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SEC Filings

424B1
DITECH HOLDING CORP filed this Form 424B1 on 09/16/1997
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operation of HCMC which will be contributed to the Company as a part of the
consummation of the Formation Transactions.
 
     Commercial and Multifamily Underwriting Guidelines.  The Company's policy
regarding underwriting guidelines for Commercial Mortgage Loans and Multifamily
Mortgage Loans centers on the origination process for Commercial Mortgage Loans
and Multifamily Mortgage Loans within the framework of creating loans eligible
for securitization. The due diligence process in underwriting Commercial
Mortgage Loans and Multifamily Mortgage Loans focuses on four main areas: (i) a
property level review, (ii) borrower credit issues, (iii) cash flow structures,
and (iv) adequacy of legal documentation. The property level review begins with
a review of the on-site inspection by the underwriting group and includes an
analysis of the third party reports, including the appraisal, engineering report
and the environmental report. The borrower credit issues include an analysis of
the borrower's legal structure, a review of financials to determine net worth,
past credit history of principals, management ability and experience and
prior/existing relationships. The cash flow structures include an analysis of
the loan-to-value ratio, the expense ratio, the debt service coverage, the value
per unit, the occupancy levels and the historical expense records. The legal
documentation review includes a review of any changes to the approved program
loan documents, including the note, the mortgage, the reserve agreements, the
assignments of leases and rents and any borrower certifications. The program
loan documents will be structured in order to meet the requirements of
securitization with respect to prepayment penalties, recourse carve-outs and the
overall soundness of the documents. In addition, the Company obtains a "Phase I"
environmental site assessment (i.e., generally a record search with no invasive
testing) on properties for Commercial and Multifamily Mortgage Loans prior to
any loan being made. Depending on the results of the Phase I environmental site
assessment, the Company may require a Phase II environmental site assessment.
The Company's loan servicing guidelines require that the Company obtain a Phase
I environmental site assessment (i.e., including invasive testing) of any
mortgaged property prior to acquiring title to or assuming operation of the
mortgaged property. This requirement effectively precludes enforcement of the
rights under the Mortgage Loan until a satisfactory Phase I environmental site
assessment is obtained or until any required remedial action is thereafter
taken, but also decreases the likelihood that the Company will become liable for
any material environmental condition at a mortgaged property.
 
     Commercial and Multifamily Mortgage Loan Servicing.  To control the credit
risk of retained interests in loans securitized, HCMC will retain the servicing
rights on the Commercial Mortgage Loans and Multifamily Mortgage Loans held in
the Investment Portfolio. HCMC may also retain the servicing rights on loans
originated and sold to third party conduits. HCMC, as servicer, will have the
risks associated with operating a mortgage servicing business as well as the
risk of ownership of the servicing.
 
     At June 30, 1997, HCMC serviced approximately $121.7 million of Commercial
Mortgage Loans. Servicing Commercial Mortgage Loans involves a contractual right
to receive a fee for processing and administering the Mortgage Loan payments.
This processing involves collecting monthly mortgage payments on behalf of
investors, reporting information to those investors on a monthly basis and
maintaining custodial escrow accounts for the payment of principal and interest
to investors and property taxes and insurance premiums on behalf of borrowers.
 
     The primary risk of operating a servicing business is the improper
servicing of the Commercial Mortgage Loans and Multifamily Mortgage Loans as
specified under the related servicing contracts, whereby the servicer becomes
liable for possible losses suffered by the owner of the Commercial Mortgage
Loans and Multifamily Mortgage Loans. The operational requirements include
proper handling and accounting for all payment and escrow amounts, proper
borrower and periodic credit reviews, proper value and property reviews and
proper payment of all monies due to third parties such as real estate taxing
authorities and hazard insurance companies.
 
     The primary risks of ownership of servicing include the loss of value in
the servicing either through faster than anticipated Commercial Mortgage Loan
and Multifamily Mortgage Loan prepayments (even though there exist prepayment
penalties on most Mortgage Loans) or improper servicing as outlined above.
 
     Commercial Market Trends.  The market for Commercial Mortgage Loans has
undergone dramatic changes in recent years. Securitization has provided the
mechanism for a fundamental change in the
 
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