Sec Form 4 Filing - GOLDMAN SACHS GROUP INC/ @ NOVASTAR FINANCIAL INC - 2007-09-21

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 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

OMB APPROVAL OMB Number: 3235-0287 Expires: November 30, 2011 Estimated average burden hours per response... 0.5

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 (MM/DD/YY) 09/21/2007 (Street) NEW YORK, NY10004 4. If Amendment, Date Original Filed (MM/DD/YY) 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 (MM/DD/YY) 2A. Deemed Execution Date, if any (MM/DD/YY) 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) Code V Amount (A) or (D) Price 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 )

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 (MM/DD/YY) 3A. Deemed Execution Date, if any (MM/DD/YY) 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 (MM/DD/YY) 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 V (A) (D) Date Exercisable Expiration Date Title Amount or Number of Shares Put option (right to sell) $ 10 09/21/2007 X 4,300 ( 3 ) ( 4 ) 09/22/2007 Common Stock 107,500 $ 0 0 I See footnote ( 1 ) Put option (right to sell) $ 12.5 09/21/2007 X 3,200 ( 3 ) ( 4 ) 09/22/2007 Common Stock 80,000 $ 0 0 I See footnote ( 1 ) Put option (right to sell) $ 15 09/21/2007 X 1,250 ( 3 ) ( 4 ) 09/22/2007 Common Stock 31,250 $ 0 0 I See footnote ( 1 )

Reporting Owners Reporting Owner Name / Address Relationships Director 10% Owner Officer Other GOLDMAN SACHS GROUP INC/ 85 BROAD ST NEW YORK, NY10004 X Global Securities Services 85 BROAD STREET NEW YORK, NY10004 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:

( 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.

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 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).

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 Number.