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
Date of Report: October 21, 1998
(Date of earliest event reported)
NOVASTAR MORTGAGE FUNDING CORPORATION (as depositor under the
Trust Agreement, dated as of August 19, 1998, and pursuant to
which an Indenture was entered into, providing for, inter alia,
the issuance by NovaStar Mortgage Funding Trust, Series 1998-2,
of Home Equity Loan Asset-Backed Bonds)
NovaStar Mortgage Funding Corporation
(Exact name of registrant as specified in its charter)
Delaware 333-44099 48-1195807
(State or Other (Commission File I.R.S. Employer
Jurisdiction Number) Identification No.)
of Incorporation)
1901 West 47th Street
Suite 105
Kansas City, Kansas 66205
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code:(913) 514-3500
_________________________________________________________________
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On October 21, 1998 (following the issuance on August
19, 1998 by NovaStar Mortgage Funding Trust, Series 1998-2 (the
"Issuer"), of NovaStar Home Equity Loan Asset-Backed Bonds)),
NovaStar Financial, Inc. (the "Seller") sold to NovaStar Mortgage
Funding Corporation (the "Company") certain Subsequent Mortgage
Loans (as defined in the Mortgage Loan Purchase Agreement dated
August 1, 1998 (the "Purchase Agreement") among the Seller, the
Issuer, the Company and First Union National Bank, as indenture
trustee (the "Indenture Trustee")) pursuant to the Seller's
Subsequent Transfer Instrument, dated as of October 21, 1998 (the
"Seller's Subsequent Transfer Instrument"), between the Seller
and the Company, and the Company then sold the Subsequent
Mortgage Loans to the Issuer pursuant to the Company's Subsequent
Transfer Instrument, dated as of October 21, 1998, between the
Company and the Issuer, which was acknowledged and accepted by
the Indenture Trustee. The Subsequent Mortgage Loans had an
aggregate principal balance equal to $42,388,504.45, and were
purchased with funds on deposit in the pre-funding account
established pursuant to the Purchase Agreement at a purchase
price equal to the principal balance thereof.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
Item 601(a) of
Regulation S-K
Exhibit No. Description
99.1 Seller's Subsequent Transfer Instrument,
dated as of October 21, 1998 between
NovaStar Financial, Inc., the seller,
and NovaStar Mortgage Funding
Corporation, the company.
99.2 Company's Subsequent Transfer
Instrument, dated as of October 21,
1998, between NovaStar Mortgage Funding
Corporation, the company, and NovaStar
Mortgage Funding Trust, Series 1998-2,
the issuer, and acknowledged and
accepted by First Union National Bank,
as indenture trustee.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly
authorized.
NOVASTAR MORTGAGE FUNDING
CORPORATION
By: /s/ David J. Lee
Name: David J. Lee
Title: Vice President
Dated: October 23, 1998
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
99.1 Seller's Subsequent Transfer Instrument 5
99.2 Company's Subsequent Transfer Instrument 11
EXHIBIT 99.1
SELLER'S SUBSEQUENT TRANSFER INSTRUMENT
Pursuant to this Seller's Subsequent Transfer
Instrument (the "Seller's Instrument"), dated as of October 21,
1998, between NovaStar Financial, Inc. as seller (the "Seller"),
and NovaStar Mortgage Funding Corporation, as company (the
"Company"), and pursuant to the Mortgage Loan Purchase Agreement,
dated as of August 1, 1998 (the "Mortgage Loan Purchase
Agreement"), among the Seller, the Company, NovaStar Mortgage
Funding Trust, Series 1998-2, as issuer (the "Issuer"), and First
Union National Bank, as indenture trustee (the "Indenture
Trustee"), the Seller and the Company agree to the sale by the
Seller and the purchase by the Company of the subsequent Mortgage
Loans listed on the attached Mortgage Loan Schedule (the
"Subsequent Mortgage Loans") and the related PMI Policies.
Capitalized terms used and not defined herein have
their respective meanings as set forth in the definitions
contained in Appendix A to the Indenture, dated as of August 1,
1998 (the "Indenture"), between the Issuer and the Indenture
Trustee, which definitions are incorporated by reference herein.
All other capitalized terms used herein shall have the meanings
specified herein.
Section 1. Conveyance of Subsequent Mortgage Loans.
(a) The Seller does hereby sell, transfer, assign, set
over and convey to the Company, without recourse, all of its
right, title and interest in and to the Subsequent Mortgage Loans
and the related PMI Policies, all scheduled payments of principal
and interest on the Subsequent Mortgage Loans due after the
Subsequent Cut-off Date, and all other payments of principal and
interest on the Subsequent Mortgage Loans collected after the
Subsequent Cut-off Date (minus that portion of any such payment
which is allocable to the period prior to the Subsequent Cut-off
Date); provided, however, that no scheduled payments of principal
and interest due on or before the Subsequent Cut-off Date and
collected after the Subsequent Cut-off Date shall belong to the
Company pursuant to the terms of this Seller's Instrument. The
Seller, contemporaneously with the delivery of this Seller's
Instrument, has delivered or caused to be delivered to the
Indenture Trustee, at the direction of the Company, each item set
forth in Section 2.1(b) of the Mortgage Loan Purchase Agreement
with respect to such Subsequent Mortgage Loans and the related
PMI Policies. The transfer to the Company by the Seller of the
Subsequent Mortgage Loans identified on the attached Mortgage
Loan Schedule shall be absolute and is intended by the Seller,
the Company, the Indenture Trustee and the Bondholders to
constitute and to be treated as a sale by the Seller.
The parties hereto intend that the transactions set
forth herein constitute a sale by the Seller to the Company on
the Subsequent Transfer Date of all the Seller's right, title and
interest in and to the Subsequent Mortgage Loans and the related
PMI Policies, and other property as and to the extent described
above. In the event the transactions set forth herein shall be
deemed not to be a sale, the Seller hereby grants to the Company
as of the Subsequent Transfer Date a security interest in all of
the Seller's right, title and interest in, to and under the
Subsequent Mortgage Loans, and such other property, to secure all
of the Seller's obligations hereunder, and this Agreement shall
constitute a security agreement under applicable law, and in <PAGE> such
event, the parties hereto acknowledge that the Indenture Trustee,
in addition to holding the Subsequent Mortgage Loans and the
related PMI Policies for the benefit of the Bondholders and the
Bond Insurer, holds the Subsequent Mortgage Loans and the related
PMI Policies as designee and agent of the Company. The Seller
agrees to take or cause to be taken such actions and to execute
such documents, including without limitation the filing of all
necessary UCC-1 financing statements filed in the State of
Maryland and the State of Kansas (which shall be submitted for
filing as of the Subsequent Transfer Date), any continuation
statements with respect thereto and any amendments thereto
required to reflect a change in the name or corporate structure
of the Seller or the filing of any additional UCC-1 financing
statements due to the change in the principal office of the
Seller, as are necessary to perfect and protect the interests of
the Company and its assignees in each Subsequent Mortgage Loan,
the related PMI Policies and the proceeds thereof.
(b) The expenses and costs relating to the delivery of
the Subsequent Mortgage Loans, this Seller's Instrument and such
other items required under the Mortgage Loan Purchase Agreement
shall be borne by the Seller.
(c) Additional terms of the sale are set forth on
Attachment A hereto.
Section 2. Representations and Warranties;
Conditions Precedent.
(a) The Seller hereby affirms the representations and
warranties set forth in Section 3.1 of the Mortgage Loan Purchase
Agreement that relate to the Seller and the Subsequent Mortgage
Loans as of the date hereof. The Seller hereby confirms that
each of the conditions set forth in Section 2.2(b) of the
Mortgage Loan Purchase Agreement are satisfied as of the date
hereof and further represents and warrants that each Subsequent
Mortgage Loan complies with the requirements of this Seller's
Instrument and Section 2.2(c) of the Mortgage Loan Purchase
Agreement.
(b) The Seller is solvent, is able to pay its debts as
they become due and has capital sufficient to carry on its
business and its obligations hereunder; it will not be rendered
insolvent by the execution and delivery of this Seller's
Instrument or by the performance of its obligations hereunder nor
is it aware of any pending insolvency; no petition of bankruptcy
(or similar insolvency proceeding) has been filed by or against
the Seller prior to the date hereof;
(c) All terms and conditions of the Mortgage Loan
Purchase Agreement are hereby ratified and confirmed; provided,
however, that in the event of any conflict the provisions of this
Seller's Instrument shall control over the conflicting provisions
of the Mortgage Loan Purchase Agreement.
Section 3. Recordation of the Seller's Instrument.
To the extent permitted by applicable law, this
Seller's Instrument, or a memorandum thereof if permitted under
applicable law, is subject to recordation in all appropriate
<PAGE>
public offices for real property records in all of the counties
or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any
other appropriate public recording office or elsewhere, such
recordation to be effected by the Servicer, but only when
accompanied by an Opinion of Counsel to the effect that such
recordation materially and beneficially affects the interests of
the Bondholders or is necessary for the administration or
servicing of the Mortgage Loans.
Section 4. Governing Law.
This Seller's Instrument shall be construed in
accordance with the laws of the State of New York and the
obligations, rights and remedies of the parties hereunder shall
be determined in accordance with such laws, without giving effect
to principles of conflicts of law.
Section 5. Counterparts.
This Seller's Instrument may be executed in one or more
counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed to
be an original; such counterparts, together, shall constitute one
and the same instrument.
Section 6. Successors and Assigns.
This Seller's Instrument shall inure to the benefit of
and be binding upon the Seller and the Company and their
respective successors and assigns. The Bond Insurer and the
Indenture Trustee shall be express third party beneficiaries
hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
and delivered this Seller's Instrument as of the day and year
first written above.
NOVASTAR FINANCIAL, INC.,
as Seller
By: /s/ David J. Lee
Name: David J. Lee
Title: Vice President
NOVASTAR MORTGAGE FUNDING
CORPORATION,
as Company
By: /s/ David J. Lee
Name: David J. Lee
Title: Vice President
<PAGE>
NOVASTAR HOME EQUITY LOAN ASSET-BACKED BONDS, SERIES 1998-2
ATTACHMENT A TO SELLER'S SUBSEQUENT TRANSFER INSTRUMENT
October 21, 1998
A. Profile of Subsequent Mortgage Loans:
1. Subsequent Cut-off Date: October 1, 1998
2. Subsequent Transfer Date: October 21, 1998
3. Aggregate Principal Balance of
the Subsequent Mortgage Loans as
of the Subsequent Cut-off Date: $42,388,504.45
4. Purchase Price: 100.00%
B. As to all the Subsequent Mortgage Loans the subject of this
Instrument:
1. Longest stated term to maturity: 360 months
2. Minimum Mortgage Rate: 7.375%
3. Maximum Mortgage Rate: 13.49%
4. WAC of all Mortgage Loans: 10.11%
5. WAM of all Mortgage Loans: 303.979%
6. Largest Principal Balance: $551,059.30
7. Non-owner occupied Mortgaged
Properties: 7.24%
8. California zip code concentration: 5.935%
9. Condominiums: 3.16%
10. Single-family: 82.11%
11. Weighted average term since
origination: 2.23 months
EXHIBIT 99.2
COMPANY'S SUBSEQUENT TRANSFER INSTRUMENT
Pursuant to this Company's Subsequent Transfer
Instrument (the "Company's Instrument"), dated as of October 21,
1998, between NovaStar Mortgage Funding Corporation, as company
(the "Company"), and the NovaStar Mortgage Funding Trust, Series
1998-2, as issuer (the "Issuer"), and pursuant to the Mortgage
Loan Purchase Agreement, dated as of August 1, 1998 (the
"Mortgage Loan Purchase Agreement"), among NovaStar Financial,
Inc., as seller (the "Seller"), the Company, the Issuer, and
First Union National Bank, as indenture trustee (the "Indenture
Trustee"), the Company and the Issuer agree to the sale by the
Company and the purchase by the Issuer of the subsequent Mortgage
Loans listed on the attached Mortgage Loan Schedule (the
"Subsequent Mortgage Loans") and the related PMI Policies, and
the pledge of the Subsequent Mortgage Loans by the Issuer to the
Indenture Trustee.
Capitalized terms used and not defined herein have
their respective meanings as set forth in the definitions
contained in Appendix A to the Indenture, dated as of August 1,
1998 (the "Indenture"), between the Issuer and the Indenture
Trustee, which definitions are incorporated by reference herein.
All other capitalized terms used herein shall have the meanings
specified herein.
Section 1. Conveyance of Subsequent Mortgage Loans.
(a) The Company does hereby sell, transfer, assign,
set over and convey to the Issuer, without recourse, (i) all of
its right, title and interest in and to the Subsequent Mortgage
Loans and the related PMI Policies, all scheduled payments of
principal and interest on the Subsequent Mortgage Loans due after
the Subsequent Cut-off Date, and all other payments of principal
and interest on the Subsequent Mortgage Loans collected after the
Subsequent Cut-off Date (minus that portion of any such payment
which is allocable to the period prior to the Subsequent Cut-off
Date); provided, however, that no scheduled payments of principal
and interest due on or before the Subsequent Cut-off Date and
collected after the Subsequent Cut-off Date shall belong to the
Issuer pursuant to the terms of this Company's Instrument and
(ii) all of its right, title and interest in and to the Seller's
Subsequent Transfer Instrument, dated as of October 21, 1998 (the
"Seller's Instrument"), between the Seller and the Company. The
Company, contemporaneously with the delivery of this Company's
Instrument, has delivered or caused to be delivered to the
Indenture Trustee each item set forth in Section 2.1(b) of the
Mortgage Loan Purchase Agreement with respect to such Subsequent
Mortgage Loans. The transfer to the Issuer by the Company of the
Subsequent Mortgage Loans identified on the attached Mortgage
Loan Schedule and the related PMI Policies shall be absolute and
is intended by the Company, the Issuer, the Indenture Trustee and
the Bondholders to constitute and to be treated as a sale by the
Company.
The parties hereto intend that the transactions set
forth herein constitute a sale by the Company to the Issuer on
the Subsequent Transfer Date of all the Company's right, title
and interest in and to the Subsequent Mortgage Loans and the
related PMI Policies, and other property as and to the extent
described above. In the event the transactions set forth herein
shall be deemed not to be a sale, the Company hereby grants to
the Issuer as of the Subsequent <PAGE> Transfer Date a security interest
in all of the Company's right, title and interest in, to and
under the Subsequent Mortgage Loans, and such other property, to
secure all of the Company's obligations hereunder, and this
Company's Instrument shall constitute a security agreement under
applicable law, and in such event, the parties hereto acknowledge
that the Indenture Trustee, in addition to holding the Subsequent
Mortgage Loans and the related PMI Policies for the benefit of
the Bondholders and the Bond Insurer, holds the Subsequent
Mortgage Loans and the related PMI Policies as designee and agent
of the Issuer. The Company agrees to take or cause to be taken
such actions and to execute such documents, including without
limitation the filing of all necessary UCC-1 financing statements
filed in the State of Delaware and the State of Kansas (which
shall be submitted for filing as of the Subsequent Transfer
Date), any continuation statements with respect thereto and any
amendments thereto required to reflect a change in the name or
corporate structure of the Company or the filing of any
additional UCC-1 financing statements due to the change in the
principal office of the Company, as are necessary to perfect and
protect the interests of the Issuer and its assignees in each
Subsequent Mortgage Loan, the related PMI Policies and the
proceeds thereof.
(b) The expenses and costs relating to the delivery of
the Subsequent Mortgage Loans, this Company's Instrument and such
other items required under the Mortgage Loan Purchase Agreement
shall be borne by the Company.
Section 2. Representations and Warranties;
Conditions Precedent.
(a) The Company hereby affirms the representations and
warranties set forth in Section 3.2 of the Mortgage Loan Purchase
Agreement that relate to the Company as of the date hereof.
(b) The Company is solvent, is able to pay its debts
as they become due and has capital sufficient to carry on its
business and its obligations hereunder; it will not be rendered
insolvent by the execution and delivery of this Company's
Instrument or by the performance of its obligations hereunder nor
is it aware of any pending insolvency; no petition of bankruptcy
(or similar insolvency proceeding) has been filed by or against
the Company prior to the date hereof;
(c) All terms and conditions of the Mortgage Loan
Purchase Agreement are hereby ratified and confirmed; provided,
however, that in the event of any conflict the provisions of this
Company's Instrument shall control over the conflicting
provisions of the Mortgage Loan Purchase Agreement.
Section 3. Grant from Issuer to Indenture Trustee.
The Issuer hereby Grants as of the Subsequent Transfer
Date to the Indenture Trustee, as trustee of the Bondholders and
the Bond Insurer, to secure all of the Issuer's obligations under
the Indenture, all of the Issuer's right, title and interest in
and to, whether now existing or hereafter created, (a) the
Subsequent Mortgage Loans and the proceeds thereof and all <PAGE> rights
under the Related Documents (including the related Mortgage
Files); (b) all funds on deposit from time to time in the
Collection Account allocable to the Subsequent Mortgage Loans,
excluding any investment income from such funds; (c) all its
rights under the Seller's Instrument and this Company's
Instrument; and (d) all present and future claims, demands,
causes and choses in action in respect of any or all of the
foregoing and all payments on or under, and all proceeds of every
kind and nature whatsoever in respect of, any or all of the
foregoing and all payments on or under, and all proceeds of every
kind and nature whatsoever in the conversion thereof, voluntary
or involuntary, into cash or other liquid property, all cash
proceeds, accounts, accounts receivable, notes, drafts
acceptances, checks, deposit accounts, rights to payment of any
and every kind, and other forms of obligations and receivables,
instruments and other property which at any time constitute all
or part of or are included in the proceeds of any of the
foregoing.
Section 4. Recordation of Instrument.
To the extent permitted by applicable law, this
Company's Instrument, or a memorandum thereof if permitted under
applicable law, is subject to recordation in all appropriate
public offices for real property records in all of the counties
or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any
other appropriate public recording office or elsewhere, such
recordation to be effected by the Servicer, but only when
accompanied by an Opinion of Counsel to the effect that such
recordation materially and beneficially affects the interests of
the Bondholders or is necessary for the administration or
servicing of the Mortgage Loans.
Section 5. Governing Law.
This Company's Instrument shall be construed in
accordance with the laws of the State of New York and the
obligations, rights and remedies of the parties hereunder shall
be determined in accordance with such laws, without giving effect
to principles of conflicts of law.
Section 6. Counterparts.
This Company's Instrument may be executed in one or
more counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed to
be an original; such counterparts, together, shall constitute one
and the same instrument.
Section 7. Successors and Assigns.
This Company's Instrument shall inure to the benefit of
and be binding upon the Company and the Issuer and their
respective successors and assigns. The Bond Insurer and the
Indenture Trustee shall be express third party beneficiaries
hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
and delivered this Company's Instrument as of the day and year
first written above.
NOVASTAR MORTGAGE FUNDING
CORPORATION,
as Company
By: /s/ David J. Lee
Name: David J. Lee
Title: Vice President
NOVASTAR MORTGAGE FUNDING
TRUST, SERIES 1998-2,
as Issuer
By: WILMINGTON TRUST
COMPANY, not in its
individual capacity,
but solely in its
capacity as Owner
Trustee
By: /s/ Denise M. Geran
Name: Denise M. Geran
Title: Financial Services Officer
Acknowledged and Accepted:
FIRST UNION NATIONAL BANK,
as Indenture Trustee
By: /s/ Robert Asbaugh
Name: Robert Asbaugh
Title: Vice President
