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Home Equity Investments (HEI) | 9 Months Ended
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Sep. 30, 2023
Equity Method Investments and Joint Ventures [Abstract] |
Home Equity Investments (HEI) | Home Equity Investments (HEI) From time to time, we may purchase home equity investment contracts from third party originators under flow purchase agreements. Additionally, in the third quarter of 2023, we began to originate HEI. Each HEI provides the owner of such HEI the right to purchase a percentage ownership interest in an associated residential property, and the homeowner's obligations under the HEI are secured by a lien (primarily second liens) on the property created by recording a security instrument (e.g., deed of trust) with respect to the property. Our investments in HEI expose us to both home price appreciation and depreciation of the associated property. The following table presents our home equity investments at September 30, 2023 and December 31, 2022. Table 10.1 – Home Equity Investments
(In Thousands) |  | September 30, 2023 |  | December 31, 2022
HEI at Redwood |  | $ | 302,122 |  |  | $ | 270,835 |
HEI held at consolidated HEI securitization entity |  | 129,150 |  |  | 132,627 |
Total Home Equity Investments |  | $ | 431,272 |  |  | $ | 403,462 |
We consolidate the HEI securitization entity in accordance with GAAP and have elected to account for it under the CFE election. As such, market valuation changes for the securitized HEI are based on the estimated fair value of the associated ABS issued by the entity, including the securities we own in the entity. The following table details our HEI activity during the three and nine months ended September 30, 2023 and 2022. Table 10.2 – Activity of HEI
|  | Three Months Ended September 30, 2023 |  | Three Months Ended September 30, 2022
(In Thousands) |  | HEI at Redwood |  | Securitized HEI |  | HEI at Redwood |  | Securitized HEI
Fair value of HEI purchased and originated |  | $ | 113 |  |  | $ | — |  |  | $ | 79,050 |  |  | $ | — |
Net market valuation gains (losses) recorded (1) |  | 9,290 |  |  | 4,212 |  |  | (4,774) |  |  | (724) |
|  | Nine Months Ended September 30, 2023 |  | Nine Months Ended September 30, 2022
(In Thousands) |  | HEI at Redwood |  | Securitized HEI |  | HEI at Redwood |  | Securitized HEI
Fair value of HEI purchased and originated |  | $ | 25,626 |  |  | $ | — |  |  | $ | 176,439 |  |  | $ | — |
Net market valuation gains (losses) recorded (1) |  | 21,598 |  |  | 8,418 |  |  | (1,986) |  |  | 8,587 |
(1)We account for HEI at Redwood under the fair value option and record net market valuation changes through Investment fair value changes, net on our Consolidated statements of income. We account for Securitized HEI under the CFE election and net market valuation gains (losses) for these investments are recorded through Investment fair value changes, net on our Consolidated statements of income. The net impact to our income statement associated with our economic investment in these securitization entities is presented in Table 4.2. The following tables summarizes the characteristics of our HEI at September 30, 2023 and December 31, 2022. Table 10.3 – HEI Characteristics
|  | September 30, 2023 |  | December 31, 2022
(Dollars in Thousands) |  | HEI at Redwood |  | Securitized HEI |  | HEI at Redwood |  | Securitized HEI
Number of HEI contracts |  | 2,644 |  |  | 929 |  |  | 2,599 |  |  | 1,007 |
Average initial amount of contract |  | $ | 103 |  |  | $ | 95 |  |  | $ | 101 |  |  | $ | 94 |

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- Definition The entire disclosure for certain real estate investment financial statements, real estate investment trust operating support agreements, real estate owned, retail land sales, time share transactions, as well as other real estate related disclosures. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 976 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//976/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 978 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//978/tableOfContent Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 970 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//970/tableOfContent Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 972 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//972/tableOfContent Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 974 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//974/tableOfContent + Details
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