FORM 4
[ X ] Check this box if no longer subject to Section 16. Form 4 or Form 5 obligations may continue. See Instruction 1(b).         
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP OF SECURITIES
                                                                                  
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Filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, Section 17(a) of the Public
Utility Holding Company Act of 1935 or Section 30(f) of the Investment Company Act of 1940
                      

1. Name and Address of Reporting Person *

GOLDMAN SACHS GROUP INC/ 		2. Issuer Name and Ticker or Trading Symbol

NOVASTAR FINANCIAL INC [ NFI ] 		5. Relationship of Reporting Person(s) to Issuer (Check all applicable)

_____ Director                      __ X __ 10% Owner
_____ Officer (give title below)      _____ Other (specify below)
(Last)          (First)          (Middle)

85 BROAD ST 		3. Date of Earliest Transaction (MM/DD/YYYY)

9/21/2007
(Street)

NEW YORK, NY 10004
(City)        (State)        (Zip)
4. If Amendment, Date Original Filed (MM/DD/YYYY)

 
6. Individual or Joint/Group Filing (Check Applicable Line)

___ Form filed by One Reporting Person
_ X _ Form filed by More than One Reporting Person

Table I - Non-Derivative Securities Acquired, Disposed of, or Beneficially Owned
1.Title of Security
(Instr. 3) 		2. Trans. Date 2A. Deemed Execution Date, if any 3. Trans. Code
(Instr. 8) 		4. Securities Acquired (A) or Disposed of (D)
(Instr. 3, 4 and 5) 		5. Amount of Securities Beneficially Owned Following Reported Transaction(s)
(Instr. 3 and 4) 		6. Ownership Form: Direct (D) or Indirect (I) (Instr. 4) 7. Nature of Indirect Beneficial Ownership (Instr. 4)
Code V Amount (A) or (D) Price
Common Stock   9/21/2007     X    107500   D $10   890888   I   See footnote   (1)
Common Stock   9/21/2007     X    80000   D $12.5   810888   I   See footnote   (1)
Common Stock   9/21/2007     X    31250   D $15.00   779638   (2) I   See footnote   (1)

Table II - Derivative Securities Beneficially Owned ( e.g. , puts, calls, warrants, options, convertible securities)
1. Title of Derivate Security
(Instr. 3) 		2. Conversion or Exercise Price of Derivative Security 3. Trans. Date 3A. Deemed Execution Date, if any 4. Trans. Code
(Instr. 8) 		5. Number of Derivative Securities Acquired (A) or Disposed of (D)
(Instr. 3, 4 and 5) 		6. Date Exercisable and Expiration Date 7. Title and Amount of Securities Underlying Derivative Security
(Instr. 3 and 4) 		8. Price of Derivative Security
(Instr. 5) 		9. Number of derivative Securities Beneficially Owned Following Reported Transaction(s) (Instr. 4) 10. Ownership Form of Derivative Security: Direct (D) or Indirect (I) (Instr. 4) 11. Nature of Indirect Beneficial Ownership (Instr. 4)
Code V (A) (D) Date Exercisable Expiration Date Title Amount or Number of Shares
Put option (right to sell)   $10.00   9/21/2007     X        4300   (3)     (4) 9/22/2007   Common Stock   107500   $0   0   I   See footnote   (1)
Put option (right to sell)   $12.50   9/21/2007     X        3200   (3)     (4) 9/22/2007   Common Stock   80000   $0   0   I   See footnote   (1)
Put option (right to sell)   $15.00   9/21/2007     X        1250   (3)     (4) 9/22/2007   Common Stock   31250   $0   0   I   See footnote   (1)

Explanation of Responses:
( 1)  This statement is being filed by The Goldman Sachs Group, Inc. ("GS Group") and Global Securities Services ("GSS", and together with GS Group, the "Reporting Persons"), a separate business unit within the Goldman Sachs organization. GSS beneficially owns directly and GS Group may be deemed to beneficially own indirectly the securities reported herein.
( 2)  As of September 21, 2007, the Reporting Persons ceased to beneficially own more than 10% of Novastar Financial, Inc.'s (the "Company"), common stock, par value $0.01 per share ("Common Stock").
( 3)  Each contract relates to 25 shares of the Company's Common Stock.
( 4)  Immediately exercisable.

Reporting Owners
Reporting Owner Name / Address
Relationships
Director 10% Owner Officer Other
GOLDMAN SACHS GROUP INC/
85 BROAD ST
NEW YORK, NY 10004
X

Global Securities Services
85 BROAD STREET
NEW YORK, NY 10004
X


Signatures
/s/Andrea DeMar, Attorney-in-fact 9/28/2007
** Signature of Reporting Person Date

/s/Andrea DeMar, Attorney-in-fact 9/28/2007
** Signature of Reporting Person Date


Reminder: Report on a separate line for each class of securities beneficially owned directly or indirectly.
* If the form is filed by more than one reporting person, see Instruction 4(b)(v).
** Intentional misstatements or omissions of facts constitute Federal Criminal Violations. See 18 U.S.C. 1001 and 15 U.S.C. 78ff(a).
Note: File three copies of this Form, one of which must be manually signed. If space is insufficient, see Instruction 6 for procedure.
Persons who respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.
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