NovaStar stops new wholesale loans temporarily, cites secondary market conditions

By Lisa Kerner

Charlotte, N.C., Aug. 6 - NovaStar Financial, Inc. temporarily suspended new loan commitments in its wholesale channel until Tuesday "due to disruptions in the secondary market for loans," the company announced in a news release on Monday. Its retail channel, which deals directly with homeowners, continued to make loans.

The company is adjusting its pricing and guidelines and expected to return to committing on new loans in the wholesale channel and funding those loans as expected on Tuesday.

The Kansas City, Mo., specialty finance company continued to honor existing commitments and fund all loans approved and committed for closing.

As previously announced, NovaStar entered into a definitive securities purchase agreement, a standby purchase agreement and other agreements with MassMutual Capital Partners LLC and Jefferies Capital Partners IV LLC. As part of this strategic transaction, NovaStar's board will end its process to explore alternatives for the company and new investors will nominate members to be added to NovaStar's board.

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