Consolidated Agency Multifamily Loans

6 Months Ended

Jun. 30, 2022

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 June 30, 2022 and December 31, 2021.

Table 6.1 – Classifications and Carrying Values of Residential Loans


June 30, 2022			Legacy				Freddie Mac
(In Thousands)	Redwood		Sequoia		Sequoia		SLST		Total
Held-for-sale at fair value	$	1,213,067	$	—	$	—	$	—	$	1,213,067
Held-for-investment at fair value	—		208,788		3,525,459		1,631,285		5,365,532
Total Residential Loans	$	1,213,067	$	208,788	$	3,525,459	$	1,631,285	$	6,578,599


December 31, 2021			Legacy				Freddie Mac
(In Thousands)	Redwood		Sequoia		Sequoia		SLST		Total
Held-for-sale at fair value	$	1,845,282	$	—	$	—	$	—	$	1,845,282
Held-for-investment at fair value	—		230,455		3,628,465		1,888,230		5,747,150
Total Residential Loans	$	1,845,282	$	230,455	$	3,628,465	$	1,888,230	$	7,592,432

At June 30, 2022, we owned mortgage servicing rights associated with $1.16 billion (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

The following table summarizes the characteristics of residential loans held-for-sale at June 30, 2022 and December 31, 2021.

Table 6.2 – Characteristics of Residential Loans Held-for-Sale


(Dollars in Thousands)	June 30, 2022			December 31, 2021
Number of loans	1,469			2,196
Unpaid principal balance	$	1,238,469		$	1,813,865
Fair value of loans	$	1,213,067		$	1,845,282
Market value of loans pledged as collateral under short-term borrowing agreements	$	1,207,185		$	1,838,797
Weighted average coupon	4.47		%	3.27		%

Delinquency information
Number of loans with 90+ day delinquencies	1			3
Unpaid principal balance of loans with 90+ day delinquencies	$	211		$	2,923
Fair value of loans with 90+ day delinquencies	$	170		$	2,304
Number of loans in foreclosure	—			—

The following table provides the activity of residential loans held-for-sale during the three and six months ended June 30, 2022 and 2021.

Table 6.3 – Activity of Residential Loans Held-for-Sale


	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Principal balance of loans acquired (1)	$	1,145,450	$	3,484,633	$	3,260,641	$	6,580,681
Principal balance of loans sold	1,238,327		3,324,919		3,065,691		5,600,751
Principal balance of loans transferred to HFI	—		—		687,192		—
Net market valuation gains (losses) recorded (2)	(32,527)		26,278		(63,978)		49,707

(1)For the three and six months ended June 30, 2022, includes zero and $102 million of loans acquired through calls of zero and three seasoned Sequoia securitizations, respectively.

(2)Net market valuation gains (losses) on residential loans held-for-sale are recorded primarily through Mortgage banking activities, net on our consolidated statements of income (loss).

Residential Loans Held-for-Investment at Fair Value

We invest in residential subordinate securities issued by Legacy Sequoia, Sequoia and Freddie Mac SLST securitization trusts and consolidate the underlying residential loans owned by these entities for financial reporting purposes in accordance with GAAP. The following tables summarize the characteristics of the residential loans owned at consolidated Sequoia and Freddie Mac SLST entities at June 30, 2022 and December 31, 2021.

Table 6.4 – Characteristics of Residential Loans Held-for-Investment


June 30, 2022	Legacy						Freddie Mac
(Dollars in Thousands)	Sequoia			Sequoia			SLST
Number of loans	1,447			4,738			11,285
Unpaid principal balance	$	234,213		$	3,988,148		$	1,796,594
Fair value of loans	$	208,788		$	3,525,459		$	1,631,285
Weighted average coupon	2.27		%	3.26		%	4.50		%

Delinquency information
Number of loans with 90+ day delinquencies (1)	29			14			1,370
Unpaid principal balance of loans with 90+ day delinquencies	$	5,107		$	12,008		$	236,941
Fair value of loans with 90+ day delinquencies (2)	N/A			N/A			N/A
Number of loans in foreclosure	11			5			257
Unpaid principal balance of loans in foreclosure	$	1,483		$	5,004		$	45,536


December 31, 2021	Legacy						Freddie Mac
(Dollars in Thousands)	Sequoia			Sequoia			SLST
Number of loans	1,583			4,300			11,986
Unpaid principal balance	$	264,057		$	3,605,469		$	1,932,241
Fair value of loans	$	230,455		$	3,628,465		$	1,888,230
Weighted average coupon	1.87		%	3.39		%	4.51		%

Delinquency information
Number of loans with 90+ day delinquencies (1)	32			18			1,208
Unpaid principal balance of loans with 90+ day delinquencies	$	7,482		$	15,124		$	212,961
Fair value of loans with 90+ day delinquencies (2)	N/A			N/A			N/A
Number of loans in foreclosure	10			2			241
Unpaid principal balance of loans in foreclosure	$	2,188		$	1,624		$	43,637

(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 consolidated entities during the three and six months ended June 30, 2022 and 2021.

Table 6.5 – Activity of Residential Loans Held-for-Investment at Consolidated Entities

Three Months Ended June 30, 2022

Three Months Ended June 30, 2021

Legacy

Freddie Mac

Legacy

Freddie Mac

(In Thousands)

Sequoia

SLST

Sequoia

SLST

Fair value of loans transferred from HFS to HFI (1)

N/A

—

N/A

1,205,494

N/A

Net market valuation gains (losses) recorded (2)

779

(211,486)

(76,735)

4,863

(12,835)

22,579

Six Months Ended June 30, 2022

Six Months Ended June 30, 2021

Legacy

Freddie Mac

Legacy

Freddie Mac

(In Thousands)

Sequoia

SLST

Sequoia

SLST

Fair value of loans transferred from HFS to HFI (1)

N/A

684,491

N/A

1,205,494

N/A

Net market valuation gains (losses) recorded (2)

7,104

(482,217)

(120,503)

12,476

(15,413)

19,013

(1)Represents the transfer of loans from held-for-sale to held-for-investment associated with Sequoia securitizations.

(2)For loans held at our consolidated Legacy Sequoia, Sequoia, and Freddie Mac SLST 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, and are recorded in Investment fair value changes, net on our consolidated statements of income (loss). The net impact to our income statement associated with our economic investments in these securitization entities is presented in Table 4.2.

REO

See Note 12 for detail on residential loans transferred to REO during 2022.

Business Purpose Loans

We originate and invest in business purpose loans, including single-family rental ("SFR") loans and bridge loans. 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, 2022 and December 31, 2021.

Table 7.1 – Classifications and Carrying Values of Business Purpose Loans


June 30, 2022	Single-Family Rental				Bridge
(In Thousands)	Redwood		CAFL		Redwood		CAFL		Total
Held-for-sale at fair value	$	505,171	—		$	—	$	—	$	505,171
Held-for-investment at fair value	—		3,046,277		1,109,337		542,152		4,697,766
Total Business Purpose Loans	$	505,171	$	3,046,277	$	1,109,337	$	542,152	$	5,202,937


December 31, 2021	Single-Family Rental				Bridge
(In Thousands)	Redwood		CAFL		Redwood		CAFL		Total
Held-for-sale at fair value	$	358,309	$	—	$	—	$	—	$	358,309
Held-for-investment at fair value	—		3,488,074		666,364		278,242		4,432,680
Total Business Purpose Loans	$	358,309	$	3,488,074	$	666,364	$	278,242	$	4,790,989

Nearly all of the outstanding single-family rental loans at June 30, 2022 were first-lien, fixed-rate loans with original maturities of five, seven, or ten years, with 3% having original maturities of 30 years. The outstanding bridge loans held-for-investment at June 30, 2022 were first-lien, interest-only loans with original maturities of six to 36 months and were comprised of 45% one-month LIBOR-indexed adjustable-rate loans, 39% one-month SOFR-indexed adjustable-rate loans, and 17% fixed-rate loans.

At June 30, 2022, we had a $835 million commitment to fund bridge loans. See Note 16 for additional information on this commitment.

The following table provides the activity of business purpose loans at Redwood during the three and six months ended June 30, 2022 and 2021.

Table 7.2 – Activity of Business Purpose Loans at Redwood


	Three Months Ended June 30, 2022				Three Months Ended June 30, 2021
(In Thousands)	SFR at Redwood		Bridge at Redwood		SFR at Redwood		Bridge at Redwood
Principal balance of loans originated	$	323,245	$	542,241	$	312,217	$	215,160
Principal balance of loans acquired	38,457		19,023		—		—
Principal balance of loans sold to third parties	—		—		—		354
Fair value of loans transferred (1)	295,037		306,313		297,301		—

Mortgage banking activities income (loss) recorded (2)	(40,034)		(1,136)		25,222		978
Investment fair value changes recorded (3)	—		(5,455)		—		(62)


	Six Months Ended June 30, 2022				Six Months Ended June 30, 2021
(In Thousands)	SFR at Redwood		Bridge at Redwood		SFR at Redwood		Bridge at Redwood
Principal balance of loans originated	$	765,972	$	954,179	$	565,315	$	348,389
Principal balance of loans acquired	100,349		22,006		—		—
Principal balance of loans sold to third parties	331,502		—		—		9,231
Fair value of loans transferred (1)	295,037		388,604		466,705		N/A

Mortgage banking activities income (loss) recorded (2)	(64,502)		1,239		35,470		1,520
Investment fair value changes recorded (3)	—		(6,214)		—		3,242

(1)For SFR at Redwood, represents the transfer of loans from held-for-sale to held-for-investment associated with CAFL SFR securitizations. For Bridge at Redwood, represents the transfer of bridge loans from "Bridge at Redwood" to "Bridge at CAFL" resulting from their securitization.

(2)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, 2022, we recorded loan origination fee income of $12 million and $27 million, respectively, through Mortgage banking activities, net on our consolidated statements of income (loss).

(3)Represents net market valuation changes for loans classified as held-for-investment and associated interest-only strip liabilities.

Business Purpose Loans Held-for-Investment at CAFL

We invest in securities issued by CAFL securitizations sponsored by CoreVest and consolidate the underlying single-family rental loans and bridge loans owned by these entities. The following table provides the activity of business purpose loans held-for-investment at CAFL during the three and six months ended June 30, 2022 and 2021.

Table 7.3 – Activity of Business Purpose Loans Held-for-Investment at CAFL


	Three Months Ended June 30, 2022				Three Months Ended June 30, 2021
(In Thousands)	SFR at CAFL		Bridge at CAFL		SFR at CAFL		Bridge at CAFL
Net market valuation gains (losses) recorded (1)	$	(118,299)	$	(281)	$	(1,230)	$	—


	Six Months Ended June 30, 2022				Six Months Ended June 30, 2021
(In Thousands)	SFR at CAFL		Bridge at CAFL		SFR at CAFL		Bridge at CAFL
Net market valuation gains (losses) recorded (1)	$	(310,202)	$	(1,856)	$	(62,132)	$	—

(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, and are recorded through Investment fair value changes, net on our consolidated statements of income (loss). The net impact to our income statement associated with our economic investments in these securitization entities is presented in Table 4.2.

REO

See Note 12 for detail on BPL loans transferred to REO during 2022.

Business Purpose Loan Characteristics

The following tables summarize the characteristics of the business purpose loans owned at Redwood and at consolidated CAFL entities at June 30, 2022 and December 31, 2021.

Table 7.4 – Characteristics of Business Purpose Loans


June 30, 2022	SFR at Redwood			SFR at CAFL			Bridge at Redwood			Bridge at CAFL
(Dollars in Thousands)
Number of loans	355			1,154			1,131			2,268
Unpaid principal balance	$	536,344		$	3,227,172		$	1,116,582		$	541,677
Fair value of loans	$	505,171		$	3,046,277		$	1,109,337		$	542,152
Weighted average coupon	5.31		%	5.16		%	6.73		%	6.89		%
Weighted average remaining loan term (years)	14			6			2			1
Market value of loans pledged as collateral under short-term debt facilities	$	312,732		N/A			$	265,242		N/A
Market value of loans pledged as collateral under long-term debt facilities	$	180,482		N/A			$	779,467		N/A
Delinquency information
Number of loans with 90+ day delinquencies (1)	4			20			51			48
Unpaid principal balance of loans with 90+ day delinquencies	$	5,212		$	50,469		$	32,941		$	7,847
Fair value of loans with 90+ day delinquencies (2)	$	4,086		N/A			$	30,209		$	7,847
Number of loans in foreclosure (3)	4			7			53			3
Unpaid principal balance of loans in foreclosure	$	5,212		$	10,356		$	35,070		$	4,472
Fair value of loans in foreclosure (2)	$	4,086		N/A			$	32,338		$	4,472


December 31, 2021	SFR at Redwood			SFR at CAFL			Bridge at Redwood			Bridge at CAFL
(Dollars in Thousands)
Number of loans	245			1,173			1,134			1,640
Unpaid principal balance	$	348,232		$	3,340,949		$	670,392		$	274,617
Fair value of loans	$	358,309		$	3,488,074		$	666,364		$	278,242
Weighted average coupon	4.73		%	5.17		%	6.91		%	7.05		%
Weighted average remaining loan term (years)	12			6			1			1
Market value of loans pledged as collateral under short-term debt facilities	$	75,873		N/A			$	91,814		N/A
Market value of loans pledged as collateral under long-term debt facilities	$	244,703		N/A			$	554,597		N/A
Delinquency information
Number of loans with 90+ day delinquencies (1)	6			18			31			—
Unpaid principal balance of loans with 90+ day delinquencies	$	5,384		$	41,998		$	18,032		$	—
Fair value of loans with 90+ day delinquencies (2)	$	4,238		N/A			$	14,218		$	—
Number of loans in foreclosure (3)	7			9			28			—
Unpaid principal balance of loans in foreclosure	$	5,473		$	12,648		$	18,043		$	—
Fair value of loans in foreclosure (2)	$	4,305		N/A			$	14,257		$	—

Footnotes to Table 7.4

(1)The number of loans greater than 90 days delinquent includes loans in foreclosure.

(2)The fair value of the loans held by consolidated CAFL 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.

(3)May include loans that are less than 90 days delinquent.

Consolidated Agency Multifamily Loans

We invest in multifamily subordinate securities issued by a Freddie Mac K-Series securitization trust and consolidate the underlying multifamily loans owned by this entity for financial reporting purposes in accordance with GAAP. The following table summarizes the characteristics of our consolidated Agency multifamily loans at June 30, 2022 and December 31, 2021.

Table 8.1 – Characteristics of Consolidated Agency Multifamily Loans


(Dollars in Thousands)	June 30, 2022			December 31, 2021
Number of loans	28			28
Unpaid principal balance	$	451,197		$	455,168
Fair value of loans	$	443,114		$	473,514
Weighted average coupon	4.25		%	4.25		%
Weighted average remaining loan term (years)	3			4

Delinquency information
Number of loans with 90+ day delinquencies	—			—


Number of loans in foreclosure	—			—

The outstanding consolidated Agency multifamily loans held-for-investment at the consolidated Freddie Mac K-Series entity at June 30, 2022 were first-lien, fixed-rate loans that were originated in 2015. The following table provides the activity of multifamily loans held-for-investment during the three and six months ended June 30, 2022 and 2021.

Table 8.2 – Activity of Consolidated Agency Multifamily Loans Held-for-Investment


	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Net market valuation gains (losses) recorded (1)	$	(6,748)	$	(2,528)	$	(26,429)	$	(3,258)

(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 entity, 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 investment in these securitization entities is presented in Table 4.2.