10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended June 30, 2015

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

For the Transition Period From to

Commission File Number 001-13533

NOVATION COMPANIES, INC.

(Exact Name of Registrant as Specified in its Charter)

Maryland (State or Other Jurisdiction of Incorporation or Organization) 74-2830661 (I.R.S. Employer Identification No.)

2114 Central Street, Suite 600, Kansas City, MO (Address of Principal Executive Office) 64108 (Zip Code)

Registrant's Telephone Number, Including Area Code:(816) 237-7000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	Accelerated filer	Non-accelerated filer	Smaller reporting company
o	o	o	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

The number of shares of the Registrant's Common Stock outstanding on July 31, 2015 was 91,479,519.

NOVATION COMPANIES, INC.

FORM 10-Q

For the Quarterly Period Ended June 30, 2015

TABLE OF CONTENTS

PART I	Financial Information
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive (Loss) Income	3
	Condensed Consolidated Statements of Shareholders’ Equity (Deficit)	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30
PART II	Other Information	31
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	33
	Signatures	34

PART I. FINANCIAL INFORMATION

Item 1.     Financial Statements

NOVATION COMPANIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited; dollars in thousands, except share and per share amounts)

	June 30, 2015			December 31, 2014
Assets
Current Assets
Cash and cash equivalents	$	4,726		$	5,296
Marketable securities, current	21,647			29,815
Service fee receivable, net of allowance of $91 and $66, respectively	609			729
Other current assets	1,767			1,687
Current assets of discontinued operations	591			649
Total current assets	29,340			38,176
Non-Current Assets
Marketable securities, non-current	9,683			16,012
Property and equipment, net of accumulated depreciation	7,153			5,632
Deferred income tax asset, net	685			968
Other assets	1,391			1,391
Total non-current assets	18,912			24,003
Total assets	$	48,252		$	62,179
Liabilities and Shareholders' Equity (Deficit)
Liabilities:
Current Liabilities
Accounts payable and accrued expenses	$	4,393		$	4,388
Deferred income tax liability, net	685			968
Other current liabilities	361			942
Current liabilities of discontinued operations	577			875
Total current liabilities	6,016			7,173
Non-Current Liabilities
Senior notes	87,215			85,937
Other liabilities	596			622
Non-current liabilities of discontinued operations	1,798			1,797
Total non-current liabilities	89,609			88,356
Total liabilities	95,625			95,529
Commitments and contingencies (Note 7)
Shareholders' deficit:
Capital stock, $0.01 par value per share, 120,000,000 shares authorized:
Common stock, 91,479,519 shares issued and outstanding	915			915
Additional paid-in capital	744,216			743,919
Accumulated deficit	(794,441		)	(780,803		)
Accumulated other comprehensive income	1,937			2,619
Total Novation Companies, Inc. shareholders' deficit	(47,373		)	(33,350		)
Noncontrolling interests	—			—
Total shareholders' deficit	(47,373		)	(33,350		)
Total liabilities and shareholders' deficit	$	48,252		$	62,179

See notes to condensed consolidated financial statements.

1

NOVATION COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited; dollars in thousands, except share and per share amounts)

	For the Six Months Ended June 30,						For the Three Months Ended June 30,
	2015			2014			2015			2014
Income and Revenues:
Service fee income	$	1,680		$	1,419		$	891		$	629
Service fee income – transition services	—			968			—			968
Interest income – mortgage securities	3,206			3,396			1,650			1,610
Total	4,886			5,783			2,541			3,207
Costs and Expenses:
Cost of services	3,115			1,363			1,682			666
Cost of services – transition services	—			608			—			608
Development	766			894			472			487
Sales and marketing	4,914			1,527			2,469			941
General and administrative	7,900			8,706			3,723			4,169
Total	16,695			13,098			8,346			6,871
Other (expense) income	(68		)	66			(75		)	29
Interest expense	(1,636		)	(1,594		)	(752		)	(798		)
Loss from continuing operations before income taxes	(13,513		)	(8,843		)	(6,632		)	(4,433		)
Income tax expense (benefit), continuing operations	107			(8,185		)	17			(6,151		)
Net (loss) income from continuing operations	(13,620		)	(658		)	(6,649		)	1,718
(Loss) Income from discontinued operations, net of income taxes	(18		)	41,665			(18		)	38,526
Net (loss) income	(13,638		)	41,007			(6,667		)	40,244
Less: Net loss attributable to noncontrolling interests	—			—			—			(33		)
Net (loss) income attributable to Novation	$	(13,638	)	$	41,007		$	(6,667	)	$	40,277
Earnings Per Share attributable to Novation:
Basic	$	(0.15	)	$	0.45		$	(0.07	)	$	0.44
Diluted	$	(0.15	)	$	0.45		$	(0.07	)	$	0.44
Weighted average basic shares outstanding	91,061,455			90,866,933			91,097,761			90,866,933
Weighted average diluted shares outstanding	91,061,455			90,866,933			91,097,761			90,940,843

See notes to condensed consolidated financial statements.

2

NOVATION COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(unaudited; dollars in thousands)

	For the Six Months Ended June 30,						For the Three Months Ended June 30,
	2015			2014			2015			2014
Net (loss) income	$	(13,638	)	$	41,007		$	(6,667	)	$	40,244
Other comprehensive (loss) income:
Change in unrealized gain on marketable securities – available-for-sale	(682		)	(176		)	(605		)	50
Total comprehensive (loss) income	(14,320		)	40,831			(7,272		)	40,294
Comprehensive loss attributable to noncontrolling interests:
Less: Net loss attributable to noncontrolling interests	—			—			—			(33		)
Total comprehensive (loss) income attributable to Novation	$	(14,320	)	$	40,831		$	(7,272	)	$	40,327

See notes to condensed consolidated financial statements.

3

NOVATION COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

(unaudited; dollars in thousands)

	Total Novation Shareholders’ Equity (Deficit)
	Common Stock		Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Income			Noncontrolling Interests		Total Shareholders’ Equity (Deficit)
Balance, December 31, 2014	$	915	$	743,919	$	(780,803	)	$	2,619		$	—	$	(33,350	)
Compensation recognized under stock compensation plans	—		297		—			—			—		297
Net loss	—		—		(13,638		)	—			—		(13,638		)
Other comprehensive loss	—		—		—			(682		)	—		(682		)
Balance, June 30, 2015	$	915	$	744,216	$	(794,441	)	$	1,937		$	—	$	(47,373	)

	Total Novation Shareholders’ Equity (Deficit)
	Common Stock		Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Income			Noncontrolling Interests			Total Shareholders’ Equity (Deficit)
Balance, December 31, 2013	$	915	$	739,468	$	(811,742	)	$	3,103		$	36		$	(68,220	)
Compensation recognized under stock compensation plans	—		381		—			—			—			381
Distributions to noncontrolling interests	—		—		—			—			(5		)	(5		)
Exchange of membership interests for forgiveness of note payable	—		3,814		—			—			107			3,921
Deconsolidation of subsidiary	—		—		—			—			(138		)	(138		)
Net income	—		—		41,007			—			—			41,007
Other comprehensive loss	—		—		—			(176		)	—			(176		)
Balance, June 30, 2014	$	915	$	743,663	$	(770,735	)	$	2,927		$	—		$	(23,230	)
See notes to condensed consolidated financial statements.

4

NOVATION COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; dollars in thousands)

	For the Six Months Ended June 30,
	2015			2014
Cash flows from operating activities:
Net (loss) income	$	(13,638	)	$	41,007
Net (loss) income from discontinued operations	(18		)	41,665
Net loss from continuing operations	(13,620		)	(658		)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Accretion of marketable securities	(77		)	(385		)
Provision for bad debt	61			56
Amortization of deferred debt issuance costs and senior debt discount	1,278			1,090
Loss on disposal of fixed assets, net	5			6
Compensation recognized under stock compensation plans	297			381
Depreciation expense	1,111			725
Deferred taxes	—			(8,185		)
Eliminations of intercompany activity with discontinued operations	3			2,940
Changes in:
Due from discontinued operations	(5		)	4,945
Service fee receivable	59			(566		)
Other current assets and liabilities, net	(605		)	339
Other noncurrent assets and liabilities, net	(54		)	(68		)
Accounts payable and accrued expenses	5			(1,437		)
Net cash (used in) provided by operating activities of continuing operations	(11,542		)	(817		)
Net cash used in operating activities of discontinued operations	(297		)	(4,184		)
Net cash used in operating activities	(11,839		)	(5,001		)
Cash flows from investing activities:
Proceeds from sales and maturities of marketable securities	15,121			385
Payments for other investing activities	—			(3		)
Proceeds from sale of subsidiary	—			54,748
Purchases of available-for-sale securities	(1,229		)	(17,536		)
Purchase of cost method investment	—			(600		)
Purchases of property and equipment	(2,587		)	(876		)
Net cash provided by investing activities of continuing operations	11,305			36,118
Net cash used in investing activities of discontinued operations	—			(593		)
Net cash provided by investing activities	11,305			35,525
Cash flows from financing activities:
Cash payments for contributions of capital to discontinued operations	(255		)	(2,373		)
Cash receipts from distributions of earnings from discontinued operations	—			9
Principal payments under capital leases	(78		)	(136		)
Net cash used in financing activities of continuing operations	(333		)	(2,500		)
Net cash provided by financing activities of discontinued operations	255			2,289
Net cash used in financing activities	(78		)	(211		)
	Continued

5

NOVATION COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; dollars in thousands)
	For the Six Months Ended June 30,
	2015			2014
Net (decrease) increase in cash and cash equivalents of continuing operations	$	(570	)	$	32,801
Cash and cash equivalents, beginning of period	5,296			5,768
Cash and cash equivalents, end of period	$	4,726		$	38,569
Net decrease in cash and cash equivalents of discontinued operations	$	(42	)	$	(2,488	)
Cash and cash equivalents, beginning of period	358			3,499
Cash and cash equivalents, end of period	$	316		$	1,011

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

(unaudited; dollars in thousands)

	For the Six Months Ended June 30,
	2015			2014
Cash paid for interest	$	439		$	551
Cash (paid for) received from income taxes, net	(737		)	37
Cash received on mortgage securities – available-for-sale with no cost basis	2,929			3,011
Non-cash investing and financing activities:
Assets acquired under capital lease	84			140
See notes to condensed consolidated financial statements.

6

NOVATION COMPANIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of and for the period ended June 30, 2015 (Unaudited)

Note 1. Financial Statement Presentation

Description of Operations – Novation Companies, Inc. (the “Company” or "Novation" or "we” or “us”) owns 100% of Corvisa LLC ("Corvisa"). Corvisa sells cloud-based communication software under the CorvisaOne® brand, telecommunications services, and implementation consulting services for its own customers as well as customers of a leading customer relationship management (CRM) software provider. This business was formerly known as CorvisaCloud, LLC, but was rebranded to Corvisa during the first quarter of 2015.

On April 16, 2014 we announced a significant strategic shift for Novation with the decision to focus our resources primarily on the business of Corvisa. This decision was based largely on the Company's belief that Corvisa represents a better opportunity for Novation to build long-term shareholder value due to Corvisa's CorvisaOne technology platform and the size of its target customer base.

On April 16, 2014, the Company and the non-controlling members of StreetLinks, a national residential appraisal and mortgage real estate valuation management services company, entered into a purchase and sale agreement with Assurant Services, LLC, a subsidiary of Assurant, Inc. ("Assurant"), pursuant to which Assurant purchased 100% of the outstanding membership units of StreetLinks. See Note 3 to the condensed consolidated financial statements for additional information regarding this transaction. The operations of StreetLinks have been classified as discontinued operations for all periods presented.

On August 18, 2014, the Company sold certain intellectual property, software, and customer data of its other operating subsidiary, Advent Financial Services LLC (“Advent”), to Santa Barbara Tax Products Group, LLC, and announced that it would be conducting an orderly winding-down of the remaining business and operations of Advent; a financial settlement services provider for professional tax preparers nationwide. As discussed in Note 3, the operations of Advent have been classified as discontinued operations for all periods presented.

Prior to 2008, the Company originated, purchased, securitized, sold, invested in and serviced residential nonconforming mortgage loans and mortgage securities. As a result of those activities, the Company acquired mortgage securities that continue to be a source of its earnings and cash flow. See Note 4 and Note 8 to the condensed consolidated financial statements for additional information regarding these securities and the valuation thereof. Also as a result of those activities, the Company may, from time to time, receive indemnification and loan repurchase demands related to past sales of loans to securitization trusts and other third parties. See Note 7 to the condensed consolidated financial statements for additional information regarding these demands.

Financial Statement Presentation – The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the period. The Company uses estimates and judgments in establishing the fair value of its mortgage securities and accounting for income taxes, including the determination of the timing of the establishment or release of the valuation allowance related to the deferred tax asset balances and reserves for uncertain tax positions. While the condensed consolidated financial statements and footnotes reflect the best estimates and judgments of management at the time, actual results could differ significantly from those estimates.

Cash equivalents consist of liquid investments with an original maturity of three months or less. Cash equivalents are stated at cost, which approximates fair value.

The condensed consolidated financial statements of the Company include the accounts of all wholly-owned and majority-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

The Company's condensed consolidated financial statements are unaudited. In the opinion of management, all necessary adjustments have been made, which were of a normal and recurring nature, for a fair presentation of the condensed consolidated financial statements. The Company's condensed consolidated financial statements should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements of the Company and the notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

Comparability. As noted in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, during the fourth quarter of 2014 the Company elected to update the presentation of its consolidated statement of operations to be more consistent with industry practice and allow for enhanced comparability between Corvisa and its peers. This update involved moving from the Company's historical presentation of only two categories of operating expenses to the revised presentation, which presents four categories of operation expenses: Cost of services, Development, Sales and marketing, and General and

7

administrative. As a result, operating results for the six and three months ended June 30, 2014 have been reclassified to conform to the revised presentation.

Note 2. New Accounting Pronouncements

In April 2015, the FASB issued Accounting Standards Update ("ASU") 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, which provides guidance on a customer’s accounting for cloud computing costs. Under the ASU, a customer must determine whether a cloud computing arrangement contains a software license. If so, the customer would account for the fees related to the software license element in a manner consistent with how the acquisition of other software licenses is accounted for under ASC 350-40. If the arrangement does not contain a software license, the customer would account for the arrangement as a service contract. The ASU is effective for annual periods (and interim periods) beginning after December 15, 2015. Early adoption is permitted. Entities may adopt the guidance (1) retrospectively or (2) prospectively to arrangements entered into, or materially modified, after the effective date. The Company does not expect this guidance to have a significant impact on the Company’s financial statements.

In January 2015, the FASB issued ASU 2015-1, Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items, which eliminates from U.S. GAAP the concept of an extraordinary item, which is an event or transaction that is both (1) unusual in nature and (2) infrequently occurring. Under this ASU, an entity will no longer (1) segregate an extraordinary item from the results of ordinary operations; (2) separately present an extraordinary item on its income statement, net of tax, after income from continuing operations; or (3) disclose income taxes and earnings-per-share data applicable to an extraordinary item. The ASU is effective for annual periods beginning after December 15, 2015, and interim periods within those annual periods. Entities may apply the guidance prospectively or retrospectively to all prior periods presented in the financial statements. Early adoption is permitted if the guidance is applied as of the beginning of the annual period of adoption. The Company does not expect this guidance to have a significant impact on the Company’s financial statements.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how reporting entities must disclose going-concern uncertainties in their financial statements. This new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date of issuance of the entity’s financial statements. Further, an entity must provide certain disclosures if there is “substantial doubt about the entity’s ability to continue as a going concern.” This ASU is effective for annual periods ending after December 15, 2016, and interim periods thereafter. Early adoption is permitted. The Company does not expect this guidance to have a significant impact on the Company’s financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This ASU applies to all contracts with customers except those that are within the scope of other topics in the FASB Accounting Standards Codification. Compared with current U.S. GAAP, this ASU also requires significantly expanded disclosures about revenue recognition. On July 9th, 2015 the FASB voted to defer the effective date of this ASU by one year. Early adoption is permitted. However, entities are not allowed to adopt this ASU before the original effective date (that is, annual periods beginning after December 15, 2016). The Company is evaluating the impact of ASU 2014-09 on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of this standard on its ongoing financial reporting.

In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which amends the definition of a discontinued operation in ASC 205-20 and requires entities to provide additional disclosures about discontinued operations as well as disposal transactions that do not meet the discontinued-operations criteria. The FASB issued this ASU to provide more decision-useful information and to make it more difficult for a disposal transaction to qualify as a discontinued operation. This ASU is effective prospectively for all disposals (except disposals classified as held for sale before the adoption date) or components initially classified as held for sale in periods beginning on or after December 15, 2014. Early adoption is permitted. The impact of the adoption of ASU 2014-08 did not have a significant impact on the Company's financial statements.

Note 3. Divestitures

Advent Financial Services, LLC (Financial Intermediary Segment)

On August 18, 2014, Advent sold certain intellectual property, software, and customer data to Santa Barbara Tax Products Group, LLC, for cash consideration of $1.0 million paid at closing. The transaction resulted in a gain of approximately $0.8

8

million during 2014. Due to the timing of the transaction, no portion of this gain is reflected in net income from discontinued operations during the six and three months ended June 30, 2014.

Also on August 18, 2014, the Company announced that it was conducting an orderly winding-down of Advent’s remaining business and operations. As the run-off operations are substantially complete, and as the Company will not have any significant continuing involvement in Advent, the operations of Advent have been classified as discontinued operations for all periods presented.

StreetLinks, LLC (Appraisal Management Segment)

Prior to 2013, the Company entered into a Membership Interest Purchase Agreement (the "Unit Purchase Agreement") with its Chief Operating Officer, Mr. Steve Haslam, pursuant to which Mr. Haslam sold 1,927 units in StreetLinks to the Company in exchange for a total purchase price of $6.1 million, payable in quarterly installments. At the time of the original transaction, Mr. Haslam's units represented approximately 5% of the outstanding StreetLinks membership units. On April 16, 2014, the Company and Mr. Haslam agreed to terminate the Unit Purchase Agreement. In full satisfaction of the Company's outstanding obligations under the Unit Purchase Agreement, the Company transferred back to Mr. Haslam 1,218 StreetLinks membership units (approximately 3% of StreetLinks), which represents the portion of the membership units attributable to the $3.9 million in unpaid installment payments and $0.2 million in interest remaining under the Unit Purchase Agreement. The termination of the Unit Purchase Agreement and simultaneous transfer of 1,218 StreetLinks membership units to Mr. Haslam reduced the Company's ownership interest to approximately 88% as of April 16, 2014.

On April 16, 2014, the Company and non-controlling members of StreetLinks (the "Sellers") entered into a purchase and sale agreement with Assurant, pursuant to which Assurant purchased 100% of the outstanding membership units of StreetLinks in exchange for $60.0 million paid in cash at closing and up to $12.0 million in post-closing consideration contingent upon the total revenue of StreetLinks in fiscal years 2015 and 2016. The Company received approximately $53.9 million in cash proceeds at closing, of which $1.0 million was used to make certain earned bonus payments to three StreetLinks executives. Subsequent to closing, the Company received an additional $0.8 million relating to adjustments for working capital. The transaction resulted in a gain of approximately $48.2 million during the second quarter of 2014. The Company also incurred approximately $1.8 million of transaction-related expenses during second quarter of 2014, such as legal and consulting fees.

The post-closing consideration provides for payment if (a) the total revenue of StreetLinks is $184 million or more for calendar year 2015, Assurant shall pay to the Sellers an aggregate of $12.0 million; but if not, then (b) if the total revenue of StreetLinks is greater than $167.5 million for the calendar year 2016, Assurant shall pay to Sellers up to an aggregate of $12.0 million, based on a linear scale where full payment of the $12.0 million would occur at total revenue of $184 million. The post-closing consideration will be reduced for certain earned bonus payments to three StreetLinks executives of $2.0 million if the maximum post-closing consideration is earned and otherwise prorated based on the same linear scale. There can be no assurance that the Company will receive any post-closing consideration. Assurant has agreed to act in good faith in conducting the business of StreetLinks and to keep separate records, but generally the Company does not control how Assurant may operate the business of StreetLinks. In accordance with the relevant accounting guidance, the post-closing consideration will be treated as a gain contingency. As such, no post-closing consideration will be recognized in earnings until the contingency is resolved.

In connection with the sale, the Company and Assurant also entered into a transition services agreement, pursuant to which the Company will provide ongoing information technology, human resources management and accounting services to StreetLinks for a period of up to eighteen months. The cash flows related to these services are not significant to StreetLinks. The Company will have no significant continuing involvement with StreetLinks beyond the transition services. As the agreed-upon professional services were substantially complete as of December 31, 2014, professional service fees earned under the transition services agreement for the six and three months ended June 30, 2015 were not material. Professional service fees earned by the Company under the transition services agreement for the six and three months ended June 30, 2014 are included in the service fee income – transition services line on the consolidated statement of operations, while the related costs are included in cost of services – transition services.

The Company has also executed a Non-Competition, Non-Solicitation and Non-Disclosure Agreement with StreetLinks providing that Novation will be prohibited from competing in the real estate appraisal management or valuation services business for a period of four years.

Results of Discontinued Operations

For the six and three months ended June 30, 2014, net income from discontinued operations consists of the net operating income and losses of the disposed entities and any necessary eliminations and income tax expense. For the six and three months ended June 30, 2015 the net loss from discontinued operations consists primarily of settlements of miscellaneous Advent liabilities.

9

The results of the Company's discontinued operations are summarized below (dollars in thousands):

	For the Six Months Ended June 30,					For the Three Months Ended June 30,
	2015			2014		2015			2014
Service fee income	$	—		$	37,347	$	—		$	6,582
(Loss) income from discontinued operations before income taxes	$	(18	)	$	50,448	$	(18	)	$	45,247
Income tax expense	—			8,783		—			6,721
(Loss) income from discontinued operations, net of income taxes	$	(18	)	$	41,665	$	(18	)	$	38,526

The assets and liabilities of discontinued operations as of June 30, 2015 and December 31, 2014 relate entirely to Advent. As of June 30, 2015, the current liabilities of discontinued operations were comprised primarily of unclaimed funds and fees withheld from Advent's business partners for various violations of Advent's compliance program. Unclaimed funds will be escheated to the applicable state in accordance with unclaimed property laws. Obligations relating to fees withheld from business partners will be resolved when claims are received or when the statute of limitations for the related contractual obligation expires.

Noncurrent liabilities of discontinued operations consist entirely of fees withheld from business partners for various violations of Advent's compliance program. The classification of these fees held as current versus noncurrent is dependent on the nature of the compliance violation and the tax year during which the violation occurred.

The major classes of assets and liabilities of discontinued operations as of June 30, 2015and December 31, 2014 are detailed below (dollars in thousands).

	June 30, 2015		December 31, 2014
Assets
Current Assets
Cash and cash equivalents	$	316	$	358
Other current assets	275		291
Total current assets	$	591	$	649
Liabilities
Current Liabilities
Accounts payable and accrued expenses	$	577	$	875
Total current liabilities (A)	577		875
Non-Current Liabilities
Other liabilities	1,798		1,797
Total non-current liabilities	1,798		1,797
Total liabilities (A)	$	2,375	$	2,672

(A) Excludes amounts due to Novation of approximately $0.7 million as of both June 30, 2015 and December 31, 2014. These amounts are eliminated upon consolidation and, therefore, are not included in the consolidated balance sheets for any periods presented.

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Note 4. Marketable Securities

The following table presents certain information on the Company's portfolio of available-for-sale securities as of June 30, 2015 and December 31, 2014 (dollars in thousands):

	As of June 30, 2015
Description of Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Marketable securities, current
Corporate notes and bonds	$	19,087	$	—	$	(10	)	$	19,077
Mortgage securities	609		1,961		—			2,570
Total	$	19,696	$	1,961	$	(10	)	$	21,647
Marketable securities, non-current
Corporate notes and bonds	$	8,697	$	—	$	(15	)	$	8,682
Agency securities	1,000		1		—			1,001
Total	$	9,697	$	1	$	(15	)	$	9,683
	As of December 31, 2014
Description of Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Marketable securities, current
Corporate notes and bonds	$	24,462	$	—	$	(26	)	$	24,436
Commercial paper	1,998		—		—			1,998
Mortgage securities	682		2,699		—			3,381
Total	$	27,142	$	2,699	$	(26	)	$	29,815
Marketable securities, non-current
Corporate notes and bonds	$	15,066	$	—	$	(52	)	$	15,014
Agency securities	1,000		—		(2		)	998
Total	$	16,066	$	—	$	(54	)	$	16,012

Prior to 2008, the Company originated, purchased, securitized, sold, invested in and serviced residential nonconforming mortgage loans and mortgage securities. As a result of those activities, the Company acquired mortgage securities that continue to be a source of its earnings and cash flow. As of June 30, 2015 and December 31, 2014, these mortgage securities consisted entirely of the Company's investment in the residual securities issued by securitization trusts sponsored by the Company. Residual securities consist of interest-only, prepayment penalty and overcollateralization bonds.

There were no other-than-temporary impairments relating to available-for-sale securities for the six and three months ended June 30, 2015 and 2014. The average remaining maturities of the Company’s short-term and long-term available-for-sale investments at June 30, 2015 were approximately five months and eighteen months, respectively. Maturities of mortgage securities owned by the Company depend on repayment characteristics and experience of the underlying financial instruments. See Note 8 to the condensed consolidated financial statements for details on the Company's fair value methodology.

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The following table relates to the securitizations where the Company retained an interest in the assets issued by the securitization trust (dollars in thousands):

	Size/Principal Outstanding (A)		Assets on Balance Sheet (B)		Liabilities on Balance Sheet		Maximum Exposure to Loss(C)		Year to Date Loss on Sale		Year to Date Cash Flows (D)
June 30, 2015	$	3,836,814	$	2,570	$	—	$	2,570	$	—	$	3,279
December 31, 2014	4,062,068		3,381		—		3,381		—		3,395

(A) Size/Principal Outstanding reflects the estimated principal of the underlying assets held by the securitization trust.

(B) Assets on balance sheet are securities issued by the entity and are recorded in the current marketable securities line item on the condensed consolidated balance sheets.

(C) The maximum exposure to loss includes the assets held by the Company. The maximum exposure to loss assumes a total loss on the referenced assets held by the securitization trust.

(D) Year to date cash flows are for the six months ended June 30, 2015 and 2014, respectively.

Note 5. Property and Equipment, Net

All of the Company's property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets. The estimated useful lives of the Company's property and equipment are the lesser of 5 years or remaining lease term for leasehold improvements, 5 years for furniture and fixtures, 3 to 5 years for office and computer equipment, and 1 to 3 years for software.

Maintenance and repairs are charged to expense. Major renewals and improvements are capitalized. Gains and losses on dispositions are credited or charged to earnings as incurred. Depreciation and amortization expense relating to property and equipment was $1.1 million and $0.6 million for the six and three months ended June 30, 2015, respectively, and $0.7 million and $0.4 million for the six and three months ended June 30, 2014, respectively.

The following table shows the Company's property and equipment, net as of June 30, 2015 and December 31, 2014 (dollars in thousands):

	June 30, 2015			December 31, 2014
Software	$	5,786		$	4,384
Hardware and computer equipment	4,661			3,388
Leasehold improvements	905			905
Furniture, fixtures and office equipment	753			756
Total Cost	12,105			9,433
Less: Accumulated depreciation and amortization	(4,952		)	(3,801		)
Property and equipment, net	$	7,153		$	5,632

The hardware and computer equipment amount above includes gross assets under capital leases of $1.1 million and $0.9 million as of June 30, 2015 and December 31, 2014, respectively. Accumulated depreciation and amortization of leased assets totaled approximately $0.8 million and $0.6 million as of June 30, 2015 and December 31, 2014, respectively.

Note 6. Borrowings

Senior Notes –The Company has outstanding unsecured senior notes pursuant to three indentures (collectively, the “Senior Notes”) with an aggregate principal balance of $85.9 million. The Senior Notes were created through an exchange of the Company's previously outstanding junior subordinated notes that occurred prior to 2012. This exchange was considered a modification of a debt instrument for accounting purposes, therefore the Company uses the effective interest method to accrete from the existing balance as of the modification date to $87.2 million and $85.9 million as of June 30, 2015 and December 31, 2014, respectively. Under the effective interest method, significant changes in the rate at which a debt instrument accrues interest over its term can result in a recorded balance in excess of the aggregate principal balance of the debt instrument.

The Senior Notes accrue interest at a rate of 1.0% until the earlier of (a) the completion of an equity offering by the Company or its subsidiaries that results in proceeds of $40 million or more or (b) January 1, 2016. Thereafter, the Senior Notes will accrue interest at a rate of three-month LIBOR plus 3.5% (the “Full Rate”). Interest on the Senior Notes is paid on a quarterly basis and no principal payments are due until maturity on March 30, 2033.

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The indentures governing the Senior Notes (the “Indentures”) contain certain restrictive covenants (the “Negative Covenants”) subject to certain exceptions in the Indentures, including written consent of the holders of the Senior Notes. The Negative Covenants prohibit the Company and its subsidiaries, from among other things, incurring debt, permitting any lien upon any of its property or assets, making any cash dividend or distribution or liquidation payment, acquiring shares of the Company or its subsidiaries, making payment on debt securities of the Company that rank pari passu or junior to the Senior Notes, or disposing of any equity interest in its subsidiaries or all or substantially allof the assets of its subsidiaries. The Negative Covenants remain in effect until both of the following conditions are met: 1) the Senior Notes begin accruing interest at the Full Rate, and 2) the Company satisfies certain financial covenants (the “Financial Covenants”). Satisfaction of the Financial Covenants requires the Company to demonstrate on a consolidated basis that (1) its Tangible Net Worth is equal to or greater than $40 million, and (2) either (a) the Interest Coverage Ratio is equal to or greater than 1.35x, or (b) the Leverage Ratio is not greater than 95%. As the Senior Notes were not accruing interest at the Full Rate, the Negative Covenants, as defined above, were still in effect as of June 30, 2015 and December 31, 2014. Compliance with the Financial Covenants is required only when the Company seeks to take action prohibited by the Negative Covenants that has not been approved by the holders of the Senior Notes.

As discussed in Note 3 to the condensed consolidated financial statements, on April 16, 2014, the Company and the non-controlling members of StreetLinks entered into a purchase and sale agreement with Assurant, pursuant to which Assurant purchased 100% of the outstanding membership units of StreetLinks. The sale of a subsidiary is not prohibited by the Negative Covenants provided that the sale is at fair market value and the proceeds are reinvested in the Company. As such, the Company was in compliance with all Negative Covenants as of June 30, 2015 and December 31, 2014, and therefore the Company was under no obligation to comply with the Financial Covenants during these periods.

Note Payable to Related Party – As detailed in Note 3, prior to 2013, the Company entered into a Membership Interest Purchase Agreement (the "Unit Purchase Agreement") with its Chief Operating Officer, Mr. Steve Haslam, pursuant to which Mr. Haslam sold 1,927 units in StreetLinks to the Company in exchange for a total purchase price of $6.1 million, payable in quarterly installments. On April 16, 2014, the Company and Mr. Haslam agreed to terminate the Unit Purchase Agreement. In full satisfaction of the Company's outstanding obligation under the Unit Purchase Agreement, the Company transferred back to Mr. Haslam 1,218 StreetLinks membership units, which represents the portion of the membership units attributable to the $3.9 million in unpaid installment payments and $0.2 million in interest remaining under the Unit Purchase Agreement.

Capital Leases –The Company leases hardware and computer equipment under capital leases. These capital leases are payable in 36 monthly installments and mature between July 2015 and March 2018. Current maturities of obligations under capital leases were approximately $0.3 million as of both June 30, 2015 and December 31, 2014, while noncurrent maturities of obligations under capital leases were approximately $0.1 million as of both June 30, 2015 and December 31, 2014. Due to the immaterial nature of these obligations with regard to the Company's financial statements as a whole, current maturities and noncurrent maturities of capital leases are included in the other current liabilities and other liabilities line items, respectively, in the Company's condensed consolidated balance sheets.

Note 7. Commitments and Contingencies

Commitments –In September 2014, Steve Haslam, who was then Senior Vice President and Chief Operating Officer of the Company announced that, in lieu of accepting a new role with the Company and relocating, he was retiring from the Company effective October 1, 2014. Pursuant to the terms of his Employment Agreement dated March 8, 2012, Mr. Haslam elected to terminate his employment for “Good Reason” in connection with the new position and relocation offered to him. In addition to accrued but unpaid salary and other benefits, Mr. Haslam will be paid $0.4 million severance from the date of termination through October 1, 2015. The full amount of Mr. Haslam's severance was charged to income from continuing operations during the third quarter of 2014 in accordance with the relevant accounting guidance. As of June 30, 2015, the remaining accrual of $0.1 million is included in accounts payable and accrued expenses and will be reduced as payments are made to Mr. Haslam.

In conjunction with its minority investment in ManyWho, Inc. ("ManyWho") during the second quarter of 2014, Corvisa entered into an Original Equipment Manufacturer ("OEM") agreement with ManyWho, which provides Corvisa with a non-exclusive license to integrate ManyWho's workflow technology into existing and forthcoming Corvisa service offerings. In exchange for this non-exclusive license, the OEM agreement provided for usage-based license fees as well as certain guaranteed minimum annual royalty and professional services fees. The annual minimum due under the OEM agreement for the twelve month period ended June 20, 2015 was $0.5 million. As of June 30, 2015, the Company had accrued approximately $0.4 million related to this obligation. This accrual is included in accounts payable and accrued expenses, while approximately $0.2 million and $0.1 million of the corresponding expense is included in cost of services for the six and three months ended June 30, 2015, respectively. Due to the timing of this agreement, the royalty expense for the six and three months ended June 30, 2014 was not material.

Subsequent to June 30, 2015, Corvisa and ManyWho entered into Amendment No. 1 to the OEM Agreement, whereby Corvisa agreed to pay approximately $0.4 million in satisfaction of the minimum royalties payable for the first contract year. The parties also agreed to eliminate the minimum royalty amounts payable in future years. The usage-based license fees set forth in the original OEM were not impacted by the amendment.

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Contingencies –Prior to 2008, the Company originated, purchased, securitized, sold, invested in and serviced residential nonconforming mortgage loans and mortgage securities. The Company has received indemnification and loan repurchase demands with respect to alleged violations of representations and warranties (“defects”) and with respect to other alleged misrepresentations and contractual commitments made in loan sale and securitization agreements. These demands have been received substantially beginning in 2006 and have continued into 2015. Prior to the Company ceasing the origination of loans in its mortgage lending business, it sold loans to securitization trusts and other third parties and agreed to repurchase loans with material defects and to otherwise indemnify parties to these transactions. Beginning in 1997 and ending in 2007, affiliates of the Company sold loans to securitization trusts and third parties with the potential of such obligations. The aggregate original principal balance of these loans was $43.1 billion at the time of sale or securitization. The remaining principal balance of these loans is not available as these loans are serviced by third parties and may have been refinanced, sold or liquidated. Claims to repurchase loans or to indemnify under securitization documents have not been acknowledged as valid by the Company. In some cases, claims were made against affiliates of the Company that have ceased operations and have no or limited assets. The Company has not repurchased any loans or made any such indemnification payments since 2010.

Historically, repurchases of loans or indemnification of losses where a loan defect has been alleged have been insignificant and any future losses for alleged loan defects have not been deemed to be probable or reasonably estimable; therefore, the Company has recorded no reserves related to these claims. The Company does not use internal groupings for purposes of determining the status of these loans. The Company is unable to develop an estimate of the maximum potential amount of future payments related to repurchase demands because the Company does not have access to information relating to loans sold and securitized and the number or amount of claims deemed probable of assertion is not known nor is it reasonably estimable. Further, the validity of claims received remains questionable. Also, considering that the Company completed its last sale or securitization of loans during 2007, the Company believes that it will be difficult for a claimant to successfully validate any additional repurchase demands. Management does not expect that the potential impact of claims will be material to the Company's financial statements.

Pending Litigation –The Company is a party to various legal proceedings. Except as set forth below, these proceedings are of an ordinary and routine nature. Any legal fees associated with these proceedings are expensed as incurred.

Although it is not possible to predict the outcome of any legal proceeding, in the opinion of management, other than the active proceedings described in detail below, proceedings and actions against the Company should not, individually, or in the aggregate, have a material effect on the Company's financial condition, operations or liquidity. Furthermore, due to the uncertainty of any potential loss as a result of pending litigation and due to the Company's belief that an adverse ruling is not probable, the Company has not accrued a loss contingency related to the following matters in its consolidated financial statements. However, a material outcome in one or more of the active proceedings described below could have a material impact on the results of operations in a particular quarter or fiscal year.

On May 21, 2008, a purported class action case was filed in the Supreme Court of the State of New York, New York County, by the New Jersey Carpenters' Health Fund, on behalf of itself and all others similarly situated. Defendants in the case included NovaStar Mortgage Funding Corporation (“NMFC”), a wholly-owned subsidiary of the Company, and its individual directors, several securitization trusts sponsored by the Company (“affiliated defendants”) and several unaffiliated investment banks and credit rating agencies. The case was removed to the United States District Court for the Southern District of New York. On June 16, 2009, the plaintiff filed an amended complaint. The plaintiff seeks monetary damages, alleging that the defendants violated sections 11, 12 and 15 of the Securities Act of 1933, as amended, by making allegedly false statements regarding mortgage loans that served as collateral for securities purchased by the plaintiff and the purported class members. On August 31, 2009, the Company filed a motion to dismiss the plaintiff's claims, which the court granted on March 31, 2011, with leave to amend. The plaintiff filed a second amended complaint on May 16, 2011, and the Company again filed a motion to dismiss. On March 29, 2012, the court dismissed the plaintiff's second amended complaint with prejudice and without leave to replead. The plaintiff filed an appeal. On March 1, 2013, the appellate court reversed the judgment of the lower court, which had dismissed the case. Also, the appellate court vacated the judgment of the lower court which had held that the plaintiff lacked standing, even as a class representative, to sue on behalf of investors in securities in which plaintiff had not invested, and the appellate court remanded the case back to the lower court for further proceedings. On April 23, 2013 the plaintiff filed its memorandum with the lower court seeking a reconsideration of the earlier dismissal of plaintiff's claims as to five offerings in which plaintiff was not invested, and on February 5, 2015 the lower court granted plaintiff's motion for reconsideration and vacated its earlier dismissal. Given the early stage of the litigation, the Company cannot provide an estimate of the range of any loss. The Company believes that the affiliated defendants have meritorious defenses to the case and expects them to defend the case vigorously.

On June 20, 2011, the National Credit Union Administration Board, as liquidating agent of U.S. Central Federal Credit Union, filed an action against NMFC and numerous other defendants in the United States District Court for the District of Kansas, claiming that the defendants issued or underwrote residential mortgage-backed securities pursuant to allegedly false or misleading registration statements, prospectuses, and/or prospectus supplements. On August 24, 2012, the plaintiff filed an amended complaint making essentially the same claims against NMFC. NMFC filed a motion to dismiss the amended complaint which was denied on September 12, 2013. The defendants had claimed that the case should be dismissed based upon a statute of limitations and sought an appeal of the court's denial of this defense. An interlocutory appeal of this issue was allowed, and on August 27, 2013, the Tenth Circuit affirmed the lower court’s denial of defendants’ motion to dismiss the plaintiff’s claims as being time barred; the appellate court held that the Extender Statute, 12 U.S.C. §1787(b)(14) applied to plaintiff’s claims. On

14

June 16, 2014, the United States Supreme Court granted a petition of NMFC and its co-defendants for certiorari, vacated the ruling of the Tenth Circuit, and remanded the case back to that court for further consideration in light of the Supreme Court’s decision in CTS Corp. v. Waldburger, 134 S. Ct. 2175 (2014). On August 19, 2014, the Tenth Circuit reaffirmed its prior decision, and on October 2, 2014 the defendants filed a petition for writ of certiorari with the Supreme Court, which was denied. This litigation is in an early stage, and the Company cannot provide an estimate of the range of any loss. The Company believes that NMFC has meritorious defenses to the case and expects it to defend the case vigorously.

On February 28, 2013 the Federal Housing Finance Agency, as conservator for the Federal Home Loan Mortgage Corporation (Freddie Mac) and on behalf of the Trustee of the NovaStar Mortgage Funding Trust, Series 2007-1 (the “Trust”), a securitization trust in which the Company retains a residual interest, filed a summons with notice in the Supreme Court of the State of New York, County of New York against Novation Companies, Inc. and NovaStar Mortgage, Inc. (“NMI”), a wholly-owned subsidiary of the Company. The notice provides that this is a breach of contract action with respect to certain, unspecified mortgage loans and defendant's failure to repurchase such loans under the applicable agreements. Plaintiff alleges that defendants, from the closing date of the transaction that created the Trust that mortgage loans that were sold to the Trust, were aware of the breach of the representations and warranties made and failed to notice and cure such breaches, and due to the failure of defendants to cure any breach, notice to defendants would have been futile. The summons with notice was not served until June 28, 2013. By letter dated June 24, 2013, the Trustee of the Trust forwarded a notice from Freddie Mac alleging breaches of representations and warranties with respect to 43 loans, as more fully set forth in included documentation. The 43 loans had an aggregate, original principal balance of about $6.5 million. On August 19, 2013, Deutsche Bank National Trust Company, as Trustee, filed a complaint identifying alleged breaches of representations and warranties with respect to seven loans that were included in the earlier list of 43 loans. Plaintiff also generally alleged a trust-wide breach of representations and warranties by defendants with respect to loans sold and transferred to the trust. Plaintiff seeks specific performance of repurchase obligations; compensatory, consequential, recessionary and equitable damages for breach of contract; specific performance and damages for anticipatory breach of contract; and indemnification (indemnification against NMI only). On October 9, 2013, the Company and NMI filed a motion to dismiss plaintiff’s complaint. This motion to dismiss was withdrawn after plaintiff filed an amended complaint on January 28, 2014, and on March 4, 2014 the Company and NMI filed a motion to dismiss the amended complaint. This litigation is in an early stage, and the Company cannot provide an estimate of the range of any loss. The Company believes that it has meritorious defenses to the case and expects to defend the case vigorously.

Note 8. Fair Value Accounting

Fair Value Measurements

The Company's valuation techniques are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs create the following fair value hierarchy:

•Level 1 – Valuations based on quoted prices in active markets for identical assets and liabilities.

•Level 2 – Valuations based on observable inputs in active markets for similar assets and liabilities, other than Level 1 prices, such as quoted interest or currency exchange rates.

•Level 3 – Valuations based on significant unobservable inputs that are supported by little or no market activity, such as discounted cash flow methodologies based on internal cash flow forecasts.

15

The following tables present for each of the fair value hierarchy levels, the Company's assets which are measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014 (dollars in thousands):

			Fair Value Measurements at Reporting Date Using
Description	Fair Value at June 30, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents:
Cash	2,149		$	2,149	$	—	$	—
Money market funds	2,577		2,577		—		—
Marketable securities, current:
Corporate notes and bonds	19,077		—		19,077		—
Mortgage securities	2,570		—		—		2,570
Marketable securities, non-current:
Corporate notes and bonds	8,682		—		8,682		—
Agency securities	1,001		—		1,001		—
Total	$	36,056	$	4,726	$	28,760	$	2,570

			Fair Value Measurements at Reporting Date Using
Description	Fair Value at December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents:
Cash	$	2,701	$	2,701	$	—	$	—
Money market funds	2,595		2,595		—		—
Marketable securities, current:
Corporate notes and bonds	24,436		—		24,436		—
Commercial paper	1,998		—		1,998		—
Mortgage securities	3,381		—		—		3,381
Marketable securities, non-current:
Corporate notes and bonds	15,014		—		15,014		—
Agency securities	998		—		998		—
Total	$	51,123	$	5,296	$	42,446	$	3,381

Valuation Methods and Processes

The Company determines the fair value of its cash equivalents and marketable securities based on pricing from our service provider and market prices from industry-standard independent data providers. Such market prices may be quoted prices in active markets for identical assets (Level 1 inputs) or pricing determined using inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs), such as yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, broker and dealer quotes, as well as other relevant economic measures.

To the extent observable inputs are not available, as is the case with the Company's mortgage securities, the Company estimates fair value using present value techniques and generally does not have the option to choose other valuation methods for these securities. The methods and processes used to estimate the fair value of the Company's mortgage securities are discussed further below. There have been no significant changes to the Company's valuation techniques during the six months ended June 30, 2015. Accordingly, there have been no material changes to the financial statements resulting from changes to our valuation techniques during the six months ended June 30, 2015.

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The Company's marketable securities are classified as available-for-sale and are reported at their estimated fair value with unrealized gains and losses reported in accumulated other comprehensive income. To the extent that the cost basis of the Company's marketable securities exceeds the fair value and the unrealized loss is considered to be other than temporary, an impairment charge is recognized and the amount recorded in accumulated other comprehensive income or loss is reclassified to earnings as a realized loss. The specific identification method is used in computing realized gains or losses.

Mortgage securities - available-for-sale. As discussed above and in Note 4 to the condensed consolidated financial statements, the Company's mortgage securities – available-for-sale, are measured at fair value. These securities are valued at each reporting date using significant unobservable inputs (Level 3) by discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment.

The Company uses the discount rate methodology for determining the fair value of its residual securities. The fair value of the residual securities is estimated based on the present value of future expected cash flows to be received. Management's best estimate of key assumptions, including credit losses, prepayment speeds, forward yield curves and discount rates commensurate with the risks involved, are used in estimating future cash flows.

An independent entity has been engaged to prepare projected future cash flows of the Company's mortgage securities for each reporting period (quarterly) used by management to estimate fair value. The Company's internal finance and accounting staff reviews and monitors the work of the independent entity, including an analysis of the assumptions used, retrospective review of prior period assumptions, and preparation of an overall conclusion regarding the value and valuation process. All other fair value analysis, consisting of simple cash flow estimates and discounting techniques, is conducted internally by the Company's internal financial staff. The Company's fair value process is conducted under the supervision of the Chief Financial Officer.

The following table presents certain quantitative information about the significant unobservable inputs used in the fair value measurement for items measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

Description	Valuation Techniques	Significant Unobservable Inputs	Range
Assets:
Mortgage securities – available-for-sale	Present value analysis	Prepayment rates	5.4% – 10.6%
		Weighted average life (years)	2.0

The significant unobservable inputs used in the fair value measurement of mortgage securities – available-for-sale are prepayment rates and the weighted average life for the underlying mortgage loan collateral. Using a faster (higher) estimated prepayment rate would decrease the value of the securities. The Company uses a weighted average life of 2 years from the reporting date for the expected future estimated cash flows. The future cash flows are highly-dependent upon the performance of the underlying collateral of mortgage loans. The nonperformance risk associated with the collateral is the key reason the Company utilizes such a short weighted average life in its calculation. Assuming a shorter weighted average life would decrease the estimated value of the mortgage securities. Alternatively, assuming a longer weighted average life would increase the estimated value of the mortgage securities.

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The following table provides a reconciliation of the beginning and ending balances for the Company's mortgage securities – available-for-sale, which are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six and three months ended June 30, 2015 and 2014 (dollars in thousands):

	For the Six Months Ended June 30,						For the Three Months Ended June 30,
	2015			2014			2015			2014
Balance, beginning of period	$	3,381		$	3,728		$	3,201		$	3,466
Increases (decreases) to mortgage securities – available-for-sale:
Accretion of income (A)	277			385			140			192
Proceeds from paydowns of securities (A)	(351		)	(385		)	(173		)	(156		)
Mark-to-market value adjustment	(737		)	(176		)	(598		)	50
Net (decrease) increase to mortgage securities – available-for-sale	(811		)	(176		)	(631		)	86
Balance, end of period	$	2,570		$	3,552		$	2,570		$	3,552

(A) Cash received on mortgage securities with no cost basis was $2.9 million and $1.5 million for the six and three months ended June 30, 2015, respectively, and $3.0 million and $1.4 million for the six and three months ended June 30, 2014, respectively.

Adjustments to assets and liabilities measured at fair value on a recurring and nonrecurring basis did not have a material impact on the earnings of continuing operations for any period presented.

The following disclosure of the estimated fair value of financial instruments presents amounts that have been determined using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that could be realized in a current market exchange. The use of different market assumptions or estimation methodologies could have a material impact on the estimated fair value amounts. The fair value of short-term financial assets and liabilities, such as service fees receivable, notes receivable, and accounts payable and accrued expenses are not included in the following table as their carrying value approximates their fair value.

The estimated fair values of the Company's financial instruments are as follows as of June 30, 2015 and December 31, 2014 (dollars in thousands):

	As of June 30, 2015				As of December 31, 2014
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Restricted cash	$	649	$	487	$	597	$	450
Marketable securities	31,330		31,330		45,827		45,827
Financial liabilities:
Senior notes	$	87,215	$	16,692	$	85,937	$	15,189

For the items in the table above not measured at fair value in the statement of financial position but for which the fair value is disclosed, the fair value has been estimated using Level 3 methodologies, based on significant unobservable inputs that are supported by little or no market activity, such as discounted cash flow calculations based on internal cash flow forecasts. No assets or liabilities have been transferred between levels during any period presented.

Restricted cash – The fair value of restricted cash was estimated by discounting estimated future releases of the cash from restriction. Restricted cash is included in the other current assets and other assets line items in the Company's condensed consolidated balance sheets.

Senior notes – The fair value is estimated by discounting future projected cash flows using a discount rate commensurate with the risks involved. The value of the Senior Notes was calculated assuming that the Company would be required to pay interest at a rate of 1.0% per annum until January 2016, at which time the Company would be required to start paying the Full Rate of three-month LIBOR plus 3.5% until maturity in March 2033. The three-month LIBOR used in the analysis was projected using a forward interest rate curve.

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Note 9. Income Taxes

For the six months ended June 30, 2015, the Company recorded an income tax expense from continuing operations of approximately $0.1 million. Income tax expense for three months ended June 30, 2015 was not material. The majority of income tax expense for the six months ended June 30, 2015 relates to our residual interests in certain mortgage securities and additional unrecognized tax benefits. For the six and three months ended June 30, 2014, the Company recorded an income tax benefit of $8.2 million and $6.2 million, respectively. The income tax benefit for these periods relates primarily to operating losses from continuing operations and the utilization of a portion of the Company's deferred tax assets to offset the income tax expense from discontinued operations arising from the gain on the sale of StreetLinks during the second quarter of 2014.

For the six and three months ended June 30, 2015, income tax expense from discontinued operations was not material. For the six and three months ended June 30, 2014, income tax expense from discontinued operations totaled $8.8 million and $6.7 million, respectively, and relates to income from discontinued operations arising primarily from the gain on the sale of StreetLinks.

The consolidated income tax expense (benefit) was not material for the six and three months ended June 30, 2015, as the Company's effective tax rate is expected to be close to 0% due to the valuation allowance against the Company's deferred tax assets, which is discussed further below. The consolidated income tax expense of $0.6 million and$0.5 million for the six and three months ended June 30, 2014, respectively, is comprised primarily of state income tax expense on the income from discontinued operations arising due to variations in state tax law around both the ability and the period over which to carryforward net operating losses.

Prior to 2014, the Company determined that it was no longer more likely than not that it will recognize a portion of its deferred tax assets. Therefore, as of both June 30, 2015 and December 31, 2014, the Company maintained a full valuation allowance against its deferred tax assets of $274.1 million and $268.6 million, respectively. The Company's determination of the extent to which its deferred tax assets will be realized requires the exercise of significant judgment, based in part on business plans and expectations about future outcomes. In the event the actual results differ from these estimates in future periods, the Company may need to adjust the valuation allowance, which could materially impact our financial position and results of operations. The Company will continue to assess the need for a valuation allowance in future periods.

As of both June 30, 2015 and December 31, 2014, the total gross amount of unrecognized tax benefits was $0.5 million. This amount also represents the total amount of unrecognized tax benefits that would impact the effective tax rate in the respective periods. The Company anticipates an additional reduction of the unrecognized tax benefits in the amount of $0.1 million due to the lapse of statute of limitations in the next twelve months.

Note 10. Segment Reporting

As detailed in Note 1 to the condensed consolidated financial statements, during 2014 the Company announced a significant strategic shift for Novation with the decision to focus its resources primarily on the business of Corvisa. Consistent with this strategic shift, the Company now operates as a single, consolidated operating segment, which encompasses the development, marketing, and support of the Company's cloud-based communication software and related services. Accordingly, the Company has determined that it has only one operating segment, and therefore, one reportable segment.

The Company's service fee income from external customers is comprised of the following products and services (dollars in thousands):

	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	2015		2014		2015		2014
Professional services	$	954	$	916	$	505	$	358
Communications services	726		503		386		271
Transition services	—		968		—		968
Total net service fee income	$	1,680	$	2,387	$	891	$	1,597

Reconciliation to Financial Statements

Prior to 2008, the Company originated, purchased, securitized, sold, invested in and serviced residential nonconforming mortgage loans and mortgage securities. The Company incurred significant debt to finance these legacy operations, which, though modified as discussed in Note 6, remains outstanding as of June 30, 2015. For the six and three months ended June 30,

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2015, the Company incurred interest expense on its Senior Notes of approximately $1.7 million and $0.8 million, respectively, compared to $1.6 million and $0.8 million for the six and three months ended June 30, 2014, respectively.

Also as a result of the Company's legacy mortgage lending activities, the Company acquired mortgage securities that continue to be a source of its earnings and cash flow. The interest and cash flows received from these securities are used to fund the Company's ongoing operations described above. For the six and three months ended June 30, 2015, the Company earned interest income on these securities of approximately $3.2 million and $1.7 million, respectively. For the six and three months ended June 30, 2014, the Company earned approximately $3.4 million and $1.6 million from these securities, respectively.

Note 11. Earnings per Share

Basic earnings per share is computed by dividing net earnings available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share include the effect of conversions of stock options and nonvested shares. The computations of basic and diluted earnings per share for the six and three months ended June 30, 2015 and 2014 (dollars in thousands, except share and per share amounts) are as follows:

	For the Six Months Ended June 30,						For the Three Months Ended June 30,
	2015			2014			2015			2014
Numerator:
Net (loss) income from continuing operations	$	(13,620	)	$	(658	)	$	(6,649	)	$	1,718
Net (loss) income from discontinued operations	(18		)	41,665			(18		)	38,526
Net (loss) income	(13,638		)	41,007			(6,667		)	40,244
Less net loss attributable to noncontrolling interests	—			—			—			(33		)
Net (loss) income available to common shareholders	$	(13,638	)	$	41,007		$	(6,667	)	$	40,277
Denominator:
Weighted average common shares outstanding – basic	91,061,455			90,866,933			91,097,761			90,866,933
Weighted average common shares outstanding – dilutive:
Weighted average common shares outstanding – basic	91,061,455			90,866,933			91,097,761			90,866,933
Stock options	—			—			—			—
Nonvested shares	—			—			—			73,910
Weighted average common shares outstanding – dilutive	91,061,455			90,866,933			91,097,761			90,940,843
Basic earnings per share:
Net (loss) income from continuing operations	$	(0.15	)	$	(0.01	)	$	(0.07	)	$	0.02
Net (loss) income from discontinued operations	—			0.46			—			0.42
Net (loss) income	(0.15		)	0.45			(0.07		)	0.44
Less net loss attributable to noncontrolling interests	—			—			—			—
Net (loss) income available to common shareholders	$	(0.15	)	$	0.45		$	(0.07	)	$	0.44
Diluted earnings per share:
Net (loss) income from continuing operations	$	(0.15	)	$	(0.01	)	$	(0.07	)	$	0.02
Net (loss) income from discontinued operations	—			0.46			—			0.42
Net (loss) income	(0.15		)	0.45			(0.07		)	0.44
Less net loss attributable to noncontrolling interests	—			—			—			—
Net (loss) income available to common shareholders	$	(0.15	)	$	0.45		$	(0.07	)	$	0.44

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The following weighted-average options to purchase shares of common stock were outstanding during each period presented, but were not included in the computation of diluted earnings per share because the calculated number of shares assumed to be repurchased was greater than the number of shares to be obtained upon exercise, therefore, the effect would be antidilutive (in thousands, except exercise prices):

	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	2015		2014		2015		2014
Number of stock options	10,148		8,675		10,350		8,856
Weighted average exercise price of stock options	$	0.63	$	0.68	$	0.62	$	0.68

During the second quarter of 2015, the Company granted approximately 0.7 million options to purchase shares of common stock at a weighted average exercise price of $0.51. The weighted average impact of 0.2 million and 0.4 million of these current year option grants are included in the table above for the six and three months ended June 30, 2015, respectively. During the second quarter of 2014, the Company granted 3.0 million options to purchase shares of common stock at a weighted average exercise price of $0.51. The weighted average impact of 0.2 million and 0.4 million of these options are included in the table above for the six and three months ended June 30, 2014, respectively.

The Company had approximately 0.4 million and 0.6 million nonvested shares outstanding as of June 30, 2015 and June 30, 2014, respectively. The majority of the nonvested shares vest ratably over their original term of six years, while a small number of these shares as of June 30, 2014 had an original cliff vesting schedule of ten years. The weighted average impact of approximately 0.4 million nonvested shares were not included in the calculation of earnings per share for the six and three months ended June 30, 2015, respectively, because they were anti-dilutive. Approximately 0.6 million and 0.5 million nonvested shares were not included in the calculation of earnings per share for the six and three months ended June 30, 2014, respectively.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Statements in this report regarding Novation Companies, Inc. and its business, that are not historical facts are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are those that predict or describe future events, do not relate solely to historical matters and include statements regarding management's beliefs, estimates, projections, and assumptions with respect to, among other things, our future operations, business plans and strategies, as well as industry and market conditions, all of which are subject to change at any time without notice. Words such as “believe,” “expect,” “anticipate,” “promise,” “plan,” and other expressions or words of similar meanings, as well as future or conditional auxiliary verbs such as “would,” “should,” “could,” or “may” are generally intended to identify forward-looking statements. Actual results and operations for any future period may vary materially from those discussed herein. Some important factors that could cause actual results to differ materially from those anticipated include: our ability to manage and scale our business; the competitive nature of the markets in which we operate; market acceptance of our products and services; defects or disruptions in our service or our underlying infrastructure; our reliance on third party data center and co-location service providers; breaches of security and unauthorized access to proprietary or customer data; changes in the regulatory environments within which we operate; our ability to develop new relationships and maintain existing relationships with both customers and business partners; decreases in cash flows from our mortgage securities; our ability to remain in compliance with the agreements governing our indebtedness; the outcome of litigation actions pending against us or other legal contingencies; our compliance with applicable local, state and federal laws and regulations; compliance with new accounting pronouncements; the impact of general economic conditions; and the risks that are from time to time included in our filings with the Securities and Exchange Commission, including the Company's most recent annual report on Form 10-K, and this report on Form 10-Q. Other factors not presently identified may also cause actual results to differ. This report on Form 10-Q speaks only as of its date and we expressly disclaim any duty to update the information herein except as required by federal securities laws.

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Executive Overview

The following Management's Discussion and Analysis of Financial Condition and Operating Results (“MD&A”) should be read in conjunction with the preceding unaudited condensed consolidated financial statements of Novation Companies, Inc. and its subsidiaries (the “Company” or ”Novation" or “we” or “us”) and the notes thereto as well as the Company's Annual Report on Form 10-K for the year ended December 31, 2014 and subsequent amendments on Form 10-K/A. MD&A includes the following sections:

• Corporate Overview, Background and Strategy – a brief overview of our business, current strategy, and significant recent events.

• Critical Accounting Policies – an update, since December 31, 2014, of our discussion of accounting policies that impact our financial statements and involve a high degree of judgment or complexity. This section also includes the impact of new accounting standards.

• Results of Operations – an analysis of our results of operations for the six months ended June 30, 2015 and 2014 as presented in our unaudited Condensed Consolidated Financial Statements.

• Liquidity and Capital Resources – an analysis of our cash flows and financial commitments.

Corporate Overview, Background and Strategy

Our Business

We are a Maryland corporation formed on September 13, 1996. We own 100% of Corvisa LLC ("Corvisa"). Corvisa sells cloud-based communication software under the CorvisaOne® brand, telecommunications services, and implementation consulting services. A detailed discussion of the Corvisa business is included below. This business was formerly known as CorvisaCloud, LLC, but was rebranded to Corvisa during the first quarter of 2015.

On August 18, 2014, the Company announced that it would be conducting an orderly winding-down of the remaining business and operations of Advent Financial Services LLC (“Advent”), a financial settlement services provider for professional tax preparers nationwide. As discussed in Note 3 to the condensed consolidated financial statements, the operations of Advent have been classified as discontinued operations for all periods presented.

On April 16, 2014, the Company and the non-controlling members of StreetLinks, a national residential appraisal and mortgage real estate valuation management services company, entered into a purchase and sale agreement with Assurant Services, LLC, a subsidiary of Assurant, Inc. ("Assurant"), pursuant to which Assurant purchased 100% of the outstanding membership units of StreetLinks. See Note 3 to the consolidated financial statements for additional information regarding this transaction. The operations of StreetLinks have been classified as discontinued operations for all periods presented.

The sale of StreetLinks marked a significant strategic shift for Novation. On April 16, 2014, the Company announced that it would be focusing its resources primarily on the business of Corvisa. This decision was based largely on the Company's belief that Corvisa represents a better opportunity for Novation to build long-term shareholder value due to Corvisa's CorvisaOne technology platform and the size of its target customer base.

Corvisa LLC

Corvisa sells cloud-based, proprietary communication software under the brand CorvisaOne, telecommunications services, and implementation consulting services for its own clients as well as clients of a leading customer relationship management (CRM) software provider.

Corvisa derives its revenue from software subscription fees for its product and telecommunications minutes used with its CorvisaOne and Summit® Platform brands. Corvisa also derives revenue from professional service fees charged for enhanced implementation requirements of its contact center solution as well as CRM implementation services.

CorvisaOne is a full contact center suite including both inbound and outbound contact center functionality as well as full business phone system functionality. Features of the communications software include interactive voice response, automated call distribution, campaign dialing, and a variety of other services, all of which are delivered to clients as part of a comprehensive cloud solution. The software can be fully integrated with leading CRM providers and other third-party software solutions via integration solutions provided by our underlying Summit Platform. Corvisa's target customers are businesses of all sizes in all industries, anywhere in the world. We offer our customers the ability to purchase the following products:

• Business Phone System - this is our basic private branch exchange ("PBX") solution targeted towards businesses of all sizes anywhere in the world.

• Contact Center Basic Edition - this edition of our contact center product includes a limited feature set and supports a maximum of 50 users, geared toward small contact centers that just need the basics.

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• Contact Center Inbound Edition - this is our contact center product without the outbound dialer and is geared towards inbound only contact center businesses that prefer not to pay for the additional cost of an outbound dialer.

• Contact Center Full Edition - this is our complete CorvisaOne full contact center solution, which includes both inbound and outbound functionality.

• Summit Platform - this is the platform upon which our products are built and gives our customers the ability to customize our products to fit their unique business needs. We also offer this as a standalone platform product to developers or businesses looking to develop their own voice and SMS applications.

We acquired Corvisa in October 2012 and set out to build a complete cloud-based contact center software solution. By joining the years of contact center operating experience possessed by Novation’s leadership team with the technology team acquired through the Corvisa acquisition, we believe we have built a best-in-class contact center software solution. In addition to the product offering, Corvisa has built its product as part of a platform that enables its customers and others to develop their own tools to tie into Corvisa's product offering.

In addition to the benefits associated with cloud-based technology solutions such as security, scalability, reliability, rapid deployment and low cost, additional business benefits to customers using Corvisa's technology product/platform include:

Integrated Cloud Business Phone System within Corvisa's Contact Center Application. This integration enables executives and contact center employees to be on the same platform and eliminates the need for separate contact center and business phone system vendors.

Product-plus-Platform Approach. Corvisa's Summit Platform is highly customizable and allows for the creation or customization of voice and SMS applications utilizing Corvisa's Lua-based programming language and development toolkits. This includes the ability for customers to modify their instance of Corvisa's business phone and contact center suite products to meet their specific and unique business demands or the ability to build entirely custom standalone applications. Applications built on Summit are fully hosted on the Corvisa network that provides scalability, redundancy, backup, testing frameworks and other features required for enterprise-class applications, making it a true Platform as a Service (PaaS) offering. Existing applications or those developed by third-party developers can also easily be integrated through our open application programming interfaces (APIs). This makes it easy for developers to easily build scale and effectively support their applications while eliminating the need to manage independent server and hosting environments.

Redundant Instance-Based Architecture. Corvisa's highly scalable, instance-based architecture allows CorvisaOne to scale to support a worldwide presence while providing customer benefits such as read access to their client data, segmented client data and a highly redundant architecture to maximize reliability and security.

Combined Telecom and Production Reporting. As business operators ourselves, we believe strongly in the importance of closely aligning telecommunications and production data to give greater visibility into overall business operations. The CorvisaOne product is tightly integrated with leading CRM systems to ensure accurate and comprehensive business reporting.

While Corvisa is still in the early stages of launching its product, our plan over time is to sell Corvisa's product and services through its direct sales force, which is comprised of telephone sales personnel located regionally. Corvisa recently expanded its sales strategy to also include a channel partner sales program. For larger opportunities Corvisa will send its implementation teams on site in a consulting role to help onboard clients.

Corvisa's marketing strategy is to continue to increase its brand awareness, while generating and helping to nurture quality leads for its sales force. Corvisa's primary marketing activities consist of:

• press and industry analyst relations for third-party validation of the Corvisa offering and value proposition;

• participation in industry conferences, trade shows and events;

• search engine marketing and online advertising to drive leads to the Corvisa sales force;

• email marketing to drive and nurture leads;

• use of customer testimonials and referrals;

• marketing activities to engage with and generate leads from channel partners;

• leads from the Corvisa CRM implementation practice; and

• purchase of leads from third parties.

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Competition

The markets for contact center solutions and business phone systems are highly competitive, rapidly evolving, and subject to changing technology, shifting customer needs, and frequent introductions of new features and services. Corvisa's current competitors include:

• large legacy technology vendors that offer on-premise enterprise telephony and contact center systems;

• legacy on-premise software companies, which are supplementing their traditional on-premise contact center systems with cloud-based or hybrid offerings either through acquisition or in-house development;

• vendors that historically provided other contact center services and technologies and expanded to offer cloud-based contact center software; and

• smaller contact center service providers with specialized contact center software offerings.

The principal competitive factors in Corvisa's market include:

• service features and capabilities;

• system reliability, availability and performance;

• speed and ease of activation, setup and configuration;

• ownership and control of the underlying technology;

• integration with mobile devices;

• brand awareness and recognition;

• quality of customer and technical support;

• simplicity of the pricing model; and

• total cost of ownership.

We believe that Corvisa generally competes favorably on the basis of the factors listed above.

Our Strategy

During 2014 we announced a significant strategic shift with the Company focusing its resources primarily on the business of Corvisa. Given the early-stage nature of this business, it may not contribute to earnings for some time but we believe Corvisa represents a solid investment with the opportunity for future earnings and equity value creation that will benefit shareholders. Management is focused on building Corvisa and creating this long-term value for shareholders.

We use a combination of financial measures prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and non-GAAP financial measures to assess performance. The key performance measures for executive management are:

• Corvisa gross service fee income;

• Corvisa gross margin; and

• consolidated earnings before interest, taxes, depreciation and amortization, as adjusted for share-based compensation ("adjusted EBITDA")

We use adjusted EBITDA, a non-GAAP performance measure, because we believe it reflects the Company’s core operating performance by excluding certain charges, such as share-based compensation, and the impact of the effect of financing and investing activities by eliminating the effects of interest, depreciation and amortization costs. Adjusted EBITDA is included as a complement to results provided in accordance with GAAP because we believe this non-GAAP financial measure helps us explain underlying performance trends in our business and provide useful information to both management and investors. This measure should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results.

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The following table sets forth the key performance metrics for the Company for the six and three months ended June 30, 2015 and 2014, as derived from our consolidated financial statements, and should be read in conjunction with the more detailed information therein and with the disclosure included in this report under the heading “Management's Discussion and Analysis of Financial Condition and Results of Operations.” Also included in the following table is a reconciliation of adjusted EBITDA to the most directly comparable GAAP measure, net loss from continuing operations.

Table 1 – Summary of Financial Highlights and Key Performance Metrics (dollars in thousands; except per share amounts)

	For the Six Months Ended June 30,						For the Three Months Ended June 30,
	2015			2014			2015			2014
Gross Corvisa service fee income	$	1,680		$	1,419		$	891		$	629
Corvisa gross margin	$	(1,435	)	$	56		$	(791	)	$	(37	)
Reconciliation from net loss to adjusted EBITDA
Net loss from continuing operations	$	(13,620	)	$	(658	)	$	(6,649	)	$	1,718
Non-GAAP adjustments:
Interest expense	1,636			1,594			752			798
Income tax expense (benefit)	107			(8,185		)	17			(6,151		)
Depreciation and amortization (A)	1,111			725			618			373
Share-based compensation (A)	297			381			150			254
Adjusted EBITDA	$	(10,469	)	$	(6,143	)	$	(5,112	)	$	(3,008	)

(A) Amounts are included in the cost of services, development, sales and marketing, and general and administrative expense line items of the consolidated statements of operations.

Significant Recent Events

Subsequent to June 30, 2015, Corvisa and ManyWho entered into Amendment No. 1 to the OEM Agreement, whereby Corvisa agreed to pay approximately $0.4 million in satisfaction of the minimum royalties payable for the first contract year. The parties also agreed to eliminate the minimum royalty amounts payable in future years. The usage-based license fees set forth in the original OEM were not impacted by the amendment.

Critical Accounting Policies

In our Annual Report on Form 10-K for the year ended December 31, 2014, we disclose critical accounting policies that require management to use significant judgment or that require significant estimates. Management regularly reviews the selection and application of our critical accounting policies. There have been no updates to the critical accounting policies contained in our Annual Report on Form 10-K for the year ended December 31, 2014.

Impact of Recently Issued Accounting Pronouncements

In April 2015, the FASB issued Accounting Standards Update ("ASU") 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, which provides guidance on a customer’s accounting for cloud computing costs. Under the ASU, a customer must determine whether a cloud computing arrangement contains a software license. If so, the customer would account for the fees related to the software license element in a manner consistent with how the acquisition of other software licenses is accounted for under ASC 350-40. If the arrangement does not contain a software license, the customer would account for the arrangement as a service contract. The ASU is effective for annual periods (and interim periods) beginning after December 15, 2015. Early adoption is permitted. Entities may adopt the guidance (1) retrospectively or (2) prospectively to arrangements entered into, or materially modified, after the effective date. The Company does not expect this guidance to have a significant impact on the Company’s financial statements.

In January 2015, the FASB issued ASU 2015-1, Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items, which eliminates from U.S. GAAP the concept of an extraordinary item, which is an event or transaction that is both (1) unusual in nature and (2) infrequently occurring. Under this ASU, an entity will no longer (1) segregate an extraordinary item from the results of ordinary operations; (2) separately present an extraordinary item on its income statement, net of tax, after income from continuing operations; or (3) disclose income taxes and earnings-per-share data applicable to an extraordinary item. The ASU is effective for annual periods

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beginning after December 15, 2015, and interim periods within those annual periods. Entities may apply the guidance prospectively or retrospectively to all prior periods presented in the financial statements. Early adoption is permitted if the guidance is applied as of the beginning of the annual period of adoption. The Company does not expect this guidance to have a significant impact on the Company’s financial statements.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how reporting entities must disclose going-concern uncertainties in their financial statements. This new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date of issuance of the entity’s financial statements. Further, an entity must provide certain disclosures if there is “substantial doubt about the entity’s ability to continue as a going concern.” This ASU is effective for annual periods ending after December 15, 2016, and interim periods thereafter. Early adoption is permitted. The Company does not expect this guidance to have a significant impact on the Company’s financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This ASU applies to all contracts with customers except those that are within the scope of other topics in the FASB Accounting Standards Codification. Compared with current U.S. GAAP, this ASU also requires significantly expanded disclosures about revenue recognition. On July 9th, 2015 the FASB voted to defer the effective date of this ASU by one year. Early adoption is permitted. However, entities are not allowed to adopt this ASU before the original effective date (that is, annual periods beginning after December 15, 2016). The Company is evaluating the impact of ASU 2014-09 on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of this standard on its ongoing financial reporting.

In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which amends the definition of a discontinued operation in ASC 205-20 and requires entities to provide additional disclosures about discontinued operations as well as disposal transactions that do not meet the discontinued-operations criteria. The FASB issued this ASU to provide more decision-useful information and to make it more difficult for a disposal transaction to qualify as a discontinued operation. This ASU is effective prospectively for all disposals (except disposals classified as held for sale before the adoption date) or components initially classified as held for sale in periods beginning on or after December 15, 2014. Early adoption is permitted. The impact of the adoption of ASU 2014-08 did not have a significant impact on the Company's financial statements.

Results of Operations

Service Fee Income

We earn communications services fees through software licenses, inbound and outbound minute usage, ancillary fees, and implementation services. Once implemented, clients pay a software as a service (SaaS) fee for a contact center seat license or business phone system license, as well as a per minute fee for inbound and outbound minutes used. Minute fees can also be generated from the use of our platform and legacy interactive voice response software.

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We also earn professional service fees for providing CRM implementation, support and administrative services to our clients. The following table provides a summary of our service fee income by service.

Table 2 – Summary of Service Fee Income by Service (dollars in thousands)

	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	2015		2014		2015		2014
Professional services	$	954	$	916	$	505	$	358
Communications services	726		503		386		271
Total net service fee income	$	1,680	$	1,419	$	891	$	629

On a consolidated basis, service fee income increased to $1.7 million and $0.9 million for the six and three months ended June 30, 2015, respectively, from $1.4 million and $0.6 million for the six and three months ended June 30, 2014, respectively. The growth in communications services revenue was driven primarily by more aggressive sales efforts, which began during the second half of 2014 and have continued into 2015. These efforts included a reorganization of the Company's sales and marketing function, an increase in the headcount of the Company's sales and marketing function, and purchases of leads from external sources. The increase in professional services revenue when comparing the three months ended June 30, 2015 and 2014 is due primarily to an increase in the average billing rate coupled with an increase in the relative size of active projects in terms of both total time commitment and total dollars.

Service Fee Income – Transition Services

In connection with the sale of StreetLinks, the Company and Assurant entered into a transition services agreement, pursuant to which the Company agreed to provide ongoing information technology, human resources management and accounting services to StreetLinks for a period of up to eighteen months. During the six and three months ended June 30, 2014, the Company earned approximately $1.0 million of professional service fees under the transition services agreement. As the agreed-upon professional services were substantially complete as of December 31, 2014, professional service fees earned under the transition services agreement for the six and three months ended June 30, 2015 were not material.

Interest Income – Mortgage Securities

Interest income on the mortgage securities we own decreased to approximately $3.2 million during the six months ended June 30, 2015 compared to $3.4 million during the six months ended June 30, 2014. Interest income for the three months ended June 30, 2015 was relatively flat at $1.7 million compared to $1.6 million for the same period in 2014. Fluctuations in the interest income received from our mortgage portfolio are typically due to factors beyond the Company's control, such as the performance of the underlying loan collateral, prepayment speeds, interest rates, etc. The Company expects interest income and cash flow from these securities to decline as the principal on the underlying loan collateral is paid, written down, or written off.

Cost of Services

Direct costs of the Company's communications services consist primarily of expenses incurred to host and support our CorvisaOne software, co-location and data charges, fees paid to third party telecommunications carriers for usage,software license fees and royalty expenses, depreciation expense associated with capitalized software related to these services, and allocated overhead, such as occupancy charges and IT infrastructure. Direct costs of the Company's professional services consist almost entirely of the compensation and related expenses of those individuals providing professional services.

Cost of services increased to $3.1 million and $1.7 million for the six and three months ended June 30, 2015, respectively, from $1.4 million and $0.7 million for the six and three months ended June 30, 2014, respectively. This increase was partly driven by the current year growth in sales of our communications services offerings, which resulted in an increase in usage-related fees paid to third party telecommunications carriers and certain software license fees. Also driving the increase in cost of services both in total dollars and as a percentage of service fee income was the growth in the headcount of our customer support and professional services personnel, certain software royalty expenses, and depreciation expense related to our internally developed software. As this business is still in the early stages of development, Management continues to identify and explore opportunities to scale the business and improve the efficiency of operations with the intent to generate positive margins.

Cost of Services – Transition Services

During the six and three months ended June 30, 2014, the Company incurred approximately $0.6 million in costs to provide the services set forth in the transition services agreement. As the agreed-upon professional services were substantially complete as of December 31, 2014, cost of services – transition servicesfor the six and three months ended June 30, 2015 were not material.

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Development

Development costs consist primarily of non-capitalized salaries and related expenses for our development personnel, and allocated overhead. Our development efforts are focused on adding new features and services, integrating licensed technologies, increasing the functionality and security of our CorvisaOne software, and enhancing the ease of use of this software.

Development expenses can vary period over period based on a number of factors including, but not limited to, significant changes in development staff headcount, the stage of the Company's various development projects within the software development lifecycle and the existence of the technology necessary for the Company's development projects to achieve their targeted performance requirements. In periods where a significant number of projects are within the application development stage, development costs may decline due to the capitalization of these costs as internal use software. Conversely, in periods where substantial development effort is devoted to projects for which the necessary technology does not currently exist, development costs that would normally be capitalized would be expensed as incurred until the technology is developed and the preliminary project stage is completed.

Despite the period over period growth in the headcount of the Company's development personnel, development costs decreased to $0.8 million in six months ended June 30, 2015 compared to $0.9 million for the six months ended June 30, 2014. This decrease was due primarily to the fact that, during the six months ended June 30, 2015, a larger percentage of developer time was spent working on projects in the application development stage of the software development lifecycle. As such, a larger percentage of the compensation and other costs associated with these projects were capitalized in accordance with the relevant accounting guidance. Development costs for the three months ended June 30, 2015 and 2014 were relatively flat at $0.5 million.

Sales and Marketing

Sales and marketing costs consist primarily of salaries and related expenses for our sales and marketing staff, commissions, advertising, purchases of leads from third parties, and allocated overhead.

Sales and marketing increased to approximately $4.9 million and $2.5 million for the six and three months ended June 30, 2015, respectively, from $1.5 million and $0.9 million for the six and three months ended June 30, 2014, respectively. As noted within the service fee income discussion above, this increase in sales and marketing costs for all periods was due primarily to the growth in the headcount of the Company's sales and marketing function and purchases of leads from external sources.

General and Administrative

General and administrative expenses consist of salaries and related expenses for finance and accounting, legal, internal audit, human resources and management information systems personnel, legal costs, professional fees, other corporate expenses and allocated overhead.

General and administrative expenses decreased from $8.7 million and $4.2 million for the six and three months ended June 30, 2014, respectively, to approximately $7.9 million and $3.7 million for the six and three months ended June 30, 2015, respectively. The decrease in general and administrative expenses for all periods is due primarily to a decrease in compensation and benefits as a result of the retirement of the Company's Chief Operating Officer, Steve Haslam, during the third quarter of 2014. See Note 7 for additional information regarding the impact of the Mr. Haslam's retirement on the condensed consolidated financial statements. The decrease in general and administrative expenses is also due to a reduction in rent expense for all periods due to the abandonment of an operating lease during the fourth quarter of 2014.

Other (Expense) Income

Other income (expense) was not material for any period presented.

Interest Expense

Interest expense was materially consistent period over period, with the Company incurring approximately $1.6 million during the six months ended June 30, 2015 and 2014 and $0.8 million for the three months ended June 30, 2015 and 2014. See Note 6 to the condensed consolidated financial statements for additional information regarding the Company's borrowings.

Income Tax Expense (Benefit)

For the six months ended June 30, 2015, the Company recorded an income tax expense from continuing operations of approximately $0.1 million. Income tax expense for three months ended June 30, 2015 was not material. The majority of income tax expense for the six months ended June 30, 2015 relates to our residual interests in certain mortgage securities and additional unrecognized tax benefits. For the six and three months ended June 30, 2014, the Company recorded an income tax benefit of $8.2 million and $6.2 million, respectively. The income tax benefit for these periods relates primarily to operating losses from continuing operations and the utilization of a portion of the Company's deferred tax assets to offset the income tax expense from discontinued operations arising from the gain on the sale of StreetLinks during the second quarter of 2014.

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Liquidity and Capital Resources

As of June 30, 2015, we had approximately $4.7 million in unrestricted cash and cash equivalents and $0.6 million of restricted cash, which is primarily included in the other noncurrent assets line item on the condensed consolidated balance sheet. In addition, the Company held approximately $28.7 million in corporate notes and bonds and agency securities with average remaining maturities between five months and eighteen months. These securities are classified as available-for-sale as of June 30, 2015 and are included in the current and non-current marketable securities line items on the condensed, consolidated balance sheet.

Our current projections indicate that sufficient cash and cash flows are and will be available to meet payment needs. It is important to note, though, that our mortgage securities cash flows are volatile and uncertain, and the amounts we receive could vary materially from our projections. Further, given the early stage nature of Corvisa, this business may not contribute to quarterly earnings for some time as it continues to invest for long-term growth. Sufficient cash is available to meet the immediate and near-term operating cash needs of Corvisa. However, if current trends continue, the Company will need to obtain additional liquid resources and/or modify its organizational structure, processes, and/or systems in an effort to streamline operations and reduce monthly cash spend while continuing to provide necessary levels of support to ensure continued growth of Corvisa.

As discussed under the heading “Item 1. Legal Proceedings” of Part II of this report, we are also the subject of various legal proceedings, the outcomes of which are uncertain. We may also face demands in the future that are unknown to us today related to our legacy lending and servicing operations. Management believes that its current operations and its available cash are sufficient for the Company to discharge its liabilities and meet its commitments in the normal course of business.

The indentures governing the Senior Notes (the “Indentures”) contain restrictive covenants (the “Negative Covenants”) subject to exceptions in the Indentures, including written consent of the holders of the Senior Notes. The Negative Covenants prohibit NCI and its subsidiaries, from among other things, incurring debt, permitting any lien upon any of its property or assets, making any cash dividend or distribution or liquidation payment, acquiring our shares or equity in our subsidiaries, making payment on our debt securities that rank pari passu or junior to the Senior Notes, or disposing of any equity interest in our subsidiaries or all or substantially allof the assets of our subsidiaries. The Senior Notes accrue interest at a rate of 1.0% until the earlier of (a) the completion of an equity offering by NCI or our subsidiaries that results in proceeds of $40 million or more or (b) January 1, 2016. Thereafter, the Senior Notes will accrue interest at a rate of three-month LIBOR plus 3.5% (the “Full Rate”). Interest on the Senior Notes is paid on a quarterly basis and no principal payments are due until maturity on March 30, 2033. The Negative Covenants remain in effect until both of the following conditions are met: 1) the Senior Notes begin accruing interest at the Full Rate, and 2) the Company satisfies certain financial covenants (the “Financial Covenants”). Satisfaction of the Financial Covenants requires the Company to demonstrate on a consolidated basis that (1) its Tangible Net Worth is equal to or greater than $40 million, and (2) either (a) the Interest Coverage Ratio is equal to or greater than 1.35x, or (b) the Leverage Ratio is not greater than 95%. As the Senior Notes were not accruing interest at the Full Rate, the Negative Covenants, as defined above, were still in effect as of June 30, 2015 and December 31, 2014. Compliance with the Financial Covenants is required only when the Company seeks to take action prohibited by the Negative Covenants that has not been approved by the holders of the Senior Notes.

As discussed in Note 3 to the condensed consolidated financial statements, on April 16, 2014, the Company and the non-controlling members of StreetLinks entered into a purchase and sale agreement with Assurant, pursuant to which Assurant purchased 100% of the outstanding membership units of StreetLinks. The sale of a subsidiary is not prohibited by the Negative Covenants, provided that the sale is at fair market value and the proceeds are reinvested in the Company. As such, the Company was in compliance with all Negative Covenants as of June 30, 2015 and December 31, 2014, and therefore the Company was under no obligation to comply with the Financial Covenants during these periods.

Except as discussed in Note 7 to the condensed consolidated financial statements, there have been no significant changes to the Company's contractual obligations as presented in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

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Overview of Cash Flow for the Six Months Ended June 30, 2015

The following table provides a summary of our operating, investing and financing cash flows as taken from our condensed consolidated statements of cash flows for the six months ended June 30, 2015 and 2014.

Table 3 – Summary of Operating, Investing and Financing Cash Flows (dollars in thousands)

	For the Six Months Ended June 30,
	2015			2014
Consolidated Statements of Cash Flows:
Cash (used in) provided by operating activities of continuing operations	$	(11,542	)	$	(817	)
Cash flows provided by investing activities of continuing operations	11,305			36,118
Cash flows used in financing activities of continuing operations	(333		)	(2,500		)

Operating Activities

The decrease in net cash flows provided by operating activities from $0.8 million during the six months ended June 30, 2014 to $11.5 million used in operating activities during the six months ended June 30, 2015 is driven primarily by the operations of Corvisa and decreases in collections of amounts due from discontinued operations.

Investing Activities

The decrease in the net cash flows provided by investing activities is due primarily to the cash proceeds received from the sale of StreetLinks during the second quarter of 2014, as no such proceeds were received during the six months ended June 30, 2015. This was offset slightly by an increase in cash proceeds from the sales and maturities of marketable securities during the six months ended June 30, 2015, coupled with a reduction in purchases of marketable securities period over period.

Financing Activities

The decrease in net cash flows used in financing activities when comparing the six months ended June 30, 2015 and 2014 is due primarily to a reduction in cash payments for contributions of capital to discontinued operations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to provide the information required by this Item.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Company maintains a system of disclosure controls and procedures that are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the federal securities laws, including this report, is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Company's principal executive officer and principal financial officer evaluated the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(d)) as of the end of the period covered by this report and concluded that the Company's controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting during the three months ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Pending Litigation.

The Company is a party to various legal proceedings. Except as set forth below, these proceedings are of an ordinary and routine nature. Any legal fees associated with these proceedings are expensed as incurred.

Although it is not possible to predict the outcome of any legal proceeding, in the opinion of management, other than the active proceedings described in detail below, proceedings and actions against the Company should not, individually, or in the aggregate, have a material effect on the Company's financial condition, operations and liquidity. Furthermore, due to the uncertainty of any potential loss as a result of pending litigation and due to the Company's belief that an adverse ruling is not probable, the Company has not accrued a loss contingency related to the following matters in its consolidated financial statements. However, a material outcome in one or more of the active proceedings described below could have a material impact on the results of operations in a particular quarter or fiscal year.

On May 21, 2008, a purported class action case was filed in the Supreme Court of the State of New York, New York County, by the New Jersey Carpenters' Health Fund, on behalf of itself and all others similarly situated. Defendants in the case included NovaStar Mortgage Funding Corporation (“NMFC”), a wholly-owned subsidiary of the Company, and its individual directors, several securitization trusts sponsored by the Company (“affiliated defendants”) and several unaffiliated investment banks and credit rating agencies. The case was removed to the United States District Court for the Southern District of New York. On June 16, 2009, the plaintiff filed an amended complaint. The plaintiff seeks monetary damages, alleging that the defendants violated sections 11, 12 and 15 of the Securities Act of 1933, as amended, by making allegedly false statements regarding mortgage loans that served as collateral for securities purchased by the plaintiff and the purported class members. On August 31, 2009, the Company filed a motion to dismiss the plaintiff's claims, which the court granted on March 31, 2011, with leave to amend. The plaintiff filed a second amended complaint on May 16, 2011, and the Company again filed a motion to dismiss. On March 29, 2012, the court dismissed the plaintiff's second amended complaint with prejudice and without leave to replead. The plaintiff filed an appeal. On March 1, 2013, the appellate court reversed the judgment of the lower court, which had dismissed the case. Also, the appellate court vacated the judgment of the lower court which had held that the plaintiff lacked standing, even as a class representative, to sue on behalf of investors in securities in which plaintiff had not invested, and the appellate court remanded the case back to the lower court for further proceedings. On April 23, 2013 the plaintiff filed its memorandum with the lower court seeking a reconsideration of the earlier dismissal of plaintiff's claims as to five offerings in which plaintiff was not invested, and on February 5, 2015 the lower court granted plaintiff's motion for reconsideration and vacated its earlier dismissal. Given the early stage of the litigation, the Company cannot provide an estimate of the range of any loss. The Company believes that the affiliated defendants have meritorious defenses to the case and expects them to defend the case vigorously.

On June 20, 2011, the National Credit Union Administration Board, as liquidating agent of U.S. Central Federal Credit Union, filed an action against NMFC and numerous other defendants in the United States District Court for the District of Kansas, claiming that the defendants issued or underwrote residential mortgage-backed securities pursuant to allegedly false or misleading registration statements, prospectuses, and/or prospectus supplements. On August 24, 2012, the plaintiff filed an amended complaint making essentially the same claims against NMFC. NMFC filed a motion to dismiss the amended complaint which was denied on September 12, 2013. The defendants had claimed that the case should be dismissed based upon a statute of limitations and sought an appeal of the court's denial of this defense. An interlocutory appeal of this issue was allowed, and on August 27, 2013, the Tenth Circuit affirmed the lower court’s denial of defendants’ motion to dismiss the plaintiff’s claims as being time barred; the appellate court held that the Extender Statute, 12 U.S.C. §1787(b)(14) applied to plaintiff’s claims. On June 16, 2014, the United States Supreme Court granted a petition of NMFC and its co-defendants for certiorari, vacated the ruling of the Tenth Circuit, and remanded the case back to that court for further consideration in light of the Supreme Court’s decision in CTS Corp. v. Waldburger, 134 S. Ct. 2175 (2014). On August 19, 2014, the Tenth Circuit reaffirmed its prior decision, and on October 2, 2014 the defendants filed a petition for writ of certiorari with the Supreme Court, which was denied. This litigation is in an early stage, and the Company cannot provide an estimate of the range of any loss. The Company believes that NMFC has meritorious defenses to the case and expects it to defend the case vigorously.

On February 28, 2013 the Federal Housing Finance Agency, as conservator for the Federal Home Loan Mortgage Corporation (Freddie Mac) and on behalf of the Trustee of the NovaStar Mortgage Funding Trust, Series 2007-1 (the “Trust”), a securitization trust in which the Company retains a residual interest, filed a summons with notice in the Supreme Court of the State of New York, County of New York against Novation Companies, Inc. and NovaStar Mortgage, Inc. (“NMI”), a wholly-owned subsidiary of the Company. The notice provides that this is a breach of contract action with respect to certain, unspecified mortgage loans and defendant's failure to repurchase such loans under the applicable agreements. Plaintiff alleges that defendants, from the closing date of the transaction that created the Trust that mortgage loans that were sold to the Trust, were aware of the breach of the representations and warranties made and failed to notice and cure such breaches, and due to the failure of defendants to cure any breach, notice to defendants would have been futile. The summons with notice was not served until June 28, 2013. By letter dated June 24, 2013, the Trustee of the Trust forwarded a notice from Freddie Mac alleging breaches of representations and warranties with respect to 43 loans, as more fully set forth in included documentation. The 43 loans had an aggregate, original principal balance of about $6.5 million. On August 19, 2013, Deutsche Bank National Trust Company, as Trustee, filed a

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complaint identifying alleged breaches of representations and warranties with respect to seven loans that were included in the earlier list of 43 loans. Plaintiff also generally alleged a trust-wide breach of representations and warranties by defendants with respect to loans sold and transferred to the trust. Plaintiff seeks specific performance of repurchase obligations; compensatory, consequential, recessionary and equitable damages for breach of contract; specific performance and damages for anticipatory breach of contract; and indemnification (indemnification against NMI only). On October 9, 2013, the Company and NMI filed a motion to dismiss plaintiff’s complaint. This motion to dismiss was withdrawn after plaintiff filed an amended complaint on January 28, 2014, and on March 4, 2014 the Company and NMI filed a motion to dismiss the amended complaint. This litigation is in an early stage, and the Company cannot provide an estimate of the range of any loss. The Company believes that it has meritorious defenses to the case and expects to defend the case vigorously.

Item 1A. Risk Factors

Risk Factors

There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2014.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(dollars in thousands, except per share amounts)

	Issuer Purchases of Equity Securities
	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (A)
April 1, 2015 - April 30, 2015	—	—	—	$	1,020
May 1, 2015 - May 31, 2015	—	—	—	$	1,020
June 1, 2015 - June 30, 2015	—	—	—	$	1,020

(A) A current report on Form 8-K was filed on October 2, 2000 announcing that the Board of Directors authorized the Company to repurchase its common shares, bringing the total authorization to $9 million. The Company has repurchased $8.0 million to date, leaving approximately $1.0 million of shares that may yet be purchased under the plan.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

On July 21, 2015, the Company held its Annual Meeting of Shareholders. On this date, our shareholders approved and adopted certain proposals, as set forth in the Company’s definitive proxy statement on Schedule 14A filed with the Securities and Exchange Commission on June 1, 2015, and as subsequently supplemented. Among the proposals approved and adopted by our shareholders was the Company’s 2015 Incentive Stock Plan, which replaces the Company's 2004 Incentive Stock Plan, as amended from time to time. Our shareholders also approved an amendment to our Articles of Amendment and Restatement, which is designed to prevent certain transfers of the Company's common stock that could result in an ownership change under Section 382 of the Internal Revenue Code and, therefore, significantly impair the value of the Company's net operating loss carryforwards. As detailed in the exhibit listing in Item 6, copies of these documents are attached as exhibits to this quarterly report on Form 10-Q.

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Item 6. Exhibits

Exhibit Listing

Exhibit No.	Description of Document
3.1	Articles of Amendment and Restatement filed on July 23, 2015 with the State of Maryland
10.1	Novation Companies, Inc. 2015 Incentive Stock Plan *
10.2	Form of Restricted Stock Award for Non-Employee Directors under the Novation Companies, Inc. 2015 Incentive Stock Plan *
10.3	Form of Option Award for Key Executives under the Novation Companies, Inc. 2015 Incentive Stock Plan *
10.4	Form of Option Award for Corvisa Employees under the Novation Companies, Inc. 2015 Incentive Stock Plan *
31.1	Chief Executive Officer Certification filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Principal Financial Officer Certification filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Chief Executive Officer Certification furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Principal Financial Officer Certification furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following financial information from Novation Companies, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, formatted in XBRL (Extensible Business Reporting Language) includes: (i) Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014, (ii) Consolidated Statements of Operations for the six and three months ended June 30, 2015 and 2014, (iii) Consolidated Statements of Comprehensive Income for the six and three months ended June 30, 2015 and 2014, (iv) Consolidated Statements of Shareholders' Equity for the six months ended June 30, 2015 and 2014, (v) Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2014, and (vi) the Notes to Consolidated Financial Statements.
* Management contract of compensatory plan or arrangement

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SIGNATURES

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 thereunto duly authorized.

		NOVATION COMPANIES, INC.
DATE:	August 6, 2015	/s/ W. Lance Anderson
		W. Lance Anderson, Chairman of the Board of Directors and Chief Executive Officer
		(Principal Executive Officer)
DATE:	August 6, 2015	/s/ Rodney E. Schwatken
		Rodney E. Schwatken, Chief Financial Officer
		(Principal Financial Officer)
DATE:	August 6, 2015	/s/ Brett A. Monger
		Brett A. Monger, Vice President and Chief Accounting Officer
		(Principal Accounting Officer)

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EX-3.1

Exhibit 3.1

Novation Companies, Inc.

ARTICLES OF AMENDMENT AND RESTATEMENT

FIRST: Novation Companies, Inc., a Maryland corporation desires to amend and restate its charter as currently in effect and as hereinafter amended.

SECOND: The following provisions are all the provisions of the charter currently in effect and as hereinafter amended:

Article INAME

The name of the corporation (the “Corporation”) is:

Novation Companies, Inc.

Article IIPURPOSES

The purpose for which the Corporation is formed is to transact any or all lawful business, not required to be specifically stated in the Charter, for which corporations may be incorporated under the MGCL.

Article IIIPRINCIPAL OFFICE

The address of the principal office of the Corporation in the State of Maryland is:

c/o CSC-Lawyers Incorporating Service Company

7 St. Paul Street, Suite 820

Baltimore, Maryland 21202

Article IVRESIDENT AGENT

The name and address of the resident agent of the Corporation in the State of Maryland is:

CSC-Lawyers Incorporating Service Company

7 St. Paul Street, Suite 820

Baltimore, Maryland 21202

Said resident agent is a Maryland corporation.

Article VCAPITAL STOCK

A.The total number of shares of Capital Stock of all classes which the Corporation has authority to issue is 120,000,000 shares of Capital Stock, consisting of 119,950,000 shares of Common Stock, $0.01 par value per share (“Common Stock”), and 50,000 shares of Preferred Stock, $0.01 par value per share (“Preferred Stock”), all of which are currently classed as Series F Junior Participating Preferred Stock. The aggregate par value of all authorized shares of stock having par value is $1,200,000. The Board of Directors may classify and reclassify any unissued shares of Capital Stock, whether now or hereafter authorized, by setting or changing in any one or more respects the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of such shares of Capital Stock. All persons who acquire shares of Capital Stock or securities exercisable for or convertible into shares of Capital Stock shall acquire such shares subject to the provisions of the Charter (including Article X) and Bylaws of the Corporation.

B.The following is a description of the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of the Common Stock of the Corporation:

(1)Each share of Common Stock shall have one vote, and, except as otherwise provided in respect of any class of Capital Stock hereafter classified or reclassified, the exclusive voting power for all purposes shall be vested in the holders of the Common Stock.

(2)Subject to the provisions of law and any preferences of any class of Capital Stock hereafter classified or reclassified, dividends, including dividends payable in shares of the Corporation’s Capital Stock, may be paid on the Common Stock of the Corporation at such time and in such amounts as the Board of Directors may deem advisable.

(3)In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the Common Stock shall be entitled, after payment or provision for payment of the debts and other liabilities of the Corporation and the amount to which the holders of any class of Capital Stock hereafter classified or reclassified having a preference on distributions in the liquidation, dissolution or winding up of the Corporation shall be entitled, together with the holders of any other class of Capital Stock hereafter classified or reclassified not having a preference on distributions in the liquidation, dissolution or winding up of the Corporation, to share ratably in the remaining net assets of the Corporation.

C.Subject to the foregoing, the power of the Board of Directors to classify and reclassify any of the shares of Capital Stock shall include, without limitation, subject to the provisions of the Charter, authority to classify or reclassify any unissued shares of such Capital Stock into a class or classes of preferred stock, preference stock, special stock, or other stock, and to divide and classify shares of any class into one or more series of such class, by determining, fixing or altering one or more of the following:

(1)The distinctive designation of such class or series and the number of shares to constitute such class or series; provided that, unless otherwise prohibited by the terms of such or any other class or series, the number of shares of any class or series may be decreased by the Board of Directors in connection with any classification or reclassification of unissued shares and the number of shares of such class or series may be increased by the Board of Directors in connection with any such classification or reclassification, and any shares of any class or series which have been redeemed, purchased, otherwise acquired or converted into shares of Common Stock or any other class or series shall become part of the authorized Capital Stock and be subject to classification and reclassification as provided in this subparagraph.

(2)Whether or not and, if so, the rates, amounts and times at which, and the conditions under which, dividends shall be payable on shares of such class or series, whether any such dividends shall rank senior or junior to or on a parity with the dividends payable on any other class or series of Capital Stock, and the status of any such dividends as cumulative, cumulative to a limited extent or noncumulative and as participating or nonparticipating.

(3)Whether or not shares of such class or series shall have voting rights in addition to any voting rights provided by law and, if so, the terms of such voting rights.

(4)Whether or not shares of such class or series shall have conversion or exchange privileges and, if so, the terms and conditions thereof, including provision for adjustment of the conversion or exchange rate in such events or at such times as the Board of Directors shall determine.

(5)Whether or not shares of such class or series shall be subject to redemption and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; and whether or not there shall be any sinking fund or purchase account in respect thereof, and if so, the terms thereof.

(6)The rights of the holders of shares of such class or series upon the liquidation, dissolution or winding up of the affairs of, or upon any distribution of the assets of, the Corporation, which rights may vary depending upon whether such liquidation, dissolution or winding up is voluntary or involuntary and, if voluntary, may vary at different dates, and whether such rights shall rank senior or junior to or on a parity with such rights of any other class or series of Capital Stock.

(7)Whether or not there shall be any limitations applicable, while shares of such class or series are outstanding, upon the payment of dividends or making of distributions on, or the acquisition of, or the use of moneys for purchase or redemption of, any Capital Stock of the Corporation, or upon any other action of the Corporation, including action under this subparagraph, and, if so, the terms and conditions thereof.

(8)Any other preferences, rights, restrictions, including restrictions on transferability, and qualifications of shares of such class or series, not inconsistent with law and the Charter.

D.For the purposes hereof and of any Articles Supplementary hereto providing for the classification or reclassification of any shares of Capital Stock or of any other Charter document of the Corporation (unless otherwise provided in any such Articles or document), any class or series of Capital Stock of the Corporation shall be deemed to rank:

(1)prior to another class or series either as to dividends or upon liquidation, if the holders of such class or series shall be entitled to the receipt of dividends or of amounts distributable on liquidation, dissolution or winding up, as the case may be, in preference or priority to holders of such other class or series;

(2)on a parity with another class or series either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation price per share thereof be different from those of such others, if the holders of such class or series of stock shall be entitled to receipt of dividends or amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or redemption or liquidation prices, without preference or priority over the holders of such other class or series; and

(3)junior to another class or series either as to dividends or upon liquidation, if the rights of the holders of such class or series shall be subject or subordinate to the rights of the holders of such other class or series in respect of the receipt of dividends or the amounts distributable upon liquidation, dissolution or winding up, as the case may be.

E.The Series F Junior Participating Preferred Stock has the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption set forth in Exhibit A.

Article VIDIRECTORS

A.The number of directors of the Corporation shall be seven, which number may be increased or decreased by the Board of Directors pursuant to the Bylaws of the Corporation, but shall never be less than the minimum number permitted by the MGCL.

B.The current directors who will serve for the remainder of the terms for which they have been elected and until their successors are elected and qualify are as follows:

Howard M. Amster

W. Lance Anderson

Gregory T. Barmore

Art N. Burtscher

Jeffrey E. Eberwein

Barry A. Igdaloff

Robert G. Pearse

C.The directors (other than any director elected solely by holders of one or more classes or series of preferred stock) shall be classified, with respect to the terms for which they severally hold office, into three classes, with the term of office of the first class to expire the next succeeding annual meeting of stockholders, the term of office of the second class to expire at the second succeeding annual meeting of stockholders, and the term of office of the third class to expire at the third succeeding annual meeting of stockholders. At each annual meeting of the stockholders, the successors to the class of directors whose term expires at such meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election and until their successors are duly elected and qualify. The number of directors in each class shall be determined by the Board of Directors.

D.Subject to the rights of the holders of any class of preferred stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies on the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office, or other cause shall be filled by the required vote of the stockholders or the directors then in office. A director so chosen by the stockholders shall hold office for the balance of the term then remaining. A director so chosen by the remaining directors shall hold office until the next annual meeting of stockholders, at which time the stockholders shall elect a director to hold office for the balance of the term then remaining. No decrease in the number of directors constituting the Board of Directors shall affect the tenure of office of any director.

E.Whenever the holders of any one or more series of preferred stock of the Corporation shall have the right, voting separately as a class, to elect one or more directors of the Corporation, the Board of Directors shall consist of such directors so elected in addition to the number of directors fixed as provided in paragraph A of this Article VI or in the Bylaws.

F.Subject to the rights of the holders of any class separately entitled to elect one or more directors, any director, or the entire Board of Directors, may be removed from office at any time, but only for cause and then only by the affirmative vote of the holders of at least a majority of the combined voting power of all classes of shares of capital stock entitled to vote in the election for directors voting together as a single class.

Article VIIPREEMPTIVE RIGHTS

No holder of any Capital Stock or any other securities of the Corporation, whether now or hereafter authorized, shall have a preemptive right to subscribe for or purchase any Capital Stock or any other securities of the Corporation other than such, if any, as the Board of Directors, in its sole discretion, may determine and at such price or prices and upon such other terms as the Board of Directors, in its sole discretion, may determine and at such price or prices and upon such other terms as the Board of Directors, in its sole discretion, may fix; and any Capital Stock or other securities which the Board of Directors may determine to offer for subscription may, as the Board of Directors in its sole discretion shall determine, be offered to the holders of any class, series or type of Capital Stock or other securities at the time outstanding to the exclusion of the holders of any or all other classes, series or types of Capital Stock or other securities at the time outstanding.

Article VIIIINDEMNIFICATION

The Corporation shall indemnify (A) its present and former directors and officers, whether serving the Corporation or at its request any other entity, to the full extent required or permitted by Maryland law in effect from time to time, including the advance of expenses under the procedures and to the full extent permitted by law and (B) other employees and agents to such extent as shall be authorized by the Board of Directors or the Corporation’s Bylaws and be permitted by law. The foregoing rights of indemnification shall not be exclusive of any other rights to which those seeking indemnification may be entitled. The Board of Directors may take such action as is necessary to carry out these indemnification provisions and is expressly empowered to adopt, approve and amend from time to time such Bylaws, resolutions or contracts implementing such provisions or such further indemnification arrangements as may be permitted by law. No amendment of the Charter of the Corporation or repeal of any of its provisions shall limit or eliminate the right to indemnification provided hereunder with respect to acts or omissions occurring prior to such amendment or repeal.

Article IXPERSONAL LIABILITY

To the fullest extent permitted by Maryland law in effect from time to time, no present or former director or officer of this Corporation shall be personally liable to the Corporation or its stockholders for money damages. No amendment of the Charter of the Corporation or repeal of any of its provisions shall limit or eliminate the benefits provided to directors and officers under this provision with respect to any act or omission which occurred prior to such amendment or repeal.

Article XFIVE PERCENT OWNERSHIP

A.In order to preserve the Tax Benefits to which the Corporation or any direct or indirect subsidiary thereof is entitled pursuant to the Internal Revenue Code of 1986, as amended, or any successor statute (the “Code”) and the Treasury Regulations promulgated thereunder, the Corporation Securities shall be subject to the following restrictions:

(1)Certain Definitions. For purposes of this Article X, the following terms shall have the meanings indicated (and any references to any portions of Treasury Regulation § 1.382-2T shall include any successor provisions):

(a) “4.99% Transaction” means any Transfer or purported Transfer of Corporation Securities described in Section A(2) of this Article X, which Transfer is prohibited and/or void under the provisions of such Section A(2) of this Article X.

(b) “Agent” means any agent designated by the Board of Directors of the Corporation pursuant to Section B(2) of this Article X.

(c) “Corporation Securities” means (I) shares of Common Stock, (II) shares of preferred stock (other than preferred stock described in Section 1504(a)(4) of the Code), (III) warrants, rights, or options (including options within the meaning of Treasury Regulation § 1.382-2T(h)(4)(v)) to purchase stock (other than preferred stock described in Section 1504(a)(4) of the Code) of the Corporation, and (IV) any other interest that would be treated as “stock” of the Corporation pursuant to Treasury Regulation § 1.382-2T(f)(18).

(d) “Excess Securities” has the meaning set forth in Section B(1) of this Article X.

(e) “4.99-Percent Stockholder” means a Person or group of Persons that is a “5-percent stockholder” of the Corporation pursuant to Treasury Regulation § 1.382-2T(g).

(f) “Percentage Stock Ownership” means the percentage stock ownership interest as determined in accordance with Treasury Regulation § 1.382-2T(g), (h), (j) and (k).

(g) “Permitted Transfer” means a Transfer of Corporation Securities (A) after the Restriction Release Date, (B) pursuant to any (1) merger, consolidation or similar transaction approved in advance by the Board of Directors or (2) tender or exchange offer made pursuant to the applicable rules and regulations of the Exchange Act, for any or all outstanding Common Stock in which a majority of each class of the outstanding Common Stock has been validly tendered and not withdrawn and in which offer the offeror or an affiliate thereof has committed to consummate a merger with the Corporation in which all of the Common Stock not so acquired in such offer is (subject to any applicable dissenters’ rights) converted into the same type and amount of consideration paid for Common Stock accepted in such tender or exchange offer, (C) pursuant to the exercise of any option or warrant outstanding on the effective date of these Articles of Amendment and Restatement to purchase Corporation Securities from the Corporation, or (D) any issuance of Corporation Securities by the Corporation or any of its subsidiaries.

(h) “Person” shall mean any individual, firm, corporation, partnership, trust association, limited liability company, limited liability partnership, or other entity, or any group of Persons making a “coordinated acquisition” of shares or otherwise treated as an entity within the meaning of Treasury Regulation § 1.382-3(a)(1), or otherwise and shall include any successor (by merger or otherwise) of any such entity.

(i) “Prohibited Distribution” has the meaning set forth in Section B(2) of this Article X.

(j) “Purported Transferee” has the meaning set forth in Section B(1) of this Article X.

(k) “Prohibited Transfer” means any 4.99% Transaction (other than a Permitted Transfer).

(l) “Remedial Holder” has the meaning set forth in Section B(4) of this Article X.

(m) “Restriction Release Date” means the earlier of (x) date that is 36 months and one day from the effective date of these Articles of Amendment and Restatement, or (y) such other date as the Board of Directors may determine in good faith that this Article X is no longer in the best interests of the Corporation and its stockholders.

(n) “Section 382” means Section 382 of the Code, or any comparable successor provision.

(o) “Tax Benefit” means the net operating loss carryovers, capital loss carryovers, general business credit carryovers, alternative minimum tax credit carryovers and foreign tax credit carryovers, as well as any loss or deduction attributable to a “net unrealized built-in loss” within the meaning of Section 382, of the Corporation or any direct or indirect subsidiary thereof.

(p) “Transfer” means any direct or indirect sale, transfer, assignment, exchange, issuance, grant, redemption, repurchase, conveyance, pledge or other disposition, whether voluntary or involuntary, and whether by operation of law or otherwise, by any Person other than the Corporation. A Transfer also shall include the creation or grant of an option, warrant or right (including an option within the meaning of Treasury Regulation Section 1.382-4(d)(9)) by any Person other than the Corporation, but only if such option, warrant or right would be deemed exercised pursuant to Treasury Regulation Section 1.382-4(d)(2)(i).

(q) “Treasury Regulations” means the income tax regulations, including temporary and proposed regulations, promulgated under the Code by the United States Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

(2)Transfer Restrictions. Any attempted Transfer of Corporation Securities prior to the Restriction Release Date, or any attempted Transfer of Corporation Securities pursuant to an agreement entered into prior to the Restriction Release Date, that is not a Permitted Transfer shall be prohibited and void ab initio insofar as it purports to transfer ownership or rights in respect of such Corporation Securities to the Purported Transferee to the extent that, as a result of such Transfer (or any series of Transfers of which such Transfer is a part), either (1) any Person or group of Persons shall become a 4.99-Percent Stockholder other than by reason of Treasury Regulation Section 1.382-2T(j)(3)(i), or (2) the Percentage Stock Ownership interest in the Corporation of any 4.99-Percent Stockholder shall be increased.

(3)The restrictions set forth in Section A(2) of this Article X shall not apply to an attempted Transfer that is a 4.99% Transaction if the transferor or the transferee obtains the prior or retroactive written approval of the Board of Directors or a duly authorized committee thereof. In considering whether to approve any such Transfer, the Board of Directors may grant its approval in whole or in part with respect to such Transfer and may impose any conditions that it deems reasonable and appropriate in connection with such approval, including, without limitation, restrictions on the ability of any transferee to Transfer Corporation Securities acquired through a Transfer. The Board of Directors may exercise the authority granted by this Section A(3) of this Article X through duly authorized officers or agents of the Corporation to the fullest extent permitted by law.

(4)Each certificate representing shares of Corporation Securities issued prior to the Restriction Release Date shall contain the legend set forth below, evidencing the restrictions set forth in this Article X:

“The transfer of securities represented by this certificate is (and other securities of the Corporation may be) subject to restriction pursuant to Article X of the Corporation’s Articles of Amendment and Restatement. The Corporation will furnish a copy of its Articles of Amendment and Restatement setting forth the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock

or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights to the holder of record of this Certificate without charge upon written request addressed to the Corporation at its principal place of business.”

B.Treatment of Excess Securities.

(1)No employee or agent of the Corporation shall record any Prohibited Transfer, and the purported transferee of such a Prohibited Transfer (the “Purported Transferee”) shall not be recognized as a stockholder of the Corporation for any purpose whatsoever in respect of the Corporation Securities which are the subject of the Prohibited Transfer (the “Excess Securities”). The Purported Transferee shall not be entitled, with respect to such Excess Securities, to any rights of stockholders of the Corporation, including, without limitation, the right to vote such Excess Securities or to receive dividends or distributions, whether liquidating or otherwise, in respect thereof, if any, and the Excess Securities shall be deemed to remain with the Transferor unless and until the Excess Securities are transferred to the Agent pursuant to Section B(2) of this Article X or until an approval is obtained under Section A(3). Once the Excess Securities have been acquired in a Transfer that is not a Prohibited Transfer, the Corporation Securities shall cease to be Excess Securities. For this purpose, any transfer of Excess Securities not in accordance with the provisions of this Section B of this Article X shall also be a Prohibited Transfer.

(2)If the Board of Directors determines that a Transfer of Corporation Securities constitutes a Prohibited Transfer then, upon written demand by the Corporation sent within thirty days of the date on which the Board of Directors determines that the attempted Transfer would result in Excess Securities, the Purported Transferee shall transfer or cause to be transferred any certificate or other evidence of ownership of the Excess Securities within the Purported Transferee’s possession or control, together with any dividends or other distributions that were received by the Purported Transferee from the Corporation with respect to the Excess Securities (“Prohibited Distributions”), to the Agent designated by the Board of Directors. The Agent shall thereupon sell to a buyer or buyers, which may include the Corporation, the Excess Securities transferred to it in one or more arm’s length transactions (on the public securities market on which such Excess Securities are traded, if possible, or otherwise privately); provided, however, that the Agent shall effect such sale or sales in an orderly fashion and shall not be required to effect any such sale within any specific timeframe if, in the Agent’s discretion, such sale or sales would disrupt the market for the Corporation Securities or otherwise would adversely affect the value of the Corporation Securities. If the Purported Transferee has resold the Excess Securities before receiving the Corporation’s demand to surrender Excess Securities to the Agent, the Purported Transferee shall be deemed to have sold the Excess Securities for the Agent, and shall be required to transfer to the Agent any Prohibited Distributions and proceeds of such sale, except to the extent that the Corporation grants written permission to the Purported Transferee to retain a portion of such sales proceeds not exceeding the amount that the Purported Transferee would have received from the Agent pursuant to Section B(3) of this Article X if the Agent rather than the Purported Transferee had resold the Excess Securities. Disposition of Excess Securities by the Agent pursuant to this Section B(2) of this Article X shall be deemed to occur simultaneously with the Prohibited Transfer to which the Excess Securities relate.

(3)The Agent shall apply any proceeds of a sale by it of Excess Securities and, if the Purported Transferee has previously resold the Excess Securities, any amounts received by it from a Purported Transferee, as follows: (x) first, such amounts shall be paid to the Agent to the extent necessary to cover its costs and expenses incurred in connection with its duties hereunder; (y) second, any remaining amounts shall be paid to the Purported Transferee, up to the amount paid by the Purported Transferee for the Excess Securities (or the fair market value of the Excess Securities (i) calculated on the basis of the closing market price for the Corporation Securities on such national securities exchange on which the Corporation Securities

are then listed or admitted to trading, on the day before the Prohibited Transfer, (ii) if the Corporation Securities are not listed or admitted to trading on any national securities exchange but are traded in the over-the-counter market, calculated based upon the difference between the highest bid and lowest asked prices, as such prices are reported by NASDAQ or any successor system on the day before the Prohibited Transfer or, if none, on the last preceding day for which such quotations exist, or (iii) if the Corporation Securities are neither listed nor admitted to trading on any stock exchange nor traded in the over-the-counter market, then as determined in good faith by the Board of Directors, at the time of the Prohibited Transfer to the Purported Transferee), which amount (or fair market value) shall be determined by the Board of Directors in its discretion; and (z) third, any remaining amounts, subject to the limitations imposed by the following proviso, shall be paid to one or more organizations qualifying under Section 501(c)(3) of the Code (or any comparable successor provision) (“Section 501(c)(3)”) selected by the Board of Directors; provided, however, that if the Excess Securities (including any Excess Securities arising from a previous Prohibited Transfer not sold by the Agent in a prior sale or sales), represent a 4.99% or greater Percentage Stock Ownership in any class of Corporation Securities, then any such remaining amounts to the extent attributable to the disposition of the portion of such Excess Securities exceeding a 4.99% Percentage Stock Ownership interest in such class shall be paid to two or more organizations qualifying under Section 501(c)(3) selected by the Board of Directors. The Purported Transferee shall have no claim, cause of action or any other recourse whatsoever against any transferor of Excess Securities. The recourse of any Purported Transferee in respect of any Prohibited Transfer shall be limited to the amount payable to the Purported Transferee pursuant to clause (y) of the preceding sentence. In no event shall the proceeds of any sale of Excess Securities pursuant to this Section B of this Article X inure to the benefit of the Corporation.

(4)In the event of any Transfer which does not involve a transfer of Corporation Securities within the meaning of Maryland law but which would cause a 4.99-percent Stockholder to violate a restriction on Transfers provided for in this Article X, the application of Sections B(2) and B(3) of this Article X shall be modified as described in this Section B(4) of this Article X. In such case, no such 4.99-percent Stockholder shall be required to dispose of any interest that is not a Corporation Security, but such 4.99-percent Stockholder and/or any Person whose ownership of Corporation Securities is attributed to such 4.99-percent Stockholder (such 4.99-percent Stockholder or other Person, a “Remedial Holder”) shall be deemed to have disposed of and shall be required to dispose of sufficient Corporation Securities (which Corporation Securities shall be disposed of in the inverse order in which they were acquired) to cause such 4.99-percent Stockholder, following such disposition, not to be in violation of this Article X. Such disposition shall be deemed to occur simultaneously with the Transfer giving rise to the application of this provision, and such number of Corporation Securities that are deemed to be disposed of shall be considered Excess Securities and shall be disposed of through the Agent as provided in Sections B(2) and B(3) of this Article X, except that the maximum aggregate amount payable to a Remedial Holder in connection with such sale shall be the fair market value of such Excess Securities at the time of the purported Transfer. A Remedial Holder shall not be entitled, with respect to such Excess Securities, to any rights of stockholders of the Corporation, including, without limitation, the right to vote such Excess Securities and to receive dividends or distributions, whether liquidating or otherwise, in respect thereof, if any, following the time of the purported Transfer. All expenses incurred by the Agent in disposing of such Excess Stock shall be paid out of any amounts due such 4.99-percent Stockholder or such other Person. The purpose of this Section B(4) of this Article X is to extend the restrictions in Sections B(1) and B(2) of this Article X to situations in which there is a 4.99-percent Transaction without a direct Transfer of Corporation Securities, and this Section B(4) of this Article X, along with the other provisions of this Article X, shall be interpreted to produce the same results, with differences as the context requires, as a direct Transfer of Corporation Securities.

(5)If the Purported Transferee fails to surrender the Excess Securities or the proceeds of a sale thereof to the Agent within 30 days from the date on which the Corporation makes a written demand

pursuant to Section B(2) of this Article X, then the Corporation shall use its best efforts to enforce the provisions hereof, including the institution of legal proceedings to compel such surrender.

(6)The Corporation shall make the written demand described in Section B(2) of this Article X within 30 days of the date on which the Board of Directors determines that the attempted Transfer would result in Excess Securities; provided, however, that if the Corporation makes such demand at a later date, the provisions of Sections A and B of this Article X shall apply nonetheless.

(7)Anything herein to the contrary notwithstanding, the Agent shall not act or be treated as acting as an agent for or on behalf of the Purported Transferee or for or on behalf of the Corporation and shall have no right to bind any of them, in contract or otherwise, but shall act only to carry out the ministerial functions assigned to it in this Section B of this Article X.

(8)The Corporation may require as a condition to the registration of the Transfer of any Corporation Securities or the payment of any distribution on any Corporation Securities that the Purported Transferee or payee furnish to the Corporation all information reasonably requested by the Corporation with respect to its direct or indirect ownership interests in such Corporation Securities. The Corporation may make such arrangements or issue such instructions to its stock transfer agent as may be determined by the Board of Directors to be necessary or advisable to implement this Article X, including, without limitation, authorizing such transfer agent to require an affidavit from a Purported Transferee regarding such Person’s actual and constructive ownership of Corporation Securities and other evidence that a Transfer will not be prohibited by this Article X as a condition to registering any Transfer.

C.Board Authority. The Board of Directors shall have the power to determine all matters necessary for assessing compliance with Sections A and B of this Article X, including, without limitation, (i) the identification of any 4.99-Percent Stockholder, (ii) whether a Transfer is a 4.99% Transaction, a Prohibited Transfer or a Permitted Transfer, (iii) the Percentage Stock Ownership in the Corporation of any 4.99-Percent Stockholder, (iv) whether an instrument constitutes Corporation Securities, (v) the amount (or fair market value) due to a Purported Transferee pursuant to Section B(3) of this Article X, and (vi) any other matters which the Board of Directors determines to be relevant; and the good-faith determination of the Board of Directors on such matters shall be conclusive and binding for all the purposes of Sections A and B of this Article X. Nothing contained herein shall limit the authority of the Board of Directors to take such other action, in its discretion, to the extent permitted by law as it deems necessary or advisable to protect the Corporation, any direct or indirect subsidiary thereof and the interests of the holders of the Corporation’s securities in preserving the Tax Benefit. Without limiting the generality of the foregoing, in the event of a change in law or Treasury Regulations making one or more of the following actions necessary or desirable, the Board of Directors may (i) accelerate the Restriction Release Date, (ii) modify the specific application of the Transfer restrictions set forth in Section A(2) of this Article X, or (iii) modify the definitions of any terms set forth in this Article X; provided that the Board of Directors shall determine in writing that such acceleration, extension, change or modification is reasonably necessary or advisable to preserve the Tax Benefit under the Code and the regulations thereunder or that the continuation of these restrictions is no longer reasonably necessary for the preservation of the Tax Benefit.

D.Miscellaneous.

(1)Any provision in this Article X which is judicially determined to be prohibited, invalid or otherwise unenforceable (whether on its face or as applied to a particular stockholder, transferee or Transfer) under the laws of the State of Maryland shall be ineffective to the extent of such prohibition, invalidity or unenforceability without prohibiting, invalidating or rendering unenforceable the remaining provisions of this Article X and of these Articles of Amendment and Restatement, which shall be thereafter interpreted as if the prohibited, invalid or unenforceable part were not contained herein, and, to the maximum

extent possible, in a manner consistent with preserving the Corporation’s use of the Tax Benefits without any Section 382 limitation.

(2)To the fullest extent permitted by law, any stockholder subject to the provisions of this Article X who knowingly violates this Article X and any Persons controlling, controlled by or under common control with such stockholder shall be jointly and severally liable to the Corporation for, and shall indemnify and hold the Corporation harmless against, any and all damages suffered as a result of such violation, including but not limited to damages resulting from a reduction in, or elimination of, the Corporation’s ability to use its Tax Benefit, and attorneys’ and auditors’ fees incurred in connection with such violation.

(3)For purposes of determining the existence and identity of, and the amount of any Corporation Securities owned by, any stockholder, the Corporation is entitled to rely on the existence and absence of filings of Schedule 13D or 13G under the Securities and Exchange Act of 1934, as amended (or similar filings), as of any date, subject to its actual knowledge of the ownership of Corporation Securities.

(4)Nothing in this Article X shall be construed to give to any Person other than the Corporation or the Agent any legal or equitable right, remedy or claim under this Article X. This Article X shall be for the sole and exclusive benefit of the Corporation and the Agent.

(5)With regard to any power, remedy or right provided herein or otherwise available to the Corporation or the Agent under this Article X, (i) no waiver will be effective unless expressly contained in a writing signed by the waiving party and (ii) no alteration, modification or impairment will be implied by reason of any previous waiver, extension of time, delay or omission in exercise or other indulgence.

Article XIDIRECTOR DISCRETION

With respect to any proposed merger, acquisition, business combination or other similar transaction or proposal, a director of the Corporation, in determining what is in the best interests of the Corporation, shall consider the interest of the stockholders of the Corporation and, in his or her discretion, may consider (i) the interests of the Corporation’s employees, suppliers, creditors and customers, (ii) the economy of the nation, (iii) community and societal interests and (iv) the long-term as well as short-term interests of the Corporation and its stockholders, including the possibility that these interests may be best served by the continued independence of the Corporation. Pursuant to this provision, the Board of Directors may consider numerous judgmental or subjective factors affecting a proposal, including certain nonfinancial matters, and on the basis of these considerations may oppose a business combination or other transaction which, as an exclusively financial matter, might be attractive to some, or a majority, of the Corporation’s stockholders.

Article XIIMAJORITY VOTE

Notwithstanding any provision of law requiring any action to be taken or approved by the affirmative vote of the holders of shares entitled to cast a greater number of votes, any such action shall be effective and valid if declared advisable by the Board of Directors and taken or approved by the affirmative vote of holders of shares entitled to cast a majority of all the votes entitled to be cast on the matter, except as otherwise provided in the Charter.

Article XIIISHARE ISSUANCE

The Board of Directors is hereby empowered to authorize the issuance from time to time of shares of its Capital Stock of any class, whether now or hereafter authorized, or securities exercisable or exchangeable for or convertible into shares of its Capital Stock of any class or classes, whether now or hereafter authorized, for such consideration as may be deemed advisable by the Board of Directors and without any action by the stockholders.

Article XIVCHARTER AMENDMENTS

The Corporation reserves the right to amend, alter, change or repeal any provision contained in the Charter, including any amendments changing the terms or contract rights, as expressly set forth in the Charter, of any of its outstanding stock by classification, reclassification or otherwise, by a majority of the directors’ adopting a resolution setting forth the proposed change, declaring its advisability, and either calling a special meeting of the stockholders entitled to vote on the proposed change, or directing the proposed change to be considered at the next annual stockholders meeting. Unless otherwise provided herein, the proposed change will be effective only if it is adopted upon the affirmative vote of the holders of not less than a majority of the aggregate votes entitled to be cast thereon (considered for this purpose as a single class); provided, however, that any amendment to, repeal of or adoption of any provision inconsistent with Article VI or this Article XIV will be effective only if it is also advised by at least two-thirds of the Board of Directors and adopted upon the affirmative vote of the holders of not less than two-thirds of the aggregate votes entitled to be cast thereon (considered for this purpose as a single class).

Article XVDIRECTORS’ POWERS

The enumeration and definition of particular powers of the Board of Directors included in the foregoing Articles shall in no way be limited or restricted by reference to or inference from the terms of any other Article of the Charter of the Corporation, or construed as or deemed by inference or otherwise in any manner to exclude or limit any powers conferred upon the Board of Directors under the General Laws of the State of Maryland now or hereafter in force.

The Board of Directors of the Corporation shall, consistent with applicable law, have power in its sole discretion to determine from time to time in accordance with sound accounting practice or other reasonable valuation methods what constitutes annual or other net profits, earnings, surplus, or net assets in excess of capital; to fix and vary from time to time the amount to be reserved as working capital, or determine that retained earnings or surplus shall remain in the hands of the Corporation; to set apart out of funds of the Corporation such reserve or reserves in such amount or amounts and for such proper purpose or purposes as it shall determine and to abolish any such reserve or any part thereof; to distribute and pay distributions or dividends in Capital Stock, cash or other securities or property, out of surplus or any other funds or amounts legally available therefor, at such times and to the stockholders of record on such dates as it may, from time to time, determine; and to determine whether and to what extent and at what times and places and under what conditions and regulations the books, accounts and documents of the Corporation, or any of them, shall be open to the inspection of stockholders, except as otherwise provided by statute or by the Bylaws, and, except as so provided, no stockholder shall have any right to inspect any book, account or document of the Corporation unless authorized to do so by resolution of the Board of Directors.

For any stockholder proposal to be presented in connection with an annual meeting of stockholders of the Corporation, including any proposal relating to the nomination of a director to be elected to the Board of Directors of the Corporation, the stockholders must have given timely written notice thereof in writing to the Secretary of the Corporation in the manner and containing the information required by the Bylaws. Stockholder proposals to be presented in connection with a special meeting of stockholders will be presented by the Corporation only to the extent required by Section 2-502 of the MGCL and the Bylaws.

Article XVIDURATION

The duration of the Corporation shall be perpetual.

Article XVIIDEFINITIONS

The following terms shall have the meanings provided below when used in the Charter:

Board of Directors. The term “Board of Directors” shall mean the board of directors of the Corporation, as it may be constituted from time to time.

Bylaws. The term “Bylaws” shall mean the Corporation’s bylaws adopted by the Board of Directors, as they may be amended from time to time.

Capital Stock. The term “Capital Stock” shall mean all classes or series of stock of the Corporation, including, without limitation, Common Stock and Preferred Stock.

Charter. The term “Charter” shall mean the charter of the Corporation, as that term is defined in the MGCL.

Corporation. The term “Corporation” shall mean the corporation formed by these Articles of Incorporation, as they may be amended from time to time.

MGCL. The term “MGCL” shall mean the Maryland General Corporation Law, as amended from time to time.

THIRD: The amendment to and restatement of the charter as hereinabove set forth have been duly advised by the Board of Directors and approved by the stockholders of the Corporation as required by law.

FOURTH: The current address of the principal office of the Corporation is as set forth in Article III of the foregoing amendment and restatement of the charter.

FIFTH: The name and address of the Corporation’s current resident agent is as set forth in Article IV of the foregoing amendment and restatement of the charter.

SIXTH: The number of directors of the Corporation and the names of those currently in office are as set forth in Article VI of the foregoing amendment and restatement of the charter.

SEVENTH: The undersigned Chairman of the Board and Chief Executive Officer acknowledges these Articles of Amendment and Restatement to be the corporate act of the Corporation and as to all matters or facts required to be verified under oath, the undersigned Chairman of the Board and Chief Executive Officer acknowledges that, to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.

IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment and Restatement to be executed in its name and on its behalf by its Chairman of the Board and Chief Executive Officer and attested to by its Chief Financial Officer on this 21st day of July, 2015.

ATTEST:		NOVATION COMPANIES, INC.
By:	/s/ Rodney Schwatken	By:	/s/ W. Lance Anderson
Name:	Rodney Schwatken	Name:	W. Lance Anderson
Title:	Chief Financial Officer	Title:	Chairman of the Board and Chief Executive Officer

NOVATION COMPANIES, INC.

EXHIBIT A

Series F Junior Participating Preferred Stock

Section 1.    Designation and Amount. The shares of this series shall be designated as “Series F Junior Participating Preferred Stock” (the “Series F Preferred Stock”) and the number of shares constituting the Series F Preferred Stock shall be 50,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series F Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series F Preferred Stock.

Section 2.    Dividends and Distributions.

(A)    Subject to the rights of the holders of any shares of any series of preferred stock (or any similar stock) ranking prior and superior to the Series F Preferred Stock with respect to dividends, the holders of shares of Series F Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series F Preferred Stock, in an amount per share (rounded to the nearest cent), subject to the provision for adjustment hereinafter set forth, equal to 10,000 times the aggregate per share amount of all cash dividends, and 10,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, declared on the Common Stock, par value $0.01 per share (the “Common Stock”), of the Corporation since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series F Preferred Stock, other than, in each case, a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise). In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series F Preferred Stock were entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(B)    The Corporation shall declare a dividend or distribution on the Series F Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock).

(C)    Dividends, to the extent payable as provided in paragraphs (A) and (B) of this Section, shall begin to accrue and be cumulative on outstanding shares of Series F Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series F Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative

from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series F Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series F Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof.

Section 3.    Voting Rights. The holders of shares of Series F Preferred Stock shall have the following voting rights:

(A)    Subject to the provision for adjustment hereinafter set forth, each share of Series F Preferred Stock shall entitle the holder thereof to 10,000 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series F Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(B)    Except as otherwise provided herein, in any other Articles Supplementary creating a series of preferred stock or any similar stock, or by law, the holders of shares of Series F Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.

(C)    Except as set forth herein, or as otherwise provided by law, holders of Series F Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.

Section 4.    Certain Restrictions.

(A)    Whenever quarterly dividends or other dividends or distributions payable on the Series F Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series F Preferred Stock outstanding shall have been paid in full, the Corporation shall not:

(i)    declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series F Preferred Stock;

(ii)    declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series F Preferred Stock, except dividends paid ratably on the Series F Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

(iii)    redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series

F Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series F Preferred Stock; or

(iv)    redeem or purchase or otherwise acquire for consideration any shares of Series F Preferred Stock, or any shares of stock ranking on a parity with the Series F Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

(B)    The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.

Section 5.    Reacquired Shares. Any shares of Series F Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of preferred stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Articles of Amendment and Restatement, or in any other Articles Supplementary creating a series of Preferred Stock or any similar stock or as otherwise required by law.

Section 6.    Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series F Preferred Stock unless, prior thereto, the holders of shares of Series F Preferred Stock shall have received $10,000 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series F Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 10,000 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series F Preferred Stock, except distributions made ratably on the Series F Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series F Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

Section 7.    Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series F Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 10,000 times the aggregate amount

of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series F Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

Section 8.    No Redemption. The shares of Series F Preferred Stock shall not be redeemable.

Section 9.    Rank. The Series F Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporation's Preferred Stock.

Section 10.    Amendment. The Articles of Amendment and Restatement of the

Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series F Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series F Preferred Stock, voting together as a single class.

Section 11.    Fractional Shares. The Series F Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series F Preferred Stock.

EX-10.1

Exhibit 10.1

NOVATION COMPANIES, INC.

2015 INCENTIVE STOCK PLAN

1.    Purpose of the Plan.

The purpose of the Plan is to provide the Company with a means to assist in recruiting, retaining and rewarding certain employees, directors and consultants and to motivate such individuals to exert their best efforts on behalf of the Employer by providing incentives through the granting of Awards. By granting Awards to such individuals, the Company expects that the interests of the recipients will be better aligned with those of the Employer and its stockholders.

2.    Definitions.

Unless the context clearly indicates otherwise, the following capitalized terms shall have the meanings set forth below:

A. “Act” means the Securities Exchange Act of 1934, as amended, or any successor thereto.

B. “Affiliate” means a member of an affiliated group of corporations, as defined in Code Section 1504 (determined without regard to subsection (b) thereof).

C. “Award” means an a grant under the Plan of an Option, Restricted Stock, Restricted Stock Unit or Cash-Based Award.

D. “Award Agreement” means an agreement entered into between the Employer and a Participant setting forth the terms and provisions applicable to Awards granted under the Plan.

E. “Board” means the Board of Directors of the Company.

F. “Cash-Based Award” means an Award described in Section 8.

G. “Change of Control” means:

(i) any “person” or “group,” as those terms are used in Sections 13(d) and 14(d) of the Act or any successors thereto, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Act or any successor thereto), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities (provided, that the acquisition of additional securities by any person or group that owns 50% or more of the voting power prior to such acquisition of additional securities shall not be a Change of Control);

(ii) during any twelve-month period, individuals who at the beginning of such period constitute the Board and any new Directors whose election by the Board or nomination for election by the Company’s stockholders was approved by at least a majority of the Directors then still in office who either were Directors at the beginning of the period or whose election was previously so approved, cease for any reason to constitute a majority thereof;

(iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation and such merger or consolidation is

consummated, other than a merger or consolidation (a) which would result in all or a portion of the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (b) by which the corporate existence of the Company is not affected and following which the Company’s chief executive officer and Directors retain their positions with the Company (and constitute at least a majority of the Board); or

(iv) the stockholders of the Company approve a plan of complete liquidation or an agreement for the sale or disposition by the Company of all or substantially all the Company’s assets and such sale or disposition is consummated.

H. “Code” means the Internal Revenue Code of 1986, as amended, or any successor thereto, and the regulations issued thereunder.

I. “Committee” means the committee described in Section 5.

J. “Company” means Novation Companies, Inc., a Maryland corporation.

K. “Consultant” means any person who provides consulting, advisory or other services to an Employer as an independent contractor.

L. “Director” means a voting member of the Board.

M. “Disability” means, except as otherwise provided in an Award Agreement, that (i) in the case of a Participant who is an Employee, the Participant is disabled for purposes of any long-term disability plan maintained by the Company or any Employer in which the Participant participates, and (ii) in the case of a Participant other than an Employee, the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months; provided, however, for purposes of an Incentive Stock Option, the term Disability shall have the meaning ascribed to it under Section 22(e)(3) of the Code.

N. “Employee” means a person employed by an Employer, including (i) officers, and (ii) Directors who are employed by an Employer.

O. “Employer” means the Company and any other entity directly or indirectly controlling, controlled by, or under common control with, the Company or any other entity designated by the Board in which the Company has an interest.

P. “Fair Market Value” means, as of any date, (i) the closing price of a Share as reported on the principal U.S. national securities exchange on which the Stock is listed and traded on such date, or, if there is no closing price on that date, then on the last preceding date on which such a closing price was reported; (ii) if the Stock is not listed on any U.S. national securities exchange but is quoted in an inter-dealer quotation system on a last sale basis, the final ask price of a Share reported on the inter-dealer quotation system for such date, or, if there is no such sale on such date, then on the last preceding date on which a sale was reported; or (iii) if the Stock is neither listed on a U.S. national securities exchange nor quoted on an inter-dealer quotation system on a last sale basis, the amount determined by the Committee to be the fair market value of a Share, in its sole discretion.

Q. “Incentive Stock Option” means a stock option which is an incentive stock option within the meaning of Code Section 422.

R. “Non-Employee Director” means a Director who is not an Employee.

S. “Non-Qualified Stock Option” means a stock option which is not an Incentive Stock Option.

T. “Option” means both an Incentive Stock Option and a Non-Qualified Stock Option.

U. “Outside Director” means a Director who:

(i) is not an Employee of the Company or an Affiliate while he or she is a member of the Committee;

(ii) is not a former Employee of the Company or an Affiliate who receives compensation for prior services (other than benefits under a tax-qualified retirement plan) during the taxable year;

(iii) has not been an officer of the Company or an Affiliate (as determined in accordance with Treas. Reg. Section 1.162-27(e)(3) or any successor thereto); and

(iv) shall not receive remuneration (as determined in accordance with Treas. Reg. Section 1.162-27(e)(3) or any successor thereto) from the Company or an Affiliate either directly or indirectly in any capacity other than as a Director.

V. “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if, at the time of the granting of the Option, each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain, or such other meaning as may be hereafter ascribed to it in Code Section 424.

W. “Participant” means an Employee, Non-Employee Director or Consultant who is selected by the Committee to receive an Award.

X. “Plan” means the Novation Companies, Inc. 2015 Incentive Stock Plan, as set forth herein and amended from time to time.

Y. “Restricted Stock” means any Share issued with the restriction that the holder may not sell, transfer, pledge or assign such Share and with such vesting restrictions as the Committee, in its sole discretion, may establish, which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, or based upon such performance goals, as the Committee may deem appropriate.

Z. “Restricted Stock Unit” means a bookkeeping entry representing an amount equal to the Fair Market Value of one Share, which amount may be paid to the Participant in Shares or cash as determined by the Committee, in its sole discretion, upon the satisfaction of such vesting restrictions as the Committee, in its sole discretion, may establish, which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, or based upon such performance goals, as the Committee may deem appropriate. Each Restricted Stock Unit represents an unfunded and unsecured obligation of the Company.

AA. “Share” means one share of Stock.

BB. “Share Reserve” means the number of Shares reserved and available for granting Awards under the Plan, as set forth in Section 3.A.

CC. “Stock” means the common stock, par value of $0.01 per share, of the Company, or any securities issued in respect thereof by the Company or any successor to the Company as a result of an event described in Section 15.

DD. “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of granting an Award, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain, or such other meaning as may be hereafter ascribed to it in Code Section 424.

EE. “2004 Plan” means the Novation Companies, Inc. 2004 Incentive Stock Plan.

3.    Stock Subject to the Plan; Limits on Awards.

A. Number of Shares. Subject to adjustment in accordance with Section 15, the Share Reserve is five million three hundred ninety-seven thousand nine hundred seventy-four (5,397,974) Shares. All Shares in the Share Reserve shall be available for the grant of Incentive Stock Options or any other Awards under the Plan. The Share Reserve shall be reduced by one (1) Share for every one (1) Share subject to an Award. The Company may, in its discretion, use Shares held in the treasury in lieu of authorized but unissued Shares.

B. Lapsed Awards. If any Award (or any Award of Stock Options, Restricted Stock or Performance Shares under the 2004 Plan, as defined therein, granted prior to the effective date of this Plan) shall expire or terminate for any reason, the Shares subject to the Award shall again be available for the purposes of the Plan. Any Shares that again become available for grant pursuant to this subsection B shall be added back as (i) one (1) Share for every one (1) Share subject to an Award.

C. Payment of Purchase Price; Tax Withholding; Purchase. Any Shares of Stock which are used by a Participant as full or partial payment to the Company of the purchase price to exercise an Option (or a Stock Option under the 2004 Plan) shall not be available again for the purposes of the Plan. To the extent any Shares subject to an Award or an Award under the 2004 Plan are not delivered to a Participant because such Shares are used to satisfy an applicable tax-withholding obligation, such withheld Shares shall not be available again for the purposes of the Plan. Shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of Options (or Stock Options under the 2004 Plan) shall not be available for the purposes of the Plan.

D. Limitations.

(i) The maximum number of Shares of Stock subject to Awards which may be granted during a calendar year to a Participant shall be 2,500,000; provided, that if an Award is cancelled, the cancelled Award shall continue to be counted toward such limitation.

(ii) Notwithstanding paragraph (i) above, the maximum number of Shares of Stock subject to Awards which may granted under the Plan to Non-Employee Directors shall be 2,500,000 in the aggregate over the term of the Plan.

(iii) The maximum amount of any Cash-Based Award that is intended to satisfy the performance-based exception under Code Section 162(m) which may be granted during a calendar year to a Participant shall be $1,0000,000.

4.    Administration.

The Plan shall be administered by the Committee. Subject to the express provisions of the Plan, the Committee’s charter (if applicable), and applicable law, and in addition to other express powers and authorities conferred by the Plan, the Committee shall have plenary authority:

A. to construe and interpret the Plan and apply its provisions;

B. to promulgate, amend, and rescind rules and regulations relating to the administration of the Plan;

C. to authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan;

D. to delegate its authority to one or more officers of the Company with respect to Awards that do not involve “covered employees” within the meaning of Code Section 162(m) or “insiders” within the meaning of Section 16 of the Act;

E. to determine when Awards are to be granted under the Plan and the applicable grant date;

F. from time to time to select those Participants to whom Awards shall be granted;

G. to determine the number of Shares of Stock to be made subject to each Award, subject to the limitations set forth in the Plan;

H. to determine whether each Option is to be an Incentive Stock Option or a Non-Qualified Stock Option;

I. to prescribe the terms and conditions of each Award granted hereunder, including, without limitation, (i) the purchase price, medium of payment and vesting provisions, and (ii) the restricted period applicable to any Award of Restricted Stock or Restricted Stock Units and the date or dates on which restrictions applicable thereto shall lapse during such period;

J. to designate an Award shall be subject to the satisfaction of performance goals and to select the performance goals applicable to such Award;

K. to amend any outstanding Awards, including for the purpose of modifying the time or manner of vesting or restriction, or the term of any outstanding Award; provided, however, that (i) any such modification or amendment is permitted only if consistent with the terms of Section 6.I of this Plan, and (ii) if any such amendment impairs a Participant’s rights or increases a Participant’s obligations under his or her Award or creates or increases a Participant’s federal income tax liability with respect to an Award, such amendment shall also be subject to the Participant’s consent;

L. to determine the duration and purpose of leaves of absences which may be granted to a Participant without constituting termination of their employment for purposes of the Plan, which periods shall be no shorter than the periods generally applicable to Employees under the Employer’s employment policies, provided, however, that any such determination shall satisfy the requirements of Code Section 409A and the regulations thereunder, if applicable;

M. to make decisions with respect to outstanding Awards and the Plan that may become necessary upon a Change of Control or an event that triggers adjustments under Section 15;

N. to accelerate the time at which an Award may first be exercised or the time during which an Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Award stating the time at which it may first be exercised or the time during which it will vest, provided, however, that any such acceleration shall satisfy the requirements of Code Section 409A and the regulations thereunder, if applicable;

O. to interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan and any instrument or agreement relating to, or Award granted under, the Plan;

P. to adopt, alter, and repeal such administrative rules, guidelines, and practices governing the Plan as it shall from time to time deem advisable and to otherwise supervise the administration of the Plan;

Q. to determine the terms and conditions, not inconsistent with the terms of the Plan, which shall govern written instruments evidencing the Awards; and

R. to exercise discretion to make any and all other determinations which it determines to be necessary or advisable for the administration of the Plan.

The Committee’s determinations on the matters referred to in this Section 4 shall be conclusive.

5.    Committee.

The Board shall have the discretion to determine whether or not it intends to comply with the exemption requirements of Rule 16b-3 of the Act and/or Code Section 162(m). Nothing herein shall create an inference that an Award is not validly granted under the Plan in the event that the Awards are granted under the Plan when the Committee does not at all times consist solely of two or more Non-Employee Directors who are also Outside Directors. The Committee shall be appointed by the Board, which may from time to time appoint members of the Committee in substitution for members previously appointed and may fill vacancies, however caused, in the Committee. The Committee shall act pursuant to a vote or the written consent of the majority of its members or, in the case of a Committee comprised of only two members, the unanimous consent of its members, whether present or not, and minutes shall be kept of all of its meetings and copies thereof shall be provided to the Board. Subject to the limitations prescribed by the Plan and the Board, the Committee may establish and follow such rules and regulations for the conduct of its business as it may determine to be advisable in the best interests of the Company.

6.    Options.

The Committee, in its discretion, may grant Options which are Incentive Stock Options or Non-Qualified Stock Options, as evidenced by an Award Agreement, and shall be subject to the following

terms and conditions and to such other terms and conditions, not inconsistent therewith, as the Committee shall determine:

A. Type of Option. Incentive Stock Options may be granted to any Participant who is an Employee of the Company, a Parent or a Subsidiary. A Non-Qualified Stock Option may be granted to any Employee, Non-Employee Director or Consultant selected by the Committee.

B. Purchase Prices. The purchase price of the Stock under each Option shall not be less than 100% of the Fair Market Value of the Stock on the date such Option is granted; provided that, in the case of a Participant who owns more than 10% of the total combined voting power of all classes of stock of the Company, a Parent or a Subsidiary, the purchase price of the Stock under each Incentive Stock Option shall not be less than 110% of the Fair Market Value of the Stock on the date such Option is granted.

C. Exercise - Elections and Restrictions. The purchase price of the Stock under an Option is to be paid in full upon the exercise of the Option, either (i) in cash (or cash equivalents acceptable to the Company), (ii) in the discretion of the Committee, by the tender to the Company (either actually or by attestation) of Shares already owned by the Participant and registered in his or her name, having a Fair Market Value equal to the cash purchase price under the Option being exercised, (iii) in the discretion of the Committee, by withholding Shares having a Fair Market Value equal to the cash purchase price under the Option being exercised which are otherwise issuable in connection with the Option, (iv) in the discretion of the Committee, through a cashless form of exercise in which the certificate or certificates for the Shares of Stock for which the Option is exercised are delivered to a licensed broker acceptable to the Company as the agent for the individual exercising the Option and, at the time such certificate or certificates are delivered, the broker tenders to the Company cash (or cash equivalents acceptable to the Company) equal to the purchase price for the Shares of Stock purchased pursuant to the exercise of the Option plus the amount (if any) of any withholding obligations on the part of the Company, (v) in the discretion of the Committee, by any combination of the payment methods specified in clauses (i), (ii), (iii) and (iv) hereof, or (vi) any other form of legal consideration acceptable to the Committee; provided, however, that no Shares of Stock may be tendered in exercise of an Incentive Stock Option if such Shares were acquired by the Participant through the exercise of an Incentive Stock Option unless (a) such Shares have been held by the Participant for at least one year, and (b) at least two years have elapsed since such prior Incentive Stock Option was granted. The proceeds of sale of Stock subject to the Option are to be added to the general funds of the Company or to the Shares of the Stock held in its Treasury, and used for its corporate purposes as the Board shall determine.

D. Option Terms. The term of each Option shall not be more than 10 years from the date of granting thereof or such shorter period as is prescribed in the Award Agreement; provided that, in the case of a Participant who owns more than 10% of the total combined voting power of all classes of stock of the Company, a Parent or a Subsidiary, the term of any Incentive Stock Option shall not be more than five years from the date of granting thereof or such shorter period as prescribed in the Award Agreement. Within such limit, and subject to subsections E, F and G, Options will be exercisable at such time or times, and subject to such restrictions and conditions, as the Committee shall, in each instance, approve, which need not be uniform for all Participants. The holder of an Option shall

have none of the rights of a stockholder with respect to the Shares subject to Option until such Shares shall be issued to him or her upon the exercise of his or her Option.

E. Termination of Service. Unless otherwise provided in an Award Agreement, in the event a Participant’s service terminates (other than upon the Participant’s death or Disability), the Participant may exercise his or her Option (to the extent that the Participant was entitled to exercise such Option as of the date of termination) but only within such period of time ending on the earlier of (i) the date three months following the termination of the Participant’s service, or (ii) the expiration of the term of the Option as set forth in the Award Agreement; provided, however that if the termination of service is by the Company, an Affiliate or an Employer for cause (as defined in the applicable Award Agreement or, if not defined in such Award Agreement, in the Participant’s employment or services agreement, if applicable), all outstanding Options (whether or not vested) shall immediately terminate and cease to be exercisable. If, after termination, the Participant does not exercise his or her Option within the time specified in the Award Agreement or this subsection E, as applicable, the Option shall terminate.

F. Disability.Unless otherwise provided in an Award Agreement, in the event that a Participant’s service terminates as a result of the Participant’s Disability, the Participant may exercise his or her Option (to the extent that the Participant was entitled to exercise such Option as of the date of termination), but only within such period of time ending on the earlier of (i) the date 12 months following such termination or (ii) the expiration of the term of the Option as set forth in the Award Agreement. If, after termination upon Disability, the Participant does not exercise his or her Option within the time specified in the Award Agreement or this subsection F, as applicable, the Option shall terminate.

G. Death. Unless otherwise provided in an Award Agreement, in the event a Participant’s service terminates as a result of the Participant’s death, then the Option may be exercised (to the extent the Participant was entitled to exercise such Option as of the date of death) by the Participant’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Participant’s death, but only within the period ending on the earlier of (i) the date 12 months following the date of death or (b) the expiration of the term of such Option as set forth in the Award Agreement. If, after the Participant’s death, the Option is not exercised within the time specified in the Award Agreement or this subsection G, as applicable, the Option shall terminate.

H. Additional Incentive Stock Option Requirements. The maximum aggregate Fair Market Value (determined at the time an Option is granted) of the Stock with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year (under all plans of the Company, a Parent and a Subsidiary) shall not exceed $100,000. A Participant who disposes of Stock acquired upon the exercise of an Incentive Stock Option either (i) within two years after the date of grant of such Incentive Stock Option or (ii) within one year after the transfer of such Shares to the Participant, shall notify the Company of such disposition and of the amount realized upon such disposition.

I. Cancellation/Repricing. Notwithstanding anything herein to the contrary, the Board may not (except pursuant to Section 15), without the approval of the Company’s stockholders, (i) reduce the purchase price of the Stock under an Option, (ii) cancel an Option in exchange for cash or another Award when the exercise or grant price per Share exceeds

the Fair Market Value of one Share, or (iii) take any action with respect to an Option that would be treated as a repricing under the rules and regulations of the principal securities exchange on which the Shares are traded.

7.    Restricted Stock.

The Committee, in its discretion, may grant Restricted Stock, as evidenced by an Award Agreement, which shall be subject to the following terms and conditions and to such other terms and conditions, not inconsistent therewith, as the Committee shall determine:

A.    Grant. All or any part of any Restricted Stock Award may be subject to such conditions and restrictions as may be established by the Committee, and set forth in the applicable Award Agreement, which may include, but are not limited to, a requirement that a Participant pay a purchase price for such Award, the provision of services for the Company, an Affiliate or an Employer over a specified period of time, employment on a specified date, the achievement of specific performance goals established pursuant to Section 10 and/or applicable securities laws restrictions. Subject to the restrictions set forth in the Award Agreement, during any period during which an Award of Restricted Stock is restricted and subject to a substantial risk of forfeiture, Participants holding Restricted Stock Awards may exercise full voting rights with respect to such Shares and shall be entitled to receive all dividends and other distributions paid with respect to such Shares while they are so restricted. Any dividends or dividend equivalents may be paid currently or may be credited to a Participant’s account and may be subject to such restrictions and conditions as the Committee may establish. If the Committee determines that Restricted Stock shall be held by the Company or in escrow rather than delivered to the Participant pending the release of the applicable restrictions, the Committee may require the Participant to execute and deliver to the Company an escrow agreement satisfactory to the Committee, if applicable, and an appropriate blank stock power with respect to the Restricted Stock covered by such agreement.

B.    Restrictions. Restricted Stock awarded to a Participant shall be subject to the following restrictions until the expiration of the period during which the Award is restricted, and to such other terms and conditions as may be set forth in the applicable Award Agreement: (i) if an escrow arrangement is used, the Participant shall not be entitled to delivery of the stock certificate; (ii) the Shares shall be subject to the restrictions on transferability set forth in the Award Agreement; (iii) the Shares shall be subject to forfeiture for such period and subject to satisfaction of any applicable performance goals during such period, to the extent provided in the applicable Award Agreement; and (iv) to the extent such Shares are forfeited, the stock certificates, if any, shall be returned to the Company, and all rights of the Participant to such Shares and as a stockholder with respect to such Shares shall terminate without further obligation on the part of the Company. Each certificate representing Restricted Stock awarded under the Plan shall bear a legend in such form as the Company deems appropriate.

8.    Restricted Stock Units.

The Committee, in its discretion, may grant Restricted Stock Units, as evidenced by an Award Agreement, which shall be subject to the following terms and conditions and to such other terms and conditions, not inconsistent therewith, as the Committee shall determine:

A.    Grant. All or any part of any Restricted Stock Unit Award may be subject to such conditions and restrictions as may be established by the Committee, and set forth in the applicable Award Agreement, which may include, but are not limited to, the provision of services for the Company, an Affiliate or an Employer over a specified period of time, employment on a specified date, the achievement of specific performance goals established pursuant to Section 10, and/or applicable securities laws restrictions. Subject to the restrictions set forth in the Award Agreement, during any period during which an Award of Restricted Stock Units is restricted and subject to a substantial risk of forfeiture, Participants holding Restricted Stock Units shall have no rights to dividends or dividend equivalents with respect to Shares subject to such Restricted Stock Units other than as the Committee so provides, in its discretion, in an Award Agreement, and shall have no voting rights with respect to such Awards. Any dividends or dividend equivalents may be paid currently or may be credited to a Participant’s account and may be subject to such restrictions and conditions as the Committee may establish.

B.    Restrictions. Restricted Stock Units awarded to any Participant shall be subject to (i) forfeiture until the expiration of the period during which the Award is restricted, and the satisfaction of any applicable performance goals during such period, to the extent provided in the applicable Award Agreement, and to the extent such Restricted Stock Units are forfeited, all rights of the Participant to such Restricted Stock Units shall terminate without further obligation on the part of the Company, and (ii) such other terms and conditions as may be set forth in the applicable Award Agreement.

C.    Form and Timing of Payment. Payment of earned Restricted Stock Units will be made as soon as practicable after the date(s) determined by the Committee and set forth in the Award Agreement, which shall be no later than March 15 of the year following the year in which the Restricted Stock Unit is no longer subject to a substantial risk of forfeiture. The Committee, in its sole discretion, may settle earned Restricted Stock Units in cash, Shares or a combination of both.

9.    Cash-Based Awards.

Cash-Based Awards may be granted hereunder by the Committee to Participants (other than Non-Employee Directors) either alone or in addition to other Awards granted under the Plan. A Cash-Based Award shall be subject to such terms and conditions as may be determined by the Committee, and shall be subject to the satisfaction of such requirements be established by the Committee and set forth in the Award Agreement (or, if applicable, in a resolution duly adopted by the Committee), which may include, but are not limited to, the provision of services for the Company, an Affiliate or an Employer over a specified period of time, employment on a specified date and/or the achievement of specific performance goals established pursuant to Section 10. Cash-Based Awards granted under this Plan shall be payable in cash no later than March 15 of the year following the year in which the Cash-Based Award is no longer subject to a substantial risk of forfeiture.

10.    Performance Goals.

The Committee may, in its sole and absolute discretion, determine that certain Awards should be subject to the satisfaction of such performance goals as shall be established by the Committee and provided in an Award Agreement. An Award that is intended to comply with the performance-based exception under Code Section 162(m) shall be granted by the Committee in a manner to satisfy the requirements of Code Section 162(m) and the regulations thereunder, including stockholder approval. The performance goals shall be chosen by the Committee, in its sole and absolute discretion, from among

the following: earnings per Share; sales; earnings; cash flow; profitability; revenues; financial return ratios; market performance; stockholder return and/or value; operating profits (including earnings before income taxes, depreciation and amortization); net profits; earnings per Share growth; profit returns and margins; Stock price; working capital; business trends; project milestones; gross margin; operating margin; net margin; market share; expense margins; earnings before interest or taxes; earnings before interest, taxes, depreciation or amortization; net assets; working capital; asset turnover; working capital turnover; debt to equity; debt to capital; return on equity; return on assets; return on net assets; return on invested capital; return on gross assets; cash flow return on investment; cash value added; price to earnings ratio; market to book ratio; market to capital ratio; cost of capital; cost of debt; cost of equity; market risk premium; Stock price appreciation with or without divisions; total stockholder return; economic value added; economic profit; sales growth percents; cash flow growth year over year; return on total capital; new customers; new seat licenses; minutes used; or any combination of the foregoing. The performance goals may relate to the Company, an Affiliate, an Employer or one or more units of such an entity. The Committee shall determine whether, with respect to a performance period, the applicable performance goals have been met with respect to an Award and, if they have, to so certify and ascertain the amount of the applicable Award. The Committee shall have the discretion to adjust Awards subject to this Section 10 downward.

11.    Exercisability and Vesting.

Notwithstanding anything herein to the contrary, Options, Restricted Stock Awards and Restricted Stock Unit Awards granted to Employees shall be subject to the following:

A. General Rule. Except as otherwise determined by the Committee, in its sole discretion, and provided in the applicable Award Agreement, or as provided in subsection B, Options shall vest and become exercisable, and Restricted Stock Awards and Restricted Stock Unit Awards shall vest over a period of not less than one year.

B. Exceptions. Notwithstanding subsection A, the Committee may, in its sole discretion, provide in an Award Agreement for the accelerated vesting of an Option, Restricted Stock Award or Restricted Stock Unit Award in the event of the Participant’s death, Disability, involuntary termination of employment by the Company without cause (as defined in the applicable Award Agreement or, if not defined in such Award Agreement, in the Participant’s employment or services agreement, if applicable), voluntary termination of employment by the Participant for good reason (as defined in the applicable Award Agreement or, if not defined in such Award Agreement, in the Participant’s employment or services agreement, if applicable) or retirement at or after an age specified by the Committee or as set forth in such Award Agreement, or upon the occurrence of a Change of Control to the extent provided in Section 15.

12.    Tax Withholding.

A. Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to an Award (or exercise thereof), the Company will have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local, foreign income, employment or other taxes required to be withheld with respect to such Award (or exercise thereof).

B. Withholding Arrangements. The Committee, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part by (without limitation) (i) paying cash,

(ii) electing to have the Company withhold otherwise deliverable Shares having a Fair Market Value equal to the minimum statutory amount required to be withheld, (iii) delivering to the Company already-owned Shares having a Fair Market Value equal to the statutory amount required to be withheld, provided the delivery of such Shares will not result in any adverse accounting consequences, as the Committee determines in its sole discretion, or (iv) selling a sufficient number of Shares otherwise deliverable to the Participant through such means as the Committee may determine in its sole discretion (whether through a broker or otherwise) equal to the amount required to be withheld. The amount of the withholding requirement will be deemed to include any amount which the Committee agrees may be withheld at the time the election is made, not to exceed the amount determined by using the maximum federal, state or local marginal income tax rates applicable to the Participant with respect to the Award on the date that the amount of tax to be withheld is to be determined. The Fair Market Value of the Shares to be withheld or delivered will be determined as of the date that the taxes are required to be withheld.

13.    Nontransferability of Awards.

Unless otherwise determined by the Committee and expressly set forth in an Award Agreement, an Award granted under the Plan shall, by its terms, be non-transferable otherwise than by will or the laws or descent and distribution and an Award may be exercised, if applicable, during the lifetime of the Participant thereof, only by the Participant or his or her guardian or legal representative. Notwithstanding the above, the Committee may not provide in an Award Agreement that an Incentive Stock Option is transferable.

14.    Investment Purpose.

Each Award under the Plan shall be awarded only on the condition that all purchases or other acquisitions of Stock thereunder shall be for investment purposes, and not with a view to resale or distribution, except that the Committee may make such provision with respect to Awards granted under this Plan as it deems necessary or advisable for the release of such condition upon the registration with the Securities and Exchange Commission of Stock subject to the Award, or upon the happening of any other contingency warranting the release of such condition.

15.    Adjustments Upon Changes in Capitalization; Change of Control.

Notwithstanding any other provisions of the Plan, the Award Agreements may contain such provisions as the Committee shall determine to be appropriate for the adjustment of the number and class of shares subject to each outstanding Award and the purchase prices, if applicable, in the event of changes in the outstanding Stock by reason of stock dividends, recapitalization, mergers, consolidations, split-ups, combinations or exchanges of shares and the like, and, in the event of any such change in the outstanding Stock, the aggregate number and class of shares available under the Plan and the maximum number of shares as to which Awards may be granted to an individual shall be appropriately adjusted by the Committee, whose determination shall be conclusive. In the event the Company, a Parent or a Subsidiary enters into a transaction described in Section 424(a) of the Code with any other corporation, the Committee may grant options to employees or former employees of such corporation in substitution of options previously granted to them upon such terms and conditions as shall be necessary to qualify such grant as a substitution described in Section 424(a) of the Code. In the event of a Change of Control, notwithstanding any other provisions of the Plan or an Award Agreement to the contrary, the following provisions shall apply:

A. Plan Assumed, Continued or Replaced. If and to the extent that outstanding Awards under the Plan (i) are assumed by the successor corporation (or an affiliate of the successor) or continued, or (ii) are replaced with equity awards that preserve the existing value of the awards at the time of the Change of Control and provide for subsequent payout in accordance with a vesting schedule and performance goals, as applicable, that are the same or more favorable to the Participants than the vesting schedule and performance goals applicable to the Awards, then all such Awards or such substitutes for them shall remain outstanding and be governed by their respective terms and the provisions of the Plan, subject to subsection D below.

B. Plan Not Assumed, Continued or Replaced. If and to the extent that outstanding Awards under the Plan are not assumed, continued or replaced in accordance with subsection A above, then upon the Change of Control the following treatment shall apply to such Awards: (i) any Awards subject to vesting based only on continued service with the Company, an Affiliate or an Employer shall immediately become fully vested, and as applicable such Awards shall become exercisable with respect to 100% of the Shares subject to the Award for a period of three years from the closing date of the Change of Control; (ii) any performance goals applicable to any Awards shall be deemed to have been achieved at the target performance level and such Awards shall immediately become vested as to a pro rata portion of such Award based on the portion of the performance period that has been completed at the time of the Change of Control (or, if subsection D is applicable, termination of employment); and (iii) any other restrictions and conditions applicable to such Awards shall immediately lapse; provided, however, unless the Change of Control is a change in the ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company (within the meaning of Code Section 409A), a Change of Control shall not accelerate the time of payment of Awards and amounts payable under the Plan that are deferred compensation subject to Code Section 409A.

C. Cash-out of Awards. If and to the extent that outstanding Awards under the Plan are not assumed, continued or replaced in accordance with paragraph (i) above, then the Committee, in its sole discretion, may provide for cancellation of such outstanding Awards at the time of the Change of Control in which case a payment of cash, property or a combination of cash or property shall be made to each such Participant, upon the consummation of the Change of Control, in an amount that is determined by the Committee in its sole discretion to be equivalent to the value of the Award (net of any applicable purchase price in the case of Options) based upon the price per Share of Stock received or to be received by other stockholders of the Company pursuant to the Change of Control (except that, in the case of Options, such payment shall be limited as necessary to prevent the Option from being subject to Code Section 409A).

D. Termination without Cause. If and to the extent that (i) outstanding Awards are assumed, continued or replaced in accordance with subsection A above, and (ii) a Participant’s employment with, or performance of services for, the Company, an Affiliate, an Employer or the successor (or an affiliate of the successor) is terminated by the Company, the Affiliate, the Employer or the successor (or an affiliate of the successor) without cause (as defined in the applicable Award Agreement or, if not defined in such Award Agreement, in the Participant’s employment or services agreement, if applicable) within the 18 month period commencing on the closing of the Change of Control, then, as of the date of such Participant’s termination, the Change of Control treatment in subsection B

above shall apply to all assumed, continued or replaced awards of such Participant then outstanding.

16.    Amendment and Termination.

The Board may at any time terminate the Plan, or make such modifications to the Plan as it shall deem advisable; provided, however, that the Board may not, without further approval by the holders of Stock, increase the maximum number of Shares as to which Awards may be granted under the Plan (except under the anti-dilution provisions of Section 15), or change the class of Employees to whom Incentive Stock Options may be granted, or withdraw the authority to administer the Plan from a committee whose members satisfy the requirements of Section 5. No termination or amendment of the Plan may, without the consent of the Participant to whom any Award shall theretofore have been granted, adversely affect the rights of such Participant under such Award.

17.    Effectiveness of the Plan.

The Plan shall become effective upon adoption by the Board subject, however, to its further approval by the stockholders of the Company given within twelve (12) months of the date the Plan is adopted by the Board at a regular meeting of the stockholders or at a special meeting duly called and held for such purpose. Grants of Awards may be made prior to such stockholder approval but all Award grants made prior to stockholder approval shall be subject to the obtaining of such approval and if such approval is not obtained, such Awards shall not be effective for any purpose.

18.    Time of Granting of an Award.

An Award grant under the Plan shall be deemed to be made on the date on which the Committee, by formal action of its members duly recorded in the records thereof, makes an Award to a Participant (but in no event prior to the adoption of the Plan by the Board); provided that, such Award is evidenced by a written Award Agreement duly executed on behalf of the Company and on behalf of the Participant within a reasonable time after the date of the Committee action.

19.    Term of Plan.

This Plan shall terminate 10 years after the date on which it is approved and adopted by the Board and no Award shall be granted hereunder after the expiration of such 10-year period. Awards outstanding at the termination of the Plan shall continue in accordance with their terms and shall not be affected by such termination.

20.    No Right To Continued Employment.

Nothing in the Plan or in any Award granted pursuant to the Plan shall confer on any individual any right to continue in the employ of the Employer or interfere in any way with the right of the Employer to terminate his or her employment at any time.

21.    Choice of Law.

The Plan shall be governed by and construed in accordance with the laws of the State of Maryland without regard to conflicts of law.

22.    Data Privacy.

As a condition of acceptance of an Award, the Participant explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of personal data as described in this Section 22 for the exclusive purpose of implementing, administering and managing the Participant’s participation

in the Plan and complying with applicable laws, including securities laws. The Participant understands that the Company holds certain personal information about the Participant, including the Participant’s name, home address and telephone number, date of birth, social security number or other identification number, salary, nationality, job title, any Shares of Stock or directorships held in the Company, details of all Awards or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in the Participant’s favor, for the purpose of implementing, managing and administering the Plan (the “Data”). The Participant further understands that the Company may transfer the Data internally as necessary for the purpose of implementation, management and administration of the Participant’s participation in the Plan, and that the Company may further transfer the Data to any third parties assisting the Company in the implementation, management, and administration of the Plan. The Participant understands that these recipients may be located in the Participant’s country, or elsewhere, and that the recipient’s country may have different data privacy laws and protections than the Participant’s country. The Participant understands that he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative. The Participant, through participation in the Plan and acceptance of an Award under the Plan, authorizes such recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Participant’s participation in the Plan and complying with applicable laws, including any requisite transfer of such Data as may be required to a broker or other third party with whom the Participant may elect to deposit any Shares. The Participant understands that the Data will be held only as long as is necessary to implement, manage, and administer the Participant’s participation in the Plan and to comply with applicable laws. The Participant understands that he or she may, at any time, view the Data, request additional information about the storage and processing of the Data, require any necessary amendments to the Data, or refuse or withdraw the consents herein in writing, in any case without cost, by contacting his or her local human resources representative. The Participant understands that refusal or withdrawal of consent may affect the Participant’s ability to participate in the Plan. For more information on the consequences of refusal to consent or withdrawal of consent, the Participant understands that he or she may contact his or her local human resources representative.

23.    Indemnification.

To the extent allowable pursuant to applicable law, each member of the Committee or of the Board and any person to whom the Committee has delegated any of its authority under the Plan shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her; provided he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company’s certificate of incorporation or bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

24.    Compliance With Code Section 409A.

Awards will be designed and operated in such a manner that they are either exempt from the application of, or comply with, the requirements of Code Section 409A, except as otherwise determined in the sole discretion of the Administrator. The Plan and each Award Agreement under the Plan is intended to meet the requirements of Code Section 409A and will be construed and interpreted in

accordance with such intent, except as otherwise determined in the sole discretion of the Administrator. To the extent that an Award or payment, or the settlement or deferral thereof, is subject to Code Section 409A the Award will be granted, paid, settled or deferred in a manner that will meet the requirements of Code Section 409A, such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable under Code Section 409A.

25.    Cancellation of Award; Forfeiture of Gain.

Notwithstanding anything to the contrary contained herein, an Award Agreement may provide that:

A. Any Award which is subject to recovery under any law, government regulation, stock exchange listing requirement, or Company policy, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement, or any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement or otherwise.

B. If the Participant, without the consent of the Company, while employed by or providing services to the Company, Parent or any Subsidiary Employer or after termination of such employment or service, violates a noncompetition, nonsolicitation or nondisclosure covenant or agreement or otherwise engages in activity that is in conflict with or adverse to the interest of the Company, Parent or any Subsidiary or Employer, as determined by the Committee in its sole discretion, then (i) any outstanding, vested or unvested, earned or unearned portion of the Award may, at the Committee’s discretion, be cancelled, and (ii) the Committee, in its discretion, may require the Participant or other person to whom any payment has been made or Shares or cash have been transferred in connection with the Award to forfeit and pay over to the Company, on demand, all or any portion of the gain (whether or not taxable) realized upon the exercise of any Option and the value realized (whether or not taxable) on the vesting or payment of any other Award during the time period specified in the Award Agreement.

* * *

The foregoing Plan was approved and adopted by the Board on April 1, 2015, and by the stockholders of the Company on July 21, 2015.

EX-10.2

NOVATION COMPANIES, INC.

RESTRICTED STOCK AWARD AGREEMENT

TO NON-EMPLOYEE DIRECTOR

This Restricted Stock Award Agreement (the “Agreement”) is by and between Novation Companies, Inc., a Maryland corporation (the “Corporation”), and [________] (“Director”), and is effective as of [________], 20[__].

WHEREAS, pursuant to Section 7.A. of the Novation Companies, Inc. 2015 Incentive Stock Plan (the “Plan”), the Compensation Committee of the Corporation’s Board of Directors (the “Committee”) has determined that the Director is to be granted a restricted stock award of shares of the Corporation’s common stock, par value $0.01 per share (the “Common Stock”), on the terms and conditions set forth herein, and the Committee hereby grants such award. Any capitalized terms not defined herein shall have the meaning set forth in the Plan.

NOW, THEREFORE, in consideration of the mutual covenants and representations set forth herein, the Corporation and Director agree as follows:

1.Grant of Stock. Subject to the terms and conditions of this Agreement and pursuant to the Plan, the Committee hereby grants to Director [________]shares of the Corporation’s Common Stock (the “Stock”) subject to vesting pursuant to Section 2 below.

2.Vesting Restrictions; Acceleration. The Stock shall be subject to vesting as set forth in this Section 2:

(a)The Stock shall vest in its entirety on [________], 20[__]. Notwithstanding the preceding sentence, any non-vested Stock shall be immediately vested upon the death or Disability (interpreted as though the Director were covered under the Corporation’s disability program or policy) of Director while serving as a director of the Corporation.

(b)The rights of Director upon a Change of Control of the Corporation shall be determined in accordance with Section 15 of the Plan. Director expressly consents to such Section 15, to the definition of “Change of Control” in Section 2.G. of the Plan and the other terms and conditions of the Plan.

3.Responsibility for Tax Payments. The Director shall be responsible for all income and other taxes incurred by the Director in connection with this award under this Agreement, including, without limitation, in connection with the issuance or vesting of Stock.

4.Corporate Transactions. In the event of changes in the outstanding Stock by reason of stock dividends, recapitalization, mergers, consolidations, split-ups, combinations or exchanges of shares and the like, the number of shares of non-vested Stock shall be adjusted accordingly to preserve the benefits or potential benefits of the awards in a manner consistent with the Plan. In such event, any and all new, substituted or additional securities or other property to which Director is entitled by reason of his ownership of non-vested Stock shall be immediately subject to this Agreement and be subject to all restrictions as the Stock with the same force and effect under this Agreement.  Any and all such new, substituted, or additional securities or other property to which Director is entitled by reason of his ownership of the shares of Stock subject to this

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Agreement shall become vested, released from all restrictions and otherwise released and paid to the Director on the date that the restrictions lapse with respect to the underlying Stock to which it relates.

5.Restriction on Transfer. Director shall not sell, transfer, pledge, hypothecate or otherwise dispose of any shares of the non-vested Stock. Notwithstanding the foregoing, the Director may transfer all or any portion of the Stock to a trust or trusts for the exclusive benefit of the Director and his spouse, qualified domestic partner, children or grandchildren or any other persons related to the Director as may be approved by the Administrator.

The Corporation shall not be required (i) to transfer on its books any shares of Stock which shall have been sold or transferred in violation of any of the provisions set forth in this Agreement, or (ii) to treat as owner of such shares of Stock or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares shall have been so transferred.

6.Legend. All certificates representing any of the shares of Stock subject to the provisions of this Agreement shall have endorsed thereon the following legend:

“The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions of the Novation Companies, Inc. 2015 Incentive Stock Plan and a Restricted Stock Award Agreement entered into and between the registered owner and Novation Companies, Inc. Copies of the plan and agreement are on file in the offices of Novation Companies, Inc.”

7.Limitations on Disposition. The Director shall in no event make any disposition of all or any portion of the Stock unless and until:

(a)The shares of Stock proposed to be transferred are vested; and

(b)If Director is, or is likely deemed to be, an affiliate of the Corporation, the disposition is made (i) pursuant to an effective registration statement filed and effective with the Securities and Exchange Commission (or successor agency), (ii) pursuant to the applicable provisions of Rule 144 of the Securities Act of 1933, as amended (or successor statute or regulation) or (iii) in a manner that is otherwise exempt from such registration requirements in the opinion of counsel acceptable to the Corporation.

8.Escrow. As security for the faithful performance of the terms of this Agreement and to ensure the availability for delivery of the Director’s Stock free of legends upon lapse of the restrictions herein provided for, the Director agrees to deposit with the Secretary of the Corporation, or such other person designated by the Corporation, as escrow agent in this transaction (the “Escrow Agent”), the Stock, to be held by the Escrow Agent and delivered by said Escrow Agent pursuant to the Joint Escrow Instructions of the Corporation and the Director set forth in Exhibit A attached hereto and incorporated by this reference, which instructions shall also be delivered to the Escrow Agent at the closing hereunder.

9.Miscellaneous.

(a)Subject to the provisions and limitations hereof, Director may, during the term of this Agreement, exercise all rights and privileges of a stockholder of the Corporation with respect to the Stock, including, but not limited to, voting and dividend rights. In the event of a stock dividend, any and all new securities

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to which Director is entitled by reason of his ownership of non-vested Stock shall be immediately subject to this Agreement and be subject to all restrictions as the Stock with the same force and effect under this Agreement.  Any and all such new securities to which Director is entitled by reason of his ownership of the shares of Stock subject to this Agreement shall become vested, released from all restrictions and otherwise released and paid to the Director on the date that the restrictions lapse with respect to the underlying Stock to which it relates.

(b)The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.

(c)Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given and received (i) if delivered personally or actually received, as of the date received, (ii) if delivered by by registered or certified mail with postage and fees prepaid, two (2) business days after being mailed, or (iii) if delivered by a nationally recognized overnight delivery service, one (1) business day after being sent to such service, or (iv) if sent via facsimile, electronic mail or similar electronic transmission, as of the date received. Any such notice shall be addressed to Director or Corporation and shall use the address, facsimile or electronic mail address set forth on the signature page of this Agreement or such other address as such party may designate by ten days’ advance written notice to the other party hereto.

(d)The Corporation may assign its rights and delegate its duties under this Agreement. If any such assignment or delegation requires consent of any state securities authorities, the parties agree to cooperate in requesting such consent. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Corporation and, subject to the restrictions on transfer herein set forth, the Director’s heirs, legatees, executors and administrators.

(e)Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Corporation and shareholders to terminate Director’s service, for any reason, with or without cause.

(f)The failure of the Corporation to enforce at any time any provision on this Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.

(g)This Agreement shall be governed by and construed according to the laws of the State of Maryland without regard to its principles of conflict of laws.

(h)The Plan is hereby incorporated by reference and made a part hereof, and this Agreement is subject to all terms and conditions of the Plan.

(i)This Agreement may be amended or modified at any time by an instrument in writing signed by the parties hereto.

(j)This Agreement may be executed in multiple counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument.

[Remainder of page intentionally left blank; signature page follows.]

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IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above written.

NOVATION COMPANIES, INC.

Rodney E. Schwatken, Chief Financial Officer

Notice Address:        

Novation Companies, Inc.

2114 Central Street, Suite 600

Kansas City, MO 64108

Attention: Secretary

Fax: [________________]

Email: [________________]

By: [________________]

Notice Address:    [________________]

[________________]

[________________]

Fax: [________________]

Email: [________________]

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EXHIBIT A

JOINT ESCROW INSTRUCTIONS

[Date]

Rodney E. Schwatken

c/o Novation Companies, Inc.

2114 Central Street, Suite 600

Kansas City, MO 64108

Dear Sir:

As Escrow Agent for the undersigned parties, Novation Companies, Inc., a Maryland corporation (the “Corporation”), and [________________] (“Director”), you are hereby authorized and directed to hold the Stock deposited with you pursuant to the terms of that certain Restricted Stock Award Agreement (the “Agreement”) between the Corporation and the Director, to which a copy of these Joint Escrow Instructions is attached as Exhibit A, in accordance with the following instructions (capitalized terms used herein shall have the meanings set forth in the Agreement):

1.The Director irrevocably authorizes the Corporation to deposit with you the shares of Stock to be held by you hereunder and any additions and substitutions to said shares as defined in the Agreement. The Director does hereby irrevocably constitute and appoint you as his attorney-in-fact and agent for the term of this escrow to execute with respect to such securities all documents necessary or appropriate to make such securities negotiable and to complete any transaction herein contemplated. Subject to the provisions of the Agreement, the Director shall have all rights and privileges of a shareholder of the Corporation while the Stock is held by you.

2.Upon written request of the Director or the Director’s personal representative, the Corporation will confirm to you in writing the number of shares of Stock that are no longer subject to the vesting restrictions. Promptly after your receipt of such confirmation, you will deliver to the Director or the Director’s personal representative such number of shares of Stock as are not then subject to the vesting restrictions and have not been previously delivered to the Director or the Director’s personal representative. Such shares will be free of legends.

3.If at the time of termination of this escrow you should have in your possession any documents, securities, or other property belonging to the Director, you shall deliver all of same to the Director and shall be discharged of all further obligations hereunder.

4.Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto.

5.You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for the Director while acting in good faith, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith. The Corporation shall indemnify and hold the Escrow Agent harmless against any and all liabilities, obligations, losses, damages, penalties, actions,

A-1

judgments, suits, costs, expenses, attorney fees or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against it or them hereunder and under the Agreement, except for any of the foregoing incurred in connection with, or arising out of, the Escrow Agent’s willful misfeasance, bad faith or negligence in the performance of its duties hereunder or by reason of its reckless disregard for its obligations and duties hereunder.

6.You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law and you are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.

7.You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder.

8.You shall not be liable for relinquishing of any rights under the statute of limitations with respect to these Joint Escrow Instructions or any documents deposited with you.

9.You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder, and you may rely upon the advice of such counsel. Such counsel’s reasonable compensation shall be paid by the Corporation.

10.Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be Secretary of the Corporation or if you shall resign by written notice to each party. In the event of any such termination, the Corporation shall appoint a successor Escrow Agent.

11.You are authorized to employ as agents banks, brokerage firms or other financial institutions to hold in safekeeping any certificates, instruments or other documents delivered to you hereunder and to perform other services such as sale of securities, recordkeeping and other administrative services as you may deem appropriate. Any or all of the shares of Stock being deposited with you may be held in book entry form at the Corporation’s custodian, properly marked to indicate your interest therein. All fees and expenses of such agents shall be paid by the Corporation. If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.

12.It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder, you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities until such disputes shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.

13.Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties thereunto entitled at the following

A-2

addresses, or at such other addresses as a party may designate by ten days’ advance written notice to each of the other parties hereto.

CORPORATION:

Novation Companies, Inc.

2114 Central Street, Suite 600

Kansas City, MO 64108

Attention: Secretary

DIRECTOR:

[________________]

ESCROW AGENT:

Rodney E. Schwatken

c/o Novation Companies, Inc.

2114 Central Street, Suite 600

Kansas City, MO 64108

14.By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Agreement.

15.Your duties under these Joint Escrow Instructions shall terminate upon the expiration of the vesting restrictions as to all shares of Stock covered thereby and the delivery of the certificates evidencing the Stock to the party entitled thereto.

16.This instrument shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns.

Very truly yours,

NOVATION COMPANIES, INC.

By:    

Title:    

DIRECTOR:

[________________]

ESCROW AGENT:

Rodney E. Schwatken

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EX-10.3

EMPLOYEE NON-QUALIFIED STOCK OPTION AGREEMENT

[Key Executive Form]

THIS EMPLOYEE NON-QUALIFIED STOCK OPTION AGREEMENT (this “Agreement”), dated as of the ____ day of _________, 20[__], is entered into by and between Novation Companies, Inc., a Maryland corporation (the “Company”) and [____________] (the “Optionee”).

WHEREAS, pursuant to the terms of the Company’s 2015 Incentive Stock Plan (the “Plan”), the Compensation Committee of the Board of Directors of the Company (the “Committee”) has determined that the Optionee is to be granted an option to purchase a specified number of shares of the Company’s common stock on the terms and conditions set forth herein;

WHEREAS, the Optionee is now an employee of the Company or an “Employer”, as defined in the Plan (an “Employer”); and

WHEREAS, the Company and the Optionee desire to enter into this Agreement for the purpose of memorializing the terms and conditions of the option.

NOW, THEREFORE, the Company and the Optionee agree as follows:

1.    Grant Subject to Plan. The Option (as defined below) is expressly subject to all terms and provisions of the Plan, and the terms and provisions of such Plan are incorporated herein by reference. Capitalized terms not defined herein shall have the meaning ascribed thereto in the Plan.

2.    Number of Shares and Option Price. Pursuant to the action of the Committee, which action was effective on ____________, 20[__] (the “Date of Grant”), the Optionee is hereby granted a non-qualified stock option (the “Option”) to purchase [______ (______)] shares of the Company’s common stock (the “Option Shares”), at the purchase price of [______ ($____)] per share (the “Option Price”). The Option Price is equal to or greater than the price at which the Company’s common stock was last sold as quoted on the OTCQB (or applicable exchange or quotation system) on the Date of Grant.

3.    Period of Option. The term of the Option and of this Agreement shall commence on the Date of Grant and terminate upon the expiration of ten (10) years from the Date of Grant. Upon termination of the Option, all rights of the Optionee hereunder shall cease.

4.    Conditions of Exercise. This Option may be exercised, in whole or in part at any time, or from time to time, up to ten (10) years from the Date of Grant, but only (i) with respect to Option Shares which have vested, and (ii) during the period in which such Option remains exercisable as herein provided. One-quarter of the Option Shares shall vest on each anniversary of the Date of Grant.

5.    Nontransferability of Option. Other than a transfer as described in Section 13 of the Plan or otherwise in the discretion of the Committee pursuant to Section 13 of the Plan, the Option and this Agreement shall not be transferable.

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6.    Exercise of Option. The Option may be exercised using the methods described in Section 6.C. of the Plan and the Option Shares purchased shall thereupon be promptly delivered. The Optionee will not be deemed to be a holder of any Option Shares pursuant to exercise of the Option until the Option Shares are paid in full and issued to him or her upon the exercise of the Option.

7.    Adjustment for Changes in Capitalization. As described in Section 15 of the Plan, in the event of changes in the outstanding stock of the Company by reason of stock dividends, recapitalization, mergers, consolidations, split-ups, combinations or exchanges of shares and the like, occurring after the date hereof, the number of shares covered by this Agreement and the price thereof shall be adjusted to the same proportionate number of shares and price as set forth in Section 2 of this Agreement.

8.    Termination by Death. In accordance with Sections 6.G. and 11.B. of the Plan, if the Optionee’s service with the Company (and/or any Employer, as the case may be, such that Optionee is no longer employed by either the Company or any Employer) terminates by reason of the Optionee’s death, then the vesting of the Option shall be accelerated and the full number of then-unexercised Option Shares shall become exercisable in full by the legal representative of the estate or by the legatee of the Optionee under the will of the Optionee, for a period of twelve (12) months following the date of death or until the expiration of the stated term of such Option, whichever period is shorter. If the Option is not exercised within the foregoing time period, the Option shall terminate.

9.    Termination by Reason of Disability. In accordance with Sections 6.F. and 11.B. of the Plan, if the Optionee’s service with the Company (and/or any Employer, as the case may be, such that Optionee is no longer employed by either the Company or any Employer) terminates by reason of the Optionee’s Disability, as defined in Section [__] of the Employment Agreement entered into between the Company and the Optionee on [________], 20[__] (the “Employment Agreement”), then the vesting of the Option shall be accelerated and the full number of then-unexercised Option Shares shall become exercisable in full by the Optionee for a period of twelve (12) months following the date of termination or until the expiration of the stated term of such Option, whichever period is shorter; provided, however, that if the Optionee dies within such twelve (12) month period and prior to the expiration of the stated term of such Option, such Option may thereafter be exercised for a period of twelve (12) months from the date of death or until the expiration of the stated term of such Option, whichever period is shorter. If the Option is not exercised within the foregoing time periods, the Option shall terminate.

10.    Termination for Cause. In accordance with Section 6.E. of the Plan, if the Optionee’s employment with the Company (and/or any Employer, as the case may be, such that Optionee is no longer employed by either the Company or any Employer) is terminated by the Company for “Cause” as defined in Section [__] of the Employment Agreement, then the Option shall immediately terminate and cease to be exercisable by the Optionee.

11.    Termination for Good Reason. In accordance with Section 6.E. of the Plan, if the Optionee’s employment with the Company (and/or any Employer, as the case may be, such that Optionee is no longer employed by either the Company or any Employer) is terminated by him for

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“Good Reason” as defined in Section [__] of the Employment Agreement, the Option may be exercised to the extent it has become exercisable by the Optionee at the time of such termination, for a period of three (3) years from the effective date of such termination of employment or until the expiration of the stated term of such Option, whichever period is shorter. If the Option is not exercised within the foregoing time period, the Option shall terminate. Notwithstanding the foregoing, a termination of employment by Optionee for Good Reason shall not be considered as having occurred for purposes of this Agreement unless the Optionee provides written notice to the Company of the events or conditions constituting Good Reason, specifying that the Optionee believes such events or conditions constitute Good Reason, and (if such events or conditions can be remedied) the Company has been afforded a period of at least fifteen (15) days following delivery of such notice to remedy the events or conditions constituting Good Reason and has not done so to the reasonable satisfaction of the Optionee.

12.    Termination Without Cause. In accordance with Section 6.E. of the Plan, if the Optionee’s service with the Company (and/or any Employer, as the case may be, such that the Optionee is no longer employed by either the Company or any Employer) is terminated by the Company without Cause, the Option may be exercised to the extent it has become exercisable at the time of such termination, for a period of three (3) years from the effective date of such termination of employment or until the expiration of the stated term of such Option, whichever period is shorter. If the Option is not exercised within the foregoing time period, the Option shall terminate.

13.    Retirement. In accordance with Section 6.E. of the Plan, if the Optionee resigns from the Company (and/or any Employer, as the case may be, such that the Optionee is no longer employed by either the Company or any Employer) after reaching (i) the age of 65 following a term of employment with the Company or any Employer for a continuous period of 10 years or more or (ii) the age of 55 following a term of employment with the Company or any Employer for a continuous period of 20 years or more (“Retirement”), the then-unvested portion of the Option, if any, shall continue to vest in accordance with its terms without giving any effect to such Retirement. Notwithstanding the foregoing, vesting of the Option after Retirement shall immediately cease (and the unvested portion of the Option shall be forfeited) if, after such Retirement, the Committee determines in good faith that the Optionee has breached any of his or her obligations to the Company or any Employer or otherwise taken any willful action that has had a significant adverse effect upon the Company or any Employer. Upon Retirement, the Option may be exercised for a period of three (3) years (x) after the date of such Retirement, with respect to the amount of the Option vested upon such date or (y) after the date of vesting, with respect to the amount of the Option which is unvested at the time of Retirement but which becomes vested after Retirement, subject in both cases to the expiration of the stated term of such Option. If the Option is not exercised within the foregoing time period, the Option shall terminate.

14.    Change of Control. The rights of the Optionee in the event of a Change of Control of the Company (as defined in Section 1.G. of the Plan) shall be determined in accordance with Section 15 of the Plan.

15.    Other Termination. In accordance with Section 6.E. of the Plan, if the Optionee’s service with the Company (and/or any Employer, as the case may be, such that Optionee is no longer employed by either the Company or any Employer) terminates for any reason other than those described in Sections 8 through 14 above, the Option may be exercised to the extent it has become

3

exercisable at the time of such termination, for a period of three (3) months from the date of such termination or until the expiration of the stated term of the Option, whichever period is shorter; provided, however, that if the Optionee dies within such three (3) month period and prior to the expiration of the stated term of such Option, such Option may thereafter be exercised to the extent it has become exercisable for a period of three (3) months from the date of death or until the expiration of the stated term of the Option, whichever period is shorter. If the Option is not exercised within the foregoing time period, the Option shall terminate.

16.    Option Not an Incentive Stock Option. It is intended that the Option shall not be treated as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended.

17.    No Contract of Employment. Nothing contained in this Agreement shall be considered or construed as creating a contract of employment for any specified period of time.

18.    Failure to Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.

19.    Entire Agreement; Amendments. No modification, amendment or waiver of any of the provisions of this Agreement shall be effective unless in writing specifically referred hereto, and signed by the parties hereto. This Agreement supersedes all prior agreements and understandings between the Optionee and the Company to the extent that any such agreements or understandings conflict with the terms hereof.

20.    Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Missouri without regard to the principles of conflicts of law, which might otherwise apply.

[signature page follows]

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IN WITNESS WHEREOF, this Agreement is executed as of the day and year first above written.

NOVATION COMPANIES, INC.

Name: W. Lance Anderson

Title: Chief Executive Officer

OPTIONEE

[________]

[SIGNATURE PAGE TO [____] STOCK OPTION AGREEMENT]

EX-10.4

EMPLOYEE NON-QUALIFIED STOCK OPTION AGREEMENT

[Corvisa Employee Form]

THIS EMPLOYEE NON-QUALIFIED STOCK OPTION AGREEMENT (this “Agreement”),dated as of the ____ day of _________, 20[__], is entered into by and between Novation Companies, Inc., a Maryland corporation (the “Company”) and [________] (the “Optionee”).

WHEREAS, pursuant to the terms of the Company’s 2015 Incentive Stock Plan (the “Plan”), the Compensation Committee of the Board of Directors of the Company (the “Committee”) has determined that the Optionee is to be granted an option to purchase a specified number of shares of the Company’s common stock on the terms and conditions set forth herein;

WHEREAS, the Optionee is now an employee of the Company or an “Employer”, as defined in the Plan (a “Employer”); and

WHEREAS, the Company and the Optionee desire to enter into this Agreement for the purpose of memorializing the terms and conditions of the option.

NOW, THEREFORE, the Company and the Optionee agree as follows:

1.Grant Subject to Plan. The Option (as defined below) is expressly subject to all terms and provisions of the Plan, and the terms and provisions of such Plan are incorporated herein by reference. Capitalized terms not defined herein shall have the meaning ascribed thereto in the Plan.

2.Number of Shares and Option Price. Pursuant to the action of the Committee, which action was effective on ____________, 20[__] (the “Date of Grant”), the Optionee is hereby granted a non-qualified stock option (the “Option”) to purchase [______ (______)] shares of the Company’s common stock (the “Option Shares”), at the purchase price of [______ ($____)] per share (the “Option Price”). The Option Price is equal to or greater than the price at which the Company’s common stock was last sold as quoted on the OTCQB (or applicable exchange or quotation system) on the Date of Grant.

3.Period of Option. The term of the Option and of this Agreement shall commence on the Date of Grant and terminate upon the expiration of ten (10) years from the Date of Grant. Upon termination of the Option, all rights of the Optionee hereunder shall cease.

4.Conditions of Exercise. This Option may be exercised, in whole or in part at any time, or from time to time, up to ten (10) years from the Date of Grant, but only (i) with respect to Option Shares which have vested, and (ii) during the period in which such Option remains

exercisable as herein provided. One-quarter of the Option Shares shall vest on each anniversary of the Date of Grant.

5.Nontransferability of Option. Other than a transfer as described in Section 13 of the Plan or otherwise in the discretion of the Committee pursuant to Section 13 of the Plan, the Option and this Agreement shall not be transferable.

6.Exercise of Option. The Option may be exercised using the methods described in Section 6.C. of the Plan and the Option Shares purchased shall thereupon be promptly delivered. The Optionee will not be deemed to be a holder of any Option Shares pursuant to exercise of the Option until the Option Shares are paid in full and issued to him or her upon the exercise of the Option.

7.Adjustment for Changes in Capitalization. As described in Section 15 of the Plan, in the event of changes in the outstanding stock of the Company by reason of stock dividends, recapitalization, mergers, consolidations, split-ups, combinations or exchanges of shares and the like, occurring after the date hereof, the number of shares covered by this Agreement and the price thereof shall be adjusted to the same proportionate number of shares and price as set forth in Section 2 of this Agreement.

8.Termination by Death. In accordance with Sections 6.G. and 11.B. of the Plan, if the Optionee’s service with the Company (and/or any Employer, as the case may be, such that Optionee is no longer employed by either the Company or any Employer) terminates by reason of the Optionee’s death, then the vesting of the Option shall be accelerated and the full number of then-unexercised Option Shares shall become exercisable in full by the legal representative of the estate or by the legatee of the Optionee under the will of the Optionee, for a period of twelve (12) months following the date of death or until the expiration of the stated term of such Option, whichever period is shorter. If the Option is not exercised within the foregoing time period, the Option shall terminate.

9.Termination by Reason of Disability. In accordance with Sections 6.F. and 11.B. of the Plan, if the Optionee’s service with the Company (and/or any Employer, as the case may be, such that Optionee is no longer employed by either the Company or any Employer) terminates by reason of the Optionee’s Disability (as defined under the Plan), then the vesting of the Option shall be accelerated and the full number of then-unexercised Option Shares shall become exercisable in full by the Optionee for a period of twelve (12) months following the date of termination or until the expiration of the stated term of such Option, whichever period is shorter; provided, however, that if the Optionee dies within such twelve (12) month period and prior to the expiration of the stated term of such Option, such Option may thereafter be exercised for a period of twelve (12) months from the date of death or until the expiration of the stated term of such Option, whichever

2

period is shorter. If the Option is not exercised within the foregoing time periods, the Option shall terminate.

10.Termination for Cause. In accordance with Section 6.E. of the Plan, if the Optionee’s employment with the Company (and/or any Employer, as the case may be, such that Optionee is no longer employed by either the Company or any Employer) is terminated by the Company for “Cause,” as defined below, then the Option shall immediately terminate and cease to be exercisable by the Optionee. For purposes of this Agreement, “Cause” shall mean:

a)the failure by Optionee to perform such material duties as are reasonably requested in good faith by the Company or, in the case of an employee of an Employer, by the Optionee’s Employer, in the course of Optionee’s performance of his duties as an employee;

b)Optionee’s material disregard of his duties or material failure to act, where such action would be in the ordinary course of Optionee’s duties as an employee;

c)the material failure by Optionee to observe Company policies or, in the case of an employee of an Employer, the policies of Optionee’s Employer;

d)gross negligence, recklessness or willful misconduct by Optionee in the performance of his duties as an employee;

e)a conviction of or a plea of guilty or nolo contendere by Optionee to a misdemeanor involving fraud, embezzlement, theft, other financial dishonesty or moral turpitude, or to a felony;

f)the Company’s reasonable determination, or in the case of an employee of an Employer, the Optionee’s Employer’s reasonable determination, that Optionee has engaged in the commission of violations of state or federal law relating to the workplace environment (including, without limitation, laws prohibiting unlawful harassment, discrimination, retaliation, or other conduct related to the workplace);

g)the breach by Optionee of the provisions of any agreement between the Optionee and Company or, in the case of an employee of an Employer, the breach by Optionee of the provisions of any agreement between the Optionee and the Optionee’s Employer; or

h)any definition of “Cause” set forth in any contract governing termination of Optionee’s employment by Company or any Employer.

11.Termination without Cause. In accordance with Section 6.E. of the Plan, if the Optionee’s service with the Company (and/or any Employer, as the case may be, such that the

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Optionee is no longer employed by either the Company or any Employer) is terminated by the Company without Cause, the Option may be exercised to the extent it has become exercisable at the time of such termination, for a period of three (3) months from the effective date of such termination of employment or until the expiration of the stated term of such Option, whichever period is shorter. If the Option is not exercised within the foregoing time period, the Option shall terminate.

12.Change of Control. The rights of the Optionee in the event of a Change of Control of the Company (as defined in Section 1.G. of the Plan) or Corvisa, LLC (“Corvisa”) shall be determined in accordance with Section 15 of the Plan, as supplemented by this Section 12. For the purposes of this Agreement, the following definition of “Change of Control” shall apply with respect to Corvisa only:

a) all of the equity interests, or substantially all of the assets, of Corvisa are sold to any person that is not directly or indirectly controlling, controlled by, or under common control with, the Company (a “Third Party”). For the purposes of the foregoing sentence, “control” of an entity means (A) the right, contractual or otherwise, to, directly or indirectly, manage such entity or substantially all of its assets, or (B) the direct or indirect ownership of more than fifty percent (50%) of the outstanding capital stock or other equity interests of such entity having ordinary voting power; or

b) Corvisa is merged with and into a Third Party and does not retain its separate legal existence; or

c) Corvisa ceases to be a limited liability company or other entity (i) whose assets and liabilities are consolidated with those of the Company on the Company’s balance sheet, or (ii) whose issued and outstanding voting equity is fifty percent (50%) or more owned or controlled, directly or indirectly, by the Company.

13.Other Termination. In accordance with Section 6.E. of the Plan, if the Optionee’s service with the Company (and/or any Employer, as the case may be, such that Optionee is no longer employed by either the Company or any Employer) terminates for any reason other than those described in Sections 8 through 12 above, the Option may be exercised to the extent it has become exercisable at the time of such termination, for a period of three (3) months from the date of such termination or until the expiration of the stated term of the Option, whichever period is shorter; provided, however, that if the Optionee dies within such three (3) month period and prior to the expiration of the stated term of such Option, such Option may thereafter be exercised to the extent it has become exercisable for a period of three (3) months from the date of death or until the expiration

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of the stated term of the Option, whichever period is shorter. If the Option is not exercised within the foregoing time period, the Option shall terminate.

14.Option Not an Incentive Stock Option. It is intended that the Option shall not be treated as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended.

15.No Contract of Employment. Nothing contained in this Agreement shall be considered or construed as creating a contract of employment for any specified period of time.

16.Failure to Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.

17.Entire Agreement; Amendments. No modification, amendment or waiver of any of the provisions of this Agreement shall be effective unless in writing specifically referred hereto, and signed by the parties hereto. This Agreement supersedes all prior agreements and understandings between the Optionee and the Company to the extent that any such agreements or understandings conflict with the terms hereof.

18.Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Missouri without regard to the principles of conflicts of law, which might otherwise apply.

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IN WITNESS WHEREOF, this Agreement is executed as of the day and year first above written.

NOVATION COMPANIES, INC.

Name: W. Lance Anderson

Title: Chief Executive Officer

OPTIONEE

[________]

[SIGNATURE PAGE TO [____] STOCK OPTION AGREEMENT]

EX-31.1

Exhibit 31.1

CERTIFICATION

I, W. Lance Anderson, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Novation Companies, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

Date:	August 6, 2015	/s/ W. Lance Anderson
		W. Lance Anderson
		Chairman of the Board of Directors and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Rodney E. Schwatken, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Novation Companies, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

Date:	August 6, 2015	/s/ Rodney E. Schwatken
		Rodney E. Schwatken
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES - OXLEY ACT OF 2002

In connection with the Quarterly Report of Novation Companies, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, W. Lance Anderson, Chairman of the Board and Chief Executive Officer of the Company certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	August 6, 2015	/s/ W. Lance Anderson
		W. Lance Anderson
		Chairman of the Board of Directors and Chief Executive Officer

This certification is made solely for purpose of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES - OXLEY ACT OF 2002

In connection with the Quarterly Report of Novation Companies, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Rodney E. Schwatken, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	August 6, 2015	/s/ Rodney E. Schwatken
		Rodney E. Schwatken
		Chief Financial Officer

This certification is made solely for purpose of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose.

XML

Borrowings - Capital Leases (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Debt Instrument [Line Items]
Capital Leases, Maturity Date Range, Start	Jul. 20, 2015
Capital Leases, Maturity Date Range, End	Mar. 20, 2018
Capital Lease Obligations, Current	$ 0.3	$ 0.3
Capital Lease Obligations, Noncurrent	$ 0.1	$ 0.1

XML

Earnings per Share - Narrative (Details) - $ / shares shares in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Stock Options [Member]
Class of Stock [Line Items]
Grants in period	0.7	3.0
Grants in period, weighted average exercise price	$ 0.51	$ 0.51
Antidilutive securities excluded from computation of earnings per share	0.4	0.4	0.2	0.2
Restricted Stock [Member]
Class of Stock [Line Items]
Nonvested shares oustanding	0.4	0.6	0.4	0.6
Antidilutive securities excluded from computation of earnings per share	0.4	0.5	0.4	0.6

XML

Income Taxes - Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Millions	Jun. 30, 2015	Dec. 31, 2014
Operating Loss Carryforwards [Line Items]
Deferred Tax Assets, Valuation Allowance	$ 274.1	$ 268.6

XML

Marketable Securities - Securitization Trusts (Details) - Securitization Trust, Primary Beneficiary [Member] - USD ($) $ in Thousands		6 Months Ended
		Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Securitization Trust [Line Items]
Size/Principal outstanding	[1]	$ 3,836,814		$ 4,062,068
Assets on Balance Sheet	[2]	2,570		3,381
Liabilities on Balance Sheet		0		0
Maximum exposure to loss	[3]	2,570		3,381
Year to date loss on sale		0		$ 0
Year to date cash flows	[4]	$ 3,279	$ 3,395

[1] Size/Principal Outstanding reflects the estimated principal of the underlying assets held by the securitization trust.

[2] Assets on balance sheet are securities issued by the entity and are recorded in the current marketable securities line item on the condensed consolidated balance sheets.

[3] The maximum exposure to loss includes the assets held by the Company. The maximum exposure to loss assumes a total loss on the referenced assets held by the securitization trust.

[4] Year to date cash flows are for the six months ended June 30, 2015 and 2014, respectively.

XML

Fair Value Accounting (Tables)

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value Measurements, Recurring and Nonrecurring

The following tables present for each of the fair value hierarchy levels, the Company's assets which are measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014 (dollars in thousands):

			Fair Value Measurements at Reporting Date Using
Description	Fair Value at June 30, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents:
Cash	2,149		$	2,149	$	—	$	—
Money market funds	2,577		2,577		—		—
Marketable securities, current:
Corporate notes and bonds	19,077		—		19,077		—
Mortgage securities	2,570		—		—		2,570
Marketable securities, non-current:
Corporate notes and bonds	8,682		—		8,682		—
Agency securities	1,001		—		1,001		—
Total	$	36,056	$	4,726	$	28,760	$	2,570

			Fair Value Measurements at Reporting Date Using
Description	Fair Value at December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents:
Cash	$	2,701	$	2,701	$	—	$	—
Money market funds	2,595		2,595		—		—
Marketable securities, current:
Corporate notes and bonds	24,436		—		24,436		—
Commercial paper	1,998		—		1,998		—
Mortgage securities	3,381		—		—		3,381
Marketable securities, non-current:
Corporate notes and bonds	15,014		—		15,014		—
Agency securities	998		—		998		—
Total	$	51,123	$	5,296	$	42,446	$	3,381

Fair Value Inputs, Assets and Liabilities, Quantitative Information

The following table presents certain quantitative information about the significant unobservable inputs used in the fair value measurement for items measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

Description	Valuation Techniques	Significant Unobservable Inputs	Range
Assets:
Mortgage securities – available-for-sale	Present value analysis	Prepayment rates	5.4% – 10.6%
		Weighted average life (years)	2.0

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

The following table provides a reconciliation of the beginning and ending balances for the Company's mortgage securities – available-for-sale, which are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six and three months ended June 30, 2015 and 2014 (dollars in thousands):

	For the Six Months Ended June 30,						For the Three Months Ended June 30,
	2015			2014			2015			2014
Balance, beginning of period	$	3,381		$	3,728		$	3,201		$	3,466
Increases (decreases) to mortgage securities – available-for-sale:
Accretion of income (A)	277			385			140			192
Proceeds from paydowns of securities (A)	(351		)	(385		)	(173		)	(156		)
Mark-to-market value adjustment	(737		)	(176		)	(598		)	50
Net (decrease) increase to mortgage securities – available-for-sale	(811		)	(176		)	(631		)	86
Balance, end of period	$	2,570		$	3,552		$	2,570		$	3,552

(A) Cash received on mortgage securities with no cost basis was $2.9 million and $1.5 million for the six and three months ended June 30, 2015, respectively, and $3.0 million and $1.4 million for the six and three months ended June 30, 2014, respectively.

Fair Value, Measured on Recurring and Nonrecurring Basis, Gain (Loss) Included in Earnings

Adjustments to assets and liabilities measured at fair value on a recurring and nonrecurring basis did not have a material impact on the earnings of continuing operations for any period presented.

Fair Value, by Balance Sheet Grouping

The estimated fair values of the Company's financial instruments are as follows as of June 30, 2015 and December 31, 2014 (dollars in thousands):

	As of June 30, 2015				As of December 31, 2014
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Restricted cash	$	649	$	487	$	597	$	450
Marketable securities	31,330		31,330		45,827		45,827
Financial liabilities:
Senior notes	$	87,215	$	16,692	$	85,937	$	15,189

XML

Segment Reporting - Revenues from External Customers (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Revenues from External Customers and Long-Lived Assets [Line Items]
Service fee income	$ 891	$ 629	$ 1,680	$ 1,419
Service fee income – transition services	0	968	0	968
Sales Revenue, Services, Total	891	1,597	1,680	2,387
Professional Services [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Service fee income	505	358	954	916
Service fee income – transition services	0	968	0	968
Communications Services [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Service fee income	$ 386	$ 271	$ 726	$ 503

XML

Fair Value Accounting - Recurring Basis (Details) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Marketable Securities, Current [Abstract]
Fair value, current	$ 21,647,000	$ 29,815,000
Marketable Securities, Noncurrent [Abstract]
Fair value, non-current	9,683,000	16,012,000
Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	36,056,000	51,123,000
Commercial paper
Marketable Securities, Current [Abstract]
Fair value, current		1,998,000
Commercial paper | Fair Value, Measurements, Recurring [Member]
Marketable Securities, Current [Abstract]
Fair value, current		1,998,000
Corporate notes and bonds
Marketable Securities, Current [Abstract]
Fair value, current	19,077,000	24,436,000
Marketable Securities, Noncurrent [Abstract]
Fair value, non-current	8,682,000	15,014,000
Corporate notes and bonds | Fair Value, Measurements, Recurring [Member]
Marketable Securities, Current [Abstract]
Fair value, current	19,077,000	24,436,000
Marketable Securities, Noncurrent [Abstract]
Fair value, non-current	8,682,000	15,014,000
Agency securities
Marketable Securities, Noncurrent [Abstract]
Fair value, non-current	1,001,000	998,000
Agency securities | Fair Value, Measurements, Recurring [Member]
Marketable Securities, Noncurrent [Abstract]
Fair value, non-current	1,001,000	998,000
Mortgage securities
Marketable Securities, Current [Abstract]
Fair value, current	2,570,000	3,381,000
Mortgage securities | Fair Value, Measurements, Recurring [Member]
Marketable Securities, Current [Abstract]
Fair value, current	2,570,000	3,381,000
Cash | Fair Value, Measurements, Recurring [Member]
Cash and cash equivalents:
Cash and Cash Equivalents, Fair Value Disclosure	2,149,000	2,701,000
Money market funds | Fair Value, Measurements, Recurring [Member]
Cash and cash equivalents:
Cash and Cash Equivalents, Fair Value Disclosure	2,577,000	2,595,000
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	4,726,000	5,296,000
Fair Value, Inputs, Level 1 [Member] | Commercial paper | Fair Value, Measurements, Recurring [Member]
Marketable Securities, Current [Abstract]
Fair value, current		0
Fair Value, Inputs, Level 1 [Member] | Corporate notes and bonds | Fair Value, Measurements, Recurring [Member]
Marketable Securities, Current [Abstract]
Fair value, current	0	0
Marketable Securities, Noncurrent [Abstract]
Fair value, non-current	0	0
Fair Value, Inputs, Level 1 [Member] | Agency securities | Fair Value, Measurements, Recurring [Member]
Marketable Securities, Noncurrent [Abstract]
Fair value, non-current	0	0
Fair Value, Inputs, Level 1 [Member] | Mortgage securities | Fair Value, Measurements, Recurring [Member]
Marketable Securities, Current [Abstract]
Fair value, current	0	0
Fair Value, Inputs, Level 1 [Member] | Cash | Fair Value, Measurements, Recurring [Member]
Cash and cash equivalents:
Cash and Cash Equivalents, Fair Value Disclosure	2,149,000	2,701,000
Fair Value, Inputs, Level 1 [Member] | Money market funds | Fair Value, Measurements, Recurring [Member]
Cash and cash equivalents:
Cash and Cash Equivalents, Fair Value Disclosure	2,577,000	2,595,000
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	28,760,000	42,446,000
Fair Value, Inputs, Level 2 [Member] | Commercial paper | Fair Value, Measurements, Recurring [Member]
Marketable Securities, Current [Abstract]
Fair value, current		1,998,000
Fair Value, Inputs, Level 2 [Member] | Corporate notes and bonds | Fair Value, Measurements, Recurring [Member]
Marketable Securities, Current [Abstract]
Fair value, current	19,077,000	24,436,000
Marketable Securities, Noncurrent [Abstract]
Fair value, non-current	8,682,000	15,014,000
Fair Value, Inputs, Level 2 [Member] | Agency securities | Fair Value, Measurements, Recurring [Member]
Marketable Securities, Noncurrent [Abstract]
Fair value, non-current	1,001,000	998,000
Fair Value, Inputs, Level 2 [Member] | Mortgage securities | Fair Value, Measurements, Recurring [Member]
Marketable Securities, Current [Abstract]
Fair value, current	0	0
Fair Value, Inputs, Level 2 [Member] | Cash | Fair Value, Measurements, Recurring [Member]
Cash and cash equivalents:
Cash and Cash Equivalents, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 2 [Member] | Money market funds | Fair Value, Measurements, Recurring [Member]
Cash and cash equivalents:
Cash and Cash Equivalents, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	2,570,000	3,381,000
Fair Value, Inputs, Level 3 [Member] | Commercial paper | Fair Value, Measurements, Recurring [Member]
Marketable Securities, Current [Abstract]
Fair value, current		0
Fair Value, Inputs, Level 3 [Member] | Corporate notes and bonds | Fair Value, Measurements, Recurring [Member]
Marketable Securities, Current [Abstract]
Fair value, current	0	0
Marketable Securities, Noncurrent [Abstract]
Fair value, non-current	0	0
Fair Value, Inputs, Level 3 [Member] | Agency securities | Fair Value, Measurements, Recurring [Member]
Marketable Securities, Noncurrent [Abstract]
Fair value, non-current	0	0
Fair Value, Inputs, Level 3 [Member] | Mortgage securities | Fair Value, Measurements, Recurring [Member]
Marketable Securities, Current [Abstract]
Fair value, current	2,570,000	3,381,000
Fair Value, Inputs, Level 3 [Member] | Cash | Fair Value, Measurements, Recurring [Member]
Cash and cash equivalents:
Cash and Cash Equivalents, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 3 [Member] | Money market funds | Fair Value, Measurements, Recurring [Member]
Cash and cash equivalents:
Cash and Cash Equivalents, Fair Value Disclosure	$ 0	$ 0

XML

Borrowings - Senior Notes (Details) $ in Thousands	Mar. 22, 2011 USD ($)	Jun. 30, 2015 USD ($)	Dec. 31, 2014 USD ($)
Debt Instrument [Line Items]
Senior notes		$ 87,215	$ 85,937
Post-Modification Notes [Member]
Debt Instrument [Line Items]
Senior notes		$ 87,200	$ 85,900
Senior Notes [Member] | Post-Modification Notes [Member]
Debt Instrument [Line Items]
Face amount of debt	$ 85,900
Senior Notes [Member] | Post-Modification Notes [Member] | Interest Rate, Pre-Trigger [Member]
Debt Instrument [Line Items]
Interest rate	1.00%
Senior Notes [Member] | Post-Modification Notes [Member] | Modification Trigger, One [Member]
Debt Instrument [Line Items]
Proceeds from equity offering, minimum	$ 40,000
Senior Notes [Member] | Post-Modification Notes [Member] | Interest Rate, Post-Trigger [Member]
Debt Instrument [Line Items]
Variable rate, description	three-month LIBOR
Basis spread on variable rate	3.50%
Restriction Release Trigger, One [Member] | Senior Notes [Member] | Post-Modification Notes [Member]
Debt Instrument [Line Items]
Tangible net worth, minimum	$ 40,000
Restriction Release Trigger, Two [Member] | Senior Notes [Member] | Post-Modification Notes [Member]
Debt Instrument [Line Items]
Interest coverage ratio, minimum	1.35
Leverage ratio, maximum	95.00%

XML

Earnings per Share - Computation of Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Numerator:
Net loss from continuing operations	$ (6,649)	$ 1,718	$ (13,620)	$ (658)
(Loss) Income from discontinued operations, net of income taxes	(18)	38,526	(18)	41,665
Net (loss) income	(6,667)	40,244	(13,638)	41,007
Less net loss attributable to noncontrolling interests	0	(33)	0	0
Net (loss) income available to common shareholders	$ (6,667)	$ 40,277	$ (13,638)	$ 41,007
Denominator:
Weighted average common shares outstanding – basic	91,097,761	90,866,933	91,061,455	90,866,933
Weighted average common shares outstanding - diluted	91,097,761	90,940,843	91,061,455	90,866,933
Basic earnings per share:
Net (loss) income from continuing operations	$ (0.07)	$ 0.02	$ (0.15)	$ (0.01)
Net (loss) income from discontinued operations	0.00	0.42	0.00	0.46
Net (loss) income	(0.07)	0.44	(0.15)	0.45
Less net loss attributable to noncontrolling interests	0.00	0.00	0.00	0.00
Net (loss) income available to common shareholders	(0.07)	0.44	(0.15)	0.45
Diluted earnings per share:
Net (loss) income from continuing operations	(0.07)	0.02	(0.15)	(0.01)
Net (loss) income from discontinued operations	0.00	0.42	0.00	0.46
Net (loss) income	(0.07)	0.44	(0.15)	0.45
Less net loss attributable to noncontrolling interests	0.00	0.00	0.00	0.00
Net (loss) income available to common shareholders	$ (0.07)	$ 0.44	$ (0.15)	$ 0.45
Stock Options [Member]
Denominator:
Incremental shares related to share-based compensation	0	0	0	0
Nonvested Shares [Member]
Denominator:
Incremental shares related to share-based compensation	0	73,910	0	0

XML

Income Taxes - Income Tax Expense (Benefit) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Operating Loss Carryforwards [Line Items]
Income tax expense (benefit), continuing operations	$ 17	$ (6,151)	$ 107	$ (8,185)
Income tax expense from discontinued operations	$ 0	6,721	$ 0	8,783
Effective Income Tax Rate Reconciliation, Percent			0.00%
Income Tax Expense (Benefit), Intraperiod Tax Allocation		$ 500		$ 600

XML

New Accounting Pronouncements

6 Months Ended

Jun. 30, 2015

Accounting Changes and Error Corrections [Abstract]

New Accounting Pronouncements

New Accounting Pronouncements

In April 2015, the FASB issued Accounting Standards Update ("ASU") 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, which provides guidance on a customer’s accounting for cloud computing costs. Under the ASU, a customer must determine whether a cloud computing arrangement contains a software license. If so, the customer would account for the fees related to the software license element in a manner consistent with how the acquisition of other software licenses is accounted for under ASC 350-40. If the arrangement does not contain a software license, the customer would account for the arrangement as a service contract. The ASU is effective for annual periods (and interim periods) beginning after December 15, 2015. Early adoption is permitted. Entities may adopt the guidance (1) retrospectively or (2) prospectively to arrangements entered into, or materially modified, after the effective date. The Company does not expect this guidance to have a significant impact on the Company’s financial statements.

In January 2015, the FASB issued ASU 2015-1, Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items, which eliminates from U.S. GAAP the concept of an extraordinary item, which is an event or transaction that is both (1) unusual in nature and (2) infrequently occurring. Under this ASU, an entity will no longer (1) segregate an extraordinary item from the results of ordinary operations; (2) separately present an extraordinary item on its income statement, net of tax, after income from continuing operations; or (3) disclose income taxes and earnings-per-share data applicable to an extraordinary item. The ASU is effective for annual periods beginning after December 15, 2015, and interim periods within those annual periods. Entities may apply the guidance prospectively or retrospectively to all prior periods presented in the financial statements. Early adoption is permitted if the guidance is applied as of the beginning of the annual period of adoption. The Company does not expect this guidance to have a significant impact on the Company’s financial statements.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how reporting entities must disclose going-concern uncertainties in their financial statements. This new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date of issuance of the entity’s financial statements. Further, an entity must provide certain disclosures if there is “substantial doubt about the entity’s ability to continue as a going concern.” This ASU is effective for annual periods ending after December 15, 2016, and interim periods thereafter. Early adoption is permitted. The Company does not expect this guidance to have a significant impact on the Company’s financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This ASU applies to all contracts with customers except those that are within the scope of other topics in the FASB Accounting Standards Codification. Compared with current U.S. GAAP, this ASU also requires significantly expanded disclosures about revenue recognition. On July 9th, 2015 the FASB voted to defer the effective date of this ASU by one year. Early adoption is permitted. However, entities are not allowed to adopt this ASU before the original effective date (that is, annual periods beginning after December 15, 2016). The Company is evaluating the impact of ASU 2014-09 on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of this standard on its ongoing financial reporting.

In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which amends the definition of a discontinued operation in ASC 205-20 and requires entities to provide additional disclosures about discontinued operations as well as disposal transactions that do not meet the discontinued-operations criteria. The FASB issued this ASU to provide more decision-useful information and to make it more difficult for a disposal transaction to qualify as a discontinued operation. This ASU is effective prospectively for all disposals (except disposals classified as held for sale before the adoption date) or components initially classified as held for sale in periods beginning on or after December 15, 2014. Early adoption is permitted. The impact of the adoption of ASU 2014-08 did not have a significant impact on the Company's financial statements.

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Fair Value Accounting - Significant Unobservable Inputs (Details) - 6 months ended Jun. 30, 2015 - Mortgage securities - Present Value Analysis [Member] - Fair Value, Inputs, Level 3 [Member]	Total
Fair Value Inputs, Quantitative Information [Line Items]
Fair value inputs, weighted average life, in years	2 years
Minimum [Member]
Fair Value Inputs, Quantitative Information [Line Items]
Fair value inputs, prepayment rates	5.40%
Maximum [Member]
Fair Value Inputs, Quantitative Information [Line Items]
Fair value inputs, prepayment rates	10.60%

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Divestitures - Income Statement of Discontinued Operations (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Service fee income	$ 0	$ 6,582	$ 0	$ 37,347
(Loss) income from discontinued operations before income taxes	(18)	45,247	(18)	50,448
Income tax expense from discontinued operations	0	6,721	0	8,783
(Loss) income from discontinued operations, net of income taxes	$ (18)	$ 38,526	$ (18)	$ 41,665

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Financial Statement Presentation (Details)	Jun. 30, 2015
Corvisa LLC [Member]
Operations [Line Items]
Ownership percentage	100.00%

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Fair Value Accounting - Reconciliation of Changes in Level 3 Balances (Details) - Available-for-sale Securities [Member] - Mortgage securities - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance, beginning of period		$ 3,201	$ 3,466	$ 3,381	$ 3,728
Accretion of income	[1]	140	192	277	385
Proceeds from paydowns of securities	[1]	(173)	(156)	(351)	(385)
Mark-to-market value adjustment		(598)	50	(737)	(176)
Net increases (decreases) to mortgage securities - available-for-sale		(631)	86	(811)	(176)
Balance, end of period		2,570	3,552	2,570	3,552
Cash received on mortgage securities with no cost basis		$ 1,500	$ 1,400	$ 2,900	$ 3,000

[1] Cash received on mortgage securities with no cost basis was $2.9 million and $1.5 million for the six and three months ended June 30, 2015, respectively, and $3.0 million and $1.4 million for the six and three months ended June 30, 2014, respectively.

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Divestitures - Balance Sheet of Discontinued Operations (Details) - USD ($) $ in Thousands		Jun. 30, 2015	Dec. 31, 2014	Jun. 30, 2014	Dec. 31, 2013
Discontinued Operations and Disposal Groups [Abstract]
Due to Novation	[1]	$ 700	$ 700
Assets
Cash and cash equivalents		316	358	$ 1,011	$ 3,499
Other current assets		275	291
Total current assets		591	649
Current Liabilities
Accounts payable and accrued expenses		577	875
Total current liabilities (A)	[1]	577	875
Non-Current Liabilities
Other liabilities		1,798	1,797
Total non-current liabilities		1,798	1,797
Total liabilities (A)	[1]	$ 2,375	$ 2,672

[1] Excludes amounts due to Novation of approximately $0.7 million as of both June 30, 2015 and December 31, 2014. These amounts are eliminated upon consolidation and, therefore, are not included in the consolidated balance sheets for any periods presented.

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Divestitures - Narrative (Details) - USD ($) $ in Thousands				3 Months Ended	6 Months Ended
	Aug. 18, 2014	Apr. 16, 2014	Mar. 08, 2012	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Divestitures Narrative
Proceeds from sale of subsidiary					$ 0	$ 54,748
Advent Financial Services LLC [Member]
Divestitures Narrative
Proceeds from Sale of Intangible Assets	$ 1,000
Gain (Loss) on Disposition of Intangible Assets	$ 800
StreetLinks LLC [Member]
Divestitures Narrative
Bonus payments to StreetLinks employees		$ 1,000
Gain on sale of subsidiary before taxes				$ 48,200
Transaction-related costs				1,800
Assurant Services, LLC [Member] | Purchase and Sale Agreement [Member] | StreetLinks LLC [Member]
Divestitures Narrative
Cash received at closing, including portion attributable to noncontrolling interests		60,000
Proceeds from sale of subsidiary		53,900
Proceeds from sale of subsidiary, adjustments for working capital				$ 800
Contingent Consideration Receivable [Member] | Assurant Services, LLC [Member] | Purchase and Sale Agreement [Member] | StreetLinks LLC [Member]
Divestitures Narrative
Post-closing consideration, maximum		12,000
Minimum [Member] | 2015 [Member] | Contingent Consideration Receivable [Member] | Purchase and Sale Agreement [Member]
Divestitures Narrative
Post-closing consideration, total revenue requirement		184,000
Minimum [Member] | 2016 [Member] | Contingent Consideration Receivable [Member] | Purchase and Sale Agreement [Member]
Divestitures Narrative
Post-closing consideration, total revenue requirement		167,500
Potential Bonus Payments to StreetLinks Employees [Member]
Divestitures Narrative
Potential reduction of proceeds, maximum		$ 2,000
StreetLinks LLC [Member]
Divestitures Narrative
Increase in ownership percentage			5.00%
Decrease in ownership percentage		3.00%
Ownership percentage		88.00%
StreetLinks LLC [Member] | Unit Purchase Agreement [Member]
Divestitures Narrative
Membership units purchased			1,927
Membership units transferred		1,218
Remaining obligation, principal		$ 3,900
Remaining obligation, interest		$ 200

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Financial Statement Presentation

6 Months Ended

Jun. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Financial Statement Presentation

Financial Statement Presentation

Description of Operations – Novation Companies, Inc. (the “Company” or "Novation" or "we” or “us”) owns 100% of Corvisa LLC ("Corvisa"). Corvisa sells cloud-based communication software under the CorvisaOne® brand, telecommunications services, and implementation consulting services for its own customers as well as customers of a leading customer relationship management (CRM) software provider. This business was formerly known as CorvisaCloud, LLC, but was rebranded to Corvisa during the first quarter of 2015.

On April 16, 2014 we announced a significant strategic shift for Novation with the decision to focus our resources primarily on the business of Corvisa. This decision was based largely on the Company's belief that Corvisa represents a better opportunity for Novation to build long-term shareholder value due to Corvisa's CorvisaOne technology platform and the size of its target customer base.

On April 16, 2014, the Company and the non-controlling members of StreetLinks, a national residential appraisal and mortgage real estate valuation management services company, entered into a purchase and sale agreement with Assurant Services, LLC, a subsidiary of Assurant, Inc. ("Assurant"), pursuant to which Assurant purchased 100% of the outstanding membership units of StreetLinks. See Note 3 to the condensed consolidated financial statements for additional information regarding this transaction. The operations of StreetLinks have been classified as discontinued operations for all periods presented.

On August 18, 2014, the Company sold certain intellectual property, software, and customer data of its other operating subsidiary, Advent Financial Services LLC (“Advent”), to Santa Barbara Tax Products Group, LLC, and announced that it would be conducting an orderly winding-down of the remaining business and operations of Advent; a financial settlement services provider for professional tax preparers nationwide. As discussed in Note 3, the operations of Advent have been classified as discontinued operations for all periods presented.

Prior to 2008, the Company originated, purchased, securitized, sold, invested in and serviced residential nonconforming mortgage loans and mortgage securities. As a result of those activities, the Company acquired mortgage securities that continue to be a source of its earnings and cash flow. See Note 4 and Note 8 to the condensed consolidated financial statements for additional information regarding these securities and the valuation thereof. Also as a result of those activities, the Company may, from time to time, receive indemnification and loan repurchase demands related to past sales of loans to securitization trusts and other third parties. See Note 7 to the condensed consolidated financial statements for additional information regarding these demands.

Financial Statement Presentation – The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the period. The Company uses estimates and judgments in establishing the fair value of its mortgage securities and accounting for income taxes, including the determination of the timing of the establishment or release of the valuation allowance related to the deferred tax asset balances and reserves for uncertain tax positions. While the condensed consolidated financial statements and footnotes reflect the best estimates and judgments of management at the time, actual results could differ significantly from those estimates.

Cash equivalents consist of liquid investments with an original maturity of three months or less. Cash equivalents are stated at cost, which approximates fair value.

The condensed consolidated financial statements of the Company include the accounts of all wholly-owned and majority-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

The Company's condensed consolidated financial statements are unaudited. In the opinion of management, all necessary adjustments have been made, which were of a normal and recurring nature, for a fair presentation of the condensed consolidated financial statements. The Company's condensed consolidated financial statements should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements of the Company and the notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

Comparability. As noted in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, during the fourth quarter of 2014 the Company elected to update the presentation of its consolidated statement of operations to be more consistent with industry practice and allow for enhanced comparability between Corvisa and its peers. This update involved moving from the Company's historical presentation of only two categories of operating expenses to the revised presentation, which presents four categories of operation expenses: Cost of services, Development, Sales and marketing, and General and administrative. As a result, operating results for the six and three months ended June 30, 2014 have been reclassified to conform to the revised presentation.

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Marketable Securities - Available-for-Sale (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Marketable Securities, Current [Abstract]
Amortized cost basis, current	$ 19,696	$ 27,142
Accumulated gross unrealized gains, current	1,961	2,699
Accumulated gross unrealized losses, current	(10)	(26)
Fair value, current	$ 21,647	29,815
Average remaining maturity	5 months
Marketable Securities, Noncurrent [Abstract]
Amortized cost basis, non-current	$ 9,697	16,066
Accumulated gross unrealized gains, non-current	1	0
Accumulated gross unrealized losses, non-current	(15)	(54)
Fair value, non-current	$ 9,683	16,012
Average remaining maturity	18 months
Corporate notes and bonds
Marketable Securities, Current [Abstract]
Amortized cost basis, current	$ 19,087	24,462
Accumulated gross unrealized gains, current	0	0
Accumulated gross unrealized losses, current	(10)	(26)
Fair value, current	19,077	24,436
Marketable Securities, Noncurrent [Abstract]
Amortized cost basis, non-current	8,697	15,066
Accumulated gross unrealized gains, non-current	0	0
Accumulated gross unrealized losses, non-current	(15)	(52)
Fair value, non-current	8,682	15,014
Agency securities
Marketable Securities, Noncurrent [Abstract]
Amortized cost basis, non-current	1,000	1,000
Accumulated gross unrealized gains, non-current	1	0
Accumulated gross unrealized losses, non-current	0	(2)
Fair value, non-current	1,001	998
Commercial paper
Marketable Securities, Current [Abstract]
Amortized cost basis, current		1,998
Accumulated gross unrealized gains, current		0
Accumulated gross unrealized losses, current		0
Fair value, current		1,998
Mortgage securities
Marketable Securities, Current [Abstract]
Amortized cost basis, current	609	682
Accumulated gross unrealized gains, current	1,961	2,699
Accumulated gross unrealized losses, current	0	0
Fair value, current	$ 2,570	$ 3,381

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Commitments and Contingencies (Details) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2015	Dec. 31, 2007
Claims to Repurchase Securitized Loans [Member]
Loss Contingencies [Line Items]
Principal Amount Outstanding on Loans Securitized or Asset-backed Financing Arrangement			$ 43,100.0
Severance Agreements [Member]
Loss Contingencies [Line Items]
Contractual Obligation, Due in First Year	$ 0.1	$ 0.1
Contractual Obligation	0.4	0.4
Royalty Agreements [Member]
Loss Contingencies [Line Items]
Contractual Obligation, Due in First Year	0.5	0.5
Royalty Expense	0.1	0.2
Accrued Royalties	$ 0.4	$ 0.4

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Earnings per Share - Antidilutive Securities (Details) - Stock Options [Member] - $ / shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	10,350	8,856	10,148	8,675
Weighted average exercise price of stock otions	$ 0.62	$ 0.68	$ 0.63	$ 0.68

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands		Jun. 30, 2015	Dec. 31, 2014
Current Assets
Cash and cash equivalents		$ 4,726	$ 5,296
Marketable securities, current		21,647	29,815
Service fee receivable, net of allowance of $91 and $66, respectively		609	729
Other current assets		1,767	1,687
Current assets of discontinued operations		591	649
Total current assets		29,340	38,176
Non-Current Assets
Marketable securities, non-current		9,683	16,012
Property and equipment, net of accumulated depreciation		7,153	5,632
Deferred income tax asset, net		685	968
Other assets		1,391	1,391
Total non-current assets		18,912	24,003
Total assets		48,252	62,179
Current Liabilities
Accounts payable and accrued expenses		4,393	4,388
Deferred income tax liability, net		685	968
Other current liabilities		361	942
Current liabilities of discontinued operations	[1]	577	875
Total current liabilities		6,016	7,173
Non-Current Liabilities
Senior notes		87,215	85,937
Other liabilities		596	622
Non-current liabilities of discontinued operations		1,798	1,797
Total non-current liabilities		89,609	88,356
Total liabilities		$ 95,625	$ 95,529
Commitments and contingencies (Note 7)
Capital stock, $0.01 par value per share, 120,000,000 shares authorized:
Common stock, 91,479,519 shares issued and outstanding		$ 915	$ 915
Additional paid-in capital		744,216	743,919
Accumulated deficit		(794,441)	(780,803)
Accumulated other comprehensive income		1,937	2,619
Total Novation Companies, Inc. shareholders' deficit		(47,373)	(33,350)
Noncontrolling interests		0	0
Total shareholders' deficit		(47,373)	(33,350)
Total liabilities and shareholders' deficit		$ 48,252	$ 62,179

[1] Excludes amounts due to Novation of approximately $0.7 million as of both June 30, 2015 and December 31, 2014. These amounts are eliminated upon consolidation and, therefore, are not included in the consolidated balance sheets for any periods presented.

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Fair Value Accounting - Carrying Values and Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Carrying Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Restricted cash	$ 649	$ 597
Marketable securities	31,330	45,827
Senior notes	87,215	85,937
Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Restricted cash	487	450
Marketable securities	31,330	45,827
Senior notes	$ 16,692	$ 15,189

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Condensed Consolidated Statements of Shareholders' Equity (Deficit) - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Income [Member]	Noncontrolling Interest [Member]
Balance at Dec. 31, 2013	$ (68,220)	$ 915	$ 739,468	$ (811,742)	$ 3,103	$ 36
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Compensation recognized under stock compensation plans	381		381
Distributions to noncontrolling interests	(5)					(5)
Exchange of membership interests for forgiveness of note payable	3,921		3,814			107
Deconsolidation of subsidiary	(138)					(138)
Net (loss) income	41,007			41,007		0
Other comprehensive loss	(176)				(176)
Balance at Jun. 30, 2014	(23,230)	915	743,663	(770,735)	2,927	0
Balance at Dec. 31, 2014	(33,350)	915	743,919	(780,803)	2,619	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Compensation recognized under stock compensation plans	297		297
Net (loss) income	(13,638)			(13,638)		0
Other comprehensive loss	(682)				(682)
Balance at Jun. 30, 2015	$ (47,373)	$ 915	$ 744,216	$ (794,441)	$ 1,937	$ 0

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Property and Equipment, Net - Schedule of Property and Equipment (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 12,105	$ 9,433
Less: Accumulated depreciation and amortization	(4,952)	(3,801)
Property and equipment, net	7,153	5,632
Furniture, Fixtures and Office Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	753	756
Hardware and Computer Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	4,661	3,388
Software [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	5,786	4,384
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 905	$ 905

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Marketable Securities (Tables)

6 Months Ended

Jun. 30, 2015

Investments, Debt and Equity Securities [Abstract]

Available-for-sale Securities

The following table presents certain information on the Company's portfolio of available-for-sale securities as of June 30, 2015 and December 31, 2014 (dollars in thousands):

	As of June 30, 2015
Description of Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Marketable securities, current
Corporate notes and bonds	$	19,087	$	—	$	(10	)	$	19,077
Mortgage securities	609		1,961		—			2,570
Total	$	19,696	$	1,961	$	(10	)	$	21,647
Marketable securities, non-current
Corporate notes and bonds	$	8,697	$	—	$	(15	)	$	8,682
Agency securities	1,000		1		—			1,001
Total	$	9,697	$	1	$	(15	)	$	9,683
	As of December 31, 2014
Description of Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Marketable securities, current
Corporate notes and bonds	$	24,462	$	—	$	(26	)	$	24,436
Commercial paper	1,998		—		—			1,998
Mortgage securities	682		2,699		—			3,381
Total	$	27,142	$	2,699	$	(26	)	$	29,815
Marketable securities, non-current
Corporate notes and bonds	$	15,066	$	—	$	(52	)	$	15,014
Agency securities	1,000		—		(2		)	998
Total	$	16,066	$	—	$	(54	)	$	16,012

Schedule of Securitization Trust

The following table relates to the securitizations where the Company retained an interest in the assets issued by the securitization trust (dollars in thousands):

	Size/Principal Outstanding (A)		Assets on Balance Sheet (B)		Liabilities on Balance Sheet		Maximum Exposure to Loss(C)		Year to Date Loss on Sale		Year to Date Cash Flows (D)
June 30, 2015	$	3,836,814	$	2,570	$	—	$	2,570	$	—	$	3,279
December 31, 2014	4,062,068		3,381		—		3,381		—		3,395

(A) Size/Principal Outstanding reflects the estimated principal of the underlying assets held by the securitization trust.

(B) Assets on balance sheet are securities issued by the entity and are recorded in the current marketable securities line item on the condensed consolidated balance sheets.

(C) The maximum exposure to loss includes the assets held by the Company. The maximum exposure to loss assumes a total loss on the referenced assets held by the securitization trust.

(D) Year to date cash flows are for the six months ended June 30, 2015 and 2014, respectively.

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Property and Equipment, Net - Capital Leases (Details) - USD ($) $ in Millions	Jun. 30, 2015	Dec. 31, 2014
Capital Leased Assets [Line Items]
Capital Leased Assets, Gross	$ 1.1	$ 0.9
Capital Leased Assets, Accumulated Depreciation	$ 0.8	$ 0.6

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Contractual Obligation, Fiscal Year Maturity Schedule

In exchange for this non-exclusive license, the OEM agreement provided for usage-based license fees as well as certain guaranteed minimum annual royalty and professional services fees. The annual minimum due under the OEM agreement for the twelve month period ended June 20, 2015 was $0.5 million.

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash flows from operating activities:
Net (loss) income	$ (13,638)	$ 41,007
(Loss) Income from discontinued operations, net of income taxes	(18)	41,665
Net loss from continuing operations	(13,620)	(658)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Accretion of marketable securities	(77)	(385)
Provision for bad debt	61	56
Amortization of deferred debt issuance costs and senior debt discount	1,278	1,090
Loss on disposal of fixed assets, net	5	6
Compensation recognized under stock compensation plans	297	381
Depreciation expense	1,111	725
Deferred taxes	0	(8,185)
Eliminations of intercompany activity with discontinued operations	3	2,940
Changes in:
Due from discontinued operations	(5)	4,945
Service fee receivable	59	(566)
Other current assets and liabilities, net	(605)	339
Other noncurrent assets and liabilities, net	(54)	(68)
Accounts payable and accrued expenses	5	(1,437)
Net cash (used in) provided by operating activities of continuing operations	(11,542)	(817)
Net cash used in operating activities of discontinued operations	(297)	(4,184)
Net cash used in operating activities	(11,839)	(5,001)
Cash flows from investing activities:
Proceeds from sales and maturities of marketable securities	15,121	385
Payments for other investing activities	0	(3)
Proceeds from sale of subsidiary	0	54,748
Purchases of available-for-sale securities	(1,229)	(17,536)
Purchase of cost method investment	0	(600)
Purchases of property and equipment	(2,587)	(876)
Net cash provided by investing activities of continuing operations	11,305	36,118
Net cash used in investing activities of discontinued operations	0	(593)
Net cash provided by investing activities	11,305	35,525
Cash flows from financing activities:
Cash payments for contributions of capital to discontinued operations	(255)	(2,373)
Cash receipts from distributions of earnings from discontinued operations	0	9
Principal payments under capital leases	(78)	(136)
Net cash used in financing activities of continuing operations	(333)	(2,500)
Net cash provided by financing activities of discontinued operations	255	2,289
Net cash used in financing activities	(78)	(211)
Net (decrease) increase in cash and cash equivalents of continuing operations	(570)	32,801
Cash and cash equivalents, beginning of period	5,296	5,768
Cash and cash equivalents, end of period	4,726	38,569
Net decrease in cash and cash equivalents of discontinued operations	(42)	(2,488)
Cash and cash equivalents, beginning of period	358	3,499
Cash and cash equivalents, end of period	316	1,011
Supplemental Disclosure of Cash Flow Information
Cash paid for interest	439	551
Cash (paid for) received from income taxes, net	(737)	37
Cash received on mortgage securities – available-for-sale with no cost basis	2,929	3,011
Non-cash investing and financing activities:
Assets acquired under capital lease	$ 84	$ 140

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Balance Sheet Parenthetical - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Current Assets:
Allowance for doubtful accounts, service fee receivable	$ 91	$ 66
Shareholders' deficit:
Capital stock, par value	$ 0.01	$ 0.01
Capital stock, shares authorized	120,000,000	120,000,000
Common stock, shares issued	91,479,519	91,479,519
Common stock, shares outstanding	91,479,519	91,479,519

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Income Taxes

6 Months Ended

Jun. 30, 2015

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

For the six months ended June 30, 2015, the Company recorded an income tax expense from continuing operations of approximately $0.1 million. Income tax expense for three months ended June 30, 2015 was not material. The majority of income tax expense for the six months ended June 30, 2015 relates to our residual interests in certain mortgage securities and additional unrecognized tax benefits. For the six and three months ended June 30, 2014, the Company recorded an income tax benefit of $8.2 million and $6.2 million, respectively. The income tax benefit for these periods relates primarily to operating losses from continuing operations and the utilization of a portion of the Company's deferred tax assets to offset the income tax expense from discontinued operations arising from the gain on the sale of StreetLinks during the second quarter of 2014.

For the six and three months ended June 30, 2015, income tax expense from discontinued operations was not material. For the six and three months ended June 30, 2014, income tax expense from discontinued operations totaled $8.8 million and $6.7 million, respectively, and relates to income from discontinued operations arising primarily from the gain on the sale of StreetLinks.

The consolidated income tax expense (benefit) was not material for the six and three months ended June 30, 2015, as the Company's effective tax rate is expected to be close to 0% due to the valuation allowance against the Company's deferred tax assets, which is discussed further below. The consolidated income tax expense of $0.6 million and$0.5 million for the six and three months ended June 30, 2014, respectively, is comprised primarily of state income tax expense on the income from discontinued operations arising due to variations in state tax law around both the ability and the period over which to carryforward net operating losses.

Prior to 2014, the Company determined that it was no longer more likely than not that it will recognize a portion of its deferred tax assets. Therefore, as of both June 30, 2015 and December 31, 2014, the Company maintained a full valuation allowance against its deferred tax assets of $274.1 million and $268.6 million, respectively. The Company's determination of the extent to which its deferred tax assets will be realized requires the exercise of significant judgment, based in part on business plans and expectations about future outcomes. In the event the actual results differ from these estimates in future periods, the Company may need to adjust the valuation allowance, which could materially impact our financial position and results of operations. The Company will continue to assess the need for a valuation allowance in future periods.

As of both June 30, 2015 and December 31, 2014, the total gross amount of unrecognized tax benefits was $0.5 million. This amount also represents the total amount of unrecognized tax benefits that would impact the effective tax rate in the respective periods. The Company anticipates an additional reduction of the unrecognized tax benefits in the amount of $0.1 million due to the lapse of statute of limitations in the next twelve months.

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Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Jul. 31, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	NOVATION COMPANIES, INC.
Entity Central Index Key	0001025953
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Document Type	10-Q
Document Period End Date	Jun. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		91,479,519

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Segment Reporting

6 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

As detailed in Note 1 to the condensed consolidated financial statements, during 2014 the Company announced a significant strategic shift for Novation with the decision to focus its resources primarily on the business of Corvisa. Consistent with this strategic shift, the Company now operates as a single, consolidated operating segment, which encompasses the development, marketing, and support of the Company's cloud-based communication software and related services. Accordingly, the Company has determined that it has only one operating segment, and therefore, one reportable segment.

The Company's service fee income from external customers is comprised of the following products and services (dollars in thousands):

	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	2015		2014		2015		2014
Professional services	$	954	$	916	$	505	$	358
Communications services	726		503		386		271
Transition services	—		968		—		968
Total net service fee income	$	1,680	$	2,387	$	891	$	1,597

Reconciliation to Financial Statements

Prior to 2008, the Company originated, purchased, securitized, sold, invested in and serviced residential nonconforming mortgage loans and mortgage securities. The Company incurred significant debt to finance these legacy operations, which, though modified as discussed in Note 6, remains outstanding as of June 30, 2015. For the six and three months ended June 30, 2015, the Company incurred interest expense on its Senior Notes of approximately $1.7 million and $0.8 million, respectively, compared to $1.6 million and $0.8 million for the six and three months ended June 30, 2014, respectively.

Also as a result of the Company's legacy mortgage lending activities, the Company acquired mortgage securities that continue to be a source of its earnings and cash flow. The interest and cash flows received from these securities are used to fund the Company's ongoing operations described above. For the six and three months ended June 30, 2015, the Company earned interest income on these securities of approximately $3.2 million and $1.7 million, respectively. For the six and three months ended June 30, 2014, the Company earned approximately $3.4 million and $1.6 million from these securities, respectively.

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Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income and Revenues:
Service fee income	$ 891	$ 629	$ 1,680	$ 1,419
Service fee income – transition services	0	968	0	968
Interest income – mortgage securities	1,650	1,610	3,206	3,396
Total	2,541	3,207	4,886	5,783
Costs and Expenses:
Cost of services	1,682	666	3,115	1,363
Cost of services – transition services	0	608	0	608
Development	472	487	766	894
Sales and marketing	2,469	941	4,914	1,527
General and administrative	3,723	4,169	7,900	8,706
Total	8,346	6,871	16,695	13,098
Other (expense) income	(75)	29	(68)	66
Interest expense	(752)	(798)	(1,636)	(1,594)
Loss from continuing operations before income taxes	(6,632)	(4,433)	(13,513)	(8,843)
Income tax expense (benefit), continuing operations	17	(6,151)	107	(8,185)
Net (loss) income from continuing operations	(6,649)	1,718	(13,620)	(658)
(Loss) Income from discontinued operations, net of income taxes	(18)	38,526	(18)	41,665
Net (loss) income	(6,667)	40,244	(13,638)	41,007
Less: Net loss attributable to noncontrolling interests	0	(33)	0	0
Net (loss) income attributable to Novation	$ (6,667)	$ 40,277	$ (13,638)	$ 41,007
Earnings Per Share attributable to Novation:
Basic, in dollars per share	$ (0.07)	$ 0.44	$ (0.15)	$ 0.45
Diluted, in dollars per share	$ (0.07)	$ 0.44	$ (0.15)	$ 0.45
Weighted average basic shares outstanding	91,097,761	90,866,933	91,061,455	90,866,933
Weighted average diluted shares outstanding	91,097,761	90,940,843	91,061,455	90,866,933

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Property and Equipment, Net

6 Months Ended

Jun. 30, 2015

Property, Plant and Equipment [Abstract]

Property and Equipment, Net

Property and Equipment, Net

All of the Company's property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets. The estimated useful lives of the Company's property and equipment are the lesser of 5 years or remaining lease term for leasehold improvements, 5 years for furniture and fixtures, 3 to 5 years for office and computer equipment, and 1 to 3 years for software.

Maintenance and repairs are charged to expense. Major renewals and improvements are capitalized. Gains and losses on dispositions are credited or charged to earnings as incurred. Depreciation and amortization expense relating to property and equipment was $1.1 million and $0.6 million for the six and three months ended June 30, 2015, respectively, and $0.7 million and $0.4 million for the six and three months ended June 30, 2014, respectively.

The following table shows the Company's property and equipment, net as of June 30, 2015 and December 31, 2014 (dollars in thousands):

	June 30, 2015			December 31, 2014
Software	$	5,786		$	4,384
Hardware and computer equipment	4,661			3,388
Leasehold improvements	905			905
Furniture, fixtures and office equipment	753			756
Total Cost	12,105			9,433
Less: Accumulated depreciation and amortization	(4,952		)	(3,801		)
Property and equipment, net	$	7,153		$	5,632

The hardware and computer equipment amount above includes gross assets under capital leases of $1.1 million and $0.9 million as of June 30, 2015 and December 31, 2014, respectively. Accumulated depreciation and amortization of leased assets totaled approximately $0.8 million and $0.6 million as of June 30, 2015 and December 31, 2014, respectively.

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Marketable Securities

6 Months Ended

Jun. 30, 2015

Investments, Debt and Equity Securities [Abstract]

Marketable Securities

Marketable Securities

The following table presents certain information on the Company's portfolio of available-for-sale securities as of June 30, 2015 and December 31, 2014 (dollars in thousands):

	As of June 30, 2015
Description of Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Marketable securities, current
Corporate notes and bonds	$	19,087	$	—	$	(10	)	$	19,077
Mortgage securities	609		1,961		—			2,570
Total	$	19,696	$	1,961	$	(10	)	$	21,647
Marketable securities, non-current
Corporate notes and bonds	$	8,697	$	—	$	(15	)	$	8,682
Agency securities	1,000		1		—			1,001
Total	$	9,697	$	1	$	(15	)	$	9,683
	As of December 31, 2014
Description of Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Marketable securities, current
Corporate notes and bonds	$	24,462	$	—	$	(26	)	$	24,436
Commercial paper	1,998		—		—			1,998
Mortgage securities	682		2,699		—			3,381
Total	$	27,142	$	2,699	$	(26	)	$	29,815
Marketable securities, non-current
Corporate notes and bonds	$	15,066	$	—	$	(52	)	$	15,014
Agency securities	1,000		—		(2		)	998
Total	$	16,066	$	—	$	(54	)	$	16,012

Prior to 2008, the Company originated, purchased, securitized, sold, invested in and serviced residential nonconforming mortgage loans and mortgage securities. As a result of those activities, the Company acquired mortgage securities that continue to be a source of its earnings and cash flow. As of June 30, 2015 and December 31, 2014, these mortgage securities consisted entirely of the Company's investment in the residual securities issued by securitization trusts sponsored by the Company. Residual securities consist of interest-only, prepayment penalty and overcollateralization bonds.

There were no other-than-temporary impairments relating to available-for-sale securities for the six and three months ended June 30, 2015 and 2014. The average remaining maturities of the Company’s short-term and long-term available-for-sale investments at June 30, 2015 were approximately five months and eighteen months, respectively. Maturities of mortgage securities owned by the Company depend on repayment characteristics and experience of the underlying financial instruments. See Note 8 to the condensed consolidated financial statements for details on the Company's fair value methodology.

The following table relates to the securitizations where the Company retained an interest in the assets issued by the securitization trust (dollars in thousands):

	Size/Principal Outstanding (A)		Assets on Balance Sheet (B)		Liabilities on Balance Sheet		Maximum Exposure to Loss(C)		Year to Date Loss on Sale		Year to Date Cash Flows (D)
June 30, 2015	$	3,836,814	$	2,570	$	—	$	2,570	$	—	$	3,279
December 31, 2014	4,062,068		3,381		—		3,381		—		3,395

(A) Size/Principal Outstanding reflects the estimated principal of the underlying assets held by the securitization trust.

(B) Assets on balance sheet are securities issued by the entity and are recorded in the current marketable securities line item on the condensed consolidated balance sheets.

(C) The maximum exposure to loss includes the assets held by the Company. The maximum exposure to loss assumes a total loss on the referenced assets held by the securitization trust.

(D) Year to date cash flows are for the six months ended June 30, 2015 and 2014, respectively.

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Property and Equipment, Net (Tables)

6 Months Ended

Jun. 30, 2015

Property, Plant and Equipment [Abstract]

Property and Equipment, Net

The following table shows the Company's property and equipment, net as of June 30, 2015 and December 31, 2014 (dollars in thousands):

	June 30, 2015			December 31, 2014
Software	$	5,786		$	4,384
Hardware and computer equipment	4,661			3,388
Leasehold improvements	905			905
Furniture, fixtures and office equipment	753			756
Total Cost	12,105			9,433
Less: Accumulated depreciation and amortization	(4,952		)	(3,801		)
Property and equipment, net	$	7,153		$	5,632

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Earnings per Share

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Earnings per Share

Earnings per Share

Basic earnings per share is computed by dividing net earnings available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share include the effect of conversions of stock options and nonvested shares. The computations of basic and diluted earnings per share for the six and three months ended June 30, 2015 and 2014 (dollars in thousands, except share and per share amounts) are as follows:

	For the Six Months Ended June 30,						For the Three Months Ended June 30,
	2015			2014			2015			2014
Numerator:
Net (loss) income from continuing operations	$	(13,620	)	$	(658	)	$	(6,649	)	$	1,718
Net (loss) income from discontinued operations	(18		)	41,665			(18		)	38,526
Net (loss) income	(13,638		)	41,007			(6,667		)	40,244
Less net loss attributable to noncontrolling interests	—			—			—			(33		)
Net (loss) income available to common shareholders	$	(13,638	)	$	41,007		$	(6,667	)	$	40,277
Denominator:
Weighted average common shares outstanding – basic	91,061,455			90,866,933			91,097,761			90,866,933
Weighted average common shares outstanding – dilutive:
Weighted average common shares outstanding – basic	91,061,455			90,866,933			91,097,761			90,866,933
Stock options	—			—			—			—
Nonvested shares	—			—			—			73,910
Weighted average common shares outstanding – dilutive	91,061,455			90,866,933			91,097,761			90,940,843
Basic earnings per share:
Net (loss) income from continuing operations	$	(0.15	)	$	(0.01	)	$	(0.07	)	$	0.02
Net (loss) income from discontinued operations	—			0.46			—			0.42
Net (loss) income	(0.15		)	0.45			(0.07		)	0.44
Less net loss attributable to noncontrolling interests	—			—			—			—
Net (loss) income available to common shareholders	$	(0.15	)	$	0.45		$	(0.07	)	$	0.44
Diluted earnings per share:
Net (loss) income from continuing operations	$	(0.15	)	$	(0.01	)	$	(0.07	)	$	0.02
Net (loss) income from discontinued operations	—			0.46			—			0.42
Net (loss) income	(0.15		)	0.45			(0.07		)	0.44
Less net loss attributable to noncontrolling interests	—			—			—			—
Net (loss) income available to common shareholders	$	(0.15	)	$	0.45		$	(0.07	)	$	0.44

The following weighted-average options to purchase shares of common stock were outstanding during each period presented, but were not included in the computation of diluted earnings per share because the calculated number of shares assumed to be repurchased was greater than the number of shares to be obtained upon exercise, therefore, the effect would be antidilutive (in thousands, except exercise prices):

	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	2015		2014		2015		2014
Number of stock options	10,148		8,675		10,350		8,856
Weighted average exercise price of stock options	$	0.63	$	0.68	$	0.62	$	0.68

During the second quarter of 2015, the Company granted approximately 0.7 million options to purchase shares of common stock at a weighted average exercise price of $0.51. The weighted average impact of 0.2 million and 0.4 million of these current year option grants are included in the table above for the six and three months ended June 30, 2015, respectively. During the second quarter of 2014, the Company granted 3.0 million options to purchase shares of common stock at a weighted average exercise price of $0.51. The weighted average impact of 0.2 million and 0.4 million of these options are included in the table above for the six and three months ended June 30, 2014, respectively.

The Company had approximately 0.4 million and 0.6 million nonvested shares outstanding as of June 30, 2015 and June 30, 2014, respectively. The majority of the nonvested shares vest ratably over their original term of six years, while a small number of these shares as of June 30, 2014 had an original cliff vesting schedule of ten years. The weighted average impact of approximately 0.4 million nonvested shares were not included in the calculation of earnings per share for the six and three months ended June 30, 2015, respectively, because they were anti-dilutive. Approximately 0.6 million and 0.5 million nonvested shares were not included in the calculation of earnings per share for the six and three months ended June 30, 2014, respectively.

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Commitments and Contingencies Subsequent Events (Notes)

6 Months Ended

Jun. 30, 2015

Subsequent Events [Abstract]

Subsequent Events [Text Block]

Subsequent to June 30, 2015, Corvisa and ManyWho entered into Amendment No. 1 to the OEM Agreement, whereby Corvisa agreed to pay approximately $0.4 million in satisfaction of the minimum royalties payable for the first contract year. The parties also agreed to eliminate the minimum royalty amounts payable in future years. The usage-based license fees set forth in the original OEM were not impacted by the amendment.

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Borrowings

6 Months Ended

Jun. 30, 2015

Borrowings [Abstract]

Borrowings

Borrowings

Senior Notes –The Company has outstanding unsecured senior notes pursuant to three indentures (collectively, the “Senior Notes”) with an aggregate principal balance of $85.9 million. The Senior Notes were created through an exchange of the Company's previously outstanding junior subordinated notes that occurred prior to 2012. This exchange was considered a modification of a debt instrument for accounting purposes, therefore the Company uses the effective interest method to accrete from the existing balance as of the modification date to $87.2 million and $85.9 million as of June 30, 2015 and December 31, 2014, respectively. Under the effective interest method, significant changes in the rate at which a debt instrument accrues interest over its term can result in a recorded balance in excess of the aggregate principal balance of the debt instrument.

The Senior Notes accrue interest at a rate of 1.0% until the earlier of (a) the completion of an equity offering by the Company or its subsidiaries that results in proceeds of $40 million or more or (b) January 1, 2016. Thereafter, the Senior Notes will accrue interest at a rate of three-month LIBOR plus 3.5% (the “Full Rate”). Interest on the Senior Notes is paid on a quarterly basis and no principal payments are due until maturity on March 30, 2033.

The indentures governing the Senior Notes (the “Indentures”) contain certain restrictive covenants (the “Negative Covenants”) subject to certain exceptions in the Indentures, including written consent of the holders of the Senior Notes. The Negative Covenants prohibit the Company and its subsidiaries, from among other things, incurring debt, permitting any lien upon any of its property or assets, making any cash dividend or distribution or liquidation payment, acquiring shares of the Company or its subsidiaries, making payment on debt securities of the Company that rank pari passu or junior to the Senior Notes, or disposing of any equity interest in its subsidiaries or all or substantially allof the assets of its subsidiaries. The Negative Covenants remain in effect until both of the following conditions are met: 1) the Senior Notes begin accruing interest at the Full Rate, and 2) the Company satisfies certain financial covenants (the “Financial Covenants”). Satisfaction of the Financial Covenants requires the Company to demonstrate on a consolidated basis that (1) its Tangible Net Worth is equal to or greater than $40 million, and (2) either (a) the Interest Coverage Ratio is equal to or greater than 1.35x, or (b) the Leverage Ratio is not greater than 95%. As the Senior Notes were not accruing interest at the Full Rate, the Negative Covenants, as defined above, were still in effect as of June 30, 2015 and December 31, 2014. Compliance with the Financial Covenants is required only when the Company seeks to take action prohibited by the Negative Covenants that has not been approved by the holders of the Senior Notes.

As discussed in Note 3 to the condensed consolidated financial statements, on April 16, 2014, the Company and the non-controlling members of StreetLinks entered into a purchase and sale agreement with Assurant, pursuant to which Assurant purchased 100% of the outstanding membership units of StreetLinks. The sale of a subsidiary is not prohibited by the Negative Covenants provided that the sale is at fair market value and the proceeds are reinvested in the Company. As such, the Company was in compliance with all Negative Covenants as of June 30, 2015 and December 31, 2014, and therefore the Company was under no obligation to comply with the Financial Covenants during these periods.

Note Payable to Related Party – As detailed in Note 3, prior to 2013, the Company entered into a Membership Interest Purchase Agreement (the "Unit Purchase Agreement") with its Chief Operating Officer, Mr. Steve Haslam, pursuant to which Mr. Haslam sold 1,927 units in StreetLinks to the Company in exchange for a total purchase price of $6.1 million, payable in quarterly installments. On April 16, 2014, the Company and Mr. Haslam agreed to terminate the Unit Purchase Agreement. In full satisfaction of the Company's outstanding obligation under the Unit Purchase Agreement, the Company transferred back to Mr. Haslam 1,218 StreetLinks membership units, which represents the portion of the membership units attributable to the $3.9 million in unpaid installment payments and $0.2 million in interest remaining under the Unit Purchase Agreement.

Capital Leases –The Company leases hardware and computer equipment under capital leases. These capital leases are payable in 36 monthly installments and mature between July 2015 and March 2018. Current maturities of obligations under capital leases were approximately $0.3 million as of both June 30, 2015 and December 31, 2014, while noncurrent maturities of obligations under capital leases were approximately $0.1 million as of both June 30, 2015 and December 31, 2014. Due to the immaterial nature of these obligations with regard to the Company's financial statements as a whole, current maturities and noncurrent maturities of capital leases are included in the other current liabilities and other liabilities line items, respectively, in the Company's condensed consolidated balance sheets.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Commitments –In September 2014, Steve Haslam, who was then Senior Vice President and Chief Operating Officer of the Company announced that, in lieu of accepting a new role with the Company and relocating, he was retiring from the Company effective October 1, 2014. Pursuant to the terms of his Employment Agreement dated March 8, 2012, Mr. Haslam elected to terminate his employment for “Good Reason” in connection with the new position and relocation offered to him. In addition to accrued but unpaid salary and other benefits, Mr. Haslam will be paid $0.4 million severance from the date of termination through October 1, 2015. The full amount of Mr. Haslam's severance was charged to income from continuing operations during the third quarter of 2014 in accordance with the relevant accounting guidance. As of June 30, 2015, the remaining accrual of $0.1 million is included in accounts payable and accrued expenses and will be reduced as payments are made to Mr. Haslam.

In conjunction with its minority investment in ManyWho, Inc. ("ManyWho") during the second quarter of 2014, Corvisa entered into an Original Equipment Manufacturer ("OEM") agreement with ManyWho, which provides Corvisa with a non-exclusive license to integrate ManyWho's workflow technology into existing and forthcoming Corvisa service offerings. In exchange for this non-exclusive license, the OEM agreement provided for usage-based license fees as well as certain guaranteed minimum annual royalty and professional services fees. The annual minimum due under the OEM agreement for the twelve month period ended June 20, 2015 was $0.5 million. As of June 30, 2015, the Company had accrued approximately $0.4 million related to this obligation. This accrual is included in accounts payable and accrued expenses, while approximately $0.2 million and $0.1 million of the corresponding expense is included in cost of services for the six and three months ended June 30, 2015, respectively. Due to the timing of this agreement, the royalty expense for the six and three months ended June 30, 2014 was not material.

Subsequent to June 30, 2015, Corvisa and ManyWho entered into Amendment No. 1 to the OEM Agreement, whereby Corvisa agreed to pay approximately $0.4 million in satisfaction of the minimum royalties payable for the first contract year. The parties also agreed to eliminate the minimum royalty amounts payable in future years. The usage-based license fees set forth in the original OEM were not impacted by the amendment.

Contingencies –Prior to 2008, the Company originated, purchased, securitized, sold, invested in and serviced residential nonconforming mortgage loans and mortgage securities. The Company has received indemnification and loan repurchase demands with respect to alleged violations of representations and warranties (“defects”) and with respect to other alleged misrepresentations and contractual commitments made in loan sale and securitization agreements. These demands have been received substantially beginning in 2006 and have continued into 2015. Prior to the Company ceasing the origination of loans in its mortgage lending business, it sold loans to securitization trusts and other third parties and agreed to repurchase loans with material defects and to otherwise indemnify parties to these transactions. Beginning in 1997 and ending in 2007, affiliates of the Company sold loans to securitization trusts and third parties with the potential of such obligations. The aggregate original principal balance of these loans was $43.1 billion at the time of sale or securitization. The remaining principal balance of these loans is not available as these loans are serviced by third parties and may have been refinanced, sold or liquidated. Claims to repurchase loans or to indemnify under securitization documents have not been acknowledged as valid by the Company. In some cases, claims were made against affiliates of the Company that have ceased operations and have no or limited assets. The Company has not repurchased any loans or made any such indemnification payments since 2010.

Historically, repurchases of loans or indemnification of losses where a loan defect has been alleged have been insignificant and any future losses for alleged loan defects have not been deemed to be probable or reasonably estimable; therefore, the Company has recorded no reserves related to these claims. The Company does not use internal groupings for purposes of determining the status of these loans. The Company is unable to develop an estimate of the maximum potential amount of future payments related to repurchase demands because the Company does not have access to information relating to loans sold and securitized and the number or amount of claims deemed probable of assertion is not known nor is it reasonably estimable. Further, the validity of claims received remains questionable. Also, considering that the Company completed its last sale or securitization of loans during 2007, the Company believes that it will be difficult for a claimant to successfully validate any additional repurchase demands. Management does not expect that the potential impact of claims will be material to the Company's financial statements.

Pending Litigation –The Company is a party to various legal proceedings. Except as set forth below, these proceedings are of an ordinary and routine nature. Any legal fees associated with these proceedings are expensed as incurred.

Although it is not possible to predict the outcome of any legal proceeding, in the opinion of management, other than the active proceedings described in detail below, proceedings and actions against the Company should not, individually, or in the aggregate, have a material effect on the Company's financial condition, operations or liquidity. Furthermore, due to the uncertainty of any potential loss as a result of pending litigation and due to the Company's belief that an adverse ruling is not probable, the Company has not accrued a loss contingency related to the following matters in its consolidated financial statements. However, a material outcome in one or more of the active proceedings described below could have a material impact on the results of operations in a particular quarter or fiscal year.

On May 21, 2008, a purported class action case was filed in the Supreme Court of the State of New York, New York County, by the New Jersey Carpenters' Health Fund, on behalf of itself and all others similarly situated. Defendants in the case included NovaStar Mortgage Funding Corporation (“NMFC”), a wholly-owned subsidiary of the Company, and its individual directors, several securitization trusts sponsored by the Company (“affiliated defendants”) and several unaffiliated investment banks and credit rating agencies. The case was removed to the United States District Court for the Southern District of New York. On June 16, 2009, the plaintiff filed an amended complaint. The plaintiff seeks monetary damages, alleging that the defendants violated sections 11, 12 and 15 of the Securities Act of 1933, as amended, by making allegedly false statements regarding mortgage loans that served as collateral for securities purchased by the plaintiff and the purported class members. On August 31, 2009, the Company filed a motion to dismiss the plaintiff's claims, which the court granted on March 31, 2011, with leave to amend. The plaintiff filed a second amended complaint on May 16, 2011, and the Company again filed a motion to dismiss. On March 29, 2012, the court dismissed the plaintiff's second amended complaint with prejudice and without leave to replead. The plaintiff filed an appeal. On March 1, 2013, the appellate court reversed the judgment of the lower court, which had dismissed the case. Also, the appellate court vacated the judgment of the lower court which had held that the plaintiff lacked standing, even as a class representative, to sue on behalf of investors in securities in which plaintiff had not invested, and the appellate court remanded the case back to the lower court for further proceedings. On April 23, 2013 the plaintiff filed its memorandum with the lower court seeking a reconsideration of the earlier dismissal of plaintiff's claims as to five offerings in which plaintiff was not invested, and on February 5, 2015 the lower court granted plaintiff's motion for reconsideration and vacated its earlier dismissal. Given the early stage of the litigation, the Company cannot provide an estimate of the range of any loss. The Company believes that the affiliated defendants have meritorious defenses to the case and expects them to defend the case vigorously.

On June 20, 2011, the National Credit Union Administration Board, as liquidating agent of U.S. Central Federal Credit Union, filed an action against NMFC and numerous other defendants in the United States District Court for the District of Kansas, claiming that the defendants issued or underwrote residential mortgage-backed securities pursuant to allegedly false or misleading registration statements, prospectuses, and/or prospectus supplements. On August 24, 2012, the plaintiff filed an amended complaint making essentially the same claims against NMFC. NMFC filed a motion to dismiss the amended complaint which was denied on September 12, 2013. The defendants had claimed that the case should be dismissed based upon a statute of limitations and sought an appeal of the court's denial of this defense. An interlocutory appeal of this issue was allowed, and on August 27, 2013, the Tenth Circuit affirmed the lower court’s denial of defendants’ motion to dismiss the plaintiff’s claims as being time barred; the appellate court held that the Extender Statute, 12 U.S.C. §1787(b)(14) applied to plaintiff’s claims. On June 16, 2014, the United States Supreme Court granted a petition of NMFC and its co-defendants for certiorari, vacated the ruling of the Tenth Circuit, and remanded the case back to that court for further consideration in light of the Supreme Court’s decision in CTS Corp. v. Waldburger, 134 S. Ct. 2175 (2014). On August 19, 2014, the Tenth Circuit reaffirmed its prior decision, and on October 2, 2014 the defendants filed a petition for writ of certiorari with the Supreme Court, which was denied. This litigation is in an early stage, and the Company cannot provide an estimate of the range of any loss. The Company believes that NMFC has meritorious defenses to the case and expects it to defend the case vigorously.

On February 28, 2013 the Federal Housing Finance Agency, as conservator for the Federal Home Loan Mortgage Corporation (Freddie Mac) and on behalf of the Trustee of the NovaStar Mortgage Funding Trust, Series 2007-1 (the “Trust”), a securitization trust in which the Company retains a residual interest, filed a summons with notice in the Supreme Court of the State of New York, County of New York against Novation Companies, Inc. and NovaStar Mortgage, Inc. (“NMI”), a wholly-owned subsidiary of the Company. The notice provides that this is a breach of contract action with respect to certain, unspecified mortgage loans and defendant's failure to repurchase such loans under the applicable agreements. Plaintiff alleges that defendants, from the closing date of the transaction that created the Trust that mortgage loans that were sold to the Trust, were aware of the breach of the representations and warranties made and failed to notice and cure such breaches, and due to the failure of defendants to cure any breach, notice to defendants would have been futile. The summons with notice was not served until June 28, 2013. By letter dated June 24, 2013, the Trustee of the Trust forwarded a notice from Freddie Mac alleging breaches of representations and warranties with respect to 43 loans, as more fully set forth in included documentation. The 43 loans had an aggregate, original principal balance of about $6.5 million. On August 19, 2013, Deutsche Bank National Trust Company, as Trustee, filed a complaint identifying alleged breaches of representations and warranties with respect to seven loans that were included in the earlier list of 43 loans. Plaintiff also generally alleged a trust-wide breach of representations and warranties by defendants with respect to loans sold and transferred to the trust. Plaintiff seeks specific performance of repurchase obligations; compensatory, consequential, recessionary and equitable damages for breach of contract; specific performance and damages for anticipatory breach of contract; and indemnification (indemnification against NMI only). On October 9, 2013, the Company and NMI filed a motion to dismiss plaintiff’s complaint. This motion to dismiss was withdrawn after plaintiff filed an amended complaint on January 28, 2014, and on March 4, 2014 the Company and NMI filed a motion to dismiss the amended complaint. This litigation is in an early stage, and the Company cannot provide an estimate of the range of any loss. The Company believes that it has meritorious defenses to the case and expects to defend the case vigorously.

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Fair Value Accounting

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value Accounting

Fair Value Accounting

Fair Value Measurements

The Company's valuation techniques are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs create the following fair value hierarchy:

•Level 1 – Valuations based on quoted prices in active markets for identical assets and liabilities.

•Level 2 – Valuations based on observable inputs in active markets for similar assets and liabilities, other than Level 1 prices, such as quoted interest or currency exchange rates.

•Level 3 – Valuations based on significant unobservable inputs that are supported by little or no market activity, such as discounted cash flow methodologies based on internal cash flow forecasts.

The following tables present for each of the fair value hierarchy levels, the Company's assets which are measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014 (dollars in thousands):

			Fair Value Measurements at Reporting Date Using
Description	Fair Value at June 30, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents:
Cash	2,149		$	2,149	$	—	$	—
Money market funds	2,577		2,577		—		—
Marketable securities, current:
Corporate notes and bonds	19,077		—		19,077		—
Mortgage securities	2,570		—		—		2,570
Marketable securities, non-current:
Corporate notes and bonds	8,682		—		8,682		—
Agency securities	1,001		—		1,001		—
Total	$	36,056	$	4,726	$	28,760	$	2,570

			Fair Value Measurements at Reporting Date Using
Description	Fair Value at December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents:
Cash	$	2,701	$	2,701	$	—	$	—
Money market funds	2,595		2,595		—		—
Marketable securities, current:
Corporate notes and bonds	24,436		—		24,436		—
Commercial paper	1,998		—		1,998		—
Mortgage securities	3,381		—		—		3,381
Marketable securities, non-current:
Corporate notes and bonds	15,014		—		15,014		—
Agency securities	998		—		998		—
Total	$	51,123	$	5,296	$	42,446	$	3,381

Valuation Methods and Processes

The Company determines the fair value of its cash equivalents and marketable securities based on pricing from our service provider and market prices from industry-standard independent data providers. Such market prices may be quoted prices in active markets for identical assets (Level 1 inputs) or pricing determined using inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs), such as yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, broker and dealer quotes, as well as other relevant economic measures.

To the extent observable inputs are not available, as is the case with the Company's mortgage securities, the Company estimates fair value using present value techniques and generally does not have the option to choose other valuation methods for these securities. The methods and processes used to estimate the fair value of the Company's mortgage securities are discussed further below. There have been no significant changes to the Company's valuation techniques during the six months ended June 30, 2015. Accordingly, there have been no material changes to the financial statements resulting from changes to our valuation techniques during the six months ended June 30, 2015.

The Company's marketable securities are classified as available-for-sale and are reported at their estimated fair value with unrealized gains and losses reported in accumulated other comprehensive income. To the extent that the cost basis of the Company's marketable securities exceeds the fair value and the unrealized loss is considered to be other than temporary, an impairment charge is recognized and the amount recorded in accumulated other comprehensive income or loss is reclassified to earnings as a realized loss. The specific identification method is used in computing realized gains or losses.

Mortgage securities - available-for-sale. As discussed above and in Note 4 to the condensed consolidated financial statements, the Company's mortgage securities – available-for-sale, are measured at fair value. These securities are valued at each reporting date using significant unobservable inputs (Level 3) by discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment.

The Company uses the discount rate methodology for determining the fair value of its residual securities. The fair value of the residual securities is estimated based on the present value of future expected cash flows to be received. Management's best estimate of key assumptions, including credit losses, prepayment speeds, forward yield curves and discount rates commensurate with the risks involved, are used in estimating future cash flows.

An independent entity has been engaged to prepare projected future cash flows of the Company's mortgage securities for each reporting period (quarterly) used by management to estimate fair value. The Company's internal finance and accounting staff reviews and monitors the work of the independent entity, including an analysis of the assumptions used, retrospective review of prior period assumptions, and preparation of an overall conclusion regarding the value and valuation process. All other fair value analysis, consisting of simple cash flow estimates and discounting techniques, is conducted internally by the Company's internal financial staff. The Company's fair value process is conducted under the supervision of the Chief Financial Officer.

The following table presents certain quantitative information about the significant unobservable inputs used in the fair value measurement for items measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

Description	Valuation Techniques	Significant Unobservable Inputs	Range
Assets:
Mortgage securities – available-for-sale	Present value analysis	Prepayment rates	5.4% – 10.6%
		Weighted average life (years)	2.0

The significant unobservable inputs used in the fair value measurement of mortgage securities – available-for-sale are prepayment rates and the weighted average life for the underlying mortgage loan collateral. Using a faster (higher) estimated prepayment rate would decrease the value of the securities. The Company uses a weighted average life of 2 years from the reporting date for the expected future estimated cash flows. The future cash flows are highly-dependent upon the performance of the underlying collateral of mortgage loans. The nonperformance risk associated with the collateral is the key reason the Company utilizes such a short weighted average life in its calculation. Assuming a shorter weighted average life would decrease the estimated value of the mortgage securities. Alternatively, assuming a longer weighted average life would increase the estimated value of the mortgage securities.

The following table provides a reconciliation of the beginning and ending balances for the Company's mortgage securities – available-for-sale, which are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six and three months ended June 30, 2015 and 2014 (dollars in thousands):

	For the Six Months Ended June 30,						For the Three Months Ended June 30,
	2015			2014			2015			2014
Balance, beginning of period	$	3,381		$	3,728		$	3,201		$	3,466
Increases (decreases) to mortgage securities – available-for-sale:
Accretion of income (A)	277			385			140			192
Proceeds from paydowns of securities (A)	(351		)	(385		)	(173		)	(156		)
Mark-to-market value adjustment	(737		)	(176		)	(598		)	50
Net (decrease) increase to mortgage securities – available-for-sale	(811		)	(176		)	(631		)	86
Balance, end of period	$	2,570		$	3,552		$	2,570		$	3,552

(A) Cash received on mortgage securities with no cost basis was $2.9 million and $1.5 million for the six and three months ended June 30, 2015, respectively, and $3.0 million and $1.4 million for the six and three months ended June 30, 2014, respectively.

Adjustments to assets and liabilities measured at fair value on a recurring and nonrecurring basis did not have a material impact on the earnings of continuing operations for any period presented.

The following disclosure of the estimated fair value of financial instruments presents amounts that have been determined using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that could be realized in a current market exchange. The use of different market assumptions or estimation methodologies could have a material impact on the estimated fair value amounts. The fair value of short-term financial assets and liabilities, such as service fees receivable, notes receivable, and accounts payable and accrued expenses are not included in the following table as their carrying value approximates their fair value.

The estimated fair values of the Company's financial instruments are as follows as of June 30, 2015 and December 31, 2014 (dollars in thousands):

	As of June 30, 2015				As of December 31, 2014
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Restricted cash	$	649	$	487	$	597	$	450
Marketable securities	31,330		31,330		45,827		45,827
Financial liabilities:
Senior notes	$	87,215	$	16,692	$	85,937	$	15,189

For the items in the table above not measured at fair value in the statement of financial position but for which the fair value is disclosed, the fair value has been estimated using Level 3 methodologies, based on significant unobservable inputs that are supported by little or no market activity, such as discounted cash flow calculations based on internal cash flow forecasts. No assets or liabilities have been transferred between levels during any period presented.

Restricted cash – The fair value of restricted cash was estimated by discounting estimated future releases of the cash from restriction. Restricted cash is included in the other current assets and other assets line items in the Company's condensed consolidated balance sheets.

Senior notes – The fair value is estimated by discounting future projected cash flows using a discount rate commensurate with the risks involved. The value of the Senior Notes was calculated assuming that the Company would be required to pay interest at a rate of 1.0% per annum until January 2016, at which time the Company would be required to start paying the Full Rate of three-month LIBOR plus 3.5% until maturity in March 2033. The three-month LIBOR used in the analysis was projected using a forward interest rate curve.

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Property and Equipment, Net - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Property, Plant and Equipment [Line Items]
Depreciation and amortization expense	$ 0.6	$ 0.4	$ 1.1	$ 0.7
Leasehold Improvements [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life of property and equipment			5 years
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life of property and equipment			5 years
Office and Computer Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life of property and equipment			3 years
Office and Computer Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life of property and equipment			5 years
Software [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life of property and equipment			1 year
Software [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful life of property and equipment			3 years

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Segment Reporting - Narrative (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($) segments	Jun. 30, 2014 USD ($)
Segment Reporting Information [Line Items]
Interest income – mortgage securities	$ 1,650	$ 1,610	$ 3,206	$ 3,396
Number of company reporting segments | segments			1
Segment Reconciling Items [Member]
Segment Reporting Information [Line Items]
Interest expense, debt	800	800	$ 1,700	1,600
Interest income – mortgage securities	$ 1,700	$ 1,600	$ 3,200	$ 3,400

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Divestitures (Tables)

6 Months Ended

Jun. 30, 2015

Discontinued Operations and Disposal Groups [Abstract]

Income Statement by Disposal Groups, Including Discontinued Operations [Table Text Block]

The results of the Company's discontinued operations are summarized below (dollars in thousands):

	For the Six Months Ended June 30,					For the Three Months Ended June 30,
	2015			2014		2015			2014
Service fee income	$	—		$	37,347	$	—		$	6,582
(Loss) income from discontinued operations before income taxes	$	(18	)	$	50,448	$	(18	)	$	45,247
Income tax expense	—			8,783		—			6,721
(Loss) income from discontinued operations, net of income taxes	$	(18	)	$	41,665	$	(18	)	$	38,526

Balance Sheet by Disposal Groups, Including Discontinued Operations [Table Text Block]

The major classes of assets and liabilities of discontinued operations as of June 30, 2015and December 31, 2014 are detailed below (dollars in thousands).

	June 30, 2015		December 31, 2014
Assets
Current Assets
Cash and cash equivalents	$	316	$	358
Other current assets	275		291
Total current assets	$	591	$	649
Liabilities
Current Liabilities
Accounts payable and accrued expenses	$	577	$	875
Total current liabilities (A)	577		875
Non-Current Liabilities
Other liabilities	1,798		1,797
Total non-current liabilities	1,798		1,797
Total liabilities (A)	$	2,375	$	2,672

(A) Excludes amounts due to Novation of approximately $0.7 million as of both June 30, 2015 and December 31, 2014. These amounts are eliminated upon consolidation and, therefore, are not included in the consolidated balance sheets for any periods presented.

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Segment Reporting (Tables)

6 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

Revenue from External Customers by Products and Services [Table Text Block]

The Company's service fee income from external customers is comprised of the following products and services (dollars in thousands):

	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	2015		2014		2015		2014
Professional services	$	954	$	916	$	505	$	358
Communications services	726		503		386		271
Transition services	—		968		—		968
Total net service fee income	$	1,680	$	2,387	$	891	$	1,597

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Income Taxes - Unrecognized Tax Benefits (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Income Tax Contingency [Line Items]
Unrecognized Tax Benefits	$ 0.5	$ 0.5
Unrecognized Tax Benefits Reductions Resulting From Lapse Of Applicable Statute Of Limitations, Due In Next Twelve Months	$ 0.1

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Commitments and Contingencies Subsequent Events (Details) $ in Millions	3 Months Ended
	Sep. 30, 2015 USD ($)
Royalty Agreements [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Loss Contingency Accrual, Payments	$ 0.4

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Condensed Consolidated Statements of Comprehensive (Loss) Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Net (loss) income	$ (6,667)	$ 40,244	$ (13,638)	$ 41,007
Other comprehensive (loss) income:
Change in unrealized gain on marketable securities – available-for-sale	(605)	50	(682)	(176)
Total comprehensive (loss) income	(7,272)	40,294	(14,320)	40,831
Comprehensive loss attributable to noncontrolling interests:
Less: Net loss attributable to noncontrolling interests	0	(33)	0	0
Total comprehensive (loss) income attributable to Novation	$ (7,272)	$ 40,327	$ (14,320)	$ 40,831

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Divestitures (Notes)

6 Months Ended

Jun. 30, 2015

Discontinued Operations and Disposal Groups [Abstract]

Divestitures

Divestitures

Advent Financial Services, LLC (Financial Intermediary Segment)

On August 18, 2014, Advent sold certain intellectual property, software, and customer data to Santa Barbara Tax Products Group, LLC, for cash consideration of $1.0 million paid at closing. The transaction resulted in a gain of approximately $0.8 million during 2014. Due to the timing of the transaction, no portion of this gain is reflected in net income from discontinued operations during the six and three months ended June 30, 2014.

Also on August 18, 2014, the Company announced that it was conducting an orderly winding-down of Advent’s remaining business and operations. As the run-off operations are substantially complete, and as the Company will not have any significant continuing involvement in Advent, the operations of Advent have been classified as discontinued operations for all periods presented.

StreetLinks, LLC (Appraisal Management Segment)

Prior to 2013, the Company entered into a Membership Interest Purchase Agreement (the "Unit Purchase Agreement") with its Chief Operating Officer, Mr. Steve Haslam, pursuant to which Mr. Haslam sold 1,927 units in StreetLinks to the Company in exchange for a total purchase price of $6.1 million, payable in quarterly installments. At the time of the original transaction, Mr. Haslam's units represented approximately 5% of the outstanding StreetLinks membership units. On April 16, 2014, the Company and Mr. Haslam agreed to terminate the Unit Purchase Agreement. In full satisfaction of the Company's outstanding obligations under the Unit Purchase Agreement, the Company transferred back to Mr. Haslam 1,218 StreetLinks membership units (approximately 3% of StreetLinks), which represents the portion of the membership units attributable to the $3.9 million in unpaid installment payments and $0.2 million in interest remaining under the Unit Purchase Agreement. The termination of the Unit Purchase Agreement and simultaneous transfer of 1,218 StreetLinks membership units to Mr. Haslam reduced the Company's ownership interest to approximately 88% as of April 16, 2014.

On April 16, 2014, the Company and non-controlling members of StreetLinks (the "Sellers") entered into a purchase and sale agreement with Assurant, pursuant to which Assurant purchased 100% of the outstanding membership units of StreetLinks in exchange for $60.0 million paid in cash at closing and up to $12.0 million in post-closing consideration contingent upon the total revenue of StreetLinks in fiscal years 2015 and 2016. The Company received approximately $53.9 million in cash proceeds at closing, of which $1.0 million was used to make certain earned bonus payments to three StreetLinks executives. Subsequent to closing, the Company received an additional $0.8 million relating to adjustments for working capital. The transaction resulted in a gain of approximately $48.2 million during the second quarter of 2014. The Company also incurred approximately $1.8 million of transaction-related expenses during second quarter of 2014, such as legal and consulting fees.

The post-closing consideration provides for payment if (a) the total revenue of StreetLinks is $184 million or more for calendar year 2015, Assurant shall pay to the Sellers an aggregate of $12.0 million; but if not, then (b) if the total revenue of StreetLinks is greater than $167.5 million for the calendar year 2016, Assurant shall pay to Sellers up to an aggregate of $12.0 million, based on a linear scale where full payment of the $12.0 million would occur at total revenue of $184 million. The post-closing consideration will be reduced for certain earned bonus payments to three StreetLinks executives of $2.0 million if the maximum post-closing consideration is earned and otherwise prorated based on the same linear scale. There can be no assurance that the Company will receive any post-closing consideration. Assurant has agreed to act in good faith in conducting the business of StreetLinks and to keep separate records, but generally the Company does not control how Assurant may operate the business of StreetLinks. In accordance with the relevant accounting guidance, the post-closing consideration will be treated as a gain contingency. As such, no post-closing consideration will be recognized in earnings until the contingency is resolved.

In connection with the sale, the Company and Assurant also entered into a transition services agreement, pursuant to which the Company will provide ongoing information technology, human resources management and accounting services to StreetLinks for a period of up to eighteen months. The cash flows related to these services are not significant to StreetLinks. The Company will have no significant continuing involvement with StreetLinks beyond the transition services. As the agreed-upon professional services were substantially complete as of December 31, 2014, professional service fees earned under the transition services agreement for the six and three months ended June 30, 2015 were not material. Professional service fees earned by the Company under the transition services agreement for the six and three months ended June 30, 2014 are included in the service fee income – transition services line on the consolidated statement of operations, while the related costs are included in cost of services – transition services.

The Company has also executed a Non-Competition, Non-Solicitation and Non-Disclosure Agreement with StreetLinks providing that Novation will be prohibited from competing in the real estate appraisal management or valuation services business for a period of four years.

Results of Discontinued Operations

For the six and three months ended June 30, 2014, net income from discontinued operations consists of the net operating income and losses of the disposed entities and any necessary eliminations and income tax expense. For the six and three months ended June 30, 2015 the net loss from discontinued operations consists primarily of settlements of miscellaneous Advent liabilities.

The results of the Company's discontinued operations are summarized below (dollars in thousands):

	For the Six Months Ended June 30,					For the Three Months Ended June 30,
	2015			2014		2015			2014
Service fee income	$	—		$	37,347	$	—		$	6,582
(Loss) income from discontinued operations before income taxes	$	(18	)	$	50,448	$	(18	)	$	45,247
Income tax expense	—			8,783		—			6,721
(Loss) income from discontinued operations, net of income taxes	$	(18	)	$	41,665	$	(18	)	$	38,526

The assets and liabilities of discontinued operations as of June 30, 2015 and December 31, 2014 relate entirely to Advent. As of June 30, 2015, the current liabilities of discontinued operations were comprised primarily of unclaimed funds and fees withheld from Advent's business partners for various violations of Advent's compliance program. Unclaimed funds will be escheated to the applicable state in accordance with unclaimed property laws. Obligations relating to fees withheld from business partners will be resolved when claims are received or when the statute of limitations for the related contractual obligation expires.

Noncurrent liabilities of discontinued operations consist entirely of fees withheld from business partners for various violations of Advent's compliance program. The classification of these fees held as current versus noncurrent is dependent on the nature of the compliance violation and the tax year during which the violation occurred.

The major classes of assets and liabilities of discontinued operations as of June 30, 2015and December 31, 2014 are detailed below (dollars in thousands).

	June 30, 2015		December 31, 2014
Assets
Current Assets
Cash and cash equivalents	$	316	$	358
Other current assets	275		291
Total current assets	$	591	$	649
Liabilities
Current Liabilities
Accounts payable and accrued expenses	$	577	$	875
Total current liabilities (A)	577		875
Non-Current Liabilities
Other liabilities	1,798		1,797
Total non-current liabilities	1,798		1,797
Total liabilities (A)	$	2,375	$	2,672

(A) Excludes amounts due to Novation of approximately $0.7 million as of both June 30, 2015 and December 31, 2014. These amounts are eliminated upon consolidation and, therefore, are not included in the consolidated balance sheets for any periods presented.

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Earnings per Share (Tables)

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The computations of basic and diluted earnings per share for the six and three months ended June 30, 2015 and 2014 (dollars in thousands, except share and per share amounts) are as follows:

	For the Six Months Ended June 30,						For the Three Months Ended June 30,
	2015			2014			2015			2014
Numerator:
Net (loss) income from continuing operations	$	(13,620	)	$	(658	)	$	(6,649	)	$	1,718
Net (loss) income from discontinued operations	(18		)	41,665			(18		)	38,526
Net (loss) income	(13,638		)	41,007			(6,667		)	40,244
Less net loss attributable to noncontrolling interests	—			—			—			(33		)
Net (loss) income available to common shareholders	$	(13,638	)	$	41,007		$	(6,667	)	$	40,277
Denominator:
Weighted average common shares outstanding – basic	91,061,455			90,866,933			91,097,761			90,866,933
Weighted average common shares outstanding – dilutive:
Weighted average common shares outstanding – basic	91,061,455			90,866,933			91,097,761			90,866,933
Stock options	—			—			—			—
Nonvested shares	—			—			—			73,910
Weighted average common shares outstanding – dilutive	91,061,455			90,866,933			91,097,761			90,940,843
Basic earnings per share:
Net (loss) income from continuing operations	$	(0.15	)	$	(0.01	)	$	(0.07	)	$	0.02
Net (loss) income from discontinued operations	—			0.46			—			0.42
Net (loss) income	(0.15		)	0.45			(0.07		)	0.44
Less net loss attributable to noncontrolling interests	—			—			—			—
Net (loss) income available to common shareholders	$	(0.15	)	$	0.45		$	(0.07	)	$	0.44
Diluted earnings per share:
Net (loss) income from continuing operations	$	(0.15	)	$	(0.01	)	$	(0.07	)	$	0.02
Net (loss) income from discontinued operations	—			0.46			—			0.42
Net (loss) income	(0.15		)	0.45			(0.07		)	0.44
Less net loss attributable to noncontrolling interests	—			—			—			—
Net (loss) income available to common shareholders	$	(0.15	)	$	0.45		$	(0.07	)	$	0.44

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

The following weighted-average options to purchase shares of common stock were outstanding during each period presented, but were not included in the computation of diluted earnings per share because the calculated number of shares assumed to be repurchased was greater than the number of shares to be obtained upon exercise, therefore, the effect would be antidilutive (in thousands, except exercise prices):

	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	2015		2014		2015		2014
Number of stock options	10,148		8,675		10,350		8,856
Weighted average exercise price of stock options	$	0.63	$	0.68	$	0.62	$	0.68

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Borrowings - Note Payable to Related Party (Details) - Unit Purchase Agreement [Member] - StreetLinks LLC [Member] - USD ($) $ in Millions	Apr. 16, 2014	Mar. 08, 2012
Debt Instrument [Line Items]
Membership units purchased		1,927
Purchase price		$ 6.1
Membership units transferred	1,218
Remaining obligation, principal	$ 3.9
Remaining obligation, interest	$ 0.2

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Financial Statement Presentation (Policies)

6 Months Ended

Jun. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Accounting

The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Consolidation, Policy

The condensed consolidated financial statements of the Company include the accounts of all wholly-owned and majority-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

The Company's condensed consolidated financial statements are unaudited. In the opinion of management, all necessary adjustments have been made, which were of a normal and recurring nature, for a fair presentation of the condensed consolidated financial statements. The Company's condensed consolidated financial statements should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements of the Company and the notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

Cash and Cash Equivalents, Policy

Cash equivalents consist of liquid investments with an original maturity of three months or less. Cash equivalents are stated at cost, which approximates fair value.

Property and Equipment, Net

All of the Company's property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets. The estimated useful lives of the Company's property and equipment are the lesser of 5 years or remaining lease term for leasehold improvements, 5 years for furniture and fixtures, 3 to 5 years for office and computer equipment, and 1 to 3 years for software.

Maintenance and repairs are charged to expense. Major renewals and improvements are capitalized. Gains and losses on dispositions are credited or charged to earnings as incurred.

Valuation Methods and Processes

The Company determines the fair value of its cash equivalents and marketable securities based on pricing from our service provider and market prices from industry-standard independent data providers. Such market prices may be quoted prices in active markets for identical assets (Level 1 inputs) or pricing determined using inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs), such as yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, broker and dealer quotes, as well as other relevant economic measures.

To the extent observable inputs are not available, as is the case with the Company's mortgage securities, the Company estimates fair value using present value techniques and generally does not have the option to choose other valuation methods for these securities. The methods and processes used to estimate the fair value of the Company's mortgage securities are discussed further below. There have been no significant changes to the Company's valuation techniques during the six months ended June 30, 2015. Accordingly, there have been no material changes to the financial statements resulting from changes to our valuation techniques during the six months ended June 30, 2015.

The Company's marketable securities are classified as available-for-sale and are reported at their estimated fair value with unrealized gains and losses reported in accumulated other comprehensive income. To the extent that the cost basis of the Company's marketable securities exceeds the fair value and the unrealized loss is considered to be other than temporary, an impairment charge is recognized and the amount recorded in accumulated other comprehensive income or loss is reclassified to earnings as a realized loss. The specific identification method is used in computing realized gains or losses.

Mortgage securities - available-for-sale. As discussed above and in Note 4 to the condensed consolidated financial statements, the Company's mortgage securities – available-for-sale, are measured at fair value. These securities are valued at each reporting date using significant unobservable inputs (Level 3) by discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment.

The Company uses the discount rate methodology for determining the fair value of its residual securities. The fair value of the residual securities is estimated based on the present value of future expected cash flows to be received. Management's best estimate of key assumptions, including credit losses, prepayment speeds, forward yield curves and discount rates commensurate with the risks involved, are used in estimating future cash flows.

Earnings per Share

Basic earnings per share is computed by dividing net earnings available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share include the effect of conversions of stock options and nonvested shares.