8-K

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 8-K


                                 CURRENT REPORT
                     PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                                October 22, 2007
                Date of Report (Date of earliest event reported)

                            NOVASTAR FINANCIAL, INC.
             (Exact name of registrant as specified in its charter)

           Maryland                      001-13533                74-2830661
- -------------------------------         ------------         -------------------
(State or other jurisdiction of         (Commission           (I.R.S. Employer
incorporation or organization)          File Number)         Identification No.)

               8140 Ward Parkway, Suite 300, Kansas City, MO 64114
               ---------------------------------------------------
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (816) 237-7000
                                 --------------
              (Registrant's telephone number, including area code)

                                 Not Applicable
                                 --------------
          (Former Name or Former Address, if Changed Since Last Report)



Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:

[  ] Written communications  pursuant to Rule 425 under the Securities Act (17
     CFR 230.425)
[  ] Soliciting  material  pursuant to Rule 14a-12 under the Exchange Act (17
     CFR 240.14a-12)
[  ] Pre-commencement  communications  pursuant  to Rule  14d-2(b)  under the
     Exchange Act (17 CFR 240.14d-2(b))
[  ] Pre-commencement  communications  pursuant  to Rule  13e-4(c)  under the
     Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

Wachovia Master Repurchase Agreement (2007 Servicing Rights) and Wachovia Master
Repurchase Agreement (2007 Residual Securities)

As previously disclosed, in April 2007 NovaStar Financial, Inc. ("NFI"), as
guarantor, and certain of its subsidiaries (collectively, with NFI, "NovaStar")
entered into a Master Repurchase Agreement (2007 Servicing Rights) (as amended,
the "Servicing Rights Facility") with Wachovia Bank, N.A. and certain of its
affiliates (collectively, "Wachovia Bank"), and a Master Repurchase Agreement
(2007 Residual Securities) (as amended, the "Residual Securities Facility") with
Wachovia Capital Markets, LLC and certain of its affiliates. The Servicing
Rights Facility and the Residual Securities Facility collectively provide for a
$100 million combined maximum advance amount, with a maximum advance amount of
no more than $70 million under the Servicing Rights Facility.

In order to address certain short-term liquidity requirements, on October 22,
2007, the maximum advance amount under the Servicing Rights Facility was
temporarily increased to $115 million, the combined maximum advance amount under
the Servicing Rights Facility and the Residual Securities Facility was
temporarily increased to $120 million, and NovaStar Mortgage, Inc. ("NovaStar
Mortgage") drew funds under the Servicing Rights Facility, on a short-term
basis, against the pledge of NovaStar Mortgage's right to reimbursement for
certain principal and interest advances made by NovaStar Mortgage to certain
securitization trusts in NovaStar Mortgage's capacity as servicer of the
underlying securitized mortgage loans. The October 22nd advance must be repaid
in full no later than November 5, 2007. The increase in the maximum advance
amount under the Servicing Rights Facility and the increase in the combined
maximum advance amount under the Servicing Rights Facility and the Residual
Securities Facility will expire on November 5, 2007, at which time the maximum
advance amount under the Servicing Rights Facility will revert to $70 million
and the combined maximum advance amount under the Servicing Rights Facility and
the Residual Securities Facility will revert to $100 million.

In addition, on October 23, 2007, NovaStar and Wachovia Bank entered into
Amendment Number Three to the Servicing Rights Facility to add, as eligible
collateral thereunder, NovaStar Mortgage's servicing rights with respect to
mortgage loans securitized by NovaStar pursuant to the NovaStar Mortgage Funding
Trust, Series 2007-2. The foregoing summary of the terms of Amendment Number
Three is qualified in its entirety by reference to the full text of Amendment
Number Three, which is attached hereto as Exhibit 10.1 and is incorporated
herein by reference.

In addition to the financing agreements described above, Wachovia Bank or
certain of its affiliates provide to NFI and its affiliates certain additional
previously disclosed financing facilities and routinely engage in other ordinary
course financial transactions with NFI and its affiliates, including but not
limited to financial derivative transactions and acting as an underwriter for
certain securitizations sponsored by NFI and its affiliates.

DBSP Receivables Loan and Security Agreement

On October 22, 2007, NovaStar Mortgage, NFI, NovaStar Certificates Financing
Corporation ("NCFC"), NFI Holding Corporation ("NFI Holding"), NovaStar CDO
Holdings, Inc. ("CDO Holdings"), and DB Structured Products, Inc. ("DBSP")
executed a Forbearance Agreement and Amendment Number Nine ("Amendment No. 9")
to the existing Receivables Loan and Security Agreement (the "Servicing Advance
Facility"). Among other things, Amendment No. 9 extended the Servicing Advance
Facility termination date to the earlier of (a) the closing of the sale of
NovaStar Mortgage's mortgage servicing rights to Saxon Mortgage Services, Inc.
pursuant to that certain previously disclosed Servicing Rights Transfer
Agreement, and (b) January 22, 2008.

In connection with Amendment No. 9, NovaStar Mortgage paid DBSP a forbearance
fee and customary costs and expenses incurred by DBSP in connection with
Amendment No. 9.

In addition, in connection with Amendment No. 9, on October 22, 2007, NFI
Holding and CDO Holdings became signatories to that certain Amended and Restated
Master Netting Agreement dated as of January 5, 2007, among NFI, NMI, NCFC,
NovaStar Certificates Financing LLC, and HomeView Lending, Inc. (with NFI
Holding and CDO Holdings, the "NovaStar Entities"), and DBSP and certain of its
affiliates (the "DB Entities"), by the execution of a joinder agreement with
respect thereto (the "Joinder Agreement"). The Amended and Restated Master
Netting Agreement cross-collateralizes all or substantially all financial
transactions between any NovaStar Entity and any DB Entity and, upon an event of
default under any such transaction, permits the DB Entities to, among other
remedies, treat all such transactions as in default, set off any obligation of
any DB Entity against any obligation of any NovaStar Entity thereunder, and
apply collateral provided with respect to a particular transaction against any
obligation of any NovaStar Entity under any of such transactions.

In addition to the Servicing Advance Facility, DBSP and its affiliates routinely
engage in other ordinary course financial transactions with NFI and its
affiliates, including but not limited to financial derivative transactions and
acting as an underwriter for certain securitizations sponsored by NFI and its
affiliates.

Item 2.03 Creation of a Direct Financial Obligation or an obligation under an
Off-Balance Sheet Arrangement of a Registrant

The disclosure under "Item 1.01 Entry into a Material Definitive Agreement" of
this Current Report with respect to NovaStar's Servicing Rights Facility and
Residual Securities Facility is incorporated herein by reference.

Item 9.01 Financial Statement and Exhibits

(d) Exhibits.

Exhibit No.    Document

10.1           Amendment Number Three, dated as of October 22, 2007, to the
               Master Repurchase Agreement (2007 Servicing Rights), dated as of
               April 25, 2007, among Wachovia Bank, N.A., as Buyer, Wachovia
               Capital Markets, LLC, as Agent, NovaStar Mortgage, Inc., as
               Seller and a Guarantor, and NovaStar Financial, Inc., NFI Holding
               Corporation, and HomeView Lending, Inc., as Guarantors.

                                    SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                       NOVASTAR FINANCIAL, INC.


DATE:  October 25, 2007                /s/ Todd M. Phillips
                                       -----------------------------------------
                                       Todd M. Phillips
                                       Vice President, Treasurer and
                                       Controller

                                Index to Exhibits


Exhibit No.    Document

10.1           Amendment Number Three, dated as of October 22, 2007, to the
               Master Repurchase Agreement (2007 Servicing Rights), dated as of
               April 25, 2007, among Wachovia Bank, N.A., as Buyer, Wachovia
               Capital Markets, LLC, as Agent, NovaStar Mortgage, Inc., as
               Seller and a Guarantor, and NovaStar Financial, Inc., NFI Holding
               Corporation, and HomeView Lending, Inc., as Guarantors.

EX-10.1

                                                                    Exhibit 10.1

                             AMENDMENT NUMBER THREE
                                     to the

               MASTER REPURCHASE AGREEMENT (2007 SERVICING RIGHTS)

                           Dated as of April 25, 2007

                                      among

                               WACHOVIA BANK, N.A.
                          WACHOVIA CAPITAL MARKETS, LLC

                                       and

                             NOVASTAR MORTGAGE, INC.


     AMENDMENT NUMBER THREE ("Amendment Number Three"),  dated as of October 22,
2007, by and among Wachovia Bank,  N.A., as buyer  ("Buyer"),  Wachovia  Capital
Markets,  LLC,  as agent  ("Agent"),  NovaStar  Mortgage,  Inc.,  as seller (the
"Seller"),  NovaStar  Financial,  Inc.  ("NFI"),  NovaStar  Holding  Corporation
("NHC") and Homeview  Lending Inc.  ("Homeview",  together with Seller,  NFI and
NHC,  each  a  Guarantor  and  collectively  the  "Guarantors")  to  the  Master
Repurchase  Agreement  (2007 Servicing  Rights),  dated as of April 25, 2007, as
amended by Amendment Number One, dated May 10, 2007 and by Amendment Number Two,
dated September 7, 2007 (as amended, the "Master Repurchase Agreement"),  by and
among the Buyer, the Agent, the Seller and the Guarantors.

                                    RECITALS

          WHEREAS,  Buyer, the Seller,  the Guarantors and the Agent have agreed
to amend the Master  Repurchase  Agreement  pursuant to the terms and conditions
set forth herein.

          NOW THEREFORE,  for good and valuable  consideration,  the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

          SECTION 1. Defined  Terms.  Any terms  capitalized  but not  otherwise
defined  herein  shall  have the  respective  meanings  set forth in the  Master
Repurchase Agreement.

          SECTION 2.  Amendments.  Effective as of the date  hereof,  the Master
Repurchase Agreement is hereby amended as follows:

          (a) Section (c) of Schedule 1 of the Master  Repurchase  Agreement  is
hereby  amended  by  adding  new  subsection  "7."  directly  after  the  end of
subsection "6." therein as follows:

               "7. NovaStar  Mortgage  Funding Trust,  Series 2007-2 Pooling and
               Servicing Agreement, dated as of May 1, 2007, by and among

               NOVASTAR  MORTGAGE FUNDING  CORPORATION,  as depositor,  NOVASTAR
               MORTGAGE  INC.,  as servicer and as sponsor,  U.S.  BANK NATIONAL
               ASSOCIATION,  as  custodian  and  DEUTSCHE  BANK  NATIONAL  TRUST
               COMPANY, as trustee."

          SECTION 3.  Conditions  Precedent.  This Amendment  Number Three shall
become effective only when:

          (a) This  Amendment  Number  Three is executed  and  delivered by duly
     authorized officers of each of Buyer, Seller, Guarantors and Agent;

          (b) Buyer  shall  have  received  all fees and other  amounts  due and
     payable  on or prior to the date  hereof,  including  reimbursement  of all
     out-of  pocket  expenses  required  to be  reimbursed  or  paid  by  Seller
     hereunder or any other Program Document;

          (c) Any other deliverable due as the date hereof to Buyer; and

          (d) Buyer has received any other  documents as the Buyer or counsel to
     the Buyer may reasonably request.

          SECTION  4.  Governing  Law.  THIS  AMENDMENT  NUMBER  THREE  SHALL BE
CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAW OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.

          SECTION 5.  Counterparts.  This Amendment Number Three may be executed
by each of the parties  hereto on any number of separate  counterparts,  each of
which shall be an original and all of which taken together shall  constitute one
and the same instrument.

          SECTION  6.  Costs.  Seller  shall  promptly  reimburse  Buyer for all
out-of-pocket  costs and expenses of Buyer in connection  with the  preparation,
execution  and  delivery of this  Amendment  Number  Three  (including,  without
limitation, the fees and expenses of counsel for Buyer).

          SECTION  7.  Limited  Effect.  Except as  amended  hereby,  the Master
Repurchase  Agreement shall continue in full force and effect in accordance with
its respective terms.  Reference to this Amendment Number Three need not be made
in the Master Repurchase  Agreement or any other instrument or document executed
in connection therewith,  or in any certificate,  letter or communication issued
or made pursuant to, or with respect to, the Master  Repurchase  Agreement,  any
reference therein to the Master Repurchase Agreement,  being sufficient to refer
to the  Master  Repurchase  Agreement,  as  amended  thereby.  Seller  shall  be
responsible for all costs associated with this Amendment Number Three.

                            [SIGNATURE PAGE FOLLOWS]

          IN WITNESS WHEREOF,  Seller,  Buyer,  Agent and Guarantors have caused
their  names to be signed to this  Amendment  Number  Three by their  respective
officers thereunto duly authorized as of the date first above written.


                                       NOVASTAR MORTGAGE, INC., as Seller


                                       By:  /s/ Todd M. Phillips
                                          --------------------------------------
                                       Name:  Todd M. Phillips
                                            ------------------------------------
                                       Title:  Executive Vice President
                                             -----------------------------------

                                       WACHOVIA BANK, N.A., as Buyer


                                       By:  /s/ Andrew W. Riebe
                                          --------------------------------------
                                       Name:  Andrew W. Riebe
                                            ------------------------------------
                                       Title:  Director
                                             -----------------------------------


                                       WACHOVIA CAPITAL MARKETS, LLC, as Agent


                                       By:  /s/ Goetz Rokahr
                                          --------------------------------------
                                       Name:  Goetz Rokahr
                                            ------------------------------------
                                       Title:  Vice President
                                             -----------------------------------


Amendment No. 3 to the Master Repurchase Agreement (Servicing Rights)

Acknowledged and Agreed:

NFI HOLDING CORPORATION, as Guarantor

By:  /s/ Todd M. Phillips
   -----------------------------------------
Name:  Todd M. Phillips
     ---------------------------------------
Title:  Vice President
      --------------------------------------

NOVASTAR FINANCIAL, INC., as Guarantor

By:  /s/ Todd M. Phillips
   -----------------------------------------
Name:  Todd M. Phillips
     ---------------------------------------
Title:  Vice President
      --------------------------------------

NOVASTAR MORTGAGE, INC., as Guarantor

By:  /s/ Todd M. Phillips
   -----------------------------------------
Name:  Todd M. Phillips
     ---------------------------------------
Title:  Executive Vice President
      --------------------------------------

HOMEVIEW LENDING INC., as Guarantor

By:  /s/ Todd M. Phillips
   -----------------------------------------
Name:  Todd M. Phillips
     ---------------------------------------
Title:  Vice President
      --------------------------------------


Amendment No. 3 to the Master Repurchase Agreement (Servicing Rights)