FORM 3
        
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

INITIAL STATEMENT OF BENEFICIAL OWNERSHIP OF SECURITIES

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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
                      

1. Name and Address of Reporting Person *

SCHWATKEN RODNEY E

2. Date of Event Requiring Statement (MM/DD/YYYY)
1/3/2008 

3. Issuer Name and Ticker or Trading Symbol

NOVASTAR FINANCIAL INC [NFI]

(Last)        (First)        (Middle)

C/O NOVASTAR FINANCIAL INC, 8140 WARD PARKWAY

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

_____ Director                            _____ 10% Owner
___ X ___ Officer (give title below)          _____ Other (specify below)
Chief Financial Officer /

(Street)

KANSAS CITY, MO 64114       

(City)              (State)              (Zip)
5. If Amendment, Date Original Filed (MM/DD/YYYY)

 

6. Individual or Joint/Group Filing (Check Applicable Line)

_ X _ Form filed by One Reporting Person
___ Form filed by More than One Reporting Person


Table I - Non-Derivative Securities Beneficially Owned
1.Title of Security
(Instr. 4) 		2. Amount of Securities Beneficially Owned
(Instr. 4) 		3. Ownership Form: Direct (D) or Indirect (I)
(Instr. 5) 		4. Nature of Indirect Beneficial Ownership
(Instr. 5)
NovaStar Financial, Inc. Common Stock   2137   D    
NovaStar Financial, Inc. Common Stock   (4) 47   D    
NovaStar Financial, Inc. Common Stock   (5) 44   D    
NovaStar Financial, Inc. Common Stock   (6) 103   D    
NovaStar Financial, Inc. Common Stock   (7) 376   D    
NovaStar Financial, Inc. Common Stock   5088   I   By Rodney E. Schwatken Trust  

Table II - Derivative Securities Beneficially Owned ( e.g. , puts, calls, warrants, options, convertible securities)
1. Title of Derivate Security
(Instr. 4) 		2. Date Exercisable and Expiration Date
(MM/DD/YYYY) 		3. Title and Amount of Securities Underlying Derivative Security
(Instr. 4) 		4. Conversion or Exercise Price of Derivative Security 5. Ownership Form of Derivative Security: Direct (D) or Indirect (I)
(Instr. 5) 		6. Nature of Indirect Beneficial Ownership
(Instr. 5)
Date Exercisable Expiration Date Title Amount or Number of Shares
Stock Option   (2)   (2) 2/7/2015   NovaStar Financial, Inc. Common Stock   (2) 125   (2) $168.52   (2) D   (2)  
Stock Option   (1)   (1) 2/8/2016   NovaStar Financial, Inc. Common Stock   (1) 234   (1) $124.84   (1) D   (1)  
Stock Option   (3)   (3) 3/14/2017   NovaStar Financial, Inc. Common Stock   (3) 643   (3) $16.72   (3) D   (3)  

Explanation of Responses:
( 1)  Consists of 234 derivatives which vest in four annual installments of 58 shares on 2/8/2007, 59 shares on 2/8/2008, 58 shares on 2/8/2009, and 59 shares on 2/8/2010.
( 2)  Consists of 125 derivatives which vest in four annual installments of 31 shares on 2/7/2006, 31 shares on 2/7/2007, 31 shares on 2/7/2008, and 32 shares on 2/7/2009.
( 3)  Consists of 643 derivatives which vest in four annual installments of 160 shares on 3/14/2008, 161 shares on 3/14/2009, 161 shares on 3/14/2010, and 161 shares on 3/14/2011.
( 4)  Time-vesting restricted stock which vest on 1/28/2008. These shares have voting rights and rights to receive dividends, but are subject to forfeiture.
( 5)  Time-vesting restricted stock which vests on 2/7/2015. These shares have voting rights and rights to receive dividends, but are subject to forfeiture.
( 6)  Time-vesting restricted stock which vests on 2/8/2011. These shares have voting rights and rights to receive dividends, but are subject to forfeiture.
( 7)  Time-vesting restricted stock which vests on 3/14/2012. These shares have voting rights and rights to receive dividends, but are subject to forfeiture.

Reporting Owners
Reporting Owner Name / Address
Relationships
Director 10% Owner Officer Other
SCHWATKEN RODNEY E
C/O NOVASTAR FINANCIAL INC
8140 WARD PARKWAY
KANSAS CITY, MO 64114

Chief Financial Officer

Signatures
Rodney E. Schwatken 1/10/2008
** Signature of Reporting Person Date


Reminder: Report on a separate line for each class of securities beneficially owned directly or indirectly.
* If the form is filed by more than one reporting person, see Instruction 5(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).
Note: File three copies of this Form, one of which must be manually signed. If space is insufficient, see Instruction 6 for procedure.
Persons who respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.
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