SAN DIEGO– LAWFUEL – Class Action Law News –Lerach Coughlin Stoia …

SAN DIEGO– LAWFUEL – Class Action Law News –Lerach Coughlin Stoia Geller Rudman & Robbins LLP (“Lerach Coughlin”) (http://www.lerachlaw.com/cases/novastar/) today announced that a class action has been commenced in the United States District Court for the Western District of Missouri on behalf of purchasers of NovaStar Financial, Inc. (“NovaStar”) (NYSE:NFI) common stock during the period between May 4, 2006 and February 20, 2007 (the “Class Period”).

If you wish to serve as lead plaintiff, you must move the Court no later than 60 days from today. If you wish to discuss this action or have any questions concerning this notice or your rights or interests, please contact plaintiff’s counsel, William Lerach or Darren Robbins of Lerach Coughlin at 800/449-4900 or 619/231-1058 , or via e-mail at [email protected] If you are a member of this class, you can view a copy of the complaint as filed or join this class action online at http://www.lerachlaw.com/cases/novastar/. Any member of the purported class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member.

The complaint charges NovaStar and certain of its officers and directors with violations of the Securities Exchange Act of 1934. NovaStar operates as a specialty finance company that originates, purchases, invests in and services residential nonconforming loans.

The complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding the Company’s business and financial results. As a result of defendants’ false statements, NovaStar stock traded at artificially inflated prices during the Class Period, reaching a high of $37.59 per share in May 2006.

On February 20, 2007, after the markets closed, NovaStar announced disappointing fourth quarter and year-end 2006 results and further warned that the Company expected to earn little, if any, taxable income in the next five years. On this news, NovaStar’s stock collapsed to close at $10.10 per share on February 21, 2007, a one-day decline of 42%, on volume of 22.4 million shares, 15 times the average three-month volume.

According to the complaint, the true facts, which were known by the defendants but concealed from the investing public during the Class Period, were as follows: (a) the Company lacked requisite internal controls, and, as a result, the Company’s projections and reported results issued during the Class Period were based upon defective assumptions about loan delinquencies; (b) the Company’s financial statements were materially misstated due to its failure to properly account for its allowance for loan losses; (c) given the deterioration and the increased volatility in the subprime market, the Company would be forced to tighten its underwriting guidelines which would have a direct material negative impact on its loan production going forward; and (d) given the increased volatility in the lending market, the Company had no reasonable basis to make projections about its ability to maintain its Real Estate Investment Trust (“REIT”) taxable income, which drives dividends, and potentially even its very status as a REIT. As a result, the Company’s projections issued during the Class Period about its REIT taxable income and dividends were at a minimum reckless.

Plaintiff seeks to recover damages on behalf of all purchasers of NovaStar common stock during the Class Period (the “Class”). The plaintiff is represented by Lerach Coughlin, which has expertise in prosecuting investor class actions and extensive experience in actions involving financial fraud.

Lerach Coughlin, a 180-lawyer firm with offices in San Diego, San Francisco, Los Angeles, New York, Boca Raton, Washington, D.C., Houston, Philadelphia and Seattle, is active in major litigations pending in federal and state courts throughout the United States and has taken a leading role in many important actions on behalf of defrauded investors, consumers, and companies, as well as victims of human rights violations. Lerach Coughlin lawyers have been responsible for more than $20 billion in aggregate recoveries. The Lerach Coughlin Web site (http://www.lerachlaw.com) has more information about the firm.

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