NovaStar Financial, Inc. Reports Record Earnings

Apr 25, 2001, 01:00 ET from NovaStar Financial, Inc.

    WESTWOOD, Kansas, April 25 /PRNewswire/ -- NovaStar Financial, Inc.,
 (NYSE:   NFI), a non-conforming residential mortgage originator and portfolio
 investor, announced operating results for the three month period ended March
 31, 2001.  The Company reported net earnings of $3.0 million or $0.30 per
 diluted share for the 2001 first quarter versus earnings of $1.2 million or
 $0.09 for the same period in 2000.  The Company also announced that its Board
 of Directors has declared a dividend of $525,000, or $0.1225 per share, on its
 cumulative convertible preferred stock.  The dividend will be paid on May 10,
 2001 to holders of record as of April 27, 2001.  No dividend was declared on
 the Company's common stock.
     Scott Hartman, Chief Executive Officer, had the following comments: "First
 quarter results reflect the impact of the operational and financial
 disciplines put in place during the last two years: lower the cost to
 originate, increase quality and eventually deliver a 15-20% return on equity
 to shareholders.  A combination of lower interest rates and modestly higher
 production volumes have moved us ahead of our internal earnings expectations
 for 2001 and 2002.  Most of the increased earnings will come from faster
 growth of the investment portfolio and a higher expected rate of return on new
 investments due to a decrease in the cost of production."
     The Company began 2001 with a $2.7 million net operating loss carryforward
 which will reduce its dividend requirement for the year.  Currently, the
 Company expects taxable income from operations to exhaust the NOL during the
 third quarter of 2001, resulting in a small dividend being declared for that
 period.  The dividend for the fourth quarter of this year is expected to
 represent the Company's full taxable income for the period.
 
     Loan Production
     NovaStar Mortgage, the Company's wholesale mortgage banking unit, posted
 its eighth consecutive quarter of higher loan production.  Non-conforming
 residential mortgage originations were $245 million for the 2001 first quarter
 versus $208 million in the previous quarter and $132 million during the same
 period a year ago, respective increases of 17% and 85%.  "The expansion of our
 sales forces has been the key to our production growth," said Lance Anderson,
 Chief Operating Officer.  "In the past 15 months we have doubled our number of
 account executives and expect to add another 30-40 by the end of this year."
 The Company received 24,424 submissions during the quarter, a 42% increase
 over the previous quarter.  More than 99% of first quarter submissions came to
 the Company via its web based origination system, Internet Underwriter(R).
     Efficiency also continues to be a main focus for the mortgage lending
 unit.  The Company's all-in cost of production decreased to 3.0% in the first
 quarter of 2001, versus 3.3% in the previous quarter.  The Company anticipates
 that with the scalable technology in place, primarily Internet Underwriter(R),
 that its marginal cost of production should continue to decline throughout
 2001.
 
     Mortgage Insurance / Credit Performance
     The Company also announced that it has acquired deep mortgage insurance
 down to 50% LTV on the majority of its seasoned loan portfolio.  The insurance
 was obtained from a prominent AA-rated carrier and covers all current 1997,
 1998 and 1999 vintage loans not previously covered by insurance.  As a result
 of the transaction, more than 93% of NovaStar's $1.2 billion securitized loan
 portfolio is now covered by mortgage insurance.
     Mortgage insurance dramatically reduces the Company's exposure to credit
 risk, thereby making future earnings considerably less volatile.  Net charge
 offs recognized during the three-month period ended March 31, 2001 totaled
 $1.6 million, down from the $1.9 million charge taken in the previous quarter.
 Future charge offs are expected to decline even more significantly due to this
 purchase of insurance on the seasoned portfolio.  The Company plans to
 continue acquiring mortgage insurance on substantially all future loan
 originations.
 
     Financing Agreements / Liquidity
     First Union National Bank and the Company agreed to extend the maturity
 date of the $25 million mortgage security repurchase facility through April,
 2003.  Also during the quarter, Morgan Stanley agreed to provide the Company a
 $100 million committed repurchase facility to fund mortgage loans and
 securities.  Terms of the agreement allow for a maximum of $25 million in
 financing for mortgage securities.  The agreement matures March 31, 2002.  The
 Company now has a total committed maximum borrowing capacity of $425 million,
 $50 million of which is eligible for the financing of mortgage securities.  At
 quarter-end, $332 million of its maximum borrowing capacity was unused and
 available to fund future loan originations.
     NovaStar maintained substantial liquidity throughout the quarter and the
 Company remains confident that its existing funds are more than adequate to
 fuel its anticipated growth.  Cash and available liquidity at March 31, 2001
 aggregated more than $63 million.
 
     Senior Subordinate Pass-Through
     During the quarter the Company issued a senior subordinate pass-through
 security backed by $415 million of fixed and adjustable rate mortgage loans.
 The series 2001-1 offering is the Company's fourth to be structured as a sale
 for financial reporting and tax purposes and eighth overall securitization.
 The bonds issued consist of six separate classes with an aggregate face amount
 of $409 million.  NovaStar retained the AAA-rated interest-only certificates,
 as well as the prepayment and overcollateralization components of the
 security.  First Union Securities served as the lead manager with Morgan
 Stanley Dean Witter acting as a co-manager on the transaction which closed on
 March 29, 2001.
 
     NovaStar Home Mortgage Branches
     The Company's branch unit, operating under the name NovaStar Home
 Mortgage, continued its steady growth.  Quarter over quarter, the number of
 branches increased from 60 to 76, while loan volume increased more than 36% to
 $140 million.  "The expansion of our branch operation is ahead of schedule,"
 said Mr. Anderson.  "We still expect to finish the year around 100 branches,
 but now anticipate that the branch operation will be profitable in the second
 quarter of this year."
 
     New Director
     The Company also announced that it has filled a vacancy on its Board
 of Directors by appointing Art Burtscher as a third outside director.
 Mr. Burtscher is currently President of McCarthy Group Asset Management.
 Prior to McCarthy, he served as President and Chief Executive Officer of Great
 Western Bank in Omaha, Nebraska.  Mr. Burtscher has agreed to serve on the
 Audit Committee.
 
     About NovaStar
     NovaStar Financial, Inc. is a real estate investment trust (REIT) that
 originates single-family residential non-conforming mortgage loans.  Mortgage
 loans are financed on a long-term basis by issuing asset-backed bonds.
 NovaStar Financial is headquartered in Westwood, Kansas, a part of the Kansas
 City metropolitan area.  The Company's wholesale lending operation is located
 in Orange County, California, and its servicing operation is located in
 Westwood, Kansas.
 
     Certain matters discussed in this news release may constitute
 forward-looking statements within the meaning of the federal securities laws
 that inherently include certain risks and uncertainties.  Actual results and
 the timing of certain events could differ materially from those projected in
 or contemplated by the forward-looking statements due to a number of factors,
 including general economic conditions, fluctuations in interest rates,
 fluctuations in losses due to default on the Company's mortgage loans, the
 availability of non-conforming residential mortgage loans, the availability
 and access to financing and liquidity resources, and other risk factors
 outlined in the Company's 2000 annual report on Form 10-K (available on the
 Company's website or by request to the Investor Relations Contact).  Other
 factors not presently identified may also cause actual results to differ.
 We continuously update and revise our estimates based on actual conditions
 experienced.  It is not practicable to publish all such revisions and, as a
 result, no one should assume that results projected in or contemplated by the
 forward-looking statements included above will continue to be accurate in the
 future.
 
 
                            NovaStar Financial, Inc.
                 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
                (dollars in thousands, except per share amounts)
 
                                   For the Three Months Ended
 
                                          3/31/2001*    12/31/2000  03/31/2000
     NovaStar Financial Inc.
       Income Statement Data
     Mortgage loan interest income          $12,740       $9,695      $12,812
     Mortgage loan interest expense           8,516        7,083        9,698
     Net interest income from
       mortgage loans                         4,224        2,612        3,114
     Net interest income from mortgage
       securities                             1,350          890          266
     Prepayment penalty income                  250          345          489
     Provision for credit losses                519        1,445        1,579
     Other portfolio income (expense)         5,767         (783)      (1,061)
     Other income (expense)                   5,470        1,029           (2)
     Equity in earnings of NFI
       Holding Corporation                       --          477          699
     General and administrative expenses     11,823          835          714
     Accounting transition adjustment        (1,706)          --           --
     Net income                              $3,013       $2,290       $1,212
 
     Basic earnings per share                 $0.43        $0.29        $0.09
     Diluted earnings per share               $0.30        $0.22        $0.09
 
 
                                                         As of
                                         3/31/2001*   12/31/2000   03/31/2000
     NovaStar Financial, Inc.
       Balance Sheet Data
     Mortgage loans                       $430,880      $373,537     $551,776
     Mortgage securities                    76,207        46,650        6,775
     Allowance for credit losses             6,825         7,690        9,763
     Total assets                          552,185       494,482      625,531
     Borrowings                            411,455       382,437      520,895
     Stockholders' equity                  117,162       107,919      101,657
 
 
                                              For the Three Months Ended
                                        03/31/2001   12/31/2000    03/31/2000
     Other Data:
     NovaStar Home Mortgage
       Loan Volume                     $139,837       $103,545        $3,922
     NovaStar Home Mortgage
       Branches                              76             60            20
 
     NovaStar Mortgage Servicing
       Portfolio                     $1,263,773     $1,112,615      $872,693
     Loans sold for cash by
       affiliates                        10,773         46,158        48,548
     Loans securitized by
       affiliates                       211,420        151,277       128,171
     NovaStar Financial Mortgage
       Loan Portfolio:
        Weighted-average coupon          11.06%         11.02%        10.45%
        Premium as a percent
          of principal                    1.84%          2.07%         2.05%
        Charge-offs                      $1,638         $1,887        $2,921
     Net interest rate spread             4.09%          3.66%         2.74%
     Net yield                            4.49%          3.53%         2.51%
     Dividends declared per
       common share                          --             --            --
     Dividends declared per
       preferred share                    $0.12          $0.12         $0.12
     Book value per diluted share        $11.22         $10.20         $8.78
 
     * Amounts reflect the purchase of all outstanding common stock of NFI
       Holding Corporation on January 1, 2001.
 
 
                            NovaStar Financial, Inc.
                   SELECTED SECURITIZED LOAN PERFORMANCE DATA
                             (as of March 31, 2001)
 
                  Principal   Weighted                              90+ days
                  outstanding  average                            delinquencies
                   (000's)      age                CPR                 and
                             (months)   3 month   12 month   Life  foreclosures
     NovaStar Home
     Equity Loan
     Series Data:
     1997-1         45,688      49       40.3%     38.6%     39.5%    11.45%
     1997-2         45,165      43       46.0%     44.9%     37.2%    10.01%
     1998-1         97,866      38       41.1%     41.2%     31.2%    10.84%
     1998-2        144,300      34       33.3%     35.4%     25.2%    11.18%
     1999-1         88,360      30       37.0%     33.4%     24.0%    12.86%
     2000-1        202,017      14       20.2%     11.5%     10.8%     3.39%
     2000-2        323,603       7       11.4%       N/A      7.8%     1.12%
     2001-1        209,572     N/A         N/A       N/A       N/A       N/A
 
 
                            NovaStar Financial, Inc.
                         SELECTED LOAN ORIGINATION DATA
 
                                          For the Three Months Ended
                                  03/31/2001      12/31/2000      03/31/2000
     Loans originated by NovaStar
      affiliates:
       Principal at purchase:
         Adjustable-rate
          mortgage loans          $185,854,487   $163,388,612    $94,918,276
         Fixed-rate mortgage
          loans                     58,784,373     44,843,647     37,153,638
            Total                 $244,638,860   $208,232,259   $132,071,914
     Average principal balance
      per loan                        $117,220       $117,778       $107,201
     Weighted-average interest rate:
       Adjustable-rate mortgage
        loans                           10.26%         10.58%         10.13%
       Fixed-rate mortgage loans        10.65%         11.29%         10.26%
         Total                          10.35%         10.73%         10.16%
     Weighted-average loan to value:
       Adjustable-rate mortgage
        loans                              83%            83%            81%
       Fixed-rate mortgage loans           77%            81%            77%
         Total                             82%            82%            80%
     Weighted-average broker
      premium                            1.05%          1.08%          1.06%
     Loans with prepayment
      penalties                            81%            86%            93%
     Weighted-average prepayment
      period                               2.4            2.7            3.1
     NovaStar Mortgage account
      executives                            91             85             56
     Costs of Wholesale Loan
      Production:
        Origination costs                 2.5%           2.8%           2.8%
        Premium paid to broker, net
         of fees received                 0.5%           0.5%           1.1%
            Total All-in Cost
             of Production                3.0%           3.3%           3.8%
 
 
                            NovaStar Financial, Inc.
                         SELECTED LOAN ORIGINATION DATA
 
                                       For the Three Months Ended 3/31/2001
                                    Weighted           Weighted
                                     Average            Average      Percent
                                     Coupon              LTV         of Total
 
     Summary by Credit Grade
       AAA                             9.80%             77%         19.3%
       AA                             10.13%             83%         32.5%
       A                              10.41%             81%         18.6%
       A-                             10.50%             81%          9.7%
       B                              10.65%             78%          8.4%
       C                              11.14%             68%          1.0%
       C-                             12.97%             85%          0.1%
       FICO enhanced                  11.49%             94%         10.4%
 
                                      10.35%             82%        100.0%
 
     Summary by Program Type
       2-Year Fixed                   10.25%             83%         69.1%
       30-Year Fixed Due in 15        11.22%             79%         12.5%
       3-Year Fixed                   10.28%             81%          6.9%
       30-Year Fixed                   9.79%             80%          9.2%
       15-Year Fixed                  11.21%             55%          2.0%
       Other Products                  9.94%             83%          0.4%
 
                                      10.35%             82%        100.0%
 
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SOURCE NovaStar Financial, Inc.
    WESTWOOD, Kansas, April 25 /PRNewswire/ -- NovaStar Financial, Inc.,
 (NYSE:   NFI), a non-conforming residential mortgage originator and portfolio
 investor, announced operating results for the three month period ended March
 31, 2001.  The Company reported net earnings of $3.0 million or $0.30 per
 diluted share for the 2001 first quarter versus earnings of $1.2 million or
 $0.09 for the same period in 2000.  The Company also announced that its Board
 of Directors has declared a dividend of $525,000, or $0.1225 per share, on its
 cumulative convertible preferred stock.  The dividend will be paid on May 10,
 2001 to holders of record as of April 27, 2001.  No dividend was declared on
 the Company's common stock.
     Scott Hartman, Chief Executive Officer, had the following comments: "First
 quarter results reflect the impact of the operational and financial
 disciplines put in place during the last two years: lower the cost to
 originate, increase quality and eventually deliver a 15-20% return on equity
 to shareholders.  A combination of lower interest rates and modestly higher
 production volumes have moved us ahead of our internal earnings expectations
 for 2001 and 2002.  Most of the increased earnings will come from faster
 growth of the investment portfolio and a higher expected rate of return on new
 investments due to a decrease in the cost of production."
     The Company began 2001 with a $2.7 million net operating loss carryforward
 which will reduce its dividend requirement for the year.  Currently, the
 Company expects taxable income from operations to exhaust the NOL during the
 third quarter of 2001, resulting in a small dividend being declared for that
 period.  The dividend for the fourth quarter of this year is expected to
 represent the Company's full taxable income for the period.
 
     Loan Production
     NovaStar Mortgage, the Company's wholesale mortgage banking unit, posted
 its eighth consecutive quarter of higher loan production.  Non-conforming
 residential mortgage originations were $245 million for the 2001 first quarter
 versus $208 million in the previous quarter and $132 million during the same
 period a year ago, respective increases of 17% and 85%.  "The expansion of our
 sales forces has been the key to our production growth," said Lance Anderson,
 Chief Operating Officer.  "In the past 15 months we have doubled our number of
 account executives and expect to add another 30-40 by the end of this year."
 The Company received 24,424 submissions during the quarter, a 42% increase
 over the previous quarter.  More than 99% of first quarter submissions came to
 the Company via its web based origination system, Internet Underwriter(R).
     Efficiency also continues to be a main focus for the mortgage lending
 unit.  The Company's all-in cost of production decreased to 3.0% in the first
 quarter of 2001, versus 3.3% in the previous quarter.  The Company anticipates
 that with the scalable technology in place, primarily Internet Underwriter(R),
 that its marginal cost of production should continue to decline throughout
 2001.
 
     Mortgage Insurance / Credit Performance
     The Company also announced that it has acquired deep mortgage insurance
 down to 50% LTV on the majority of its seasoned loan portfolio.  The insurance
 was obtained from a prominent AA-rated carrier and covers all current 1997,
 1998 and 1999 vintage loans not previously covered by insurance.  As a result
 of the transaction, more than 93% of NovaStar's $1.2 billion securitized loan
 portfolio is now covered by mortgage insurance.
     Mortgage insurance dramatically reduces the Company's exposure to credit
 risk, thereby making future earnings considerably less volatile.  Net charge
 offs recognized during the three-month period ended March 31, 2001 totaled
 $1.6 million, down from the $1.9 million charge taken in the previous quarter.
 Future charge offs are expected to decline even more significantly due to this
 purchase of insurance on the seasoned portfolio.  The Company plans to
 continue acquiring mortgage insurance on substantially all future loan
 originations.
 
     Financing Agreements / Liquidity
     First Union National Bank and the Company agreed to extend the maturity
 date of the $25 million mortgage security repurchase facility through April,
 2003.  Also during the quarter, Morgan Stanley agreed to provide the Company a
 $100 million committed repurchase facility to fund mortgage loans and
 securities.  Terms of the agreement allow for a maximum of $25 million in
 financing for mortgage securities.  The agreement matures March 31, 2002.  The
 Company now has a total committed maximum borrowing capacity of $425 million,
 $50 million of which is eligible for the financing of mortgage securities.  At
 quarter-end, $332 million of its maximum borrowing capacity was unused and
 available to fund future loan originations.
     NovaStar maintained substantial liquidity throughout the quarter and the
 Company remains confident that its existing funds are more than adequate to
 fuel its anticipated growth.  Cash and available liquidity at March 31, 2001
 aggregated more than $63 million.
 
     Senior Subordinate Pass-Through
     During the quarter the Company issued a senior subordinate pass-through
 security backed by $415 million of fixed and adjustable rate mortgage loans.
 The series 2001-1 offering is the Company's fourth to be structured as a sale
 for financial reporting and tax purposes and eighth overall securitization.
 The bonds issued consist of six separate classes with an aggregate face amount
 of $409 million.  NovaStar retained the AAA-rated interest-only certificates,
 as well as the prepayment and overcollateralization components of the
 security.  First Union Securities served as the lead manager with Morgan
 Stanley Dean Witter acting as a co-manager on the transaction which closed on
 March 29, 2001.
 
     NovaStar Home Mortgage Branches
     The Company's branch unit, operating under the name NovaStar Home
 Mortgage, continued its steady growth.  Quarter over quarter, the number of
 branches increased from 60 to 76, while loan volume increased more than 36% to
 $140 million.  "The expansion of our branch operation is ahead of schedule,"
 said Mr. Anderson.  "We still expect to finish the year around 100 branches,
 but now anticipate that the branch operation will be profitable in the second
 quarter of this year."
 
     New Director
     The Company also announced that it has filled a vacancy on its Board
 of Directors by appointing Art Burtscher as a third outside director.
 Mr. Burtscher is currently President of McCarthy Group Asset Management.
 Prior to McCarthy, he served as President and Chief Executive Officer of Great
 Western Bank in Omaha, Nebraska.  Mr. Burtscher has agreed to serve on the
 Audit Committee.
 
     About NovaStar
     NovaStar Financial, Inc. is a real estate investment trust (REIT) that
 originates single-family residential non-conforming mortgage loans.  Mortgage
 loans are financed on a long-term basis by issuing asset-backed bonds.
 NovaStar Financial is headquartered in Westwood, Kansas, a part of the Kansas
 City metropolitan area.  The Company's wholesale lending operation is located
 in Orange County, California, and its servicing operation is located in
 Westwood, Kansas.
 
     Certain matters discussed in this news release may constitute
 forward-looking statements within the meaning of the federal securities laws
 that inherently include certain risks and uncertainties.  Actual results and
 the timing of certain events could differ materially from those projected in
 or contemplated by the forward-looking statements due to a number of factors,
 including general economic conditions, fluctuations in interest rates,
 fluctuations in losses due to default on the Company's mortgage loans, the
 availability of non-conforming residential mortgage loans, the availability
 and access to financing and liquidity resources, and other risk factors
 outlined in the Company's 2000 annual report on Form 10-K (available on the
 Company's website or by request to the Investor Relations Contact).  Other
 factors not presently identified may also cause actual results to differ.
 We continuously update and revise our estimates based on actual conditions
 experienced.  It is not practicable to publish all such revisions and, as a
 result, no one should assume that results projected in or contemplated by the
 forward-looking statements included above will continue to be accurate in the
 future.
 
 
                            NovaStar Financial, Inc.
                 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
                (dollars in thousands, except per share amounts)
 
                                   For the Three Months Ended
 
                                          3/31/2001*    12/31/2000  03/31/2000
     NovaStar Financial Inc.
       Income Statement Data
     Mortgage loan interest income          $12,740       $9,695      $12,812
     Mortgage loan interest expense           8,516        7,083        9,698
     Net interest income from
       mortgage loans                         4,224        2,612        3,114
     Net interest income from mortgage
       securities                             1,350          890          266
     Prepayment penalty income                  250          345          489
     Provision for credit losses                519        1,445        1,579
     Other portfolio income (expense)         5,767         (783)      (1,061)
     Other income (expense)                   5,470        1,029           (2)
     Equity in earnings of NFI
       Holding Corporation                       --          477          699
     General and administrative expenses     11,823          835          714
     Accounting transition adjustment        (1,706)          --           --
     Net income                              $3,013       $2,290       $1,212
 
     Basic earnings per share                 $0.43        $0.29        $0.09
     Diluted earnings per share               $0.30        $0.22        $0.09
 
 
                                                         As of
                                         3/31/2001*   12/31/2000   03/31/2000
     NovaStar Financial, Inc.
       Balance Sheet Data
     Mortgage loans                       $430,880      $373,537     $551,776
     Mortgage securities                    76,207        46,650        6,775
     Allowance for credit losses             6,825         7,690        9,763
     Total assets                          552,185       494,482      625,531
     Borrowings                            411,455       382,437      520,895
     Stockholders' equity                  117,162       107,919      101,657
 
 
                                              For the Three Months Ended
                                        03/31/2001   12/31/2000    03/31/2000
     Other Data:
     NovaStar Home Mortgage
       Loan Volume                     $139,837       $103,545        $3,922
     NovaStar Home Mortgage
       Branches                              76             60            20
 
     NovaStar Mortgage Servicing
       Portfolio                     $1,263,773     $1,112,615      $872,693
     Loans sold for cash by
       affiliates                        10,773         46,158        48,548
     Loans securitized by
       affiliates                       211,420        151,277       128,171
     NovaStar Financial Mortgage
       Loan Portfolio:
        Weighted-average coupon          11.06%         11.02%        10.45%
        Premium as a percent
          of principal                    1.84%          2.07%         2.05%
        Charge-offs                      $1,638         $1,887        $2,921
     Net interest rate spread             4.09%          3.66%         2.74%
     Net yield                            4.49%          3.53%         2.51%
     Dividends declared per
       common share                          --             --            --
     Dividends declared per
       preferred share                    $0.12          $0.12         $0.12
     Book value per diluted share        $11.22         $10.20         $8.78
 
     * Amounts reflect the purchase of all outstanding common stock of NFI
       Holding Corporation on January 1, 2001.
 
 
                            NovaStar Financial, Inc.
                   SELECTED SECURITIZED LOAN PERFORMANCE DATA
                             (as of March 31, 2001)
 
                  Principal   Weighted                              90+ days
                  outstanding  average                            delinquencies
                   (000's)      age                CPR                 and
                             (months)   3 month   12 month   Life  foreclosures
     NovaStar Home
     Equity Loan
     Series Data:
     1997-1         45,688      49       40.3%     38.6%     39.5%    11.45%
     1997-2         45,165      43       46.0%     44.9%     37.2%    10.01%
     1998-1         97,866      38       41.1%     41.2%     31.2%    10.84%
     1998-2        144,300      34       33.3%     35.4%     25.2%    11.18%
     1999-1         88,360      30       37.0%     33.4%     24.0%    12.86%
     2000-1        202,017      14       20.2%     11.5%     10.8%     3.39%
     2000-2        323,603       7       11.4%       N/A      7.8%     1.12%
     2001-1        209,572     N/A         N/A       N/A       N/A       N/A
 
 
                            NovaStar Financial, Inc.
                         SELECTED LOAN ORIGINATION DATA
 
                                          For the Three Months Ended
                                  03/31/2001      12/31/2000      03/31/2000
     Loans originated by NovaStar
      affiliates:
       Principal at purchase:
         Adjustable-rate
          mortgage loans          $185,854,487   $163,388,612    $94,918,276
         Fixed-rate mortgage
          loans                     58,784,373     44,843,647     37,153,638
            Total                 $244,638,860   $208,232,259   $132,071,914
     Average principal balance
      per loan                        $117,220       $117,778       $107,201
     Weighted-average interest rate:
       Adjustable-rate mortgage
        loans                           10.26%         10.58%         10.13%
       Fixed-rate mortgage loans        10.65%         11.29%         10.26%
         Total                          10.35%         10.73%         10.16%
     Weighted-average loan to value:
       Adjustable-rate mortgage
        loans                              83%            83%            81%
       Fixed-rate mortgage loans           77%            81%            77%
         Total                             82%            82%            80%
     Weighted-average broker
      premium                            1.05%          1.08%          1.06%
     Loans with prepayment
      penalties                            81%            86%            93%
     Weighted-average prepayment
      period                               2.4            2.7            3.1
     NovaStar Mortgage account
      executives                            91             85             56
     Costs of Wholesale Loan
      Production:
        Origination costs                 2.5%           2.8%           2.8%
        Premium paid to broker, net
         of fees received                 0.5%           0.5%           1.1%
            Total All-in Cost
             of Production                3.0%           3.3%           3.8%
 
 
                            NovaStar Financial, Inc.
                         SELECTED LOAN ORIGINATION DATA
 
                                       For the Three Months Ended 3/31/2001
                                    Weighted           Weighted
                                     Average            Average      Percent
                                     Coupon              LTV         of Total
 
     Summary by Credit Grade
       AAA                             9.80%             77%         19.3%
       AA                             10.13%             83%         32.5%
       A                              10.41%             81%         18.6%
       A-                             10.50%             81%          9.7%
       B                              10.65%             78%          8.4%
       C                              11.14%             68%          1.0%
       C-                             12.97%             85%          0.1%
       FICO enhanced                  11.49%             94%         10.4%
 
                                      10.35%             82%        100.0%
 
     Summary by Program Type
       2-Year Fixed                   10.25%             83%         69.1%
       30-Year Fixed Due in 15        11.22%             79%         12.5%
       3-Year Fixed                   10.28%             81%          6.9%
       30-Year Fixed                   9.79%             80%          9.2%
       15-Year Fixed                  11.21%             55%          2.0%
       Other Products                  9.94%             83%          0.4%
 
                                      10.35%             82%        100.0%
 
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 SOURCE  NovaStar Financial, Inc.