Fitch cuts NovaStar's subprime servicer rating

NEW YORK May 30 (Reuters) - Fitch Ratings on Wednesday cut the residential primary servicer rating for subprime mortgages of NovaStar Mortgage, Inc., a unit of NovaStar Financial Inc. NFI.N, citing uncertainties over the company's profitability.

"The downgrade reflects the challenging subprime mortgage environment and uncertainties regarding NFI's profitability, as well as concerns that the company's financial challenges may negatively impact its ongoing servicing operation and the company's servicing quality," Fitch said in a statement.

NovaStar, which put itself up for sale last month, this month posted a big first-quarter operating loss amid tough conditions for lenders that make home loans to people with poor credit histories. For details, see [ID:nN10197583]

Fitch cut NovaStar's servicer rating to "RPS3-plus," from "RPS2-minus." Servicers are rated on a scale of 1 to 5, with 1 being the highest rating.