Exhibit 16.1

July 5, 2012

Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549-7561

Dear Sirs/Madams:

We have read Item 4 of Novation Companies, Inc.'s (formerly known as NovaStar Financial Inc.) Form 8-K dated July 5, 2012, and have the following comments:

1. We agree with the statements made in Item 4(a).

2. We have no basis on which to agree or disagree with the statements made in Item 4(b).

Yours truly,

/s/ DELOITTE & TOUCHE LLP

Kansas City, Missouri