,  accordingly, included  examining,  on a test basis,  evidence about the Company's  compliance with its minimum servicing standards and performing such other procedures, as we considered  necessary  in the  circumstances.  We believe  that our  examination provides a reasonable basis for our opinion.  Our examination does not provide a legal  determination  on the  Company's  compliance  with its minimum  servicing standards.       In our opinion,  management's  assertion that the Company complied with the aforementioned minimum servicing standards as of and for the year ended December 31, 2005, is fairly stated, in all material respects,  based on the criteria set forth in Appendix I.   /s/ Deloitte & Touche, LLP - -------------------------------- March 22, 2006                                         -8-    NovaStar Mortgage, Inc. 8140 Ward Parkway Suite 300 Kansas City, Missouri  64114   MANAGEMENT'S ASSERTION  March 28, 2005       As of and for the year ended  December 31, 2004,  NovaStar  Mortgage,  Inc. (the "Company") (a wholly owned  subsidiary of NovaStar  Financial,  Inc.),  has complied,  in all material  respects,  with the  Company's  established  minimum servicing standards for single-family residential mortgage loans as set forth in Appendix I (the  "Standards").  The Standards are based on the Mortgage  Bankers Association  of  America's  Uniform  Single  Attestation  Program  for  Mortgage Bankers.       As of and for this same period,  the Company had in effect a fidelity  bond in the amount of $3,000,000  and errors and omissions  coverage in the amount of $5,000,000 on any one mortgage.  Sincerely,  /s/ W. Lance Anderson - ----------------------- W. Lance Anderson President  /s/ Gregory S. Metz - ----------------------- Gregory S. Metz Senior Vice President and Secretary   /s/ Christopher S. Miller - ------------------------- Christopher S. Miller Senior Vice President                                        -9-   NOVASTAR MORTGAGE, INC.  APPENDIX I - MINIMUM SERVICING STANDARDS AS SET FORTH IN THE MORTGAGE BANKERS ASSOCIATION OF AMERICA'S UNIFORM SINGLE ATTESTATION PROGRAM FOR MORTGAGE BANKERS   I.   CUSTODIAL BANK ACCOUNTS       1.   Reconciliations shall be prepared on a monthly basis for all custodial           bank   accounts   and   related   bank   clearing   accounts.    These           reconciliations shall:            .    Be mathematically accurate            .    Be prepared within forty-five (45) calendar days after the cutoff                date            .    Be reviewed and approved by someone other than the person who                prepared the reconciliation            .    Document explanations for reconciling items. These reconciling                items shall be resolved within ninety (90) calendar days of                their original identification.       2.   Funds of the  servicing  entity shall be advanced in cases where there           is an overdraft in an investor's or a mortgagor's account.        3.   Each  custodial  account shall be  maintained  at a federally  insured           depository institution in trust for the applicable investor.       4.   Escrow  funds held in trust for a  mortgagor  shall be returned to the           mortgagor  within  thirty (30) calendar days of payoff of the mortgage           loan.  II.    MORTGAGE PAYMENTS       1.   Mortgage  payments shall be deposited into the custodial bank accounts           and  related  bank  clearing  accounts  within  two  business  days of           receipt.       2.   Mortgage  payments  made  in  accordance  with  the  mortgagor's  loan           documents shall be posted to the applicable  mortgagor  records within           two business days of receipt.       3.   Mortgage   payments   shall  be  allocated  to  principal,   interest,           insurance,  taxes,  or  other  escrow  items  in  accordance  with the           mortgagor's loan documents.       4.   Mortgage  payments  identified  as loan payoffs  shall be allocated in           accordance with the mortgagor's loan documents.  III.   DISBURSEMENTS       1.   Disbursements  made via wire  transfer  on  behalf of a  mortgagor  or           investor shall be made only by authorized personnel.       2.   Disbursements  made on  behalf of a  mortgagor  or  investor  shall be           posted  within two  business  days to the  mortgagor's  or  investor's           records maintained by the servicing entity.       3.   Tax and insurance  payments  shall be made on or before the penalty or           insurance  policy  expiration  dates,  as  indicated  on tax bills and           insurance  premium notices,  respectively,  provided that such support           has  been  received  by the  servicing  entity  at least  thirty  (30)           calendar days prior to these dates.       4.   Any late payment penalties paid in conjunction with the payment of any           tax bill or insurance  premium notice shall be paid from the servicing           entity's  funds and not  charged  to the  mortgagor,  unless  the late           payment was due to the mortgagor's error or omission.       5.   Amounts  remitted to investors  per the  servicer's  investor  reports           shall  agree  with  cancelled  checks,  or other form of  payment,  or           custodial bank statements.       6.   Unused  checks  shall be  safeguarded  so as to  prevent  unauthorized           access.  IV.    INVESTOR ACCOUNTING AND REPORTING       1.   The servicing entity's investor reports shall agree with, or reconcile           to,  investors'  records  on a monthly  basis as to the  total  unpaid           principal  balance  and  number  of loans  serviced  by the  servicing           entity.  V.     MORTGAGOR LOAN ACCOUNTING       1.   The  servicing  entity's  mortgage  loan records  shall agree with, or           reconcile  to, the records of  mortgagors  with  respect to the unpaid           principal balance on a monthly basis.       2.   Adjustments  on ARM  loans  shall be  computed  based  on the  related           mortgage note and any ARM rider.       3.   Escrow accounts shall be analyzed,  in accordance with the mortgagor's           loan documents, on at least an annual basis.       4.   Interest on escrow accounts shall be paid, or credited,  to mortgagors           in accordance with the applicable state laws.  VI.    DELINQUENCIES       1.   Records documenting  collection efforts shall be maintained during the           period a loan is in default  and shall be  updated  at least  monthly.           Such records  shall  describe the entity's  activities  in  monitoring           delinquent  loans  including,  for example,  phone calls,  letters and           mortgage payment  rescheduling plans in cases where the delinquency is           deemed temporary (e.g., illness or unemployment).  VII.   INSURANCE POLICIES       1.   A fidelity bond and errors and omissions  policy shall be in effect on           the servicing entity  throughout the reporting period in the amount of           coverage represented to investors in management's assertion.                                        -10-                                      EXHIBIT 99.2                        Annual Statement as to Compliance                                  --------------                               NOVASTAR MORTGAGE, INC.                              CERTIFICATE OF OFFICERS                                   March 22, 2006      Christopher  S.  Miller,  Senior  Vice  President  of  Servicing  (Servicing Officer) and Gregory S. Metz, Senior Vice President and Chief Financial Officer, of NovaStar Mortgage,  Inc., a Virginia  corporation,  (Servicer) hereby certify the following:  (i)  We have  performed a review of the  activities  of the Servicer  during the      preceding  calendar  year and  performance  under the  various  Pooling and      Servicing  Agreements (see attached  Exhibit A) to which we are a party has      been made under our supervision,  (ii) To the  best of our  knowledge,  based on such  review,  the  Servicer  has      fulfilled its obligations under this Agreement in all material respects for      such year,  and, there has been no default in the fulfillment of any of its      obligations, and  (iii)No Subservicers have performed any duties on behalf of NovaStar Mortgage,      Inc.   /s/  Christopher S. Miller - --------------------------------------- Christopher S. Miller Senior Vice President of Servicing (Servicing Officer)  /s/  Gregory S. Metz - ------------------------------------------------ Gregory S. Metz Senior Vice President and Chief Financial Officer    NovaStar Mortgage, Inc. Exhibit A to Certificate of Officers March 22, 2006 - -----------------------------------------------  Servicing Agreement                                 Date of Pooling Description  NovaStar Mortgage Funding Trust, Series 2000-1          March 1, 2000 NovaStar Mortgage Funding Trust, Series 2000-2          September 1, 2000 NovaStar Mortgage Funding Trust, Series 2001-1          March 1, 2001 NovaStar Mortgage Funding Trust, Series 2001-2          September 1, 2001 NovaStar Mortgage Funding Trust, Series 2002-1          March 1, 2002 NovaStar Mortgage Funding Trust, Series 2002-2          June 1, 2002 NovaStar Mortgage Funding Trust, Series 2002-3          September 1, 2002 NovaStar Mortgage Funding Trust, Series 2003-1          February 1, 2003 NovaStar Mortgage Funding Trust, Series 2003-2          June 1, 2003 NovaStar Mortgage Funding Trust, Series 2003-3          September 1, 2003 NovaStar Mortgage Funding Trust, Series 2003-4          November 1, 2003 NovaStar Mortgage Funding Trust, Series 2004-1          March 1, 2004 NovaStar Mortgage Funding Trust, Series 2004-2          June 1, 2004 NovaStar Mortgage Funding Trust, Series 2004-3          September 1, 2004 NovaStar Mortgage Funding Trust, Series 2004-4          November 1, 2004 NovaStar Mortgage Funding Trust, Series 2005-1          February 1, 2005 NovaStar Mortgage Funding Trust, Series 2005-2          May 1, 2005 NovaStar Mortgage Funding Trust, Series 2005-3          September 1, 2005 NovaStar Mortgage Funding Trust, Series 2005-4          December 1, 2005                                        -11-    -----END PRIVACY-ENHANCED MESSAGE-----