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Residential Loans | 9 Months Ended
--- | ---
Sep. 30, 2015
Residential Loans |
Mortgage Loans on Real Estate [Line Items] |
Loans | Residential Loans We acquire residential loans from third-party originators. The following table summarizes the classifications and carrying values of the residential loans owned at Redwood and at consolidated Sequoia entities at September 30, 2015 and December 31, 2014. Table 6.1 – Classifications and Carrying Values of the Residential Loans
September 30, 2015 |  |  |  |  |  |
(In Thousands) |  | Redwood |  | Sequoia (1) |  | Total
Held-for-sale |  |  |  |  |  |
Fair value - conforming |  | $ | 236,314 |  |  | $ | — |  |  | $ | 236,314 |
Fair value - jumbo |  | 1,268,391 |  |  | — |  |  | 1,268,391 |
Lower of cost or fair value |  | 1,446 |  |  | — |  |  | 1,446 |
Held-for-investment |  |  |  |  |  |  |
Fair value - jumbo |  | 1,360,277 |  |  | 1,170,246 |  |  | 2,530,523 |
Total Residential Loans |  | $ | 2,866,428 |  |  | $ | 1,170,246 |  |  | $ | 4,036,674 |
December 31, 2014 |  |  |  |  |  |
(In Thousands) |  | Redwood |  | Sequoia (1) |  | Total
Held-for-sale |  |  |  |  |  |
Fair value - conforming |  | $ | 244,714 |  |  | $ | — |  |  | $ | 244,714 |
Fair value - jumbo |  | 1,096,317 |  |  | — |  |  | 1,096,317 |
Lower of cost or fair value |  | 1,488 |  |  | — |  |  | 1,488 |
Held-for-investment |  |  |  |  |  |
Fair value - jumbo |  | 581,668 |  |  | — |  |  | 581,668 |
At amortized cost |  | — |  |  | 1,474,386 |  |  | 1,474,386 |
Total Residential Loans |  | $ | 1,924,187 |  |  | $ | 1,474,386 |  |  | $ | 3,398,573 |
(1) | Upon adoption of ASU 2014-13 on January 1, 2015, we began to record loans held-for-investment at consolidated Sequoia entities at fair value. See Note 3 for further discussion.
At September 30, 2015, we owned mortgage servicing rights associated with $2.22 billion (principal balance) of consolidated residential loans purchased from third-party originators. The value of these MSRs is included in the carrying value of the associated loans on our balance sheet. We contract with a licensed sub-servicer that performs servicing functions for these loans. Residential Loans Held-for-Sale At Fair Value At September 30, 2015, we owned 2,669 loans held-for-sale at fair value with an unpaid principal balance of $1.46 billion, compared to 2,273 loans with an unpaid principal balance of $1.30 billion at December 31, 2014. At September 30, 2015 and December 31, 2014, none of these loans were greater than 90 days delinquent and none of these loans were in foreclosure. During the three and nine months ended September 30, 2015, we purchased $2.91 billion and $8.09 billion (principal balance) of loans, respectively, for which we elected the fair value option and recorded $11 million and $10 million of positive valuation adjustments, respectively, on residential loans held-for-sale at fair value through mortgage banking and investment activities, net, a component of our consolidated statements of income. During the three and nine months ended September 30, 2015, we sold $2.07 billion and $7.00 billion (principal balance) of loans held-for-sale, respectively. At September 30, 2015, loans held-for-sale with a market value of $1.30 billion were pledged as collateral under short-term borrowing agreements. At Lower of Cost or Fair Value At September 30, 2015 and December 31, 2014, we held nine residential loans at the lower of cost or fair value with $2 million in outstanding principal balance and a carrying value of $1 million for both periods. Residential Loans Held-for-Investment at Fair Value At Redwood At September 30, 2015, we owned 1,808 held-for-investment loans at Redwood with an unpaid principal balance of $1.33 billion compared to 803 loans with an unpaid principal balance of $566 million at December 31, 2014. At September 30, 2015, none of these loans were greater than 90 days delinquent and none of these loans were in foreclosure. At December 31, 2014, one of these loans was greater than 90 days delinquent and none of the loans were in foreclosure. During the three and nine months ended September 30, 2015, we transferred loans with a fair value of $300 million and $962 million, respectively, from held-for-sale to held-for-investment. During the three months ended September 30, 2015, we transferred loans with a fair value of $67 million from held-for-investments to held-for-sale. During the three and nine months ended September 30, 2015, we recorded positive $9 million and positive $5 million of valuation adjustments, respectively, on residential loans held-for-investment at fair value through mortgage banking and investment activities, net, a component of our consolidated statements of income. At September 30, 2015, $1.36 billion of these loans were pledged as collateral under a borrowing agreement with the FHLBC. The outstanding loans held-for-investment at Redwood at September 30, 2015 were originated in 2014 and 2015 and the weighted average FICO score of borrowers backing these loans was 772 (at origination) and the weighted average loan-to-value ("LTV") ratio of these loans was 64% (at origination). At September 30, 2015, these loans were comprised of 97% fixed-rate loans with a weighted average coupon of 4.10%, and the remainder were hybrid loans with a weighted average coupon of 3.41%. At Consolidated Sequoia Entities On January 1, 2015, we eliminated $13 million of unamortized premium, net and $21 million of allowance for loan losses, related to loans at our consolidated Sequoia entities as part of our initial adoption of ASU 2014-13 and recorded a valuation adjustment on these loans to reduce the loan carrying values to their estimated fair values. See Note 3 for further discussion. The following table details the carrying value for residential loans held-for-investment at consolidated Sequoia entities at September 30, 2015 and December 31, 2014. Table 6.2 – Carrying Value for Held-for-Investment Residential Loans at Sequoia Entities
(In Thousands) |  | September 30, 2015 |  | December 31, 2014
Principal balance |  | $ | 1,275,609 |  |  | $ | 1,483,213 |
Unamortized premium, net |  | — |  |  | 12,511 |
Allowance for loan losses |  | — |  |  | (21,338 | )
Valuation adjustment |  | (105,363 | ) |  | — |
Carrying value |  | $ | 1,170,246 |  |  | $ | 1,474,386 |
At September 30, 2015, we owned 4,815 held-for-investment loans at consolidated Sequoia entities, as compared to 5,315 loans at December 31, 2014. The weighted average FICO score of borrowers backing these loans was 732 (at origination) and the weighted average LTV ratio of these loans was 66% (at origination). At September 30, 2015 and December 31, 2014, the unpaid principal balance of loans at consolidated Sequoia entities delinquent greater than 90 days was $63 million and $73 million, respectively, and the unpaid principal balance of loans in foreclosure was $32 million and $39 million, respectively. During the three and nine months ended September 30, 2015, we recorded negative $0.4 million and positive $5 million, respectively, of net valuation adjustments on these loans through mortgage banking and investment activities, net on our consolidated statements of income.

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