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Residential Loans | 9 Months Ended
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Sep. 30, 2020
Receivables [Abstract] |
Residential Loans | Residential Loans We acquire residential loans from third-party originators and may sell or securitize these loans or hold them for investment. The following table summarizes the classifications and carrying values of the residential loans owned at Redwood and at consolidated Sequoia and Freddie Mac SLST entities at September 30, 2020 and December 31, 2019. Table 6.1 – Classifications and Carrying Values of Residential Loans
September 30, 2020 |  |  |  | Legacy |  | Sequoia |  | Freddie Mac |  |
(In Thousands) |  | Redwood |  | Sequoia |  | Choice |  | SLST |  | Total
Held-for-sale at fair value |  | $ | 105,128 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 105,128 |
Held-for-investment at fair value |  | — |  |  | 296,765 |  |  | 1,836,361 |  |  | 2,256,682 |  |  | 4,389,808 |
Total Residential Loans |  | $ | 105,128 |  |  | $ | 296,765 |  |  | $ | 1,836,361 |  |  | $ | 2,256,682 |  |  | $ | 4,494,936 |
December 31, 2019 |  |  |  | Legacy |  | Sequoia |  | Freddie Mac |  |
(In Thousands) |  | Redwood |  | Sequoia |  | Choice |  | SLST |  | Total
Held-for-sale at fair value |  | $ | 536,385 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 536,385 |
Held-for-investment at fair value |  | 2,111,897 |  |  | 407,890 |  |  | 2,291,463 |  |  | 2,367,215 |  |  | 7,178,465 |
Total Residential Loans |  | $ | 2,648,282 |  |  | $ | 407,890 |  |  | $ | 2,291,463 |  |  | $ | 2,367,215 |  |  | $ | 7,714,850 |
At September 30, 2020, we owned mortgage servicing rights associated with $103 million (principal balance) of residential loans owned at Redwood that were purchased from third-party originators. The value of these MSRs is included in the carrying value of the associated loans on our consolidated balance sheets. We contract with licensed sub-servicers that perform servicing functions for these loans. Residential Loans Held-for-Sale At Fair Value The following table summarizes the characteristics of residential loans held-for-sale at September 30, 2020 and December 31, 2019. Table 6.2 – Characteristics of Residential Loans Held-for-Sale
(Dollars in Thousands) |  | September 30, 2020 |  | December 31, 2019
Number of loans |  | 118 |  |  | 669 |
Unpaid principal balance |  | $ | 102,921 |  |  | $ | 524,928 |
Fair value of loans |  | $ | 105,128 |  |  | $ | 536,280 |
Number of loans with 90+ day delinquencies |  | 2 |  |  | 1 |
Unpaid principal balance of loans with 90+ day delinquencies |  | $ | 2,356 |  |  | $ | 747 |
Fair value of loans with 90+ day delinquencies |  | $ | 1,767 |  |  | $ | 616 |
Number of loans in foreclosure |  | — |  |  | — |
Market value of loans pledged as collateral under short-term borrowing agreements |  | $ | 95,023 |  |  | $ | 201,949 |
The following table provides the activity of residential loans held-for-sale during the three and nine months ended September 30, 2020 and 2019. Table 6.3 – Quarterly Activity of Residential Loans Held-for-Sale
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(In Thousands) |  | 2020 |  | 2019 |  | 2020 |  | 2019
Principal balance of loans acquired |  | $ | 172,162 |  |  | $ | 1,446,750 |  |  | $ | 2,859,813 |  |  | $ | 3,936,111 |
Principal balance of loans sold |  | 87,868 |  |  | 1,534,315 |  |  | 5,024,663 |  |  | 3,921,280 |
Net market valuation gains (losses) recorded (1) |  | (478) |  |  | (6,623) |  |  | (15,972) |  |  | 286 |
(1)Net market valuation gains (losses) on residential loans held-for-sale are recorded through Mortgage banking activities, net on our consolidated statements of income (loss). Residential Loans Held-for-Investment at Fair Value The following tables summarize the characteristics of the residential loans owned at Redwood and at consolidated Sequoia and Freddie Mac SLST entities at September 30, 2020 and December 31, 2019. Table 6.4 – Characteristics of Residential Loans Held-for-Investment
September 30, 2020 |  |  |  | Legacy |  | Sequoia |  | Freddie Mac
(Dollars in Thousands) |  | Redwood |  | Sequoia |  | Choice |  | SLST
Number of loans |  | — |  |  | 1,976 |  |  | 2,546 |  |  | 13,893 |
Unpaid principal balance |  | $ | — |  |  | $ | 352,392 |  |  | $ | 1,811,967 |  |  | $ | 2,304,047 |
Fair value of loans |  | $ | — |  |  | $ | 296,765 |  |  | $ | 1,836,361 |  |  | $ | 2,256,683 |
Number of loans with 90+ day delinquencies (1) |  | — |  |  | 49 |  |  | 132 |  |  | 1,772 |
Unpaid principal balance of loans with 90+ day delinquencies |  | $ | — |  |  | $ | 16,076 |  |  | $ | 102,693 |  |  | $ | 339,537 |
Fair value of loans with 90+ day delinquencies (2) |  | $ | — |  |  | N/A |  | N/A |  | N/A
Number of loans in foreclosure |  | — |  |  | 21 |  |  | 3 |  |  | 175 |
Unpaid principal balance of loans in foreclosure |  | $ | — |  |  | $ | 4,820 |  |  | $ | 1,814 |  |  | $ | 28,380 |
December 31, 2019 |  |  |  | Legacy |  | Sequoia |  | Freddie Mac
(Dollars in Thousands) |  | Redwood |  | Sequoia |  | Choice |  | SLST
Number of loans |  | 2,940 |  |  | 2,198 |  |  | 3,156 |  |  | 14,502 |
Unpaid principal balance |  | $ | 2,052,778 |  |  | $ | 424,829 |  |  | $ | 2,240,679 |  |  | $ | 2,428,035 |
Fair value of loans |  | $ | 2,111,897 |  |  | $ | 407,890 |  |  | $ | 2,291,463 |  |  | $ | 2,367,215 |
Number of loans with 90+ day delinquencies (1) |  | 2 |  |  | 39 |  |  | 9 |  |  | 587 |
Unpaid principal balance of loans with 90+ day delinquencies |  | $ | 1,585 |  |  | $ | 9,803 |  |  | $ | 6,755 |  |  | $ | 134,680 |
Fair value of loans with 90+ day delinquencies (2) |  | $ | 1,424 |  |  | N/A |  | N/A |  | N/A
Number of loans in foreclosure |  | — |  |  | 16 |  |  | 3 |  |  | 208 |
Unpaid principal balance of loans in foreclosure |  | $ | — |  |  | $ | 3,673 |  |  | $ | 2,290 |  |  | $ | 33,042 |
(1)For loans held at consolidated entities, the number of loans greater than 90 days delinquent includes loans in foreclosure. (2)The fair value of the loans held by consolidated entities was based on the fair value of the ABS issued by these entities, including securities we own, which we determined were more readily observable, in accordance with accounting guidance for collateralized financing entities. The following table provides the activity of residential loans held-for-investment at Redwood during the three and nine months ended September 30, 2020 and 2019. Table 6.5 – Quarterly Activity of Residential Loans Held-for-Investment at Redwood
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(In Thousands) |  | 2020 |  | 2019 |  | 2020 |  | 2019
Principal balance of loans acquired |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 39,194 |
Principal balance of loans sold |  | — |  |  | — |  |  | — |  |  | — |
Fair value of loans transferred from HFS to HFI |  | — |  |  | — |  |  | 13,258 |  |  | 68,703 |
Fair value of loans transferred from HFI to HFS |  | — |  |  | — |  |  | 1,870,986 |  |  | 22,814 |
Net market valuation gains (losses) recorded (1) |  | 218 |  |  | 7,667 |  |  | (93,314) |  |  | 71,323 |
(1)Net market valuation gains (losses) on residential loans held-for-investment at Redwood are recorded through Investment fair value changes, net on our consolidated statements of income (loss). The following table provides the activity of residential loans held-for-investment at consolidated entities during the three and nine months ended September 30, 2020 and 2019. Table 6.6 – Quarterly Activity of Residential Loans Held-for-Investment at Consolidated Entities
|  | Three Months Ended September 30, 2020 |  | Nine Months Ended September 30, 2020
|  | Legacy |  | Sequoia |  | Freddie Mac |  | Legacy |  | Sequoia |  | Freddie Mac
(In Thousands) |  | Sequoia |  | Choice |  | SLST |  | Sequoia |  | Choice |  | SLST
Fair value of loans transferred from HFS to HFI (1) |  | N/A |  | $ | — |  |  | N/A |  | N/A |  | $ | 270,506 |  |  | N/A
Net market valuation gains (losses) recorded (2) |  | $ | 21,938 |  |  | $ | (5,175) |  |  | $ | 159,687 |  |  | $ | (38,996) |  |  | $ | (21,727) |  |  | $ | 15,254 |
|  | Three Months Ended September 30, 2019 |  | Nine Months Ended September 30, 2019
|  | Legacy |  | Sequoia |  | Freddie Mac |  | Legacy |  | Sequoia |  | Freddie Mac
(In Thousands) |  | Sequoia |  | Choice |  | SLST |  | Sequoia |  | Choice |  | SLST
Fair value of loans transferred from HFS to HFI (1) |  | N/A |  | $ | 727,088 |  |  | N/A |  | N/A |  | $ | 1,076,671 |  |  | N/A
Net market valuation gains (losses) recorded (2) |  | $ | (103) |  |  | $ | (11,029) |  |  | $ | 39,783 |  |  | $ | 5,271 |  |  | $ | 4,841 |  |  | $ | 94,788 |
(1)Represents the transfer of loans from held-for-sale to held-for-investment associated with Sequoia Choice securitizations. (2)For loans held at our consolidated Legacy Sequoia, Sequoia Choice, and Freddie Mac SLST entities, market value changes are based on the estimated fair value of the associated ABS issued, pursuant to collateralized financing entity guidelines. The net impact to our income statement associated with our economic investments in these securitization entities is presented in Note 5. Business Purpose Residential LoansWe originate business purpose residential loans, including single-family rental loans and residential bridge loans. This origination activity commenced in connection with our acquisitions of 5 Arches and CoreVest in 2019. Business Purpose Residential Loan Originations During the three months ended September 30, 2020, we funded $261 million of business purpose residential loans and sold $2 million of residential bridge loans and $2 million of single-family rental loans to third parties. The remaining business purpose residential loans were transferred to our investment portfolio (residential bridge loans), or retained in our mortgage banking business (single-family rental loans) for future securitizations. Prior to the transfer of residential bridge loans to our investment portfolio, we recorded a net market valuation gain of less than $0.1 million on these loans through Mortgage banking activities, net on our consolidated statements of income (loss) for the three months ended September 30, 2020. Market valuation adjustments on our single-family rental loans are also recorded in Mortgage banking activities, net on our consolidated statements of income (loss) prior to their sale or securitization. Additionally, during the three and nine months ended September 30, 2020, we recorded loan origination fee income associated with business purpose residential loans of $3 million and $13 million, respectively, through Mortgage banking activities, net on our consolidated statements of income (loss). The following table summarizes the classifications and carrying values of the business purpose residential loans owned at Redwood at September 30, 2020 and December 31, 2019. Table 7.1 – Classifications and Carrying Values of Business Purpose Residential Loans
September 30, 2020 |  | Single-Family Rental |  | Residential |  |
(In Thousands) |  | Redwood |  | CAFL |  | Bridge |  | Total
Held-for-sale at fair value |  | $ | 285,549 |  |  | — |  |  | $ | — |  |  | $ | 285,549 |
Held-for-investment at fair value |  | — |  |  | 2,969,692 |  |  | 700,860 |  |  | 3,670,552 |
Total Business Purpose Residential Loans |  | $ | 285,549 |  |  | $ | 2,969,692 |  |  | $ | 700,860 |  |  | $ | 3,956,101 |
December 31, 2019 |  | Single-Family Rental |  | Residential |  |
(In Thousands) |  | Redwood |  | CAFL |  | Bridge |  | Total
Held-for-sale at fair value |  | $ | 331,565 |  |  | $ | — |  |  | $ | — |  |  | $ | 331,565 |
Held-for-investment at fair value |  | 237,620 |  |  | 2,192,552 |  |  | 745,006 |  |  | 3,175,178 |
Total Business Purpose Residential Loans |  | $ | 569,185 |  |  | $ | 2,192,552 |  |  | $ | 745,006 |  |  | $ | 3,506,743 |
The following tables summarize the characteristics of the business purpose residential loans owned at Redwood at September 30, 2020 and December 31, 2019. Table 7.2 – Characteristics of Business Purpose Residential Loans
September 30, 2020 |  | Single-Family Rental at Redwood |  | Single-Family Rental at CAFL |  | Residential Bridge
(Dollars in Thousands) |  |  |
Number of loans |  | 140 |  |  | 1,027 |  |  | 2,262 |
Unpaid principal balance |  | $ | 272,492 |  |  | $ | 2,815,045 |  |  | $ | 708,555 |
Fair value of loans |  | $ | 285,549 |  |  | $ | 2,969,692 |  |  | $ | 700,860 |
Weighted average coupon |  | 5.26 | % |  | 5.50 | % |  | 8.02 | %
Weighted average remaining loan term (years) |  | 7 |  | 6 |  | 1
Number of loans with 90+ day delinquencies (1) |  | 6 |  |  | 26 |  |  | 24 |
Unpaid principal balance of loans with 90+ day delinquencies |  | $ | 3,018 |  |  | $ | 70,949 |  |  | $ | 38,437 |
Fair value of loans with 90+ day delinquencies (2) |  | $ | 2,954 |  |  | N/A |  | $ | 33,464 |
Number of loans in foreclosure |  | — |  |  | 9 |  |  | 24 |
Unpaid principal balance of loans in foreclosure |  | $ | — |  |  | $ | 14,032 |  |  | $ | 39,755 |
Fair value of loans in foreclosure (2) |  | $ | — |  |  | N/A |  | $ | 34,489 |
December 31, 2019 |  | Single-Family Rental at Redwood |  | Single-Family Rental at CAFL |  | Residential Bridge
(Dollars in Thousands) |  |  |
Number of loans |  | 308 |  |  | 783 |  |  | 2,653 |
Unpaid principal balance |  | $ | 552,848 |  |  | $ | 2,078,214 |  |  | $ | 742,528 |
Fair value of loans |  | $ | 569,185 |  |  | $ | 2,192,552 |  |  | $ | 745,006 |
Weighted average coupon |  | 4.96 | % |  | 5.70 | % |  | 8.11 | %
Weighted average remaining loan term (years) |  | 9 |  | 7 |  | 2
Number of loans with 90+ day delinquencies (1) |  | 2 |  |  | 18 |  |  | 31 |
Unpaid principal balance of loans with 90+ day delinquencies |  | $ | 1,688 |  |  | $ | 29,039 |  |  | $ | 14,186 |
Fair value of loans with 90+ day delinquencies (2) |  | $ | 1,818 |  |  | N/A |  | $ | 12,111 |
Number of loans in foreclosure |  | 1 |  |  | 5 |  |  | 15 |
Unpaid principal balance of loans in foreclosure |  | $ | 130 |  |  | $ | 9,169 |  |  | $ | 8,987 |
Fair value of loans in foreclosure (2) |  | $ | 130 |  |  | N/A |  | $ | 6,917 |
(1)The number of loans greater than 90 days delinquent includes loans in foreclosure. (2)The fair value of the loans held by consolidated entities was based on the fair value of the ABS issued by these entities, including securities we own, which we determined were more readily observable, in accordance with accounting guidance for collateralized financing entities. Single-Family Rental Loans During the three and nine months ended September 30, 2020, we originated $196 million and $632 million of single-family rental loans, respectively. During the nine months ended September 30, 2020, we transferred $925 million of single-family rental loans from held-for-sale to held-for-investment associated with three CAFL securitizations and sold $34 million to third parties. Additionally, at March 31, 2020, we transferred all held-for-investment single-family rental loans to held-for-sale. During the three and nine months ended September 30, 2020, we recorded net market valuation gains of $43 million and $34 million, respectively, on single-family rental loans. The $43 million of net market valuation gains recorded during the three months ended September 30, 2020 were recorded through Mortgage banking activities, net on our consolidated statements of income (loss). Of the $34 million of net market valuation gains recorded during the nine months ended September 30, 2020, $55 million of net market valuation gains were recorded through Mortgage banking activities, net and $21 million of net market valuation losses were recorded through Investment fair value changes, net on our consolidated statements of income (loss). During the three and nine months ended September 30, 2019, we recorded net market valuation gains of $1 million and $3 million, respectively, on single-family rental loans through Mortgage banking activities, net on our consolidated statements of income (loss). Single-Family Rental Loans Held-for-Investment at CAFL In conjunction with our acquisition of CoreVest in the fourth quarter of 2019, we consolidated the single-family rental loans owned at certain CAFL securitization entities. The outstanding single-family rental loans held-for-investment at CAFL at September 30, 2020 were first-lien, fixed-rate loans with original maturities of five, seven, or ten years. During the three and nine months ended September 30, 2020, we recorded a net market valuation gain of $88 million and a net market valuation loss of $14 million, respectively, on these loans through Investment fair value changes, net on our consolidated statements of income (loss). Pursuant to the collateralized financing entity guidelines, the market valuation changes of these loans are based on the estimated fair value of the ABS issued associated with CAFL securitizations. The net impact to our income statement associated with our retained economic investment in the CAFL securitization entities is presented in Note 5. Residential Bridge Loans Held-for-Investment The outstanding residential bridge loans held-for-investment at September 30, 2020 were first lien, fixed-rate, interest-only loans with original maturities of six to 24 months. During the nine months ended September 30, 2020, we transferred four loans with a fair value of $5 million to REO, which is included in Other assets on our consolidated balance sheets. During the three and nine months ended September 30, 2020, $64 million and $324 million of newly originated residential bridge loans, respectively, were transferred to our investment portfolio. During the three and nine months ended September 30, 2020, we recorded a net market valuation gain of $7 million and a net market valuation loss of $10 million, respectively, on residential bridge loans held-for-investment at fair value through Investment fair value changes, net on our consolidated statements of income (loss). During both the three and nine months ended September 30, 2019, we recorded net market valuation losses of $1 million on residential bridge loans held-for-investment at fair value through Investment fair value changes, net on our consolidated statements of income (loss). At September 30, 2020, we had a $225 million commitment to fund residential bridge loans. See Note 16 for additional information on this commitment. Multifamily Loans Since 2018, we have invested in multifamily subordinate securities issued by Freddie Mac K-Series securitization trusts and were required to consolidate the underlying multifamily loans owned at these entities for financial reporting purposes in accordance with GAAP. During the first quarter of 2020, we sold subordinate securities issued by four such Freddie Mac K-Series securitization trusts and deconsolidated $3.85 billion of multifamily loans. See Note 2 for further discussion. The following table summarizes the characteristics of the multifamily loans consolidated at Redwood at September 30, 2020 and December 31, 2019. Table 8.1 – Characteristics of Multifamily Loans
(Dollars in Thousands) |  | September 30, 2020 |  | December 31, 2019
Number of loans |  | 28 |  |  | 279 |
Unpaid principal balance |  | $ | 464,680 |  |  | $ | 4,195,000 |
Fair value of loans |  | $ | 491,415 |  |  | $ | 4,408,524 |
Weighted average coupon |  | 4.25 | % |  | 4.13 | %
Weighted average remaining loan term (years) |  | 5 |  | 6
Number of loans with 90+ day delinquencies |  | — |  |  | — |
Number of loans in foreclosure |  | — |  |  | — |
The outstanding multifamily loans held-for-investment at the Freddie Mac K-Series entities at September 30, 2020 were first-lien, fixed-rate loans that were originated in 2015 and had original loan terms of ten years. The following table provides the activity of multifamily loans held-for-investment during the three and nine months ended September 30, 2020 and 2019. Table 8.2 – Quarterly Activity of Multifamily Loans Held-for-Investment
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(In Thousands) |  | 2020 |  | 2019 |  | 2020 |  | 2019
Net market valuation gains (losses) recorded (1) |  | $ | 2,340 |  |  | $ | 47,353 |  |  | $ | (61,500) |  |  | $ | 178,374 |
(1)Net market valuation gains (losses) on multifamily loans held-for-investment are recorded through Investment fair value changes, net on our consolidated statements of income (loss). For loans held at our consolidated Freddie Mac K-Series entities, market value changes are based on the estimated fair value of the associated ABS issued, pursuant to collateralized financing entity guidelines. The net impact to our income statement associated with our economic investment in these securitization entities is presented in Note 5.

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- Definition The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses. + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -URI http://asc.fasb.org/subtopic&trid=2196772 + Details
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