| 1.                                               | I      have reviewed this annual report on Form 10-K of NovaStar Financial,      Inc.;                                                                                                                                                                                                                                                                             |
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| 2.                                               | Based on my knowledge, this report 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 with respect to the period covered by      this report;                                     |
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| 3.                                               | Based on my knowledge, the financial statements, and other      financial information included in this report, fairly present in all      material respects the financial condition, results of operations and cash      flows of the registrant as of, and for, the periods presented in this      report;                                                        |
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| 4.                                               | The      registrant’s other certifying officer and I are responsible for      establishing and maintaining disclosure controls and procedures (as      defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control      over financial reporting (as defined in Exchange Act Rules 13a-15(f) and      15d-15(f)) for the registrant and have: |
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|                                                  |                                                                                                                                                                                                                                                                                                                                                               | a. | Designed such      disclosure controls and procedures, or caused such disclosure controls and      procedures to be designed under our supervision, to ensure that material      information relating to the registrant, including its consolidated      subsidiaries, is made known to us by others within those entities,      particularly during the period in which this report is being      prepared; |
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|                                                  |                                                                                                                                                                                                                                                                                                                                                               | b. | Designed such      internal control over financial reporting, or caused such internal control      over financial reporting to be designed under our supervision, to provide      reasonable assurance regarding the reliability of financial reporting and      the preparation of financial statements for external purposes in      accordance with generally accepted accounting principles; |
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|                                                  |                                                                                                                                                                                                                                                                                                                                                               | c. | Evaluated the      effectiveness of the registrant’s disclosure controls and procedures and      presented in this report our conclusions about the effectiveness of the      disclosure controls and procedures, as of the end of the period covered by      this report based on such evaluation; and |
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|                                                  |                                                                                                                                                                                                                                                                                                                                                               | d. | Disclosed in      this report any change in the registrant’s internal control over financial      reporting that occurred during the registrant’s most recent fiscal quarter      (the registrant’s fourth fiscal quarter in the case of an annual report)      that has materially affected, or is reasonably likely to materially      affect, the registrant’s internal control over financial reporting;      and |
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| 5.                                               | The      registrant’s other certifying officer and I have disclosed, based on our      most recent evaluation of internal control over financial reporting, to      the registrant’s auditors and the audit committee of registrant’s board of      directors (or persons performing the equivalent function):                                   |
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|                                                  |                                                                                                                                                                                                                                                                                                                                                               | a. | All      significant deficiencies and material weaknesses in the design or      operation of internal control over financial reporting which are      reasonably likely to adversely affect the registrant’s ability to record,      process, summarize and report financial information; and |
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|                                                  |                                                                                                                                                                                                                                                                                                                                                               | b. | Any fraud,      whether or not material, that involves management or other employees who      have a significant role in the registrant’s internal controls over      financial reporting. |

| Date:      March 31, 2010 |   /s/ Rodney      E. Schwatken |
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|                           |   Rodney E. Schwatken          |
|                           |   Chief Financial Officer      |

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