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After selling off its main profit-generating operations during the last two years, Novation announced that it planned to use the proceeds to invest in early-stage, technology-enabled businesses. But that's a difficult proposition for a company that has a balance sheet with three times more liabilities than the $31.9 million in assets it listed in its 2015 annual report.
The company's discontinued operations remain a weight around its neck, causing nearly $26 million in losses in 2015. That's an untenable situation for a company that generated $6.13 million in 2015 income, especially since the company still faces three major lawsuits related to its subprime past.
One lawsuit was filed by a pension fund that acquired $7.75 billion in mortgage-backed securities from NovaStar. The suit argues the company hid how it systematically disregarded its own underwriting guidelines and "financially incentivized" its employees to make noncompliant loans to extremely risky borrowers. The alleged reckless actions caused the pension fund to lose more than $2.5 billion. The fund is seeking damages from Novation, which said it will vigorously defend itself from the claims
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