Report: NovaStar Suspends Some Loan Fundings

NovaStar today sent out an email to its brokers informing them that it has suspended funding of most mortgage loans. The lender confirmed the move as temporary due to the latest buzz word in the industry — “dislocation” — in an interview published at

A copy of the email message posted on several housing-related Web sites cites a “severe dislocation in the secondary market” for the decision. The move applies to “all loan transactions that have not been locked via a NovaStar Lock In Confirmation” through Tuesday. The note says new loan applications will be accepted but will be put on hold till the suspension is lifted. NovaStar, which has been a leader in the business of lending to homebuyers in the hard-hit subprime market, said it will re-examine the decision on a day-to-day basis. “This is not a long-term decision or change in strategy,” a spokesman told, “only a temporary response to dislocation in the secondary market.”

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