<SEC-DOCUMENT>0001104659-23-100557.txt : 20231220
<SEC-HEADER>0001104659-23-100557.hdr.sgml : 20231220
<ACCEPTANCE-DATETIME>20230913203636
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0001104659-23-100557
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		2
FILED AS OF DATE:		20230913

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			REDWOOD TRUST INC
		CENTRAL INDEX KEY:			0000930236
		STANDARD INDUSTRIAL CLASSIFICATION:	REAL ESTATE INVESTMENT TRUSTS [6798]
		ORGANIZATION NAME:           	05 Real Estate & Construction
		IRS NUMBER:				680329422
		STATE OF INCORPORATION:			MD
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		ONE BELVEDERE PLACE
		STREET 2:		SUITE 300
		CITY:			MILL VALLEY
		STATE:			CA
		ZIP:			94941
		BUSINESS PHONE:		(415) 380-2317

	MAIL ADDRESS:	
		STREET 1:		ONE BELVEDERE PLACE
		STREET 2:		SUITE 300
		CITY:			MILL VALLEY
		STATE:			CA
		ZIP:			94941
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
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<P STYLE="margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR>
    <TD ROWSPAN="3" STYLE="vertical-align: top"><IMG SRC="tm2326051d1_correspimg01.jpg" ALT=""></TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">One Belvedere
    Place</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Suite&nbsp;300</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Mill Valley, CA 94941</FONT></TD></TR>
  <TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom">&nbsp;</TD></TR>
  <TR>
    <TD STYLE="vertical-align: top; width: 75%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 7%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Phone </FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 18%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">415.389.7373</FONT></TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: right; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">September&nbsp;13, 2023</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>VIA EDGAR AND E-MAIL</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Securities and Exchange Commission<BR>
Division of Corporation Finance<BR>
100 F Street, N.W.<BR>
Washington, D.C. 20549</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Attn:</FONT></TD>
    <TD><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Eric McPhee</P>
    <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Jennifer Monick</P></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Office of Real Estate&nbsp;&amp; Construction</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Re:</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Redwood Trust,&nbsp;Inc.</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Response to Comments on:</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Form&nbsp;10-K for the Year Ended December&nbsp;31,
    2022, filed March&nbsp;1, 2023</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Form&nbsp;8-K, filed July&nbsp;27, 2023</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">File No.&nbsp;001-13759</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Dear Mr.&nbsp;McPhee and Ms.&nbsp;Monick,</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On behalf of Redwood Trust,&nbsp;Inc. (&ldquo;Redwood&rdquo;
or the &ldquo;Company&rdquo;),&nbsp;I hereby provide the following responses in reply to the Staff&rsquo;s comment letter dated August&nbsp;31,
2023 (the &ldquo;Comment Letter&rdquo;) in connection with the above-referenced Annual Report on Form&nbsp;10-K (the &ldquo;2022 Form&nbsp;10-K&rdquo;)
and Current Report on Form&nbsp;8-K (the &ldquo;July&nbsp;2023 8-K&rdquo;). For your convenience, our response is preceded with an italicized
recitation of the comment set forth in the Comment Letter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Form&nbsp;8-K filed July&nbsp;27, 2023</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Exhibit&nbsp;99.1</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Non-GAAP Disclosures, Page&nbsp;10</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>1.</I></FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>We note your reconciliation
    of GAAP Net Income Available to Common Stockholders to non-GAAP Earnings Available for Distribution; specifically, we note your reconciling
    item for change in economic basis of investments and your note (4)&nbsp;to the table. Please further clarify for us how you derive
    estimated economic income. In addition, please tell us how you determined it was appropriate to adjust for this item.</I></FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>How Redwood Derives Estimated Economic
Income:</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Redwood consistently derives estimated economic
income for an investment by first calculating the internal rate of return (&ldquo;IRR&rdquo;) for an investment, using the investment&rsquo;s
carrying value at the beginning of a quarter (which for nearly all of our investments is fair value) and our projected future cash flows
for the investment (the same cash flows we use to value the assets at the beginning of the quarter, which include any expected losses).
We apply this IRR (or estimated economic yield) to the average carrying value of the investment for the quarter to derive what we refer
to as &ldquo;estimated economic income&rdquo;.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">September&nbsp;13, 2023</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Page&nbsp;2 of 3</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As an illustrative example, assume the Company
held a mortgage-backed security with a par value of $1 million, a 4.0% coupon and a 10-year expected remaining life. The security is
accounted for under the fair value option, and at the beginning of the quarter it had a GAAP fair value of 85% of par value. Assuming
the Company expects no losses on the security, the estimated economic yield for this security would be approximately 6% (representing
the IRR based on the projected cash flows and the carrying value at the beginning of the quarter). Applying this estimated economic yield
to the average carrying value of the security for the quarter, the estimated economic income for this security for the quarter would
be $12.8 thousand. Further, assuming we recorded coupon interest income from this security of $10.0 thousand for the quarter, our change
in economic basis of this security for that quarter would be $2.8 thousand ($12.8 thousand, less $10.0 thousand). While the change in
the economic basis of the security in this example is positive, we note that the change in economic basis for an investment can also
be negative.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Why Change in Economic Basis of Investments
is One of the Adjustments Redwood Makes to GAAP Net Income in Calculating Earnings Available for Distribution:</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company believes a non-GAAP measure of earnings
 &ndash; in particular, non-GAAP Earnings Available for Distribution &ndash; that adjusts for various items (as presented in our non-GAAP
reconciliation), including the adjustment for Change in economic basis of investments, is and has been considered useful <FONT STYLE="color: #231f20">information
to assist management and investors in analyzing the Company&rsquo;s results of operations and help facilitate comparisons to industry
peers. The Company also believes that Earnings Available for Distribution is a metric that can supplement management&rsquo;s analysis
of the Company&rsquo;s ability to pay dividends, by providing an indication of the current income generating capacity of the Company's
business operations as of the quarter being presented</FONT>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">With respect to the question of why it is appropriate
for Change in economic basis of investments to be one of the adjustments the Company makes in calculating non-GAAP Earnings Available
for Distribution, management believes the inclusion of this adjustment assists in analysis of the Company&rsquo;s results of operations
in the following manner:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></FONT></TD><TD STYLE="text-align: justify">By
                                            including the adjustment for Change in economic basis of investments as one of these adjustments,
                                            users of the Company&rsquo;s financial statements can readily distinguish:</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">o</FONT></TD><TD STYLE="text-align: justify">the
                                            component of our investments&rsquo; market value changes associated with the passage of time
                                            based on our expected economic return (i.e., the &ldquo;Change in the economic basis of investments&rdquo;);
                                            from</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">o</FONT></TD><TD STYLE="text-align: justify">the
                                            component of our investments&rsquo; market value changes associated with changes in benchmark
                                            interest rates, credit spreads and other factors, which can be volatile and may not be indicative
                                            of future economic performance.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Based on discussions with users of the Company&rsquo;s
financial statements (both investors and Wall St. equity research analysts), the Company believes they too find these adjustments related
to investment fair value (together with the other adjustments used to derive non-GAAP Earnings Available for Distribution) valuable for
distinguishing between these two components of market value changes as part of reviewing this supplemental measure of our overall results
of operations. Prior to the Company first publishing the Earnings Available for Distribution metric, several analysts suggested that
the Company provide such a supplemental metric, and after its introduction the analyst community provided positive feedback to the Company
regarding the metric. Further, after it began publishing its Earnings Available for Distribution metric, all of the analysts who cover
the Company incorporated the metric into their analysis of the Company and utilized it as a supplemental measure to the Company&rsquo;s
GAAP results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">September&nbsp;13, 2023</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Page&nbsp;3 of 3</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company recently re-surveyed the non-GAAP
disclosure practices of twelve other publicly-traded mortgage REITs whose business models share a common focus with Redwood on investing
in residential mortgage and related assets. This survey found that all of them publish non-GAAP financial measures &ndash; with ten of
the twelve disclosing an &ldquo;earnings available for distribution&rdquo; or &ldquo;distributable earnings&rdquo; metric, reflecting
wide and recognized use of this type of metric. While each of these companies has separately established the adjustments they make in
calculating their own non-GAAP metric &ndash; presumably to provide disclosures that are meaningful in the context of their own investments
and/or operations &ndash; this review confirmed the Company&rsquo;s view that investors and Wall St. equity research analysts focused
on this sector of the market are accustomed to having this type of disclosure available to analyze together with, and in the context
of, a mortgage REIT&rsquo;s GAAP financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Enhanced Disclosure:</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Upon the Staff&rsquo;s request, Redwood can enhance
its future disclosures related to non-GAAP Earnings Available for Distribution, and specifically related to the Change in basis of investments
adjustment, to provide additional detail as to the methodology of the calculation and the usefulness of the adjustment, consistent with
the additional information included in this response to the Staff&rsquo;s inquiry.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; * &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Should you have any further comments or questions
about this letter, please contact me by telephone at 415-384-3827 or by email at <U>brooke.carillo@redwoodtrust.com</U>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Very truly
    yours,</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 3%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 47%; text-align: justify">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Redwood Trust,&nbsp;Inc.</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">By:&nbsp;&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-variant: small-caps">/s/
    Brooke Carillo</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Brooke Carillo</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chief Financial Officer</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

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end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
