Who’s Behind the Financial Meltdown?

Published — May 6, 2009 Updated — May 19, 2014 at 12:19 pm ET

No. 21 of The Subprime 25: NovaStar Financial Inc.

Introduction

Total high-interest loans 2005-2007:

At least $16 billion

Federal bailout money received:

None

Company overview

  • Status: STOPPED LENDING. NovaStar stopped making mortgage loans in 2007.
  • History: Founded in 1996, NovaStar Financial was a real estate investment trust and subprime lender. Having weathered near bankruptcy and legal challenges, the publicly traded company is no longer originating mortgage loans. It sold its servicing business to Morgan Stanley affiliate Saxon Mortgage Services in 2006.
  • Parent/subsidiary companies:
  • CEO: Chairman/CEO: Scott F. Hartman
    • Most recent salary: 2007 – $663,204; total compensation, $1,115,025
  • Location: Kansas City, Missouri
  • Year founded: 1996
  • Backers: NovaStar defaulted on a credit agreement with JPMorgan Chase in 2008 and also maintained a credit agreement with Wachovia. SEC filings show NovaStar also sold loans for securitization by Wall Street firms such as Goldman Sachs and JPMorgan Chase.

Lobbying overview

  • Lobbying: None found.**
  • Total Contributions: At least $18,448 *
  • Top Recipients:
    1. National Republican Congressional Committee $3,200 (tie)
    2. George W. Bush $2,000 (tie)
    2. Representative Paul Kanjorski, D-Pennsylvania $2,000 (tie)
    2. Senator Harry Reid, D-Nevada $2,000 (tie)
    5. Senator Hillary Rodham Clinton, D-New York $1,000 (tie)
    5. Republican National Committee $1,000

Investigations

  • Settlements:
    • In 2004, NovaStar was fined $80,000 by the state of Nevada for failure to renew its licenses to operate in the state. It was also fined $22,500 by state authorities in Massachusetts for operating an unlicensed location.
    • In 2007, NovaStar agreed to pay more than $5 million to settle a 2005 class action lawsuit filed in Tacoma, Washington, federal court involving 1,600 plaintiffs accusing the company of overcharging them on loan fees.

** Lobbying totals calculated by the Center for Public Integrity using data from the Senate Office of Public Records.

* Contribution grand total includes employee and soft money contributions from the lender and its subsidiaries. Top recipient totals include employee and political action committee contributions. Data provided by CQ Money Line, analysis by the Center for Public Integrity.

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