PARENT GUARANTEE AGREEMENT

Exhibit 10.61

EXECUTION COPY

PARENT GUARANTEE AGREEMENT

between

NOVASTAR FINANCIAL, INC.,

as Parent Guarantor,

and

THE BANK OF NEW YORK MELLON TRUST COMPANY,

NATIONAL ASSOCIATION,

as Guarantee Trustee

Dated as of February 18, 2009

NOVASTAR MORTGAGE, INC.

TABLE OF CONTENTS

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This P ARENT G UARANTEE A GREEMENT , dated as of February 18, 2009, executed and delivered by N OVA S TAR F INANCIAL , I NC ., a Maryland corporation (the “ Parent Guarantor ”) having its principal office at 2114 Central Street, Suite 600, Kansas City, Missouri 64108, and THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association, as trustee (in such capacity, the “ Guarantee Trustee ”), for the benefit of the Trust (as defined herein), the Holders (as defined herein) and the Note Holders (as defined herein) from time to time of the Notes (as defined herein) of NovaStar Mortgage, Inc., a Virginia corporation (the “ Company ”).

W ITNESSETH :

W HEREAS , pursuant to an Indenture, dated as of the date hereof (the “ Indenture ”), among the Company, the Parent Guarantor and The Bank of New York Mellon Trust Company, National Association, as trustee, the Company is issuing Twenty-Eight Million Nine Hundred Ninety-Five Thousand Dollars ($28,995,000) aggregate principal amount of its junior subordinated notes (the “ Notes ”) having the terms set forth in the Indenture to N OVA S TAR C APITAL T RUST II/B, a Delaware statutory trust (the “ Trust ”), evidencing indebtedness of the Company to the Trust in connection with the issuance of undivided preferred beneficial interests in the assets of the Trust (the “ Preferred Securities ”), and undivided common beneficial interests in the assets of the Trust (collectively, together with the Preferred Securities, the “ Trust Securities ”) and the exchange of the Preferred Securities for certain undivided preferred beneficial interests in the assets of NovaStar Capital Trust II (the “ Exchange ”);

W HEREAS , the Parent Guarantor owns one hundred percent (100%) of the outstanding capital stock of the Company, and will substantially benefit from the Exchange; and

W HEREAS , as incentive for the Holders (as defined herein) to consummate the Exchange, the Parent Guarantor desires irrevocably and unconditionally to agree, to the extent set forth herein, to pay to the Note Holders (as defined herein) the Parent Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein.

Now, T HEREFORE , in consideration of the exchange by each Holder of all of the undivided preferred beneficial interests in the assets of NovaStar Capital Trust II for the Preferred Securities, the Parent Guarantor executes and delivers this Parent Guarantee Agreement to provide as follows for the benefit of the Holders and the Note Holders (as defined herein):

ARTICLE I

I NTERPRETATION AND D EFINITIONS

SECTION 1.1. Interpretation.

In this Parent Guarantee Agreement, unless the context otherwise requires:

(a) capitalized terms used in this Parent Guarantee Agreement but not defined in the preamble hereto have the respective meanings assigned to them in Section 1.2 ;

(b) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”;

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(c) all references to “the Parent Guarantee Agreement” or “this Parent Guarantee Agreement” are to this Parent Guarantee Agreement, as modified, supplemented or amended from time to time;

(d) all references in this Parent Guarantee Agreement to articles and sections are to articles and sections of this Parent Guarantee Agreement unless otherwise specified;

(e) the words “hereby”, “herein”, “hereof” and “hereunder” and other words of similar import refer to this Parent Guarantee Agreement as a whole and not to any particular Article, Section or other subdivision;

(f) a reference to the singular includes the plural and vice versa;

(g) the masculine, feminine or neuter genders used herein shall include the masculine, feminine and neuter genders.

SECTION 1.2. Definitions.

As used in this Parent Guarantee Agreement, the terms set forth below shall, unless the context otherwise requires, have the following meanings:

“ Affiliate ” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “ control ” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “ controlling ” and “ controlled ” have meanings correlative to the foregoing.

“ Beneficiaries ” means the Guarantee Trustee, the Delaware Trustee, the Property Trustee, the Administrative Trustees and any successors thereof.

“ Board of Directors ” means either the board of directors of the Parent Guarantor or any duly authorized committee of that board.

“ Common Securities ” means the securities representing common undivided beneficial interests in the assets of the Trust.

“ Debt ” means with respect to any Person, whether recourse is to all or a portion of the assets of such Person, whether currently existing or hereafter incurred, and whether or not contingent and without duplication, (i) every obligation of such Person for money borrowed; (ii) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers’ acceptances or similar facilities issued for the account of such Person; (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable arising in the ordinary course of business); (v) every capital lease obligation of such Person; (vi) all indebtedness of such Person, whether incurred on or prior to the date of this Parent Guarantee Agreement or thereafter incurred, for claims in respect of derivative products, including interest rate, foreign exchange rate and commodity forward contracts, options, swaps and similar arrangements; (vii) every obligation of the type referred to in clauses (i) through (vi) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or

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is responsible or liable for, directly or indirectly, as obligor or otherwise; and (viii) any renewals, extensions, refundings, amendments or modifications of any obligation of the type referred to in clauses (i) through (vii).

“ Event of Default ” means a default by the Parent Guarantor on any of its payment or other obligations under this Parent Guarantee Agreement; provided , that except with respect to a default in payment of any Parent Guarantee Payments, such default shall not be an Event of Default unless the Parent Guarantor shall have received notice of such default in accordance with the terms herein from the Guarantee Trustee, the Trust or any Holder and shall have failed to cure such default within thirty (30) days after receipt of such notice.

“ Guarantee Trustee ” means The Bank of New York Mellon Trust Company, National Association, until a Successor Guarantee Trustee, as defined below, has been appointed and has accepted such appointment pursuant to the terms of this Parent Guarantee Agreement, and thereafter means each such Successor Guarantee Trustee, in any case solely in its capacity as guarantee trustee and not in its individual capacity.

“ Holder ” means any holder, as registered on the books and records of the Trust, of any Preferred Securities; provided , that in determining whether the holders of the requisite percentage of Preferred Securities have given any request, notice, consent or waiver hereunder, “Holder” shall not include the Parent Guarantor, the Guarantee Trustee or any Affiliate of the Parent Guarantor or the Guarantee Trustee.

“ List of Holders ” has the meaning specified in Section 2.1 .

“ Majority in Liquidation Amount of the Preferred Securities ” means a vote by the Holder(s), voting separately as a class, of more than fifty percent (50%) of the aggregate Liquidation Amount of all then outstanding Preferred Securities issued by the Trust.

“ Majority in Principal Amount of the Notes ” means a vote by the Note Holder(s), voting separately as a class, of more than fifty percent (50%) of the aggregate principal amount of all then outstanding Notes.

“ Note Holder ” means any holder, as registered on the books and records of the Trustee (as defined in the Indenture), of any Notes; provided , that, in determining whether the holders of the requisite percentage of Notes have given any request, notice, consent or waiver hereunder, “Note Holder” shall not include either the Parent Guarantor, the Company, the Guarantee Trustee or any Affiliate of either of the Parent Guarantor or the Guarantee Trustee unless all of the Notes are held by such Persons.

“ Officers’ Certificate ” means, with respect to any Person, a certificate signed by the Chief Executive Officer, President or a Vice President of such Person, and by the Chief Financial Officer, Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of such Person, and delivered to the Guarantee Trustee. Any Officers’ Certificate delivered with respect to compliance with a condition or covenant provided for in this Parent Guarantee Agreement (other than the certificate provided pursuant to Section 2.2 ) shall include:

(a) a statement that each officer signing the Officers’ Certificate has read the covenant or condition and the definitions relating thereto;

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(b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers’ Certificate;

(c) a statement that each officer has made such examination or investigation as, in such officer’s opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(d) a statement as to whether, in the opinion of each officer, such condition or covenant has been complied with.

“ Parent Guarantee Payments ” means the following payments or distributions, without duplication, with respect to the Notes, to the extent not fully and promptly paid or made by the Company immediately after the expiration of any grace or cure period applicable to the Company under the terms of the Indenture: (a) any accrued and unpaid payments of interest or principal, or other amounts, required to be paid on the Notes; and (b) payment of any other amounts to be paid by the Company under the Indenture, including all amounts due to any Beneficiary by the Company.

“ Person ” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, company, trust, unincorporated association or government or any agency or political subdivision thereof or any other entity of whatever nature.

“ Responsible Officer ” means, with respect to the Guarantee Trustee, the officer in the Institutional Trust Services Department of the Trustee having direct responsibility for the administration of this Parent Guarantee Agreement.

“ Senior Debt ” means the principal of and any premium, if any, and interest on (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Parent Guarantor whether or not such claim for post-petition interest is allowed in such proceeding) all Debt of the Parent Guarantor, whether incurred on or prior to the date of the Indenture or thereafter incurred, unless it is provided in the instrument creating or evidencing the same or pursuant to which the same is outstanding, that such obligations are not superior in right of payment to the Notes; provided, however, that Senior Debt shall not include any other debt securities, and guarantees in respect of such debt securities, issued to any trust other than the Trust (or a trustee of such trust), partnership or other entity affiliated with the Company or the Guarantor that is a financing vehicle of the Company or the Guarantor (a “financing entity”), in connection with the issuance by such financing entity of equity securities or other securities that are treated as equity capital that rank pari passu with or junior in right of payment to the Indenture, including, without limitation, the debt securities of the Company issued under the Indenture, dated the date hereof, between the Company and The Bank of New York Mellon Trust Company, National Association, as trustee, in connection with the Other Preferred Securities.

“ Trust Indenture Act ” means the Trust Indenture Act of 1939, as amended and as in effect on the date of this Parent Guarantee Agreement.

“ Successor Guarantee Trustee ” means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.1 .

Capitalized or otherwise defined terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Indenture as in effect on the date hereof.

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ARTICLE II

R EPORTS

SECTION 2.1. List of Holders.

The Parent Guarantor shall furnish or cause to be furnished to the Guarantee Trustee at such times as the Guarantee Trustee may request in writing, within thirty (30) days after the receipt by the Parent Guarantor of any such request, a list, in such form as the Guarantee Trustee may reasonably require, of the names and addresses of the Holders or Note Holders (each a “ List of Holders ”) as of a date not more than fifteen (15) days prior to the time such list is furnished, in each case to the extent such information is in the possession or control of the Parent Guarantor or the Company and is not identical to a previously supplied List of Holders or has not otherwise been received by the Guarantee Trustee in its capacity as such. The Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders.

SECTION 2.2. Periodic Reports to the Guarantee Trustee.

(a) The Parent Guarantor shall deliver to the Guarantee Trustee, within ninety (90) days after the end of each fiscal year of the Parent Guarantor ending after the date of this Parent Guarantee Agreement, an Officers’ Certificate covering the preceding fiscal year, stating whether or not to the knowledge of the signers thereof the Parent Guarantor is in default in the performance or observance of any of the terms or provisions or any of the conditions of this Parent Guarantee Agreement (without regard to any period of grace or requirement of notice provided hereunder) and, if the Parent Guarantor shall be in default thereof, specifying all such defaults and the nature and status thereof of which they have knowledge.

(b) The Parent Guarantor shall furnish (i) to the Guarantee Trustee; (ii) to the Holders, at 2107 Wilson Blvd., Suite 450, Arlington, VA 22201, Attention: Robert Hurley, Chief Financial Officer or such other address as designated by such Holders); and (iii) any Owner of the Preferred Securities reasonably identified to the Company and the Trust (which identification may be made by such Owner) a duly completed and executed certificate substantively and substantially in the form attached hereto as Exhibit A , including the financial statements referenced in such Exhibit, which certificate and financial statements shall be so furnished by the Parent Guarantor not later than forty five (45) days after the end of each of the first three fiscal quarters of each fiscal year of the Parent Guarantor and not later than ninety (90) days after the end of each fiscal year of the Parent Guarantor.

SECTION 2.3. Event of Default; Waiver.

Neither the Trust nor the Note Holders shall have the right to waive any past Event of Default without the consent of the Holders of a Majority in Liquidation Amount of the Preferred Securities. The Holders of a Majority in Liquidation Amount of the Preferred Securities may, on behalf of the Holders, the Trust or the Note Holders, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Parent Guarantee Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent therefrom.

SECTION 2.4. Event of Default; Notice.

(a) The Guarantee Trustee shall, within ninety (90) days after the occurrence hereunder of a default, transmit to the Trust, the Note Holders, the Company and the Holders notices of all defaults actually known to the Guarantee Trustee, unless such defaults

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have been cured or waived before the giving of such notice. For the purpose of this Section 2.4 , the term “ default ” means any event that is, or after notice or lapse of time or both would become, an Event of Default.

(b) The Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Guarantee Trustee shall have received written notice, or a Responsible Officer charged with the administration of this Parent Guarantee Agreement shall have obtained written notice, of such Event of Default from the Parent Guarantor, the Company, a Note Holder or a Holder.

ARTICLE III

P OWERS , D UTIES AND R IGHTS OF THE G UARANTEE T RUSTEE

SECTION 3.1. Powers and Duties of the Guarantee Trustee.

(a) This Parent Guarantee Agreement shall be held by the Guarantee Trustee for the benefit of the Holders, the Note Holders and the Trust, and the Guarantee Trustee shall not transfer this Parent Guarantee Agreement to any Person except a Holder or Note Holder exercising its rights pursuant to Section 5.4(d) or to a Successor Guarantee Trustee upon acceptance by such Successor Guarantee Trustee of its appointment to act as Successor Guarantee Trustee. The right, title and interest of the Guarantee Trustee shall automatically vest in any Successor Guarantee Trustee, upon acceptance by such Successor Guarantee Trustee of its appointment hereunder, and such vesting and succession of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee.

(b) The rights, immunities, duties and responsibilities of the Guarantee Trustee shall be as provided by this Parent Guarantee Agreement and there shall be no other duties or obligations, express or implied, of the Guarantee Trustee. Notwithstanding the foregoing, no provisions of this Parent Guarantee Agreement shall require the Guarantee Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not herein expressly so provided, every provision of this Parent Guarantee Agreement relating to the conduct or affecting the liability of or affording protection to the Guarantee Trustee shall be subject to the provisions of this Section 3.1 . To the extent that, at law or in equity, the Guarantee Trustee has duties and liabilities relating to the Trust, the Parent Guarantor or the Note Holde