Novastar, a REIT specializing in Subprime lending, has announced they are eliminating their dividend and are also contemplating giving up their REIT status. It turns out that maybe you can't get blood out of turnip after all!
Subprime lenders have grown way too fast and made too many bad loans. The subprime loan market is fraught with fraudulent practices, all with the attitude that an appreciating Real Estate market will forgive all sins.
The real question is... Will this impending collapse affect the Prime Lending industry or not. My guess is it will have a small effect. More important to the Prime Lenders is the state of the housing market. And that looks shaky at best.
All Trust Deed buyers beware - that 70 cents on the dollar note you are looking at is probably not a good deal!
