Edgar Filing: NOVASTAR FINANCIAL INC

Ownership Submission

FORM 4

Check this box if no longer subject to Section 16. Form 4 or Form 5 obligations may continue. See Instruction 1(b).

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP OF SECURITIES

Filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, Section 17(a) of the Public Utility Holding Company Act of 1935 or Section 30(h) of the Investment Company Act of 1940

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(Print or Type Responses)

1. Name and Address of Reporting Person ^*

GOLDMAN SACHS GROUP INC/

2. Issuer Name and Ticker or Trading Symbol
NOVASTAR FINANCIAL INC [NFI]

5. Relationship of Reporting Person(s) to Issuer
(Check all applicable)

_____ Director	__X__ 10% Owner
_____ Officer (give title below)	_____ Other (specify below)

(Last)

(First)

(Middle)

85 BROAD ST

3. Date of Earliest Transaction (Month/Day/Year)
09/21/2007

(Street)

NEW YORK, NY 10004

4. If Amendment, Date Original Filed(Month/Day/Year)

6. Individual or Joint/Group Filing(Check Applicable Line)
___ Form filed by One Reporting Person
_X_ Form filed by More than One Reporting Person

(City)

(State)

(Zip)

Table I - Non-Derivative Securities Acquired, Disposed of, or Beneficially Owned

1.Title of Security (Instr. 3)	2. Transaction Date (Month/Day/Year)	2A. Deemed Execution Date, if any (Month/Day/Year)	3. Transaction Code (Instr. 8)		4. Securities Acquired (A) or Disposed of (D) (Instr. 3, 4 and 5)			5. Amount of Securities Beneficially Owned Following Reported Transaction(s) (Instr. 3 and 4)	6. Ownership Form: Direct (D) or Indirect (I) (Instr. 4)	7. Nature of Indirect Beneficial Ownership (Instr. 4)
1.Title of Security (Instr. 3)	2. Transaction Date (Month/Day/Year)	2A. Deemed Execution Date, if any (Month/Day/Year)	Code	V	Amount	(A) or (D)	Price		6. Ownership Form: Direct (D) or Indirect (I) (Instr. 4)	7. Nature of Indirect Beneficial Ownership (Instr. 4)
Common Stock	09/21/2007		X		107,500	D	$ 10	890,888	I	See footnote ⁽¹⁾
Common Stock	09/21/2007		X		80,000	D	$ 12.5	810,888	I	See footnote ⁽¹⁾
Common Stock	09/21/2007		X		31,250	D	$ 15	779,638 ⁽²⁾	I	See footnote ⁽¹⁾

Reminder: Report on a separate line for each class of securities beneficially owned directly or indirectly.
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Table II - Derivative Securities Acquired, Disposed of, or Beneficially Owned
(e.g., puts, calls, warrants, options, convertible securities)

1. Title of Derivative Security
(Instr. 3)

2. Conversion or Exercise Price of Derivative Security

3. Transaction Date (Month/Day/Year)

3A. Deemed Execution Date, if any (Month/Day/Year)

4. Transaction Code
(Instr. 8)

5. Number of Derivative Securities Acquired (A) or Disposed of (D)
(Instr. 3, 4, and 5)

6. Date Exercisable and Expiration Date
(Month/Day/Year)

7. Title and Amount of Underlying Securities
(Instr. 3 and 4)

8. Price of Derivative Security
(Instr. 5)

9. Number of Derivative Securities Beneficially Owned Following Reported Transaction(s)
(Instr. 4)

10. Ownership Form of Derivative Security: Direct (D) or Indirect (I)
(Instr. 4)

11. Nature of Indirect Beneficial Ownership
(Instr. 4)

Code

(A)

(D)

Date Exercisable

Expiration Date

Title

Amount or Number of Shares

Put option (right to sell)

$ 10

09/21/2007

4,300 ⁽³⁾

⁽⁴⁾

09/22/2007

Common Stock

107,500

$ 0

See footnote ⁽¹⁾

Put option (right to sell)

$ 12.5

09/21/2007

3,200 ⁽³⁾

⁽⁴⁾

09/22/2007

Common Stock

80,000

$ 0

See footnote ⁽¹⁾

Put option (right to sell)

$ 15

09/21/2007

1,250 ⁽³⁾

⁽⁴⁾

09/22/2007

Common Stock

31,250

$ 0

See footnote ⁽¹⁾

Reporting Owners

Reporting Owner Name / Address	Relationships
Reporting Owner Name / Address	Director	10% Owner	Officer	Other
GOLDMAN SACHS GROUP INC/ 85 BROAD ST NEW YORK, NY 10004		X
Global Securities Services 85 BROAD STREET NEW YORK, NY 10004		X

Signatures

/s/Andrea DeMar, Attorney-in-fact		09/28/2007
^**Signature of Reporting Person		Date
/s/Andrea DeMar, Attorney-in-fact		09/28/2007
^**Signature of Reporting Person		Date

Explanation of Responses:

*	If the form is filed by more than one reporting person, see Instruction 4(b)(v).
**	Intentional misstatements or omissions of facts constitute Federal Criminal Violations. See 18 U.S.C. 1001 and 15 U.S.C. 78ff(a).
(1)	This statement is being filed by The Goldman Sachs Group, Inc. ("GS Group") and Global Securities Services ("GSS", and together with GS Group, the "Reporting Persons"), a separate business unit within the Goldman Sachs organization. GSS beneficially owns directly and GS Group may be deemed to beneficially own indirectly the securities reported herein.
(2)	As of September 21, 2007, the Reporting Persons ceased to beneficially own more than 10% of Novastar Financial, Inc.'s (the "Company"), common stock, par value $0.01 per share ("Common Stock").
(3)	Each contract relates to 25 shares of the Company's Common Stock.
(4)	Immediately exercisable.

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