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Home Equity Investments (HEI) | 3 Months Ended
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Mar. 31, 2024
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 directly. 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. As discussed in Note 3, we co-sponsored two HEI securitization transactions. We consolidate these HEI securitization entities in accordance with GAAP and have elected to account for them 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 interest we own, and are reported in HEI income, net on our Consolidated statements of income. The following table presents our HEI at March 31, 2024 and December 31, 2023. Table 10.1 – Home Equity Investments
(In Thousands) |  | March 31, 2024 |  | December 31, 2023
HEI at Redwood |  | $ | 246,561 |  |  | $ | 244,719 |
HEI held at consolidated HEI securitization entities |  | 314,184 |  |  | 305,717 |
Total Home Equity Investments |  | $ | 560,745 |  |  | $ | 550,436 |
The following table details our HEI activity during the three months ended March 31, 2024 and 2023. Table 10.2 – Activity of HEI
|  | Three Months Ended March 31, 2024 |  | Three Months Ended March 31, 2023
(In Thousands) |  | HEI at Redwood |  | Securitized HEI |  | HEI at Redwood |  | Securitized HEI
Fair value of HEI purchased and originated |  | $ | 307 |  |  | $ | — |  |  | $ | 40,141 |  |  | $ | — |
Fair value of HEI transferred |  | — |  |  | — |  |  | — |  |  | — |
The following table provides the components of HEI income, net for the three months ended March 31, 2024 and 2023 and reflect net market valuation gains (losses) recorded on HEI at Redwood and on securitized HEI, net of the third party and non-controlling interests in the HEI securitizations that are not owned by Redwood. Table 10.3 – Components of HEI Income, net
|  | Three Months Ended March 31, 2024 |  | Three Months Ended March 31, 2023
(In Thousands) |  |
Net market valuation gains (losses) recorded on HEI at Redwood |  | $ | 6,143 |  |  | $ | 3,840 |
Net market valuation gains (losses) recorded on Securitized HEI |  | 15,424 |  |  | 1,068 |
Net market valuation gains (losses) recorded on ABS Issued from HEI securitizations(1) |  | (7,409) |  |  | 126 |
Net market valuation gains (losses) recorded on non-controlling interests in HEI securitizations |  | (5,127) |  |  | (769) |
Total HEI income, net |  | $ | 9,031 |  |  | $ | 4,265 |
(1)Amount includes interest expense associated with ABS issued, which totaled $3 million and $1 million for the three months ended March 31, 2024 and 2023, respectively. The following tables summarizes the characteristics of our HEI at March 31, 2024 and December 31, 2023. Table 10.4 – HEI Characteristics
|  | March 31, 2024 |  | December 31, 2023
(Dollars in Thousands) |  | HEI at Redwood |  | Securitized HEI |  | HEI at Redwood |  | Securitized HEI
Number of HEI contracts |  | 1,992 |  |  | 2,370 |  |  | 2,034 |  |  | 2,434 |
Average initial amount of contract |  | $ | 105 |  |  | $ | 95 |  |  | $ | 105 |  |  | $ | 96 |

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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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