NovaStar Financial, Inc. Changes Record Date for Proposed Rights Offering

Pursuant to the rights offering, NovaStar intends to distribute at nocharge to each eligible shareholder of record as of the close of business onthe Record Date non-transferable subscription rights, each of which willentitle the holder to purchase one share of Series D-2 Preferred Stock for$25.00 in cash. The number of rights to be distributed to eligibleshareholders will be determined as of the Record Date, based on the number ofshares of common stock and Series D-1 Preferred Stock outstanding on thatdate. No fractional rights will be distributed. Fractional rights will berounded to the nearest whole number, with such adjustments as may be necessaryto ensure that 4,047,000 shares of Series D-2 Preferred Stock are offered inthe rights offering.

Rights offering materials, including a prospectus supplement andaccompanying prospectus and the subscription rights certificates, will bemailed on or about September 10, 2007 to eligible shareholders. The prospectussupplement and accompanying prospectus will contain important informationabout the rights offering, and shareholders are urged to read them carefullywhen available. The rights offering will expire at 5:00 p.m. Eastern DaylightTime on October 9, 2007, unless extended by NovaStar. However, other than asmay be necessary to comply with requirements and regulations of the New YorkStock Exchange, the Securities and Exchange Commission or other applicablelaws, we may not extend the expiration date beyond October 23, 2007 withoutthe consent of the Investors (as defined below). NFI reserves the right tocancel, amend, modify or terminate the rights offering at any time prior tothe expiration date, for any reason.

In connection with their purchase of the Series D-1 Preferred Stock onJuly 16, 2007, affiliates of MassMutual Capital Partners LLC and funds managedby Jefferies Capital Partners IV LLC (collectively, the "Investors") haveentered into a standby purchase agreement with NovaStar, in which theInvestors agreed, subject to certain conditions, to purchase the Series D-2Preferred Stock not subscribed for in the rights offering, up to the total of$101.175 million of Series D-2 Preferred Stock.

NovaStar intends to file a post-effective amendment to its existingeffective shelf registration statement in connection with the rights offeringprior to the Record Date. The proposed transaction is subject to completion ofdefinitive documentation and certain other conditions.

This press release shall not constitute an offer to sell, nor thesolicitation of an offer to buy, any securities, nor shall there be any saleof securities mentioned in this press release in any state in which suchoffer, solicitation or sale would be unlawful prior to registration orqualification under the securities laws of any such state. The rights offeringwill be made only by means of a prospectus and a related prospectussupplement. When available, copies of the prospectus and prospectus supplementmay be obtained from our information agent, Morrow & Co., Inc. at 470 WestAvenue, Stamford, CT 06902, telephone: (800) 607-0088. Shareholders shouldwatch for any additional press releases containing additional pertinentinformation regarding the rights offering.

About NovaStar

NovaStar Financial, Inc. (NYSE: - ) is a specialty finance company thatoriginates, purchases, securitizes, sells and invests in loans andmortgage-backed securities. The Company also services a large portfolio ofresidential loans. NovaStar is headquartered in Kansas City, Missouri, and haslending operations nationwide.

For more information, please reference our website at.

This Press Release contains forward-looking statements within the meaningof Section 21E of the Securities Exchange Act of 1934, as amended, regardingmanagement's beliefs, estimates, projections, and assumptions with respect to,among other things, the Company's ability to consummate the transactionscontemplated by this press release. Some important factors that could affectour ability to consummate the transactions contemplated by this press releaseinclude: our ability to manage and operate our business during this difficultperiod for the subprime industry; our ability to generate and maintainsufficient liquidity on favorable terms; the size, frequency and structure ofour securitizations; our ability to originate and sell loans at a profit;impairments on our mortgage assets; increases in prepayment or default rateson our mortgage assets; increases in loan repurchase requests; our ability touse our net operating loss carryforwards and net unrealized built-in losses;changes in the types of products we offer; inability of potential borrowers tomeet our underwriting guidelines; changes in assumptions regarding estimatedloan losses and fair value amounts; our ability to improve and maintaineffective internal control over financial reporting and disclosure controlsand procedures in the future; finalization of the amount and terms of anyseverance provided to terminated employees; finalization of the accountingimpact of our previously announced reductions in workforce; events impactingthe subprime mortgage industry in general, including events impacting ourcompetitors and liquidity available to the industry; the initiation of margincalls under our credit facilities; the ability of our servicing operations tomaintain high performance standards and maintain appropriate ratings fromrating agencies; our ability to generate acceptable origination volume whilemaintaining an acceptable level of overhead; residential property values; ourcontinued status as a REIT and our compliance with laws and regulationsapplicable to REITs; interest rate fluctuations on our assets that differ fromour liabilities; our ability to acquire mortgage insurance at favorable pricesor at all; the outcome of litigation or regulatory actions pending against usor other legal contingencies; our compliance with applicable local, state andfederal laws and regulations or opinions of counsel relating thereto and theimpact of new local, state or federal legislation or regulations or opinionsof counsel relating thereto or court decisions on our operations; our abilityto adapt to and implement technological changes; compliance with newaccounting pronouncements; our ability to successfully integrate acquiredbusinesses or assets with our existing business; the impact of generaleconomic conditions; and the risks that are from time to time included in ourfilings with the SEC, including our Annual Report on Form 10-K for the yearended December 31, 2006, and our quarterly reports on Form 10-Q, for theperiods ending March 31, 2007 and June 30, 2007. Other factors not presentlyidentified may also cause actual results to differ. Words such as "believe,""expect," "continue," "anticipate," "promise," "intend," "estimate,""project," "plan," "assume," "seek to" or the negative of those terms andother expressions or words of similar meanings, as well as future orconditional verbs such as "will," "would," "should," "could," or "may" aregenerally intended to identify forward-looking statements. This press releasespeaks only as of its date and we expressly disclaim any duty to update theinformation herein.