GAAP requires us to consider whether securitizations we sponsor and other transfers of financial assets should be treated as sales or financings, as well as whether any VIEs that we hold variable interests in – for example, certain legal entities often used in securitization and other structured finance transactions – should be included in our consolidated financial statements. The GAAP principles we apply require us to reassess our requirement to consolidate VIEs each quarter and therefore our determination may change based upon new facts and circumstances pertaining to each VIE. This could result in a material impact to our consolidated financial statements during subsequent reporting periods.

At March 31, 2024, we consolidated Legacy Sequoia, Sequoia, CAFL, Freddie Mac SLST, Freddie Mac K-Series, and HEI securitization entities that we determined were VIEs and for which we determined we were the primary beneficiary. Each of these entities is independent of Redwood and of each other and the assets and liabilities of these entities are not owned by and are not legal obligations of ours. Our exposure to these entities is primarily through the financial interests we have retained, although for certain securitizations, we are exposed to financial risks associated with our role as a sponsor, servicing administrator, collateral administrator, or depositor of these entities or as a result of our having sold assets directly or indirectly to these entities.

We also consolidate two Servicing Investment entities formed to invest in servicing-related assets that we determined were VIEs and for which we determined we were the primary beneficiary. At March 31, 2024, we held an 80% ownership interest in, and were responsible for the management of, each entity. See Note 11 for a further description of these entities and the investments they hold and Note 13 for additional information on the minority partner’s non-controlling interest. Additionally, we consolidated an entity that was formed to finance servicer advances that we determined was a VIE and for which we, through our control of one of the aforementioned partnerships, were the primary beneficiary. The servicer advance financing consists of non-recourse short-term securitization debt, secured by servicer advances. We consolidate the securitization entity, but the securitization entity is independent of Redwood and the assets and liabilities are not owned by and are not legal obligations of Redwood. See Note 14 for additional information on the servicer advance financing.

During the fourth quarter of 2023 and the third quarter of 2021, we co-sponsored two HEI securitization transactions, and we consolidate the respective HEI securitization entities that we determined were VIEs and for which we determined we were the primary beneficiary. At March 31, 2024 and December 31, 2023, we owned a portion of the subordinate certificates issued by these entities and had certain decision-making rights for the entities. See Note 10 for a further description of these entities and the investments it holds and Note 13 for additional information on non-controlling interests in these entities. We consolidate these HEI securitization entities, but the securitization entities are independent of Redwood and the assets and liabilities are not owned by and are not legal obligations of Redwood.

During the fourth quarter of 2023, we re-securitized subordinate securities we owned in our consolidated Freddie Mac SLST securitization trusts through the transfer of these financial assets to a re-securitization trust that we sponsored. We retain a subordinate investment in the re-securitization trust and maintain certain discretionary rights associated with the ownership of this investment that we determined reflected a controlling financial interest in the entity, as we have both the power to direct the activities that most significantly impact the performance of the VIE and the right to receive benefits of, and the obligation to absorb losses from, the VIE that could potentially be significant to the VIE.

For certain of our consolidated VIEs, we have elected to account for the assets and liabilities of these entities as collateralized financing entities ("CFE"). A CFE is a variable interest entity that holds financial assets and issues beneficial interests in those assets, and these beneficial interests have contractual recourse only to the related assets of the CFE. Accounting guidance for CFEs allows companies to elect to measure both the financial assets and financial liabilities of a CFE using the more observable of the fair value of the financial assets or fair value of the financial liabilities. The net equity in an entity accounted for under the CFE election effectively represents the fair value of the beneficial interests we own in the entity.


March 31, 2024	Legacy Sequoia		Sequoia		CAFL(1)		Freddie Mac SLST(1)		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Residential consumer loans, held-for-investment	$	131,859	$	5,640,341	$	—	$	1,332,686	$	—	$	—	$	—	$	7,104,886
Residential investor loans, held-for-investment	—		—		3,615,210		—		—		—		—		3,615,210
Consolidated Agency multifamily loans	—		—		—		—		422,788		—		—		422,788

Home equity investments	—		—		—		—		—		—		314,184		314,184
Other investments	—		—		—		—		—		247,308		—		247,308
Cash and cash equivalents	—		—		—		—		—		16,902		—		16,902
Restricted cash	70		94		25,613		—		—		—		8,127		33,904
Accrued interest receivable	310		24,520		20,462		4,759		1,314		2,421		—		53,786
Other assets	—		—		32,382		3,178		—		5,834		99		41,493
Total Assets	$	132,239	$	5,664,955	$	3,693,667	$	1,340,623	$	424,102	$	272,465	$	322,410	$	11,850,461
Short-term debt	$	—	$	—	$	—	$	—	$	—	$	147,342	$	—	$	147,342
Accrued interest payable	283		21,428		10,653		4,391		1,184		396		—		38,335
Accrued expenses and other liabilities	—		—		6,316		—		—		36,802		64,878		107,996
Asset-backed securities issued	130,875		5,423,137		3,228,804		1,235,810		389,238		—		220,325		10,628,189
Total Liabilities	$	131,158	$	5,444,565	$	3,245,773	$	1,240,201	$	390,422	$	184,540	$	285,203	$	10,921,862

Value of our investments in VIEs(1)	$	984	$	217,299	$	445,332	$	100,053	$	33,550	$	87,925	$	37,207	$	922,350
Number of VIEs	20		25		21		3		1		3		2		75


December 31, 2023	Legacy Sequoia		Sequoia		CAFL(1)		Freddie Mac SLST(1)		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Residential consumer loans, held-for-investment	$	139,739	$	4,640,464	$	—	$	1,359,242	$	—	$	—	$	—	$	6,139,445
Residential investor loans, held-for-investment	—		—		3,734,321		—		—		—		—		3,734,321
Consolidated Agency multifamily loans	—		—		—		—		425,285		—		—		425,285
Home equity investments	—		—		—		—		—		—		305,717		305,717
Other investments	—		—		—		—		—		257,489		—		257,489
Cash and cash equivalents	—		—		—		—		—		9,482		—		9,482
Restricted cash	68		95		33,921		—		—		—		10,821		44,905
Accrued interest receivable	332		19,697		20,806		4,821		1,320		822		—		47,798
Other assets	—		—		14,886		3,158		—		6,337		62		24,443
Total Assets	$	140,139	$	4,660,256	$	3,803,934	$	1,367,221	$	426,605	$	274,130	$	316,600	$	10,988,885
Short-term debt	$	—	$	—	$	—	$	—	$	—	$	153,653	$	—	$	153,653
Accrued interest payable	303		15,990		11,537		4,496		1,190		416		—		33,932
Accrued expenses and other liabilities	—		—		2,734		—		—		34,357		59,752		96,843
Asset-backed securities issued	138,530		4,430,130		3,362,978		1,265,777		391,977		—		222,488		9,811,880
Total Liabilities	$	138,833	$	4,446,120	$	3,377,249	$	1,270,273	$	393,167	$	188,426	$	282,240	$	10,096,308

Value of our investments in VIEs(1)	$	1,209	$	210,429	$	424,136	$	96,623	$	33,308	$	85,704	$	34,361	$	885,770
Number of VIEs	20		22		21		3		1		3		2		72

(1)Value of our investments in VIEs, as presented in this table, generally represents the fair value of the economic interests we own in VIEs (i.e., the securities or other interests we legally own in the consolidated securitizations or other VIEs). While most of our VIEs are accounted for under the CFE election (whereby the net equity in the VIE generally represents the fair value of our retained interests and associated accrued interest receivable), certain entities, including two CAFL bridge loan securitizations (included within the CAFL column), our SLST re-securitization (included within the Freddie Mac SLST column), and our Servicing Investment VIEs are not accounted for under the CFE election and their associated ABS issued are accounted for at amortized historical cost. As of March 31, 2024 and December 31, 2023, the fair value of our interests in the CAFL term loan securitizations accounted for under the CFE election were $333 million and $323 million, respectively, and the fair value of our interest in the CAFL bridge loan securitizations accounted for under the CFE election was $21 million and $22 million, respectively, with the difference from the tables above generally representing ABS issued and carried at amortized historical cost and accrued interest on our economic interests. As of March 31, 2024 and December 31, 2023, the fair value of our interests in the Freddie Mac SLST securitizations accounted for under the CFE election were $271 million and $274 million, respectively, with the difference from the tables above representing ABS issued and carried at amortized historical cost.


	Three Months Ended March 31, 2024
	Legacy Sequoia		Sequoia		CAFL		Freddie Mac SLST		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Interest income	$	2,298	$	60,680	$	60,994	$	14,616	$	4,581	$	7,551	$	—	$	150,720
Interest expense	(2,194)		(56,628)		(43,283)		(13,980)		(4,199)		(3,219)		—		(123,503)
Net interest income	104		4,052		17,711		636		382		4,332		—		27,217
Non-interest income

Investment fair value changes, net	(218)		5,346		13,503		3,730		243		(1,503)		—		21,101
HEI income, net	—		—		—		—		—		—		2,888		2,888
Other income	—		—		305		—		—		—		—		305
Realized gains, net	—		—		314		—		—		—		—		314
Total non-interest income, net	(218)		5,346		14,122		3,730		243		(1,503)		2,888		24,608
General and administrative expenses	—		—		—		(14)		—		(51)		—		(65)
Other expenses	—		—		—		—		—		(556)		—		(556)

Income (loss) from Consolidated VIEs	$	(114)	$	9,398	$	31,833	$	4,352	$	625	$	2,222	$	2,888	$	51,204


	Three Months Ended March 31, 2023
	Legacy Sequoia		Sequoia		CAFL		Freddie Mac SLST		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Interest income	$	2,543	$	34,644	$	54,437	$	15,493	$	4,618	$	7,814	$	—	$	119,549
Interest expense	(2,504)		(30,055)		(39,542)		(11,218)		(4,241)		(3,848)		—		(91,408)
Net interest income	39		4,589		14,895		4,275		377		3,966		—		28,141
Non-interest income

Investment fair value changes, net	(94)		2,442		(9,682)		8,934		363		(1,047)		—		916
HEI income, net	—		—		—		—		—		—		425		425
Other income	—		—		172		—		—		—		—		172
Total non-interest income, net	(94)		2,442		(9,510)		8,934		363		(1,047)		425		1,513
General and administrative expenses	—		—		—		—		—		10		—		10
Other expenses	—		—		—		—		—		(577)		—		(577)

Income (loss) from Consolidated VIEs	$	(55)	$	7,031	$	5,385	$	13,209	$	740	$	2,352	$	425	$	29,087

We consolidate the assets and liabilities of certain Sequoia, CAFL and HEI securitization entities, as we did not meet either the GAAP sale criteria at the time we transferred financial assets to these entities or we determined we were the primary beneficiary of a VIE. Our involvement in consolidated Sequoia, CAFL and HEI entities continues in the following ways: (i) we continue to hold subordinate investments in each entity, and for certain entities, more senior investments; (ii) we maintain certain discretionary rights associated with our sponsorship of, or our subordinate investments in, each entity, including rights to direct loss mitigation activities; and (iii) we continue to hold a right to call the assets of certain entities (once they have been paid down below a specified threshold) at a price equal to, or in excess of, the current outstanding principal amount of the entity’s asset-backed securities issued. These factors have resulted in our continuing to consolidate the assets and liabilities of these Sequoia, CAFL and HEI entities in accordance with GAAP.

We consolidate the assets and liabilities of certain Freddie Mac K-Series and SLST securitization (and re-securitzation) trusts resulting from our investment in subordinate securities issued by these trusts, and in the case of certain CAFL securitizations, resulting from securities acquired through our acquisition of CoreVest. Additionally, we consolidate the assets and liabilities of Servicing Investment entities from our investment in servicer advance investments and excess MSRs. In each case, we maintain certain discretionary rights associated with the ownership of these investments that we determined reflected a controlling financial interest, as we have both the power to direct the activities that most significantly impact the economic performance of the VIEs and the right to receive benefits of and the obligation to absorb losses from the VIEs that could potentially be significant to the VIEs.

Since 2012, we have transferred residential consumer loans to 46 Sequoia securitization entities sponsored by us that are still outstanding as of March 31, 2024, and accounted for these transfers as sales for financial reporting purposes, in accordance with GAAP. We also determined we were not the primary beneficiary of these VIEs as we lacked the power to direct the activities that will have the most significant economic impact on the entities. For certain of these transfers to securitization entities, for the transferred loans where we held the servicing rights prior to the transfer and continued to hold the servicing rights following the transfer, we recorded mortgage servicing rights ("MSRs") on our consolidated balance sheets, and classified those MSRs as Level 3 assets. We also retained senior and subordinate securities in these securitizations that we classified as Level 3 assets. Our continuing involvement in these securitizations is limited to customary servicing obligations associated with retaining servicing rights (which we retain a third-party sub-servicers to perform) and the receipt of interest income associated with the securities we retained.


(In Thousands)	March 31, 2024		December 31, 2023
On-balance sheet assets, at fair value:
Interest-only, senior and subordinate securities, classified as trading	$	35,709	$	31,690
Subordinate securities, classified as AFS	87,647		78,942
Mortgage servicing rights	11,796		10,885
Maximum loss exposure (1)	$	135,152	$	121,517
Assets transferred:
Principal balance of loans outstanding	$	3,702,972	$	3,758,914
Principal balance of loans 30+ days delinquent	22,779		22,367

(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.


March 31, 2024	MSRs			Senior Securities (1)			Subordinate Securities
(Dollars in Thousands)
Fair value at March 31, 2024	$	11,796		$	35,709		$	87,647
Expected life (in years) (2)	9			11			10
Prepayment speed assumption (annual CPR) (2)	4		%	3		%	6		%
Decrease in fair value from:
10% adverse change	$	177		$	347		$	626
25% adverse change	439			912			642
Discount rate assumption (2)	12		%	12		%	9		%
Decrease in fair value from:
100 basis point increase	$	471		$	1,646		$	6,973
200 basis point increase	900			3,181			12,731
Credit loss assumption (2)	N/A			0.03		%	0.03		%
Decrease in fair value from:
10% higher losses	N/A			N/A			$	646
25% higher losses	N/A			N/A			703


December 31, 2023	MSRs			Senior Securities (1)			Subordinate Securities
(Dollars in Thousands)
Fair value at December 31, 2023	$	10,885		$	31,690		$	78,942
Expected life (in years) (2)	8			9			13
Prepayment speed assumption (annual CPR) (2)	6		%	5		%	6		%
Decrease in fair value from:
10% adverse change	$	207		$	532		$	200
25% adverse change	513			1,335			477
Discount rate assumption (2)	13		%	13		%	9		%
Decrease in fair value from:
100 basis point increase	$	405		$	1,322		$	6,855
200 basis point increase	827			2,506			12,883
Credit loss assumption (2)	N/A			0.03		%	0.03		%
Decrease in fair value from:
10% higher losses	N/A			N/A			$	36
25% higher losses	N/A			N/A			96

Third-party VIEs are securitization entities in which we maintain an economic interest, but do not sponsor. Our economic interest may include several securities and other investments from the same third-party VIE, and in those cases, the analysis is performed in consideration of all of our interests. The following table presents a summary of our interests in third-party VIEs at March 31, 2024 and December 31, 2023, grouped by asset type.

We determined that we are not the primary beneficiary of these third-party VIEs, as we do not have the required power to direct the activities that most significantly impact the economic performance of these entities. Specifically, we do not service or manage these entities or otherwise solely hold decision making powers that are significant. As a result of this assessment, we do not consolidate any of the underlying assets and liabilities of these third-party VIEs – we only account for our specific interests in them.