Asset-Backed Securities Issued

Through our Sequoia securitization program, we sponsor securitization transactions in which ABS backed by residential mortgage loans are issued by Sequoia entities. We consolidated the Legacy Sequoia and Sequoia Choice securitization entities, and beginning in the third quarter of 2018, certain third-party Freddie Mac K-Series securitization entities, that we determined were VIEs and for which we determined we were the primary beneficiary. Each consolidated securitization entity is independent of Redwood and of each other and the assets and liabilities are not owned by and are not legal obligations of Redwood. Our exposure to these entities is primarily through the financial interests we have retained, although we are exposed to certain financial risks associated with our role as a sponsor, servicing administrator, or depositor of these entities or as a result of our having sold assets directly or indirectly to these entities.

We account for the ABS issued under our consolidated entities at fair value, with periodic changes in fair value recorded in Investment fair value changes, net on our consolidated statements of income. Pursuant to the CFE guidelines, the market valuation changes on our loans are based on the estimated fair value of the associated ABS issued. The net impact to our income statement associated with our retained economic investment in each of these securitization entities is presented in Note 5.

The ABS issued by these entities consist of various classes of securities that pay interest on a monthly or quarterly basis. All ABS issued by the Sequoia Choice and Freddie Mac K-Series entities pay fixed rates of interest and substantially all ABS issued by the Legacy Sequoia entities pay variable rates of interest, which are indexed to one-, three-, or six-month LIBOR. ABS issued also includes some interest-only classes with coupons set at a fixed spread to a benchmark rate, or set at a spread to the interest rates earned on the assets less the interest rates paid on the liabilities of a securitization entity.

The carrying values of ABS issued by Sequoia securitization entities we sponsored at September 30, 2018 and December 31, 2017, along with other selected information, are summarized in the following table.

Table 13.1 – Asset-Backed Securities Issued



September 30, 2018	Legacy Sequoia			Sequoia Choice		Freddie Mac K-Series			Total
(Dollars in Thousands)	Legacy Sequoia			Sequoia Choice		Freddie Mac K-Series			Total
Certificates with principal balance	$	574,615		$	1,952,059	$	867,705		$	3,394,379
Interest-only certificates	1,447			27,763		35,358			64,568
Market valuation adjustments	(31,139		)	6,634		(27,457		)	(51,962		)
ABS Issued, Net	$	544,923		$	1,986,456	$	875,606		$	3,406,985
Range of weighted average interest rates, by series	2.33% to 3.43%			4.47% to 4.97%		3.39% to 3.80%
Stated maturities	2024 - 2036			2047 - 2048		2025 - 2027
Number of series	20			6		2



December 31, 2017	Legacy Sequoia			Sequoia Choice		Freddie Mac K-Series			Total
(Dollars in Thousands)	Legacy Sequoia			Sequoia Choice		Freddie Mac K-Series			Total
Certificates with principal balance	$	691,125		$	526,657	$	—		$	1,217,782
Interest-only certificates	1,972			7,695		—			9,667
Market valuation adjustments	(70,652		)	7,788		—			(62,864		)
ABS Issued, Net	$	622,445		$	542,140	$	—		$	1,164,585
Range of weighted average interest rates, by series	1.46% to 2.78%			4.52% to 4.73%		—		%
Stated maturities	2024 - 2036			2047		—
Number of series	20			2		—

The actual maturity of each class of ABS issued is primarily determined by the rate of principal prepayments on the assets of the issuing entity. Each series is also subject to redemption prior to the stated maturity according to the terms of the respective governing documents of each ABS issuing entity. As a result, the actual maturity of ABS issued may occur earlier than its stated maturity. At September 30, 2018, all of the ABS issued and outstanding had contractual maturities beyond five years. The following table summarizes the accrued interest payable on ABS issued at September 30, 2018 and December 31, 2017. Interest due on consolidated ABS issued is payable monthly.

Table 13.2 – Accrued Interest Payable on Asset-Backed Securities Issued



(In Thousands)	September 30, 2018		December 31, 2017
Legacy Sequoia	$	590	$	537
Sequoia Choice	7,643		2,031
Freddie Mac K-Series	2,606		—
Total Accrued Interest Payable on ABS Issued	$	10,839	$	2,568

The following table summarizes the carrying value components of the collateral for ABS issued and outstanding at September 30, 2018 and December 31, 2017.

Table 13.3 – Collateral for Asset-Backed Securities Issued



September 30, 2018	Legacy Sequoia		Sequoia Choice		Freddie Mac K-Series		Total
(In Thousands)	Legacy Sequoia		Sequoia Choice		Freddie Mac K-Series		Total
Residential loans	$	553,958	$	2,181,195	$	—	$	2,735,153
Multifamily loans	—		—		942,165		942,165
Restricted cash	147		11		—		158
Accrued interest receivable	860		9,046		2,843		12,749
REO	2,915		—		—		2,915
Total Collateral for ABS Issued	$	557,880	$	2,190,252	$	945,008	$	3,693,140



December 31, 2017	Legacy Sequoia		Sequoia Choice		Freddie Mac K-Series		Total
(In Thousands)	Legacy Sequoia		Sequoia Choice		Freddie Mac K-Series		Total
Residential loans	$	632,817	$	620,062	$	—	$	1,252,879
Restricted cash	147		4		—		151
Accrued interest receivable	867		2,524		—		3,391
REO	3,353		—		—		3,353
Total Collateral for ABS Issued	$	637,184	$	622,590	$	—	$	1,259,774