Habitat for Humanity Kansas City and NovaStar Financial, Inc. Announce Community Partnership to Serve Homeowners.

KANSAS CITY, Mo. -- Habitat for Humanity Kansas City and NovaStar Financial, Inc. (NYSE: NFI) today announced an innovative community partnership to serve Habitat for Humanity homeowners in Kansas City, Missouri. In a pilot program, NovaStar's mortgage servicing group is contributing personnel and systems to provide hands-on servicing for mortgages owned by Habitat, freeing the nonprofit group's resources for other activities. In addition, NovaStar is offering job counseling and credit education to the homeowners.

"NovaStar approached us last year with an idea for donating business expertise to help Habitat focus on our mission of broadening home ownership and revitalizing neighborhoods in our city," said Yahna Gibson, Executive Director of the organization. "Nearly 150 families own Habitat for Humanity homes in Kansas City with active mortgages. Servicing these financial relationships is a natural way for a mortgage lender to contribute to our efforts and help these families succeed long-term."

Habitat for Humanity provides simple, decent, energy-efficient homes for low-income families that lack affordable housing. New homes are built by volunteers with donated and purchased materials. Habitat sells these houses, at no profit, to the partner families. Self-help is a cornerstone of the group's philosophy, so a partner family also must contribute at least 350 hours of "sweat equity" to acquire a Habitat home. Since Habitat families actually purchase their houses, each home is backed by a no-interest, long-term loan that ensures consistent, affordable monthly payments. Habitat recycles the payments from these mortgages to fund new homes.

NovaStar Mortgage, Inc., the primary loan origination and servicing subsidiary of NovaStar, began servicing Habitat for Humanity Kansas City's homeowner base in February 2006. The company has assigned servicing personnel to assist Habitat and its families. Habitat still owns the mortgages and receives all payments, and NovaStar provides its services as a donation. In addition to billing statements, escrow management, and customer service for the homeowners, which lifts an administrative burden from Habitat's staff, NovaStar offers the partner families in Kansas City (all of them first-time homeowners) services they have not had in the past:

--Choice of making payments by check or automatic bank withdrawal.

--Payment and account information online, via email or by automated phone system.

--On-site or at-home education and explanations on mortgage processes and personal credit management.

--Access to LaunchPoint, an innovative program introduced by NovaStar in 2004 to provide job counseling to mortgage customers who face employment problems.

"Habitat for Humanity is a proven, effective program to help families achieve the dream of home ownership. In Kansas City, where our company is headquartered, Habitat is making an impact in revitalizing core city neighborhoods -- and we are proud to offer our support to this effort," said Lance Anderson, President and Chief Operating Officer of NovaStar Financial.

In addition to the servicing partnership, NovaStar is a house sponsor for the "Homes from the Heartland" project to benefit families left homeless by Hurricane Katrina. The company will provide volunteers and a donation to Habitat for Humanity Kansas City to pre-build housing components in June and ship them to the Gulf Coast region to aid in hurricane recovery.

For more information, please visit www.homesfromtheheartland.org.

About Habitat

The Habitat for Humanity program is a non-profit, interfaith (non-denominational) ministry dedicated to eliminating impoverished housing. Its ministries reach all 50 states (including over 1400 communities) and more than 80 countries around the world. Habitat for Humanity carries out its mission at the community level through organized groups called affiliates.

Habitat for Humanity Kansas City is the seventh affiliate of Habitat for Humanity International. We are a 501(c)(3) non-profit organization working to fulfill the dream of home ownership for low-income families in the greater Kansas City metropolitan area. Our goal is to provide simple, decent, affordable homes to qualified families based on the principle found in Leviticus 25:35-37: "If a brother living near you becomes poor, you must provide for him...do not make a profit on the goods you sell him."

For more information, please visit our website at www.habitatkc.org.

About NovaStar

NovaStar Financial, Inc. (NYSE: NFI) is a specialty finance company that originates, purchases, invests in and services residential nonconforming loans. The company specializes in single-family mortgages, involving borrowers whose loan size, credit details or other circumstances fall outside conventional mortgage agency guidelines. A Real Estate Investment Trust (REIT) founded in 1996, NovaStar efficiently brings together the capital markets, a nationwide network of mortgage brokers and American families financing their homes. NovaStar is headquartered in Kansas City, Missouri, and has lending operations nationwide.

For more information, please reference our website at www.novastarmortgage.com.