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What changed in REDWOOD TRUST INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of REDWOOD TRUST INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+941 added−1000 removedSource: 10-K (2025-03-03) vs 10-K (2024-02-29)

Top changes in REDWOOD TRUST INC's 2024 10-K

941 paragraphs added · 1000 removed · 672 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur Business Segments We operate our business in three segments: Residential Consumer Mortgage Banking, Residential Investor Mortgage Banking and Investment Portfolio. In the fourth quarter of 2023, we updated the names of two of our segments: Residential Mortgage Banking was changed to Residential Consumer Mortgage Banking; and Business Purpose Mortgage Banking was changed to Residential Investor Mortgage Banking.
Biggest changeIn the fourth quarter of 2024, we updated the names of all of our segments: Residential Consumer Mortgage Banking was changed to Sequoia Mortgage Banking; Residential Investor Mortgage Banking was changed to CoreVest Mortgage Banking; and our Investments Portfolio was changed to Redwood Investments. No changes were made to the composition of the segments.
Our aggregation, origination and investment activities have evolved to incorporate a diverse mix of residential consumer and residential investor housing credit assets. Our goal is to provide attractive returns to shareholders through a stable and growing stream of earnings and dividends, capital appreciation, and a commitment to technological innovation that facilitates risk-minded scale.
Our aggregation, origination and investment activities have evolved to incorporate a diverse mix of residential consumer and investor housing credit assets. Our goal is to provide attractive returns to shareholders through a stable and growing stream of earnings and dividends, capital appreciation, and a commitment to technological innovation that facilitates risk-minded scale.
Each of these consolidated entities is independent of Redwood and of each other, and the assets and liabilities of these entities are not owned by us or legal obligations of ours, respectively, although we are exposed to certain financial risks associated with any role we carry out for these entities (e.g., as sponsor or depositor) and, to the extent we hold securities issued by, or other investments in, these entities, we are exposed to the performance of these entities and the assets they hold.
Each of these consolidated entities is independent of Redwood and of each other, and the assets and liabilities of these entities are not owned by us or legal obligations of ours, respectively, although we are exposed to certain financial risks 2 associated with any role we carry out for these entities (e.g., as sponsor or depositor) and, to the extent we hold securities issued by, or other investments in, these entities, we are exposed to the performance of these entities and the assets they hold.
As a result of the government’s statutory and regulatory oversight of the markets we participate in and the government’s direct and indirect participation in these markets, federal, state and local governmental actions, policies, and directives can have an adverse effect on these markets and on our business and the value of, and the returns on, mortgages, mortgage-related securities, and other assets we own or may acquire in the future, which effects may be material.
As a result of the government’s statutory and regulatory oversight of the markets we participate in and the government’s direct and indirect participation in these markets, federal, state and local governmental actions, policies, and directives can have an adverse effect on these markets and on our business and the value of, and the returns on, mortgages, mortgage-related securities, HEI, and other assets we own or may acquire in the future, which effects may be material.
ITEM 1. BUSINESS Introduction Redwood Trust, Inc., together with its subsidiaries, is a specialty finance company focused on several distinct areas of housing credit, with a mission to help make quality housing, whether rented or owned, accessible to all American households.
ITEM 1. BUSINESS Introduction Redwood Trust, Inc., together with its subsidiaries, is a specialty finance company focused on several distinct areas of housing credit, with a mission to make quality housing, whether rented or owned, accessible to all American households.
We also make available, free of charge, access to the charters for our Audit Committee, Compensation Committee, and Governance and Nominating Committee, our Corporate Governance Standards, Policy Regarding Majority Voting, and our Code of Ethics governing our directors, officers, and employees.
We also make available, free of charge, access to the charters for our Audit Committee, Compensation Committee, and Governance and Nominating Committee, our Corporate Governance Standards, Policy 4 Regarding Majority Voting, and our Code of Ethics governing our directors, officers, and employees.
We are required under GAAP to consolidate the assets and liabilities of CAFL securitization entities we have sponsored for financial reporting purposes. We refer to these securitization entities as the "consolidated CAFL entities." 2 In addition, we have co-sponsored securitizations of HEI.
We are required under GAAP to consolidate the assets and liabilities of CAFL securitization entities we have sponsored for financial reporting purposes. We refer to these securitization entities as the "consolidated CAFL entities." In addition, we have co-sponsored securitizations of HEI.
In particular, because issues relating to residential housing (including both owner-occupied and rental housing), and real estate finance can be areas of political focus, federal, state and local governments may be more likely to take actions that affect residential housing, the markets for financing residential housing, landlord and tenant rights, lender rights, and the participants in residential housing-related industries than they would with respect to other industries.
In particular, because issues relating to residential housing (including both owner-occupied and rental housing), and real estate finance can be areas of political focus, federal, state and local governments may be more likely to take actions that affect residential housing, the markets for financing residential housing, landlord and tenant rights, lender rights, institutional ownership of residential housing, and the participants in residential housing-related industries than they would with respect to other industries.
Employee Benefits We offer a competitive compensation structure to our employees, including short- and long-term financial incentives, generous health and welfare benefits including a wellness stipend to be used for fitness and mental health services, paid family leave, fertility benefits, employee service awards, reimbursement for mortgage and renters insurance and paid time off to promote a healthy work/life balance.
Employee Benefits We offer a competitive compensation structure to our employees, including short- and long-term financial incentives, generous health and welfare benefits including a wellness stipend to be used for fitness and mental health services, paid family leave, fertility benefits, employee service awards, reimbursement for mortgage and renter’s insurance and paid time off to promote a healthy work/life balance.
BPL bridge loans are mortgage loans which are generally secured by unoccupied (or in the case of certain multifamily properties, partially occupied) single-family or multifamily residential real estate that the borrower owns as an investment and that is being renovated, rehabilitated or constructed.
Residential investor bridge loans are mortgage loans which are generally secured by unoccupied (or in the case of certain multifamily properties, partially occupied) single-family or multifamily residential real estate that the borrower owns as an investment and that is being renovated, rehabilitated or constructed.
This segment’s main sources of income are net interest income earned from its inventory of loans held-for-sale, as well as income from mortgage banking activities, which includes origination and other fees on loans, valuation changes on loans from the time they are originated or purchased to when they are sold, securitized or transferred into our investment portfolio, and gains/losses from hedges used to manage risks associated with these activities.
This segment’s main sources of income are net interest income earned from its inventory of loans held-for-sale, as well as income from mortgage banking activities, which includes origination and other fees on loans, valuation changes on loans from the time they are originated or purchased to when they are sold, securitized or transferred into our Redwood Investments portfolio, and gains/losses from hedges used to manage risks associated with these activities.
Certifications Our Chief Executive Officer and Chief Financial Officer have executed certifications dated February 28, 2024, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, and we have included those certifications as exhibits to this Annual Report on Form 10-K.
Certifications Our Chief Executive Officer and Chief Financial Officer have executed certifications dated February 28, 2025, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, and we have included those certifications as exhibits to this Annual Report on Form 10-K.
Our competitors include commercial banks, other mortgage REITs, Fannie Mae, Freddie Mac, regional and community banks, broker-dealers, investment advisors, insurance companies, BPL originators and HEI originators, and other specialty finance companies and financial institutions, as well as investment funds, venture capital investors, and other investors in real estate-related assets.
Our competitors include commercial banks, other mortgage REITs, Fannie Mae, Freddie Mac, regional and community banks, broker-dealers, investment advisors, insurance companies, residential investor originators and HEI originators, and other specialty finance companies and financial institutions, as well as investment funds, venture capital investors, and other investors in real estate-related assets.
Business purpose loans are loans to investors in single-family and multifamily residential properties, which we classify as either "term" loans (which include loans with maturities that generally range from 3 to 30 years) or "bridge" loans (which include loans with maturities that generally range between 12 and 36 months).
Residential investor loans are loans to investors in single-family and multifamily residential properties, which we classify as either "term" loans (which include loans with maturities that generally range from 3 to 30 years) or "bridge" loans (which include loans with maturities that generally range between 12 and 36 months).
We typically acquire prime jumbo mortgages and the related mortgage servicing rights on a flow basis from our extensive network of loan sellers. Securities that we retain from our Sequoia securitizations are transferred to and held in our Investment Portfolio segment.
We typically acquire prime jumbo mortgages and the related mortgage servicing rights on a flow basis from our extensive network of loan sellers. Securities that we retain from our Sequoia securitizations are transferred to and held in our Redwood Investments segment.
Investment Portfolio This segment consists of organic investments sourced through our mortgage banking operations, including primarily securities retained from our residential consumer and investor securitization activities (some of which we consolidate for GAAP purposes), BPL bridge loans, as well as third-party investments including RMBS issued by third parties, investments in Freddie Mac K-Series multifamily loan securitizations and reperforming loan securitizations (both of which we consolidate for GAAP purposes), servicer advance investments, home equity investments ("HEI"), and other housing-related investments and associated hedges.
Redwood Investments This segment consists of organic investments sourced through our mortgage banking operations, including primarily securities retained from our Sequoia and CoreVest securitization activities (some of which we consolidate for GAAP purposes), residential investor bridge loans, as well as third-party investments including RMBS issued by third parties, investments in Freddie Mac K-Series multifamily loan securitizations and reperforming loan securitizations (both of which we consolidate for GAAP purposes), servicer advance investments, home equity investments ("HEI"), and other housing-related investments and associated hedges.
We typically distribute most of our term loans through our CAFL ® private-label securitization program, or through whole loan sales, and typically transfer our BPL bridge loans to co-investments in joint venture partnerships or to our Investment Portfolio, where they will either be retained for investment or securitized, or they are sold as whole loans.
We typically distribute most of our term loans through our CAFL ® private-label securitization program, or through whole loan sales, and typically transfer our residential investor loans to co-investments in joint venture partnerships or to our Redwood Investments portfolio, where they will either be retained for investment or securitized, or they are sold as whole loans.
We refer to these securitization entities as "HEI securitization entities." We also consolidate certain third-party Freddie Mac K-Series and Freddie Mac Seasoned Loans Structured Transaction ("SLST") securitization and re-securitization entities that we determined were VIEs and for which we determined we were the primary beneficiary.
We refer to these securitization entities as "HEI securitization entities." We also consolidate certain third-party Freddie Mac K-Series and Freddie Mac Seasoned Loans Structured Transaction ("SLST") securitization and re-securitization entities that we determined were variable interest entities (“VIEs”) and for which we determined we were the primary beneficiary.
In addition, our Chief Executive Officer certified to the New York Stock Exchange (NYSE) on June 14, 2023 th at he was unaware of any violations by Redwood Trust, Inc. of the NYSE’s corporate governance listing standards in effect as of that date. 5
In addition, our Chief Executive Officer certified to the New York Stock Exchange (NYSE) on June 10, 2024 th at he was unaware of any violations by Redwood Trust, Inc. of the NYSE’s corporate governance listing standards in effect as of that date.
We refer to certain of these securitization entities issued prior to 2012 as “consolidated Legacy Sequoia entities,” and the securitization entities formed in connection with the securitization of Redwood Choice expanded-prime loans and certain Redwood Select prime loans as the "consolidated Sequoia entities." We also sponsor our CAFL ® securitization program, which we use for the securitization of BPL term and bridge mortgage loans.
We refer to certain of these securitization entities issued prior to 2012 as “consolidated Legacy Sequoia entities,” and the securitization entities formed in connection with the securitization of Aspire Expanded (formerly Redwood Choice) expanded-prime loans and certain Redwood Sequoia (previously Redwood Select) prime loans as the "consolidated Sequoia entities." We also sponsor our CAFL ® securitization program, which we use for the securitization of residential investor term and bridge loans.
Employee Talent & Development We are focused on developing and advancing our employees through targeted learning programs that build specific job-based skills and leadership capabilities across the company. We offer opportunities for training to all managers of people and focused development programs for rising women leaders within the organization.
Employee Talent & Development We are focused on and committed to developing and advancing our employees through targeted learning programs that build specific job-based skills and leadership capabilities across the company. We offer a variety of training opportunities for our employees including programs for managers of people and development programs for rising leaders.
Direct operating expenses and tax expenses associated with these activities are also included in this segment. Residential Investor Mortgage Banking This segment consists of a platform that originates business purpose lending ("BPL") loans for subsequent securitization, sale, or transfer into our investment portfolio.
Direct operating expenses and tax expenses associated with these activities are also included in this segment. CoreVest Mortgage Banking This segment consists of a platform that originates residential investor loans for subsequent securitization, sale, or transfer into our Redwood Investments portfolio.
Our employees are dispersed across our offices, including in California, Colorado, New York, North Carolina, and Oregon. Redwood’s talented employees are core to the sustainability and long-term success of Redwood and we invest in programs that attract, retain, develop, and care for our people.
Our employees are generally dispersed across our offices, including in California, Colorado, New York, North Carolina, and Oregon, while certain of our employees work on a fully remote basis. Redwood’s talented employees are core to the sustainability and long-term success of Redwood and we invest in programs that attract, retain, develop, and care for our people.
Cultural priorities and values are closely intertwined with our overarching business strategy and we believe these priorities support Redwood’s ability to fulfill our mission and contribute to our ongoing focus on having a strong, healthy culture and a capable and satisfied workforce.
Cultural priorities and values are closely intertwined with our overarching business strategy and we believe these priorities support Redwood’s ability to fulfill our mission, generate long-term value for our shareholders and the communities which we serve and contribute to our ongoing focus on having a strong, healthy culture and a capable and satisfied workforce.
This segment’s main source of income is net interest income from its inventory of loans held-for-sale, as well as income from mortgage banking activities, which includes valuation changes on loans we acquire (and associated loan purchase commitments) and subsequently sell, securitize, or transfer into our investment portfolio, and interest income/expense and gains/losses from hedges used to manage risks associated with these activities.
This segment also includes various financial instruments, including derivatives and securities, that we utilize to manage certain risks associated with our inventory of residential loans held-for-sale within this segment. 1 This segment’s main source of income is net interest income from its inventory of loans held-for-sale, as well as income from mortgage banking activities, which includes valuation changes on loans we acquire (and associated loan purchase commitments) and subsequently sell, securitize, or transfer into our Redwood Investments portfolio, and interest income/expense and gains/losses from hedges used to manage risks associated with these activities.
We also offer all employees the ability to participate in our Employee Stock Purchase Plan ("ESPP"), which incentivizes stock ownership among our employees by providing the opportunity to purchase Redwood common stock at a discounted price through payroll deductions.
We also offer all employees the ability to participate in our Employee Stock Purchase Plan ("ESPP"), which incentivizes stock ownership among our employees by providing the opportunity to purchase Redwood common stock at a discounted price through payroll deductions. 3 Corporate Responsibility We prioritize corporate responsibility initiatives that matter most to our business and shareholders.
In addition, we have an employee-led foundation that manages and raises funds for a variety of charitable causes. All employees are invited to participate through various fundraising initiatives and by submitting grant requests for causes that they are passionate about. Volunteerism is also important at Redwood, and we regularly sponsor community events and provide paid time off for volunteer activities.
All employees are invited to participate through various fundraising initiatives and by submitting grant requests for causes that they are passionate about. Volunteerism is also important at Redwood, and we regularly sponsor community events and provide paid time off for volunteer activities.
We operate our business in three segments: Residential Consumer Mortgage Banking, Residential Investor Mortgage Banking, and Investment Portfolio. Our primary sources of income are net interest income from our investments and non-interest income from our mortgage banking activities.
We operate our business in three segments: Sequoia Mortgage Banking, CoreVest Mortgage Banking, and Redwood Investments. Our primary sources of income are net interest income from our investments and non-interest income from our mortgage banking activities.
Our investment portfolio is comprised of investments sourced through our mortgage banking operations as well as investments purchased from third-parties, and generates income primarily from net interest income and asset appreciation. 1 Following is a further description of our three business segments: Residential Consumer Mortgage Banking This segment consists of a mortgage loan conduit that acquires residential loans from third-party originators for subsequent sale to whole loan buyers, securitization through our SEMT ® (Sequoia) private-label securitization program, or transfer into our investment portfolio.
Following is a further description of our three business segments: Sequoia Mortgage Banking This segment consists of a mortgage loan conduit that acquires residential consumer loans from third-party originators for subsequent sale to whole loan buyers, securitization through our SEMT ® (Sequoia) private-label securitization program, or transfer into our Redwood Investments portfolio.
Our summer internship program provides opportunities for a diverse group of students while creating a pipeline of future talent for the company. Employee Retention We regularly evaluate our ability to attract and retain our employees.
Our summer internship program is structured and organized to provide opportunities for students while creating a pipeline of future talent for the company. Employee Retention We regularly evaluate our ability to attract and retain our employees. Voluntary employee turnover remained relatively low at 7.5% for 2024.
Human Capital Resources As of December 31, 2023, Redwood employed 289 full-time employees, 164 (or 57%) of which are directly engaged in the operations of our wholly-owned subsidiary, CoreVest, with the remainder spread across our Residential Consumer Mortgage Banking, Investment Portfolio, and Corporate functions.
Human Capital Resources As of December 31, 2024, Redwood employed 283 full-time employees, including our executive officers, 147 (or 52%) of which are directly engaged in the operations of CoreVest, with the remainder spread across our Sequoia, Investment Portfolio, and Corporate functions.
For additional discussion regarding our ability to compete successfully, see the risk factor below under the heading “ We are subject to intense competition and we may not compete successfully" in Part I, Item 1A of this Annual Report on Form 10-K. 4 Federal, State and Local Regulatory and Legislative Developments Our business is affected by conditions in the housing and real estate markets and the broader financial markets, as well as by the financial condition and resources of other participants in these markets.
For additional discussion regarding our ability to compete successfully, see the risk factor below under the heading “ We are subject to intense competition and we may not compete successfully" in Part I, Item 1A of this Annual Report on Form 10-K.
Feedback and coaching are core to our overall people development programs and our performance management process is designed to foster specific and frequent performance discussions. Attracting and hiring a qualified and diverse workforce is a priority, and we strive to create robust and diverse candidate pools for any open positions across the company.
Feedback and coaching are core to our overall people development programs and our performance management process is designed to foster specific and frequent performance discussions.
We strive to have a positive impact on the communities where we live and work and support the future development and well-being of our communities. We designate corporate grants for non-profit organizations and causes that we feel strongly connected to; this has historically included equal housing and affordability, racial equality, and education.
We designate corporate grants for non-profit organizations and causes that we feel strongly connected to; this has historically included equal housing and affordability, causes that support underrepresented groups, and education. In addition, we have an employee-led foundation that manages and raises funds for a variety of charitable causes.
We support women’s leadership and development within the organization through targeted training, mentorship, and collaboration with our women’s employee resource group ("ERG"). Community Giving Being involved with and giving back to our communities is an important aspect of our culture.
Community Giving Being involved with and giving back to our communities is an important aspect of our culture. We strive to have a positive impact on the communities where we live and work and support the future development and well-being of our communities.
We seek to retain our employees by investing in firm-wide engagement programs and we foster a values- and mission-based culture. Our mission, to make quality housing, whether rented or owned, accessible to all American households, guides our day-to-day work together and serves as a cultural foundation.
As noted above, our mission to make quality housing, whether rented or owned, accessible to all American households - guides our workforce’s day-to-day collaboration and serves as a cultural foundation. As such, we prioritize business initiatives and products that align with this mission.
No changes were made to the composition of the segments. Our two mortgage banking segments generate income from the origination or acquisition of loans and the subsequent sale or securitization of those loans.
Our two mortgage banking segments generate income from the origination or acquisition of loans and the subsequent sale or securitization of those loans. Our Redwood Investments portfolio is comprised of investments sourced through our mortgage banking operations as well as investments purchased from third-parties, and generates income primarily from net interest income and asset appreciation.
Redwood’s corporate mission of making quality housing, whether rented or owned, accessible to all American households is integrated with, and linked to, our approach to ESG matters at Redwood. Our website includes information regarding ESG matters at Redwood, which we update from time to time. See “Information Available on Our Website” below.
Human Capital/Corporate Responsibility Redwood’s management, under the oversight of the Board of Directors, formulates Redwood’s approach to human capital and corporate responsibility matters. Redwood’s corporate mission of making quality housing, whether rented or owned, accessible to all American households is integrated with, and linked to, our approach to corporate responsibility and to the long-term sustainability and profitability of our business.
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This segment also includes various financial instruments, including derivatives and securities, that we utilize to manage certain risks associated with our inventory of residential loans held-for-sale within this segment.
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Our Business Segments We operate our business in three segments: Sequoia Mortgage Banking, CoreVest Mortgage Banking and Redwood Investments.
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Environmental, Social and Governance (“ESG”) Redwood’s management, under the oversight of the Board of Directors, formulates Redwood’s strategic and operational approach to environmental, social, and governance (“ESG”) matters and executes on specific ESG initiatives.
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From a human capital perspective, Redwood invests in programs that attract, retain, develop, and care for our people, as we believe our human capital resources are critical to supporting our ability to generate long-term value for our shareholders and to fulfill our mission, generate long-term value for our shareholders.
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In September 2023, we published our second annual ESG Report, which included selected metrics disclosed in accordance with the Sustainability Accounting Standards Board (“SASB”) standards for the Financials Sector – Mortgage Finance and Asset Management & Custody Activities industries.
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We believe that attracting and retaining a qualified workforce with a variety of perspectives, personal and professional experiences and backgrounds supports the long-term sustainability of our business and operation and we strive to create qualified candidate pools for any open positions across the company.
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We believe these industry standards most closely align with our businesses and investments and we chose this framework as it allows for comparable and reliable information, which is consistent with our commitment to provide transparent, useful, and relevant data to all of our stakeholders.
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Through our Operating Businesses as well as our investments, we play an active role in supporting various areas of the residential housing market, including enhancing liquidity in the residential real estate finance markets and, in turn, facilitating home ownership and access to housing across the United States.
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Voluntary employee turnover remained relatively low at 13% for 2023. 3 Employee Satisfaction and Engagement We believe that the investments we make in driving a strong, values-based culture and supporting our employees through programs, development, and competitive pay enhances our organizational capability and has a direct impact on our business results and fulfillment of Redwood’s mission.
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Our Board of Directors oversees management’s approach to Corporate Responsibility matters, with standing Board Committees playing a primary role in overseeing different aspects of Corporate Responsibility. Management regularly reports to the Board and its committees regarding Corporate Responsibility matters.
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Our core values of Growth, Results, Passion, Relationships, Innovation, and Integrity are embedded into our programs and performance goals and are frequently communicated to our employees. Diversity, Equity, Inclusion, and Belonging We are committed to fostering diversity, equity, inclusion, and belonging (“DEIB”) within the company and we are actively in the process of implementing our long-term diversity and inclusion roadmap.
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Federal, State and Local Regulatory and Legislative Developments Our business is affected by conditions in the housing and real estate markets and the broader financial markets, as well as by the financial condition and resources of other participants in these markets.
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Our DEIB work is focused on 1) developing and executing programs and processes that increase the representation of female and racially/ethnically diverse employees at all levels within the organization; and 2) investing in programs, training, and mentorship that contribute to an inclusive and equitable work environment for all of our employees.
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Our Diversity Steering Committee and Diversity Council, which are overseen by our CEO, inform and steward the company’s efforts and include leadership and employee representatives from across the organization. Our Diversity Council is empowered to create relationships with non-profit organizations that support racial equality, including through corporate donations and volunteerism efforts.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese types of transactions and investments expose us to potentially material risks .” Additionally, in its capacity as a servicer of residential mortgage loans, a sub-servicer will have access to borrowers’ non-public personal information, and we could incur liability in connection with a data breach relating to a sub-servicer, as discussed further under the risk factor titled “Maintaining information security and complying with data privacy laws and regulations are important to our business and a cybersecurity or data breach, or a violation of data privacy laws, could result in serious harm to our reputation and have a material adverse impact on our business and financial results. ” When we retain a sub-servicer we are generally also obligated to fund any obligation of the sub-servicer to make advances on behalf of a delinquent loan obligor.
Biggest changeAdditionally, in its capacity as a servicer of residential mortgage loans or HEI, a sub-servicer will have access to borrowers’ non-public personal information, and we could incur liability in connection with a data breach relating to a sub-servicer, as discussed further herein.
Even after governmental actions have 10 been taken and we believe we understand the impacts of those actions, prevailing interpretations may shift, or we may not be able to effectively respond to them so as to avoid a negative impact on our business or financial results. We are subject to intense competition and we may not compete successfully.
Even after governmental actions have been taken and we believe we understand the impacts of those actions, prevailing interpretations may shift, or we may not be able to effectively respond to them so as to avoid a negative impact on our business or financial results. 10 We are subject to intense competition and we may not compete successfully.
When we acquire or originate real estate mortgage loans, or the rights to service mortgage loans, we come into possession of non-public borrower or borrower-principal personal information that a bad actor or an identity thief could utilize in engaging in fraudulent activity or theft.
When we acquire or originate real estate mortgage loans, or the rights to service mortgage loans, we come into possession of non-public borrower or borrower-principal personal information that a bad actor or an identity thief could utilize when engaging in fraudulent activity or theft.
For example, since 2020, the COVID-19 pandemic (the "pandemic") caused, and in some ways continues to cause, significant volatility and repercussions across regional, national and global economies, financial markets, and supply chains. The pandemic impacted our mortgage banking operations, and it or another public health crisis may impact our operations again.
For example, since 2020, the COVID-19 pandemic (the "COVID pandemic") caused, and in some ways continues to cause, significant volatility and repercussions across regional, national and global economies, financial markets, and supply chains. The pandemic impacted our mortgage banking operations, and it or another public health crisis may impact our operations again.
Such impact may be due to temporary or lasting changes involving the status, practices and procedures of our operating platforms, including with respect to loan origination and loan purchase activities, as well as our HEI investment activities.
Such impact may be due to temporary or lasting changes involving the status, practices and procedures of our operating platforms, including with respect to loan origination and loan purchase activities, as well as our HEI investment and origination activities.
In addition, declines in the value of HEI can be due to, among other things, trends in and outlook for home price appreciation, cash flow trends and extension risk, economic regulatory changes, or investor preferences.
In addition, declines in the value of HEI can be due to, among other things, trends in and outlook for home price appreciation, cash flow trends and extension risk, economic or regulatory changes, or investor preferences.
The failure of mezzanine loans or mortgage loans, MBS, or HEI subject to a repurchase agreement to qualify as real estate assets would adversely affect our ability to qualify as a REIT.
The failure of mezzanine loans, mortgage loans, MBS, or HEI subject to a repurchase agreement to qualify as real estate assets would adversely affect our ability to qualify as a REIT.
In addition, if dividends on any shares of our Series A preferred stock are in arrears for six or more quarterly dividend periods, whether or not consecutive, the number of directors constituting our board of directors will, subject to the maximum number of directors authorized under our bylaws then in effect, be automatically increased by two and the holders of Series A preferred stock will be entitled to vote for the election of those two additional directors at a special meeting of shareholders, and at each subsequent annual meeting of shareholders until all dividends accumulated on the Series A preferred stock for all past dividend periods and the then-current dividend period shall have been fully paid or declared and a sum sufficient for the payment thereof set aside for payment.
In addition, if dividends on any shares of our Series A preferred stock are in arrears for six or more quarterly dividend periods, whether or not consecutive, the number of directors constituting our board of directors will, subject to the maximum number of directors authorized under our bylaws then in effect, be automatically increased by two and the holders of Series A preferred stock will be entitled to vote for the election of those two additional directors at a special meeting of shareholders, and at each subsequent annual meeting of shareholders until all dividends accumulated on the Series A preferred stock for all past dividend periods and the then-current dividend period shall have been fully paid or declared and a sum sufficient for the payment thereof set aside for payment.
It can be difficult to predict the impact on interest rates of unexpected and uncertain global political and economic events, such as the outbreak of pandemic or epidemic disease, warfare (including the outbreak of hostilities between Russia and Ukraine and between Israel and Hamas), economic and international trade conflicts or sanctions, economic indicators such as the rate of inflation or employment statistics, the change in the U.S. presidential administration and political makeup of Congress, government shutdowns, or changes in the credit rating of the U.S. government, the United Kingdom, or one or more Eurozone nations; however, increased uncertainty or changes in the economic outlook for, or rating of, the creditworthiness of the U.S. government, the United Kingdom, Eurozone nations, or China may have adverse impacts on, among other things, the U.S. economy, financial markets, the cost of borrowing, the financial strength of counterparties with whom we transact business, and the value of assets we hold.
It can be difficult to predict the impact on interest rates of unexpected and uncertain global political and economic events, such as the outbreak of pandemic or epidemic disease, warfare (including hostilities between Russia and Ukraine and between Israel and Hamas), economic and international trade conflicts, tariffs or sanctions, economic indicators such as the rate of inflation or employment statistics, the change in the U.S. presidential administration and political makeup of Congress, government shutdowns, or changes in the credit rating of the U.S. government, the United Kingdom, or one or more Eurozone nations; however, increased uncertainty or changes in the economic outlook for, or rating of, the creditworthiness of the U.S. government, the United Kingdom, Eurozone nations, or China may have adverse impacts on, among other things, the U.S. economy, financial markets, the cost of borrowing, the financial strength of counterparties with whom we transact business, and the value of assets we hold.
To the extent HEI or HEI-related assets are broadly subjected to new or modified form(s) of regulation, regulatory enforcement, litigation or claims, or are recharacterized as loans—whether such regulation or claims are initiated by federal, state or local governmental, quasi-governmental or consumer rights organizations, by homeowners themselves, or otherwise—we may be unable to continue our HEI transaction volume at current levels (or at all), we may be unable to realize expectations as to revenue or profit from our HEI business or investments or to enforce our rights under HEI we own, or we could be subjected to civil penalties, fines or damages, any of which might be significant.
To the extent HEI or HEI-related assets are broadly subjected to new or modified form(s) of regulation, regulatory enforcement, litigation or claims, or are recharacterized or regulated as loans—whether such regulation or claims are initiated by federal, state or local governmental, quasi-governmental or consumer rights organizations, by homeowners themselves, or otherwise—we may be unable to continue our HEI transaction volume at current levels (or at all), we may be unable to realize expectations as to revenue or profit from our HEI business or investments or to enforce our rights under HEI we own, or we could be subjected to civil penalties, fines or damages, any of which might be significant.
We may experience an event of default under some or all of our short- and long-term debt and financing facilities if we do not meet future margin calls or maintain compliance with financial covenants and other terms of these debt obligations, which would permit the holders of the affected indebtedness to accelerate the maturity of such indebtedness and could cause defaults under our other indebtedness, which could lead to an event of bankruptcy or insolvency, which would have a material adverse effect on our business, results of operations and financial condition.
We may experience an event of default under some or all of our short- and long-term debt and financing facilities if we do not meet future margin calls or maintain compliance with financial covenants and other terms of these debt obligations, which would permit the holders of the affected indebtedness to accelerate the maturity of such indebtedness and 15 could cause defaults under our other indebtedness, which could lead to an event of bankruptcy or insolvency, which would have a material adverse effect on our business, results of operations and financial condition.
Any failure by us to comply with 16 these statements, as well as any failure to provide comprehensive and transparent disclosure in such statements, or to comply with other federal, state, local or international privacy or data protection laws and regulations could result in inquiries or proceedings against us by governmental entities, regulators, consumer organizations, and private litigants, as well as potential fines, penalties, and monetary or other liability, any of which could have a material adverse effect on our business, results of operations, and financial condition.
Any failure by us to comply with these statements, as well as any failure to provide comprehensive and transparent disclosure in such statements, or to comply with other federal, state, local or international privacy or data protection laws and regulations could result in inquiries or proceedings against us by governmental entities, regulators, consumer organizations, and private litigants, as well as potential fines, penalties, and monetary or other liability, any of which could have a material adverse effect on our business, results of operations, and financial condition.
Any disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our ability and mortgage loan borrowers’ ability to make regular payments of principal and interest ( e.g. , due to unemployment, underemployment, or reduced income or revenues, including as a result of tenants' inability to make rental payments) or to access savings or capital necessary to fund business 44 operations or replace or renew maturing liabilities on a timely basis, and may adversely affect the valuation of financial assets and liabilities.
Any disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our ability and mortgage loan borrowers’ ability to make regular payments of principal and interest ( e.g. , due to unemployment, underemployment, or reduced income or revenues, including as a result of tenants' inability to make rental payments) or to access savings or capital necessary to fund business operations or replace or renew maturing liabilities on a timely basis, and may adversely affect the valuation of financial assets and liabilities.
Furthermore, as a result of the economic and market disruption caused by the COVID-19 pandemic, federal and state governmental authorities encouraged and, in certain cases, mandated, responses to forbearance requests from borrowers with respect to monthly mortgage payment obligations by enacting statutes, including the federal CARES Act, and promulgating various orders, regulations, and guidance to enable borrowers to defer and reschedule monthly mortgage payments, coupled with enacting or extending nationwide and/or local foreclosure and eviction moratoria.
Furthermore, as a result of the economic and market disruption caused by the COVID pandemic, federal and state governmental authorities encouraged and, in certain cases, mandated, responses to forbearance requests from borrowers with respect to monthly mortgage payment obligations by enacting statutes, including the federal CARES Act, and promulgating various orders, regulations, and guidance to enable borrowers to defer and reschedule monthly mortgage payments, coupled with enacting or extending nationwide and/or local foreclosure and eviction moratoria.
If our marketing and disclosure documentation are alleged or found to contain inaccuracies or omissions, we may be liable under federal and state securities laws (or under other laws) for damages to third parties that invest in these securitization transactions, including in circumstances where we relied on a third party in preparing accurate disclosures, or we may incur other expenses and costs in connection with disputing these allegations or settling claims (whether merited or meritless).
If our marketing and disclosure documentation are alleged or 35 found to contain inaccuracies or omissions, we may be liable under federal and state securities laws (or under other laws) for damages to third parties that invest in these securitization transactions, including in circumstances where we relied on a third party in preparing accurate disclosures, or we may incur other expenses and costs in connection with disputing these allegations or settling claims (whether merited or meritless).
These derivatives may have additional risks to us, such as: liquidity risk, due to the fact that there may not be a ready market into which we could sell these derivatives if needed; basis risk, which could result in a decline in value or a requirement to make a cash payment as a result of changes in interest rates; and counterparty risk, if a counterparty to a derivative is not willing or able to perform its obligations to us due to its financial condition or otherwise.
These derivatives may have additional risks to us, such as: liquidity risk, due to the fact that there may not be a ready market into which we could sell these derivatives if needed; basis risk, which could result in a decline in value or a requirement to make a cash payment as a result of 31 changes in interest rates; and counterparty risk, if a counterparty to a derivative is not willing or able to perform its obligations to us due to its financial condition or otherwise.
Additionally, interest rates could rise or decline 17 materially and/or credit spreads could widen as a result governmental activities taken in response to macroeconomic events, such as those taken by the Federal Reserve during the pandemic, one or more of which could cause asset values to decrease and/or prepayments on our assets to increase or decrease due to refinancing activity, which could have a material adverse effect on our results of operations.
Additionally, interest rates could rise or decline materially and/or credit spreads could widen as a result governmental activities taken in response to macroeconomic events, such as those taken by the Federal Reserve during the pandemic, one or more of which could cause asset values to decrease and/or prepayments on our assets to increase or decrease due to refinancing activity, which could have a material adverse effect on our results of operations.
Even if we obtain representations and warranties from the counterparties from whom we acquired the loans or other assets or the borrowers to whom we made the loans, or their related parties, they may not parallel the representations and warranties we make or may otherwise not protect us from losses, including, for example, due to the fact that the counterparty may be insolvent or otherwise unable to make a payment to us at the time we make a claim for repayment or damages for a breach of representation or warranty.
Even if we obtain representations and warranties from the counterparties from whom we acquired the loans, HEI, or other assets or the borrowers to whom we made the loans, or their related parties, they may not parallel the representations and warranties we make or may otherwise not protect us from losses, including, for example, due to the fact that the counterparty may be insolvent or otherwise unable to make a payment to us at the time we make a claim for repayment or damages for a breach of representation or warranty.
As another example, with respect to loans with a debt-to-income ratio greater than 43%, which, following amendments to the "qualified mortgage" definition in 2021, may now be considered “qualified mortgages” under CFPB rules if they meet the amended definition (including an Annual 39 Percentage Rate ("APR") test), rating agencies may nonetheless decide that such loans pose greater risk to investors.
As another example, with respect to loans with a debt-to-income ratio greater than 43%, which, following amendments to the "qualified mortgage" definition in 2021, may now be considered “qualified mortgages” under CFPB rules if they meet the amended definition (including an Annual Percentage Rate ("APR") test), rating agencies may nonetheless decide that such loans pose greater risk to investors.
In particular, because issues relating to residential housing (including both owner-occupied and rental housing), and real estate finance can be areas of 9 political focus, federal, state and local governments may be more likely to take actions that affect residential housing, the markets for financing residential housing, landlord and tenant rights, lender rights, and the participants in residential housing-related industries than they would with respect to other industries.
In particular, because issues relating to residential housing (including both owner-occupied and rental housing), and real estate finance can be areas of political focus, federal, state and local governments may be more likely to take actions that affect residential housing, the markets for financing residential housing, landlord and tenant rights, lender rights, and the participants in residential housing-related industries than they would with respect to other industries.
Our business and the markets in which we operate are constantly evolving and our efforts to initiate new business activities or significantly expand or reorganize existing business activities, including through acquisitions, structural changes, or the formation or expansion of business units, as ways to grow our business, implement our long-term strategy, and respond to changing circumstances may not be successful and may expose us to new risks and regulatory compliance requirements.
Our business and the markets in which we operate are constantly evolving and our efforts to initiate new business activities or significantly expand or reorganize existing business activities, including through acquisitions, structural changes, or the formation or expansion of business 45 units, as ways to grow our business, implement our long-term strategy, and respond to changing circumstances may not be successful and may expose us to new risks and regulatory compliance requirements.
As a result of the government’s statutory and regulatory oversight of the markets we participate in and the government’s direct and indirect participation in these markets, federal, state and local governmental actions, policies, and directives can have an adverse effect on these markets and on our business and the value of, and the returns on, mortgages, mortgage-related securities, and other assets we own or may acquire in the future, which effects may be material.
As a result of the government’s statutory and regulatory oversight of the markets we participate in and the government’s direct and indirect participation in these markets, federal, state and local governmental actions, policies, and directives can have an adverse effect 9 on these markets and on our business and the value of, and the returns on, mortgages, mortgage-related securities, and other assets we own or may acquire in the future, which effects may be material.
Our indebtedness could have significant negative consequences for our business, results of operations and financial condition, including: • increasing our vulnerability to adverse economic and industry conditions; • limiting our ability to obtain additional financing; • requiring the dedication of a substantial portion of our cash flows from operations to service our indebtedness, thereby reducing the amount of our cash flows available for other purposes; • requiring asset sales to fund the repayment of maturing debt or to meet margin calls; • limiting our flexibility in planning for, or reacting to, changes in our business; • dilution experienced by our existing stockholders as a result of the conversion of outstanding convertible notes or exchangeable securities into shares of common stock; and • placing us at a possible competitive disadvantage with less leveraged competitors and competitors that may have better access to capital resources or access to such resources on more favorable terms.
Our indebtedness could have significant negative consequences for our business, results of operations and financial condition, including: • increasing our vulnerability to adverse economic and industry conditions; • limiting our ability to obtain additional financing; • requiring the dedication of a substantial portion of our cash flows from operations to service our indebtedness, thereby reducing the amount of our cash flows available for other purposes; • requiring asset sales to fund the repayment of maturing debt or to meet margin calls; • limiting our flexibility in planning for, or reacting to, changes in our business; • dilution experienced by our existing stockholders as a result of the exercise of outstanding warrants or the conversion of outstanding convertible notes or exchangeable securities into shares of common stock; and • placing us at a possible competitive disadvantage with less leveraged competitors and competitors that may have better access to capital resources or access to such resources on more favorable terms.
The occurrence of a natural disaster (such as an earthquake, tornado, hurricane, flood, landslide, or wildfire), or the effects of climate change (including flooding, drought, and severe weather), may cause decreases in the value of real estate (including sudden or abrupt changes) and would likely reduce the value of the properties collateralizing real estate loans we own or those underlying the securities or other investments we own.
The occurrence of a natural disaster (such as an earthquake, tornado, hurricane, flood, landslide, or wildfire), or the effects of climate change (including flooding, drought, heatwaves and severe weather), may cause decreases in the value of real estate (including sudden or abrupt changes) and would likely reduce the value of the properties collateralizing real estate loans we own or those underlying the securities or other investments we own.
To the extent that there are significant amounts of advances that need to be funded in respect of loans where we own the servicing rights, it could have a material adverse effect on our business and financial results. In addition, we have participated in various investments structured as joint ventures or partnerships with unaffiliated third parties.
To the extent that there are significant amounts of advances that need to be funded in respect of loans or HEI where we own the servicing rights, it could have a material adverse effect on our business and financial results. In addition, we have participated in various investments structured as joint ventures or partnerships with unaffiliated third parties.
Earning non-cash REIT taxable income could necessitate our selling assets, incurring debt, or raising new equity in order to fund dividend distributions. • We could be viewed as a “dealer” with respect to certain transactions and become subject to a 100% prohibited transaction tax or other entity-level taxes on income from such transactions.
Earning non-cash REIT taxable income could necessitate our selling assets, incurring debt, or raising new equity in order to fund dividend distributions. 53 • We could be viewed as a “dealer” with respect to certain transactions and become subject to a 100% prohibited transaction tax or other entity-level taxes on income from such transactions.
If U.S. home prices experience widespread declines, as a result of increased benchmark interest rates, declining economic conditions, or for other reasons, our non-marginable borrowing facilities, and mortgage loans or securities financed thereunder during recent periods of elevated home prices, could be particularly exposed to lender margin calls.
If U.S. home prices experience widespread declines, as a result of increased benchmark interest rates, declining economic conditions, or for other reasons, our non-marginable borrowing facilities, and mortgage loans, HEI, or securities financed thereunder during recent periods of elevated home prices, could be particularly exposed to lender margin calls.
Alternatively, we could determine to change our investment strategy or financing plans to be more risk averse, resulting in potentially lower returns, which could also have an adverse effect on our financial returns. 27 The performance of the assets we own and the investments we make will vary and may not meet our earnings or cash flow expectations.
Alternatively, we could determine to change our investment strategy or financing plans to be more risk averse, resulting in potentially lower returns, which could also have an adverse effect on our financial returns. The performance of the assets we own and the investments we make will vary and may not meet our earnings or cash flow expectations.
Hedging may not achieve our desired goals. For example, in response to market dislocations during 2020 resulting from the pandemic, we made the determination that our interest rate hedges were no longer effective in hedging asset market values and we terminated or closed out substantially all of our outstanding interest rate hedges and, overall, incurred realized losses.
Hedging may not achieve our desired goals. For example, in response to market dislocations during 2020 resulting from the COVID pandemic, we made the determination that our interest rate hedges were no longer effective in hedging asset market values, and we terminated or closed out substantially all of our outstanding interest rate hedges and, overall, incurred realized losses.
As a result, we are subject to the risks associated with a third party’s failure or inability to perform, including failure to perform due to the impact of certain force majeure events, such as the pandemic, on such third party’s ability to operate, due to the bankruptcy of one or more loan or HEI servicers, or reasons such as fraud, negligence, errors, miscalculations, workforce or supply chain disruptions, or insolvency.
As a result, we are subject to the risks associated with a third party’s failure or inability to perform, including failure to perform due to the impact of certain force majeure events, such as the COVID pandemic, on such third party’s ability to operate, due to the bankruptcy of one or more loan or HEI servicers, or reasons such as fraud, negligence, errors, miscalculations, workforce or supply chain disruptions, or insolvency.
To the extent a third-party loan servicer or HEI servicer fails to fully and properly perform its obligations, loans, HEI, and securities that we hold as investments may experience losses, securitizations that we have sponsored may experience poor performance, and our ability to engage in future securitization transactions could be harmed. Moreover, the CFPB and U.S.
To the extent a third-party loan servicer or HEI servicer fails to fully and properly perform its obligations, loans, HEI, and securities that we hold as investments may experience losses, securitizations that we have sponsored may experience poor performance, and our ability to engage in future securitization transactions could be harmed. 37 Moreover, the CFPB and U.S.
Such charges could cause a material reduction, up to the full value of our net DTAs (for which a valuation allowance has not previously been established), to our GAAP earnings and book value per share for the quarterly and annual periods in which they are established and could have a material and adverse effect on our business, financial results, or liquidity.
Such charges could cause a material reduction, up to the full value of our net DTAs (for which a valuation allowance has not previously been established), to our GAAP earnings and book value per 49 share for the quarterly and annual periods in which they are established and could have a material and adverse effect on our business, financial results, or liquidity.
Additionally, our servers and systems, and those of our service providers, may be vulnerable to computer malware, break-ins, denial-of-service attacks, and similar disruptions from unauthorized tampering with our computer systems, which could result in someone obtaining unauthorized access to borrower, customer or consumer data, other personal information, or other company data, including confidential or proprietary business information.
Additionally, our servers and systems, and those of our service providers, may be vulnerable to computer malware, break-ins, denial-of-service attacks, ransomware attacks, and similar disruptions from unauthorized tampering with our computer systems, which could result in someone obtaining unauthorized access to borrower, customer or consumer data, other personal information, or other company data, including confidential or proprietary business information.
Complying with emerging and changing requirements of Data Privacy Laws may cause us to incur substantial costs, and has required and may again in the future require us to change our business practices. Noncompliance could result in significant penalties, fines, or legal liability, including as a result of private civil action or regulatory enforcement.
Complying with emerging and changing requirements of Data Privacy Laws or AI Laws may cause us to incur substantial costs, and has required and may again in the future require us to change our business practices. Noncompliance could result in significant penalties, fines, or legal liability, including as a result of private civil action or regulatory enforcement.
Further, any federal assistance programs available to mortgage loan servicers may not be available to us because our business and investments generally are not focused on mortgage loans that are eligible to be purchased or guaranteed by Fannie Mae, Freddie Mac or governmental agencies such as the Federal Housing Administration or Department of Veteran Affairs.
Further, any federal assistance programs available to mortgage loan servicers may not be available to us because our business and investments generally are not focused on mortgage loans that are eligible to be purchased or guaranteed by Fannie Mae, 22 Freddie Mac or governmental agencies such as the Federal Housing Administration or Department of Veteran Affairs.
Future economic conditions, including credit results, prepayment patterns, and interest 24 rate trends, are difficult to project with accuracy over the life of the assets we acquire, so there will be volatility in the reported returns over time. Our growth may be limited if assets are not available or not available at attractive prices.
Future economic conditions, including credit results, prepayment patterns, and interest rate trends, are difficult to project with accuracy over the life of the assets we acquire, so there will be volatility in the reported returns over time. Our growth may be limited if assets are not available or not available at attractive prices.
If, as a result of any of the foregoing issues, rating agencies place limitations on our ability to execute future securitization transactions or impose unfavorable ratings levels or conditions on our securitization transactions, it could reduce the returns we would otherwise expect to earn from executing these transactions and negatively impact our business and financial results.
If, as a result of any of the foregoing issues, rating agencies place limitations on our ability to execute future securitization 39 transactions or impose unfavorable ratings levels or conditions on our securitization transactions, it could reduce the returns we would otherwise expect to earn from executing these transactions and negatively impact our business and financial results.
While HEI we originate are subject to a maximum investor return (or “cap”) determined at origination, which caps the amount a homeowner would need to pay upon settlement of the HEI, there is no guarantee that such caps will ensure compliance with state usury restrictions if HEI are recharacterized as mortgage loans.
While HEI we originate are subject to a maximum investor return (or “cap”) determined at origination, which sets the maximum amount a homeowner would need to pay upon settlement of the HEI, there is no guarantee that such caps will ensure compliance with state usury restrictions if HEI are recharacterized as mortgage loans.
The Internal Revenue Code provides a limited relief provision concerning certain items of non-cash income; however, this provision may not sufficiently reduce our cash dividend distribution requirement. In the event that our liquidity needs exceed our access to liquidity, we may need to sell assets (including at inopportune times), thus reducing our earnings.
The Internal Revenue Code provides a limited relief provision concerning certain items of non-cash income; however, this provision may not sufficiently reduce our cash dividend distribution requirement. In the event that our liquidity needs exceed our access to liquidity, we may need to sell assets 44 (including at inopportune times), thus reducing our earnings.
In Revenue Procedure 2003-65, the IRS provided a safe harbor pursuant to which a mezzanine loan, if it meets each of the requirements contained in the Revenue Procedure, will be treated by the IRS as a real estate asset for purposes of the REIT asset tests, and interest derived from the mezzanine loan will be treated as qualifying mortgage interest for purposes of the REIT 75% gross income test.
In Revenue Procedure 2003-65, the IRS provided a safe harbor pursuant to which a mezzanine loan, if it meets each of the requirements contained in the Revenue Procedure, will be treated by the IRS as a real estate asset for purposes of the REIT asset tests, and interest derived 54 from the mezzanine loan will be treated as qualifying mortgage interest for purposes of the REIT 75% gross income test.
Furthermore, if other market participants fail to meet margin calls associated with mortgage loans or securities they finance, their financing counterparties could terminate their financing and seek to sell significant amounts of loans and securities, which could again depress the market value of these types of assets and result in additional margin calls on us and other borrowers.
Furthermore, if other market participants fail to meet margin calls associated with mortgage loans, HEI, or securities they finance, their financing counterparties could terminate their financing and seek to sell significant amounts of loans, HEI, and securities, which could again depress the market value of these types of assets and result in additional margin calls on us and other borrowers.
In addition, the amount and timing of credit losses could be affected by loan modifications, delays in the liquidation process, documentation errors, and other action by servicers or sub-servicers. Among other factors, weakness in the U.S. economy or the housing market could cause our credit losses to increase beyond levels that we currently anticipate.
In addition, the amount and timing of credit losses could be affected by loan modifications, delays in the liquidation process, documentation errors, and other 18 action by servicers or sub-servicers. Among other factors, weakness in the U.S. economy or the housing market could cause our credit losses to increase beyond levels that we currently anticipate.
Any expansion of our loss mitigation efforts could increase our operating costs, lead to enhanced regulatory scrutiny or additional legal claims, and such expanded loss mitigation efforts may not reduce our future credit losses. Credit ratings assigned to debt securities by the credit rating agencies may not accurately reflect the risks associated with those securities.
Any expansion of our loss mitigation efforts could increase our operating costs, lead to enhanced regulatory scrutiny or additional legal claims, and such expanded loss mitigation efforts may not reduce our future credit losses. 21 Credit ratings assigned to debt securities by the credit rating agencies may not accurately reflect the risks associated with those securities.
For example, in 2020, federal legislation in response to the pandemic included provisions allowing many residential mortgage loan borrowers to request forbearance relief, which would permit such borrowers to stop making payments, and during which time lenders could not charge penalties or fees, or report missed payments to credit reporting agencies.
For example, in 2020, federal legislation in response to the COVID pandemic included provisions allowing many residential mortgage loan borrowers to request forbearance relief, which would permit such borrowers to stop making payments, and during which time lenders could not charge penalties or fees, or report missed payments to credit reporting agencies.
Our Board of Directors has granted a limited number of waivers to institutional investors to own shares of our common stock in excess of this 9.8% limit, which waivers are subject to certain terms and conditions. Our Board of Directors may amend these existing waivers to permit additional share ownership or may grant waivers to additional shareholders at any time.
Our Board of Directors has granted a limited number of waivers to institutional investors to own shares of our stock in excess of this 9.8% limit, which waivers are subject to certain terms and conditions. Our Board of Directors may amend these existing waivers to permit additional share ownership or may grant waivers to additional shareholders at any time.
In some cases, we sold assets under adverse market conditions to generate liquidity in response to such margin calls. We also maintain borrowing facilities that we describe as non-marginable, because they are not subject to market-value based margin calls subject to the lender’s determination, in its sole discretion, of the market value of the underlying collateral.
In some cases, we sold assets under adverse market conditions to generate liquidity in response to such margin calls. 14 We also maintain borrowing facilities that we describe as non-marginable, because they are not subject to market-value based margin calls subject to the lender’s determination, in its sole discretion, of the market value of the underlying collateral.
Additionally, to the extent local, regional or national economic conditions decline, due to an exogenous event, such as the pandemic, or for other reasons, the value of residential real estate may decline, which would also likely negatively impact the value of mortgage loans and mortgage-backed securities we own, potentially materially.
Additionally, to the extent local, regional or national economic conditions decline, due to an exogenous event, such as the COVID pandemic, or for other reasons, the value of residential real estate may decline, which would also likely negatively impact the value of mortgage loans and mortgage-backed securities we own, potentially materially.
We may continue to make these types of credit-related investments and may also continue recent initiatives to grow our investment portfolio, including investing in residential securities collateralized by re-performing and non-performing mortgage loans, multifamily securities, HEI and securities collateralized by HEI, and investments in excess MSRs and servicer advance investments related to pools of single-family and small-balance multifamily residential mortgage loans.
We may continue to make these types of credit-related investments and may also continue recent initiatives to grow our investment portfolio, including investing in residential securities 25 collateralized by re-performing and non-performing mortgage loans, multifamily securities, HEI and securities collateralized by HEI, and investments in excess MSRs and servicer advance investments related to pools of single-family and small-balance multifamily residential mortgage loans.
In addition, when selling mortgage loans or acquiring servicing rights associated with residential mortgage loans, we typically make representations and warranties to the purchaser or to other third parties regarding, among other things, certain characteristics of those assets, including characteristics we seek to verify through our underwriting and due diligence efforts.
In addition, when selling mortgage loans or HEI, or acquiring servicing rights associated with residential mortgage loans, we typically make representations and warranties to the purchaser or to other third parties regarding, among other things, certain characteristics of those assets, including characteristics we seek to verify through our underwriting and due diligence efforts.
Failure to comply with risk retention requirements applicable to securitization transactions we have sponsored or co-sponsored could expose us to losses, including, for example, as a result of a requirement to repurchase securitized loans that did not meet these criteria, regulatory enforcement actions and/or reputational damages.
Failure to comply with risk retention requirements applicable to securitization transactions we have sponsored or co-sponsored could expose us to losses, including, for example, as a result of a requirement to repurchase securitized loans or assets that did not meet these criteria, regulatory enforcement actions and/or reputational damages.
For example, in the first quarter of 2020, as a result of the pandemic and its impact on our business, following an impairment assessment, we recorded a non-cash goodwill impairment expense and wrote down the entire $89 million remaining value of our goodwill asset associated with our acquisitions of 5 Arches and CoreVest.
For example, in the first quarter of 2020, as a result of the COVID pandemic and its impact on our business, following an impairment assessment, we recorded a non-cash goodwill impairment expense and wrote down the entire $89 million remaining value of our goodwill asset associated with our acquisitions of 5 Arches and CoreVest.
Significant ownership stakes held by these individual institutions or other investors in common stock could have adverse consequences for other shareholders because each of these shareholders will have a significant influence over the outcome of matters submitted to a vote of our shareholders, including the election of our directors and transactions involving a change in control.
Significant ownership stakes held by these individual institutions or other investors in common stock could have adverse consequences for other shareholders because each of 57 these shareholders will have a significant influence over the outcome of matters submitted to a vote of our shareholders, including the election of our directors and transactions involving a change in control.
Prior to originating or acquiring loans or other assets for sale, we may undertake underwriting and due diligence efforts with respect to various aspects of the loan or asset. When underwriting or conducting due diligence, we rely on resources and data available to us, which may be limited, and we rely on investigations by third parties.
Prior to originating or acquiring loans, HEI, or other assets for sale, we may undertake underwriting and due diligence efforts with respect to various aspects of the loan, HEI, or asset. When underwriting or conducting due diligence, we rely on resources and data available to us, which may be limited, and we rely on investigations by third parties.
In some states, foreclosure actions can sometimes take several years or more to litigate. Under certain state laws, such as New York’s, if a foreclosure action is abandoned or dismissed without prejudice, reinstating any such action may be difficult or impossible due to relevant statutes of limitations.
In some states, foreclosure actions can sometimes take several years or more to litigate. Under certain state laws, such as New York’s, if a foreclosure action is abandoned or dismissed without prejudice, reinstating any such action may be difficult or impossible due to the relevant statutes of limitations.
We have also made investments in subordinate securities backed by re-performing and non-performing residential loans, multifamily securities, HEI and securities collateralized by HEI, excess MSR and servicer advance investments collateralized by residential and multifamily loans, a joint venture to acquire CoreVest-originated bridge loans, a whole loan investment fund created to acquire light-renovation multifamily loans, and a multifamily investment fund to acquire workforce housing properties.
We have also made investments in subordinate securities backed by re-performing and non-performing residential loans, multifamily securities, HEI and securities collateralized by HEI, excess MSR and servicer advance investments collateralized by residential consumer and multifamily loans, a joint venture to acquire CoreVest-originated bridge loans, a whole loan investment fund created to acquire light-renovation multifamily loans, and a multifamily investment fund to acquire workforce housing properties.
In addition, should any of these significant shareholders 57 determine to liquidate all or a significant portion of their holdings of our stock or, to the extent our stock is included in an industry or other broad-based market index and ceases to be so included, it could have an adverse effect on the market price of our stock.
In addition, should any of these significant shareholders determine to liquidate all or a significant portion of their holdings of our stock or, to the extent our stock is included in an industry or other broad-based market index and ceases to be so included, it could have an adverse effect on the market price of our stock.
Additionally, as described above, securities financed under our short-term securities repurchase facilities, and loans financed under certain whole-loan warehouse/secured revolving borrowing facilities, are subject to mark-to-market treatment and may incur margin calls or may require us to repurchase such loans in the event the loans become delinquent.
Additionally, as described above, securities financed under our short-term securities repurchase facilities, and loans and HEI financed under certain whole-loan warehouse/secured revolving borrowing facilities, are subject to mark-to-market treatment and may incur margin calls or may require us to repurchase such loans in the event the loans become delinquent.
Our assumptions may prove wrong, market conditions may change, or we may be exposed to higher-than-expected rates of delinquency, default, 26 foreclosure, or litigation, any of which could have a negative impact on our financial or operational results related to these acquisitions and to our business as a whole.
Our assumptions may prove wrong, market conditions may change, or we may be exposed to higher-than-expected rates of delinquency, default, foreclosure, or litigation, any of which could have a negative impact on our financial or operational results related to these acquisitions and to our business as a whole.
For example, as a result of the pandemic, residential mortgage subservicers received an unprecedented level of requests from mortgage borrowers for payment forbearances and, as a result, their operational infrastructures may not have properly processed the increased volume of requests effectively or in a manner that is in our best interests.
For example, as a result of the COVID pandemic, residential mortgage subservicers received an unprecedented level of requests from mortgage borrowers for payment forbearances and, as a result, their operational infrastructures may not have properly processed the increased volume of requests effectively or in a manner that is in our best interests.
A failure by any or all of the members to make such capital contributions for amounts required to fund servicer advances could result in an event of default under our servicer advance financing and a complete loss of our investment in SA Buyer and its servicer advance investments 38 and excess MSRs.
A failure by any or all of the members to make such capital contributions for amounts required to fund servicer advances could result in an event of default under our servicer advance financing and a complete loss of our investment in SA Buyer and its servicer advance investments and excess MSRs.
For example, our charter includes provisions granting our Board of Directors the authority to issue preferred stock from time to time, such as the issuance of Series A preferred stock we completed in January 2023 or future preferred stock transaction(s), and to establish the terms, preferences, and rights of the preferred stock without the approval of our shareholders.
For example, our charter includes provisions granting our Board of Directors the authority to issue preferred stock from time to time, such as the issuance of Series A preferred stock we completed in January 2023 or future preferred stock transaction(s), and to establish the 56 terms, preferences, and rights of the preferred stock without the approval of our shareholders.
The rate at which interest accrues on these loans may change more frequently or to a greater extent than payment adjustments on an adjustable-rate loan, and adjustments of monthly payments may be subject to limitations or may be limited 19 by the borrower’s option to pay less than the full accrual rate.
The rate at which interest accrues on these loans may change more frequently or to a greater extent than payment adjustments on an adjustable-rate loan, and adjustments of monthly payments may be subject to limitations or may be limited by the borrower’s option to pay less than the full accrual rate.
We have entered into risk-sharing arrangements with Fannie Mae and Freddie Mac and have invested in credit risk transfer (CRT) securities issued by Fannie Mae and Freddie Mac under which we are compensated for agreeing to absorb credit losses on new conforming loans or for engaging in similar types of credit risk-sharing or -transfer structures.
We have entered into risk-sharing arrangements with Fannie Mae and Freddie Mac and have invested in credit risk transfer securities issued by Fannie Mae and Freddie Mac under which we are compensated for agreeing to absorb credit losses on new conforming loans or for engaging in similar types of credit risk-sharing or -transfer structures.
This type of loan is typically used for acquiring and rehabilitating or improving the quality of single-family residential or multi-family investment properties and generally serves as an interim financing solution for borrowers and/or properties prior to the borrower selling the property or stabilizing the property and obtaining long-term permanent financing.
This type of loan is typically used for acquiring and rehabilitating or improving the quality of single-family residential investor or multi-family investment properties and generally serves as an interim financing solution for borrowers and/or properties prior to the borrower selling the property or stabilizing the property and obtaining long-term permanent financing.
In connection with our business of acquiring and originating loans and HEI, engaging in securitization transactions, and investing in third-party issued securities and other assets, we rely on third-party service providers to perform certain services, comply with 37 applicable laws and regulations, and carry out contractual covenants and terms.
In connection with our business of acquiring and originating loans and HEI, engaging in securitization transactions, and investing in third-party issued securities and other assets, we rely on third-party service providers to perform certain services, comply with applicable laws and regulations, and carry out contractual covenants and terms.
If, as a result of market disruption or otherwise, we are unable to obtain and maintain adequate sources and amounts of capital, we may not have sufficient capital available to fund the growth of our business, resulting in harm to our business and financial results caused by our inability to achieve forecasted growth. 8 Changing benchmark interest rates, and the Federal Reserve’s actions and statements regarding monetary policy, have affected and may continue to affect the fixed income and mortgage finance markets in ways that adversely affect our business and financial results, our volume of loan originations and acquisitions, and the value of, and returns on, real estate-related investments and other assets we own or may acquire.
If, as a result of market disruption or otherwise, we are unable to obtain and maintain adequate sources and amounts of capital, we may not have sufficient capital available to fund the growth of our business, resulting in harm to our business and financial results caused by our inability to achieve forecasted growth. 7 Changing benchmark interest rates, and the Federal Reserve’s actions and statements regarding monetary policy, have affected and may continue to affect the fixed income and mortgage finance markets in ways that adversely affect our business and financial results, our volume of loan originations and acquisitions, and the value of, and returns on, real estate-related investments and other assets we own or may acquire.
Despite our efforts to manage credit risk, there are many aspects of credit risk that we cannot control. Our quality control and loss mitigation policies and procedures may not be successful in limiting future delinquencies, defaults, and losses, or they may not be cost effective. Our underwriting reviews may not be effective.
Despite our efforts to manage credit risk, there are many aspects of credit risk that we cannot control or predict. Our quality control and loss mitigation policies and procedures may not be successful in limiting future delinquencies, defaults, and losses, or they may not be cost effective. Our underwriting reviews may not be effective.
Any of these actions may expose us to new, different, or increased investment, operational, financial, or management risks. Several of these investments were complex, highly structured, and involve partnerships and joint ventures with co-investors or co-sponsors, any or all of which may limit the liquidity of such investments.
Any of these actions may expose us to new, different, or increased investment, operational, financial, regulatory, or management risks. Several of these investments were complex, highly structured, and involve partnerships and joint ventures with co-investors or co-sponsors, any or all of which may limit the liquidity of such investments.
Additionally, these initiatives may require us to register as an investment advisor with federal or state regulatory authorities, which would expose us to increased regulatory compliance costs and risks. We may change our investment strategy or financing plans, which may result in riskier investments and diminished returns.
Additionally, these initiatives may require us to register as an investment advisor with federal or state regulatory authorities, which would expose us to increased regulatory compliance costs and risks. 27 We may change our investment strategy or financing plans, which may result in riskier investments and diminished returns.
Furthermore, any costs or delays involved in the completion of a foreclosure of the loan or a liquidation of the underlying property would further reduce the proceeds and thus increase the loss. Any such losses could, in the aggregate, have a material and adverse effect on our business, results of operations and financial condition.
Furthermore, any costs or delays involved in the completion of a foreclosure of the loan or a liquidation of the underlying property would further reduce the proceeds and thus increase the loss. Any such losses could, in the aggregate, have a material and adverse effect on our business, operations and financial condition.
Furthermore, a borrower’s ability to repay its loan may be adversely impacted by numerous factors, including a downturn in its industry or other negative local or more general economic conditions. Deterioration in a borrower’s financial condition and prospects may be accompanied by deterioration in the collateral for the loan.
Furthermore, a borrower’s ability to repay its loan may be adversely impacted by numerous factors, including a downturn in its 19 industry or other negative local or more general economic conditions. Deterioration in a borrower’s financial condition and prospects may be accompanied by deterioration in the collateral for the loan.
The fair values can change rapidly and significantly and changes can result from changes in interest rates, perceived risk, supply, demand, and actual and projected cash flows, including from prepayments and credit performance. A decrease in fair value may not necessarily be the result of deterioration in future cash flows.
The fair values can change rapidly and significantly and changes can result from changes in interest rates, perceived 28 risk, supply, demand, and actual and projected cash flows, including from prepayments and credit performance. A decrease in fair value may not necessarily be the result of deterioration in future cash flows.
As the owner of an MSR (or excess MSR investment), we are entitled to a portion of the interest payments made by the borrower in respect of the associated loan and, in the case of MSRs, we are responsible for hiring and compensating a sub-servicer to directly service the associated loan.
As the owner of an MSR (or excess MSR investment), we are entitled to a portion of the interest payments made by the borrower in respect of the associated loan and, in the case of MSRs, we are responsible 23 for hiring and compensating a sub-servicer to directly service the associated loan.
Acquiring and originating mortgage loans, HEI, and other assets with intent to sell these loans, HEI, or other assets to third parties generally requires us to incur short-term debt, either on a recourse or non-recourse basis, to finance the accumulation of loans, HEI, or other assets prior to sale.
Acquiring and originating mortgage loans, HEI, and other assets with intent to sell these loans, HEI, or other assets to third parties generally requires us to incur debt, including short-term debt, either on a recourse or non-recourse basis, to finance the accumulation of loans, HEI, or other assets prior to sale.
We may also only conduct due diligence on a sample of a pool of loans or assets we are acquiring and assume that the sample is representative of the entire pool. Our underwriting and due diligence efforts may not reveal matters which could lead to losses.
We may also only conduct due diligence on a sample of a pool of loans, HEI, or assets we are acquiring and assume that the sample is representative of the entire pool. Our underwriting and due diligence efforts may not reveal matters which could lead to losses.
For instance, in connection with the impact of the pandemic on the non-Agency mortgage finance market and on our business and operations, one of our loan seller counterparties subjected us to litigation and others made demands regarding perceived obligations to them.
For instance, in connection with the impact of the COVID pandemic on the non-Agency mortgage finance market and on our business and operations, one of our loan seller counterparties subjected us to litigation and others made demands regarding perceived obligations to them.
Maintaining information security and complying with data privacy laws and regulations are important to our business and a cybersecurity or data breach, or a violation of data privacy laws, could result in serious harm to our reputation and have a material adverse impact on our business and financial results.
Maintaining information security and complying with data privacy and technology laws and regulations are important to our business and a cybersecurity or data breach, or a violation of data privacy or technology laws, could result in serious harm to our reputation and have a material adverse impact on our business and financial results.
Furthermore, several federal and/or state regulators have begun mandating the reporting of certain security incidents in a particular format and within required timeframes, including, without limitation, the Securities and Exchange Commission, the Federal Trade Commission, and the New York State Department of Financial Services.
Furthermore, several federal and state regulators have begun mandating the reporting of certain security incidents in a particular format and within required timeframes, including, without limitation, the Securities and Exchange Commission, the Federal Trade Commission, and the New York State Department of Financial Services.
The securitizations in which we have invested may not receive funds that we believe are due from mortgage insurance companies and other counterparties. Loan servicing companies may not cooperate with our loss mitigation efforts, or those efforts may be ineffective.
The securitizations in which we have invested may not receive funds that we believe are due from title insurance or mortgage insurance companies and other counterparties. Loan servicing companies may not cooperate with our loss mitigation efforts, or those efforts may be ineffective.
These provisions and others may deter offers to acquire our stock or large blocks of our stock upon terms attractive 56 to our shareholders, thereby limiting the opportunity for shareholders to receive a premium for their shares over then-prevailing market prices.
These provisions and others may deter offers to acquire our stock or large blocks of our stock upon terms attractive to our shareholders, thereby limiting the opportunity for shareholders to receive a premium for their shares over then-prevailing market prices.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeFor additional information about cybersecurity risk, refer to Part II, Item 7 of this Annual Report on Form 10-K generally and under the heading “ Maintaining cybersecurity and complying with data privacy laws and regulations are important to our business and a breach of our cybersecurity or a violation of data privacy laws could result in serious harm to our reputation and have a material adverse impact on our business and financial results .” 61 Cybersecurity Governance As part of its risk oversight function, our Board, including through delegation to its Audit Committee, regularly receives risk management reporting from various officers of the Company responsible for different risk disciplines, including with respect to cybersecurity and IT risk, and oversees management’s administration of our cybersecurity risk management program.
Biggest changeFor additional information about cybersecurity risk, refer to Part II, Item 7 of this Annual Report on Form 10-K generally and under the heading “ Maintaining cybersecurity and complying with data privacy laws and regulations are important to our business and a breach of our cybersecurity or a violation of data privacy laws could result in serious harm to our reputation and have a material adverse impact on our business and financial results ” in Part I, Item 1A of this Annual Report on Form 10-K.
In addition, management provides event-driven updates to the Audit Committee and Board regarding any material cybersecurity incidents and, as appropriate, any incidents with lesser impact potential. Under our cybersecurity incident response plan, our Chief Legal Officer is responsible for escalating to the Audit Committee and Board information regarding any material cybersecurity incident.
In addition, management 61 provides event-driven updates to the Audit Committee and Board regarding any material cybersecurity incidents and, as appropriate, any incidents with lesser impact potential. Under our cybersecurity incident response plan, our Chief Legal Officer is responsible for escalating to the Audit Committee and Board information regarding any material cybersecurity incident.
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Cybersecurity Governance As part of its risk oversight function, our Board, including through delegation to its Audit Committee, regularly receives risk management reporting from various officers of the Company responsible for different risk disciplines, including with respect to cybersecurity and IT risk, and oversees management’s administration of our cybersecurity risk management program.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeExecutive and Administrative Office Locations and Lease Expirations Location Lease Expiration One Belvedere Place, Suite 300 2028 Mill Valley, CA 94941 8310 South Valley Highway, Suite 425 2031 Englewood, CO 80112 4 Park Plaza, Suite 900 2027 Irvine, CA 92614 650 Fifth Avenue, Suite 2120 2025 New York, NY 10019 62
Biggest changeExecutive and Administrative Office Locations and Lease Expirations Location Lease Expiration One Belvedere Place, Suite 300 2028 Mill Valley, CA 94941 8310 South Valley Highway, Suite 425 2031 Englewood, CO 80112 4 Park Plaza, Suite 900 2027 Irvine, CA 92614 45 Rockefeller Plaza, 26th Floor 2030 New York, NY 10111 650 Fifth Avenue, Suite 2120 2025 New York, NY 10019
Additional information on our leases is included in Note 17 to the Financial Statements within this Annual Report on Form 10-K. The following table presents the locations and remaining lease terms of our primary offices.
Additional information on our leases is included in Note 18 to the Financial Statements within this Annual Report on Form 10-K. The following table presents the locations and remaining lease terms of our primary offices.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS For information on our legal proceedings, see Note 17 to the Financial Statements within this Annual Report on Form 10-K under the heading "Loss Contingencies - Litigation, Claims and Demands." ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 63 PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS For information on our legal proceedings, see Note 18 to the Financial Statements within this Annual Report on Form 10-K under the heading "Loss Contingencies - Litigation, Claims and Demands." ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 62 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeTotal Number of Shares Purchased or Acquired Average Price per Share Paid Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or approximate dollar value) of Shares that May Yet be Purchased under the Plans or Programs (In Thousands, except Per Share Data) October 1, 2023 - October 31, 2023 — $ — — $ — November 1, 2023 - November 30, 2023 — $ — — $ — December 1, 2023 - December 31, 2023 — $ — — $ — Total — $ — — $ 101,265 Information with respect to compensation plans under which equity securities of the registrant are authorized for issuance is set forth in Part II, Item 12 of this Annual Report on Form 10-K. 65 Performance Graph The following graph presents a cumulative total return comparison of our common stock, over the last five years, to the S&P Composite-500 Stock Index, the FTSE NAREIT Mortgage REIT index and the BBG mREIT Index.
Biggest changeInformation with respect to compensation plans under which equity securities of the registrant are authorized for issuance is set forth in Part III, Item 12 of this Annual Report on Form 10-K. 63 Performance Graph The following graph presents a cumulative total return comparison of our common stock, over the last five years, to the S&P Composite-500 Stock Index, the FTSE NAREIT Mortgage REIT index and the BBG mREIT Index.
The total returns reflect stock price appreciation and the reinvestment of dividends for our common stock and for each of the comparative indices, assuming that $100 was invested in each on December 31, 2018. The information has been obtained from sources believed to be reliable; but neither its accuracy nor its completeness is guaranteed.
The total returns reflect stock price appreciation and the reinvestment of dividends for our common stock and for each of the comparative indices, assuming that $100 was invested in each on December 31, 2019. The information has been obtained from sources believed to be reliable; but neither its accuracy nor its completeness is guaranteed.
None of the common stock or preferred stock dividend distributions made in 2023 are expected to be characterized for federal income tax purposes as long-term capital gain dividends.
None of the common stock or preferred stock dividend distributions made in 2024 are expected to be characterized for federal income tax purposes as long-term capital gain dividends.
The cash dividends declared on our common stock for each full quarterly period during 2023 and 2022 were as follows: Common Dividends Declared Record Date Payable Date Per Share Dividend Type Year Ended December 31, 2023 Fourth Quarter 12/20/2023 12/28/2023 $ 0.16 Regular Third Quarter 9/22/2023 9/29/2023 $ 0.16 Regular Second Quarter 6/23/2023 6/30/2023 $ 0.16 Regular First Quarter 3/24/2023 3/31/2023 $ 0.23 Regular Total $ 0.71 Year Ended December 31, 2022 Fourth Quarter 12/20/2022 12/28/2022 $ 0.23 Regular Third Quarter 9/23/2022 9/30/2022 $ 0.23 Regular Second Quarter 6/23/2022 6/30/2022 $ 0.23 Regular First Quarter 3/24/2022 3/31/2022 $ 0.23 Regular Total $ 0.92 All dividend distributions are made with the authorization of the board of directors at its discretion and will depend on such items, including, for example, GAAP net income, financial condition, REIT taxable income, other non-GAAP measures of profitability and returns, maintenance of REIT status, and other factors that the board of directors may deem relevant from time to time.
The cash dividends declared on our common stock for each full quarterly period during 2024 and 2023 were as follows: Common Dividends Declared Record Date Payable Date Per Share Dividend Type Year Ended December 31, 2024 Fourth Quarter 12/23/2024 12/30/2024 $ 0.18 Regular Third Quarter 9/23/2024 9/30/2024 $ 0.17 Regular Second Quarter 6/21/2024 6/28/2024 $ 0.16 Regular First Quarter 3/21/2024 3/28/2024 $ 0.16 Regular Total $ 0.67 Year Ended December 31, 2023 Fourth Quarter 12/20/2023 12/28/2023 $ 0.16 Regular Third Quarter 9/22/2023 9/29/2023 $ 0.16 Regular Second Quarter 6/23/2023 6/30/2023 $ 0.16 Regular First Quarter 3/24/2023 3/31/2023 $ 0.23 Regular Total $ 0.71 All dividend distributions are made with the authorization of the board of directors at its discretion and will depend on such items, including, for example, GAAP net income, financial condition, REIT taxable income, other non-GAAP measures of profitability and returns, maintenance of REIT status, and other factors that the board of directors may deem relevant from time to time.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed and traded on the NYSE under the symbol RWT. At February 21, 2024, our common stock was held by approximately 500 holders of record and the total number of beneficial stockholders holding stock through depository companies was approximately 49,076.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed and traded on the NYSE under the symbol RWT. At February 20, 2025, our common stock was held by approximately 477 holders of record and the total number of beneficial stockholders holding stock through depository companies was approximately 49,650.
During the year ended December 31, 2023, we did not repurchase any of our common stock or preferred stock and repurchased and early retired $81 million of our convertible and exchangeable debt.
During the years ended December 31, 2024 and 2023, we did not repurchase any of our common stock or preferred stock and repurchased and early retired $72 million and $81 million of our convertible and exchangeable debt, respectively.
Under these repurchase authorizations, shares or securities may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The common stock repurchase authorization replaced the $100 million common stock repurchase authorization approved by the Board of Directors in 2018.
Under these repurchase authorizations, shares or securities may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.
In July 2022, our Board of Directors approved an authorization for the repurchase of up to $125 million of our common stock, and also authorized the repurchase of outstanding debt securities, including convertible and exchangeable debt. In May 2023, our Board of Directors approved an additional authorization for the repurchase of up to $70 million of our preferred stock.
Our Board of Directors has approved authorizations for the repurchase of up to $125 million of our common stock and up to $70 million of our preferred stock , and has also authorized the repurchase of outstanding debt securities, including convertible and exchangeable debt.
As reported on our Current Report on Form 8-K filed on January 30, 2024, for dividend distributions made in 2023, we expect our common stock dividends paid in 2023 to be characterized for federal income tax purposes as 39% ordinary income (Section 199A), 23% qualified dividends, and 38% return of capital, and we expect our preferred stock dividends paid in 2023 to be characterized as 63% ordinary income and 37% qualified dividends.
As reported on our Current Report on Form 8-K filed on January 29, 2025, for dividend distributions made in 2024, we expect our common stock dividends paid in 2024 to be characterized for federal income tax purposes as 6% ordinary income (Section 199A), 44% qualified dividends, and 50% return of capital, and we expect our preferred stock dividends paid in 2024 (April, July, and October 2024 and in January 2025) to be characterized as 11% ordinary income (Section 199A) and 89% qualified dividends.
At December 31, 2023, $101 million of this current total authorization remained available for repurchases of shares of our common stock, $70 million remained available for repurchases of shares of our preferred stock, and we also continued to be authorized to repurchase outstanding debt securities. 64 The following table contains information on the shares of our common stock that we purchased or otherwise acquired during the three months ended December 31, 2023.
At December 31, 2024, $101 million of this current total authorization remained available for repurchases of shares of our common stock, $70 million remained available for repurchases of shares of our preferred stock, and we also continued to be authorized to repurchase outstanding debt securities.
At February 26, 2024, there were 131,577,032 shares of common stock outstanding.
At February 28, 2025, there were 132,861,161 shares of common stock outstanding.
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During the year ended December 31, 2022, we repurchased 7.1 million shares of our common stock for $56 million and repurchased and early retired $32 million of our convertible notes.
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The total return performance shown on the graph is not necessarily indicative of future performance of our common stock. ITEM 6. [RESERVED] 64
Removed
The total return performance shown on the graph is not necessarily indicative of future performance of our common stock. 2018 2019 2020 2021 2022 2023 Redwood Trust, Inc. 100 118 68 109 63 77 FTSE NAREIT Mortgage REIT Index 100 121 99 114 84 97 S&P Composite-500 Index 100 131 156 200 164 207 BBG mREIT Index 100 124 96 113 86 98 ITEM 6. [RESERVED] 66

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

211 edited+158 added−258 removed80 unchanged
Biggest changeTable 3 – Net Interest Income Years Ended December 31, 2023 2022 2021 (Dollars in Thousands) Interest Income/ (Expense) Average Balance (1) Yield Interest Income/ (Expense) Average Balance (1) Yield Interest Income/ (Expense) Average Balance (1) Yield Interest Income Residential loans, held-for-sale $ 21,128 $ 348,942 6.1 % $ 52,897 $ 1,256,532 4.2 % $ 49,779 $ 1,635,663 3.0 % Residential loans - HFI at Legacy Sequoia (2) 10,313 158,476 6.5 % 5,663 205,909 2.8 % 4,709 254,830 1.8 % Residential loans - HFI at Sequoia (2) 161,720 3,776,652 4.3 % 126,120 3,596,640 3.5 % 74,025 1,983,936 3.7 % Residential loans - HFI at Freddie Mac SLST (2) 60,750 1,387,656 4.4 % 65,822 1,651,215 4.0 % 76,288 2,067,313 3.7 % BPL loans - HFS 14,601 235,180 6.2 % 28,915 492,759 5.9 % 14,443 294,634 4.9 % BPL loans - HFI 150,218 1,608,067 9.3 % 85,345 1,115,981 7.6 % 49,145 643,899 7.6 % BPL term loans - HFI at CAFL (2) 166,861 2,871,111 5.8 % 214,942 3,049,569 7.0 % 201,838 3,404,933 5.9 % BPL bridge loans - HFI at CAFL (2) 50,636 517,844 9.8 % 33,279 436,764 7.6 % 5,365 76,008 7.1 % Multifamily loans - HFI at Freddie Mac K-Series (2) 18,645 422,053 4.4 % 18,938 445,062 4.3 % 19,266 486,095 4.0 % Trading securities (3) 12,560 72,486 17.3 % 17,446 142,027 12.3 % 22,783 146,328 15.6 % AFS securities 8,990 102,874 8.7 % 20,262 136,898 14.8 % 31,921 129,261 24.7 % Other interest income 48,040 1,001,953 4.8 % 38,225 924,629 4.1 % 25,364 817,808 3.1 % Total interest income 724,462 12,503,294 5.8 % 707,854 13,453,985 5.3 % 574,926 11,940,708 4.8 % Interest Expense Short-term debt facilities (92,018) 1,143,854 (8.0) % (69,898) 1,651,503 (4.2) % (37,714) 1,670,279 (2.3) % Short-term debt - servicer advance financing (14,323) 176,921 (8.1) % (9,570) 234,173 (4.1) % (4,867) 183,335 (2.7) % Promissory notes (1,325) 19,415 (6.8) % (1,040) 15,376 (6.8) % — — — % Short-term debt - convertible notes, net (8,695) 152,537 (5.7) % (3,835) 72,787 (5.3) % — — — % ABS issued - Legacy Sequoia (2) (9,980) 157,487 (6.3) % (5,207) 204,372 (2.5) % (3,040) 251,855 (1.2) % ABS issued - Sequoia (2) (144,325) 3,578,192 (4.0) % (111,060) 3,361,050 (3.3) % (59,949) 1,755,124 (3.4) % ABS issued - Freddie Mac SLST (2) (43,652) 1,112,095 (3.9) % (52,901) 1,373,679 (3.9) % (64,633) 1,805,744 (3.6) % ABS issued - Freddie Mac K-Series (2) (17,110) 389,610 (4.4) % (17,407) 413,223 (4.2) % (17,686) 456,353 (3.9) % ABS issued - CAFL Term (2) (135,166) 2,555,269 (5.3) % (167,729) 2,717,897 (6.2) % (158,548) 3,103,259 (5.1) % ABS issued - CAFL Bridge (2) (21,528) 486,928 (4.4) % (15,915) 397,349 (4.0) % (1,945) 70,317 (2.8) % Long-term debt facilities (95,644) 1,213,764 (7.9) % (51,456) 1,140,820 (4.5) % (40,516) 794,144 (5.1) % Long-term debt - corporate (47,753) 587,578 (8.1) % (46,382) 694,991 (6.7) % (37,851) 651,435 (5.8) % Total interest expense (631,519) 11,573,650 (5.5) % (552,400) 12,277,220 (4.5) % (426,749) 10,741,845 (4.0) % Net Interest Income $ 92,943 $ 155,454 $ 148,177 77 Footnotes to Table 3 (1) Average balances for residential loans held-for-sale and held-for-investment, business purpose loans held-for-sale and held-for-investment, multifamily loans held-for-investment, and trading securities are calculated based upon carrying values, which represent estimated fair values.
Biggest changeTable 2 – Consolidated Net Interest Income Years Ended December 31, 2024 2023 (Dollars in Thousands) Interest Income/ (Expense) Average Balance (1) Yield Interest Income/ (Expense) Average Balance (1) Yield Interest Income Residential consumer loans - HFS $ 59,218 $ 879,250 6.7 % $ 21,128 $ 348,942 6.1 % Residential consumer loans - HFI at Sequoia (2) 369,233 6,970,699 5.3 % 172,033 3,935,128 4.4 % Residential consumer loans - HFI at Freddie Mac SLST (2) 56,881 1,308,566 4.3 % 60,750 1,387,656 4.4 % Residential investor loans - HFS 19,644 267,574 7.3 % 14,601 235,180 6.2 % Residential investor loans - HFI 105,393 1,202,246 8.8 % 150,218 1,608,067 9.3 % Residential investor term loans - HFI at CAFL (2) 155,400 2,736,185 5.7 % 166,861 2,871,111 5.8 % Residential investor bridge loans - HFI at CAFL (2) 71,444 720,197 9.9 % 50,636 517,844 9.8 % Multifamily loans - HFI at Freddie Mac K-Series (2) 18,239 422,612 4.3 % 18,645 422,053 4.4 % Real estate securities (3) 49,694 247,251 20.1 % 21,550 175,360 12.3 % Other interest income 40,018 883,964 4.5 % 48,040 1,001,953 4.8 % Total interest income 945,164 15,638,544 6.0 % 724,462 12,503,294 5.8 % Interest Expense ABS issued - Sequoia (2) (340,234) 6,767,962 (5.0) % (154,305) 3,735,679 (4.1) % ABS issued - Freddie Mac SLST (2) (53,798) 1,211,117 (4.4) % (43,652) 1,112,095 (3.9) % ABS issued - Freddie Mac K-Series (2) (16,708) 388,671 (4.3) % (17,110) 389,610 (4.4) % ABS issued - CAFL Term (2) (126,566) 2,389,038 (5.3) % (135,166) 2,555,269 (5.3) % ABS issued - CAFL Bridge (2) (35,191) 661,635 (5.3) % (21,528) 486,928 (4.4) % Debt Facilities (199,095) 2,496,168 (8.0) % (201,985) 2,534,539 (8.0) % Corporate Debt (70,964) 776,475 (9.1) % (57,773) 759,530 (7.6) % Total interest expense (842,556) 14,691,066 (5.7) % (631,519) 11,573,650 (5.5) % Net Interest Income $ 102,608 $ 92,943 (1) Average balances for residential consumer loans held-for-sale and held-for-investment, r esidential investor loans held-for-sale and held-for-investment, multifamily loans held-for-investment, and trading securities are calculated based upon carrying values, which represent fair values.
Origination fees and any fair value changes on these loans prior to transfer are recognized within Mortgage banking activities, net on our consolidated statements of income (loss). Once the loans are transferred to our REIT, they are classified as held-for-investment, with subsequent fair value changes generally recorded through Investment fair value changes, net on our consolidated statements of income (loss).
Origination fees and any fair value changes on these loans prior to transfer are recognized within Mortgage banking activities, net on our Consolidated statements of income (loss). Once the loans are transferred to our REIT, they are classified as held-for-investment, with subsequent fair value changes generally recorded through Investment fair value changes, net on our consolidated statements of income.
In the event a counterparty to one or more of our warehouse facilities becomes insolvent or unable or unwilling to perform its obligations under the facility, we may be unable to access short-term financing we need or we may fail to recover the full value of our mortgage loans financed. Securities Repurchase Facilities .
In the event a counterparty to one or more of our warehouse facilities becomes insolvent or unable or unwilling to perform its obligations under the facility, we may be unable to access short-term financing we need or we may fail to recover the full value of our mortgage loans financed. Securities Repurchase Facility .
Significant inputs used to estimate the fair value of these assets include certain unobservable inputs (e.g., those requiring our own data or assumptions) that require significant judgment to develop, and changes in these estimates have had and are reasonably likely to have a material effect on our reported earnings and financial condition.
Significant inputs used to estimate the fair value of these assets include certain unobservable inputs (e.g., those requiring our own data or assumptions) that require significant judgment to develop, and changes in these estimates have had and are reasonably likely to have a material effect on our reported earnings and financial condition.
Changes in Values of Real Estate Owned REO property acquired through, or in lieu of, foreclosure is initially recorded at fair value, and subsequently reported at the lower of its carrying amount or fair value (less estimated costs to sell).
Changes in Values of Real Estate Owned ("REO") REO property acquired through, or in lieu of, foreclosure is initially recorded at fair value, and subsequently reported at the lower of its carrying amount or fair value (less estimated costs to sell).
Under our residential consumer and residential investor loan and HEI warehouse facilities, we also make various representations and warranties and have agreed to certain covenants, events of default, and other terms that, if breached or triggered, can result in our being required to immediately repay all outstanding amounts borrowed under these facilities and these facilities being unavailable to use for future financing needs.
Under our residential consumer and residential investor loan, MSR, and HEI warehouse facilities, we also make various representations and warranties and have agreed to certain covenants, events of default, and other terms that, if breached or triggered, can result in our being required to immediately repay all outstanding amounts borrowed under these facilities and these facilities being unavailable to use for future financing needs.
If the same counterparty does not renew the financing, it may be difficult for us to obtain financing for that security under one of our other securities repurchase facilities, due to the fact that the financial institution counterparties to our securities repurchase facilities generally only provide financing for securities that we purchased from them or one of their affiliates.
If the same counterparty does not renew the financing, it may be difficult for us to obtain financing for that security under one of our other securities repurchase facilities, due to the fact that the financial institution counterparties to our securities repurchase facilities may only provide financing for securities that we purchased from them or one of their affiliates.
In the event a counterparty to one or more of our securities repurchase facilities becomes insolvent or unable or unwilling to perform its obligations under the facility, we may be unable to access the short-term financing we need or fail to recover the full value of our securities financed. 105 Servicer Advance Financing .
In the event a counterparty to one or more of our securities repurchase facilities becomes insolvent or unable or unwilling to perform its obligations under the facility, we may be unable to access the short-term financing we need or fail to recover the full value of our securities financed. Servicer Advance Financing .
Other Risks In addition to the market and other risks described above, our business and results of operations are subject to a variety of types of risks and uncertainties, including, among other things, those described under the caption “ Risk Factors ” of this Annual Report on Form 10-K. 112
Other Risks In addition to the market and other risks described above, our business and results of operations are subject to a variety of types of risks and uncertainties, including, among other things, those described under the caption “ Risk Factors ” of this Annual Report on Form 10-K.
In particular, outstanding amounts borrowed under a facility could become immediately due and payable if there is a failure to pay any amounts due under such facility, the failure to repurchase the securities by the final maturity date, or upon the insolvency of Redwood, as guarantor.
In particular, outstanding amounts borrowed under this facility could become immediately due and payable if there is a failure to pay any amounts due under such facility, the failure to repurchase the securities by the final maturity date, or upon the insolvency of Redwood, as guarantor.
As such, these loans are carried on our consolidated balance sheets at their estimated fair value and changes in the fair values of these loans are recorded in Mortgage banking activities, net or Investment fair value changes, net on our consolidated statements of income (loss) in the period in which the valuation change occurs.
As such, these loans are carried on our consolidated balance sheets at their fair value and changes in the fair values of these loans are recorded in Mortgage banking activities, net or Investment fair value changes, net on our consolidated statements of income (loss) in the period in which the valuation change occurs.
OVERVIEW Our Business Redwood Trust, Inc., together with its subsidiaries, is a specialty finance company focused on several distinct areas of housing credit, with a mission to help make quality housing, whether rented or owned, accessible to all American households..
OVERVIEW Our Business Redwood Trust, Inc., together with its subsidiaries, is a specialty finance company focused on several distinct areas of housing credit, with a mission to make quality housing, whether rented or owned, accessible to all American households.
While we believe our available cash is sufficient to fund our operations, we may raise equity or debt capital from time to time to increase our unrestricted cash and liquidity, to repay existing debt, to make long-term portfolio investments, to fund strategic acquisitions and investments, or for other purposes.
While we believe our available cash is sufficient to fund our operations, we may raise equity or debt capital from time to time to increase our unrestricted cash and liquidity, to repay existing debt, to make long-term portfolio investments, to fund 83 strategic acquisitions and investments, or for other purposes.
If we breach or trigger the representations and warranties, covenants, events of default, or other terms of our warehouse facilities, we are exposed to liquidity and other risks, including of the type described in Part I, Item 1A of this Annual Report on Form 10-K under the heading “ Risk Factors ,” and in Part II, Item 7A of this Annual Report on Form 10-K under the heading “ Market Risks .” 104 In addition to the residential consumer and residential investor loan and HEI warehouse facilities described above, in the ordinary course of business we may seek to establish additional warehouse facilities that may be of a similar or greater size and may have similar or more restrictive terms.
If we breach or trigger the representations and warranties, covenants, events of default, or other terms of our warehouse facilities, we are exposed to liquidity and other risks, including of the type described in Part I, Item 1A of this Annual Report on Form 10-K under the heading “ Risk Factors ,” and in Part II, Item 7A of this Annual Report on Form 10-K under the heading “ Market Risks .” In addition to the residential consumer and residential investor loan, MSR, and HEI warehouse facilities described above, in the ordinary course of business we may seek to establish additional warehouse facilities that may be of a similar or greater size and may have similar or more restrictive terms.
To the extent we seek to raise additional capital, our approach will continue to be based on what we believe to be in the best interests of the company. In the discussion that follows and throughout this document, we distinguish between marginable and non-marginable debt.
To the extent we seek to raise additional capital, our approach will continue to be based on what we believe to be in the best interests of the Company. In the discussion that follows and throughout this document, we distinguish between marginable and non-marginable debt and recourse and non-recourse debt.
In addition to the subordinate securities financing facilities described above, in the ordinary course of business we may seek to establish additional long-term securities repurchase facilities that may be of a similar or greater size and may have similar or more restrictive terms.
In addition to the subordinate securities financing facility described above, in the ordinary course of business we may seek to establish additional long-term securities repurchase facilities that may be of a similar or greater size and may have similar or more restrictive terms.
This evaluation requires significant judgment in assessing the possible need for a 96 valuation allowance and changes to our assumptions could result in a material change in the valuation allowance with a corresponding impact on the provision for income taxes in the period including such change.
This evaluation requires significant judgment in assessing the possible need for a valuation allowance and changes to our assumptions could result in a material change in the valuation allowance with a corresponding impact on the provision for income taxes in the period including such change.
MARKET AND OTHER RISKS Market Risks We seek to manage risks inherent in our business — including but not limited to credit risk, interest rate risk, prepayment risk, liquidity risk, and fair value risk — in a prudent manner designed to enhance our earnings and dividends and preserve our capital.
MARKET AND OTHER RISKS Market Risks We seek to manage risks inherent in our business — including but not limited to credit risk, interest rate risk, prepayment risk, inflation risk, liquidity risk, and fair value risk — in a prudent manner designed to enhance our earnings and dividends and preserve our capital.
To the extent interest rates remain elevated or increase further, certain fixed-rate term borrowings that mature in the coming quarters may have to be refinanced at higher interest rates, which could cause a reduction in net interest income.
To the extent interest rates remain elevated or increase further, certain fixed-rate term borrowings that mature in the coming quarters could have to be refinanced at higher interest rates, which could cause a reduction in net interest income.
These repurchase facilities include the margin call provisions described below and during the twelve months ended December 31, 2023, and through the date of this Annual Report on Form 10-K, we complied with any margin calls received from creditors under these repurchase facilities: • If at any time the market value (as determined by the creditor) of any securities financed under a facility declines, then the creditor may demand that we transfer additional collateral to the creditor (in the form of cash, U.S.
These repurchase facilities include the margin call provisions described below and during the twelve months ended December 31, 2024, and through the date of this Annual Report on Form 10-K, we complied with any margin calls received from creditors under these repurchase facilities: • If at any time the market value (as determined by the creditor) of any securities financed under a facility declines, then the creditor may demand that we transfer additional collateral to the creditor (in the form of cash, U.S.
Significant inputs used to estimate the fair value of these assets include certain unobservable inputs (e.g., those requiring our own data or assumptions) that require significant judgment to develop, and changes in these estimates have had and are reasonably likely to have a material effect on our reported earnings and financial condition. 109 For AFS securities, cumulative unrealized gains and losses are recorded as a component of Accumulated other comprehensive income in our consolidated balance sheets.
Significant inputs used to estimate the fair value of these assets include certain unobservable inputs (e.g., those requiring our own data or assumptions) that require significant judgment to develop, and changes in these estimates have had and are reasonably likely to have a material effect on our reported earnings and financial condition. 93 For AFS securities, cumulative unrealized gains and losses are recorded as a component of Accumulated other comprehensive income in our consolidated balance sheets.
Financial covenants included in these securities repurchase facilities are as follows and at December 31, 2023, and through the date of this Annual Report on Form 10-K, we were in compliance with each of these financial covenants: • Maintenance of a minimum dollar amount of stockholders’ equity/tangible net worth at Redwood. • Maintenance of a minimum dollar amount of cash and cash equivalents at Redwood. • Maintenance of a maximum ratio of consolidated recourse indebtedness to consolidated adjusted tangible net worth at Redwood. • Servicer Advance Financing .
Financial covenants included in these securities repurchase facilities are as follows and at December 31, 2024, and through the date of this Annual Report on Form 10-K, we were in compliance with each of these financial covenants: • Maintenance of a minimum dollar amount of stockholders’ equity/tangible net worth at Redwood. • Maintenance of a minimum dollar amount of cash and cash equivalents at Redwood. • Maintenance of a maximum ratio of consolidated recourse indebtedness to consolidated adjusted tangible net worth at Redwood. • Servicer Advance Financing .
Financial covenants included in these warehouse facilities are as follows and at December 31, 2023, and through the date of this Annual Report on Form 10-K, we were in compliance with each of these financial covenants: • Maintenance of a minimum dollar amount of stockholders’ equity/tangible net worth at Redwood. • • Maintenance of a minimum dollar amount of cash and cash equivalents at Redwood. • Maintenance of a maximum ratio of consolidated recourse indebtedness to stockholders’ equity or tangible net worth at Redwood. • Securities Repurchase Facilities .
Financial covenants included in these warehouse facilities are as follows and at December 31, 2024, and through the date of this Annual Report on Form 10-K, we were in compliance with each of these financial covenants: • Maintenance of a minimum dollar amount of stockholders’ equity/tangible net worth at Redwood. • Maintenance of a minimum dollar amount of cash and cash equivalents at Redwood. • Maintenance of a maximum ratio of consolidated recourse indebtedness to stockholders’ equity or tangible net worth at Redwood. • Securities Repurchase Facilities .
Changes in Fair Values of Securities Our securities are classified as either trading or AFS securities, and in both cases are carried on our consolidated balance sheets at their estimated fair values.
Changes in Fair Values of Securities Our securities are classified as either trading or AFS securities, and in both cases are carried on our consolidated balance sheets at their fair values.
Changes in Fair Values of HEI HEI are carried on our consolidated balance sheets at their estimated fair values, with changes in fair values recorded in our consolidated statements of income (loss) in Investment fair value changes, net.
Changes in Fair Values of HEI HEI are carried on our consolidated balance sheets at their fair values, with changes in fair values recorded in our consolidated statements of income (loss) in Investment fair value changes, net.
See Note 5 in Part II, Item 8 of this Annual Report on Form 10-K, for additional information on our assets and liabilities accounted for at fair value at December 31, 2023, including the significant inputs used to estimate their fair values and the impact the changes in their fair values had to our financial condition and results of operations.
See Note 5 in Part II, Item 8 of this Annual Report on Form 10-K, for additional information on our assets and liabilities accounted for at fair value at December 31, 2024, including the significant inputs used to estimate their fair values and the impact the changes in their fair values had to our financial condition and results of operations.
We renewed several of these facilities during 2023, extinguished others we deemed under-utilized, and have other such facilities with scheduled maturities during the next twelve months. While there is no assurance of our ability to renew our other facilities maturing in the next year, given current market conditions we expect to extend these in the normal course of business.
We renewed several of these facilities during 2024, extinguished others we deemed under-utilized, and have other such facilities with scheduled maturities during the next twelve months. While there is no assurance of our ability to renew our other facilities maturing in the next year, given current market conditions we expect to extend these in the normal course of business.
Another source of short-term debt financing is through securities repurchase facilities we have established with various different financial institution counterparties. Under these facilities we do not have an aggregate borrowing limit; however, these facilities are uncommitted, which means that any request we make to borrow funds under these facilities may be declined for any reason.
Another source of debt financing is through securities repurchase facilities we have established with various different financial institution counterparties. Under these facilities we do not have an aggregate borrowing limit; however, these facilities are uncommitted, which means that any request we make to borrow funds under these facilities may be declined for any reason.
These warehouse facilities include the margin call provisions described below and during the twelve months ended December 31, 2023, and through the date of this Annual Report on Form 10-K, we complied with any margin calls received from creditors under these warehouse facilities: • Under our marginable residential consumer loan warehouse facilities, if at any time the market value of any residential mortgage loan financed under a facility declines (as determined by the creditor), then the creditor may demand that we transfer additional collateral to the creditor (in the form of cash, U.S.
These warehouse facilities include the margin call provisions described below and during the twelve months ended December 31, 2024, and through the date of this Annual Report on Form 10-K, we complied with any margin calls received from creditors under these warehouse facilities: • Under our marginable residential consumer loan warehouse facilities, if at any time the market value of any residential consumer loan financed under a facility declines (as determined by the creditor), then the creditor may demand that we transfer additional collateral to the creditor (in the form of cash, U.S.
Significant inputs used to estimate the fair value of these assets include certain unobservable inputs (e.g., those requiring our own data or assumptions) that require significant judgment to develop, and changes in these estimates have had and are reasonably likely to have a material effect on our reported earnings and financial condition.
Significant inputs used to estimate the fair value of certain of our derivatives include unobservable inputs (e.g., those requiring our own data or assumptions) that require significant judgment to develop, and changes in these estimates have had and are reasonably likely to have a material effect on reported earnings and our financial condition.
Financial covenants included in our repurchase facilities are further described below under the heading “ Financial Covenants Associated with Short-Term Debt and Other Debt Financing .” Our securities repurchase facilities could also become unavailable and outstanding amounts borrowed thereunder could become immediately due and payable if there is a material adverse change in our business.
Financial covenants included in our repurchase facilities are further described below under the heading “ Financial Covenants Associated with Debt Facilities and Other Debt Financing .” Our securities repurchase facilities could also become unavailable and outstanding amounts borrowed thereunder could become immediately due and payable if there is a material adverse change in our business.
If we breach or trigger the representations and warranties, covenants, events of default, or other terms of our securities repurchase facilities, we are exposed to liquidity and other risks, including of the type described in Part I, Item 1A of this Annual Report on Form 10-K under the heading “ Risk Factors ,” and in Part II, Item 7A of this Annual Report on Form 10-K under the heading “ Market Risks .” In the ordinary course of business we may seek to establish additional securities repurchase facilities that may have similar or more restrictive terms.
If we breach or trigger the representation s and warranties, covenants, events of default, or other terms of our securities repurchase facilities, we are exposed to liquidity and other risks, including of the type described in Part I, Item 1A of this Annual Report on Form 10- K under the heading “ Risk Factors ,” and in Part II, Item 7A of this Annual Report on Form 10-K under the heading “ Market Risks .” In the ordinary course of business we may seek to establish additional securities repurchase facilities that may have similar or more restrictive terms.
Certain of our ABS issued, including that issued through our CAFL Bridge loan securitizations, HEI securitizations, and SLST re-securitization, are subject to optional redemptions and interest rate step-ups. If we choose not to redeem these securitizations, the interest rates will step-up, reducing our net interest income.
Certain of our ABS issued, including that issued through our CAFL Bridge loan securitizations, HEI securitizations, and SLST re-securitization, are subject to optional redemptions and interest rate step-ups. If we choose not to redeem these securitizations, the interest rates will increase, reducing our net interest income.
See further discussion below under the heading “ Margin Call Provisions Associated with Short-Term Debt and Other Debt Financing .” Because several of these warehouse facilities are uncommitted, at any given time we may not be able to obtain additional financing under them when we need it, exposing us to, among other things, liquidity risks of the types described in Part I, Item 1A of this Annual Report on Form 10-K under the heading “ Risk Factors ,” and in Part II, Item 7A of this Annual Report on Form 10-K under the heading “ Market Risks .” In addition, with respect to residential or business purpose loans or HEI that at any given time are already being financed through these warehouse facilities, we are exposed to market, credit, liquidity, and other risks of the types described in Part I, Item 1A of this Annual Report on Form 10-K under the heading “ Risk Factors ,” and in Part II, Item 7A of this Annual Report on Form 10-K under the heading “ Market Risks ,” if and when those loans or HEI become ineligible to be financed, decline in value, or have been financed for the maximum term permitted under the applicable facility.
See further discussion below under the heading “ Margin Call Provisions Associated with Debt Facilities and Other Debt Financing .” Because several of these warehouse facilities are uncommitted, at any given time we may not be able to obtain additional financing under them when we need it, exposing us to, among other things, liquidity risks of the types described in Part I, Item 1A of this Annual Report on Form 10-K under the heading “ Risk Factors ,” and in Part II, Item 7A of this Annual Report on Form 10-K under the heading “ Market Risks .” In addition, with respect to residential consumer or residential investor loans or HEI that at any given time are already being financed through these warehouse facilities, we are exposed to market, credit, liquidity, and other risks of the types described in Part I, Item 1A of this Annual Report on Form 10-K under the heading “ Risk Factors ,” and in Part II, Item 7A of this Annual Report on Form 10-K under the heading “ Market Risks ,” if and when those loans or HEI become ineligible to be financed, decline in value, or have been financed for the maximum term permitted under the applicable facility.
At December 31, 2023, our full-year dividend distributions exceeded our minimum distribution requirements and we believe that we have met all requirements for qualification as a REIT for federal income tax purposes. Many requirements for qualification as a REIT are complex and require analysis of particular facts and circumstances.
At December 31, 2024, our full-year dividend distributions exceeded our minimum distribution requirements and we believe that we have met all requirements for qualification as a REIT for federal income tax purposes. Many requirements for qualification as a REIT are complex and require analysis of particular facts and circumstances.
As noted above, one source of our debt financing is secured borrowings under residential consumer and residential investor loan and HEI warehouse facilities we have established and, as of December 31, 2023, were in place with several different financial institution counterparties.
As noted above, one source of our debt financing is secured borrowings under residential consumer and residential investor loan and HEI warehouse facilities we have established and, as of December 31, 2024, were in place with several different financial institution counterparties.
See Note 4 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, for additional information on our principles of consolidation and Note 15 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, for additional information on our asset-backed securities issued.
See Note 15 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, for additional information on our principles of consolidation and Note 16 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, for additional information on our asset-backed securities issued.
Similar to the uncommitted warehouse and securities repurchase facilities described herein, under these facilities we make various representations and warranties and have agreed to certain covenants, events of default, and other terms that if breached or triggered can result in our being required to immediately repay all outstanding amounts borrowed under a facility and such facility being unavailable to use for future financing needs.
Similar to the uncommitted warehouse and securities repurchase facilities described herein, under this facility we make various representations and warranties and have agreed to certain covenants, events of default, and other terms that if breached or triggered can result in our being required to immediately repay all outstanding amounts borrowed under this facility and such facility being unavailable to use for future financing needs.
We determine the extent to which realization of our DTAs is not assured and establish a valuation allowance accordingly. At December 31, 2022, we reported net federal ordinary and capital DTAs with no material valuation allowance recorded against them.
We determine the extent to which realization of our DTAs is not assured and establish a valuation allowance accordingly. At December 31, 2024, we reported net federal ordinary and capital DTAs with no material valuation allowance recorded against them.
See Note 5 in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2022, incorporated herein by reference, for the same information on these assets and liabilities as of December 31, 2022.
See Note 5 in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2023, incorporated herein by reference, for the same information on these assets and liabilities as of December 31, 2023.
Cash Flows and Liquidity for the Year Ended December 31, 2023 Cash flows from our mortgage banking activities and our investments can be volatile from quarter to quarter depending on many factors, including the timing and amount of loan originations, acquisitions, sales and profitability within our mortgage banking operations, the timing and amount of securities acquisitions, sales and repayments, as well as changes in interest rates, prepayments, and credit losses.
Cash Flows and Liquidity for the Year Ended December 31, 2024 Cash flows from our mortgage banking activities and our investments can be volatile from year to year depending on many factors, including the timing and amount of loan originations, acquisitions, sales and profitability within our mortgage banking operations, the timing and amount of securities acquisitions, sales and repayments, as well as changes in interest rates, prepayments, and credit losses.
Financial covenants included in these warehouse facilities are further described below under the heading “ Financial Covenants Associated with Short-Term Debt and Other Debt Financing .” These residential consumer and residential investor loan and HEI warehouse facilities could also become unavailable and outstanding amounts borrowed thereunder could become immediately due and payable if there is a material adverse change in our business.
Financial covenants included in these warehouse facilities are further described below under the heading “ Financial Covenants Associated with Debt Facilities and Other Debt Financing .” These residential consumer and residential investor loan, MSR, and HEI warehouse facilities could also become unavailable and outstanding amounts borrowed thereunder could become immediately due and payable if there is a material adverse change in our business.
The servicer advance financing consists of non-recourse short-term securitization debt, secured by servicer advances. We consolidate the securitization entity that issued the debt, but the securitization entity is independent of Redwood and the assets and liabilities are not owned by and are not legal obligations of Redwood.
The servicer advance financing consists of non-recourse securitization debt, secured by servicer advances. We consolidate the securitization entity that issued the debt, but the securitization entity is independent of Redwood and the assets and liabilities are not owned by and are not legal obligations of Redwood.
See further discussion below under the heading “ Margin Call Provisions Associated with Short-Term Debt and Other Debt Financing .” At the end of the fixed period applicable to the financing of a security under a securities repurchase facility, if we intend to continue to obtain financing for that security we would typically request the same counterparty to renew the financing for an additional fixed period.
See further discussion below under the heading “ Margin Call Provisions Associated with Debt Facilities and Other Debt Financing .” At the end of the fixed period applicable to the financing of a security under a securities repurchase facility, if we intend to continue to obtain financing for that security we would typically request the same counterparty to renew the financing for an additional fixed period.
At December 31, 2023, for GAAP purposes, we consolidated $257 million of servicing investments and $154 million of non-recourse short-term securitization debt, as well as other assets and liabilities for these entities.
At December 31, 2023, for GAAP purposes, we consolidated $257 million of servicing investments and $154 million of non-recourse securitization debt, as well as other assets and liabilities for these entities.
In particular, with respect to: (i) financial covenants that require us to maintain a minimum dollar amount of stockholders’ equity or tangible net worth at Redwood, at December 31, 2023 our level of stockholders’ equity and tangible net worth resulted in our being in compliance with these covenants by more than $200 million; and (ii) financial covenants that require us to maintain recourse indebtedness below a specified ratio at Redwood, at December 31, 2023 our level of recourse indebtedness resulted in our being in compliance with these covenants at a level such that we could incur at least $4 billion in additional recourse indebtedness.
In particular, with respect to: (i) financial covenants that require us to maintain a minimum dollar amount of stockholders’ equity or tangible net worth at Redwood, at December 31, 2024 our level of stockholders’ equity and tangible net worth resulted in our being in compliance with these covenants by more than $200 million; and (ii) fin ancial covenants that require us to maintain recourse indebtedness below a specified ratio at Redwood, at December 31, 2024 our level of recourse indebtedness resulted in our being in compliance with these covenants at a level such that we could incur at least $4 billion in additional recourse indebtedness.
As noted above, another source of our short-term debt financing is through secured borrowings under securities repurchase facilities we have established with various financial institution counterparties.
As noted above, another source of our debt financing is through secured borrowings under securities repurchase facilities we have established with various financial institution counterparties.
Short-term financing for securities is obtained under these facilities by our transfer of securities to the counterparty in exchange for cash proceeds (in an amount less than 100% of the fair value of the transferred securities), and our covenant to reacquire those securities from the counterparty for the same amount plus a financing charge.
Financing for securities is obtained under these facilities by our transfer of securities to the counterparty in 88 exchange for cash proceeds (in an amount less than 100% of the fair value of the transferred securities), and our covenant to reacquire those securities from the counterparty for the same amount plus a financing charge.
Consolidated Entities Accounted for under the Consolidated Financing Entities Election We have elected to account for most of our consolidated securitization VIEs as collateralized financing entities and use the fair value of the liabilities issued by these entities (comprised of the ABS issued and the securities we retain in the entities, which we determined to be more observable) to determine the fair value of the assets held at these entities (generally residential, business purpose and multifamily loans, and HEI).
Consolidated Entities Accounted for under the Consolidated Financing Entities Election We have elected to account for most of our consolidated securitization VIEs as collateralized financing entities and use the fair value of the liabilities issued by these entities (comprised of the ABS issued and the securities we retain in the entities, which we determined to be more observable) to determine the fair value of the assets held at these entities (generally residential consumer, residential investor and multifamily loans, and HEI).
We note that several of these facilities used to finance our Residential Investor Mortgage Banking loan inventory are also used to finance bridge loans held in our investment portfolio. As discussed above, several of the facilities we use to finance our mortgage banking loan inventory are short-term in nature and will require renewals.
We note that several of these facilities used to finance our CoreVest Mortgage Banking loan inventory are also used to finance bridge loans held in our investment portfolio. As discussed above, several of the facilities we use to finance our mortgage banking loan inventory are short-term in nature and will require renewals.
We do not have the direct ability to control the servicer’s compliance with such covenants and tests and the failure of SA Buyer, the securitization entity, or the servicer to satisfy any such covenants or tests could result in a partial or total loss on our investment.
We do not have the direct ability to control the servicer’s compliance with such covenants and tests and the failure of SA Buyer, the securitization entity, or the servicer to satisfy any such covenants or tests could result in a partial or total loss on our investmen t.
In addition, under these warehouse facilities, residential consumer or residential investor loans can only be financed for a maximum period (i.e., a dwell time limit), which period may be limited to 364 days for our short-term warehouse facilities, and we may be subject to geographic concentration limits on real estate underlying loans or HEI being financed under the facility.
In addition, under these warehouse facilities, residential consumer or residential investor loans can only be financed for a maximum period (i.e., a dwell time limit), which period may be limited to 364 days for certain warehouse facilities, and we may be subject to geographic concentration limits on real estate underlying loans or HEI being financed under the facility.
Under our securities repurchase facilities, we also make various representations and warranties and have agreed to certain covenants, events of default, and other terms (including of the type described above under the heading “ Residential and Business Purpose Loan Warehouse Facilities ”) that if breached or triggered can result in our being required to immediately repay all outstanding amounts borrowed under these facilities and these facilities being unavailable to use for future financing needs.
Under our securities repurchase facilities, we also make various representations and warranties and have agreed to certain covenants, events of default, and other terms (including of the type described above under the heading “ Residential Consumer and Residential Investor Warehouse Facilities ”) that if breached or triggered can result in our being required to immediately repay all outstanding amounts borrowed under these facilities and these facilities being unavailable to use for future financing needs.
Under these securities repurchase facilities, securities are financed for a fixed period, which would not generally exceed 90 days. We generally intend to repay the short-term financing of a security under one of these facilities through a renewal of that financing with the same counterparty, through a sale of the security, or with other equity or long-term debt capital.
Under these securities repurchase facilities, securities are financed for a fixed period, which would not generally exceed 90 days. We generally intend to repay the short-term financing of a security under one of these facilities through a renewal of that financing with the same counterparty, through a sale of the security, or with other sources of capital.
The value of additional residential consumer and residential investor mortgage loans or HEI transferred as additional collateral is determined by the creditor. • Securities Repurchase Facilities . Another source of our short-term debt financing is through secured borrowings under securities repurchase facilities we have established with various financial institution counterparties.
The value of additional residential consumer and residential investor mortgage loans or HEI transferred as additional collateral is determined by the creditor. • Securities Repurchase Facilities . As noted above, another source of our debt financing is through secured borrowings under securities repurchase facilities we have established with various financial institution counterparties.
For additional information on commitments and contingencies as of December 31, 2023 that could impact our liquidity and capital resources, see Note 17 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
For additional information on commitments and contingencies as of December 31, 2024 that could impact our liquidity and capital resources, see Note 18 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Treasury obligations (in certain cases), or additional residential mortgage loans) with a value equal to the amount of the decline.
Treasury obligations (in certain cases), or additional residential consumer loans) with a value equal to the amount of the decline.
We generally value delinquent BPL loans at a dollar price that is informed by various market data, including the estimated fair value of the collateral securing a loan, for which we typically receive third-party appraisals, as well as estimated sales costs.
We generally value delinquent r esidential investor loans at a dollar price that is informed by various market data, including the fair value of the collateral securing a loan, for which we typically receive third-party appraisals, as well as estimated sales costs.
Financing for the securities was obtained under these facilities by our transfer of securities to the counterparty in exchange for cash proceeds (in an amount less than 100% of the fair value of the transferred securities), and our covenant to reacquire those securities from the counterparty for the same amount plus a financing charge.
Financing for the securities was obtained under this facility by our transfer of securities to the counterparty in exchange for cash proceeds (in an amount less than 100% of the fair value of the transferred securities), and our covenant to reacquire those securities from the counterparty for the same amount plus a financing charge.
Corporate Capital In addition to secured recourse and non-recourse debt we use specifically in association with our mortgage banking operations and within our investment portfolio, we also use unsecured recourse debt to finance our overall operations.
Corporate Capital In addition to secured recourse and non-recourse debt we use specifically in association with our mortgage banking operations and within our Redwood Investments portfolio, we also use unsecured recourse debt to finance our overall operations.
The remainder of the debt we use to finance our investments is recourse debt, including our subordinate securities financing facilities, BPL financing facilities, MSR financing facility, securities repo borrowings and HEI warehouse facility.
The remainder of the debt we use to finance our investments is recourse debt, including our subordinate securities financing facility, residential investor financing facilities, MSR financing facility, securities repo borrowings and HEI warehouse facility.
As noted above, servicer advance financing consists of non-recourse short-term securitization debt, secured by servicing advances.
As noted above, servicer advance financing consists of non-recourse securitization debt, secured by servicing advances.
Risks Relating to Debt Incurred under Short- and Long-Term Borrowing Facilities As described above under the heading “ Results of Operations ,” in the ordinary course of our business, we use debt financing obtained through several different types of borrowing facilities to, among other things, finance the acquisition and/or origination of residential and business purpose mortgage loans and HEI (including those we acquire and/or originate in anticipation of sale or securitization), and finance investments in securities and other investments.
Risks Relating to Debt Incurred under Borrowing Facilities As described above under the heading “ Results of Operations ,” in the ordinary course of our business, we use debt financing obtained through several different types of borrowing facilities to, among other things, finance the acquisition and/or origination of residential consumer and investor loans and HEI (including those we acquire and/or originate in anticipation of sale or securitization), and finance investments in securities and other investments.
For additional information on our segments, refer to Part I, Item 1, and Note 24 in Part II, Item 8 of this Annual Report on Form 10-K. The following table presents the segment contribution from our three segments reconciled to our consolidated net income for the years ended December 31, 2023, 2022, and 2021.
For additional information on our segments, refer to Part I, Item 1, and Note 4 in Part II, Item 8 of this Annual Report on Form 10-K. The following table presents the segment contribution from our three segments reconciled to our consolidated net income (loss) for the years ended December 31, 2024 and 2023.
The remaining $108 million of our securities, including certain securities we own that were issued by consolidated securitization entities, were financed with capital. 90 The following table summarizes the credit characteristics of our entire real estate securities portfolio by collateral type at December 31, 2023.
The remaining $298 million of our securities, including certain securities we own that were issued by consolidated securitization entities, were financed with capital. The following table summarizes the credit characteristics of our entire real estate securities portfolio by collateral type at December 31, 2024.
The income or loss generated at our TRS does not directly affect the tax characterization of our 2023 dividends; however, a $22 million dividend paid from our TRS to our REIT in 2023 allowed a portion of our REIT’s dividends to be classified as qualified dividends.
The income or loss generated at our 82 TRS does not directly affect the tax characterization of our 2024 dividends; however, a $45 million dividend paid from our TRS to our REIT in 2024 allowed a portion of our REIT’s dividends to be classified as qualified dividends.
While we continue to work proactively with certain sponsors to address the impacts of rising interest rates, elongated project timelines, or other issues, further increases in delinquencies or modifications within our BPL bridge loan portfolio could ultimately result in further decreases in the fair value of our bridge loans held for investment, and further instances of borrower/sponsor stress could lead to realized credit losses.
While we continue to work proactively with certain borrowers to address the impacts of rising interest rates, elongated project timelines, or other issues, further increases in delinquencies or modifications within our r esidential investor bridge loan portfolio could ultimately result in further decreases in net interest income and the fair value of our bridge loans held for investment, and further instances of borrower/sponsor stress could lead to realized credit losses.
Our material cash requirements from known contractual and other obligations beyond the twelve months following December 31, 2023 include maturing long-term debt, interest payments on long-term debt, payments on operating leases and funding commitments for BPL bridge loans and strategic investments, and principal and interest payments under ABS issued (as described further below under Liquidity Needs for our Investment Portfolio ).
Our material cash requirements from known contractual and other obligations beyond the twelve months following December 31, 2024 include maturing long-term debt, interest payments on long-term debt, payments on operating leases and funding commitments for residential investor bridge and term loans and strategic investments (including our joint ventures), and principal and interest payments under ABS issued (as described further below under Liquidity Needs for our Investment Portfolio ).
Additionally, we have non-recourse debt in the form of non-marginable warehouse facilities to finance a portion of our business purpose bridge loan portfolio. While this debt is non-recourse to Redwood, it does have fixed terms with prepayment options that allows us to refinance this debt or ultimately repay it upon maturity.
Additionally, we have non-recourse debt in the form of non-marginable warehouse facilities to finance a portion of our residential investor loan portfolio. While this debt is non-recours e to Redwood, it does have fixed terms with prepayment options that allows us to refinance this debt or ultimately repay it upon maturity.
These included non-marginable facilities (i.e., not subject to margin calls based solely on the lender's determination, in its discretion, of the market value of the underlying collateral that is non-delinquent) with $500 million of total capacity and marginable facilities with $650 million of total capacity.
These facilities included non-marginable facilities (i.e., not subject to margin calls based solely on the lender's determination, in its discretion, of the market value of the underlying collateral that is non-delinquent) with $700 million of total capacity and marginable facilities with $1.48 billion of total capacity.
The value of additional securities transferred as additional collateral is determined by the creditor. 108 CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported periods.
The value of additional collateral transferred to satisfy the margin call is determined by the creditor. 92 CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported periods.
Margin Call Provisions Associated With Short-Term Debt and Other Debt Financing • Residential Consumer and Residential Investor Loan and HEI Warehouse Facilities .
Margin Call Provisions Associated With Debt Facilities and Other Debt Financing • Residential Consumer and Residential Investor Loan, MSR, and HEI Warehouse Facilities .
The primary difference in both the tax and GAAP assets and liabilities is attributable to securitization entities that are consolidated for GAAP reporting purposes but not for tax purposes. Our 2023 common stock dividend distributions are expected to be characterized for federal income tax purposes as 39% ordinary dividend income (Section 199A), 23% qualified dividends, and 38% return of capital.
The primary difference in both the tax and GAAP assets and liabilities is attributable to securitization entities that are consolidated for GAAP reporting purposes but not for tax purposes. Our 2024 common stock dividend distributions are expected to be characterized for federal income tax purposes as 6% ordinary dividend income (Section 199A), 44% qualified dividends, and 50% return of capital.
As of December 31, 2023, we had approximately $290 million of unencumbered assets, and we currently estimate we could generate an incremental $185 million of capital organically through financing of these assets. Our unencumbered assets consist primarily of retained securities from our securitization activities and HEI.
As of December 31, 2024, we had approximately $325 million of unencumbered assets, and we currently estimate we could generate an incremental $200 million of capital organically through financing of these assets. Our unencumbered assets consist primarily of retained securities from our securitization activities and HEI.
If we breach or trigger the representations and warranties, covenants, events of default, or other terms of this subordinate securities financing facility, we are exposed to liquidity and other risks, including of the type described in Part I, Item 1A of this Annual Report on Form 10-K under the heading “ Risk Factors ,” and in Part II, Item 7A of this Annual Report on Form 10-K under the heading “ Market Risks .” Financial Covenants Associated With Short-Term Debt and Other Debt Financing Set forth below is a summary of the financial covenants associated with our short-term debt and other debt financing facilities. • Residential Consumer and Residential Investor Loan and HEI Warehouse Facilities .
If we breach or trigger the representations and warranties, covenants, events of default, or other terms of this corporate secured revolving financing facility, we are exposed to liquidity and other risks, includin g of the type described in Part I, Item 1A of this Annual Report on Form 10-K under 90 the heading “ Risk Factors ,” and in Part II, Item 7A of this Annual Report on Form 10-K under the heading “ Market Risks .” Financial Covenants Associated With Debt Facilities and Other Debt Financing Set forth below is a summary of the financial covenants associated with our debt facilities and other debt financing facilities. • Residential Consumer and Residential Investor Loan, MSR, and HEI Warehouse Facilities .
Our 2023 Series A preferred dividend distributions are expected to be characterized for federal income tax purposes as 63% ordinary dividend income (Section 199A) and 37% qualified dividends. Under the federal income tax rules applicable to REITs, none of the 2023 dividend distributions, neither common nor Series A preferred, are expected to be characterized as capital gain dividend income.
Our 2024 Series A preferred stock dividend distributions are expected to be characterized for federal income tax purposes as 11% ordinary dividend income (Section 199A) and 89% qualified dividends. Under the federal income tax rules applicable to REITs, none of the 2024 dividend distributions, neither common nor Series A preferred, are expected to be characterized as capital gain dividend income.
At December 31, 2023, we reported net deferred tax assets of $40 million. Realization of our deferred tax assets ("DTAs") at December 31, 2023 is dependent on many factors, including generating sufficient taxable income prior to the expiration of NOL carryforwards (where applicable) and generating sufficient capital gains in future periods prior to the expiration of capital loss carryforwards.
Realization of our deferred tax assets ("DTAs") at December 31, 2024 is dependent on many factors, including generating sufficient taxable income prior to the expiration of NOL carryforwards (where applicable) and generating sufficient capital gains in future periods prior to the expiration of capital loss carryforwards.
As noted above, one source of our debt financing is secured borrowings under residential and business purpose loan and HEI warehouse facilities we have established and, as of December 31, 2023, were in place with several different financial institution counterparties.
As noted above, one source of our debt financing is secured borrowings under residential consumer and residential investor loan and HEI warehouse 91 facilities we have established and, as of December 31, 2024, were in place with several different financial institution counterparties.
The financial covenants of SA Buyer included in this servicer advance financing are further described below under the heading “ Financial Covenants Associated with Short-Term Debt and Other Debt Financing .” Subordinate Securities Financing Facilities . Another source of long-term debt financing is through subordinate securities financing facilities providing non-mark-to-market recourse debt financing on a portfolio of subordinate securities.
The financial covenants of SA Buyer included in this servicer advance financing are further described below under the heading “ Financial Covenants Associated with Debt Facilities and Other Debt Financing .” Subordinate Securities Financing Facility . Another source of debt financing is through a subordinate securities financing facility providing non-marginable recourse debt financing on a portfolio of subordinate securities.
We may also use short- and long-term borrowings to fund other aspects of our business and operations, including the repurchase of shares of our common stock or convertible debt.
We may also use borrowings to fund other aspects of our business and operations, including the repurchase of shares of our common or preferred stock or debt securities, including convertible debt.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest change(2) As we generally expect our loans held-for-sale to be sold within one year, we have only presented principal amounts and effective rates through 2024. (3) The fair value of fixed-rate senior securities are entirely interest-only securities, for which there is no principal at December 31, 2023.
Biggest change(2) The fair value of fixed-rate senior securities are primarily interest-only securities, for which there is no principal at December 31, 2024. (3) Our CAFL entities include four bridge loan securitizations with a cumulative outstanding ABS issued balance of $765 million at December 31, 2024.
For additional details, refer to Part I, Item 1A of this Annual Report on Form 10-K and see the risk factor titled “The nature of the assets we hold and the investments we make expose us to credit risk that could negatively impact the value of those assets and investments, our earnings, dividends, cash flows, and access to liquidity, or otherwise negatively affect our business.” We manage our credit risks by analyzing the extent of the risk we are taking and reviewing whether we believe the appropriate underwriting criteria are met, and we utilize systems and staff to monitor the ongoing credit performance of our loans and securities.
For additional details, refer to Part I, Item 1A of this Annual Report on Form 10-K and see the risk factor titled “The nature of the assets we hold and the investments we make expose us to credit risk that could negatively impact the value of those assets and investments, our earnings, dividends, cash flows, and access to liquidity, or otherwise negatively affect our business.” 95 We manage our credit risks by analyzing the extent of the risk we are taking and reviewing whether we believe the appropriate underwriting criteria are met, and we utilize systems and staff to monitor the ongoing credit performance of our loans and securities.
Our consolidated financial statements are prepared in accordance with GAAP. Our activities and balance sheets are measured with reference to historical cost or fair value without considering inflation. 115 Fair Value and Liquidity Risks To fund our assets we may use a variety of debt alternatives in addition to equity capital that present us with fair value and liquidity risks.
Our consolidated financial statements are prepared in accordance with GAAP. Our activities and balance sheets are measured with reference to historical cost or fair value without considering inflation. Fair Value and Liquidity Risks To fund our assets we may use a variety of debt alternatives in addition to equity capital that present us with fair value and liquidity risks.
However, we generally do not attempt to completely hedge changes in interest rates, and at times, we may be subject to more interest rate risk than we generally desire in the long term. Changes in interest rates will have an impact on the values and cash flows of our assets and corresponding liabilities.
However, we generally do not attempt to completely hedge changes in interest rates, and at times, we may be subject to more interest rate risk than we generally 97 desire in the long term. Changes in interest rates will have an impact on the values and cash flows of our assets and corresponding liabilities.
To supplement the discussion above of the market risks we face, the following table incorporates information that may be useful in analyzing certain market risks that may affect our consolidated balance sheet at December 31, 2023. The table presents principal cash flows and related average interest rates for material interest rate sensitive assets and liabilities by year of repayment.
To supplement the discussion above of the market risks we face, the following table incorporates information that may be useful in analyzing certain market risks that may affect our consolidated balance sheet at December 31, 2024. The table presents principal cash flows and related average interest rates for material interest rate sensitive assets and liabilities by year of repayment.
As an example, under short-term borrowing facilities and certain swap and other derivative agreements, we sometimes transfer assets as collateral to our counterparties. To the extent a counterparty is not able to return this collateral to us if and when we are entitled to its return, we could suffer a loss due to the credit risk associated with that counterparty.
As an example, under borrowing facilities and certain swap and other derivative agreements, we sometimes transfer assets as collateral to our counterparties. To the extent a counterparty is not able to return this collateral to us if and when we are entitled to its return, we could suffer a loss due to the credit risk associated with that counterparty.
The forward curve (future interest rates as implied by the yield structure of debt markets) at December 31, 2023, was used to project the average coupon rates for each year presented. The timing of principal cash flows includes assumptions on the prepayment speeds of assets based on their recent prepayment performance and future prepayment performance consistent with the forward curve.
The forward curve (future interest rates as implied by the yield structure of debt markets) at December 31, 2024, was used to project the average coupon rates for each year presented. The timing of principal cash flows includes assumptions on the prepayment speeds of assets based on their recent prepayment performance and future prepayment performance consistent with the forward curve.
For additional details, refer to Part I, Item 1A of this Annual Report on Form 10-K and see the risk factor titled “Interest rate fluctuations can have various negative effects on us and could lead to reduced earnings and increased volatility in our earnings.” We invest in securities, residential loans, business purpose loans, multifamily loans, and other mortgage- or housing-related assets, which all expose us to interest rate risk.
For additional details, refer to Part I, Item 1A of this Annual Report on Form 10-K and see the risk factor titled “Interest rate fluctuations can have various negative effects on us and could lead to reduced earnings and increased volatility in our earnings.” We invest in securities, residential consumer loans, residential investor loans, multifamily loans, and other mortgage- or housing-related assets, which all expose us to interest rate risk.
For additional details, refer to Part I, Item 1A of this Annual Report on Form 10-K and see the risk factor titled “Changes in prepayment rates of mortgage loans could reduce our earnings, dividends, cash flows, and access to liquidity.” When we make investments that are subject to prepayment risk, we apply a reasonable baseline prepayment range in determining expected returns.
For additional details, refer to Part I, Item 1A of this Annual Report on Form 10-K and see the risk factor titled “Changes in prepayment rates of mortgage loans or HEI, or payment amounts under HEI agreements, could reduce our earnings, dividends, cash flows, and access to liquidity.” When we make investments that are subject to prepayment risk, we apply a reasonable baseline prepayment range in determining expected returns.
While the table above presents the repayment of this debt in 2029 or 2030 upon their legal maturity, the ABS issued may be paid down earlier based on the actual paydown of collateral included in the securitization at the end of each securitization's respective revolving period. 119
While the table above presents the repayment of this debt in 2029, 2030, and 2031 upon the legal maturity dates, the ABS issued may be paid down earlier based on the actual paydown of collateral included in the securitization at the end of each securitization's respective revolving period.
If the securitization entity is unable to pay the outstanding balance of the notes, the financing counterparty may foreclose on the servicer advances pledged as collateral. 114 Under our servicer advance financing, the consolidated partnership (SA Buyer) and the securitization entity, along with the servicer (who is unaffiliated with us except through their co-investment in SA Buyer and the securitization entity), make various representations and warranties and have agreed to certain covenants, events of default, and other terms that if breached or triggered can result in acceleration of all outstanding amounts borrowed under this facility and this facility being unavailable to use for future financing needs.
Under our servicer advance financing, the consolidated partnership (SA Buyer) and the securitization entity, along with the servicer (who is unaffiliated with us except through their co-investment in SA Buyer and the securitization entity), make various representations and warranties and have agreed to certain covenants, events of default, and other terms that if breached or triggered can result in acceleration of all outstanding amounts borrowed under this facility and this facility being unavailable to use for future financing needs.
For the securities we acquire with a combination of capital and short-term debt, we would be exposed to liquidity risk to the extent the values of these investments decline and/or the counterparties we use to finance these investments adversely change our borrowing requirements. We attempt to mitigate our liquidity risk from short-term financing facilities by setting aside adequate capital.
Some of the securities we acquire are funded with a combination of our capital and short-term debt facilities. For the securities we acquire with a combination of capital and debt, we would be exposed to liquidity risk to the extent the values of these investments decline and/or the counterparties we use to finance these investments adversely change our borrowing requirements.
Counterparties We are also exposed to credit risk with respect to our business and lender counterparties. For example, counterparties we acquire loans from, lend to, or invest in, make representations and warranties and covenants to us, and may also indemnify us against certain losses.
For example, counterparties we acquire loans from, lend to, or invest in, make representations and warranties and covenants to us, and may also indemnify us against certain losses.
Under our borrowing facilities, interest rate swaps and other derivatives agreements, we pledge assets as security for our payment obligations and make various representations and warranties and agree to certain covenants, events of default, and other terms.
We attempt to mitigate our liquidity risk from short-term financing facilities by setting aside adequate capital. Under our borrowing facilities, interest rate swaps and other derivatives agreements, we pledge assets as security for our payment obligations and make various representations and warranties and agree to certain covenants, events of default, and other terms.
Inflation Risk Virtually all of our consolidated assets and liabilities are financial in nature. Realized and expected inflation can have a material impact on interest rates, the economy, consumer behavior, financial market conditions and other conditions which could lead to adverse changes to our financial instruments and can lead to lower returns on our investments than originally anticipated.
Realized and expected inflation can have a material impact on interest rates, the economy, consumer behavior, the cost of building or rehabilitating residential properties, financial market conditions and other conditions which could lead to adverse changes to our financial instruments and can lead to lower returns on our investments than originally anticipated.
In addition, if the U.S. economy were to deteriorate (and that deteriorating was in excess of what we anticipated), credit losses could increase beyond levels that we have anticipated. Moreover, the principal balance of multifamily loans are generally significantly larger than the residential consumer and residential investor real estate loans we own.
In addition, if the U.S. economy were to deteriorate (and that deteriorating was in excess of what we anticipated), credit losses could increase beyond levels that we have anticipated.
Business, Operational, Regulatory, and Other Risks In addition to the financial risks described above, we are subject to a variety of other risks in the ordinary conduct of our business, including risks related to our business and industry (such as economic, competitive, and strategic risks), operational risks (including cybersecurity and technology risks), risks related to legislative and regulatory compliance matters, and risks related to our REIT status and our status under the Investment Company Act of 1940, among others.
For additional details, refer to Part II, Item 7 of this Annual Report on Form 10-K and see the discussion titled “Risks Relating to Debt Incurred under Short- and Long-Term Borrowing Facilities. 98 Business, Operational, Regulatory, and Other Risks In addition to the financial risks described above, we are subject to a variety of other risks in the ordinary conduct of our business, including risks related to our business and industry (such as economic, competitive, and strategic risks), operational risks (including fraud, cybersecurity and technology risks), risks related to legislative and regulatory compliance matters, and risks related to our REIT status and our status under the Investment Company Act of 1940, among others.
Accordingly, when short-term interest rates rise, required monthly payments from homeowners may rise under the terms of these loans, and this may increase borrowers’ delinquencies and defaults that can lead to additional credit losses. 113 We may also own some securities backed by loans that are not prime quality such as re-performing and non-performing loans, Alt-A quality loans, and subprime loans, that have substantially higher credit risk characteristics than prime-quality loans.
Accordingly, when short-term interest rates rise, required monthly payments from homeowners may rise under the terms of these loans, and this may increase borrowers’ delinquencies and defaults that can lead to additional credit losses.
(4) Our CAFL entities include three bridge loan securitizations with a cumulative outstanding ABS issued balance of $715 million at December 31, 2023. Two of the securitizations have revolving features that end in 2024 and have final maturities in 2029 and one has a revolving feature that ends in 2025 and has a final maturity in 2030.
Two of the securitizations have revolving features that ended in 2024 and have final maturities in 2029, one has a revolving feature that ends in 2025 and has a final maturity in 2030, and one has one has a revolving feature that ends in 2027 and has a final maturity in 2031.
Removed
Some of the securities we acquire are funded with a combination of our capital and short-term debt facilities.
Added
We may also own some securities backed by loans that are not prime quality such as re-performing and non-performing loans, Alt-A quality loans, and subprime loans, that have substantially higher credit risk characteristics than prime-quality loans.
Removed
For additional details, refer to Part II, Item 7 of this Annual Report on Form 10-K and see the discussion titled “Risks Relating to Debt Incurred under Short- and Long-Term Borrowing Facilities.
Added
Moreover, the principal balance of multifamily loans are generally significantly larger than the residential consumer and residential investor real estate loans we own. 96 Counterparties We are also exposed to credit risk with respect to our business and lender counterparties.
Removed
Our future results depend greatly on the credit performance of the underlying loans (this table assumes no credit losses), future interest rates, prepayments, and our ability to invest our existing cash and future cash flow. 116 Quantitative Information on Market Risk Principal Amounts Maturing and Effective Rates During Period December 31, 2023 (Dollars in Thousands) 2024 2025 2026 2027 2028 Thereafter Principal Balance Fair Value Interest Rate Sensitive Assets (1) Residential Loans - HFS (2) Adjustable Rate Principal $ 38 $ — $ — $ — $ — $ — $ 38 $ 28 Interest Rate 7.63 % N/A N/A N/A N/A N/A Fixed Rate Principal 916,090 — — — — — 916,090 910,482 Interest Rate 6.25 % N/A N/A N/A N/A N/A Hybrid Principal 749 — — — — — 749 682 Interest Rate 6.50 % N/A N/A N/A N/A N/A Residential Loans - HFI at Sequoia Adjustable Rate Principal 36,090 28,219 24,929 22,442 19,175 25,198 156,053 139,739 Interest Rate 5.62 % 4.59 % 4.26 % 4.21 % 4.08 % 4.08 % Fixed Rate Principal 497,729 450,004 407,494 369,553 336,101 3,181,979 5,242,860 4,640,464 Interest Rate 4.12 % 4.12 % 4.12 % 4.13 % 4.13 % 4.13 % Residential Loans - HFI at Freddie Mac SLST Fixed Rate Principal 122,097 119,274 111,324 104,029 97,140 1,061,110 1,614,974 1,359,242 Interest Rate 4.00 % 4.17 % 4.16 % 4.15 % 4.14 % 4.14 % Business Purpose Loans - HFS (2) Fixed Rate Principal 187,886 — — — — — 187,886 180,250 Interest Rate 7.50 % N/A N/A N/A N/A N/A BPL Term Loans - HFI at CAFL Fixed Rate Principal 44,278 46,703 49,260 51,958 54,804 2,947,128 3,194,131 2,971,725 Interest Rate 5.34 % 5.34 % 5.34 % 5.34 % 5.34 % 5.34 % BPL Bridge Loans - HFI at Redwood Adjustable Rate Principal 467,014 552,541 — — — — 1,019,555 1,010,289 Interest Rate 11.59 % 10.52 % N/A N/A N/A N/A Fixed Rate Principal 167,010 138,719 — — — — 305,729 295,438 Interest Rate 8.82 % 8.04 % N/A N/A N/A N/A BPL Bridge Loans - HFI at CAFL Adjustable Rate Principal 386,231 177,677 6,418 — — — 570,326 574,871 Interest Rate 11.44 % 10.78 % 10.09 % N/A N/A N/A Fixed Rate Principal 178,168 8,080 — — — — 186,248 187,725 Interest Rate 9.58 % 10.11 % N/A N/A N/A N/A Multifamily Loans - HFI at Freddie Mac K-Series Fixed Rate Principal 8,638 430,230 — — — — 438,868 425,285 Interest Rate 4.22 % 3.55 % N/A N/A N/A N/A 117 Quantitative Information on Market Risk Principal Amounts Maturing and Effective Rates During Period December 31, 2023 (Dollars in Thousands) 2024 2025 2026 2027 2028 Thereafter Principal Balance Fair Value Interest Rate Sensitive Assets (continued) Residential Senior Securities Fixed Rate (3) Principal $ — $ — $ — $ — $ — $ — $ — $ 36,109 Interest Rate 0.14 % 0.14 % 0.14 % 0.14 % 0.14 % 0.14 % Residential Subordinate Securities Fixed Rate Principal 430 412 336 185 163 138,912 140,438 79,021 Interest Rate 3.61 % 3.67 % 3.67 % 3.68 % 3.77 % 4.65 % Hybrid Principal 327 295 282 267 248 5,745 7,164 5,566 Interest Rate 3.13 % 2.44 % 2.23 % 2.27 % 3.26 % 2.82 % Multifamily Securities Adjustable Rate Principal 4,498 — — — — 3,000 7,498 7,101 Interest Rate 7.16 % 6.91 % 6.55 % 6.53 % 6.63 % 6.80 % Interest Rate Sensitive Liabilities Asset-Backed Securities Issued Sequoia Entities Adjustable Rate Principal 32,500 25,570 21,513 18,621 15,784 37,118 151,106 138,530 Interest Rate 5.54 % 4.19 % 4.28 % 3.73 % 3.63 % 2.76 % Fixed Rate Principal 488,488 439,844 396,113 358,220 325,892 2,991,983 5,000,540 4,430,130 Interest Rate 3.74 % 3.74 % 3.74 % 3.73 % 3.73 % 3.73 % Freddie Mac SLST Entities Fixed Rate Principal 129,939 123,965 179,779 73,823 436,210 384,941 1,328,657 1,265,777 Interest Rate 3.78 % 3.79 % 3.80 % 2.72 % 2.72 % 2.72 % Freddie Mac K-Series Entities Fixed Rate Principal 8,638 393,762 — — — — 402,400 391,977 Interest Rate 2.72 % 2.30 % N/A N/A N/A N/A CAFL Entities (4) Fixed Rate Principal 297,614 323,164 495,751 298,737 296,533 1,761,026 3,472,825 3,362,978 Interest Rate 3.73 % 3.85 % 3.92 % 3.72 % 3.37 % 3.37 % HEI Entities Fixed Rate Principal 53,823 49,707 46,938 37,101 18,542 27,020 233,131 222,488 Interest Rate 5.65 % 5.71 % 9.86 % 5.81 % 3.62 % 3.62 % Short-Term Debt Principal 1,416,510 — — — — — 1,416,510 1,414,644 Interest Rate 7.61 % N/A N/A N/A N/A N/A 118 Quantitative Information on Market Risk Principal Amounts Maturing and Effective Rates During Period December 31, 2023 (Dollars in Thousands) 2024 2025 2026 2027 2028 Thereafter Principal Balance Fair Value Interest Rate Sensitive Liabilities (continued) Long-Term Debt Convertible Notes Principal $ 142,977 $ 156,666 $ — $ 210,910 $ — $ — $ 510,553 $ 488,341 Interest Rate 6.54 % 6.90 % 7.75 % 7.75 % N/A N/A Trust Preferred Securities and Subordinated Notes Principal — — — — — 139,500 139,500 92,070 Interest Rate 7.18 % 5.82 % 5.55 % 5.60 % 5.69 % 5.95 % Other Long-Term Debt Principal — 1,115,627 66,967 — — — 1,182,594 1,177,287 Interest Rate 6.62 % 6.62 % 5.28 % N/A N/A N/A Interest Rate Agreements Interest Rate Swaps (Purchased) Notional Amount — — — — — 50,000 50,000 1,742 Receive Strike Rate 4.44 % 3.26 % 3.05 % 3.11 % 3.20 % 3.34 % Pay Strike Rate 3.11 % 3.11 % 3.11 % 3.11 % 3.11 % 3.11 % (1) For the key assumptions and sensitivity analysis for assets retained from securitizations that we deconsolidated, refer to Note 4 in Part II, Item 8 of this Annual Report.
Added
If the securitization entity is unable to pay the outstanding balance of the notes, the financing counterparty may foreclose on the servicer advances pledged as collateral.
Added
Inflation Risk Virtually all of our consolidated assets and liabilities are financial in nature.
Added
Our future results depend greatly on the credit performance of the underlying loans (this table assumes no credit losses), future interest rates, prepayments, and our ability to invest our existing cash and future cash flow. 99 Quantitative Information on Market Risk Principal Amounts Maturing and Effective Rates During Year December 31, 2024 (Dollars in Thousands) 2025 2026 2027 2028 2029 Thereafter Principal Balance Fair Value Interest Rate Sensitive Assets Residential Consumer Loans - HFS (1) Adjustable Rate Principal $ 172,722 $ — $ — $ — $ — $ — $ 172,722 $ 173,184 Interest Rate 6.30 % N/A N/A N/A N/A N/A Fixed Rate Principal 827,212 — — — — — 827,212 839,618 Interest Rate 6.63 % N/A N/A N/A N/A N/A Hybrid Principal 729 — — — — — 729 745 Interest Rate 8.14 % N/A N/A N/A N/A N/A Residential Consumer Loans - HFI at Sequoia Adjustable Rate Principal 86,657 73,690 62,921 53,523 42,446 170,251 489,488 477,123 Interest Rate 5.46 % 5.22 % 5.42 % 5.66 % 5.78 % 5.82 % Fixed Rate Principal 585,278 543,764 506,366 473,714 444,616 6,307,060 8,860,798 8,342,431 Interest Rate 5.36 % 5.36 % 5.36 % 5.37 % 5.37 % 5.40 % Residential Consumer Loans - HFI at Freddie Mac SLST Fixed Rate Principal 116,162 113,379 105,862 98,888 92,310 987,831 1,514,432 1,244,722 Interest Rate 3.99 % 4.16 % 4.15 % 4.14 % 4.13 % 3.52 % Residential Investor Loans - HFS (1) Fixed Rate Principal 255,075 — — — — — 255,075 237,224 Interest Rate 7.84 % N/A N/A N/A N/A N/A Residential Investor Term Loans - HFI at CAFL Fixed Rate Principal 172,661 414,674 255,357 302,961 368,286 1,125,546 2,639,485 2,485,069 Interest Rate 5.17 % 5.17 % 5.17 % 5.17 % 5.17 % 5.17 % Residential Investor Bridge Loans - HFI at Redwood Adjustable Rate Principal 473,986 92,332 — — — — 566,318 540,982 Interest Rate 10.42 % 10.23 % N/A N/A N/A N/A Fixed Rate Principal 452,950 69,488 — — — — 522,438 500,713 Interest Rate 7.49 % 8.09 % N/A N/A N/A N/A Residential Investor Bridge Loans - HFI at CAFL Adjustable Rate Principal 296,459 117,036 27,464 — — — 440,959 447,311 Interest Rate 10.08 % 8.62 % 8.30 % N/A N/A N/A Fixed Rate Principal 322,957 46,369 — — — — 369,326 375,792 Interest Rate 9.95 % 10.11 % N/A N/A N/A N/A Multifamily Loans - HFI at Freddie Mac K-Series Fixed Rate Principal 430,230 — — — — — 430,230 424,597 Interest Rate 3.55 % — % — % — % — % — % 100 Quantitative Information on Market Risk Principal Amounts Maturing and Effective Rates During Year December 31, 2024 (Dollars in Thousands) 2025 2026 2027 2028 2029 Thereafter Principal Balance Fair Value Interest Rate Sensitive Assets (continued) Residential Senior Securities Fixed Rate (2) Principal $ — $ — $ — $ — $ — $ 39,224 $ 39,224 $ 230,726 Interest Rate 0.45 % 0.44 % 0.44 % 0.44 % 0.45 % 0.45 % Residential Subordinate Securities Fixed Rate Principal 350 6,492 29,827 6,887 2,891 154,251 200,698 150,873 Interest Rate 4.27 % 4.25 % 3.84 % 3.57 % 3.72 % 3.72 % Hybrid Principal 320 280 242 209 924 24,254 26,229 11,875 Interest Rate 3.82 % 3.31 % 3.28 % 3.66 % 3.80 % 3.80 % Multifamily Securities Adjustable Rate Principal — — — — 952 10,148 11,100 11,749 Interest Rate 11.02 % 9.73 % 9.26 % 9.32 % 9.47 % 9.47 % Interest Rate Sensitive Liabilities Asset-Backed Securities Issued Sequoia Entities Adjustable Rate Principal 98,732 80,907 65,309 52,540 40,140 120,686 458,314 447,299 Interest Rate 5.00 % 4.75 % 4.95 % 5.18 % 5.28 % 5.37 % Fixed Rate Principal 999,041 869,094 934,064 655,743 570,858 4,733,041 8,761,841 8,137,778 Interest Rate 4.93 % 4.95 % 4.91 % 4.72 % 4.70 % 4.58 % Freddie Mac SLST Entities Fixed Rate Principal 102,802 119,767 165,029 443,719 392,112 — 1,223,429 1,154,288 Interest Rate 3.72 % 3.73 % 3.73 % 2.76 % 1.04 % — % Freddie Mac K-Series Entities Fixed Rate Principal 393,762 — — — — — 393,762 389,434 Interest Rate 2.32 % — % — % — % — % — % CAFL Entities (3) Fixed Rate Principal 260,097 464,280 285,875 299,329 506,197 1,181,651 2,997,429 2,931,979 Interest Rate 4.27 % 4.22 % 4.02 % 3.67 % 3.17 % 2.53 % HEI Entities Fixed Rate Principal 47,583 49,834 40,674 42,571 17,204 14,618 212,484 211,097 Interest Rate 5.76 % 5.63 % 4.99 % 4.42 % 2.76 % 0.81 % Debt Facilities and Other Financing Principal 1,545,998 664,042 110,791 268,240 — — 2,589,071 2,818,293 Interest Rate 6.56 % 7.52 % 7.87 % 7.54 % N/A N/A 101 Quantitative Information on Market Risk Principal Amounts Maturing and Effective Rates During Year December 31, 2024 (Dollars in Thousands) 2025 2026 2027 2028 2029 Thereafter Principal Balance Fair Value Interest Rate Sensitive Liabilities (continued) Corporate Debt Principal $ 136,433 $ 225,000 $ 247,170 $ — $ 145,000 $ 139,500 $ 893,103 $ 839,829 Interest Rate 8.01 % 8.40 % 7.93 % 8.10 % 8.10 % 7.10 % (1) As we generally expect our loans held-for-sale to be sold within one year, we have only presented principal amounts and effective rates through 2024.

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