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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 2003
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period from to
Commission File Number 333-102282-02
NOVASTAR MORTGAGE FUNDING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 48-1195807
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
8140 Ward Parkway, Suite 300
Kansas City, Missouri 64114
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code :(816)237-7000
NovaStar Mortgage Funding Trust, Series 2003-2
NovaStar Home Equity Loan Asset-Backed Certificates, Series 2003-2
(Title of each class of securities covered by this Form)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes No [X]
Documents incorporated by reference: None
NovaStar Mortgage Funding Trust, Series 2003-2
NovaStar Home Equity Loan Asset-Backed Certificates, Series 2003-2
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PART I
Item 1. Business
Omitted.
Item 2. Properties
Omitted.
Item 3. Legal Proceedings
The Registrant is not aware of any material legal proceeding with respect
to, the Company, the Servicer, the Trustee, in each case if applicable, as
related to the Trust.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote or consent of Holders of the Offered
Certificates during the fiscal year covered by this report.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Trust does not issue stock. There is currently no established secondary
market for the Certificates. As of December 31, 2003, the number of holders of
each Class of Offered Certificates was 25.
Item 6. Selected Financial Data
Omitted.
Item 7. Management's Discussion and Analysis of Financial condition and
Results of Operations
Omitted.
Item 8. Financial Statements and Supplementary Data
Omitted.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There was no change of accountants or disagreement with accountants on any
matter of accounting principles or practices or financial disclosure.
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PART III
Item 10. Directors and Executive Officers of the Registrant
Omitted.
Item 11. Executive Compensation
Omitted.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Omitted.
Item 13. Certain Relationships and Related Transactions
No reportable transactions have occurred.
Item 14. Principal Accounting Fees and Services
Not applicable.
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Not applicable.
(b) Reports on Form 8-K: The following Current Reports on Form 8-K with respect
to the Trust were filed by the Registrant for the last quarter of 2003.
Current Reports on Form 8-K dated October 27, 2003, November 25, 2003,
and December 26, 2003 were filed for the purpose of filing the Monthly
Statement sent to the Holders of the Offered Certificates for payments
made on the same date. The items reported in such Current Report were
Item 5 and Item 7.
(c) Exhibits to this report.
Annual Independent Accountant's Servicing Report concerning servicing
activities, filed as Exhibit 99.1 hereto.
Report of Management as to Compliance with Minimum Servicing Standards,
filed as Exhibit 99.2 herto.
Annual Statement as to Compliance, filed as Exhibit 99.3 herto.
(d) Not applicable.
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NovaStar Mortgage Funding Trust, Series 2003-2
NovaStar Home Equity Loan Asset-Backed Certificates, Series 2003-2
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, 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/ Rodney Schwatken
-----------------------------
Name: Rodney Schwatken
Title: Vice President, Treasurer and Controller
Date: March 22, 2004
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CERTIFICATION
NovaStar Mortgage Funding Trust, Series 2003-2
NovaStar Home Equity Loan Asset-Backed Certificates, Series 2003-2
I, Rodney Schwatken, certify that:
1. I have reviewed this annual report on Form 10-K, and all reports on Form
8-K containing distribution and servicing reports filed in respect of
periods included in the year covered by this annual report, NovaStar
Mortgage Funding Trust, Series 2003-2 NovaStar Home Equity Loan
Asset-Backed Certificates, Series 2003-2 (the "Trust");
2. Based on my knowledge, the information in these reports, taken as a whole,
does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading as of
the last day of the period covered by this annual report;
3. Based on my knowledge, the distribution information required to be prepared
by the Trustee based upon the servicing information required to be provided
by each Servicer under the Pooling and Servicing Agreement is included in
these reports;
4. Based on my knowledge and upon the annual compliance statements included in
the report and required to be delivered to the Trustee in accordance with
the terms of the Pooling and Servicing Agreement, and except as disclosed
in the report, the Servicer has fulfilled its obligations under the Pooling
and Servicing Agreement; and
5. The reports disclose all significant deficiencies relating to each
Servicer's compliance with the minimum servicing standards based, in each
case, upon the report provided by an independent public accountant, after
conducting a review in compliance with the Uniform Single Attestation
Program for Mortgage Bankers or similar standard as set forth in the
Pooling and Servicing Agreement, that is included in these reports.
In giving the certifications above, I have reasonably relied on information
provided to me by the following parties: NovaStar Mortgage, Inc., as Seller,
Wachovia Bank, N.A. as Custodian and JPMorgan Chase Bank, as Trustee.
NovaStar Mortgage Funding Corporation
By: /s/ Rodney Schwatken
-----------------------------
Name: Rodney Schwatken
Title: Vice President, Treasurer and Controller
Date: March 22, 2004
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Supplemental Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to
Section 12 of the Act
The registrant has not sent an annual report or proxy material to its security
holders. The registrant will not be sending an annual report or proxy material
to its security holders subsequent to the filing of this form.
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EXHIBIT INDEX
Exhibit Description
99.1 Annual Independent Accountant's Servicing Report
99.2 Report of Management as to Compliance with Minimum Servicing Standards
99.3 Annual Statement as to Compliance
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EXHIBIT 99.1
Annual Independent Accountant's Servicing Report
---------------
Deloitte & Touche, LLP
Suite 400
1010 Grand Boulevard
Kansas City, Missouri 64106-2232
Telephone: (816) 474-6180
www.deloitte.com
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors of
NovaStar Mortgage, Inc. and subsidiaries:
We have examined management's assertion about NovaStar Mortgage, Inc. and
subsidiaries (the "Company") (a wholly owned subsidiary of NovaStar Financial,
Inc.), has complied as of and for the year ended December 31, 2003 with its
established minimum servicing standards described in the accompanying
Management's Assertion dated March 3, 2004. Management is responsible for the
Company's compliance with those minimum servicing standards. Our responsibility
is to express an opinion on management's assertion about the Company's
compliance based on our examination.
Our examination was conducted in accordance with attestation standards
established by the American Institute of Certified Public Accountants and,
accordingly, included examining, on a test basis, evidence about the Company's
compliance with the minimum servicing standards and performing such other
procedures as we considered necessary in the circumstances. We believe that our
examination provides a reasonable basis for our opinion. Our examination does
not provide a legal determination on the Company's compliance with the minimum
servicing standards.
In our opinion, management's assertion that the Company complied with the
aforementioned minimum servicing standards as of and for the year December 31,
2003 is fairly stated in all material respects, based on the criteria set forth
in Appendix I.
By: /s/ Deloitte & Touche, LLP
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March 3, 2004
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EXHIBIT 99.2
Report of Management as to Compliance with Minimum Servicing Standards
-------------------
NovaStar Mortgage, Inc.
8140 Ward Parkway
Suite 300
Kansas City, Missouri 64114
MANAGEMENT'S ASSERTION
March 3, 2004
As of and for the period ended December 31, 2003, NovaStar Mortgage, Inc. and
subsidiaries (the "Company"), (a wholly owned subsidiary of NovaStar Financial,
Inc.), has complied in all material respects with the Company's establshed
minimum servicing standards for single-family residential mortgage loans as set
forth in Appendix I. The Standards are based on the Mortgage Bankers Association
of America's Uniform Single Attestion Program for Mortgage Bankers. As of and
for this same period, the Company had in effect a fidelity bond in the amount of
$1,000,000 and errors and omissions coverage in the amount of $5,000,000 on any
one mortgage.
Sincerely,
/s/ W. Lance Anderson
- -----------------------
W. Lance Anderson
President
/s/ Rodney Schwatken
- -----------------------
Rodney Schwatken
Vice President, Treasurer and Controller
/s/ Christopher S. Miller
- -------------------------
Christopher S. Miller
Senior Vice President
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APPENDIX I
MINIMUM SERVICING STANDARDS AS SET FORTH IN THE MORTGAGE BANKERS
ASSOCIATION OF AMERICA'S UNIFORM SINGLE ATTESTATION PROGRAM FOR
MORTGAGE BANKERS
I. CUSTODIAL BANK ACCOUNTS
1. Reconcilation shall be prepared on a monthly basis for all custodial bank
accounts and related bank clearing accounts. These reconciliations shall:
. be mathematically accurate;
. be prepared within forty-five (45) calendar days after the cutoff date;
. be reviewed and approved by someone other than the person who prepared the
reconcilition; and
. document explanations for reconciling items shall be resolved within ninety
(90) days of their original identification.
2. Funds of the servicing entity shall be advanced in cases where there is an
overdraft in an investor's or a mortgagor's account.
3. Each custodial account shall be maintained at a federally insured
depository insitution in trust for the applicable investor.
4. Escrow funds held in trust for a mortgagor shall be returned to the
mortgagor within thirty (30) calendar days of payoff of the mortgage loan.
II. MORTGAGE PAYMENTS
1. Mortgage payments shall be deposited into the custodial bank accounts and
related bank clearing accounts within two business days of receipt.
2. Mortgage payments made in accordance with the mortgagor's loan documents
shall be posted to the applicable mortgagor records within two business
days of receipt.
3. Mortgage payments shal be allocated to principal, interest, insurance,
taxes or other escrow items in accordance with the mortgagor's loan
documents.
4. Mortgage payments identified as loan payoffs shall be allocated in
accordance with the mortgagor's loan documents.
III. DISBURSEMENTS
1. Disbursements made via wire transfer on behalf of a mortgagor or investor
shall be made only by authorized personnel.
2. Disbursements made on behalf of a mortgagor or investor shall be posted
within two business days to the mortgagor's or investor's records
maintained by the servicing entity.
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3. Tax and insurance payments shall be made on or before the penalty or
insurance policy expiration dates, as indicated on tax bills and insurance
premium notices, respectively, provided that such support has been received
by the servicing entity at least thirty (30) days prior to these dates.
4. Any late payment penalties paid in conjunction with the payment of any tax
bill or insurance premium notice shall be paid from the servicing entity's
funds and not charged to the mortgagor, unless the late payment was due to
the mortgagor's error or omission.
5. Amounts remitted to investors per the servicer's investor reports shall
agree with cancelled checks, or other form of payment, or custodial bank
statements.
6. Unused checks shall be safeguarded so as to prevent unauthorized access.
IV. INVESTOR ACCOUNTING AND REPORTING
1. The servicing entity's investor reports shall agree with, or reconcile to,
investors' records on a monthly basis as to the total unpaid principal
balance and number of loans serviced by the servicing entity.
2. Adjustments on ARM loans shall be computed based on the related mortgage
note and any ARM rider.
3. Escrow accounts shall be analyzed, in accordance with the mortgagor's loan
documents, on at least an annual basis.
4. Interest on escrow accounts shall be paid, or credited, to mortgagors in
accordance with the applicable state laws.
V. DELINQUENCIES
1. Records documenting collection efforts shall be maintained during the
period a loan is in default and shall be updated at least monthly. Such
records shall describe the entity's activities in monitoring delinquent
loans including, for example, phone calls, letters and mortgage payment
rescheduling plans in cases where the delinquency is deemed temporary
(e.g., illness or unemployment).
VII. INSURANCE POLICIES
1. A fidelity bond and errors and omissions policy shall be in effect on the
servicing entity throughout the reporting period in the amount of coverage
represented in management's assertion.
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EXHIBIT 99.3
Annual Statement as to Compliance
--------------
NOVASTAR MORTGAGE, INC.
CERTIFICATE OF OFFICERS
March 15, 2004
Christopher S. Miller, Senior Vice President of Servicing (Servicing
Officer) and Rodney E. Schwatken, Secretary, of NovaStar Mortgage, Inc., a
Virginia corporation, (Servicer) hereby certify the following:
(i) We have performed a review of the activities of the Servicer during the
preceeding calendar year and performance under the various Pooling and
Servicing Agreements (see attached Exhibit A) to which we are a party has
been made under our supervision,
(ii) to the best of our knowledge, based on such review, the Servicer has
fulfilled its obligations under this Agreement in all material respects for
such year, and, there has been not default in the fulfillment of any of its
obligations, and
(iii)no Subservicers have performed any duties on behalf of NovaStar Mortgage,
Inc.
/s/ Christopher S. Miller
- -------------------------
Christopher S. Miller
Senior Vice President of Servicing
(Servicing Officer)
/s/ Rodney E. Schwatken
- ------------------------
Rodney E. Schwatken
Secretary
NovaStar Mortgage, Inc.
Exhibit A to Certificate of Officers
March 15, 2004
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Date of Pooling
Description Servicing Agreement
NovaStar Mortgage Funding Trust, Series 1999-1 January 1, 1999
NovaStar Mortgage Funding Trust, Series 2000-1 March 1, 2000
NovaStar Mortgage Funding Trust, Series 2000-2 September 1, 2000
NovaStar Mortgage Funding Trust, Series 2001-1 March 1, 2001
NovaStar Mortgage Funding Trust, Series 2001-2 September 1, 2001
NovaStar Mortgage Funding Trust, Series 2002-1 March 1, 2002
NovaStar Mortgage Funding Trust, Series 2002-2 June 1, 2002
NovaStar Mortgage Funding Trust, Series 2002-3 September 1, 2002
NovaStar Mortgage Funding Trust, Series 2003-1 February 1, 2003
NovaStar Mortgage Funding Trust, Series 2003-2 June 1, 2003
NovaStar Mortgage Funding Trust, Series 2003-3 September 1, 2003
NovaStar Mortgage Funding Trust, Series 2003-4 November 1, 2003
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