NovaStar Financial Announces 2004 Results As Mortgage Loan Portfolio Continues to Grow

Business Wire, Feb 8, 2005

In support of its portfolio growth, NovaStar securitized $2.5 billion in nonconforming loans in the fourth quarter, retaining non-rated securities with attractive risk-adjusted yields. The company securitized $8.3 billion in loans during 2004.

"NovaStar continues to deliver mortgage deals that perform well for bondholders, allowing us to build successful relationships with leading investment banks and institutional investors. These mortgage-backed securities provide attractive returns for the investors who fund the continued growth of our portfolio and provide non-recourse, matched funding for our shareholders," said Michael L. Bamburg, Senior Vice President and Chief Investment Officer.

Liquidity and Borrowing Capacity

NovaStar strengthened its liquidity in the fourth quarter by raising an additional $70 million in equity capital and issuing NIMs with net proceeds of $26 million. As of December 31, 2004, NovaStar had committed borrowing capacity of $3.7 billion from major lenders. Cash and available liquidity totaled $268 million.

Investor Conference Call

The NovaStar fourth-quarter investor conference call is scheduled for 3:30 p.m. Central Time (4:30 p.m. Eastern Time) on February 8, 2005. The conference call will be web cast live and will be archived on the company's website. In order to participate in the call, contact 1-800-565-5442 approximately 15 minutes before the scheduled start of the call. For investors unable to participate in the live event, a replay will be available until February 15 at 1-888-203-1112. The confirmation code for the replay is 919782.

About NovaStar

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 nationwide.

For more information, including quarterly portfolio data, please visit 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 2003 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.