NovaStar to Drop REIT Designation
KANSAS CITY (AP) - Mortgage lender NovaStar Financial said today that it would no longer be a real estate investment trust. That means the company will not be able to pay investors a required dividend. NovaStar has struggled amid the collapse of the mortgage market. Company officials had already said in February that it was considering giving up its designation as a real estate investment trust because it didn't believe it would generate taxable income for five years. Such trusts are required by law to distribute most profit in the form of dividends to shareholders. But the company said today it could not generate the money needed to pay the dividend. The decision was blamed on NovaStar's declining market value and its decision late last month to pull a stock offering.