NovaStar Mortgage Is The Next Subprime Victim Or ‘Evolving’?

Filed Under Mortgage Bubble, Mortgage News, NovaStar, NovaStar Financial, Subprime Implosion, Subprime Mortgage Industry
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NovaStar Mortgage has just put in place a ”temporary suspension” on ALL LOANS that have NOT BEEN LOCKED in the NovaStar system.

For loans that are currently locked/approved/doc’d:

1. Locked Loans:
Loans currently locked must fund by Tuesday August 7, 2007.

2. Loans Locked and approved:
Loans currently approved must fund by Tuesday August 7, 2007.

3. Doc’d Loans:
Loans that have been doc’d will close and fund as scheduled.

For new apps:
New loan applications will continue to be accepted however will be held until the temporary suspension on loan approvals and fundings has been lifted.

Novastar has recently received funding from several outside investors so this is not a liquidity problem. This is a business decision/reaction to the recent ongoings in the industry…namely bankruptcy/closing of American Home Mortgage (parent of ABC) and others…to determine how NovaStars guidelines and pricing must be adjusted to ensure the secondary market will purchase their loans.

I will put out updates as received.

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Here is the actual email from Novastar:

Due to severe dislocation in the secondary market, NovaStar Mortgage Wholesale is temporarily suspending approval and funding activity on all loan transactions that have not been locked via a NovaStar Lock In Confirmation until Tuesday, August 7th, at which time the policy will be reevaluated. Locked loans and loans with docs out will continue to fund as scheduled. This is effective immediately.
New loan applications will continue to be accepted however will be held until the temporary suspension on loan approvals and fundings has been lifted.

We apologize for short notice and will be reviewing market conditions and updating our policy on a daily basis.

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Comments

Dubya posted the following on August 4, 2007 at 11:05 pm.
Not a liquidity problem? Please. That $150m (most of which they have not received and probably never will) is not even nearly enough to keep this company afloat. This is a company that sells mortgages. If they stop selling mortgages, they die. They are now doing just that; they have stopped doing what it is that they do to make money.

My guess is that there will be a BK filing and 1000+ layoffs by Wednesday or Thursday.