NovaStar Financial Inc. today said it is making cuts in its retail mortgage business, resulting in the loss of about 275 jobs on top of 500 it cut in August. Kansas City-based NovaStar, a mortgage lender to consumers with less than perfect credit, said it would close 12 retail loan origination offices. The company said it would continue to service its existing loans to homeowners but said it would make new loans only on a limited basis.
NovaStar said the cuts announced today and those in August would leave it with about 600 employees. The company said the restructuring became necessary after it decided to cancel a previously announced offering of rights to purchase $101 million in shares of convertible preferred stock. Some analysts and auditors question whether NovaStar will survive.
Deloitte & Touche LLP told NovaStar it wouldn’t be associated with the rights offering unless the Kansas City, Missouri-based company made additional disclosures, according to a statement distributed by PR Newswire. The changes would include “an explanatory paragraph about the uncertainty of NovaStar’s ability to continue as a `going concern,”’ the company said.
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