1040719--3/31/2009--HANOVER_CAPITAL_MORTGAGE_HOLDINGS

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Failure to complete the merger could adversely impact the Company s market price. The NYSE Amex (formerly the American Stock Exchange) has notified us that we are not in compliance with its continued listing criteria. If we are delisted by the NYSE Amex, the price and liquidity of our stock will be negatively affected. Risks Related to the Company s Business Assuming the Consummation of the Pending Merger Sales of a substantial number of shares of the common stock of the Surviving Corporation following the merger may adversely affect its market price and the issuance of additional shares will dilute all other stockholdings. The Surviving Corporation may not realize the anticipated synergies, cost savings and growth opportunities from the merger. We cannot predict the price range or volatility of the common stock of the Surviving Corporation after the merger. If the spin-off does not constitute a tax-free spin-off or the merger does not constitute a tax-free reorganization under the Code, then one or more of Walter, the Surviving Corporation and Walter stockholders may be responsible for the payment of U.S. federal income taxes. The historical consolidated financial information of JWHHC and Spinco may not be indicative of Spinco s results as an independent company and may not be a reliable indicator of its historical or future results. Because Walter s Financing business has not operated on an independent basis, the future business prospects of the Surviving Corporation could suffer as a result of the separation of Spinco from Walter. Our stockholders will have significantly reduced ownership and voting interest after the merger. Governmental agencies may delay or impose conditions on approval of the merger, which may diminish the anticipated benefits of the merger. The IRS may challenge the Surviving Corporation s status as a REIT, and a court could sustain any such challenge. The board of directors of the Surviving Corporation will determine the Surviving Corporation s major policies and operations, which increases the uncertainties faced by stockholders of the Surviving Corporation. The integration of the Company and Spinco may present significant challenges to the management of the Surviving Corporation which could cause the management to fail to respond effectively to competition facing the business of the Surviving Corporation. The Surviving Corporation is exposed to increased risks of delinquencies, defaults and losses on mortgages and loans associated with the generally lower credit grade of its borrowers. The Surviving Corporation may have substantial additional liability for U.S. federal income tax allegedly owed by Walter or Spinco for periods prior to the spin-off. The Surviving Corporation may be required to satisfy certain indemnification obligations to Walter or may not be able to collect on indemnification rights from Walter. The mortgage-backed and asset-backed debt securities of the Surviving Corporation have over-collateralization and credit enhancement requirements, which, if not satisfied, may decrease its cash flow and net income. The operations of the Surviving Corporation may depend on the availability of additional financing and it will not be able to obtain financing from Walter after the merger. Economic conditions in Texas, North Carolina, Louisiana, Mississippi, Alabama and Florida may have a material impact on the Surviving Corporation s profitability because it will conduct a significant portion of its business in these markets. Natural disasters and adverse weather conditions could disrupt the Surviving Corporation s business and adversely affect its results of operations. The Surviving Corporation may be prevented from taking certain corporate actions following the merger in order to avoid significant tax-related liabilities. The Surviving Corporation will be subject to a number of federal, local and state laws and regulations that may prohibit or restrict the Surviving Corporation s mortgage financing or servicing in some regions or areas. As the Surviving Corporation builds its information technology infrastructure and transitions Spinco s data to its own systems, it could experience temporary business interruptions and incur substantial additional costs. Businesses the Surviving Corporation will acquire may not perform as expected. You may not receive the level of dividends provided for in the dividend policy the Surviving Corporation s board of directors will adopt upon the closing of the merger or any dividends at all. The Surviving Corporation s success will depend, in part, on its ability to attract and retain qualified personnel. Risks Related to Our Business Mortgage-related assets are subject to risks, including borrower defaults or bankruptcies, special hazard losses, declines in real estate values, delinquencies and fraud. Deteriorating debt and secondary mortgage market conditions have had and may continue to have a material adverse impact on our earnings and financial condition. Our current financial condition and negative cashflows from operations have raised substantial doubt about our ability to continue as a going concern. We may be unable to renew our borrowings at favorable rates or maintain longer-term financing, which may affect our profitability. Our profitability depends on the availability and prices of mortgage assets that meet our investment criteria. We are subject to various obligations related to our use of, and dependence on, debt. Our use of repurchase agreements to borrow funds may give our lenders greater rights in the event that either we or they file for bankruptcy. We may engage in hedging transactions, which can limit our gains and increase exposure to losses. Interest rate fluctuations may adversely affect our net income. The loss of any of our executive officers could adversely affect our operating performance. Further reductions in our workforce could adversely affect our operating performance and/or our ability to generate and issue timely financial information. We may hold title to real property, which could cause us to incur costly liabilities. Our business could be adversely affected if we are unable to safeguard the security and privacy of the personal financial information of borrowers to which we have access. Risks Related to Our Status as a REIT and Our Investment Company Act Exemption If we do not maintain our status as a REIT, we will be subject to tax as a regular corporation and face substantial tax liability. If we fail to comply with rules governing our ownership interests in taxable REIT subsidiaries, we will lose our REIT qualification. Complying with REIT requirements may limit our ability to hedge effectively. REIT requirements may force us to forgo or liquidate otherwise attractive investments. Complying with REIT requirements may force us to borrow or liquidate assets to make distributions to stockholders. Regulation as an investment company could materially and adversely affect our business; efforts to avoid regulation as an investment company could limit our operations. We may be unable to maintain a sufficient amount of Agency MBS to remain exempt under the 40 Act, which could materially and adversely affect our financial condition and results of operations. Risks Related to Our Corporate Organization and Structure Our charter limits ownership of our capital stock and attempts to acquire our capital stock. Provisions of our charter which inhibit changes in control could prevent stockholders from obtaining a premium price for our common stock. Our Board of Directors could adopt the limitations available under Maryland law on changes in control that could prevent transactions in the best interests of stockholders. We are dependent on external sources of capital, which may not be available.

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1040719--3/31/2009--HANOVER_CAPITAL_MORTGAGE_HOLDINGS_INC