8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

March 17, 2009

Date of Report (Date of earliest event reported)

NOVASTAR FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

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

2114 Central Street, Suite 600, Kansas City, MO 64108

(Address of principal executive offices) (Zip Code)

(816) 237-7000

(Registrant’s telephone number, including area code)

Not Applicable

 (Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

INFORMATION TO BE INCLUDED IN THE REPORT

Item 8.01 – Other Events.

On March 17, 2009, NovaStar Financial, Inc. (the “Company”) notified the holders of the Company’s 8.90% Series C Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series C Preferred Stock”) that the Company will not make the dividend payment on the Series C Preferred Stock due on March 31, 2009.  Because dividends on the Series C Preferred Stock are presently in arrears for five quarters, under the terms of the Articles Supplementary to the Company’s Charter that established the Series C Preferred Stock, the holders of the Series C Preferred Stock will have the right, as of March 31, 2009, to elect two additional directors to the Company’s board of directors.

The Notice to Holders of Series C Preferred Stock, which also allows the holders of the Series C Preferred Stock to make nominations for the election of the two additional directors to occur by vote of the holders of the Series C Preferred Stock at the Company’s annual meeting of stockholders to be held on June 25, 2009, is filed as Exhibit 99.1 to this current report on Form 8-K.

Item 9.01 – Financial Statements and Exhibits.

(c)	Exhibits
99.1	Notice to Holders of Series C Preferred Stock

SIGNATURE

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

	NOVASTAR FINANCIAL, INC.
DATE: March 25, 2009	/s/ Rodney E. Schwatken
	Rodney E. Schwatken
	Chief Financial Officer

EX-99.1

NOVASTAR FINANCIAL, INC.

NOTICE TO HOLDERS OF SERIES C PREFERRED STOCK

March 17, 2009

This Notice is being delivered to all holders of 8.90% Series C Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series C Preferred Stock”) of NovaStar Financial, Inc. (the “Company”).

The Articles Supplementary to the Company’s Charter that established the Series C Preferred Stock provide that whenever dividends on the Series C Preferred Stock are in arrears for six or more quarters (whether or not consecutive) the holders of the Series C Preferred Stock have the right to elect two additional directors to the Company’s board of directors (the “Board”).   Presently, dividends on the Series C Preferred Stock are in arrears for five quarters and the Company will not pay the dividend due on March 31, 2009.Therefore, as a holder of Series C Preferred Stock, you will be entitled as of such date to elect two additional directors to the Board (the “Series C Directors”).  The election of the Series C Directors will occur by vote of the holders of the Series C Preferred Stock at the Company’s annual meeting of stockholders to be held on June 25, 2009 (the “Annual Meeting”).  At this time we are not asking you for a proxy with respect to the election of the Series C Directors at the Annual Meeting and you are requested not to send us a proxy.

The purpose of this Notice is to allow for nominations of the Series C Directors to be made.  If you desire to nominate an individual to serve as a Series C Director, please complete the enclosed Director Nomination Form.  For your nomination to be included in the Company’s Proxy Statement for the Annual Meeting (the “Proxy Statement”) and be considered at the Annual Meeting, your Director Nomination Form must be received by the Company no later than March 31, 2009.  Nominations received after March 31, 2009 will not be accepted.  Additionally, if you sell or transfer all of your shares of Series C Preferred Stock before the Annual Meeting and as such, are no longer holder of Series C Preferred Stock at the date of the Annual Meeting, your nomination for Series C Director will not be considered.

After nominations are received, we will deliver a questionnaire to all nominees requesting certain information about the nominee to be included in the Proxy Statement.  Additionally, each nominee will be required to consent to being included as a Series C Director nominee in the Proxy Statement and, if elected, to serve on the Board.   Nominations will not be accepted other than by means of the enclosed Director Nomination Form and may not be made from the floor at the Annual Meeting.

The two nominees receiving the most votes at the Annual Meeting will be elected Series C Directors.  The Company has been notified by holders representing 26.2% of the outstanding Series C Preferred Stock that such holders intend to nominate Howard Amster and Barry Igdaloff for election as Series C Directors.

W. Lance Anderson

Chairman of the Board and

Chief Executive Officer

NovaStar Financial, Inc.

NOVASTAR FINANCIAL, INC.

8.90% SERIES C CUMULATIVE REDEEMABLE PREFERRED STOCK

DIRECTOR NOMINATION FORM

Name of Series C Preferred Stock Holder:  ____________________________________________________________

Number of Shares of Series C Preferred Stock Held:  ____________________________________________________

Telephone Number of Series C Preferred Stock Holder: __________________________________________________

E-Mail Address of Series C Preferred Stock Holder:  ____________________________________________________

Name and Street Address (No P.O. Box) of Series C Director Nominee:       

                                                                                                           _______________________________________________

                                                                                                           _______________________________________________

                                                                                                           _______________________________________________

                                                                                                           _______________________________________________
 

Telephone Number of Series C Director Nominee:  ______________________________

E-Mail Address of Series C Director Nominee: _________________________________

Return completed form by March 31, 2009 to:	Rodney E. Schwatken
	Chief Financial Officer
	NovaStar Financial, Inc.
	2114 Central Street, Suite 600
	Kansas City, MO 64108

FOR YOUR NOMINATION TO BE INCLUDED IN THE COMPANY’S PROXY STATEMENT FOR, AND TO BE CONSIDERED AT, THE 2009 ANNUAL MEETING OF SHAREHOLDERS, YOUR COMPLETED DIRECTOR NOMINATION FORM MUST BE RECEIVED BY THE COMPANY NO LATER THAN  MARCH 31, 2009.  NOMINATIONS RECEIVED AFTER MARCH 31, 2009 WILL NOT BE ACCEPTED.

WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.