Principles of Consolidation (Tables)

3 Months Ended

Mar. 31, 2015

Variable Interest Entity [Line Items]

Securitization Activity Related to Unconsolidated Variable Interest Entity's Sponsored by Redwood

The following table presents information related to securitization transactions that occurred during the three months ended March 31, 2015 and 2014.

Securitization Activity Related to Unconsolidated VIEs Sponsored by Redwood



	Three Months Ended March 31,
(In Thousands)	2015		2014
Principal balance of loans transferred	$	338,796	$	—
Trading securities retained, at fair value	3,423		—
AFS securities retained, at fair value	2,859		—
MSRs recognized	1,872		—

The following table summarizes the cash flows during the three months ended March 31, 2015 and 2014 between us and the unconsolidated VIEs sponsored by us.

Cash Flows Related to Unconsolidated VIEs Sponsored by Redwood



	Three Months Ended March 31,
(In Thousands)	2015			2014
Proceeds from new transfers	$	341,716		$	—
MSR fees received	3,770			3,423
Funding of compensating interest	(90		)	(33		)
Cash flows received on retained securities	12,645			12,303

MSR Assumptions Related to Unconsolidated Variable Interest Entity's Sponsored by Redwood

The following table presents the key weighted-average assumptions used to measure MSRs and securities retained at the date of securitization.

Assumptions Related to Assets Retained from Unconsolidated VIEs Sponsored by Redwood



	Issued During The Three Months Ended March 31, 2015
At Date of Securitization	MSRs		Subordinate Securities
Prepayment rate	5 - 19 %		8	%
Discount rates	11	%	6	%
Credit loss assumptions	N/A		0.25	%

Unconsolidated Variable Interest Entity's Sponsored by Redwood Summary

The following table presents additional information at March 31, 2015 and December 31, 2014, related to unconsolidated securitizations accounted for as sales since 2012.

Unconsolidated VIEs Sponsored by Redwood



(In Thousands)	March 31, 2015		December 31, 2014
On-balance sheet assets, at fair value:
Interest-only, senior and subordinate securities, classified as trading	$	69,258	$	93,802
Senior and subordinate securities, classified as AFS	391,296		460,990
Maximum loss exposure ⁽¹⁾	460,554		554,792
Assets transferred:
Principal balance of loans outstanding	7,287,906		7,276,825
Principal balance of delinquent loans 30+ days delinquent	20,952		17,022

(1)

Maximum loss exposure from our involvement with unconsolidated VIEs pertains to the carrying value of our securities retained from these VIEs and represents estimated losses that would be incurred under severe, hypothetical circumstances, such as if the value of our interests and any associated collateral declines to zero. This does not include, for example, any potential exposure to representation and warranty claims associated with our initial transfer of loans into a securitization.

Key Assumptions and Sensitivity Analysis for Assets Retained from Unconsolidated Variable Interest Entity's Sponsored by Redwood

The following table presents key economic assumptions for assets retained from unconsolidated VIEs and the sensitivity of their fair values to immediate adverse changes in those assumptions at March 31, 2015 and December 31, 2014.

Key Assumptions and Sensitivity Analysis for Assets Retained from Unconsolidated VIEs Sponsored by Redwood



March 31, 2015	MSRs			Senior Securities			Subordinate Securities
(Dollars in Thousands)	MSRs			Senior Securities			Subordinate Securities
Fair value at March 31, 2015	$	50,156		$	65,809		$	394,745
Expected life (in years)⁽¹⁾	6			6			11
Prepayment speed assumption (annual CPR)⁽¹⁾	17		%	11		%	10		%
Decrease in fair value from:
10% adverse change	$	2,329		$	3,697		$	905
25% adverse change	5,530			7,035			2,356
Discount rate assumption⁽¹⁾	11		%	10		%	5		%
Decrease in fair value from:
100 basis point increase	$	1,645		$	2,540		$	30,841
200 basis point increase	3,216			4,899			57,886
Credit loss assumption ⁽¹⁾	N/A			0.25		%	0.25		%
Decrease in fair value from:
10% higher losses	N/A			$	345		$	2,397
25% higher losses	N/A			456			5,704



December 31, 2014	MSRs			Senior Securities			Subordinate Securities
(Dollars in Thousands)	MSRs			Senior Securities			Subordinate Securities
Fair value at December 31, 2014	$	56,801		$	93,802		$	460,990
Expected life (in years)⁽¹⁾	7			6			10
Prepayment speed assumption (annual CPR)⁽¹⁾	14		%	9		%	10		%
Decrease in fair value from:
10% adverse change	$	2,419		$	3,999		$	684
25% adverse change	5,639			9,475			2,355
Discount rate assumption⁽¹⁾	11		%	8		%	5		%
Decrease in fair value from:
100 basis point increase	$	2,104		$	4,214		$	34,149
200 basis point increase	4,102			8,091			64,474
Credit loss assumption ⁽¹⁾	N/A			0.25		%	0.25		%
Decrease in fair value from:
10% higher losses	N/A			$	126		$	3,169
25% higher losses	N/A			299			7,841


(1)	Expected life, prepayment speed assumption, discount rate assumption, and credit loss assumption presented in the tables above represent weighted averages.

Variable Interest Entity, Primary Beneficiary

Variable Interest Entity [Line Items]

Schedule of Variable Interest Entities

Assets and Liabilities of Consolidated VIEs



March 31, 2015	Sequoia Entities		Residential Resecuritization		Commercial Securitization		Total
(Dollars in Thousands)	Sequoia Entities		Residential Resecuritization		Commercial Securitization		Total
Residential loans, held-for-investment	$	1,304,426	$	—	$	—	$	1,304,426
Commercial loans, held-for-investment	—		—		191,575		191,575
Real estate securities	—		211,316		—		211,316
Restricted cash	147		—		135		282
Accrued interest receivable	1,720		449		1,491		3,660
Other assets	5,304		—		—		5,304
Total Assets	$	1,311,597	$	211,765	$	193,201	$	1,716,563
Accrued interest payable	$	893	$	10	$	374	$	1,277
Asset-backed securities issued	1,239,065		34,280		79,676		1,353,021
Total Liabilities	$	1,239,958	$	34,290	$	80,050	$	1,354,298
Number of VIEs	24		1		1		26

Variable Interest Entity, Not Primary Beneficiary

Variable Interest Entity [Line Items]

Schedule of Variable Interest Entities

Third-Party Sponsored VIE Summary



(Dollars in Thousands)	March 31, 2015
Residential Mortgage Backed Securities
Senior	$	480,200
Re-REMIC	169,240
Subordinate	175,250
Total Investments in Third-Party Sponsored VIEs	$	824,690

- Definition

Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

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