XML 53 R39.htm IDEA: XBRL DOCUMENT

Principles of Consolidation (Tables)

12 Months Ended

Dec. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

The following table presents a summary of the assets and liabilities of our consolidated VIEs.

Table 4.1 – Assets and Liabilities of Consolidated VIEs


December 31, 2021	Legacy Sequoia		Sequoia		CAFL(1)		Freddie Mac SLST(1)		Freddie Mac K-Series		Servicing Investment		Point HEI		Total Consolidated VIEs
(Dollars in Thousands)
Residential loans, held-for-investment	$	230,455	$	3,628,465	$	—	$	1,888,230	$	—	$	—	$	—	$	5,747,150
Business purpose loans, held-for-investment	—		—		3,766,316		—		—		—		—		3,766,316
Multifamily loans, held-for-investment	—		—		—		—		473,514		—		—		473,514

Other investments	—		—		—		—		—		384,754		159,553		544,307
Cash and cash equivalents	—		—		—		—		—		6,481		—		6,481
Restricted cash	148		5		15,221		—		—		25,420		5,292		46,086
Accrued interest receivable	210		10,885		15,737		5,792		1,315		1,462		—		35,401
Other assets	61		—		32,510		2,028		—		7,177		50		41,826
Total Assets	$	230,874	$	3,639,355	$	3,829,784	$	1,896,050	$	474,829	$	425,294	$	164,895	$	10,661,081
Short-term debt	$	—	$	—	$	—	$	—	$	—	$	294,447	$	—	$	294,447
Accrued interest payable	99		8,452		11,030		4,055		1,190		192		—		25,018
Accrued expenses and other liabilities	—		5		1,171		—		—		28,115		17,034		46,325
Asset-backed securities issued	227,881		3,383,048		3,474,898		1,588,463		441,857		—		137,410		9,253,557
Total Liabilities	$	227,980	$	3,391,505	$	3,487,099	$	1,592,518	$	443,047	$	322,754	$	154,444	$	9,619,347

Value of our investments in VIEs(1)	2,634		245,417		339,419		301,795		31,657		102,540		10,451		1,033,913
Number of VIEs	20		16		16		3		1		3		1		60


December 31, 2020	Legacy Sequoia		Sequoia Choice		CAFL		Freddie Mac SLST(1)		Freddie Mac K-Series		Servicing Investment		Total Consolidated VIEs
(Dollars in Thousands)
Residential loans, held-for-investment	$	285,935	$	1,565,322	$	—	$	2,221,153	$	—	$	—	$	4,072,410
Business purpose loans, held-for-investment	—		—		3,249,194		—		—		—		3,249,194
Multifamily loans, held-for-investment	—		—		—		—		492,221		—		492,221

Other investments	—		—		—		—		—		251,773		251,773
Cash and cash equivalents	—		—		—		—		—		11,579		11,579
Restricted cash	148		—		—		—		—		23,220		23,368
Accrued interest receivable	305		6,802		13,055		6,754		1,337		2,334		30,587
Other assets	638		—		2,930		646		—		5,723		9,937
Total Assets	$	287,026	$	1,572,124	$	3,265,179	$	2,228,553	$	493,558	$	294,629	$	8,141,069
Short-term debt	$	—	$	—	$	—	$	—	$	—	$	208,375	$	208,375
Accrued interest payable	141		4,697		10,278		4,846		1,177		135		21,274
Accrued expenses and other liabilities	—		50		—		—		—		18,353		18,403
Asset-backed securities issued	282,326		1,347,357		3,013,093		1,993,919		463,966		—		7,100,661
Total Liabilities	$	282,467	$	1,352,104	$	3,023,371	$	1,998,765	$	465,143	$	226,863	$	7,348,713

Value of our investments in VIEs(1)	4,559		220,020		238,680		229,788		28,415		67,766		789,228
Number of VIEs	20		10		14		2		1		3		50

(1)Value of our investments in VIEs, as presented in this table, represent the fair value of our economic interests in the VIEs only for consolidated VIEs we account for under the CFE election. CAFL includes SFR loan securitizations we account for under the CFE election and a bridge loan securitization for which we did not make the CFE election. As of December 31, 2021 and 2020, the fair value of our interests in the CAFL SFR securitizations were $302 million and $239 million, respectively, and our net carrying value in the CAFL Bridge securitization was $38 million and zero, respectively. Freddie Mac SLST includes securitizations we account for under the CFE election and also includes ABS issued in relation to a resecuritization of the securities we own in the consolidated Freddie Mac SLST VIEs, that we account for at amortized historical cost. As of December 31, 2021 and 2020, the fair value of our interests in the Freddie Mac SLST securitizations accounted for under the CFE election were $445 million and $428 million, respectively, and the carrying value of the ABS issued and carried at amortized historical cost was $143 million and $200 million respectively.

The following tables present income (loss) from these VIEs for the years ended December 31, 2021 and 2020.

Table 4.2 – Income (Loss) from Consolidated VIEs


	Year Ended December 31, 2021
	Legacy Sequoia		Sequoia		CAFL		Freddie Mac SLST		Freddie Mac K-Series		Servicing Investment		Point HEI		Total Consolidated VIEs
(Dollars in Thousands)
Interest income	$	4,709	$	74,025	$	207,202	$	76,287	$	19,266	$	18,803	$	—	$	400,292
Interest expense	(3,040)		(59,949)		(160,618)		(64,635)		(17,686)		(4,867)		—		(310,795)
Net interest income	1,669		14,076		46,584		11,652		1,580		13,936		—		89,497
Non-interest income

Investment fair value changes, net	(1,558)		14,176		8,521		62,374		11,599		(5,209)		218		90,121
Other income	—		—		72		—		—		—		—		72

Total non-interest income, net	(1,558)		14,176		8,593		62,374		11,599		(5,209)		218		90,193
General and administrative expenses	—		—		—		—		—		(283)		—		(283)
Other expenses	—		—		—		—		—		(1,689)		—		(1,689)

Income (Loss) from Consolidated VIEs	$	111	$	28,252	$	55,177	$	74,026	$	13,179	$	6,755	$	218	$	177,718


	Year Ended December 31, 2020
	Legacy Sequoia		Sequoia		CAFL		Freddie Mac SLST		Freddie Mac K-Series		Servicing Investment		Total Consolidated VIEs
(Dollars in Thousands)
Interest income	$	9,061	$	87,093	$	136,950	$	85,609	$	54,813	$	17,665	$	391,191
Interest expense	(5,945)		(73,643)		(105,732)		(66,859)		(51,521)		(6,441)		(310,141)
Net interest income	3,116		13,450		31,218		18,750		3,292		11,224		81,050
Non-interest income

Investment fair value changes, net	(1,512)		(13,244)		(39,574)		(21,160)		(81,039)		(11,327)		(167,856)


Total non-interest income, net	(1,512)		(13,244)		(39,574)		(21,160)		(81,039)		(11,327)		(167,856)
General and administrative expenses	—		—		—		—		—		(867)		(867)
Other expenses	—		—		—		—		—		193		193

Income from Consolidated VIEs	$	1,604	$	206	$	(8,356)	$	(2,410)	$	(77,747)	$	(777)	$	(87,480)

Securitization Activity Related to Unconsolidated Variable Interest Entity's Sponsored by Redwood

Table 4.3 – Securitization Activity Related to Unconsolidated VIEs Sponsored by Redwood


	Years Ended December 31,
(In Thousands)	2021		2020
Principal balance of loans transferred	$	1,231,803	$	2,223,462
Trading securities retained, at fair value	7,774		49,089
AFS securities retained, at fair value	1,600		4,187

The following table summarizes the cash flows during the years ended December 31, 2021 and 2020 between us and the unconsolidated VIEs sponsored by us and accounted for as sales since 2012.

Table 4.4 – Cash Flows Related to Unconsolidated VIEs Sponsored by Redwood


	Years Ended December 31,
(In Thousands)	2021		2020
Proceeds from new transfers	$	1,266,063	$	2,276,521
MSR fees received	5,003		9,749
Funding of compensating interest, net	(160)		(405)
Cash flows received on retained securities	47,596		24,172

MSR Assumptions Related to Unconsolidated Variable Interest Entity's Sponsored by Redwood

The following table presents the key weighted average assumptions used to value securities retained at the date of securitization for securitizations completed during 2021 and 2020.

Table 4.5 – Assumptions Related to Assets Retained from Unconsolidated VIEs Sponsored by Redwood


	Year Ended December 31, 2021				Year Ended December 31, 2020
At Date of Securitization		Senior IO Securities		Subordinate Securities		Senior IO Securities		Subordinate Securities
Prepayment rates		11	%	11 %		29	%	14	%
Discount rates		15 %		6 %		14	%	7	%
Credit loss assumptions		0.23 %		0.23 %		0.27	%	0.24	%

Unconsolidated Variable Interest Entity's Sponsored by Redwood Summary

The following table presents additional information at December 31, 2021 and 2020, related to unconsolidated VIEs sponsored by Redwood and accounted for as sales since 2012.

Table 4.6 – Unconsolidated VIEs Sponsored by Redwood


(In Thousands)	December 31, 2021		December 31, 2020
On-balance sheet assets, at fair value:
Interest-only, senior and subordinate securities, classified as trading	$	18,214	$	20,982
Subordinate securities, classified as AFS	127,542		136,475
Mortgage servicing rights	6,450		8,413
Maximum loss exposure (1)	$	152,206	$	165,870
Assets transferred:
Principal balance of loans outstanding	$	4,959,234	$	7,728,432
Principal balance of loans 30+ days delinquent	30,594		138,029

(1)Maximum loss exposure from our involvement with unconsolidated VIEs pertains to the carrying value of our securities and MSRs retained from these VIEs and represents estimated losses that would be incurred under severe, hypothetical circumstances, such as if the value of our interests and any associated collateral declines to zero. This does not include, for example, any potential exposure to representation and warranty claims associated with our initial transfer of loans into a securitization.

Key Assumptions and Sensitivity Analysis for Assets Retained from Unconsolidated Variable Interest Entity's Sponsored by Redwood

The following table presents key economic assumptions for assets retained from unconsolidated VIEs and the sensitivity of their fair values to immediate adverse changes in those assumptions at December 31, 2021 and 2020.

Table 4.7 – Key Assumptions and Sensitivity Analysis for Assets Retained from Unconsolidated VIEs Sponsored by Redwood


December 31, 2021	MSRs			Senior Securities (1)			Subordinate Securities
(Dollars in Thousands)
Fair value at December 31, 2021	$	6,450		$	18,214		$	127,542
Expected life (in years) (2)	3			4			5
Prepayment speed assumption (annual CPR) (2)	29		%	23		%	32 %
Decrease in fair value from:
10% adverse change	$	447		$	1,130		$	531
25% adverse change	1,020			2,596			1,440
Discount rate assumption (2)	12 %			16		%	5		%
Decrease in fair value from:
100 basis point increase	$	152		$	426		$	4,801
200 basis point increase	297			829			9,139
Credit loss assumption (2)	N/A			0.35		%	0.35		%
Decrease in fair value from:
10% higher losses	N/A			$	—		$	1,528
25% higher losses	N/A			—			3,819


December 31, 2020	MSRs			Senior Securities (1)			Subordinate Securities
(Dollars in Thousands)
Fair value at December 31, 2020	$	8,413		$	17,333		$	140,124
Expected life (in years) (2)	2			3			8
Prepayment speed assumption (annual CPR) (2)	37		%	31		%	33		%
Decrease in fair value from:
10% adverse change	$	906		$	1,557		$	452
25% adverse change	2,058			3,754			2,298
Discount rate assumption (2)	12		%	21		%	5		%
Decrease in fair value from:
100 basis point increase	$	196		$	337		$	9,769
200 basis point increase	380			659			18,650
Credit loss assumption (2)	N/A			0.41		%	0.41		%
Decrease in fair value from:
10% higher losses	N/A			$	—		$	2,409
25% higher losses	N/A			—			5,915

(1)Senior securities included $18 million and $17 million of interest-only securities at December 31, 2021 and 2020, respectively.

(2)Expected life, prepayment speed assumption, discount rate assumption, and credit loss assumption presented in the tables above represent weighted averages.

Loan Transfers Accounted for as Secured Borrowings

The following table presents a summary of our interests in third-party VIEs at December 31, 2021 and 2020, grouped by asset type.

Table 4.8 – Third-Party Sponsored VIE Summary


(In Thousands)	December 31, 2021		December 31, 2020
Mortgage-Backed Securities
Senior	$	3,572	$	11,131
Mezzanine	—		2,014
Subordinate	228,083		173,523
Total Mortgage-Backed Securities	231,655		186,668
Excess MSR	10,400		14,133
Total Investments in Third-Party Sponsored VIEs	$	242,055	$	200,801

- Definition

Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

+ References + Details