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SEC Filings

424B1
DITECH HOLDING CORP filed this Form 424B1 on 09/16/1997
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                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
     As further discussed in the notes to the HCP and subsidiaries consolidated
financial statements, the financial statements of HCP and its subsidiaries ("HCP
Subsidiaries") were prepared based on historical operations of HCP, HCMC (a
wholly-owned subsidiary), HCS (a wholly-owned subsidiary), HJV (a 75% owned
subsidiary that became inactive in the fourth quarter of 1995) and certain other
inactive subsidiaries (Hanover Capital Advisors, Inc. ("HCA"), Hanover Capital
Mortgage Fund, Inc. ("HCMF") and Hanover Online Mortgage Edge, LLC ("HOME")).
HCHI is not acquiring any operating assets from any predecessor entities. HCHI
is, however, acquiring on the closing of the Offering all of the outstanding
shares of the HCP Preferred. See "Structure and Formation Transactions".
Historical financial information presented herein should be regarded solely as
background information. There can be no assurance that the results of the Due
Diligence Operations and conduit operations from HCP and HCMC, respectively, are
indicative of future results.
 
RESULTS OF OPERATIONS; HCP AND SUBSIDIARIES
 
     The following discussion relates only to HCP and its subsidiaries prior to
the contribution of the HCP Preferred to HCHI as described in "Formation and
Structure Transactions."
 
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
 
     The net income in the first half of 1997 was $35,000 as compared to net
income of $110,000 in the same period in 1996. Income before income taxes was
$73,000 in the first half of 1997 as compared to income before income taxes of
$202,000 in the first half of 1996.
 
     Total revenue in the first half of 1997 was $4,234,000, a decrease of 18.2%
from the total revenues of $5,184,000 in the first half of 1996. All revenue
categories during the first six months of 1997 reflected declines when compared
to the same period during 1996, with the most significant decrease in loan
brokerage/asset management fees (a decrease of 26.9%). Approximately 38% of the
total revenue decrease was attributable to the decrease in revenues generated by
due diligence contracts. Due diligence revenues are generated from contracts
entered into with commercial banks, private mortgagors, credit unions,
government agencies (the RTC and the FDIC) and other financial institutions. The
need for due diligence contract work is often influenced by the overall
acquisition, merger and other consolidation activity in the financial market.
HCP's sales representatives actively pursue due diligence contracts (as well as
the sale and purchase of Mortgage Loans for third parties). In addition, a
substantial portion of HCP's due diligence contracts are obtained as a result of
HCP's reputation and prior work as a due diligence contractor and HCP being
listed as an approved RTC/FDIC contractor. The type of due diligence contracts
and scope of work detailed in the contracts was generally less labor intensive
and required less travel and lodging in the first half of 1997 as compared to
the first half of 1996. Accordingly, despite the decrease in revenues, the first
half 1997 due diligence contracts were generally more profitable (on a per loan
basis) than due diligence contracts for the same period in 1996. Commercial due
diligence revenues (which account for 13.2% and 14.1% of all due diligence
revenues for the first half of 1997 and 1996, respectively) reflected a decrease
of $72,000. HCP's current contract to provide commercial due diligence for the
FDIC terminated in June 1997.
 
     Revenues from loan brokering/asset management fee operations were
$1,074,000 in the first half of 1997 as compared to $1,470,000 in the first half
of 1996, a decrease of $396,000 (41.6% of the total revenue decrease). Although
asset management fees increased substantially during this period (from $600,000
to $850,000), the increase in asset management fees in the first half of 1997
did not fully offset the revenues generated in the first half of 1996 by a
single loan sale advisory contract with a large commercial bank. This contract
generated $819,000 of revenues in the first half of 1996. No such revenues were
recognized in 1997. Asset management fees are recognized by HCP, to the extent
that HCP, as asset manager for ABH-I LLC and BT Realty Resources, Inc.,
generates returns in excess of an established base return on capital (generally
15.0%) for each entity. HCP's asset management fee is based on a portion of the
return on capital that HCP generates in excess of the base return on capital.
 
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