NovaStar Financial Inc. said it will resume funding loans through its wholesale channel today after disruptions in the secondary loan market forced it to suspend commitments for new loans last week.

The Kansas City, Mo.-based lender said it is adjusting its pricing and underwriting guidelines for the wholesale channel, but continues to honor all existing commitments and fund all loans that had already been approved.

NovaStar’s retail channel, which loans directly to homeowners, has continued to fund loans using “guidelines that are evolving to meet changing needs of the secondary market,” the company said in a statement Monday.

Wholesale loan production represented 73 percent of NovaStar’s loan originations in the first quarter, compared with 24 percent in retail and 3 percent through correspondent lending. NovaStar reported May 10 that it would have posted a $39.8 million loss for the quarter if not for a one-time tax-related gain of $84.2 million related to the termination of the lender’s status as a real estate investment trust (REIT).

Some lenders that securitize and sell their loans to Wall Street investors have had trouble unloading loans made to borrowers with flawed credit, as rising delinquencies and defaults have prompted ratings agencies to reevaluate how they assess the riskiness of such loans.

So far this year, Standard & Poor’s Ratings Service has downgraded 431 classes of subprime mortgage-backed securities issued in 2006, or about 9 percent of those rated. The ratings agency has also downgraded about 3 percent of the subprime MBS it evaluated in 2005.

Standard & Poor’s has downgraded 46.3 percent of the second-lien loans rated in 2006, and 15.75 percent of those evaluated in 2005. A smaller proportion of Alt-A loans — .3 percent of the 2006 vintage, and .33 percent of those issued in 2005 — have also been downgraded, with similar numbers on CreditWatch negative for possible downgrades.

Moody’s and Fitch Ratings made similar moves last month. On Aug. 2, Fitch Ratings said it had downgraded 291 classes of residential mortgage-backed securities with outstanding balances of $5 billion.

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription