NovaStar to Cut 85 Percent of Staff, Give Up Licenses

January 11, 2008 No Comments »

Failed mortgage lender NovaStar Financial said today that it will cut roughly 170 jobs, or 85 percent of its remaining staff, and give up both its mortgage-origination and brokerage business licenses.

The company, which will be left with about 30 employees after the latest cuts, said in an SEC filing that the reduction in staff is part of its plan to discontinue its retail and brokerage operations.

NovaStar noted that the discontinuation “may hinder or otherwise negatively affect the ability of the company to recommence a mortgage origination and mortgage brokerage business if market conditions improve.”

The Kansas City-based lender said the layoffs will result in a pre-tax charge of about $1.3 million to $1.8 million, mainly related to severance costs, with most of it realized in the first quarter.

Yesterday, the company said it had received another waiver from Wachovia Bank until February 4 to help it avoid defaulting on credit agreements.

It’s unclear to what extent the company is still operating, as a bulletin on their website reads:

“At present, we are no longer originating new loans, but we thank you for your interest and for considering us.

If you are a former customer, NovaStar Mortgage is no longer servicing any loans. You should have received a notice from both NovaStar and your new Servicer by now and will need to reference this material for their contact information.”

It is believed that the company may still be processing loans that were already submitted.

Shares of NovaStar were down 22 cents, or 6.71%, to $3.06 in late afternoon trading on Wall Street, far below their 52-week high of $97.64.

Check out the latest list of mortgage layoffs, closed lenders, mergers, and rumors.

Update: The New York Stock Exchange plans to delist the common and preferred stock for NovaStar Financial Inc. effective January 17.

The stock plummeted more than 40% in after hours trading on the news.

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