Sunday, April 01, 2007

Nova Star Financial / riding the wave

aarons mortgage lender implode-o-meter is now at 45. i think he can add nfi very soon.....

aarons sterbeliste der untergegangenen institute ist aktuell bei 45. nfi könnte der nächste sein.

....But while problems at NovaStar, one of the nation’s top 20 mortgage issuers, seemed to crop up suddenly, they were evident enough from 2002 to 2004 that a big mortgage insurer and two Wall Street banks stopped doing business with the company.

NovaStar’s financial performance in those years was blinding. With Scott F. Hartman as co-founder, Mr. Anderson built NovaStar as a low-cost, low-overhead lender that relied on as many as 16,400 independent mortgage brokers across the nation. After issuing shares to the public in 1997 at a split-adjusted price of $9, the company had explosive growth. NovaStar made $2.5 billion in mortgage loans in 2002; by last year the annual figure had risen to $10.23 billion. The stock hit $70.32 in March 2004; it now trades at $5.


As the real estate boom accelerated, lending practices loosened significantly at many companies specializing in high-risk borrowers. NovaStar was no different. A flier sent by NovaStar to mortgage brokers in 2003 highlighting its easy credit terms also noted: “Did You Know NovaStar Offers: to Completely Ignore Consumer Credit!”

The combined loan-to-value ratio in its mortgages, a measure of risk that compares the size of the total loan on a property to the underlying collateral, averaged 81.2 percent in 1998. By 2006, that figure had jumped to 87 percent. A minimum loan-to-value of 80 percent is considered prudent.

Like other lenders, NovaStar also eased up on the required documentation of a borrower’s income during the boom. In 1998, some 35 percent of the company’s mortgages did not have full borrower documentation attached to them; last year, almost 53 percent did not

It is perhaps not surprising, then, that NovaStar’s early payment default rate for loans underwritten in 2006 reached 8.19 percent, up from 5.61 percent in 2000.

Until recently, though, few investors seemed concerned about NovaStar’s lending practices. Perhaps they were lulled by its earnings, which grew to $132 million in 2005 from $32 million in 2001.

In 2002, however, the PMI Group, a leading provider of mortgage insurance to issuers, terminated its relationship with NovaStar Home Mortgage

A Lehman Brothers unit, among Wall Street’s largest packagers of residential mortgage loans that it sells to investors, terminated its relationship with NovaStar Home Mortgage in 2003.

One loan involved a property in Ohio bought for $20,000 in August 2002 and sold two months later to NovaStar borrowers for $77,500. The average sales price in the neighborhood was $31,685 at the time.

The appraiser on that loan stated that the property was rented for $900 a month, but Aurora found that it generated $475 in monthly rent.

Last week, Fitch Ratings placed NovaStar’s Mortgage Servicing unit on alert for a possible downgrade. The company’s “ability to fund its ongoing servicing operation and maintain servicing quality could come under pressure,” Fitch said.

>last week for a possible! real professionials.....with a finger on the pulse of the industry they are analyzing....

>doch schon letzte woche.....für ein mögliches downgrade. was machen die eigentlich hauptberuflich?

the go-go atmosphere at NovaStar’s Kansas City headquarters is gone. Next to online job postings for loan officers are those seeking specialists in modification of problem loans and litigation.

read this link for more infos on nfi

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Anonymous Anonymous said...

"Even 'Guns N'Roses' at full blast couldn't keep him awake..."

For sure, the song in question's called "Live and let die"...;)

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