NovaStar Will End REIT Status

Subprime lender NovaStar Financial, Kansas City, Mo., says it will not pay a dividend related to 2006 taxable income, a move that will cause its status as a real estate investment trust to be terminated.The troubled subprime lender also revealed that the change in its REIT status will have a "significant adverse impact" on its financial statements for the third quarter. In July it announced that it would pay a dividend on its common shares in the form of convertible preferred securities. NovaStar is now in talks with the New York Stock Exchange concerning its listing requirements. Like many subprime firms, NovaStar is facing a liquidity crunch because buyers of subprime loans are scarce in the secondary market. It has been forced to lay off workers and shut offices. NovaStar can be found online at http://www.novastarmortgage.com.