NovaStar Offers Flexible Warehouse Lending Programs for Correspondent

NovaStar Offers Flexible Warehouse Lending Programs for Correspondent Lenders and Broker/Bankers

    Business Editors

    KANSAS CITY, Mo.--(BUSINESS WIRE)--March 29, 2005--NovaStar Financial, Inc. (NYSE: NFI), a residential lender and mortgage Real Estate Investment Trust, today announced the launch of warehouse lending programs to help mortgage originators grow their business. The easy-to-use, flexible programs enable correspondent lenders and broker/bankers to receive warehouse funding from NovaStar Capital, Inc., a unit of NovaStar Financial.
    Kenneth D. Logan, a nationally known executive with more than 20 years of experience, spearheads warehouse lending as Executive Vice President and Chief Operating Officer of NovaStar Capital. The nationwide warehouse lending business is based in Atlanta.
    "We are very pleased to strengthen NovaStar's position as a preferred partner in the nonconforming mortgage market by offering warehouse lending in our range of services. This helps lenders serve homeowners," said Scott Hartman, Chairman and Chief Executive Officer of NovaStar Financial. "Ken Logan is an experienced professional in warehouse lending, and NovaStar Capital has made a very good start based on his relationships throughout the industry."
    Mr. Logan previously headed national warehouse lending for PCFS Financial Services, a division of Provident Bank, and has led two bank-owned regional warehouse lending companies, a mortgage banking company, and a consulting practice. He serves on the Executive Committee of the Board of Directors for the National Home Equity Mortgage Association (NHEMA).
    Mr. Logan described the programs: "Our warehouse lines are customer-friendly and flexible. NovaStar Capital's experience with warehouse lending enables the emerging broker/banker to grow volume and profitability, as well as providing the established mortgage banker with short-term financing and national resources from the NovaStar team. Our nonconforming focus allows NovaStar partners to fund nonprime or alt-A loans up to 100 percent of their warehouse lines."
    NovaStar Capital offers two warehouse programs tailored to meet customer needs:

--	NovaFund, a traditional warehouse line for correspondent lenders, provides short-term funding for loans that may be delivered to NovaStar Mortgage or other approved investors. All types of residential loans can be funded. The correspondent draws loan documents in its own name and conducts processing functions for the loans.
--	NovaFund Express, a managed warehouse line which facilitates warehouse financing for brokers with a lender's license by allowing them to use investor guarantees and approved service providers to fulfill requirements typically expected of a dedicated lender. In doing so, it eases the infrastructure needs of these emerging broker/bankers.

    Correspondent lenders and broker/bankers can obtain more information on the Web at www.novastarcapital.com or by contacting NovaStar Capital at 800-334-1939. NovaStar Mortgage customers can also obtain information from their wholesale lending account executives.
    Warehouse lending is a form of commercial lending that offers short-term financing to allow a lender to close loans, funding the amount of those loans during the time the loans are held in inventory prior to being sold in the secondary market. Warehouse lines are repaid when the loans are sold, whether to NovaStar Mortgage or other approved investors.

    About NovaStar Capital

    NovaStar Capital, Inc., a unit of NovaStar Financial, Inc., offers warehouse credit lines and top-notch financial expertise to national or regional mortgage originators, including correspondent lenders and broker/bankers. The flexible NovaFund and NovaFund Express warehouse programs offer a range of options, including funding for nonprime and alt-A loans up to 100 percent of the lines, to enable business partners to increase their volumes and profitability.

    About NovaStar Financial

    NovaStar Financial, Inc. (NYSE: NFI) is one of the nation's leading lenders and investors in residential mortgages. The company specializes in single-family, nonconforming mortgages, involving borrowers whose loan size, credit details or other circumstances fall outside conventional mortgage agency guidelines. A Real Estate Investment Trust (REIT) founded in 1996, NovaStar efficiently brings together the capital markets, a nationwide network of mortgage brokers and American families financing their homes. NovaStar is headquartered in Kansas City, Missouri, and has lending operations and affiliated branches nationwide.
    For more information, please reference our website at www.novastarmortgage.com.

    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 nonconforming residential mortgage loans, the availability and access to financing and liquidity resources, and other risk factors outlined in the Company's 2004 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.

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CONTACT: NovaStar Financial, Inc. Media Relations Contact: Mike Enos, 816-237-7597 or Investor Relations Contact: Jeffrey A. Gentle, 816-237-7424

KEYWORD: MISSOURI INDUSTRY KEYWORD: BANKING REAL ESTATE BUILDING/CONSTRUCTION PRODUCT SOURCE: NovaStar Financial, Inc.

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