Novastar Financial Inc - Current report filing (8-K)



 UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

 Washington, D.C. 20549

 FORM 8-K


 CURRENT REPORT
 PURSUANT TO SECTION 13 OR 15(d) OF THE
 SECURITIES EXCHANGE ACT OF 1934

 November 1, 2007
 Date of Report (Date of earliest event reported)



 NOVASTAR FINANCIAL, INC.
 (Exact name of registrant as specified in its charter)

 Maryland 001-13533 74-2830661
------------------------------- ---------------- -------------------
(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification No.)


 8140 Ward Parkway, Suite 300, Kansas City, MO 64114
 ---------------------------------------------------
 (Address of principal executive offices)
 (Zip Code)

 (816) 237-7000
 --------------
 (Registrant's telephone number, including area code)

 Not Applicable
 --------------
 (Former Name or Former Address, if Changed Since Last Report)



Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17
 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
 Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
 Exchange Act (17 CFR 240.13e-4(c))







Item 1.02 Termination of Material Definitive Agreement

The disclosure under "Item 8.01 Other Events" with respect to the Deutsche Bank
Servicing Advance Facility and the Wachovia Servicing Rights Facility is
incorporated herein by reference. In addition to the Wachovia Servicing Rights
Facility, the termination of which is described in this Current Report, Wachovia
provides additional financing facilities to NovaStar Financial, Inc. ("NFI") and
its affiliates. Wachovia and Deutsche Bank also routinely engage in other
ordinary course financial transactions with NFI and its affiliates, including
but not limited to financial derivative transactions, and have acted as
underwriters for certain securitizations sponsored by NFI and its affiliates.








Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

The disclosure under "Item 8.01 Other Events" with respect to the bonus paid to
Mr. Metz is incorporated herein by reference.







Item 8.01 Other Events

On October 12, 2007, NovaStar Mortgage, Inc. ("NovaStar Mortgage"), a subsidiary
of NFI, and Saxon Mortgage Services, Inc. ("Saxon") entered into a Servicing
Rights Transfer Agreement (the "Agreement") for the sale to Saxon of all of
NovaStar Mortgage's mortgage servicing rights and servicing advances relating to
its securitizations. The transaction closed on November 1, 2007, providing net
cash proceeds of $147.1 million after the deduction of certain expenses. Of the
net proceeds, approximately $21.5 million was retained for working capital
purposes and the remainder was used to repay outstanding indebtedness. An
additional $7.9 million in cash proceeds is expected to be released upon
delivery of all closing documents and, when received, is expected to be used to
repay outstanding indebtedness.

In connection with the closing of the transactions contemplated by the
Agreement, NFI's $80 million Servicing Advance Facility with DB Structured
Products, Inc. ("Deutsche Bank") and its $60 million Servicing Rights Facility
with affiliates of Wachovia Bank, N.A. (collectively "Wachovia") were paid in
full and terminated on November 1, 2007. In addition, certain employees of NFI
and its affiliates received cash bonuses as a result of the closing of the
transaction, including a $50,000 bonus received by Greg Metz, the Chief
Financial Officer of NFI.



  SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.


 NOVASTAR FINANCIAL, INC.
DATE: November 7, 2007 /s/ GREGORY S. METZ
 -------------------------------
 Gregory S. Metz
 Chief Financial Officer

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