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SEC Filings

424B1
DITECH HOLDING CORP filed this Form 424B1 on 09/16/1997
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intends to closely monitor the geographic dispersion of the Mortgage Loans and
will make decisions on a portfolio by portfolio basis about adding to specific
concentrations.
 
     The Commercial Mortgage Loans held will primarily be originated by HCMC to
underwriting standards established by the Company. These underwriting standards
reflect the experience of HCMC in its past originations as well as the
requirements of the rating agencies for Commercial Mortgage Loans. The credit
underwriting will include a financial and credit check review of the borrower,
technical reports including appraisal, engineering and environmental reports, as
well as a review of the economic status of the geographic area of the mortgaged
property. In addition to these credit underwriting activities of HCMC, a
separate credit sign-off will be required before Commercial Mortgage Loans are
transferred to the Investment Portfolio from HCMC. The Mortgage Loans will be
monitored after inclusion in the Mortgage Assets by the servicing department of
HCMC. This monitoring will include a review of financial statements of the
properties financed as well as property inspections.
 
     Single-Family Mortgage Loans will generally be purchased in bulk pools in
the range of $2 million to $100 million. The credit underwriting process will
vary depending on the pool characteristics, including seasoning, loan-to-value
ratios and payment histories. For a new pool of Single-Family Mortgage Loans, a
full due diligence review of the Single-Family Mortgage Loans will be completed
including a review of the documentation, appraisal reports and credit
underwriting of the Single-Family Mortgage Loans. Where required, an updated
property valuation will be obtained. The bulk of the work will be completed by
employees in the Due Diligence Operations of the Company who evaluate mortgage
credit risks. See "Risk Factors -- Risks Related to Operations -- Default by
Borrowers under Mortgage Assets."
 
  Interest Rate Risk Management
 
     There will be two basic types of Mortgage Loans held by the Company:
Mortgage Loans held for securitization or sale and Mortgage Loans held in
securitized form. The Mortgage Loans held for securitization or sale will
generally be hedged to protect the value of the purchased or originated Mortgage
Loans. A variety of hedging instruments may be used, depending on the asset to
be hedged, as well as on the relative price of the various hedging instruments.
These instruments include forward sales of mortgages or mortgage securities,
interest rate futures or options, interest rate swaps, and cap and floor
agreements. See "Business -- Hedging." The Mortgage Loans held in securitized
form will be financed primarily in a manner designed to maintain a consistent
spread in a variety of interest rate environments.
 
     The Company will primarily address the interest rate risk of the Investment
Portfolio through its securitization strategy, which is designed to provide
long-term financing for its Mortgage Assets while maintaining a consistent
spread in a variety of interest rate environments. In order to address any
remaining mismatch of assets and liabilities, and in order to address the
interest rate risks to which its Mortgage Assets will be subject prior to
securitization, the Company will follow an interest rate risk management
program, to the extent consistent with the Company's qualification as a REIT,
intended to protect against the effects of material interest rate changes.
Specifically, the Company's interest rate risk management program will be
formulated with the intent to offset the potential adverse effects resulting
from rate adjustment limitations, if any, on its Mortgage Assets and the
differences between interest rate adjustment indices and interest rate
adjustment periods of its ARM loans and related borrowings.
 
     The Company may purchase interest rate caps, interest rate swaps and
similar instruments to attempt to mitigate the risk of the cost of its variable
rate liabilities increasing at a faster rate than the earnings on its Mortgage
Assets during a period of rising interest rates. The Company intends generally
to hedge as much of the interest rate risk as management determines is in the
best interest of its stockholders, given the cost of such hedging transactions
and the need to maintain the Company's status as a REIT, among other factors.
See "Federal Income Tax Considerations -- Requirements for Qualification as a
REIT." This determination may result in the Principals electing to have the
Company bear a level of interest rate risk that could otherwise be hedged when
the Principals believe, based on all relevant facts, that bearing the risk is
advisable. The Company may also, to the extent consistent with its qualification
as a REIT and Maryland law, utilize financial futures contracts, options and
forward contracts and other instruments as a hedge against future
 
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