NFI Novastar Finl

KANSAS CITY, Mo., Aug. 17 /PRNewswire-FirstCall/ -- NovaStar Financial, Inc. (NYSE:NFI), a residential mortgage lender and portfolio investor, today announced a reduction in workforce to align its organization and costs with an expected reduction in loan originations. The employment reduction affects approximately 500 persons, about 37 percent of the Company's workforce. Subject to completion of the necessary legal notices and requirements, implementation will begin immediately and conclude during the fourth quarter of 2007. NovaStar continues to meet all loan commitments, and its servicing and portfolio management organizations are not affected by the reduction. Lance Anderson, President of NovaStar, commented: "During this challenging time in the housing market, NovaStar continues to honor its commitments while taking steps to adapt to industry-wide credit conditions and disruptions in capital markets. Our decision to reduce employment is painful but is required by market conditions and financial discipline. As we disclosed previously, the tighter guidelines and adjusted pricing we have adopted will reduce loan originations until the secondary market shows signs of normalizing. This reduction in force includes stepping back temporarily from pursuing new loans in the wholesale market, a decision we are also seeing among some of our peer companies. For now, we believe this is the right thing to do economically. Our retail channel will be the dominant source of new loans in the coming months. We will follow through on the funding of loans already approved through the wholesale channel." The reduction in workforce will affect NovaStar's headquarters in Kansas City and will lead to closing wholesale operation centers in California and Ohio. David A. Pazgan, who has led the Company's wholesale lending organization since 2004, most recently as President and CEO of NovaStar Mortgage, Inc. (a subsidiary of NovaStar Financial), will leave the company as part of the workforce reduction. "Dave is a dynamic leader who has made many great contributions since joining us 10 years ago. We will miss him, and wish him the very best in his future endeavors," Mr. Anderson said. His duties as CEO of NovaStar Mortgage will be assumed by Mr. Anderson. The Company estimates that the total pre-tax charge to earnings associated with this plan of termination will range between $17 million and $21 million, which is expected to be incurred in the third quarter of 2007. About NovaStar NovaStar Financial, Inc. (NYSE:NFI) is a specialty finance company that originates, purchases, securitizes, sells and invests in loans and mortgage-backed securities. The Company also services a large portfolio of residential loans. NovaStar is headquartered in Kansas City, Missouri, and has lending operations nationwide. For more information, please reference our website at http://www.novastarmortgage.com/. This Press Release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding management's beliefs, estimates, projections, and assumptions with respect to, among other things, our future operations, business plans and strategies, as well as industry and market conditions, all of which are subject to change at any time without notice. Actual results and operations for any future period may vary materially from those projected herein and from past results. Some important factors that could cause actual results to differ materially from those anticipated include: our ability to manage and operate our business during this difficult period for the subprime industry; our ability to consummate our recently announced transactions, including the rights offering and the transactions contemplated by the Standby Purchase Agreement, on their current terms; our ability to generate and maintain sufficient liquidity on favorable terms; the size, frequency and structure of our securitizations; our ability to originate and sell loans at a profit; impairments on our mortgage assets; increases in prepayment or default rates on our mortgage assets; increases in loan repurchase requests; changes in the types of products we offer; inability of potential borrowers to meet our underwriting guidelines; changes in assumptions regarding estimated loan losses and fair value amounts; our ability to improve and maintain effective internal control over financial reporting and disclosure controls and procedures in the future; finalization of the amount and terms of any severance provided to terminated employees; finalization of the accounting impact of our previously announced reduction in workforce; events impacting the subprime mortgage industry in general, including events impacting our competitors and liquidity available to the industry; the initiation of margin calls under our credit facilities; the ability of our servicing operations to maintain high performance standards and maintain appropriate ratings from rating agencies; our ability to generate acceptable origination volume while maintaining an acceptable level of overhead; residential property values; our continued status as a REIT and our compliance with laws and regulations applicable to REIT's; interest rate fluctuations on our assets that differ from our liabilities; our ability to acquire mortgage insurance at favorable prices or at all; the outcome of litigation or regulatory actions pending against us or other legal contingencies; our compliance with applicable local, state and federal laws and regulations or opinions of counsel relating thereto and the impact of new local, state or federal legislation or regulations or opinions of counsel relating thereto or court decisions on our operations; our ability to adapt to and implement technological changes; compliance with new accounting pronouncements; our ability to successfully integrate acquired businesses or assets with our existing business; the impact of general economic conditions; and the risks that are from time to time included in our filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2006, our quarterly reports on Form 10-Q for the periods ending March 31, 2007, and June 30, 2007. Other factors not presently identified may also cause actual results to differ. Words such as "believe," "expect," "anticipate," "promise," "plan," and other expressions or words of similar meanings, as well as future or conditional verbs such as "will," "would," "should," "could," or "may" are generally intended to identify forward-looking statements. This press release speaks only as of its date and we expressly disclaim any duty to update the information herein. DATASOURCE: NovaStar Financial, Inc. CONTACT: Media, Richard M. Johnson, +1-913-649-8885, for NovaStar Financial, Inc.; or Investors, Jeffrey A. Gentle, +1-816-237-7424 of NovaStar Financial, Inc. Web site: http://www.novastarmortgage.com/

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