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NovaStar Lays Off Over Half of Staff

NovaStar Lays Off Over Half of Staff

Over 270 laid off on Nov. 1

November 1, 2007

By COCO SALAZAR

photo of Coco Salazar
NovaStar Mortgage Inc.’s recent sale of most of its servicing rights wiped out hundreds of Missouri jobs.

Between 270 and 275 servicing employees were laid off around Nov. 1, the day NovaStar sold the servicing rights and advances relating to securities loans to Saxon Mortgage Services Inc., NovaStar spokesman Dick Johnson told MortgageDaily.com in a phone interview Thursday.

About 30 servicing workers remain in Kansas City, Mo., to handle loans NovaStar holds in its books, he added.

At the end of the second quarter, loans under management amounted to $15.5 billion, 3 percent less than a year earlier, NovaStar reported. In that three month period, the company securitized $1.4 billion in nonconforming loans.

The real estate investment trust said it netted $174.1 million in cash from the sale to Saxon and will receive $7.9 million more upon delivery of all closing documents. Only $21.5 million will be retained for working capital purposes, as the rest will be used to pay down debt. The deal’s closing paid off an $80 million servicing advance facility with Deutsche Bank, a $60 million servicing rights facility with affiliates of Wachovia Bank, and resulted in cash bonus to certain employees, including a $50,000 bonus for NovaStar Chief Financial Officer Greg Metz.

The latest round of layoffs brings to 1,395 the number of job cuts announced by NovaStar this year. The reductions involve 275 retail employee layoffs in September in a move to focus on core business and preserve liquidity, 500 wholesale job eliminations a month earlier due to re-halting new broker business, and 350 cuts in wholesale staff in March to adjust to market conditions.

Overall, the Kansas City-based nonconforming has “a little over” 200 employees remaining, Johnson said.

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