Novastar announced early Tuesday that it would cut 275 jobs and close 12 of its 16 retail loan origination offices.
The news comes after cash-strapped Novastar was forced to cancel a $101.2 million sale of convertible preferred stock.
The residential mortgage lender decided not to pursue the sale of $101.2 million in convertible preferred shares after concluding that it wouldn’t be able to meet certain requirements in the current deteriorating market.
Novastar currently employs 400 workers in its retail unit, which will be downsized to a mere 125 once the mortgage layoffs are completed.
Earlier this month, Novastar halted its wholesale operations as well, citing worsening secondary market conditions and liquidity woes.
Novastar expects to have 600 employees on payroll in four retail facilities, including a loan-processing center when everything is said and done.
The company is also considering strategic alternatives for its servicing organization, which has mortgage securities worth about $15.45 billion.
The way it looks, the lender may halt all business and sell off its servicing unit, but that’s just speculation.
Novastar shares shed roughly 16% on the news, dropping $1.36 to $7.13 a share, well below the 52-week high of $131.52.