NFI Novastar Finl

KANSAS CITY, Mo., Oct. 17 /PRNewswire-FirstCall/ -- NovaStar Financial, Inc. (NYSE:NFI), a residential mortgage portfolio manager, today announced that it has been advised by the staff of NYSE Regulation, Inc. that the company's Common Stock (ticker symbol: NFI) and its 8.90% Class C Cumulative Redeemable Preferred Stock (ticker symbol: NFI PR C) no longer meet applicable standards for continued listing on the New York Stock Exchange due to a previously announced change in the company's corporate structure. NovaStar intends to request a review of this determination and will explore alternative arrangements for the listing or quoting of its common and preferred stock. The company's securities are expected to continue to trade on the NYSE pending review of the NYSE's determination. There can be no assurances that the company will receive a favorable review of the staff's determination or, if its securities are delisted from the NYSE, that they will trade in another securities marketplace. On September 17, 2007, NovaStar announced a decision not to declare a dividend related to its 2006 taxable income, causing the company's status as a Real Estate Investment Trust (REIT) to terminate, retroactive to January 1, 2006. NovaStar now operates as a C corporation, and this change in corporate structure requires the Company to satisfy the criteria for original listing as a corporation. Given the current market capitalization of NovaStar and other factors, the NYSE has advised the company that it does not meet the original listing requirements for a corporation. Under NYSE procedures, a listed company has the right to a review of a staff determination by a Committee of the Board of Directors of NYSE. The request for review must be filed in writing within 10 business days after receiving the notice of the staff's determination. The company's understanding is that a suspension date will be announced by the NYSE if the company fails to properly request a review within the applicable 10-day period, if the Committee's review upholds the staff's determination, or if the Company is approved to begin trading in another securities marketplace. The NYSE has indicated that it may, at any time, suspend a security if it believes that continued dealings in the security on the NYSE are not advisable. About NovaStar NovaStar Financial, Inc. (NYSE:NFI) is a specialty finance company that focuses on single-family mortgage loans and mortgage-backed securities. NovaStar is headquartered in Kansas City, Missouri. 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 consummate the sale of substantially all of our mortgage servicing rights and servicing advances; our ability to continue the operation of our mortgage servicing business pending the sale of substantially all of our mortgage servicing rights and servicing advances; our ability to manage and operate our business during this difficult period for the subprime industry; our ability to effectively manage our portfolio and our brokering business in light of recent changes to our business and the subprime industry; our ability to continue as a "going concern"; the effect of our inability to consummate our recently announced transactions with MassMutual and Jefferies on our business; our ability to generate and maintain sufficient liquidity on favorable terms or at all; the impact of the loss of our REIT status as of January 1, 2006, on our financial statements, liquidity and covenants under certain of our financing agreements; our ability to obtain necessary waivers of, or amendments to, covenants contained in our financing agreements; the impact of the sale of our mortgage servicing rights and servicing advances on our financial statements; our ability to recommence our wholesale business or expand our retail business if market conditions improve; our ability to remain listed on the NYSE; our ability to originate and sell loans at a profit and under favorable terms, or at all, under the current circumstances; impairments on our mortgage assets; increases in prepayment or default rates on our mortgage assets; increases in loan repurchase requests; our ability to use our net loss carryforwards and net unrealized built-in losses; 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; our ability to operate effectively with a reduced workforce; finalization of the amount and terms of any severance provided to terminated employees; finalization of the accounting impact of our previously announced reductions 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 income while maintaining an acceptable level of overhead; residential property values; interest rate fluctuations on our assets that differ from our liabilities; the outcome of litigation or regulatory actions pending against us or other legal contingencies, including the outcome of the previously disclosed California case; 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; 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," "intend" 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 Relations, Richard M. Johnson, +1-913-649-8885, or Investor Relations, Jeffrey A. Gentle, +1-816-237-7424, both of NovaStar Financial, Inc. Web site: http://www.novastarmortgage.com/

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