Novastar subprime: Who's next

NovaStar Financial Inc. plunged today, falling as much as 45 percent after the company reported a fourth-quarter loss and said it would have little taxable income through 2011.

Shares of the Kansas City subprime mortgage lender fell as low as $9.80 before closing at $10.10, down $7.46, or 42.48 percent. The percentage decline was the biggest on the major U.S. exchanges.

Volume of more than 22 million shares was eighth highest on the New York Stock Exchange and more than 14 times the three-month daily average of about 1.5 million.

The price of NovaStar shares had fallen by about half in the last two months ahead of Tuesday’s announcements on concerns about weakness in the housing industry and growing mortgage defaults. Shares had closed above $31 a share as recently as Dec. 6. and now: $9.80 Ouch!!!

Is this the canary in the coal mine? Who else is in trouble?