Troubled subprime lender NovaStar Financial, Inc. said late today that it will sell its entire servicing rights to Saxon Mortgage Services, Inc. in a bulk deal that pulls the rug out of NovaStar's sizeable servicing operation. The deal will see NovaStar's servicing rights sold for roughly $175 million in cash, and will lead to "substantial reductions in both its organization and workforce," the Kansas City-based mortgage company said. Novastar employs 300 in its servicing operations. In a press statement, NovaStar president Lance Anderson hinted that the company faced trouble obtaining future capital to fund loan servicing:
Lance Anderson, President and Chief Operating Officer, commented: "This action is expected to reduce debt and risks related to operating capital needs for servicing loans. As we continue to endure a difficult period for the mortgage industry and the secondary market for mortgage loans, our focus is on managing our portfolio of mortgage securities, along with brokering loans with a retail team that continues to serve homeowners."
The deal is clearly a win for Morgan Stanley-owned Saxon, whose servicing operations the investment bank said it is committed to growing amid the industry downturn. For NovaStar, the sale represents more fuel for the ongoing speculation regarding the company's future. Nonetheless, the company's stock did rise more than 2 percent in after-hours trading -- reflecting investor's sentiment that the company may be losing a valuable asset but will also be freeing up much-needed operating capital.