##### 



Exhibit 99.1

NOVASTAR MORTGAGE FUNDING TRUST
NOVASTAR HOME EQUITY LOAN ASSET-BACKED CERTIFICATES
SERIES 2002-1

2002 ANNUAL STATEMENT TO BONDHOLDER

DISTRIBUTIONS IN DOLLARS

|       |      |            |                |                |              |           |               |               |            |        |               |               |      |  |               |               |            |          |      |           |      |  |                |                |              | 
|------ | ---- | ---------- | -------------- | -------------- | ------------ | --------- | ------------- | ------------- | ---------- | ------ | ------------- | ------------- | ---- |  | ------------- | ------------- | ---------- | -------- | ---- | --------- | ---- |  | -------------- | -------------- | ------------ | 
|       |      |            |                |                |              |           |               |               |            |        |               |               |      |  |               |               |            |          |      |           |      |  |                | CURRENT       
|       |      |            |                | ORIGINAL       |              |           |               |               |            |        |               |               |      |  |               |               |            | REALIZED |      | PRINCIPAL
|CLASS  |      | FACE VALUE |                | INTEREST       |              | PRINCIPAL |               | TOTAL         |            | LOSSES |               | BALANCE      
|       |      |            |                |                |              |           |               |               |            |        |               |              
|       | A-1  |            |                | 316,900,000.00 |              |           |               | 4,837,614.61  |            |        |               | 29,416,297.07 |      |  |               | 34,253,911.68 |            |          |      | 0.00      |      |  |                | 287,483,702.93 |             
|       | A-2  |            |                | 140,600,000.00 |              |           |               | 2,138,283.88  |            |        |               | 18,207,949.03 |      |  |               | 20,346,232.91 |            |          |      | 0.00      |      |  |                | 122,392,050.97 |             
|       | M-1  |            |                | 12,500,000.00  |              |           |               | 247,249.19    |            |        |               | 0.00          |      |  |               | 247,249.19    |            |          |      | 0.00      |      |  |                | 12,500,000.00  |             
|       | M-2  |            |                | 10,000,000.00  |              |           |               | 250,882.68    |            |        |               | 0.00          |      |  |               | 250,882.68    |            |          |      | 0.00      |      |  |                | 10,000,000.00  |             
|       | M-3  |            |                | 7,500,000.00   |              |           |               | 215,462.02    |            |        |               | 0.00          |      |  |               | 215,462.02    |            |          |      | 0.00      |      |  |                | 7,500,000.00   |             
|       | B    |            |                |                | 3,750,000.00 |           |               |               | 185,934.13 |        |               |               | 0.00 |  |               |               | 185,934.13 |          |      |           | 0.00 |  |                |                | 3,750,000.00 | 
|       | AIO* |            |                | 500,000,000.00 |              |           |               | 13,635,953.44 |            |        |               | 0.00          |      |  |               | 13,635,953.44 |            |          |      | 0.00      |      |  |                | 452,375,853.90 |             
|       | O    |            |                |                | 8,750,000.00 |           |               |               | 0.00       |        |               |               | 0.00 |  |               |               | 0.00       |          |      |           | 0.00 |  |                |                | 8,750,000.00 | 
|       | P    |            |                |                | 100.00       |           |               |               | 733,993.67 |        |               |               | 0.00 |  |               |               | 733,993.67 |          |      |           | 0.00 |  |                |                | 100.00       | 
|       |      |            |                |                |              |           |               |               |            |        |               |               |      |  |               |               |            |          |      |           |      |  |                |               
|TOTALS |      |            | 500,000,100.00 |                |              |           | 22,245,373.62 |               |            |        | 47,624,246.10 |               |      |  | 69,869,619.72 |               |            |          | 0.00 |           |      |  | 452,375,853.90 |               
|       |      |            |                |                |              |           |               |               |            |        |               |               |      |  |               |               |            |          |      |           |      |  |                |               



|* |  | Notional Balance
|- |  | ----------------

FACTOR INFORMATION PER $1000 OF ORIGINAL FACE

|      |  |           |           |          |         |           |  |       |          |         |  |  |          |         |  |  |              |              |           |  | 
|----- |  | --------- | --------- | -------- | ------- | --------- |  | ----- | -------- | ------- |  |  | -------- | ------- |  |  | ------------ | ------------ | --------- |  | 
|      |  |           |           |          |         |           |  |       |          |         |  |  |          |         |  |  |              |              | CURRENT  
|      |  |           |           |          |         |           |  |       |          |         |  |  |          |         |  |  |              |              | PRINCIPAL
|CLASS |  | CUSIP     |           | INTEREST |         | PRINCIPAL |  | TOTAL |          | BALANCE
|      |  |           |           |          |         |           |  |       |          |        
|A-1   |  | 66987XBC8 |           |          | 15.2654 |           |  |       | 92.8251  |         |  |  | 108.0906 |         |  |  | 907.174828   |             
|A-2   |  | 66987XBD6 |           |          | 15.2082 |           |  |       | 129.5017 |         |  |  | 144.7100 |         |  |  | 870.498229   |             
|M-1   |  | 66987XBE4 |           |          | 19.7799 |           |  |       | 0.0000   |         |  |  | 19.7799  |         |  |  | 1,000.000000 |             
|M-2   |  | 66987XBF1 |           |          | 25.0882 |           |  |       | 0.0000   |         |  |  | 25.0882  |         |  |  | 1,000.000000 |             
|M-3   |  | 66987XBG9 |           |          | 28.7282 |           |  |       | 0.0000   |         |  |  | 28.7282  |         |  |  | 1,000.000000 |             
|B     |  |           | 66987XBK0 |          |         | 49.5824   |  |       |          | 0.0000  |  |  |          | 49.5824 |  |  |              | 1,000.000000 |          
|AIO*  |  | 66987XBH7 |           |          | 27.2719 |           |  |       | 0.0000   |         |  |  | 27.2719  |         |  |  | 904.751708   |             
|P     |  |           | 66987XBJ3 |          |         | 0.0000    |  |       |          | 0.0000  |  |  |          | 0.0000  |  |  |              | 1,000.000000 |          

|          |  |                              
|--------- |  | -----------------------------
|Seller:   |  | NovaStar Financial, Inc.     
|Servicer: |  | NovaStar Mortgage Corporation

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##### 



NOVASTAR MORTGAGE FUNDING TRUST
NovaStar Home Equity Loan Asset-Backed Certificates
Series 2002-1

2002 ANNUAL STATEMENT TO BONDHOLDER

|                                                        |  |  |               |  |  |  |                | 
|------------------------------------------------------- |  |  | ------------- |  |  |  | -------------- | 
|Aggregate Collections From the Mortgage Loans           |  |  |               |  |  |  |                | 
|                                                        |  |  |               |  |  |  |                | 
|Total Available Funds                                   |  |  | 74,008,287.85 |  |  |  |                | 
|Total Servicer Advances                                 |  |  | 0.00          |  |  |  |                | 
|Total Compensating Interest                             |  |  | 0.00          |  |  |  |                | 
|                                                        |  |  |               |  |  |  |                | 
|Aggregate Beginning Principal Balance of Mortgage Loans |  |  |               |  |  |  | 395,124,349.85 | 
|Aggregate Ending Principal Balance of Mortgage Loans    |  |  |               |  |  |  | 452,375,853.90 | 
|                                                        |  |  |               |  |  |  |                | 
|Cumulative Realized Losses                              |  |  |               |  |  |  | 0.00           | 

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