NovaStar Financial Inc, a struggling subprime mortgage lender, said on Friday it will cut about 500 employees, or 37 percent of its work force, to reflect an expected reduction in home loans.

The Kansas City, Missouri-based company said the job cuts will begin immediately, and are expected to conclude in the fourth quarter. It expects to incur a pretax charge of $17 million to $21 million in the third quarter for the cuts.

NovaStar said it is still funding all home loans it has committed to make, and that its servicing and portfolio management operations are not affected by the job cuts.

Mortgage