Business Purpose Loans (Tables)

6 Months Ended

Jun. 30, 2021

Classifications and Carrying Value of Loans

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 June 30, 2021 and December 31, 2020.

Table 6.1 – Classifications and Carrying Values of Residential Loans


June 30, 2021			Legacy				Freddie Mac
(In Thousands)	Redwood		Sequoia		Sequoia		SLST		Total
Held-for-sale at fair value	$	1,160,548	$	—	$	—	$	—	$	1,160,548
Held-for-investment at fair value	—		260,875		2,222,553		2,098,624		4,582,052
Total Residential Loans	$	1,160,548	$	260,875	$	2,222,553	$	2,098,624	$	5,742,600


December 31, 2020			Legacy				Freddie Mac
(In Thousands)	Redwood		Sequoia		Sequoia		SLST		Total
Held-for-sale at fair value	$	176,641	$	—	$	—	$	—	$	176,641
Held-for-investment at fair value	—		285,935		1,565,322		2,221,153		4,072,410
Total Residential Loans	$	176,641	$	285,935	$	1,565,322	$	2,221,153	$	4,249,051

The following table summarizes the classifications and carrying values of the business purpose loans owned at Redwood and at consolidated CAFL entities at June 30, 2021 and December 31, 2020.

Table 7.1 – Classifications and Carrying Values of Business Purpose Loans


June 30, 2021	Single-Family Rental				Residential
(In Thousands)	Redwood		CAFL		Bridge		Total
Held-for-sale at fair value	$	418,442	—		$	—	$	418,442
Held-for-investment at fair value	—		3,263,878		726,569		3,990,447
Total Business Purpose Loans	$	418,442	$	3,263,878	$	726,569	$	4,408,889


December 31, 2020	Single-Family Rental				Residential
(In Thousands)	Redwood		CAFL		Bridge		Total
Held-for-sale at fair value	$	245,394	$	—	$	—	$	245,394
Held-for-investment at fair value	—		3,249,194		641,765		3,890,959
Total Business Purpose Loans	$	245,394	$	3,249,194	$	641,765	$	4,136,353

The following table provides the activity of business purpose loans at Redwood during the three and six months ended June 30, 2021 and 2020.

Table 7.2 – Activity of Business Purpose Loans at Redwood


	Three Months Ended June 30, 2021				Three Months Ended June 30, 2020
(In Thousands)	SFR at Redwood		Bridge		SFR at Redwood		Bridge
Principal balance of loans originated	$	312,217	$	215,160	$	175,876	$	58,468
Principal balance of loans sold to third parties	—		354		—		1,558
Fair value of loans transferred from HFS to HFI (1)	297,301		N/A		220,923		N/A
Fair value of loans transferred from HFI to HFS (2)	44,922		—		—		—
Mortgage banking activities income (loss) recorded (3)	25,222		978		1,210		(3,277)
Investment fair value changes recorded (4)	—		(62)		2,222		21,774


	Six Months Ended June 30, 2021				Six Months Ended June 30, 2020
(In Thousands)	SFR at Redwood		Bridge		SFR at Redwood		Bridge
Principal balance of loans originated	$	565,315	$	348,389	$	436,005	$	285,836
Principal balance of loans sold to third parties	—		9,231		26,148		22,293
Fair value of loans transferred from HFS to HFI (1)	466,705		N/A		599,032		N/A
Fair value of loans transferred from HFI to HFS (2)	44,922		—		—		—
Mortgage banking activities income (loss) recorded (3)	35,470		1,521		11,540		(3,441)
Investment fair value changes recorded (4)	—		3,242		(20,806)		(16,828)

(1)Represents the transfer of single-family rental loans from held-for-sale to held-for-investment associated with CAFL securitizations.

(2)Represents the transfer of single-family rental loans from held-for-investment to held-for-sale associated with the call of a consolidated CAFL securitization during the second quarter of 2021.

(3)Represents net market valuation changes from the time a loan is originated to when it is sold or transferred to our investment portfolio. Additionally, for the three and six months ended June 30, 2021, we recorded loan origination fee income of $7 million and $13 million, respectively, through Mortgage banking activities, net on our consolidated statements of income (loss). For the three and six months ended June 30, 2020, we recorded loan origination fee income of $2 million and $11 million, respectively, through Mortgage banking activities, net on our consolidated statements of income (loss).

(4)Represents net market valuation changes for loans classified as held-for-investment.

The following table provides the activity of single-family rental loans held-for-investment at CAFL during the three and six months ended June 30, 2021 and 2020.

Table 7.3 – Activity of Single-Family Rental Loans Held-for-Investment at CAFL


	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2021		2020		2021		2020
Net market valuation gains (losses) recorded (1)	$	(1,230)	$	169,327	$	(62,132)	$	(102,590)

(1)For loans held at our consolidated CAFL entities, market value changes are based on the estimated fair value of the associated ABS issued, including securities we own, 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 Table 4.2.

The following tables summarize the characteristics of the business purpose loans owned at Redwood and at consolidated CAFL entities at June 30, 2021 and December 31, 2020.

Table 7.4 – Characteristics of Business Purpose Loans


June 30, 2021	Single-Family Rental at Redwood			Single-Family Rental at CAFL			Bridge
(Dollars in Thousands)
Number of loans	112			1,121			2,471
Unpaid principal balance	$	399,900		$	3,060,949		$	729,149
Fair value of loans	$	418,442		$	3,263,878		$	726,569
Weighted average coupon	4.84		%	5.34		%	7.63		%
Weighted average remaining loan term (years)	7			5			1
Market value of loans pledged as collateral under short-term debt facilities	$	122,277		N/A			$	127,133
Market value of loans pledged as collateral under long-term debt facilities	$	246,903		N/A			$	555,791

Delinquency information
Number of loans with 90+ day delinquencies (1)	9			21			40
Unpaid principal balance of loans with 90+ day delinquencies	$	6,586		$	59,841		$	35,018
Fair value of loans with 90+ day delinquencies (2)	$	5,369		N/A			$	31,512
Number of loans in foreclosure	7			10			43
Unpaid principal balance of loans in foreclosure	$	5,976		$	24,212		$	32,611
Fair value of loans in foreclosure (2)	$	4,798		N/A			$	28,963


December 31, 2020	Single-Family Rental at Redwood			Single-Family Rental at CAFL			Bridge
(Dollars in Thousands)
Number of loans	65			1,094			1,725
Unpaid principal balance	$	234,475		$	3,017,137		$	649,532
Fair value of loans	$	245,394		$	3,249,194		$	641,765
Weighted average coupon	4.84		%	5.44		%	8.09		%
Weighted average remaining loan term (years)	8			5			1
Market value of loans pledged as collateral under short-term debt facilities	$	34,098		N/A			$	92,931
Market value of loans pledged as collateral under long-term debt facilities	$	154,774		N/A			$	544,151

Delinquency information
Number of loans with 90+ day delinquencies (1)	10			22			31
Unpaid principal balance of loans with 90+ day delinquencies	$	7,127		$	61,440		$	39,415
Fair value of loans with 90+ day delinquencies (2)	$	6,143		N/A			$	33,605
Number of loans in foreclosure	—			10			25
Unpaid principal balance of loans in foreclosure	$	—		$	24,745		$	38,552
Fair value of loans in foreclosure (2)	$	—		N/A			$	33,066

(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.