NovaStar Cuts Spare Servicing

Subprime funder NovaStar Financial recently trimmed its workforce by 17% - 350 positions - citing the changing landscape of the mortgage industry.

The nation's 16th largest subprime lender said the layoffs will affect its wholesale group "and related functions" including staffers at its headquarters here and at operation centers in California and Ohio.

Its loan servicing platform is not affected by the job cuts, it said. According to the Quarterly Data Report, NovaStar is the nation's 21st largest subprime servicer with $16.5 billion in receivables.

Like many subprime lenders, NovaStar has tightened its underwriting guidelines and exception policies in recent weeks while raising coupon rates to improve margins. It estimates the layoffs will cost up to $3.1 million in related charges.

In the fourth quarter, NovaStar funded $2.55 billion in loans, a 16% gain from the same period a year earlier. Roughly, $1.6 billion of its production was sourced through the wholesale/broker channel.

The publicly traded company - which lost $14.4 million in the fourth quarter - is contemplating getting rid of its REIT status.

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