November 23, 2014 10:56 AM ET

Capital Markets

Company Overview of Novastar Mortgage Inc.

Company Overview

Novastar Mortgage Inc. is a mortgage company that invests in and lends residential mortgage loans. It focuses on single-family loans and provides servicing for loans, title and settlement services, as well as risk management services. The company operates through independent brokers and regional offices. Novastar Mortgage Inc. was founded in 1996 and is based in Kansas City, Missouri. Novastar Mortgage Inc. operates as a subsidiary of Novastar Financial Inc.

8140 Ward Parkway

Suite 300

Kansas City, MO 64114-2006

United States

Founded in 1996



Key Executives for Novastar Mortgage Inc.

Age: 53
Senior Vice President of National Sales Manager
Senior Vice President of Wholesale Operations
Chief Credit Officer
Vice Chairman and Director
Age: 54
Compensation as of Fiscal Year 2014.

Novastar Mortgage Inc. Key Developments

Federal Appeals Court Reinstates a Class-Action Lawsuit Against Representatives of Novastar Mortgage, Royal Bank of Scotland, Deutsche Bank

A federal appeals court has reinstated a class-action lawsuit that charges a defunct subprime lender and several banks with misleading investors in the run-up to the financial crisis. The suit by the New Jersey Carpenters Health Fund against representatives of NovaStar Mortgage, Royal Bank of Scotland, Deutsche Bank and other defendants can continue, the U.S. Court of Appeals for 2nd Circuit ruled on Friday. The ruling overturned a decision last year by the U.S. District Court on Manhattan that dismissed the lawsuit for failing to state a claim that the defendants' conduct in connection with the sale of roughly $1.3 billion in residential mortgage-backed securities violated U.S. securities laws. The trial court also said the pension fund could not bring a lawsuit in connection with securities in which it had not invested. The lawsuit stems from an investment of $100,000 in 2007 by the fund in one of six trusts of securities backed by mortgage loans that NovaStar had originated. Deutsche Bank, Royal Bank of Scotland and other financial institutions underwrote and sold each of the trusts. The fund charged that the underwriters failed to tell investors that NovaStar had allegedly abandoned underwriting guidelines the company told investors it followed. The fund based its allegations on decisions by both Moody's and Standard & Poor's to lower their ratings on the securities significantly and what the fund charged was an unusually large percentage of the mortgages in each trust that later defaulted. To bolster its case, the fund, which alleges that its investment was worth roughly $350 two years later, cited comments by seven former NovaStar employees, who alleged that the pressure they felt to achieve performance targets resulted in a "systematic loosening" of underwriting standards.

Second Circuit Rules in Favor of Investors in Multibillion Dollar Novastar MBS Class Action

The Second Circuit Court of Appeals reversed a lower court's dismissal of securities claims brought by investors who purchased in a $1.32 billion offering of mortgage-backed securities sold by investment banking defendants RBS Greenwich Capital, Wachovia Capital Markets Inc. and Deutsche Bank Securities Inc., according to Cohen Milstein Sellers & Toll PLLC. The ruling also paves the way for the potential prosecution of claims arising from five other mortgage-backed securities offerings sold by the same investment banking defendants totaling an additional $6.4 billion. The investment banking defendants underwrote and sold to the lead plaintiff and the Class over $7.75 billion in mortgage-backed securities in six offerings between June 22, 2006 and May 25, 2007 where the underlying mortgages were originated by NovaStar. Soon after issuance of the certificates, and as a result of massive increases borrower delinquency, foreclosure, repossession and bankruptcy involving the mortgage loans underlying the certificates, the value of the certificates collapsed. The lawsuit alleges that the offering documents contained numerous misstatements and omissions of fact in violation of the Securities Act. In addition to the investment banking defendants RBS Securities Inc., Deutsche Bank Securities Inc., and Wachovia Capital Investments Inc., the defendants also include Novastar Mortgage Inc., Novastar Mortgage Funding Corp. and certain officers and directors of Novastar Mortgage Funding Corp.

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