Novation Companies
| Company type | Public |
|---|---|
| Industry | Technology-driven services |
| Predecessor | NovaStar Financial, Inc. |
| Founded | January 1, 1996 in Kansas City, Missouri, United States |
| Headquarters | Milwaukee , United States |
Area served | United States |
| Products | Cloud-based IVR, ACD, call center technology solutions (CorvisaCloud) |
Number of employees | 20 (approximate, post-2008) |
Novation Companies, Inc. (previously known as Novastar Financial, Inc.) owns and manages early-stage enterprises within the technology-driven services industry. It is publicly traded under the ticker symbol NOVC.
History
Established in 1996 in Kansas City, Missouri, as NovaStar Financial, Inc., the company initially specialized in residential mortgage lending through its subsidiaries NovaStar Mortgage, Inc. and NovaStar Home Mortgage, Inc. Over a span of ten years, it originated mortgage loans exceeding $40 billion and expanded its footprint to more than 400 branches nationwide, employing nearly 5,000 individuals. The firm went public less than a year after its inception.
From 2003 to 2006, the U.S. subprime loan market expanded by 17%, yet NovaStar’s business approach became untenable due to increasing loan defaults. The company played a notable role in the 2008 financial crisis. By 2008, NovaStar had completely withdrawn from mortgage lending; its stock value plunged from close to $70 down to below $1 and was subsequently removed from the New York Stock Exchange. The employee count diminished to approximately 20 staff members, and the company rebranded as Novation Companies, Inc. to distance itself from prior setbacks.
Except for CorvisaCloud, Novation has divested or liquidated all other former subsidiaries and currently concentrates solely on expanding CorvisaCloud’s operations.
Corvisa Cloud
Corvisa Cloud, LLC operates out of Milwaukee and offers cloud-based interactive voice response (IVR), automatic call distribution (ACD), and call center technology solutions.
StreetLinks Lender Solutions
StreetLinks LLC (operating as StreetLinks Lender Solutions) provides nationwide appraisal and valuation services tailored for mortgage professionals. As Novation’s inaugural and largest subsidiary acquisition, StreetLinks expanded from an initial team of 15 employees to over 600, achieving substantial revenue and net income growth in 2009.
On April 16, 2014, Novation divested StreetLinks to Assurant Services, LLC for $60 million in cash with an additional contingent payment of up to $12 million based on revenue milestones achieved during 2015-2016.
Advent Financial Services
Advent Financial Services, LLC specialized in financial settlement services for income tax preparation firms and offered customized banking accounts along with small-dollar banking products designed for low- to moderate-income consumers.
On August 18, 2014, Advent transferred specific intellectual property assets, software platforms, and customer information to Santa Barbara Tax Products Group, LLC. Concurrently, it announced a structured wind-down of its remaining business operations.
Corvisa Services
Based in Milwaukee, Corvisa Services LLC provides software development, technology support, marketing initiatives, and training programs for Novation’s group of companies.
Mango Moving
Mango Moving LLC delivered long-distance moving and nationwide storage solutions. Acquired by Novation in 2011, the business was discontinued on February 27, 2013 due to capital constraints and ongoing negative cash flow generation. Novation fully exited the logistics sector following the completion of run-off operations in the first quarter of 2013.
Conclusion of NovaStar’s mortgage lending
NovaStar specialized in originating and servicing nonconforming residential loans aimed at borrowers who did not meet conventional mortgage criteria. It maintained stakes in these loans through its mortgage securities portfolio and was classified as a real estate investment trust for tax purposes.
Following exposure during the subprime mortgage crisis, NovaStar halted lending activities at the close of 2007. Its operational divisions comprised mortgage portfolio management, lending operations, loan servicing, and branch management. All servicing rights were sold to Saxon Mortgage Services, Inc.
Legal proceedings
In 2006, a group of forty NovaStar shareholders initiated legal action against ten major Wall Street prime brokers, accusing them of manipulating stock prices through naked short selling practices.
During March and April of 2007, class action lawsuits targeted NovaStar executives, alleging that they artificially boosted stock valuations by means of misleading financial disclosures. Additionally, a separate case regarding yield spread premium payments made to brokers was scheduled for trial in May 2007. By June 2007, NovaStar's residential lending division resolved this particular lawsuit with a $5.1 million settlement, while not conceding any liability.
On September 12, 2008, creditors filed an involuntary bankruptcy petition against NovaStar Mortgage Inc., a subsidiary, following missed interest payments. Although NovaStar Financial opposed the petition, it acknowledged the potential necessity of seeking bankruptcy protection. The company also paid $2 million to dismiss an earlier involuntary bankruptcy suit that involved allegations of false advertising and unfair competition.
In November 2008, investors who had purchased NovaStar Home Equity Loan Asset-Backed Certificates brought forward a lawsuit claiming that misrepresentations had impacted the value of these securities.
Novation Companies underwent Chapter 11 bankruptcy proceedings twice: initially in 2016 and subsequently on August 13, 2023. The most recent filing reported assets valued under $50,000 in contrast to liabilities ranging from $50 million to $100 million.