Novation Holdings Inc. · OTC:NOHO
Novation — Novastar Financial — American Securitization Forum 2007
22 slides from Novation's conference presentation, Jan 29, 2007
Slide 1: American Securitization Forum, Las Vegas, January 28-31, 2007
American Securitization Forum Las Vegas, Nevada January 28-31, 2007
Slide 2: Forward looking disclosure
Forward looking disclosure Certain matters discussed in this presentation constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are those that predict or describe future events and that do not relate solely to historical matters. Forward-
Slide 3: Overview
Overview Founded: June, 1996 IPO: October, 1997 (NYSE: NFI) $800 million market cap; $543 million of GAAP equity Top 20 residential mortgage ABS issuer Current production run rate of $850 million per month Cost to originate in the 1.75%-2.00% range Servicer rating of “Strong” by S&P Completed 38 ABS
Slide 4: NovaStar Organizational Structure
NovaStar Organizational Structure
Slide 5: NovaStar Operating Strategy
NovaStar Operating Strategy NovaStar is currently structured as a REIT Parent company does not pay corporate taxes Focus is on being a portfolio investor vs. pure mortgage banking Originate high margin, non-conforming residential mortgages Service our own collateral (no third party servicing) Use te
Slide 6: Origination Strategy
Origination Strategy Primarily an A- wholesale lender Vertical integration Originator and end investor Whole loan portfolio exceeding $16 billion Centralized origination operation Strive to be a low cost producer - cost to originate below 2.00% Better risk controls - over 25% appraisal reviews Manag
Slide 7: Distribution Channels
Distribution Channels Wholesale Production centers located in Independence, OH; Richfield, OH and Lake Forest, CA Approx. 390 person inside & outside sales force located in 42 states call on a customer base of over 16,400 independent retail brokers Compete on service, primarily a price taker Corresp
Slide 8: Distribution Channels - Continued
Distribution Channels - Continued Retail Call centers located in Columbia, MD and Kansas City, MO focusing primarily on retention of existing portfolio Approx. 120 loan officers Secondary focus on new business using primarily purchased leads Current production run rate of $200-$300 million per quart
Slide 9: Historical Production
Historical Production Total Nonconforming Production $10.23B $9.28B $8.42B $5.25B $2.50B Wholesale 86% 75% 65% 67% 79% Retail 9% 16% 25% 28% 19% Correspondent / Mini Bulk 5% 9% 10% 5% 2% Securitizations Resecuritizations
Slide 10: Non-Conforming Production
Non-Conforming Production $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 Quarter 0.00% 1.00% 2.00% 3.00% 4.00% Principal Originated Cost to Originate
Slide 11: Origination Practices
Origination Practices 100% Pre-funding Audit Quality/Fraud procedures for new and existing brokers Watch list / Do not take list for 3 rd party vendors Validation of borrower identity, employment, income, occupancy 100% Appraisal Review All appraisals reviewed by underwriter as well as ran through r
Slide 12: Origination Practices - Continued
Origination Practices - Continued Post Funding Quality Control Identifies negative trends / provides feedback 5%-10% random review of production within 45 days of funding Results determine if additional biased sampling is needed Predatory Lending Issues We do not originate high cost loans (HOEPA or
Slide 13: Risks and Risk Management
Risks and Risk Management Interest rate/prepayment Hedging - match duration using swaps and caps Prepayment/convexity - prepayment penalties Portfolio is hedged within maximum exposure of 10% of equity up/down 100 bps Credit Geographic diversification Lender paid deep MI down to 50-55% LTV Common se
Slide 14: Servicing Overview
Servicing Overview $16 billion portfolio representing 105,000 accounts 22nd largest sub-prime servicer (as of 6/30/06; Source: Inside B&C Lending) Total staff of approx. 250 17 years average experience among Management/Supervisors Approved FHA, VA, Fannie Mae and Freddie Mac seller/servicer Rated by
Slide 15: Servicing
Servicing $0 $2,500 $5,000 $7,500 $10,000 $12,500 $15,000 $17,500 Quarter 0.00% 0.10% 0.20% 0.30% 0.40% 0.50% Principal Serviced Cost to Service
Slide 16: Collateral Performance Pre-Mortgage Insurance
Collateral Performance Pre-Mortgage Insurance (All data as of December 31, 2006 unless stated otherwise)
Slide 17: Production Summary
Production Summary Year Average Balance WAC LTV CLTV FICO PPP (% with) PPP Years ARM NON-FULL DOC NOO CASH OUT 1997-98 $104,857 10.03% 79.6% 81.2% 70% 2.2 68% 35.1% 5.9% 52.9% $100,903 9.91% 81.6% 82.9% 90% 3.2 64% 39.8% 7.7% 49.5% $116,458 10.57% 82.6% 85.0% 90% 2.9 77% 41.3% 6.1% 42.7% $132,426 9.
Slide 18: Actual Loss Severity
Actual Loss Severity Production Year Loans Principal Liquidated Average Balance Loss Severity 1997-1998 2,101 $207,286,241 $98,661 42.5% $66,954,314 $109,941 36.3% $107,573,615 $113,835 35.8% $114,551,265 $126,297 33.7% 1,045 $118,622,228 $113,514 34.7% 1,484 $187,130,014 $126,098 35.2% $60,643,553
Slide 19: Frequency (90+ including REO and Liquidated Loans) by Origination Year
Percent Frequency (90+ including REO and Liquidated Loans) by Origination Year (Based on Original Balance) es “1867 Prodution 2 4908 Prodution e200 Preduction “2001 Prodution 2002 Produrtion 2008 Prodution 2004 Production PO ROS EEO SSH EO ORES SEEMHOOIE SOREL 2005 Production 2006 Production fae He
Slide 20: Static Loss by Origination Year
Static Loss by Origination Year (Based on Original Balance) O97 Produstion 21098 Produstion +2000 Prodution +2001 Predution = 6 {| 200 Production 2008 Production a 2008 Predution 2005 Production 4 206 Production = Percent TOMES KY SP LL MELD ASHE LMM LE ESOP PLE GES Age
Slide 21: Early Performance Indicators
Early Performance Indicators Year First Payment Default (MBA method) First Payment Default (OTS method) Early Payment Default (OTS method) 1997-1998 4.67% 2.05% 9.20% 1.65% 0.80% 5.61% 1.33% 0.66% 5.02% 1.05% 0.45% 2.77% 0.67% 0.25% 1.79% 1.49% 0.54% 3.27% 1.73% 0.66% 3.56% 2.41% 1.32% 8.19% 2000-20
Slide 22: Additional Data
Additional Data Complete production and performance data can be found on NovaStar’s websites: Static pool data Offering documents Bond remittance statements Monthly production reports Mortgage insurance claim statistics http://www.novastarbondinvestors.com/ http://www.novastarmortgage.com/corporate/
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