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REDWOOD TRUST INC

REDWOOD TRUST INCRWTEarnings & Financial Report

NYSE

What changed in REDWOOD TRUST INC's 10-K — 2024 vs 2025

Top changes in REDWOOD TRUST INC's 2025 10-K

1095 paragraphs added · 1513 removed · 768 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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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.
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.
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.
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.
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.
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 wellness 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.
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.
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. Corporate Responsibility We prioritize corporate responsibility initiatives that matter most to our business and shareholders.
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.
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 other specialty finance companies and financial institutions, as well as investment funds, venture capital investors, and other investors in real estate-related assets.
In addition, we offer a menu of skills-based training for all employees and support for specific ongoing education and professional certifications. We regularly assess the talent and skills of our workforce and prioritize the promotion or transfer of current employees for open roles.
In addition, we offer a menu of skills-based training for all employees and support for specific ongoing education and professional certifications. We regularly assess the talent 3 and skills of our workforce and prioritize the promotion or transfer of current employees for open roles.
These markets and many of the participants in these markets are subject to, or regulated under, various federal, state and local laws and regulations. In some cases, the government or government-sponsored entities, such as Fannie Mae and Freddie Mac, directly participate in these markets.
These markets and many of the participants in these markets 4 are subject to, or regulated under, various federal, state and local laws and regulations. In some cases, the government or government-sponsored entities, such as Fannie Mae and Freddie Mac, directly participate in these markets.
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 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.
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.
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 or into joint ventures.
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.
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 operations and we strive to create qualified candidate pools for any open positions across the company.
Direct operating expenses and tax expenses associated with these activities are also included in this segment.
Direct operating expenses and tax provisions associated with these activities are also included in this segment.
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.
Following is a further description of these 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.
Moreover, to the extent we participate in markets that as-yet do not have fully developed regulatory frameworks or responsibilities, such as the market for home equity investments (HEI), we are subject to a heightened risk of new, enhanced, or changing regulation that is adverse to our business or burdensome to comply with.
Moreover, to the extent we participate in markets that as-yet do not have fully developed regulatory frameworks or responsibilities, such as the market for HEI, we are subject to a heightened risk of new, enhanced, or changing regulation that is adverse to our business or burdensome to comply with.
Net interest income primarily consists of the interest income we earn on investments less the interest expense we incur on borrowed funds and other liabilities. Income from mortgage banking activities is generated through the origination and acquisition of loans, and their subsequent sale, securitization, or transfer to our investment portfolio.
Net interest income primarily consists of the interest income we earn on investments, less the interest expense we incur on borrowed funds and other liabilities. Non-interest income from mortgage banking activities is generated through the origination and acquisition of loans, and their subsequent sale, securitization, or transfer to our investment portfolios.
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.
Certifications Our Chief Executive Officer and Chief Financial Officer have executed certifications dated February 27, 2026, 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.
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.
We typically acquire residential consumer 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.
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.
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 8.8% for 2025.
This segment’s main sources of income are net interest income and other income from investments, changes in fair value of investments and associated hedges, and realized gains and losses upon the sale of securities. Direct operating expenses and tax provisions associated with these activities are also included in this segment.
These assets were previously included within the Redwood Investments segment. This segment’s main sources of income are net interest income and other income from investments, changes in fair value of investments and associated hedges, and realized gains and losses upon the sale of assets. Direct operating expenses and tax provisions associated with these activities are also included in this segment.
Our Business Segments We operate our business in three segments: Sequoia Mortgage Banking, CoreVest Mortgage Banking and Redwood Investments.
Our Business Segments We operate our business in four segments: Sequoia Mortgage Banking, CoreVest Mortgage Banking, Redwood Investments and Legacy Investments.
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 designate corporate grants for a variety of non-profit organizations and causes; this has historically included equal housing and affordability, education and poverty. In addition, we have an employee-led foundation that manages and raises funds for a variety of charitable causes.
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.
Residential investor bridge loans include both larger balance and smaller balance mortgage loans which are generally secured by unoccupied (or in the case of certain multifamily properties, partially occupied) single-family or multifamily real estate that the borrower owns as an investment and that is being renovated, rehabilitated or constructed. Our bridge loans are first-lien, interest-only loans.
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).
Residential investor loans are loans to investors in single-family rental and multifamily properties, which we classify as either "term" loans (which include loans with maturities that generally range from 3 to 30 years) or "bridge" loans (fixed and floating-rate loans with maturities that generally range between 12 and 36 months, typically used to finance transitional properties or value-add strategies).
For additional discussion regarding federal, state and local legislative and regulatory developments, see the risk factor below under the heading “ Federal, state and local legislative and regulatory developments and the actions of governmental authorities and entities may adversely affect our business and the value of, and the returns on, mortgages, mortgage-related securities, home equity investments, and other assets we own or may acquire in the future, including as a result of any negative impact on the availability of warehouse mortgage financing facilities to us and/or the cost of borrowing under such facilities ” in Part I, Item 1A of this Annual Report on Form 10-K.
For additional discussion regarding federal, state and local legislative and regulatory developments, see the risk factor below under the heading “ Federal, state, and local legislative and regulatory developments, and actions by governmental authorities and entities, may adversely affect our business and the value of, and returns on, mortgages, mortgage-related securities, HEI, and other assets we own or may acquire, including by reducing the availability of, or increasing the cost of, our warehouse mortgage financing ” in Part I, Item 1A of this Annual Report on Form 10-K.
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.
This segment’s main sources of mortgage banking income are net interest income from its inventory of loans held-for-sale, securities utilized for interest rate hedging purposes, as well as mortgage banking activities, net which includes origination and other fees on loans, mark-to-market adjustments on loans from the time loans are originated or purchased to when they are sold, securitized or transferred into our Redwood Investments portfolio, and gains/losses from associated hedges.
Term loans are mortgage loans secured by residential real estate (primarily 1-4 unit detached or multifamily) that the borrower owns as an investment property and rents to residential tenants.
Residential investor term loans include both larger balance and smaller balance mortgage loans secured by stabilized residential real estate (primarily 1-4 units detached or multifamily) that the borrower owns as an investment property and rents to residential tenants.
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.
We refer to 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.
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.
We are required under GAAP to consolidate the assets and liabilities of certain CAFL securitization entities which we have determined to be VIEs and in which we have a controlling financial interest. We refer to these securitization entities as the "consolidated CAFL entities." In addition, we have co-sponsored securitizations of Home Equity Investments ("HEI").
Where applicable, in analyzing our results of operations, we distinguish results from curr ent operations "at Redwood" and from consolidated entities.
We refer to these securitization entities as "HEI securitization entities." Where applicable, in analyzing our results of operations, we distinguish results from current operations "at Redwood" and from consolidated entities.
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.
This segment’s main source of income is Mortgage banking income, which is comprised of net interest income from its inventory of loans held-for-sale, securities utilized for interest rate hedging purposes, as well as income from mortgage banking activities, which includes changes in fair value of loans we acquire and subsequently sell, securitize, or transfer into our Redwood Investments portfolio, loan purchase commitments, interest rate lock commitments and the hedges used to manage risks associated with these activities.
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.
Human Capital Resources As of December 31, 2025, Redwood employed 351 full-time employees, including our executive officers, 245 (or 70%) of which are directly engaged in our Mortgage Banking platforms, Sequoia (inclusive of Aspire) and CoreVest. At CoreVest, 162 employees (46%) directly engaged in originating loans to borrowers. The remainder are spread across the Investment Portfolio and Corporate functions.
We are required under GAAP to consolidate the assets and liabilities of HEI securitization entities we have sponsored for financial reporting purposes.
We are required under GAAP to consolidate the assets and liabilities of HEI securitization entities which we have determined to be VIEs and in which we have a controlling financial interest.
Consolidated Securitization Entities We sponsor our SEMT ® (Sequoia) securitization program, which we use for the securitization of residential mortgage loans. We are required under Generally Accepted Accounting Principles in the United States (“GAAP”) to consolidate the assets and liabilities of certain Sequoia securitization entities we have sponsored for financial reporting purposes.
We are required under Generally Accepted Accounting Principles in the United States (“GAAP”) to consolidate the assets and liabilities of certain Sequoia securitization entities which we have determined to be VIEs and in which we have a controlling financial interest.
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.
Our goal is to provide attractive returns to shareholders through a stable and growing stream of earnings and dividends, capital appreciation, and a continued commitment to technological innovation that supports disciplined, risk‑minded growth. Our primary sources of income are net interest income from our investments and non-interest income from our mortgage banking activities.
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 typically distribute most of our loans through our CAFL® private-label securitization program, through whole loan sales, transfers into our Redwood Investments portfolio or into sales into one of our joint ventures.
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.
Redwood Investments This segment consists of retained operating investments sourced through our Sequoia securitizations and CoreVest term and bridge loan securitizations, some of which we consolidate for GAAP purposes, and other third-party securities.
Removed
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.
Added
Our aggregation, origination, and investment activities have evolved to incorporate a diverse mix of residential consumer and residential investor housing credit assets. We operate our business across four reportable segments: Sequoia Mortgage Banking, CoreVest Mortgage Banking, Redwood Investments, and Legacy Investments.
Removed
In 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.
Added
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. In the first quarter of 2025, we launched an additional mortgage loan conduit under our Aspire brand that acquires mortgage loans under expanded underwriting criteria, commonly referred to as "Expanded" loans.
Removed
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.
Added
These loans, which primarily include bank statement and Debt Service Coverage Ratio ("DSCR") loans, are designed for prime-quality borrowers seeking alternative 1 underwriting solutions, a segment that continues to grow within the U.S. housing market. The results of Aspire are currently included within our Sequoia Mortgage Banking segment.
Removed
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.
Added
Our smaller balance term loans are referred to as DSCR loans, which are fixed or floating rate loans underwritten primarily on the basis of the property's debt service coverage ratio, rather than the borrower's personal income, and designed for stabilized rental properties.
Added
Our smaller balance bridge loans are referred to as Residential Transition Loans (“RTL”) loans, which are short-term, typically fixed-rate loans secured by 1-4 units residential properties that are commonly used by investors to acquire, renovate, or reposition properties prior to stabilization or exit.
Added
We have established joint ventures with two separate institutional investment managers, one to invest in residential investor bridge loans originated by CoreVest and another to invest in residential investor bridge and term loans originated by CoreVest. We administer the joint ventures for ongoing fees and are entitled to earn additional performance fees upon realization of specified return hurdles.
Added
Fee income associated with our administration of joint ventures and other loan-related administrative functions is also included in this segment. Direct operating expenses and tax expenses associated with these activities are also included in this segment.
Added
In the second quarter of 2025, as a part of the Company's accelerated shift towards a scalable and simplified operating model, legacy unsecuritized bridge and term loan portfolios, our consolidated re-performing loan securitization entities, and other non-core legacy assets historically held in this segment were formally reclassified to the newly established Legacy Investments segment.
Added
This reclassification did not impact our consolidated financial results but served to streamline reporting and better align Redwood’s disclosure with its strategic focus. All relevant prior period amounts and disclosures have been conformed to reflect the current segment structure.
Added
We primarily target investments with sensitivity to housing credit risk, sourced through our operating platforms where we control the underwriting and collateral review.
Added
Going forward, the Redwood Investments portfolio will focus on retained interests from the Company’s own securitizations and other investment vehicles, rather than third-party securities, consistent with Redwood’s strategic shift toward internally originated investments. 2 This segment’s main sources of income are net interest income and other income from investments, changes in fair value of investments and associated hedges, and realized gains and losses upon the sale of securities.
Added
Legacy Investments This segment consists of assets no longer aligned with our core strategic objectives, including legacy unsecuritized bridge and term loans, residential re-performing loan securities and other non-core legacy assets, that are in the active process of sale, runoff, or other disposition as part of accelerated strategic repositioning of our business model.
Added
Consolidated Securitization Entities We sponsor our SEMT ® (Sequoia) securitization program, which we use for the securitization of residential mortgage loans.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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In addition, the cash flows and earnings from, and market values of, securities, loans, and other assets we own may be volatile. We seek to manage certain of the risks associated with acquiring, originating, holding, selling, and managing real estate loans and securities, HEI, and other real estate-related investments.
In addition, the cash flows and earnings from, and market values of, securities, loans, and other assets we own may be volatile. We seek to manage certain risks associated with acquiring, originating, holding, selling, and managing real estate loans and securities, HEI, and other real estate-related investments.
Operational and Other Risks Through certain of our wholly-owned subsidiaries we have engaged in the past and plan to continue to engage in acquiring residential consumer and residential investor mortgage loans and HEI, and originating residential investor mortgage loans and HEI with the intent to sell these loans or HEI to third parties or hold them as investments.
Operational and Other Risks Through certain of our wholly-owned subsidiaries we have engaged in the past and plan to continue to engage in acquiring residential consumer and residential investor mortgage loans and originating residential investor mortgage loans and HEI with the intent to sell these loans to third parties or hold them as investments.
If, in the future, we determine that goodwill or intangible assets are impaired, we will be required to write down the value of these assets, as we did with our goodwill asset in 2020, up to the entire balance. Any such write-down would have a negative effect on our consolidated financial statements.
If we determine in the future that goodwill or intangible assets are impaired, we will be required to write down the value of these assets, as we did with our goodwill asset in 2020, up to the entire balance. Any such write-down would have a negative effect on our consolidated financial statements.
State and/or local rent control or rent stabilization regulations may reduce the value of single-family rental or multifamily properties collateralizing mortgage loans we own, or those underlying the securities or other investments we own. As a result, the value of these types of mortgage loans, securities, and other investments may be negatively impacted, which impacts could be material.
State and local rent control or rent stabilization regulations may reduce the value of single-family rental or multifamily properties collateralizing mortgage loans we own, or those underlying the securities or other investments we own. As a result, the value of these types of mortgage loans, securities, and other investments may be negatively impacted, which impacts could be material.
Legislative or regulatory changes relating to the Investment Company Act or which affect our efforts to qualify for exclusions or exemptions, including our ability to comply with the 55% Requirement and the 25% Requirement, could also result in these adverse effects on us.
Legislative or regulatory changes relating to the Investment Company Act which affect our efforts to qualify for exclusions or exemptions, including our ability to comply with the 55% Requirement and the 25% Requirement, could also result in these adverse effects on us.
Our charter limits the liability of our directors and officers to us and to shareholders for pecuniary damages to the fullest extent permitted by Maryland law.
Our charter limits the liability of our directors and officers to us and to our shareholders for pecuniary damages to the fullest extent permitted by Maryland law.
Our ability to profitably execute or participate in future securitization transactions, including, in particular, securitizations of residential consumer and residential investor mortgage loans and HEI, is dependent on numerous factors and if we are not able to achieve our desired level of profitability or if we incur losses in connection with executing or participating in future securitizations it could have a material adverse impact on our business and financial results.
Our ability to profitably execute or participate in future securitization transactions, including, in particular, securitizations of residential consumer and residential investor mortgage loans is dependent on numerous factors and if we are not able to achieve our desired level of profitability or if we incur losses in connection with executing or participating in future securitizations it could have a material adverse impact on our business and financial results.
With respect to residential mortgage loans or HEI we own or originate, or which we have purchased and subsequently sold, we may be subject to liability for potential violations of the CFPB’s TILA-RESPA Integrated Disclosure rule (also referred to as 51 “TRID”) or other similar consumer protection laws and regulations, which could adversely impact our business and financial results.
With respect to residential mortgage loans or HEI we own or originate, or which we have purchased and subsequently sold, we may be subject to liability for potential violations of the CFPB’s TILA-RESPA Integrated Disclosure rule (also referred to as “TRID”) or other similar consumer protection laws and regulations, which could adversely impact our business and financial results.
Our calculations of the fair value of the securities, loans, HEI, MSRs, derivatives, and certain other assets we own or consolidate are based upon assumptions that are inherently subjective and involve a high degree of management judgment. We report the fair values of securities, loans, HEI, MSRs, derivatives, and certain other assets on our consolidated balance sheets.
Our calculations of the fair value of the securities, loans, HEI, MSRs, derivatives, and certain other assets we own or consolidate are based upon assumptions that are inherently subjective and involve a high degree of management judgment. We report the fair value of securities, loans, HEI, MSRs, derivatives, and certain other assets on our consolidated balance sheets.
Under the Investment Company Act, an “investment company” (as defined therein) is required to register with the SEC and is subject to extensive restrictive and potentially adverse regulations relating to, among other things, operating methods, management, capital structure, dividends, and transactions with affiliates.
Under the Investment Company Act, an “investment company” (as defined therein) is required to register with the SEC and is subject to extensive and potentially adverse regulations relating to, among other things, operating methods, management, capital structure, dividends, and transactions with affiliates.
Our portfolio of residential investor loans and, to a lesser extent, HEI held for investment represents a substantial portion of our overall investment portfolio, and such loans and HEI expose us to new and different risks from our traditional investments in jumbo residential consumer mortgage loans.
Our portfolio of residential investor loans and, to a lesser extent, HEI held for investment represents a substantial portion of our overall investment portfolio, and such loans and HEI expose us to new and different risks from our traditional investments in residential consumer mortgage loans.
SA Buyer has agreed to purchase all future arising servicer advances under certain residential mortgage servicing agreements. SA Buyer relies, in part, on its members to make committed capital contributions in order to pay the purchase price for future servicer advances.
SA Buyer has agreed to purchase all future arising servicer advances under certain residential mortgage servicing agreements. SA Buyer relies on its members to make committed capital contributions in order to pay the purchase price for future servicer advances.
For example, we may be required to accrue interest and discount income on mortgage loans, MBS, and other types of debt securities or interests in debt securities before we receive any payments of interest or principal on such assets.
For example, we may be required to accrue interest, discount other income on mortgage loans, MBS, HEI and other types of debt securities or interests in debt securities before we receive any payments of interest or principal on such assets.
Our past and future loan and HEI origination and securitization activities or other past and future business or operating activities or practices could expose us to litigation, which may adversely affect our business and financial results.
Our past and future loan and HEI origination, investment, and securitization activities or other past and future business or operating activities or practices could expose us to litigation, which may adversely affect our business and financial results.
Sequoia securitization entities we sponsor issued ABS under our SEMT ® label, backed by residential mortgage loans held by these Sequoia entities. Similarly, CoreVest securitization entities (or “CAFL entities”) we sponsor 40 issued ABS under our CAFL ® label, backed by residential investor mortgage loans held by these CAFL entities.
Sequoia securitization entities we sponsor issued ABS under our SEMT ® label, backed by residential mortgage loans held by these Sequoia entities. Similarly, CoreVest securitization entities (or “CAFL entities”) we sponsor issued ABS under our CAFL ® label, backed by residential investor mortgage loans held by these CAFL entities.
Until recently, many floating-rate securities were typically valued based on a market credit spread over LIBOR and, recently (due to the cessation of LIBOR in 2023), another floating-rate index such as the Secured Overnight Financing Rate (“SOFR”) or the American Interbank Offered Rate (“Ameribor”), and such valuations are affected similarly by changes in SOFR, Ameribor, or other index spreads.
Until recently, many floating-rate securities were valued based on a market credit spread over LIBOR and, recently (due to the cessation of LIBOR in 2023), another floating-rate index such as the Secured Overnight Financing Rate (“SOFR”) or the American Interbank Offered Rate (“Ameribor”), and such valuations are affected by changes in SOFR, Ameribor, or other index spreads.
Therefore, the value of the underlying property, the creditworthiness and financial position of the borrower and/or its guarantor(s) and the priority and enforceability of the lien will significantly impact the value of such mortgages.
Therefore, the value of the underlying property, creditworthiness and financial position of the borrower and/or its guarantor(s) and the priority and enforceability of the associated lien will significantly impact the value of such mortgages.
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.
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 35 and annual periods in which they are established and could have a material and adverse effect on our business, financial results, or liquidity.
Some states have enacted, or may enact, similar laws or regulations, which in some cases may impose restrictions and requirements greater than those in place under federal laws and regulations.
Some states have enacted, or may enact, similar laws or regulations, which in some cases may impose restrictions and requirements greater than those under federal laws and regulations.
Dividend payments to holders of our Series A preferred stock are due quarterly on the 15th of January, April, July, and October, each in the amount of $1.75 million (or $0.6250 per share of the Series A preferred stock) until the first interest rate reset date (April 15, 2028).
Dividend payments to holders of our Series A preferred stock are due quarterly on January 15, April 15, July 15, and October 15, each currently in the amount of $1.75 million (or $0.6250 per share of Series A preferred stock) until the first interest rate reset date on April 15, 2028.
These regulations, among other things, may limit the ability of single-family rental and multifamily property owners who have borrowed money (including in the form of mortgage debt) to finance their property or properties to raise rents above specified percentages.
These regulations, among other things, may limit the ability of single-family rental and multifamily property owners who have borrowed money (including in the form of mortgage debt) to finance their property to raise rents above specified percentages.
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.
Such impact may be due to temporary or lasting changes involving the status, practices, or procedures of our operating platforms, including our loan origination and purchase activities, as well as our HEI investment and origination activities.
In the future we expect to continue to engage in or participate in loan and HEI origination and securitization transactions, including, in particular, securitization transactions relating to residential consumer and residential investor mortgage loans and HEI, and may also engage in other types of securitization transactions or similar transactions.
In the future we expect to continue to engage in or participate in loan and HEI origination, investment, and securitization transactions, including securitization transactions relating to residential consumer and residential investor mortgage loans and HEI, and may also engage in other types of securitization transactions or similar transactions.
The sub-servicers we retain to directly service residential mortgage loans (when we own the associated MSRs), or whom we retain to service HEI, are among our most significant service providers with respect to our residential mortgage banking and HEI activities and our failure to take steps to ensure that these sub-servicers are servicing these residential mortgage loans and HEI in accordance with applicable law and regulation could result in enforcement action by the CFPB against us that could restrict our business, expose us to penalties or other claims, negatively impact our financial results, and damage our reputation.
The sub-servicers we retain to service residential mortgage loans (when we own the related MSRs) and to service HEI are among our most significant service providers with respect to our residential mortgage banking and HEI activities and our failure to take steps to ensure that these sub-servicers are servicing these residential mortgage loans and HEI in accordance with applicable law and regulation could result in enforcement action by the CFPB against us that could restrict our business, expose us to penalties or other claims, negatively impact our financial results, and damage our reputation.
To the extent we have significant exposure to representations and warranties made to us by one or more counterparties we acquire loans or HEI from, we may determine, as a matter of risk management, to reduce or discontinue loan acquisitions from those counterparties, which could reduce the volume of residential loans we acquire and negatively impact our business and financial results.
To the extent we have significant exposure to representations and warranties made by one or more counterparties, we may determine, as a risk-management matter, to reduce or discontinue loan acquisitions from those parties, which could reduce the volume of residential loans we acquire and negatively impact our business and financial results.
Our acquisitions of 5 Arches, CoreVest, and Riverbend, or future acquisition targets, could fail to improve our business or result in diminished returns, could expose us to new or increased risks, and could increase our cost of doing business.
Our acquisitions of 5 Arches, CoreVest, and Riverbend, or future acquisitions, could fail to improve our business or result in diminished returns, could expose us to new or increased risks, and could increase our cost of doing business.
If Redwood or one of our subsidiaries fell within the definition of an investment company under the Investment Company Act and failed to qualify for an exclusion or exemption, including, for example, if it was required to and failed to meet the 55% Requirement or the 25% Requirement, it could, among other things, be required either (i) to change the manner in which it conducts operations to avoid being required to register as an investment company or (ii) to register as an investment company, either of which could adversely affect us by, among other things, requiring us to dispose of certain assets or to change the structure of our business in ways that we may not believe to be in our best interests.
If Redwood or one of our subsidiaries were to fall within the definition of an investment company under the Investment Company Act and fail to qualify for an exclusion or exemption (for example, if it was required to and failed to meet the 55% Requirement or the 25% Requirement), it could, among other things, be required either (i) to change the manner in which it conducts operations to avoid being required to register as an investment company or (ii) to register as an investment company, either of which could adversely affect us by, among other things, requiring us to dispose of certain assets or to change the structure of our business in ways that we may not believe to be in our best interests.
Similarly, we have engaged in the past, and may continue to engage, in acquiring residential MSRs. These types of transactions and investments expose us to potentially material risks.
Similarly, we have engaged in the past, and may continue to engage, in acquiring residential MSRs and in originating and acquiring HEI. These types of transactions and investments expose us to potentially material risks.
Through certain of our wholly-owned subsidiaries we have engaged in the past, and expect to continue to engage in, securitization transactions relating to real estate mortgage loans and HEI. In addition, we have invested in and continue to invest in mortgage-backed securities and other ABS issued in securitization transactions sponsored by other companies.
Through certain of our wholly-owned subsidiaries we have engaged in the past, and expect to continue to engage in, securitization transactions relating to real estate mortgage loans and HEI. In addition, we have invested in and continue to invest in MBS and other ABS issued in securitization transactions sponsored by other companies.
If we do take title, and when we are a direct or indirect owner, we could be subject to environmental liabilities with respect to the property, including liability to a governmental entity or third parties for property damage, personal injury, investigation, and clean-up costs.
If we take title, or when we are a direct or indirect owner, we could be subject to environmental liabilities with respect to the property, including liability to governmental entities or third parties for property damage, personal injury, investigation, and clean-up costs.
For example, for some of our assets, cash flows are “locked-out” and we receive less than our pro-rata share of principal payment cash flows in the early years of the investment, or, in the case of HEI, we do not receive periodic payments at all for the duration of the investment.
For example, for some of our assets, cash flows are “locked-out” and we receive less than our pro-rata share of principal payment cash flows in the early years of the investment, or, in the case of HEI, no periodic payments at all for the duration of the investment.
In order to maintain our status as a REIT, not more than 50% in value of our outstanding capital stock may be owned, actually or constructively, by five or fewer individuals (defined in the Internal Revenue Code to include certain entities).
To maintain our status as a REIT, no more than 50% in value of our outstanding capital stock may be owned, actually or constructively, by five or fewer individuals (defined in the Internal Revenue Code to include certain entities).
When engaging in securitization transactions, we also prepare marketing and disclosure documentation, including term sheets, offering documents, and prospectuses or offering memorandums that include disclosures regarding risks of the offered securities, the securitization transactions and the underlying assets being securitized.
When engaging in securitization transactions, we prepare marketing and disclosure materials, including term sheets, offering documents, and prospectuses or offering memorandums that include disclosures regarding risks of the offered securities, the securitization transactions and the underlying assets being securitized.
In addition, we may be required to repurchase loans as a result of borrower fraud or in the event of early payment default on a mortgage loan. The remedies available to a purchaser of mortgage loans may be broader than those available to us against the borrower or correspondent.
In addition, we may be required to repurchase loans due to borrower fraud or in the event of early payment default on a mortgage loan. The remedies available to a purchaser of mortgage loans may be broader than those available to us against the borrower or correspondent.
Moreover, our access to third-party sources of capital depends on a number of factors, including the market’s perception of our growth potential, our current debt levels, the market price of our preferred stock or common stock, and our current and potential future earnings.
Moreover, our access to third-party sources of capital depends on several factors, including the market’s perception of our growth potential, our current debt levels, the market price of our preferred stock or common stock, and our current and potential future earnings.
In addition, the securitization trusts or other securitization entities that own collateral underlying securitization transactions may be held liable for acts of third parties and may be required to obtain state mortgage lending licenses.
Securitization trusts and other securitization entities that own collateral underlying securitization transactions may be held liable for the acts of third parties and may be required to obtain state mortgage lending licenses.
Despite our efforts to do so, we may not be able to avoid creating or distributing UBTI to our common and preferred shareholders.
Despite our efforts, we may not be able to avoid creating or distributing UBTI to our common and preferred shareholders.
Our residential investor loan borrowers are primarily owners of single-family and small to medium-sized multifamily residential rental properties, and residential properties for rehabilitation and subsequent resale or rental. Accordingly, the success of our business is closely tied to the overall success of the investors and small business owners in these markets.
Our residential investor loan borrowers are primarily owners of single-family and small to medium-sized multifamily rental properties and residential properties intended for rehabilitation and resale or rental. Accordingly, our performance is closely tied to the success of investors and small business owners in these markets.
For example, the Tax Cuts and Jobs Act, which was enacted in 2017, among other things and subject to certain exceptions, reduced for individuals the annual residential mortgage-interest deduction for purchase money mortgage debt, as well as eliminated for individuals the deduction for interest with respect to home equity indebtedness.
For example, the Tax Cuts and Jobs Act, enacted in 2017, among other things and subject to certain exceptions, reduced for individuals the annual residential mortgage-interest deduction for purchase money mortgage debt, and eliminated for individuals the deduction for interest with respect to home equity indebtedness.
Our employees, contractors we use, and other third parties with whom we have relationships may make inadvertent errors, or fall prey to social engineering attacks or other fraud schemes, that could subject us to financial losses, claims, or enforcement actions.
Our employees, contractors we use, and other third parties with whom we have relationships may make inadvertent errors or fall victim to social engineering attacks or other fraud schemes, which could subject us to financial losses, claims, or enforcement actions.
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.
Acquiring and originating mortgage loans and other assets with intent to sell to third parties generally requires us to incur debt, including short-term debt on a recourse or non-recourse basis, to finance the accumulation of these assets.
If, based on available evidence, we conclude that it is not more likely than not that our DTAs will be realized, then a valuation allowance would be established with corresponding charges to GAAP earnings and book value per share.
If we conclude that it is not more likely than not that our DTAs will be realized, then a valuation allowance would be established with corresponding charges to GAAP earnings and book value per share.
In addition, our stated goal has been to not generate excess inclusion income at Redwood Trust, Inc. and certain of its subsidiaries that would be taxable as unrelated business taxable income (“UBTI”) to our tax-exempt shareholders.
In addition, our stated goal has been to avoid generating excess inclusion income at Redwood Trust, Inc. and certain of its subsidiaries that would be taxable as unrelated business taxable income (“UBTI”) to our tax-exempt shareholders.
As another example, we have incorporated blockchain technology into securitization transactions we sponsor for reporting purposes and, potentially, the issuance of “tokenized” digital securities.
As another example, we have incorporated blockchain technology into securitization transactions we sponsor for reporting purposes and, potentially, we may engage in the issuance of “tokenized” digital securities.
Our process for ensuring we comply with risk retention requirements applicable to securitization transactions we sponsor or co-sponsor may not correctly identify loans that do not meet the applicable criteria, including due to data entry or calculation errors during the review of these criteria for specific loans or due to errors in our interpretation of these requirements.
Our process for ensuring compliance with risk retention requirements applicable to securitization transactions we sponsor or co-sponsor may incorrectly identify loans that do not meet the applicable criteria, including due to data entry or calculation errors during the review of these criteria, or due to errors in our interpretation of these requirements.
Material risks that may affect our business, operating results and financial condition include, but are not necessarily limited to, those relating to: Risks Related to our Business and Industry (Page 7) • general economic conditions and trends and the performance of the housing, real estate, mortgage finance, and broader financial markets; • changing benchmark interest rates, and the Federal Reserve’s actions and statements regarding monetary policy; • federal, state and local legislative and regulatory developments and the actions of governmental authorities and entities; • our ability to compete successfully; • our ability to adapt our business model and strategies to changing circumstances ; • strategic business and capital deployment decisions we make ; • our use of financial leverage; • our exposure to a breach of our cybersecurity or data security; • the impact of public health issues such as pandemics; Risks Related to our Investments and Investing Activity (Page 18) • our exposure to credit risk and the timing of credit losses within our portfolio; • the concentration of the credit risks we are exposed to, including due to the structure of assets we hold and the geographical concentration of real estate underlying assets we own, and our exposure to environmental and climate-related risks; • the efficacy and expense of our efforts to manage or hedge credit risk, interest rate risk, and other financial and operational risks ; • changes in credit ratings on assets we own and changes in the rating agencies’ credit rating methodologies ; • c hanges in interest rates or mortgage prepayment rates ; • investment and reinvestment risk; • asset performance, interest rate volatility, changes in credit spreads, and changes in liquidity in the market for real estate securities and loans; • o ur ability to finance the acquisition of real estate-related assets with short-term debt ; • t he ability of counterparties to satisfy their obligations to us ; • we may enter into new lines of business, acquire other companies, or engage in other new strategic initiatives; 5 Operational and Other Risks (Page 33) • changes in the demand from investors for residential consumer and residential investor mortgages and investments, and our ability to distribute residential consumer and residential investor mortgages through our whole-loan distribution channels; • our involvement in loan and HEI origination and securitization transactions, the profitability of those transactions, and the risks we are exposed to in engaging in loan origination or securitization transactions ; • foreclosure activity may expose us to risks associated with real estate ownership and operation; • e xposure to claims and litigation, including litigation arising from loan or HEI origination and securitization transactions ; • acquisitions or new business initiatives may fail to improve our business and could expose us to new or increased risks; • w hether we have sufficient liquid assets to meet short-term needs ; • changes in our investment, financing, and hedging strategies and new risks we may be exposed to if we expand or reorganize; • our ability to successfully retain or attract key personnel ; • we are dependent on third-party information systems and third-party service providers; • our exposure to a disruption of our or a third party’s technology infrastructure and systems; • our failure to maintain appropriate internal controls over financial reporting and disclosure controls and procedures; • our risk management efforts may not be effective; • we could be harmed by misconduct or fraud; • inadvertent errors, system failures or cybersecurity incidents could disrupt our business; • the impact on our reputation that could result from our actions or omissions or from those of others; • accounting rules related to certain of our transactions and asset valuations are highly complex and involve significant judgment and assumptions; • the future realization of our deferred tax assets is uncertain, and the amount of valuation allowance we may apply against our deferred tax assets may change materially in future periods; Risks Related to Legislative and Regulatory Matters Affecting our Industry (Page 50) • the impact of changes to U.S. federal income tax laws on the U.S. housing market, mortgage finance markets, and our business ; • our failure to comply with applicable laws and regulation, including our ability to obtain or maintain required governmental licenses; Risks Related to Redwood's Capital, REIT and Legal/Organizational Structure (Page 53) • our ability to maintain our status as a REIT for tax purposes ; • decisions about raising, managing, and distributing capital ; • limitations imposed on our business due to our REIT status and our status as exempt from registration under the Investment Company Act of 1940 ; • provisions in our charter and bylaws and provisions of Maryland law may limit a change in control or deter a takeover; • the ability to take action against our directors and officers is limited by our charter and bylaws and provisions of Maryland law and we may indemnify them against certain losses; Other Risks Related to Ownership of Our Capital Stock (Page 57) • our stock may experience losses, volatility, and poor liquidity, and we may reduce our dividends; • a limited number of institutional shareholders own a significant percentage of our common stock; • future sales of our stock or other securities by us or our officers and directors may have adverse consequences for investors; • the change-in-control-related conversion rights of our preferred stock may be detrimental to holders of our common stock; • dividend distributions and the timing and character of such dividends may change; • payment of dividends in common stock could place downward pressure on market price; and • other factors not yet identified, including broad market fluctuations. 6 Risks Related to our Business and Industry General economic conditions and trends and the performance of the housing, real estate, mortgage finance, and broader financial markets have adversely affected, and may continue to adversely affect, our business and the value of, and returns on, real estate-related and other assets we own or may acquire and could also negatively impact our business and financial results.
Material risks that may affect our business, operating results and financial condition include, but are not necessarily limited to, those relating to: Risks Related to our Business and Industry (Page 8) • adverse economic and market conditions, including in housing, real estate, mortgage finance, and broader financial markets; • changing benchmark interest rates and the Federal Reserve’s actions and statements; • federal, state and local legislative and regulatory developments and the actions of governmental authorities and entities; • our ability to compete successfully; 5 • our ability to adapt our business model and strategies; • strategic business and capital deployment decisions we make; • our use of financial leverage; • our exposure to a breach of our cybersecurity or data security; • the impact of public health events such as pandemics; Risks Related to our Investments and Investing Activity (Page 13) • our exposure to credit risk and the timing of credit losses within our portfolio; • the concentration of the credit risks we are exposed to, including due to the structure of assets we hold and the geographical concentration of real estate underlying assets we own, and our exposure to environmental and climate-related risks; • the efficacy and expense of our efforts to manage or hedge credit risk, interest rate risk, and other financial and operational risks; • changes in credit ratings on assets we own and changes in the rating agencies’ credit rating methodologies; • changes in interest rates or mortgage prepayment rates; • investment and reinvestment risk; • asset performance, interest rate volatility, changes in credit spreads, and changes in liquidity in the market for real estate securities and loans; • our ability to finance the acquisition of real estate-related assets with short-term debt; • the ability of counterparties to satisfy their obligations to us; • we may enter into new lines of business, acquire other companies, or engage in other new strategic initiatives; Operational and Other Risks (Page 22) • changes in the demand from investors for residential consumer and residential investor mortgages and investments, and our ability to distribute residential consumer and residential investor mortgages through our whole-loan distribution channels; • our involvement in loan and HEI origination and securitization transactions, the profitability of those transactions, and the risks we are exposed to in engaging in loan origination or securitization transactions; • foreclosure activity may expose us to risks associated with real estate ownership and operation; • exposure to claims and litigation, including litigation arising from loan or HEI origination, investment, and securitization transactions; • acquisitions or new business initiatives may fail to improve our business and could expose us to new or increased risks; • whether we have sufficient liquid assets to meet short-term needs; • changes in our investment, financing, and hedging strategies and new risks we may be exposed to if we expand or reorganize; • our ability to successfully retain or attract key personnel; • we are dependent on third-party information systems and third-party service providers; • our exposure to a disruption of our or a third party’s technology infrastructure and systems; • our failure to maintain appropriate internal controls over financial reporting and disclosure controls and procedures; • our risk management efforts may not be effective; • we could be harmed by misconduct or fraud; • inadvertent errors, system failures or cybersecurity incidents could disrupt our business; • the impact on our reputation that could result from our actions or omissions or from those of others; • accounting rules related to certain of our transactions and asset valuations are highly complex and involve significant judgment and assumptions; • the future realization of our deferred tax assets is uncertain, and the amount of valuation allowance we may apply against our deferred tax assets may change materially in future periods; Risks Related to Legislative and Regulatory Matters Affecting our Industry (Page 35) • the impact of changes to U.S. federal income tax laws on the U.S. housing market, mortgage finance markets, and our business; • regulatory risk related to HEI, including recharacterization or regulation as mortgage loans; 6 • the impact of state and local rent control or rent stabilization laws on the value of rental properties; • our failure to comply with applicable laws and regulation, including our ability to obtain or maintain required governmental licenses; Risks Related to Redwood's Capital, REIT and Legal/Organizational Structure (Page 39) • our ability to maintain our status as a REIT for tax purposes; • our ability to raise, manage, and deploy capital; • limitations imposed on our business due to our REIT status and our status as exempt from registration under the Investment Company Act of 1940; • provisions in our charter and bylaws and provisions of Maryland law may limit a change in control or deter a takeover; • the ability to take action against our directors and officers is limited by our charter and bylaws and provisions of Maryland law and we may indemnify them against certain losses; Other Risks Related to Ownership of Our Capital Stock (Page 42) • our stock may experience losses, volatility, and poor liquidity, and we may reduce our dividends; • a limited number of institutional shareholders own a significant percentage of our common stock; • future sales of our stock or other securities by us or our officers and directors may have adverse consequences for investors; • the change-in-control-related conversion rights of our preferred stock may be detrimental to holders of our common stock; • dividend distributions and the timing and character of such dividends may change; • payment of dividends in common stock could place downward pressure on market price; and • other factors not yet identified, including broad market fluctuations. 7 Risks Related to our Business and Industry Adverse economic and market conditions, including in housing, real estate, mortgage finance, and broader financial markets, have affected, and may continue to affect, our business, our financial results, and the values and returns of the real estate-related and other assets we own or may acquire.
The effective use of technology increases efficiency and enables financial and lending institutions to better serve clients and reduce costs; however, the use of any emerging technologies, such as those incorporating AI, machine-learning, or algorithmic decision-making, poses an array of risks, both familiar and new.
While the effective use of technology increases efficiency and enables financial and lending institutions to better serve clients and reduce costs, the use of any emerging technologies, such as those incorporating AI, machine-learning, or algorithmic decision-making, poses an array of risks.
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.
Even if we obtain representations and warranties from the counterparties from whom we acquire loans, HEI, or other assets, or from borrowers or their related parties, these protections may not parallel the representations and warranties we make or may fail to 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 of warranty.
In addition, there are various other federal, state, and local laws and regulations that are intended to discourage predatory lending practices by residential mortgage loan originators.
In addition, various federal, state, and local laws and regulations are intended to discourage predatory lending practices by residential mortgage loan originators.
Any future changes in the regulations or tax laws applicable to REITs or to mortgage-related or real estate-related financial products could negatively impact our operations or reduce any competitive advantages we may have relative to non-REIT entities, either of which could reduce the value of our stock.
Future changes to the tax laws or regulations applicable to REITs or to mortgage or real estate related financial products could adversely affect our operations or reduce any competitive advantages we may have relative to non-REIT entities, either of which could reduce the value of our stock.
Accordingly, misconduct by employees, contractors, or others could subject us to losses or regulatory sanctions and seriously harm our reputation. Our controls may not be effective in detecting this type of activity. Inadvertent errors, including, for example, errors in the implementation of information technology systems, could subject us to financial loss, litigation, or regulatory action.
Accordingly, misconduct by employees, contractors, or other parties could subject us to losses or regulatory sanctions and harm our reputation, and our controls may not be effective in detecting or preventing this activity. Inadvertent errors, including, for example, errors in the implementation of information technology systems, could subject us to financial loss, litigation, or regulatory action.
If we fail to comply with these limits, we may be forced to liquidate attractive investments on short notice and on unfavorable terms in order to maintain our REIT status. • We generally use taxable REIT subsidiaries to own non-real estate assets and engage in activities that may give rise to non-real estate related income under the REIT rules.
If we fail to comply with these limits, we may be required to liquidate attractive investments on short notice and on unfavorable terms to maintain our REIT status. • We generally use taxable REIT subsidiaries to own non-real estate assets and to engage in activities that may generate non-real estate related income under the REIT rules.
This type of debt may not be available to us, or may only be available to us on an uncommitted basis, including in circumstances where a line of credit had previously been made available or committed to us.
This type of debt may not be available to us, or may be available only on an uncommitted basis, even in cases where a line of credit had previously been made available or committed to us.
The appraiser may feel pressure from the broker or originator to provide an appraisal in the amount necessary to enable the originator to make the loan or HEI, whether or not the value of the property justifies such an appraised value.
Appraisers may feel pressure from the broker or originator to provide an appraisal in the amount necessary to enable the originator to make the loan or HEI regardless of whether the value of the property justifies such an appraised value.
We could be harmed by misconduct or fraud that is difficult to detect. We are exposed to risks relating to misconduct by our employees, contractors we use, or other third parties with whom we have relationships.
We could be harmed by misconduct or fraud that is difficult to detect. We are exposed to risks arising from misconduct by our employees, contractors, or other third parties with whom we have relationships.
Rating agencies can affect our ability to execute or participate in a securitization transaction, or reduce the returns we would otherwise expect to earn from executing securitization transactions, not only by deciding not to publish ratings for our securitization transactions (or deciding not to consent to the inclusion of those ratings in the prospectuses or other documents we file with the SEC relating to securitization transactions), but also by altering the criteria and process they follow in publishing ratings.
Rating agencies can affect our ability to execute or participate in securitization transactions, or reduce the returns we expect to earn from executing securitization transactions, by deciding not to publish ratings for our securitization transactions (or deciding not to consent to the inclusion of those ratings in the prospectuses or other documents we file with the SEC relating to securitization transactions), and by altering the criteria and process they follow in publishing ratings.
Errors in the implementation of information technology systems, compliance systems and procedures, or other operational systems and procedures could also interrupt our business or subject us to financial losses, claims, or enforcement actions. Errors could also result in the inadvertent disclosure of mortgage-borrower, HEI-customer, or consumer non-public personal information. Inadvertent errors expose us to the risk of material losses.
Errors in the implementation or operation of information technology systems, compliance systems and procedures, or other operational systems and procedures could also interrupt our business or expose us to financial losses, claims, or enforcement actions. Such errors may result in the inadvertent disclosure of mortgage borrower, HEI customer, or other consumer non-public personal information.
We could incur substantial losses and our business operations could be disrupted if we are unable to effectively identify, manage, monitor, and mitigate financial risks, such as credit risk, interest-rate risk, prepayment risk, liquidity risk, and other market-related risks, as well as operational risks related to our business, assets, and liabilities, such as mortgage operations risk, legal and compliance risk, human resources-related risk, climate-related risk, data privacy, cybersecurity and technology-related risk, and financial reporting risk.
We could incur substantial losses and experience disruptions to our business operations if we are unable to effectively identify, manage, monitor, and mitigate financial risks, including credit, interest rate, prepayment, liquidity, and other market-related risks, as well as operational risks related to our business, assets, and liabilities, including mortgage operations, legal and compliance, human resources, climate-related, data privacy, cybersecurity, technology, and financial reporting risks.
Additionally, mortgage loan borrowers that have been or continue to be negatively impacted by rising interest rates, pandemic disease, natural disasters, or other adverse economic conditions may not remit payments of principal and interest relating to their mortgage loans on a timely basis, or at all.
Additionally, mortgage loan borrowers that have been or continue to be negatively impacted by rising interest rates, pandemic disease, natural disasters, or other adverse economic conditions may fail to remit principal and interest payments on a timely basis, or at all.
Additionally, we have made, and continue to make, early-stage venture capital investments through our RWT Horizons ® investment platform.
In addition, we have made, and continue to make, early-stage venture capital investments through our RWT Horizons ® investment platform.
For example, we could be subject to a margin call on non-marginable debt if an appraisal or broker price opinion indicates a decline in the estimated value of the property securing the mortgage loan that is financed, or based on the occurrence of a triggering credit event impacting the financed mortgage loan which is followed by a decline in the market value of the financed mortgage loan (as determined by the lender).
For example, we could be subject to a margin call on non-marginable debt if an appraisal indicates a decline in the value of the property securing the financed mortgage loan, or based on the occurrence of a triggering credit event impacting the financed mortgage loan followed by a decline in the market value of the financed mortgage loan (as determined by the lender).
Any default under any indebtedness could have a material adverse effect on our business, results of operations and financial condition. For an additional discussion of our outstanding indebtedness, see Part II, Item 7 of this Annual Report. Our use of financial leverage could expose us to increased risks.
Any default could have a material adverse effect on our business, results of operations, and financial condition. For additional information regarding our indebtedness, see Part II, Item 7 of this Annual Report. Our use of financial leverage could expose us to increased risks.
Thus, we cannot assure you that the Internal Revenue Service (the “IRS”) or a court would agree with our conclusion that we have qualified as a REIT historically, or that changes to our investments or business or the law will not cause us to fail to qualify as a REIT in the future.
Accordingly, we cannot assure you that the Internal Revenue Service (the “IRS”) or a court would agree with our conclusion that we have qualified as a REIT in prior years, or that changes in our investments, our business, or applicable law will not cause us to fail to qualify as a REIT in the future.
Changes in the fair values of our assets, liabilities, and derivatives can have various negative effects on us, including reduced earnings, increased earnings volatility, and volatility in our book value. Fair values for our assets and liabilities, including derivatives, can be volatile and our revenue and income can be impacted by changes in fair values.
Changes in the fair values of our assets, liabilities, and derivatives can have various negative effects on us, including reduced earnings, increased earnings volatility, and volatility in our book value. The fair values of our assets and liabilities, including derivatives, may be volatile and changes in fair value can affect our revenue and income.
Furthermore, failure of sub-servicers who service securitized loans or HEI could result in the associated securitization entity being held liable for the sub-servicer’s actions, which could result in losses to us, including as a result of a reduction in the value of mortgage securities issued by such entities that we hold as investments, as further discussed within these Risk Factors.
In addition, failure by sub-servicers who service securitized loans or HEI could result in the associated securitization 37 entity being held liable for the sub-servicer’s actions, which could cause losses to us, including reductions in the value of mortgage securities issued by such entities that we hold as investments, as further discussed in these Risk Factors.
Item 1A. Risk Factors Summary of Risk Factors The risk factors summarized and detailed below could materially harm our business, operating results and/or financial condition, impair our future prospects and/or cause the price of our common stock to decline.
Item 1A. Risk Factors Summary of Risk Factors The risk factors summarized and detailed below could materially harm our business, operating results and/or financial condition, impair our future prospects and/or cause the price of our equity or debt securities to decline.
Our future success will depend, in part, upon our ability to address the needs of our loan sellers, borrowers, and customers by using technology, such as mobile and online services, to provide products and services that will satisfy demands for convenience, as well as to create additional efficiencies in our operations.
Our future success will depend, in part, upon our ability to address the needs of our loan sellers, borrowers, and customers by using technology, such as mobile and online services, to provide products and services that will satisfy demands for convenience, as well as to create additional efficiencies in our operations, and to do so in a thoughtful and legally compliant manner.
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.
For example, because of the COVID pandemic, residential mortgage sub-servicers received unprecedented volumes 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.
Losses could occur due to the fact that a counterparty that sold us a loan or other asset (or that is the obligor or a party related to an obligor of a residential investor loan we originate or acquire) refuses or is unable ( e.g. , due to its financial condition) to repay or repurchase that loan or asset or pay damages to us if we determine subsequent to purchase that one or more of the representations or warranties made to us in connection with the sale or origination was inaccurate.
Losses may occur if a counterparty that sold us a loan or other asset (or that is the obligor, or related to the obligor, of a residential investor loan we originate or acquire) refuses or is unable (e.g., due to its financial condition) to repay or repurchase the asset or pay damages to us if we determine subsequent to purchase that representations or warranties made in connection with the sale or origination were inaccurate.
Achieving this goal has limited, and may continue to limit, our flexibility in pursuing certain transactions or has resulted in, and may continue to result in, our having to pursue certain transactions through a taxable REIT subsidiary, which would reduce the net returns on these transactions by the associated tax liabilities payable by such subsidiary.
Achieving this goal has limited, and may continue to limit, our flexibility in pursuing certain transactions or may require us to pursue certain transactions through a taxable REIT subsidiary, which would reduce the net returns on these transactions due to the associated tax liabilities payable by the subsidiary.
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.
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 qualify as “qualified mortgages” under CFPB rules if they meet the amended definition (including an annual percentage rate test), rating agencies may nonetheless determine that such loans pose greater risk to investors.
To the extent our management or personnel, or those of our key vendors, are impacted in significant numbers by natural disaster, outbreak of pandemic or epidemic disease, or other force majeure event, our business and operating results may be negatively impacted.
If our management or personnel, or the personnel of key vendors, are affected in significant numbers by natural disaster, pandemic or epidemic disease, or other force majeure event, our business and operating results may be negatively impacted.
Adverse economic conditions have at times negatively impacted, and could again negatively impact, our operating platforms including our residential investor loan origination and residential loan purchase activities, as well as our HEI origination and investment activities. Adverse economic conditions have at times adversely impacted, and could again adversely impact, our business and operations.
Adverse economic conditions have at times negatively impacted, and could again negatively impact, our operating platforms including our residential investor loan origination and residential consumer loan purchase activities. Adverse economic conditions have at times adversely impacted, and could again adversely impact, our business and operations.
Moreover, to the extent we seek 33 recourse to title insurance, we may not be successful in receiving insurance proceeds and may expend resources in pursuing title insurance claims. Our ability to operate our business in the manner described above depends on the availability and productivity of our personnel and the personnel of third-party vendors.
Moreover, to the extent we seek recourse to title insurance, we may be unsuccessful in receiving insurance proceeds and may expend resources in pursuing such claims. Our ability to operate our business as described above depends on the availability and productivity of our personnel and the personnel of our third-party vendors.
The rate of any such conversion into common stock would be based on the number of shares of common stock with a value equal to the $25.00 per-share preferred stock liquidation preference, subject to a maximum conversion rate of approximately seven shares of common stock for each share of preferred stock.
The conversion rate would be based on the number of shares of common stock having a value equal to the $25.00 per-share liquidation preference, subject to a maximum conversion rate of approximately seven shares of common stock for each share of Series A preferred stock.
Any such changes, events, or penalties could materially harm the value of our portfolio of HEI and HEI-related assets, as well as our business, cash flows, financial condition and results of operations, as further discussed within these Risk Factors. In addition, other aspects of our business operations or practices could also expose us to litigation.
Any such changes, events, litigation, or penalties could materially harm the value of our HEI and HEI-related assets and adversely affect our business, cash flows, financial condition, and results of operations, as further discussed in these Risk Factors. In addition, aspects of our business operations and practices may expose us to litigation.
However, companies primarily engaged in the business of acquiring mortgages and other liens on and interests in real estate are generally exempt from the requirements of the Investment Company Act. We believe that we have conducted our business so that we are not subject to the registration requirements of the Investment Company Act.
Companies primarily engaged in acquiring mortgages and other liens on or interests in real estate are generally exempt from these requirements. We believe we have operated our business so that we are not subject to registration under the Investment Company Act.
We attempt to diversify our counterparty exposure and (except with respect to loan-level representations and warranties) attempt to limit our counterparty exposure to counterparties with investment-grade credit ratings, although we may not always be able to do so. Our counterpar ty risk management strategy may prove ineffective and, accordingly, our earnings and cash flows could be adversely affected.
We attempt to diversify our counterparty exposure and (except with respect to loan-level representations and warranties) attempt to limit our counterparty exposure to counterparties with investment-grade credit ratings, although we may not always be able to do so. Our counterparty risk management strategies may not be effective, and our earnings and cash flows could be adversely affected.
Further, certain trustees have asserted that their indemnification rights entitle them to withhold large lump sum amounts to hold and apply to anticipated future litigation expenses. Similar holdbacks by trustees of legacy RMBS transactions could result in losses to the value of our portfolio of securities in the future, which losses could be material.
Further, certain trustees have asserted that their indemnification rights entitle them to withhold large lump sum amounts to hold and apply to anticipated future litigation expenses. Similar trustee holdbacks could reduce the value of our securities portfolio and could result in material losses.
Changes in fair values of interest rate agreements may require us to pledge significant amounts of cash or other acceptable forms of collateral. We also may hedge by taking short, forward, or long positions in U.S. Treasuries, mortgage securities, or other financial instruments. We may take both long and short positions in credit derivative transactions linked to real estate assets.
Changes in fair values of interest rate agreements may also require us to post significant cash or other collateral. We may also hedge by taking short, forward, or long positions in U.S. Treasuries, mortgage securities, or other financial instruments, and may enter into long or short credit derivative transactions linked to real estate assets.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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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.
In addition, management provides event-driven updates to the Audit Committee and Board regarding any material cybersecurity incidents and, as appropriate, 46 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.
For 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.
For 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 information security and complying with data-privacy and technology laws are critical; a cybersecurity or data incident, or a violation of such laws, could materially harm us ” in Part I, Item 1A of this Annual Report on Form 10-K.

Item 2. Properties

Properties — owned and leased real estate

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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.
Additional information on our leases is included in Note 19 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.
Executive 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
Executive 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, Suite 2630 2030 New York, NY 10111 1111 Metropolitan Avenue, Suite 1040 2027 Charlotte, North Carolina 28204

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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ITEM 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 3. LEGAL PROCEEDINGS For information on our legal proceedings, see Note 19 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. 47 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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.
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, 2020. 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 2024 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 2025 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 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.
The cash dividends declared on our common stock for each full quarterly period during 2025 and 2024 were as follows: Common Dividends Declared Record Date Payable Date Per Share Dividend Type Year Ended December 31, 2025 Fourth Quarter 12/23/2025 12/30/2025 $ 0.18 Regular Third Quarter 9/23/2025 9/30/2025 $ 0.18 Regular Second Quarter 6/23/2025 6/30/2025 $ 0.18 Regular First Quarter 3/24/2025 3/31/2025 $ 0.18 Regular Total $ 0.72 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 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 total return performance shown on the graph is not necessarily indicative of future performance of our common stock. ITEM 6. [RESERVED] 64
The total return performance shown on the graph is not necessarily indicative of future performance of our common stock. 49 ITEM 6. [RESERVED] 50
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.
Our Board of Directors has approved authorizations for the repurchase of up to $150 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 our senior notes and convertible senior notes.
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.
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 18, 2026, our common stock was held by approximately 438 holders of record and the total number of beneficial stockholders holding stock through depository companies was approximately 44,662.
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.
As reported on our Current Report on Form 8-K filed on January 29, 2026, for dividend distributions made in 2025, we expect our common stock dividends paid in 2025 to be characterized for federal income tax purposes as 39% ordinary income (Section 199A), 2% qualified dividends, and 59% return of capital, and we expect our preferred stock dividends paid in 2025 (April, July, and October 2025 and in January 2026) to be characterized as 96% ordinary income (Section 199A) and 4% qualified dividends.
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 December 31, 2025, $111 million of the previously approved authorization remained available for the repurchase of shares of our common stock, and $70 million remained available for the repurchase of shares of our preferred stock and we also continued to be authorized to repurchase outstanding debt securities.
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.
During the year ended December 31, 2024, we did not repurchase any of our common stock or preferred stock and repurchased and early retired $72 million of our convertible and exchangeable senior notes. 48 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, 2025.
At February 28, 2025, there were 132,861,161 shares of common stock outstanding.
At February 27, 2026, there were 124,989,447 shares of common stock outstanding.
Information 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.
Performance Graph The following graph presents a cumulative total return comparison of our common stock, over the last five years, to the Russell 2000 Stock Index, the FTSE NAREIT Mortgage REIT index and the BBG mREIT Index.
Added
During the year ended December 31, 2025, we repurchased 9.2 million shares of our common stock for a total cost of $53 million and we repurchased $3 million of our senior notes.
Added
Total 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 Share and Per Share Data) October 1, 2025 - October 31, 2025 181,583 $ 5.26 181,583 $ 124,694 November 1, 2025 - November 30, 2025 141,974 $ 5.48 141,974 $ 123,917 December 1, 2025 - December 31, 2025 2,362,311 $ 5.59 2,362,311 $ 110,709 Total 2,685,868 $ 5.56 2,685,868 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.

Item 7. Management's Discussion & Analysis

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

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(3) Includes changes in fair value of securitized loans held-for-investment, securitized HEI, REO and the ABS issued at the entities, which, netted together, represent the change in value of our investments at the consolidated VIEs accounted for under the CFE election. (4) Other investments includes changes in fair value of REO assets.
(3) Includes changes in fair value of the securitized loans held-for-investment, securitized HEI, REO and the ABS issued at the entities, which, netted together, represent the change in value of our investments at the consolidated VIEs accounted for under the CFE election. (4) Other investments includes changes in fair value of REO assets.
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.
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 (loss) income in the period in which the valuation change occurs.
For trading securities and collateralized financing entities, changes in fair values are recorded in Investment fair value changes, net on our consolidated statements of income (loss) in the period in which the valuation change occurs. For AFS securities, changes in fair value are generally recorded in Accumulated other comprehensive income in our consolidated balance sheets (as discussed further below).
For trading securities and collateralized financing entities, changes in fair values are recorded in Investment fair value changes, net on our consolidated statements of (loss) income in the period in which the valuation change occurs. For AFS securities, changes in fair value are generally recorded in Accumulated other comprehensive (loss) income in our consolidated balance sheets (as discussed further below).
Additionally, the nature of the instruments we use and the accounting treatment for the specific assets, liabilities, and derivatives may therefore lead to volatility in our periodic earnings, even when we are meeting our hedging objectives. Most of our derivatives are accounted for as trading instruments with associated changes in value recorded through our consolidated statements of income (loss).
Additionally, the nature of the instruments we use and the accounting treatment for the specific assets, liabilities, and derivatives may therefore lead to volatility in our periodic earnings, even when we are meeting our hedging objectives. Most of our derivatives are accounted for as trading instruments with associated changes in value recorded through our consolidated statements of (loss) income.
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).
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 loans, residential investor loans, and HEI).
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.
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 financing that security, we would typically request the same counterparty to renew the financing for an additional fixed period.
We administer the joint ventures for ongoing fees and are entitled to earn additional performance fees upon realization of specified return hurdles. This segment also includes various derivative financial instruments that we utilize to manage certain risks associated with our inventory of loans held-for-sale.
We administer the joint ventures for ongoing fees and are entitled to earn additional performance fees upon realization of specified return hurdles. 60 This segment also includes various derivative financial instruments that we utilize to manage certain risks associated with our inventory of loans held-for-sale.
This facility includes 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 the creditor under this facility: • If at any time the market value of financed collateral declines in an aggregate amount that causes the effective advance rate associated with the financing facility to exceed a specified threshold, based on market value determinations by Redwood and one or more third party valuation agents, then the creditor may demand that we transfer additional collateral to the creditor (in the form of cash, U.S.
This facility includes the margin call provisions described below and during the twelve months ended December 31, 2025, and through the date of this Annual Report on Form 10-K, we complied with any margin calls received from the creditor under this facility: • If at any time the market value of financed collateral declines in an aggregate amount that causes the effective advance rate associated with the financing facility to exceed a specified threshold, based on market value determinations by Redwood and one or more third party valuation agents, then the creditor may demand that we transfer additional collateral to the creditor (in the form of cash, U.S.
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.
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.
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.
These warehouse facilities include the margin call provisions described below and during the twelve months ended December 31, 2025, 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.
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.
These repurchase facilities include the margin call provisions described below and during the twelve months ended December 31, 2025, 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.
If estimated future credit losses exceed our prior expectations, credit losses occur more quickly than expected, prepayments occur more slowly than expected (meaning the present value of projected cash flows is less than previously expected for assets acquired at a discount to principal balance) or securities are not called (or called later than expected), the yield over the remaining life of the security may be adjusted downward. 94 Changes in the actual maturities of real estate securities may also affect their yields to maturity.
If estimated future credit losses exceed our prior expectations, credit losses occur more quickly than expected, prepayments occur more slowly than expected (meaning the present value of projected cash flows is less than previously expected for assets acquired at a discount to principal balance) or securities are not called (or called later than expected), the yield over the remaining life of the security may be adjusted downward. 80 Changes in the actual maturities of real estate securities may also affect their yields to maturity.
Financial covenants associated with this financing facility 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 SA Buyer. • Maintenance of a minimum dollar amount of cash and cash equivalents at SA Buyer. • Corporate Secured Revolving Financing Facility .
Financial covenants associated with this financing facility are as follows and at December 31, 2025, 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 SA Buyer. • Maintenance of a minimum dollar amount of cash and cash equivalents at SA Buyer. • Corporate Secured Revolving Financing Facility .
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.
Cash Flows and Liquidity for the Year Ended December 31, 2025 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.
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.
We renewed several of these facilities during 2025, 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.
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.
The value of additional collateral transferred to satisfy the margin call is determined by the creditor. 78 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.
Changes in the Fair Value of Loans Held at Fair Value We have elected the fair value option for our residential consumer loans, residential investor loans, and multifamily loans.
Changes in the Fair Value of Loans Held at Fair Value We have elected the fair value option for our residential consumer loans and residential investor loans.
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.
At December 31, 2025, 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.
The assumptions we use to estimate future cash flows and the resulting effective yields and interest income, require significant judgement 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.
The assumptions we use to estimate future cash flows and the resulting effective yields and interest income, 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.
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.
Realization of our deferred tax assets ("DTAs") at December 31, 2025 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 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.
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, 2025, were in place with several different financial institution counterparties.
Information concerning the risks we are managing, how these risks are changing over time, and potential GAAP earnings and taxable income volatility we may experience as a result of these risks is discussed under the caption “ Risk Factors ” of this Annual Report on Form 10-K, under the caption " Risks Relating to Debt Incurred under Short- and Long-Term Borrowing Facilities " within this MD&A, and under the caption " Quantitative and Qualitative Disclosures About Market Risk" of this Annual Report on Form 10-K.
Information concerning the risks we are managing, how these risks are changing over time, and potential GAAP earnings and taxable income volatility we may experience as a result of these risks is discussed under the caption “ Risk Factors ” of this Annual Report on Form 10-K, under the caption " Risks Relating to Debt Incurred under Borrowing Facilities " within this MD&A, and under the caption " Quantitative and Qualitative Disclosures About Market Risk" of this Annual Report on Form 10-K.
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.
See 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 principles of consolidation and 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 our asset-backed securities issued.
Most tables include "changes" columns that show the amounts by which the results from 2024 are greater or less than the results from the respective period in 2023. Unless otherwise specified, references in this section to increases or decreases in 2024 refer to the change in results from 2023 to 2024.
Most tables include "changes" columns that show the amounts by which the results from 2025 are greater or less than the results from the respective period in 2024. Unless otherwise specified, references in this section to increases or decreases in 2025 refer to the change in results from 2024 to 2025.
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.
We determine the extent to which realization of our DTAs is not assured and establish a valuation allowance accordingly. At December 31, 2025, we reported net federal ordinary and capital DTAs with no material valuation allowance recorded against them.
We have a commitment to contribute up to approximately $19 million to the joint venture to fund the joint venture's purchase of residential investor bridge loans, under the updated terms of the joint venture. At December 31, 2024, we had $5 million of contributed capital to the joint venture.
We have a commitment to contribute up to approximately $19 million to the joint venture to fund the joint venture's purchase of residential investor bridge loans, under the updated terms of the joint venture. At December 31, 2025, we had $5 million of contributed capital to the joint venture.
As noted above, at December 31, 2024 , and through the date of this Annual Report on Form 10-K, we were in compliance with the financial covenants associated with our debt financing facilities.
As noted above, at December 31, 2025, and through the date of this Annual Report on Form 10-K, we were in compliance with the financial covenants associated with our debt financing facilities.
This interest income may be offset by a decline in fair value (recognized through investment fair value changes, net on our consolidated statements of income) related to the receipt of cash flows each period, resulting in a lower overall economic yield for these investments. 70 Consolidated Market Valuation Gains and Losses, Net The following table presents the net market valuation gains and losses recorded in each line item of our consolidated statements of income (loss) for the years ended December 31, 2024 and 2023.
This interest income may be offset by a decline in fair value (recognized through investment fair value changes, net on our consolidated statements of (loss) income) related to the receipt of cash flows each period, resulting in a lower overall economic yield for these investments. 56 Consolidated Market Valuation Gains and Losses, Net The following table presents the net market valuation gains and losses recorded in each line item of our consolidated statements of (loss) income for the years ended December 31, 2025 and 2024.
Our MD&A is presented in six main sections: • Overview • Recent Developments • Results of Operations – Consolidated Results of Operations – Results of Operations by Segment – Income Taxes • Liquidity and Capital Resources • Critical Accounting Estimates • Market and Other risks Our MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Part II, Item 8, Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
Our MD&A is presented in five main sections: • Overview • Results of Operations – Consolidated Results of Operations – Results of Operations by Segment – Income Taxes • Liquidity and Capital Resources • Critical Accounting Estimates • Market and Other risks Our MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Part II, Item 8, Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
(2) Mortgage banking activities, net presented above does not include fee income from loan originations or acquisitions, provisions for repurchases, or other expenses that are components of Mortgage banking activities, net presented on our consolidated statements of income, as these amounts do not represent market valuation changes.
(2) Mortgage banking activities, net presented above does not include fee income from loan originations or acquisitions, provisions for repurchases, or other expenses that are components of Mortgage banking activities, net presented on our consolidated statements of (loss) in come, as these amounts do not represent market valuation changes.
We expect to meet our obligations coming due in less than one year from December 31, 2024, through a combination of cash on hand, payments of principal and interest we receive from our investment portfolio assets, proceeds from the sale of investment portfolio assets, cash generated from our operating activities, incremental borrowings under existing, new or amended financing arrangements, or through the issuance of equity or debt capital.
We expect to meet our obligations coming due in less than one year from December 31, 2025, through a combination of cash on hand, payments of principal and interest we receive from our investment portfolio assets, cash generated from our operating activities, incremental borrowings under existing, new or amended financing arrangements, or through the issuance of equity or debt capital.
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 Real Estate Securities Our real estate securities are classified as either trading or AFS securities, and in both cases are carried on our consolidated balance sheets at their fair values.
A further discussion of these risks is set forth below under the heading “ Risks Relating to Debt Incurred under Short-and Long-Term Borrowing Facilities " and in Part I, Item 1A - Risk Factors of this Annual Report on Form 10-K.
A further discussion of these risks is set forth below under the heading “ Risks Relating to Debt Incurred under Borrowing Facilities " and in Part I, Item 1A - Risk Factors of this Annual Report on Form 10-K.
Consolidated Results of Operations The following table presents the components of our net income (loss) by segments for the years ended December 31, 2024 and 2023.
Consolidated Results of Operations The following table presents the components of our net (loss) income by segments for the years ended December 31, 2025 and 2024.
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.
See Note 6 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, 2025, 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.
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.
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 four segments reconciled to our consolidated net (loss) income for the years ended December 31, 2025 and 2024.
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.
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 (loss) income in HEI Income, net.
Financial covenants included in this facility is 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. • Maintenance of a minimum ratio of consolidated adjusted tangible net worth at Redwood to outstanding under this facility.
Financial covenants included in this facility are as follows and at December 31, 2025, and through the date of this Annual Report on Form 10-K, we were in compliance with each of these financial covenants: 76 • 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. • Maintenance of a minimum ratio of consolidated adjusted tangible net worth at Redwood to outstanding under this facility.
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.
For additional information on commitments and contingencies as of December 31, 2025 that could impact our liquidity and capital resources, see Note 19 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Additionally, at December 31, 2024, we had $1.69 billion of available warehouse capacity for residential investor loans and scheduled bridge loan maturities are expected to provide an additional source of cash that can be used to fund our commitments.
Additionally, at December 31, 2025, we had $1.84 billion of available warehouse capacity for residential investor loans and scheduled bridge loan maturities are expected to provide an additional source of cash that can be used to fund our commitments.
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 facilities are as follows and at December 31, 2025, 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. • Servicer Advance Financing .
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 real estate that the borrower owns as an investment and that is being renovated, rehabilitated or constructed. Our bridge loans are first-lien, interest-only loans.
Residential investor bridge loans include both larger balance and smaller balance mortgage loans which are generally secured by unoccupied (or in the case of certain multifamily properties, partially occupied) single-family or multifamily real estate that the borrower owns as an investment and that is being renovated, rehabilitated or constructed. Our bridge loans are first-lien, interest-only loans.
The value of additional securities transferred as additional collateral is determined by the creditor. • Corporate Secured Revolving Financing Facility . As noted above, another source of our debt financing is through a corporate secured revolving financing facility.
The value of additional securities transferred as additional collateral is determined by the creditor. 77 • Secure d Revolving Financing Facility . As noted above, another source of our debt financing is through a corporate secured revolving financing facility.
Tax Provision under GAAP For the years ended December 31, 2024, 2023 and 2022 we recorded tax provisions of $19 million, $2 million and a tax benefit of $20 million, respectively. Our tax provision is primarily derived from the activities at our TRS as we do not book a material tax provision associated with income generated at our REIT.
Tax Provision under GAAP For the years ended December 31, 2025, 2024 and 2023 we recorded tax provisions of $25 million, $19 million and $2 million, respectively. Our tax provision is primarily derived from the activities at our TRS as we do not book a material tax provision associated with income generated at our REIT.
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.
See Note 6 in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2024, incorporated herein by reference, for the same information on these assets and liabilities as of December 31, 2024.
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 our unsecured debt obligations, net.
See Note 18 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 debt obligations.
Subordinate securities that we retain from our Sequoia securitizations (many of which we consolidate for GAAP purposes) are transferred to and held in our Redwood Investments segment. We typically acquire prime jumbo mortgages and the related mortgage servicing rights on a flow basis from our extensive network of loan sellers.
Subordinate securities that we retain from our Sequoia securitizations (many of which we consolidate for GAAP purposes) are transferred to and held in our Redwood Investments segment. We typically acquire residential consumer mortgages and the related mortgage servicing rights on a flow or bulk basis from our extensive network of loan sellers.
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.
The income or loss generated at our TRS does not directly affect the tax characterization of our 2025 dividends; however, a $2 million dividend paid from a TRS to our REIT in 2025 allowed a portion of our REIT’s dividends to be classified as qualified dividends.
Our TRS income is generally earned from our mortgage banking activities, MSRs, and other non-REIT eligible security investments. The effective tax rate for GAAP income earned at our TRS in 2024 was approximately 28%. At December 31, 2024, we reported net deferred tax assets of $27 million.
Our TRS income is generally earned from our mortgage banking activities, MSRs, and other non-REIT eligible security investments. The effective tax rate for GAAP income earned at our TRS in 2025 was approximately 25%. At December 31, 2025, we reported net deferred tax assets of $12 million.
Similarly, all or a significant portion of cash flows from principal payments of loans and HEI at consolidated securitization entities would generally be used to repay ABS issued by those entities. Cash Flows from Financing Activities In 2024, our net cash provided by financing activities was $3.27 billion.
Similarly, all or a significant portion of cash flows from principal payments of loans and HEI at consolidated securitization entities would generally be used to repay ABS issued by those entities. Cash Flows from Financing Activities In 2025, our net cash provided by financing activities was $5.70 billion.
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.
Our 2025 Series A preferred stock dividend distributions are expected to be characterized for federal income tax purposes as 96% ordinary dividend income (Section 199A) and 4% qualified dividends. Under the federal income tax rules applicable to REITs, none of the 2025 dividend distributions, neither common nor Series A preferred, are expected to be characterized as capital gain dividend income.
Comparison of Consolidated Results of Operations for Years Ended December 31, 2023 and 2022 For a discussion of our consolidated results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, please refer to Item 7 of Part II, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report in Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 29, 2024. 69 Consolidated Net Interest Income The following tables present the components of net interest income recorded in each line item of our consolidated statements of income for the years ended December 31, 2024 and 2023.
Comparison of Consolidated Results of Operations for Years Ended December 31, 2024 and 2023 For a discussion of our consolidated results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023, please refer to Item 7 of Part II, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report in Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March 3, 2025. 55 Consolidated Net Interest Income The following tables present the components of net interest income recorded in each line item of our consolidated statements of (loss) income for the years ended December 31, 2025 and 2024.
Factors that determine other-than-temporary-impairment include a change in our ability or intent to hold AFS securities, adverse changes to projected cash flows of assets, or the likelihood that declines in the fair values of assets would not return to their previous levels within a reasonable time.
These factors include a change in our ability or intent to hold AFS securities, adverse changes to projected cash flows of assets, or the likelihood that declines in the fair values of assets would not return to their previous levels within a reasonable time.
Refer to the section set forth below under the heading " Risks Relating to Debt Incurred under Short- and Long-Term Borrowing Facilities" section below for additional information regarding these terms on our debt.
Refer to the section set forth below under the heading " Risks Relating to Debt Incurred under Borrowing Facilities" for additional information regarding these terms on our debt.
See Notes 11 and 18 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, for additional information regarding our residential investor bridge loan joint ventures.
See Notes 12 and 19 o f the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, for additional information regarding our residential investor bridge loan joint ventures.
(5) Other income excludes net MSR fee income or provision for repurchases, as these amounts do not represent market valuation adjustments. 71 Results of Operations by Segment We report on our business using three segments: Sequoia Mortgage Banking, CoreVest Mortgage Banking, and Redwood Investments.
(5) Servicing income, net excludes net MSR fee income or provision for repurchases, as these amounts do not represent market valuation adjustments. 57 Results of Operations by Segment We report on our business using four segments: Sequoia Mortgage Banking, CoreVest Mortgage Banking, Redwood Investments and Legacy Investments.
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.
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 2025 common stock dividend distributions are expected to be characterized for federal income tax purposes as 39% ordinary dividend income (Section 199A), 2% qualified dividends, and 59% return of capital.
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.
Corporate Capital In addition to secured recourse and non-recourse debt we use specifically in association with our mortgage banking operations, Redwood Investments and Legacy investment portfolios, we also use unsecured recourse debt to finance our overall operations.
We have committed approximately $100 million of equity capital to be allocated to the joint venture entities and joint venture co-investments to be held in Redwood's investment portfolio. At December 31, 2024, we had $26 million of contributed capital, net to the joint venture.
We have committed approximately $140 million of equity capital to be allocated to the joint venture entities and joint venture co-investments to be held in Redwood's investment portfolio. At December 31, 2025, we had $42 million of net contributed capital to the joint venture.
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.
Significant inputs used to estimate the fair value of these assets include certain unobservable inputs 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. 79 For AFS securities, cumulative unrealized gains and losses are recorded as a component of Accumulated other comprehensive (loss) income in our consolidated balance sheets.
Excluding cash flows from the purchase, origination, sale and principal payments of loans classified as held-for-sale, and the settlement of associated derivatives (which cumulatively totaled $5.84 billion of net cash outflows for 2024, compared to $1.98 billion of net cash outflows in 2023), cash flows from operating activities were negative $26 million for the year ended December 31, 2024 and negative $39 million for the year ended December 31, 2023.
Excluding cash flows from the purchase, origination, sale and principal payments of loans classified as held-for-sale, and the settlement of associated derivatives (which cumulatively totaled $10.11 billion of net cash outflows for 2025, compared to $5.84 billion of net cash outflows in 2024), cash flows from operating activities were positive $13 million for the year ended December 31, 2025 and negative $26 million for the year ended December 31, 2024.
CoreVest Mortgage Banking Segment This segment consists of a platform that originates residential investor loans for subsequent securitization, sale, or transfer into our investment portfolio.
CoreVest Mortgage Banking Segment This segment consists of a platform that originates residential investor loans for subsequent securitization, sale, or transfer into our Redwood Investments portfolio or into joint ventures.
Significant inputs used to estimate the fair value of these liabilities 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 liabilities include certain unobservable inputs 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.
Significant inputs used to estimate the fair value of these assets include certain unobservable inputs 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.
Significant inputs used to estimate the fair value of these assets include certain unobservable inputs 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.
Significant inputs used to estimate the fair value of certain of our derivatives include unobservable inputs 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.
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.
As noted above, one source of our debt financing is secured borrowings under residential consumer and residential investor loan facilities, securities and MSR repurchase facilities, and HEI warehouse facilities that we have established with various financial institution counterparties and, as of December 31, 2025, were in place with several different financial institution counterparties.
Because our securities repurchase 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 securities that at any given time are already being financed through our securities repurchase 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 securities decline in value, or have been financed for the maximum term permitted under the applicable facility.
Because our securities repurchase 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 as 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, securities financed under these facilities are subject to market, credit, and liquidity risks if they decline in value or reach the maximum financing term permitted under the applicable facility.
Liquidity Needs for our Mortgage Banking Activities We generally use loan warehouse facilities to finance the loans we acquire and originate in our mortgage banking operations while we aggregate the loans for sale or securitization. At December 31, 2024, our residential consumer loan warehouse facilities total capacity was $2.18 billion of total capacity, with $1.22 billion of available capacity.
Liquidity Needs for our Mortgage Banking Activities We generally use loan warehouse facilities to finance the loans we acquire and originate in our mortgage banking operations while we aggregate the loans for sale or securitization. At December 31, 2025, our residential consumer loan warehouse facilities total capacity was $3.55 billion of total capacity, with $756 million of available capacity.
Our most significant uses of cash are to purchase and originate mortgage loans for our mortgage banking operations and manage hedges associated with those activities, to purchase investment securities and make other investments, to repay principal and interest on our debt, to meet margin calls associated with our debt and other obligations, to make dividend payments on our capital stock, to fund draws on our bridge loan portfolio and other commitments when requested, and to fund our operations.
Our most significant uses of cash are to purchase and originate mortgage loans for our mortgage banking operations, including financing loans held for sale and managing hedges associated with those activities; to purchase investment securities and make other investments, to repay principal and interest on our debt, including warehouse and other recourse borrowings as loans are sold or securitized; to meet margin calls associated with our debt and other obligations, to make dividend payments on our capital stock, to fund draws on our bridge loan portfolio and other commitments when requested, and to fund our operations.
At December 31, 2024, $101 million of the current authorization remained available for the repurchase of shares of our common stock, and $70 million remained available for the repurchase of shares of our preferred stock.
At December 31, 2025, $111 million of the authorization remained available for the repurchase of shares of our common stock, and $70 million remained available for the repurchase of shares of our preferred stock.
This segment’s main source of mortgage banking income is net interest income from its inventory of loans held-for-sale, securities utilized for hedging purposes, as well as income from mortgage banking activities, which includes valuation increases (or gains) on loans we acquire and subsequently sell, securitize, or transfer into our Redwood Investments portfolio, and the hedges used to manage risks associated with these activities.
This segment’s main source of income is Mortgage banking income, which is comprised of net interest income from its inventory of loans held-for-sale, securities utilized for interest rate hedging purposes, as well as income from mortgage banking activities, which includes changes in fair value of loans we acquire and subsequently sell, securitize, or transfer into our Redwood Investments portfolio, loan purchase commitments, interest rate lock commitments and the hedges used to manage risks associated with these activities.
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.
The 75 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 Facilities . We obtain non-marginable recourse financing on subordinate securities through subordinate securities financing facilities.
This segment also includes various derivative financial instruments and trading securities that we utilize to manage certain risks associated with our inventory of residential consumer loans held-for-sale within this segment.
We utilize a combination of capital and our residential consumer loan warehouse facilities to finance our inventory of residential consumer loans held-for-sale. This segment also includes various derivative financial instruments that we utilize to manage certain risks associated with our inventory of residential consumer loans held-for-sale within this segment.
Term loans are mortgage loans secured by stabilized residential real estate (primarily 1-4 unit detached or multifamily) that the borrower owns as an investment property and rents to residential tenants.
Residential investor term loans include both larger balance and smaller balance mortgage loans secured by stabilized residential real estate (primarily 1-4 units detached or multifamily) that the borrower owns as an investment property and rents to residential tenants.
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.
A failure by members to fund required contributions could result in an event of default under the financing and a loss of our investment in SA Buyer and its servicer advance investments and excess MSRs.
Estimates used to determine other-than-temporary-impairments on AFS securities require significant judgment and changes in these estimates have had and are reasonably likely to have a material effect on our reported earnings and financial condition.
Estimates used to determine the allowance for credit losses on AFS securities require significant judgment and changes in these estimates have had and are reasonably likely to have a material effect on our reported earnings and financial condition.
Average balances for AFS securities, debt facilities, corporate debt and certain ABS issued are calculated based upon amortized historical cost. Average balances for ABS carried at fair value are calculated based upon fair value. (2) Interest income and interest expense at "Sequoia", "Freddie Mac SLST", "Freddie Mac K-Series", "CAFL Term", and "CAFL Bridge" reflect activity from consolidated VIEs.
Average balances for AFS securities, debt facilities, corporate debt and certain ABS issued are calculated based upon amortized historical cost. Average balances for ABS carried at fair value are calculated based upon fair value. (2) Interest income and interest expense securitized loans reflect activity from consolidated VIEs.
Since mid-2023, we have established two joint ventures with two separate institutional investment managers, one in the second quarter of 2023 to invest in residential investor bridge loans originated by CoreVest and another in the first quarter of 2024 to invest in residential investor bridge and term loans originated by CoreVest.
We have established joint ventures with two separate institutional investment managers, one to invest in residential investor bridge loans originated by CoreVest and another to invest in residential investor bridge and term loans originated by CoreVest.
For GAAP purposes, we consolidated $8.82 billion of loans and $8.40 billion of ABS issued associated with these investments at December 31, 2024. We consolidated $4.64 billion of loans and $4.43 billion of ABS issued associated with these investments at December 31, 2023.
For GAAP purposes, we consolidated $14.84 billion of loans and $14.12 billion of ABS issued associated with these investments at December 31, 2025. We consolidated $8.82 billion of loans and $8.40 billion of ABS issued associated with these investments at December 31, 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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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.
As an example, under borrowing facilities and certain 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.
We are exposed to interest rate risk during the “accumulation” period - the period from when we enter into agreements to purchase or originate the loans or HEI with the intention of selling or securitizing them through to the future date when we ultimately sell or securitize them.
We are exposed to interest rate risk during the “accumulation” period - the period from when we enter into agreements to purchase or originate the loans with the intention of selling or securitizing them through to the future date when we ultimately sell or securitize them.
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.
While the table above presents the repayment of this debt in 2029, 2030, and after 2030 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. 85
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.
We may also own from time to time 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.
(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.
(2) The fair value of fixed-rate senior securities are primarily interest-only securities, for which there is no principal at December 31, 2025. (3) Our CAFL entities include six bridge loan securitizations with a cumulative outstanding ABS issued balance of $1.15 billion at December 31, 2025.
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 “Interest-rate fluctuations may reduce earnings and increase earnings volatility.” We invest in securities, residential consumer loans, residential investor loans, and other mortgage- or housing-related assets, which all expose us to interest rate risk.
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.
Three of the securitizations had revolving features that ended in 2024 or 2025 and final maturities in 2029 and 2030. One of the securitizations has a revolving period that ends in 2027 and has a final maturity in 2031, and two have revolving features that end in 2027, and final maturities in 2040.
In addition, we may invest in riskier loan types with the potential for higher delinquencies and losses as compared to regular amortization loans, but believe these securities offer us the opportunity to generate attractive risk-adjusted returns given pricing and the manner in which these securitizations are structured. Nevertheless, there remains substantial uncertainty about the future performance of these assets.
In addition, we may invest in securities backed by riskier loan types with the potential for higher delinquencies and losses as compared to regular amortization loans, but believe these investments offer us the opportunity to generate attractive risk-adjusted returns given pricing and the manner in which these securitizations are structured.
Prepayment Risk Prepayment risks exist in many of the assets and liabilities on our consolidated balance sheets. In general, discount securities and loans benefit from faster prepayment rates on the underlying real estate loans while premium securities and loans (such as certain IOs we own), and mortgage servicing assets benefit from slower prepayments on the underlying loans.
In general, discount securities and loans benefit from faster prepayment rates on the underlying real estate loans while premium securities and loans (such as certain IOs we own), and mortgage servicing assets benefit from slower prepayments on the underlying loans.
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.
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.
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.
For additional discussion of risks relating to leverage, margin requirements, and liquidity refer to Part I, Item 1A Risk Factors and to Part II, Item 7 under the discussion titled “Risks Relating to Debt Incurred under Borrowing Facilities." Of this Annual Report on Form 10-K Business, Operational, Regulatory, and Other Risks In addition to the financial risks described above, our business is subject to a variety of operational, regulatory, and strategic risks.
Interest Rate Risk Changes in the level of interest rates and the shape of the yield curve can affect the cash flows and fair values of our assets, liabilities, and derivative financial instruments and, consequently, affect our earnings and reported equity.
Interest Rate Risk Changes in interest rates and the shape of the yield curve can affect the cash flows and fair values of our assets, liabilities, and derivative financial instruments. Rising rates generally reduce the value of fixed-rate assets and increase financing costs, while declining rates may reduce income from certain servicing and interest-only investments and accelerate prepayments.
The effective management of these risks is of critical importance to the overall success of our business. These risks are further discussed in Part I, Item 1A Risk Factors of this Annual Report on Form 10-K.
Additional discussion of these risks is included in Part I, Item 1A, Risk Factors, and in Part II, Item 7 of this Annual Report on Form 10-K.
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.
The forward interest rate curve at December 31, 2025, was used to project average coupon rates. Principal cash flow timing reflects assumptions regarding prepayment speeds based on recent performance and forward curve expectations. The table assumes no credit losses. Actual results will vary based on credit performance, interest rate movements, prepayment behavior, and reinvestment of cash flows.
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.
These risks are further discussed in Part I, Item 1A Risk Factors of this Annual Report on Form 10-K. 83 Quantitative Information on Market Risk The following table presents principal cash flows and related average interest rates for material interest rate-sensitive assets and liabilities at December 31, 2025.
Additional information concerning the risks we are managing, how these risks are changing over time, and potential GAAP earnings and taxable income volatility we may experience as a result of these risks is further discussed in Part I, Item 1A and Part II, Item 7 of this Annual Report on Form 10-K.
Additional information regarding credit risks is included in Part I, Item 1A of this Annual Report on Form 10-K. Counterparties We are also exposed to credit risk with respect to our business and lender counterparties.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 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, and fair value and liquidity risk - in a prudent manner designed to enhance our earnings and dividends and preserve our capital.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risks We are exposed to market risks arising from changes in interest rates, credit conditions, prepayment behavior, inflation and broader economic conditions. These factors may affect the fair value of our assets and liabilities, the timing and amount of cash flows, and our earnings and equity.
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In general, we seek to assume risks that can be quantified from historical experience, to actively manage such risks, and to maintain capital levels consistent with these risks. This section presents a general overview of these risks.
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We seek to manage these risks through active asset and liability management, the use of derivatives, portfolio diversification, and maintaining appropriate capital and liquidity levels. However, market conditions may change in ways that adversely affect our results.
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Credit Risk Integral to our business is assuming credit risk through our ownership of real estate loans, securities and other investments as well as through our reliance on the creditworthiness of business counterparties.
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Credit Risk We assume credit risk primarily through our ownership of residential consumer loans, residential investor loans, multifamily loans, mortgage-backed securities, and certain credit risk transfer securities, as well as through exposure to business counterparties. These investments are subject to the risk of borrower default, deterioration in property values, adverse economic conditions, and changes in regulatory or market environments.
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We believe the securities, loans and other assets we purchase are priced to generate an expected return that compensates us for the underlying credit risk associated with these investments. Nevertheless, there may be significant credit losses associated with these investments should they perform worse than we expect on a credit basis.
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Credit losses on residential real estate loans and securities 81 can occur for many reasons, including but not limited to: risk of borrower default, deterioration in property values, adverse economic conditions, and changes in market or regulatory environments.
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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.
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Residential investor loans may be particularly sensitive to rental market conditions and borrower refinancing risk, especially where loans are interest-only or otherwise not fully amortizing. In addition, adjustable-rate loans may experience higher delinquencies in rising rate environments.
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To the extent we find the credit risks on specific assets are changing adversely, we may be able to take actions, such as selling the affected investments, to mitigate potential losses. The market may adversely change before we have the ability to sell the affected investment and we may sell below our estimated fair market value.
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Nevertheless, there remains substantial uncertainty about the future performance of these assets.
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Additionally, we may not always be successful in analyzing risks, reviewing underwriting criteria, foreseeing adverse changes in credit performance or in effectively mitigating future credit losses and the ability to sell an asset may be limited due to the structure of the asset or the absence of a liquid market for the asset.
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We are exposed to interest rate risk during the period between loan origination or acquisition and ultimate sale or securitization (the “accumulation period”). We use derivative instruments to mitigate a portion of this exposure; however, we do not fully hedge all interest rate risk.
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Credit losses on residential real estate loans and securities can occur for many reasons, including, but not limited to: poor origination practices; fraud; poor underwriting; poor servicing practices; weak economic conditions; increases in payments required to be made by borrowers (including, for example, for hazard insurance covering their property); declines in the value of real estate; natural disasters, the effects of climate change (including flooding, drought, and severe weather) and other natural events; uninsured property loss; over-leveraging of the borrower; costs of remediation of environmental conditions, such as indoor mold; acts of war or terrorism; changes in legal protections for lenders and other changes in law or regulation; and personal events affecting borrowers, such as reduction in income, job loss, divorce, or health problems.
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Changes in interest rates will have an impact on the values and cash flows of our assets and corresponding liabilities. 82 Prepayment Risk Prepayment risks exist in many of the assets and liabilities on our consolidated balance sheets.
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In addition, if the U.S. economy or the housing market were to deteriorate (and that deteriorating was in excess of what we anticipated), credit losses could increase beyond levels that we have anticipated. Credit losses on residential investor real estate loans and securities can occur for many of the reasons noted above for residential consumer real estate loans and securities.
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When evaluating investments, we apply baseline assumptions regarding expected prepayment speeds; however, actual prepayment behavior may differ from expectations due to changes in interest rates, housing market conditions, borrower behavior, or other factors. Variations from assumed prepayment rates may adversely affect earnings, cash flows, and dividends.
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Moreover, these types of real estate loans and securities may not be fully amortizing and, therefore, the borrower’s ability to repay the principal when due may depend upon the ability of the borrower to refinance or sell the property at maturity.
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For additional details, refer to Part I, Item 1A of this Annual Report on Form 10-K, Risk Factors. Inflation Risk Inflation and expectations of future inflation can influence interest rates, financing costs, property values, and broader economic conditions. Sustained inflation may increase borrowing costs, reduce housing affordability, or otherwise affect asset performance and valuation.
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Residential investor real estate loans and securities are particularly sensitive to conditions in the rental housing market, including declining or delinquent rents, the level of operating expenses required to maintain properties, and to demand for rental residential properties, as well as changes in the financial wherewithal of the borrower.
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Although our assets and liabilities are primarily financial in nature and measured at historical cost or fair value in accordance with GAAP, changes in inflation may indirectly affect our earnings and financial condition through their impact on market conditions and interest rates.
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Multifamily Loans and Securities Multifamily loans we may acquire, invest in, or originate are generally secured by real property. The multifamily securities we invest in are primarily subordinate positions in securitizations sponsored by Freddie Mac that are comprised of loans collateralized by multifamily properties. We also own and may continue to invest in other third-party sponsored multifamily mortgage-backed securities.
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Fair Value and Liquidity Risks We finance our assets through a combination of equity capital and short- and long-term debt, including warehouse facilities, repurchase agreements, securitizations, and other secured and unsecured borrowings. Changes in the fair value of our assets may affect our liquidity, particularly during periods when assets are financed with short-term debt.
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Credit losses on these real estate loans and securities can occur for many of the same reasons noted above for residential consumer and residential investor real estate loans, including: poor origination practices; fraud; faulty appraisals; documentation errors; poor underwriting; legal errors; poor servicing practices; weak economic conditions; decline in the value of properties; declining rents on single and multifamily residential rental properties; special hazards; earthquakes and other natural events; over-leveraging of the borrower or on the property; reduction in market rents and occupancies and poor property management practices; increases in operating cost (including, for example, increases in the cost of insurance); and changes in legal protections for lenders.
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During the accumulation period — when loans or other assets are funded prior to sale or securitization — declines in asset values may reduce borrowing capacity or require the posting of additional collateral under marginable facilities.
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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.
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In addition, certain financing arrangements are uncommitted or subject to renewal, and counterparties may elect not to extend additional credit or may do so on less favorable terms. We seek to manage liquidity risk by maintaining what we believe to be adequate capital and cash reserves, diversifying financing sources, and structuring certain financings as non-recourse or non-marginable where appropriate.
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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.
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Quantitative Information on Market Risk Principal Amounts Maturing and Effective Rates During Year December 31, 2025 (Dollars in Thousands) 2026 2027 2028 2029 2030 Thereafter Principal Balance Fair Value Interest Rate Sensitive Assets Residential Consumer Loans - HFS (1) Fixed Rate Principal 2,855,953 — — — — — 2,855,953 2,923,329 Interest Rate 6.62 % N/A N/A N/A N/A N/A Hybrid Principal 166,407 — — — — — 166,407 168,685 Interest Rate 6.10 % N/A N/A N/A N/A N/A Residential Consumer Loans - HFI at Sequoia Adjustable Rate Principal 137,314 111,757 90,958 70,612 57,476 188,765 656,882 656,496 Interest Rate 4.56 % 4.20 % 4.14 % 3.95 % 3.94 % 3.05 % Fixed Rate Principal 2,165,392 1,806,464 1,511,052 1,267,588 1,066,690 6,574,752 14,391,938 14,187,251 Interest Rate 3.88 % 3.88 % 3.88 % 3.89 % 3.89 % 3.92 % Residential Investor Term Loans - HFS (1) Fixed Rate Principal 965 — — 10,210 28,935 165,474 205,584 202,422 Interest Rate 6.90 % N/A N/A 7.75 % 6.38 % 6.72 % Residential Investor Bridge Loans - HFS (1) Adjustable Rate Principal 81,552 11,989 3,514 — — — 97,055 83,773 Interest Rate 9.49 % 7.73 % 7.73 % N/A N/A N/A Fixed Rate Principal 220,135 9,049 13,155 — — — 242,339 227,158 Interest Rate 8.85 % 7.84 % 14.00 % N/A N/A N/A Residential Investor Term Loans - HFI at CAFL Fixed Rate Principal 431,309 259,245 210,489 347,407 349,553 485,077 2,083,080 1,985,910 Interest Rate 4.86 % 5.74 % 6.22 % 5.23 % 4.99 % 6.69 % Residential Investor Bridge Loans - HFI at CAFL Adjustable Rate Principal 250,317 218,282 7,854 — — — 476,453 485,068 Interest Rate 8.53 % 7.33 % 7.52 % N/A N/A N/A Fixed Rate Principal 586,706 36,191 — — — — 622,897 632,333 Interest Rate 9.71 % 9.73 % N/A N/A N/A N/A 84 Quantitative Information on Market Risk Principal Amounts Maturing and Effective Rates During Year December 31, 2025 (Dollars in Thousands) 2026 2027 2028 2029 2030 Thereafter Principal Balance Fair Value Interest Rate Sensitive Assets (continued) Residential Senior Securities Fixed Rate (2) Principal — — — — — — — 133,593 Interest Rate 0.31 % 0.31 % 0.31 % 0.30 % 0.30 % 0.23 % Residential Subordinate Securities Fixed Rate Principal 300 182,264 173 891 368 137,889 321,885 284,516 Interest Rate 1.49 % 1.52 % 1.50 % 1.50 % 1.49 % 1.78 % Hybrid Principal 419 311 234 479 2,404 13,663 17,510 4,907 Interest Rate 0.27 % 0.25 % 0.26 % 0.22 % 0.37 % 0.12 % Interest Rate Sensitive Liabilities Asset-Backed Securities Issued Sequoia Entities Adjustable Rate Principal 116,469 96,136 79,055 62,994 51,963 218,128 624,745 624,286 Interest Rate 4.97 % 5.03 % 5.13 % 5.21 % 5.32 % 2.95 % Fixed Rate Principal 2,379,882 2,004,660 1,834,207 1,514,171 1,150,638 5,482,003 14,365,561 13,916,111 Interest Rate 5.00 % 5.03 % 4.99 % 4.92 % 4.67 % 4.52 % CAFL Entities (3) Fixed Rate Principal 405,419 245,968 194,991 290,863 451,953 1,257,068 2,846,262 2,824,159 Interest Rate 4.91 % 4.74 % 4.58 % 4.19 % 3.65 % 2.90 % HEI Entity Fixed Rate Principal 34,733 30,393 28,023 19,405 14,618 — 127,172 127,475 Interest Rate 6.56 % 5.63 % 5.89 % 4.48 % 1.51 % N/A Debt Facilities and Other Financing Principal 3,279,609 501,498 263,063 — — — 4,044,170 4,036,314 Interest Rate 5.98 % 7.78 % 7.54 % N/A N/A N/A Corporate Debt Principal $ 9,264 $ 297,170 $ — $ 143,142 $ 189,232 $ 139,500 $ 778,308 $ 763,068 Interest Rate 8.11 % 8.13 % N/A 8.36 % 8.06 % 6.35 % (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 2026.
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In connection with our servicer advance investments, the partnership entity (the "SA Buyer") formed to invest in servicer advance investments and excess MSRs, has agreed to purchase all future arising servicer advances under certain residential mortgage servicing agreements.
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SA Buyer relies, in part, on its members to make committed capital contributions in order to pay the purchase price for future servicer advances.
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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.
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The outstanding balance of servicer advances securing the financing is not likely to be repaid on or before the maturity date of such financing arrangement.
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We expect to request the same counterparty or another one of our financing sources to renew or refinance the financing for an additional fixed period, however, there can be no assurance that we will be able to extend the financing arrangement upon the expiration of its stated term, which subjects us to a number of risks.
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A financing source that elects to extend or refinance may charge higher interest rates and impose more onerous terms upon us, including without limitation, lowering the amount of financing that can be extended against the servicer advances being financed.
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If we are unable to renew or refinance the servicer advance financing, the securitization entity will be required to repay the outstanding balance of the financing on the related maturity date.
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Additionally, there may be substantial increases in the interest rates under the financing arrangement if the notes are not repaid, extended or refinanced prior to the expected repayment date, which may be before the related maturity date.
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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.
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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.
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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.
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Our general strategy with respect to interest rates is to maintain an asset/liability posture (including hedges) that assumes some interest rate risks but not to such a degree that the achievement of our long-term goals would likely be adversely affected by changes in interest rates.
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Accordingly, we are willing to accept short-term volatility of earnings and changes in our reported equity in order to accomplish our goal of achieving attractive long-term returns.
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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.
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If actual prepayment rates deviate from our baseline expectations, it could have an adverse change to our expected returns. In order to mitigate this risk, we may use derivative financial instruments. We caution that prepayment rates are difficult to predict or anticipate, and adverse changes in the rate of prepayment could reduce our cash flows, earnings, and dividends.
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Inflation Risk Virtually all of our consolidated assets and liabilities are financial in nature.
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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.
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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.
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We seek to manage these risks, including by maintaining what we believe to be adequate cash and capital levels. We acquire or originate residential consumer and residential investor loans and HEI and then hold, sell or securitize them as part of our mortgage banking operations.
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Changes in the fair value of the loans or HEI, once sold or securitized, do not have an impact on our liquidity. However, changes in fair values during the accumulation period (while these loans or HEI are typically funded with short-term debt before they are sold or securitized) may impact our liquidity.
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We would be exposed to liquidity risk to the extent the values of these loans or HEI 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, in addition to amounts required by our financing counterparties.
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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.
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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.
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In addition, our borrowing facilities are generally uncommitted, meaning that each time we request a new borrowing under a facility the lender has the option to decline to extend credit to us.
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The terms of these facilities and agreements typically include financial covenants (such as covenants to maintain a minimum amount of tangible net worth or stockholders’ equity, and/or a minimum amount of liquid assets and/or a maximum amount of recourse debt to equity), margin requirements (which typically require us to pledge additional collateral if and when the value of previously pledged collateral declines), operating covenants (such as covenants to conduct our business in accordance with applicable laws and regulations and covenants to provide notice of certain events to creditors), representations and warranties (such as representations and warranties relating to characteristics of pledged collateral, our exposure to litigation and/or regulatory enforcement actions and the absence of material adverse changes to our financial condition, our operations, or our business prospects), and events of default (such as a breach of covenant or representation/warranty and cross-defaults, under which an event of default is triggered under a credit facility if an event of default or similar event occurs under another credit facility).
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Quantitative Information on Market Risk Our future earnings are sensitive to a number of market risk factors and changes in these factors may have a variety of secondary effects that, in turn, will also impact our earnings and equity.
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. 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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