(Update 1: clarifies questions outlined in firm’s SEC filing) NovaStar Financial, the one-time mega subprime lender, is continuing to face questions about its future, according to a 10-K filed Wednesday with the Securities and Exchange Commission. “We have discontinued our mortgage lending business, have sold most of the loans that we had not yet securitized, and have sold our mortgage servicing assets to generate cash to repay indebtedness and to reduce cash requirements,” reads the report. “We also have terminated all but a core group of our workforce. Our historical operations are now limited to managing our existing portfolio of mortgage securities.” The report goes on to say that considering the depth of disruption to subprime mortgage loan markets in the United States, there are no assurances that these markets will improve or return to past levels, damping any chance of a meaningful recovery in the near term. Unless the firm is able to reestablish profitable operations, either within historical or in new business areas, the firm says it “will not be able to continue as a going concern,” according to the SEC filing. “Our ability to start or acquire new businesses is significantly constrained by our limited liquidity and our likely inability to obtain debt financing or to issue equity securities as a result of our current financial condition, including a shareholders’ deficit, as well as other uncertainties and risks,” the report concludes. Net losses on all structured finance transactions at the company stood at $661.5m at the end of 2008, compared to $254m in 2007. Write to Jacob Gaffney.

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