Novastar Financial Inc (Other) (3)

FORM 3	UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 INITIAL STATEMENT OF BENEFICIAL OWNERSHIP OF SECURITIES	OMB APPROVAL OMB Number: 3235-0104 Expires: January 31, 2008 Estimated average burden hours per response... 0.5
	Filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, Section 17(a) of the Public Utility Holding Company Act of 1935 or Section 30(h) of the Investment Company Act of 1940

1. Name and Address of Reporting Person ^*

GOLDMAN SACHS GROUP INC/

2. Date of Event Requiring Statement (MM/DD/YYYY) 9/20/2007

3. Issuer Name and Ticker or Trading Symbol

NOVASTAR FINANCIAL INC [NFI]

(Last) (First) (Middle)

85 BROAD ST

4. Relationship of Reporting Person(s) to Issuer (Check all applicable)

_____ Director ___ X ___ 10% Owner
_____ Officer (give title below) _____ Other (specify below)

(Street)

NEW YORK, NY 10004

(City) (State) (Zip)

5. If Amendment, Date Original Filed (MM/DD/YYYY)

6. Individual or Joint/Group Filing (Check Applicable Line)

___ Form filed by One Reporting Person
_ X _ Form filed by More than One Reporting Person

Table I - Non-Derivative Securities Beneficially Owned
1.Title of Security (Instr. 4)	2. Amount of Securities Beneficially Owned (Instr. 4)	3. Ownership Form: Direct (D) or Indirect (I) (Instr. 5)	4. Nature of Indirect Beneficial Ownership (Instr. 5)
Common Stock	998388	I	See footnote ⁽¹⁾
8.90% Series C Nonconvertible Preferred Stock	100	I	See footnote ⁽¹⁾

*Table II - Derivative Securities Beneficially Owned ( e.g.* , puts, calls, warrants, options, convertible securities)**
1. Title of Derivate Security (Instr. 4)	2. Date Exercisable and Expiration Date (MM/DD/YYYY)		3. Title and Amount of Securities Underlying Derivative Security (Instr. 4)		4. Conversion or Exercise Price of Derivative Security	5. Ownership Form of Derivative Security: Direct (D) or Indirect (I) (Instr. 5)	6. Nature of Indirect Beneficial Ownership (Instr. 5)
1. Title of Derivate Security (Instr. 4)	Date Exercisable	Expiration Date	Title	Amount or Number of Shares	4. Conversion or Exercise Price of Derivative Security		6. Nature of Indirect Beneficial Ownership (Instr. 5)
Call option (obligation to sell)	⁽²⁾	9/22/2007	Common Stock	107500	$10	I	See footnote ⁽¹⁾
Call option (obligation to sell)	⁽²⁾	9/22/2007	Common Stock	80000	$12.5	I	See footnote ⁽¹⁾
Call option (obligation to sell)	⁽²⁾	9/22/2007	Common Stock	31250	$15	I	See footnote ⁽¹⁾
Call option (obligation to sell)	⁽²⁾	12/22/2007	Common Stock	4650	$7.5	I	See footnote ⁽¹⁾
Call option (obligation to sell)	⁽²⁾	12/22/2007	Common Stock	106500	$10	I	See footnote ⁽¹⁾
Call option (obligation to sell)	⁽²⁾	12/22/2007	Common Stock	3825	$12.5	I	See footnote ⁽¹⁾
Call option (obligation to sell)	⁽²⁾	12/22/2007	Common Stock	550000	$15	I	See footnote ⁽¹⁾
Call option (obligation to sell)	⁽²⁾	1/19/2008	Common Stock	2500	$7.5	I	See footnote ⁽¹⁾
Call option (obligation to sell)	⁽²⁾	1/19/2008	Common Stock	77675	$10	I	See footnote ⁽¹⁾
Call option (obligation to sell)	⁽²⁾	1/19/2008	Common Stock	2500	$12.5	I	See footnote ⁽¹⁾
Call option (obligation to sell)	⁽²⁾	1/19/2008	Common Stock	55000	$35	I	See footnote ⁽¹⁾
Put option (right to sell)	⁽²⁾	9/22/2007	Common Stock	107500	$10	I	See footnote ⁽¹⁾
Put option (right to sell)	⁽²⁾	9/22/2007	Common Stock	80000	$12.5	I	See footnote ⁽¹⁾
Put option (right to sell)	⁽²⁾	9/22/2007	Common Stock	31250	$15	I	See footnote ⁽¹⁾
Put option (right to sell)	⁽²⁾	12/22/2007	Common Stock	6250	$7.5	I	See footnote ⁽¹⁾
Put option (right to sell)	⁽²⁾	12/22/2007	Common Stock	127675	$10	I	See footnote ⁽¹⁾
Put option (right to sell)	⁽²⁾	12/22/2007	Common Stock	550000	$15	I	See footnote ⁽¹⁾
Put option (right to sell)	⁽²⁾	1/19/2008	Common Stock	9600	$7.5	I	See footnote ⁽¹⁾
Put option (right to sell)	⁽²⁾	1/19/2008	Common Stock	83275	$10	I	See footnote ⁽¹⁾
Put option (right to sell)	⁽²⁾	1/19/2008	Common Stock	55000	$35	I	See footnote ⁽¹⁾

Explanation of Responses:
( 1)	This statement is being filed by The Goldman Sachs Group, Inc. ("GS Group") and Global Securities Services ("GSS", and together with GS Group, the "Reporting Persons"), a separate business unit within the Goldman Sachs organization. GSS beneficially owns directly and GS Group may be deemed to beneficially own indirectly the securities reported herein.
( 2)	Immediately exercisable.

Reporting Owners
Reporting Owner Name / Address	Relationships
Reporting Owner Name / Address	Director	10% Owner	Officer	Other
GOLDMAN SACHS GROUP INC/ 85 BROAD ST NEW YORK, NY 10004		X
Global Securities Services 85 BROAD STREET NEW YORK, NY 10004		X

Signatures
/s/ Andrea DeMar, Attorney-in-fact		9/28/2007
^** Signature of Reporting Person		Date
/s/ Andrea DeMar, Attorney-in-fact		9/28/2007
^** Signature of Reporting Person		Date

Reminder: Report on a separate line for each class of securities beneficially owned directly or indirectly.
*	If the form is filed by more than one reporting person, see Instruction 5(b)(v).
**	Intentional misstatements or omissions of facts constitute Federal Criminal Violations. See 18 U.S.C. 1001 and 15 U.S.C. 78ff(a).
Note:	File three copies of this Form, one of which must be manually signed. If space is insufficient, see Instruction 6 for procedure.
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