Other Assets and Liabilities

12 Months Ended

Dec. 31, 2021

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Other assets at December 31, 2021 and 2020 are summarized in the following table.

Table 12.1 – Components of Other Assets


(In Thousands)	December 31, 2021		December 31, 2020
Investment receivable	$	82,781	$	43,176
Accrued interest receivable	47,515		39,445
REO	36,126		8,413
Deferred tax asset	20,867		871
Operating lease right-of-use assets	18,772		15,012

Fixed assets and leasehold improvements (1)	9,019		4,203
Margin receivable	7,269		4,758

Pledged collateral	—		1,177




Other	8,768		13,533
Total Other Assets	$	231,117	$	130,588

(1)Fixed assets and leasehold improvements had a basis of $17 million and accumulated depreciation of $8 million at December 31, 2021.

Accrued expenses and other liabilities at December 31, 2021 and 2020 are summarized in the following table.

Table 12.2 – Components of Accrued Expenses and Other Liabilities


(In Thousands)	December 31, 2021		December 31, 2020
Accrued compensation	$	74,636	$	24,393
Payable to non-controlling interests	42,670		16,941
Accrued interest payable	39,297		34,858
Margin payable	24,368		14,728
Operating lease liabilities	20,960		16,687
Residential loan and MSR repurchase reserve	9,306		8,631
Guarantee obligations	7,459		10,039
Accrued operating expenses	4,377		5,509
Bridge loan holdbacks	3,109		5,708
Accrued income taxes payable	726		5,614
Deferred consideration	—		14,579





Other	18,880		21,653
Total Accrued Expenses and Other Liabilities	$	245,788	$	179,340

Deferred Consideration

The deferred consideration presented in the table above is related to our acquisition of 5 Arches in 2019. During the first quarter of 2021, we distributed 806,068 shares of Redwood common stock and paid $1 million in cash in full settlement of the remaining deferred consideration associated with this acquisition.

Investment Receivable

Investment receivable primarily consists of amounts receivable from third-party servicers related to principal and interest receivable from business purpose loans and fees receivable from servicer advance investments.

Margin Receivable and Payable

Margin receivable and payable resulted from margin calls between us and our counterparties under derivatives, master repurchase agreements, and warehouse facilities, whereby we or the counterparty posted collateral. Through December 31, 2021, we had met all margin calls due.

Operating Lease Right-of-Use Assets and Operating Lease Liabilities

Operating lease liabilities are equal to the present value of our remaining lease payments discounted at our incremental borrowing rate and the operating lease right-of-use assets are equal to the operating lease liabilities adjusted for our deferred rent liabilities. These balances are reduced as lease payments are made. See Note 16 for additional information on leases.

REO

The following table summarizes the activity and carrying values of REO assets held at Redwood and at consolidated Legacy Sequoia, Freddie Mac SLST, and CAFL entities during the year ended December 31, 2021 and 2020.

Table 12.3 – REO Activity


	Year Ended December 31, 2021
(In Thousands)	Bridge		Legacy Sequoia		Freddie Mac SLST		SFR at CAFL		Total
Balance at beginning of period	$	4,600	$	638	$	646	$	2,529	$	8,413
Transfers to REO	15,424		217		3,268		21,129		40,038
Liquidations (1)	(7,515)		(956)		(2,137)		(2,034)		(12,642)
Changes in fair value, net	559		162		251		(655)		317
Balance at End of Period	$	13,068	$	61	$	2,028	$	20,969	$	36,126


	Year Ended December 31, 2020
(In Thousands)	Bridge		Legacy Sequoia		Freddie Mac SLST		SFR at CAFL		Total
Balance at beginning of period	$	6,887	$	460	$	445	$	1,670	$	9,462
Transfers to REO	6,111		532		1,319		6,157		14,119
Liquidations (1)	(8,830)		(243)		(1,178)		(4,371)		(14,622)
Changes in fair value, net	432		(111)		60		(927)		(546)
Balance at End of Period	$	4,600	$	638	$	646	$	2,529	$	8,413

(1)For the years ended December 31, 2021 and 2020, REO liquidations resulted in $0.3 million and $1 million of realized losses, respectively, which were recorded in Investment fair value changes, net on our consolidated statements of income (loss).

The following table provides the detail of REO assets at Redwood and at consolidated Legacy Sequoia, Freddie Mac SLST, and CAFL entities at December 31, 2021 and 2020.

Table 12.4 – REO Assets


Number of REO assets	Redwood Bridge	Legacy Sequoia	Freddie Mac SLST	SFR at CAFL	Total
At December 31, 2021	5	2	24	3	34
At December 31, 2020	3	3	9	2	17

Legal and Repurchase Reserves

See Note 16 for additional information on the legal and residential repurchase reserves.

Payable to Non-Controlling Interests

In 2018, Redwood and a third-party co-investor, through two partnership entities consolidated by Redwood, purchased servicer advances and excess MSRs related to a portfolio of residential mortgage loans serviced by the co-investor (see Note 4 and Note 10 for additional information on the partnership entities and associated investments). We account for the co-investor’s interests in the entities as liabilities and at December 31, 2021, the carrying value of their interests was $26 million, representing their current economic interest in the entities. Earnings from the partnership entities are allocated to the co-investors on a proportional basis and during the years ended December 31, 2021, 2020, and 2019 we allocated $2 million of income, $0.2 million of losses, and $1 million of gains, respectively, to the co-investors, which were recorded in Other expenses on our consolidated statements of income (loss).

During the third quarter of 2021, Redwood and a third-party investor co-sponsored the transfer and securitization of HEIs through the Point HEI securitization entity. We account for the co-investor’s interest in the Point HEI securitization entity as a liability and at December 31, 2021, the carrying value of their interests was $17 million, representing their current economic interest in the Point HEI entity. See Note 10 for a further discussion of the Point HEI securitization.