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Unfair Lending Practices

Kansas city, MO: (Mar-20-08) Irvine, CA-based American Interbanc Mortgage LLC and two other entities brought a lawsuit against NovaStar Financial Inc., alleging that a residential mortgage unit of NovaStar engaged in false advertising and unfair competition. The plaintiffs filed an involuntary bankruptcy petition in January 2007 against Novastar, a lender that suffered largely in the mortgage market collapse of 2007. Records show that NovaStar was primarily a sub prime mortgage lender before rapidly rising discrepancies hit the lending market, forcing it to close its lending operations and sell off its mortgage servicing arm. Currently, NovaStar focuses on managing its remaining portfolio of mortgages.

In a recent development in the case, sources stated that NovaStar Financial agreed to resolve the lawsuit for more than $2 million. Under the terms of the settlement agreement, Kansas City-based NovaStar said it will pay $2 million plus an extra amount tied to the company's net worth over the next two years. In exchange, American Interbanc said that it will withdraw the involuntary bankruptcy petition. [FORBES: NOVASTAR SETTLES LAWSUIT FOR $2 MILLION]

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Published on Mar-24-08


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