Mortgage lender NovaStar Financial Inc. said Friday it was cutting 500 jobs, or 37 percent of its work force, as it stops selling home loans through brokers.
The Kansas City, Mo-based company said it would begin the cutbacks immediately and complete them in the fourth quarter.
Most of the cuts will come as NovaStar closes its wholesale operation centers in California and Ohio.
Wholesale loans are mortgages issued through a broker, as opposed to directly to a home buyer. NovaStar said it was still lending directly and said it had honored all commitments to fund already approved loans.
NovaStar, like other subprime mortgage lenders, provide money to home buyers with spotty credit. Such lenders have struggled recently as their customers increasingly have defaulted on loans, because of lower home prices and rising interest rates. That has lowered demand for the loans among investors in the debt market.
NovaStar shares closed Friday at $7.97, up 64 cents, or 8.7 percent.