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                                                                 Exhibit 10.11.2

                                  CONFIDENTIAL
                    SEPARATION AGREEMENT AND GENERAL RELEASE

                           This is a Confidential Separation Agreement and
General Release (the "Agreement") between Hanover Capital Mortgage Holdings,
Inc. (the "Company") and George J. Ostendorf (the "Employee" and together with
the Company, the "Parties", each a "Party") that nullifies and supersedes that
certain Amended and Restated Employment Agreement dated July 1, 2002, as same
has been amended from time to time, together with all agreements referenced
and/or incorporated therein (the "Employment Agreement"), including, but not
limited to, those related to the Employee's employment, compensation, benefits
and directorship. EMPLOYEE IS ADVISED TO CONSULT WITH AN ATTORNEY BEFORE SIGNING
THIS AGREEMENT. In consideration of the mutual promises and commitments made in
this Agreement, and intending to be legally bound, the Company on the one hand,
and Employee on the other hand, agree to the terms set forth in this Agreement.

                  1.       SEPARATION

                           Employee's employment with the Company was separated
by mutual agreement effective December 29, 2006 (the "Separation Date").
Employee agrees and acknowledges that Employee's employment relationship with
the Company and any of its Related Organizations (i.e., the Company's parent,
subsidiary and related corporations, and their predecessors and successors) has
ended, and that neither the Company nor any of its Related Organizations has any
obligation to hire, rehire or employ Employee. Furthermore, Employee represents
and acknowledges that Employee voluntarily and willfully resigned as a member of
the Company's Board of Directors and as a member of the Board of Directors of
any Related Organizations as of the Separation Date.

                  2.       CONSIDERATION

                           (a)      In exchange for Employee's execution of this
Agreement, and the relinquishment and nullification of the Employment Agreement,
and Employee's resignation from the Company's Board of Directors and as a member
of the Board of Directors of any Related Organizations and provided that
Employee does not revoke this Agreement within the seven day revocation period
described in Paragraph 14 hereof, the Company will pay Employee the equivalent
of one year's separation pay, based on Employee's base salary rate in effect on
the Separation Date (the "Severance Payment") by check payable to Employee's
order in the gross amount of $281,175.60. From the gross amount of the Severance
Payment, the Company will determine and withhold payroll deductions for taxes
(federal, FICA, Medicare, state, local and unemployment compensation).

                           (b)      The obligation of the Company to make the
Severance Payment shall be fulfilled by the mailing of such check by Federal
Express, next-day-air, to Employee at Employee's home address listed as: 506
East Marshall Street, Arlington Heights, IL 60004 not less than eight days and
not more than thirty days after Employee executes this Agreement and the seven
day revocation period described in Paragraph 14 hereof has expired without the
Employee having revoked this Agreement.

                           (c)      If Employee is a participant in the
Company's group health care plans (medical, dental and vision), Employee's
eligibility for benefits under those plans will terminate as of December 31,
2006, unless Employee elects to continue coverage in accordance with the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). In order to
elect such coverage, Employee must complete all necessary forms in a timely
manner.

                           (d)      If Employee elects COBRA continuation
coverage, the Company will waive payment of the COBRA premiums for the first
twelve (12) complete calendar months following the month in which employment
terminated. If Employee is eligible for, and elects to, continue such benefit
coverage beyond the waiver period provided in the preceding sentence, during the
time period that the Company is required to provide such coverage under COBRA,
Employee will be required to pay the COBRA premiums for such coverage. The
Company has no obligation under this Agreement with regard to any group health
care plan benefit coverage beyond the waiver of premiums for the period set
forth in this subparagraph. Moreover, the Company's obligation under this
subparagraph to waive the premiums for such coverage will cease immediately if
Employee ceases to be eligible for COBRA coverage or obtains comparable benefit
coverage from any future employer.

                           (e)      The Company confirms that it has paid the
premium for Employee's supplemental life insurance policy, administered by
ReliaStar Life Insurance Company (Policy #SC2515046D) ("the Policy"), through
August 6,


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2007. The Company shall, thereafter, transfer any ownership interest that it has
in the Policy and all payment obligations thereunder to Employee.

                           (f)      The Company agrees to pay the rent for the
premises at: 208 South LaSalle Street, Suite 1331, Chicago, IL (the "Chicago
Office") for the lesser of six (6) months through June 30, 2007 or the date
Employee vacates the Chicago Office and to permit Employee to utilize the
Chicago Office and all furniture and equipment located therein through that
date. Employee agrees not to abuse or remove the furniture in the Chicago
Office, and to vacate those premises no later than June 30, 2007, leaving all
furniture and equipment presently located therein. Employee represents that,
with the exception of the furniture and equipment located in the Chicago Office,
Employee returned to the Company all Company records and Company property, on or
before the Separation Date and before executing this Agreement. The Company has
no obligation under this Agreement with regard to the Chicago Office beyond
paying the rent therefore and permitting Employee to use the furniture and
equipment located therein.

                           (g)      The Company shall reimburse Employee for
reasonable attorneys' fees, up to a maximum of $2,500, incurred by Employee in
the negotiation of the non-competition agreement Employee is being asked to sign
with Terwin Acquisition I, LLC in connection with the Asset Purchase Agreement
by and among Company, Hanover Capital Partners 2 Ltd. ("HCP") and Terwin
Acquisition I, LLC ("Terwin") (the "Asset Purchase Agreement").

                           (h)      The Parties will use reasonable best efforts
to agree upon the language for any public communication related to Employee's
separation from employment.

                           (i)      Employee acknowledges and agrees that the
Company's obligations under subparagraphs 2(a), 2(d), 2(e), 2(f), 2(g) and 2(h)
arise under this Agreement, are in consideration for Employee's signing this
Agreement, and constitute consideration to which Employee is not otherwise
entitled. Employee also acknowledges and agrees that the Company shall be
entitled to discontinue providing payments and benefits under this Agreement if
Employee breaches any of Employee's obligations hereunder including, without
limitation, Employee's obligations under paragraph 4 of this Agreement, and that
such discontinuance will not relieve Employee of his obligations hereunder, nor
shall it affect the validity of the release of claims provided in Paragraph 3 of
this Agreement.

                   3.      GENERAL RELEASE OF CLAIMS

                           It is understood and agreed by and between the
Parties to this Agreement that in return for the consideration set forth in
Paragraph 2 and the other promises contained herein, Employee does, knowingly
and voluntarily, completely and forever release and discharge the Company,
including all present and former parent corporations, affiliates, subsidiaries,
predecessors, successors, agents, assigns, insurers, and all of their present
and former employees, officers, directors, and representatives (collectively the
"Released Parties"), from any and all causes of action, claims, judgments,
obligations, damages of any kind (e.g., compensatory and punitive), claims for
attorneys' fees, and rights to pre- or post-judgment interest or liabilities of
whatever kind and character, that Employee (on behalf of either Employee or any
other person or entity) ever had, now has, or may have against, or pertaining
to, any or all of the Released Parties, based on, relating to, involving, or
arising from any cause, decision, event, matter, omission, statement or any
other thing, existing or occurring at any time up to and including the time when
Employee signs this Agreement. This release includes any claims that Employee or
anyone on Employee's behalf may have arising under the New Jersey Conscientious
Employee Protection Act, N.J.S.A. 34:19-1 et seq., the New Jersey Law Against
Discrimination ("NJLAD"), N.J.S.A. 10:5-1 et seq., New Jersey Family Leave Act,
N.J.S.A. 34:11B-1 et seq., the Civil Rights Act of 1964 as amended, the Civil
Rights Act of 1991 as amended, the Americans with Disabilities Act ("ADA"), 42
U.S.C. Section 12101 et seq., the Employee Retirement Income Security Act
("ERISA"), 29 U.S.C. Section 1001 et seq., the Consolidated Omnibus Budget
Reconciliation Act "COBRA"), the Age Discrimination in Employment Act ("ADEA"),
29 U.S.C. Section 621 et seq., 42 U.S.C. Sections 1981-1988, the Worker
Adjustment and Retraining Notification Act ("WARN"), 29 U.S.C. Section 2101 et
seq., or any other federal, state or local human rights, civil rights, wage and
hour, notice, pension, employment or labor law, rule and/or regulation, public
policy, contract or tort law, any claim of retaliation under such laws, any
claim arising under the common law, including but not limited to causes of
action for wrongful discharge, breach of contract, fraud, defamation,
interference with contract or prospective economic advantage, violation of
public policy, infliction of emotional distress, violation of any other
national, state or local statute, law or ordinance, claims for loss of income,
compensatory damages, emotional distress, liquidated damages, punitive damages,
attorneys' fees and costs, and any other action whether cognizable in law or in
equity based on any conduct up to and including the date on which Employee
executes this Agreement. The release of claims in this Agreement shall extend to
claims of any nature whatsoever including claims that are known or unknown.
Employee further represents that, before executing this Agreement, Employee has
not asserted a claim against or involving the Company before any court, agency
or tribunal.


                                   Page 2 of 6
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                  4.       NON-COMPETE, NON-SOLICITATION AND NON-DISCLOSURE

                           (a)      Non-Compete.  For a period of six (6) months
following the Separation Date, Employee shall not, within or with respect to the
geographical area of the United States and Canada, directly or indirectly own,
operate, lease, manage, control, participate in, consult with, advise, permit
his name to be used by, provide services for, or in any manner engage in any
business (including by himself or in association with any person, firm,
corporate or other business organization or through any other entity) that
distributes any product or provides any service that is distributed or provided
by, or otherwise competes with any product or service of, the business carried
out with respect to the Assets (as defined the Asset Purchase Agreement) (i.e.,
the business of providing due diligence services to mortgage bankers, banks,
thrifts, pension funds and government agencies, such due diligence line of
business being referred to as the "Business" in the Asset Purchase Agreement ;
provided, however, that nothing in this subparagraph 4(a) shall prohibit
Employee from (x) engaging in the business consistent with that currently
conducted by Company unrelated to the Assets or to the Business, or (y) being a
passive owner of not more than 2% of the outstanding stock of any other
corporation which is publicly traded, so long as Employee has no active
participation in the business of such corporation.

                            (b)     Non-Solicitation.  For a period of six (6)
months following the Separation Date (the "Non-Solicit Period"), Employee shall
not directly or indirectly (i) induce or attempt to induce any employee,
consultant or contractor of the Company or any of its affiliates (i.e.,
collectively the "Company Group") to leave the employ of the Company or such
affiliate, or in any way interfere with the relationship between the employee,
consultant or contractor and the Company or such affiliate, including inducing
or attempting to induce any union, employee or group of employees to interfere
with the business or operations of the Company or any such affiliate, (ii) hire
any person who was an employee, consultant or contractor of the Company or any
such affiliate at any time during the Non-Solicit Period, or (iii) induce or
attempt to induce any customer, supplier, distributor, franchisee, licensee or
other business relation of the Company or any such affiliate not to do, or to
cease doing, business with the Company or such affiliate, or in any way
interfere with the relationship between any such customer, supplier,
distributor, franchisee, licensee or business relation and the Company or such
affiliate.

                            (c)     Non-Disclosure.  Employee covenants and
agrees that Employee will keep confidential and will not at any time disclose,
directly or indirectly, or make available to any person or entity, or in any
manner use for Employee's own benefit, any information concerning the Business,
the Assets or the Assumed Liabilities (each as defined in the Asset Purchase
Agreement) which is of a type that in accordance with Company's and HCP's past
practices has been treated as confidential or proprietary, including, without
limitation, business strategies, operating plans, acquisition strategies
(including the identities of [and any other information concerning] possible
acquisition candidates), pro forma financial information, market analysis,
acquisition terms and conditions, personnel information, product information
(whether existing, former, or proposed), trade secrets, sources of leads and
methods of obtaining new business, know-how, customer lists and relationships,
supplier lists and relationships, or other non-public confidential and
proprietary information relating to the Company Group, except to the extent that
such information (i) is obtained from a third party whom Employee has no reason
to believe is bound by a duty of confidentiality, (ii) relates to information
that is or becomes generally known to the public other than as a result of a
breach of this Agreement, or (iii) is required to be disclosed by law or
judicial administrative process (in which case prior to such disclosure Employee
shall promptly provide prior written notice of such required disclosure to the
Company in order to afford the Company the opportunity to seek an appropriate
protective order preventing such disclosure).

                  5.       NON-DISPARAGEMENT

                           Nothing in this Agreement shall restrict Employee's
ability to provide truthful testimony in response to any lawful subpoena or
compulsory process or restrict Employee's ability to file an administrative
charge, testify, assist or otherwise participate in any manner in any
investigation, proceeding or hearing before any federal, state or local
governmental agency. Except as provided in the foregoing sentence, Employee
covenants and agrees that Employee will not make any statement, written or oral,
in disparagement of the Company or any of its officers, shareholders, directors,
employees, agents, or associates (including, but not limited to, negative
references to each or any of the Company's products, services, or corporate
policies) to the general public and/or the Company's employees, potential
employees, customers, potential customers, suppliers, potential suppliers,
business partners, and/or potential business partners.

                  6.       COOPERATION

                           Employee agrees reasonably to cooperate with the
Company in connection with any dispute, claim, litigation or investigation by
any person or entity against or involving the Company or any of its officers,
employees, agents or representatives. As part of this agreement reasonably to
cooperate, Employee agrees to speak and/or meet with the Company and/or its
representatives or counsel at and for reasonable times upon reasonable notice,
without the need for any legal proceeding or compulsory process. Employee also
agrees to make Employee available at and for reasonable times upon reasonable
notice for


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such things as interviews, depositions and trials. The Company agrees to
reimburse Employee for reasonable expenses incurred with respect to such
cooperation.

                  7.       UNDISPUTED AMOUNTS

                           (a)      Employee acknowledges and agrees that,
except as set forth in Paragraphs 2 and 7(b) of this Agreement, Employee has
received all compensation and other payments to which Employee is or may be
entitled by reason of Employee's employment or termination of employment with
the Company.

                           (b)      Notwithstanding anything in this Agreement
to the contrary, the Parties are not waiving or changing any rights, claims,
conditions, requirements, or defenses in connection with the following matters:
(1) Employee's 401(k) account and the related matching contribution made by the
Company for the calendar year 2006, if any, and: (2) the reimbursement to
Employee of reasonable and necessary business expenses incurred by Employee on
or before December 29, 2006 on behalf of the Company, and reported and properly
documented on expense reports, in accordance with and subject to the
requirements of the Company's expense reimbursement practices.

                  8.       DENIAL OF LIABILITY

                           Employee acknowledges and agrees that neither the
offer of this Agreement, nor the acceptance of this Agreement, nor the Agreement
itself is an admission, or shall be construed to be an admission, of any
wrongdoing or liability by the Company or any of the Released Parties; moreover,
any such liability or wrongdoing is denied by the Company. Neither the offer of
this Agreement, nor the Agreement, nor any of its terms, shall be admissible as
evidence of any liability or wrongdoing by the Company or any of the Released
Parties in any judicial, administrative or other proceeding now pending or
hereafter instituted by any person or entity.

                  9.       ARBITRATION

                           (a)      Should either party to this Agreement have
any dispute as to any aspect of this Agreement, or arising out of, or related to
or connected with Employee's employment, compensation or benefits, or the
termination thereof, the parties will submit any such dispute to final and
binding arbitration pursuant to the Employment Arbitration Rules of the American
Arbitration Association before a neutral arbitrator selected from the list of
Arbitrators. Unless another limitations period is expressly mandated by statute,
to be timely, any dispute must be referred to arbitration within twelve (12)
months of the date on which the Party making such referral became aware, or with
reasonable diligence should have become aware, of the incident or complaint
giving rise to the dispute. Disputes not timely referred to arbitration shall be
deemed waived, and the arbitrator shall deny any untimely claims. THE PARTIES
EXPRESSLY AGREE THAT SUCH ARBITRATION SHALL BE THE EXCLUSIVE REMEDY FOR ANY
DISPUTE INVOLVING THIS AGREEMENT, THE EMPLOYEE'S EMPLOYMENT, TERMINATION,
COMPENSATION, BENEFITS OR THE VIOLATION OF EMPLOYEE'S CIVIL RIGHTS, AND HEREBY
EXPRESSLY WAIVE ANY RIGHT THEY HAVE, OR MAY HAVE, TO A COURT TRIAL OR A JURY
TRIAL OF ANY SUCH DISPUTE. In making an award, the arbitrator shall have no
power to add to, delete from or modify this Agreement, or to enforce purported
unwritten or prior agreements, or to construe implied terms or covenants into
the Agreement. In reaching a decision, the arbitrator shall adhere to the
relevant law and applicable precedent, and shall have no power to vary
therefrom. In construing this Agreement, its language shall be given a fair and
reasonable construction in accordance with the intention of the parties and
without regard to which party drafted it. At the time of issuing a decision, the
arbitrator shall (in the decision or separately) make specific findings of fact,
and shall set forth such facts as support the decision, as well as conclusions
of law, and the reasons and bases for the opinion. In the event the arbitrator
exceeds the powers or jurisdiction here conferred, or fails to issue a decision
in conformance herewith, it is specifically agreed that the aggrieved party may
petition a court of competent jurisdiction to correct or vacate such award, and
that the arbitrator's act of exceeding his or her powers shall be grounds for
granting such relief. It is further agreed by the parties that venue for any
arbitration or other legal proceedings shall be Edison, New Jersey. This
arbitration clause is entered pursuant to, and shall be governed by, the Federal
Arbitration Act, but in all other respects this Agreement shall be governed by
the provisions of New Jersey law without application of its laws with respect to
conflict of laws. If the Federal Arbitration Act is not applicable then the New
Jersey General Arbitration Act shall govern (N.J.S.A. 2A:24-1 et. seq.). If any
one or more provisions of this arbitration clause shall for any reason be held
invalid or unenforceable, it is the specific intent of the parties that such
provisions shall be modified to the minimum extent necessary to make it or its
application valid and enforceable.

                  10.      SEVERABILITY

                           All provisions and portions of this Agreement are
severable. If any provision or portion of this Agreement or the application of
any provision or portion of this Agreement to any person, to any circumstance,
or to any claims,


                                   Page 4 of 6

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shall be determined to be invalid, void, voidable or unenforceable to any extent
for any reason, (1) the application of such provision or portion of this
Agreement to any other person, to any other circumstance, or to any other claims
shall be unaffected thereby, and the remaining provisions and portions of this
Agreement also shall be unaffected thereby; (2) all other provisions and
portions of this Agreement shall remain in full force and shall continue to be
enforceable to the fullest and greatest extent permitted by law; and (3) any
provision or part of the Agreement found by any Court with jurisdiction to be
invalid, void, voidable or unenforceable, may be construed or changed by the
Court to the extent reasonably necessary to make the provision or part (as
construed or changed), valid, enforceable and binding.

                  11.      APPLICABLE LAW

                            This Agreement is made and entered into by the
Company in the State of New Jersey. The Agreement shall in all respects be
governed by and interpreted under and in accordance with the laws of the State
of New Jersey. The breach of any promise in this Agreement by any party shall
not invalidate the Agreement or the release and shall not be a defense to the
enforcement of the Agreement against any party.

                  12.      INTEGRATION

                           Employee warrants and agrees that no promise, other
than the promises in this Agreement, has been made to Employee. Employee
warrants and agrees that in signing this Agreement Employee is not relying upon
any statement or representation made by or on behalf of the Company concerning
the merits or value of any Claims or concerning any other thing or matter.
Employee warrants and agrees that Employee is relying solely upon Employee's own
judgment and that before signing this Agreement Employee has read it.

                  13.      CONSTRUCTION

                           The Parties have had an ample opportunity to review
and have in fact reviewed this Agreement. Accordingly, the normal rule of
construction, to the effect that any ambiguities be resolved against the
drafting party, shall not be employed in the interpretation of this Agreement.
The captions and headings at the beginning of each paragraph are for convenience
and reference only and shall not limit, define, or affect the construction and
interpretation of this Agreement.

                  14.      REVIEW AND REVOCATION

                           Employee acknowledges that Employee was given
twenty-one (21) days to review this Agreement from the time it was presented to
Employee on December 22, 2006 and Employee has reviewed it with an attorney to
the extent Employee chose to do so. If Employee does not return this Agreement
executed by the end of the twenty-one (21) day review period, this Agreement
shall be null and void for all purposes. Employee also acknowledges that
Employee was advised that Employee has seven (7) days after signing and
delivering this Agreement to the Company in which to revoke it by notifying
Caryl O'Dowd, Vice President, Human Resources, in writing at Hanover Capital
Mortgage Holdings, Inc., 200 Metroplex Drive -- Suite 100, Edison, New Jersey,
08817. This Agreement is not effective or enforceable until the seven (7) day
revocation period has expired.

                  15.      MISCELLANEOUS

                           (a)      Employee acknowledges that Employee is
signing this Agreement voluntarily, with full knowledge of the nature and
consequences of its terms.

                           (b)      All executed copies of this Agreement and
photocopies thereof shall have the same force and effect and shall be as legally
binding and enforceable as the original.

                           (c)      This Agreement shall inure to the benefit of
the Company and its predecessors, successors and assigns, and to the benefit of
Employee and Employee's heirs, administrators and executors.

                           (d)      This Agreement is being signed by Employee
and for the Company with the intent to be legally bound.


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BY SIGNING THIS AGREEMENT, EMPLOYEE ACKNOWLEDGES AS FOLLOWS:

-        EMPLOYEE HAS READ THIS AGREEMENT COMPLETELY.
-        EMPLOYEE HAS HAD THE OPPORTUNITY TO CONSIDER THE TERMS OF THIS
         AGREEMENT.
-        EMPLOYEE HAS BEEN ADVISED TO CONSULT WITH AN ATTORNEY PRIOR TO
         EXECUTING THIS AGREEMENT.
-        EMPLOYEE UNDERSTANDS AND MEANS EVERYTHING THAT EMPLOYEE SAID IN THIS
         AGREEMENT AND EMPLOYEE AGREES TO ALL ITS TERMS.
-        EMPLOYEE IS NOT RELYING ON THE COMPANY OR ANY REPRESENTATIVE OF THE
         COMPANY TO EXPLAIN THIS AGREEMENT TO EMPLOYEE.
-        EMPLOYEE HAS HAD AN OPPORTUNITY TO CONSULT AN ATTORNEY TO EXPLAIN THIS
         AGREEMENT AND ITS CONSEQUENCES TO EMPLOYEE BEFORE EMPLOYEE SIGNED IT,
         AND EMPLOYEE HAS DONE SO TO WHATEVER EXTENT EMPLOYEE DESIRED.

EMPLOYEE HAS SIGNED THIS AGREEMENT CONSISTING OF 6 PAGES VOLUNTARILY AND
ENTIRELY OF EMPLOYEE'S OWN FREE WILL, WITHOUT ANY PRESSURE FROM THE COMPANY OR
ANY REPRESENTATIVE OF THE COMPANY.



DATED: 12/27/06                          /s/ GEORGE OSTENDORF
                                         ---------------------------------------
                                             GEORGE J. OSTENDORF



DATED: 12/21/06                          HANOVER CAPITAL MORTGAGE HOLDINGS, INC.




                                         BY: /s/ JOHN A. BURCHETT
                                             -----------------------------------
                                             JOHN A. BURCHETT
                                             CHIEF EXECUTIVE OFFICER


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