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SEC Filings

424B1
DITECH HOLDING CORP filed this Form 424B1 on 09/16/1997
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Company anticipates it will retain such securities only on terms which it
believes are sufficiently attractive to compensate it for assuming such
associated risks.
 
     The Company may also retain subordinated securities, with ratings ranging
from AA to unrated, primarily fixed-rate and backed by Mortgage Loans. The
fixed-rate securities are anticipated to primarily evidence interests in 30-year
Single-Family Mortgage Loans. Securities backed by Commercial and Multifamily
Mortgage Loans are anticipated to primarily evidence interests in 7 or 10 year
balloon loans with 25 or 30 year amortization schedules. In general,
subordinated classes of a particular series of securities bear all losses prior
to the related senior classes. Losses in excess of expected losses at the time
such securities are purchased would adversely affect the Company's yield on such
securities and, in extreme circumstances, could result in the failure of the
Company to recoup its initial investment. See "Risk Factors -- Risks Related to
Operations -- Negative Effects of Fluctuating Interest Rates;" "-- Reduction of
Income Due to Prepayment;" and "-- Losses Related to Investing in Subordinated
Classes of Mortgage-Backed Securities."
 
     Except in the case of a breach of the standard representations and
warranties made by the Company when Mortgage Loans are securitized, Mortgage
Assets created by the Company will be non-recourse to the Company. Typically,
the Company will have recourse to the sellers of Mortgage Loans for any such
breaches, but there can be no assurance of the sellers' abilities to honor their
respective obligations.
 
     The Company will also use securitization as a tool to transfer some of the
interest rate risk of the Mortgage Loan collateral to the CMO bondholder and
credit risk to third party monoline bond insurers. Due to the fact that the CMO
financing is generally non-recourse to the Company (except in the event of a
breach of a representation or warranty), the Company is able to maintain the
economic benefit of financing the Mortgage Assets and earning a positive net
interest spread, while limiting its potential risk of credit loss to its
investment in the subordinated or residual classes of securities (generally
approximately 5% to 10% of the loan pool amount). A second advantage to the CMO
structure is that it is permanent financing and, therefore, not subject to
margin calls during periods in which the value of the pool assets are declining
due to increases in interest rates.
 
     The Company would typically pay a monoline bond insurer a monthly fee to
assume a portion of the credit risk in a pool of Mortgage Loans. The monoline
insurer would generally require the issuer to retain a portion of the credit
risk and over-collateralize a particular pool of Mortgage Loans.
 
     Proceeds from such securitizations will be available to support new loan
originations and acquisitions. In addition to providing relatively less
expensive long-term financing, the Principals intend that the Company's
securitizations will reduce the Company's interest rate risk on Mortgage Assets
held for long-term investment. The Company's securitizations may generate excess
inclusion income to its stockholders. See "Risk Factors -- Potential
Characterization of Distributions as UBTI; Taxation of Tax-Exempt Investors;"
and "Federal Income Tax Considerations -- Special Considerations."
 
  Credit Enhancement
 
     Any REMICs or CMOs created by the Company are expected to be structured so
that one or more of the classes of such securities are rated investment grade by
at least one nationally recognized rating agency. In contrast to Agency
Certificates in which the principal and interest payments are guaranteed by the
U.S. Government or an agency thereof, Mortgage Assets created by the Company
will not benefit from any such guarantee. The ratings for the Company's Mortgage
Assets will be based on the perceived credit risk by the applicable rating
agency of the underlying Mortgage Loans, the structure of the Mortgage Assets
and the associated level of credit enhancement. Credit enhancement is designed
to provide protection to the security holders in the event of borrower defaults
and other losses including those associated with fraud or reductions in the
principal balances or interest rates on Mortgage Loans as required by law or a
bankruptcy court. The Company can utilize multiple forms of credit enhancement,
including special hazard insurance, monoline insurance, reserve funds, letters
of credit, surety bonds and subordination or any combination thereof. A decline
in the credit quality of the Mortgage Loans backing any Mortgage Assets
(including delinquencies and/or credit losses above initial expectations) or of
any third party credit enhancement provider, or adverse
 
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