Mortgage lender defends record in Nevada, other states

Tuesday, April 13, 2004 | 10:58 a.m.

SUN STAFF AND WIRE REPORTS

NovaStar Financial Inc.'s legal troubles in Nevada, where regulators said the mortgage lender's branches weren't licensed to do business, highlight concerns that the company has grown too quickly to keep up its regulatory compliance, the Wall Street Journal reported Monday.

NovaStar, which makes home loans to people with poor credit, agreed to pay Nevada an $80,000 fine in February and was permitted to resume business in the state.

Massachusetts also ordered NovaStar to cease operations there after its banking division found the company was doing business with an unlicensed broker, the paper said. It was allowed to resume business after paying a fine. The company also hasn't registered its branches in Texas, the paper said, citing the Texas Savings and Loan Department.

NovaStar, based in Kansas City, Mo., said it had 432 branches in 39 states as of Dec. 31, more than double the branches it had a year earlier, the Journal said.

In a statement responding to the Journal story, NovaStar said the company's lending operations and branches are in good standing in all states where the company does business.

"The lending operations of NovaStar have been audited and examined by numerous state and Federal agencies, as everyone in the mortgage industry is. We are currently in good standing with all states in which we are licensed," said Scott Hartman, chief executive officer. "As NovaStar has grown, we have paid close attention to compliance and we work closely with the agencies to resolve any issue or disagreement that arises."

"The company opened the (Nevada) branches under its interpretation of a statutory lending exemption. After Nevada regulatory authorities advised that they did not accept the company's interpretation, the branches voluntarily ceased originating loans in January 2004 until licensing issues could be satisfactorily resolved. The company paid a fine of $80,000 and was cleared to resume lending in February."

"The column cited discrepancies in the Nevada branch offices that had been listed on the company's Web site. In a time of rapid growth in the industry, a number of mortgage offices have opened and closed, and data in the online branch locator for customers has lagged these changes from time to time," NovaStar said. "The company's financial disclosures accurately report the number of NovaStar offices and branches, and the company has updated the data on its Web site."

Corey Williams, a NovaStar branch manager in Las Vegas, told the Las Vegas Sun in February that the state Mortgage Lending Division fine resulted from a change in state law. "We used to be exempt (from licensing requirements)," Williams said at the time. Scott Bice, who heads the Nevada agency, said that prior to the implementation of new regulations on Dec. 31, subsidiaries of national companies were exempt because they were subject to federal regulation. NovaStar on Monday said it also cleared up a regulatory problem in Massachusetts and said it's approved to do business in Texas.

archive