Other Investments

3 Months Ended

Mar. 31, 2024

Investments, All Other Investments [Abstract]

Other investments at March 31, 2024 and December 31, 2023 are summarized in the following table.

Table 11.1 – Components of Other Investments


(In Thousands)	March 31, 2024		December 31, 2023
Servicer advance investments	$	216,033	$	225,345
Strategic investments	57,608		56,107
Excess MSRs	36,122		37,367
Mortgage servicing rights	27,417		24,877

Other	165		234
Total Other Investments	$	337,345	$	343,930

Servicer advance investments

We and a third-party co-investor, through two partnerships (“SA Buyers”) consolidated by us, purchased the outstanding servicer advances and excess MSRs related to portfolios of legacy residential mortgage-backed securitizations serviced by the co-investor. Refer to Note 11 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 for additional information regarding the transactions.

At March 31, 2024, our servicer advance investments had a carrying value of $216 million and were associated with specified pools of residential mortgage loans with an unpaid principal balance of $9.92 billion. The outstanding servicer advance receivables associated with these investments were $176 million at March 31, 2024, which were financed with short-term non-recourse securitization debt. See Note 14 for additional detail on this debt. The servicer advance receivables were comprised of the following types of advances at March 31, 2024 and December 31, 2023.

Table 11.2 – Components of Servicer Advance Receivables


(In Thousands)	March 31, 2024		December 31, 2023
Principal and interest advances	$	56,005	$	60,216
Escrow advances (taxes and insurance advances)	89,381		91,792
Corporate advances	30,523		32,579
Total Servicer Advance Receivables	$	175,909	$	184,587

We account for our servicer advance investments at fair value and during the three months ended March 31, 2024, we received $9 million in repayments, recorded $5 million of interest income, through Other interest income, and recorded a net market valuation loss of $1 million through Investment fair value changes, net in our consolidated statements of income.

Strategic Investments

Strategic investments represent investments we made in companies either through our RWT Horizons venture investment platform or separately at a corporate level. At March 31, 2024, we had made a total of 36 investments in companies through RWT Horizons with a total carrying value of $22 million, as well as seven corporate-level investments. For the three months ended March 31, 2024, we recognized a net market valuation gain of $1 million on our strategic investments through Investment fair value changes, net in our consolidated statements of income, largely driven by one of the portfolio companies completing a Series A capital raising transaction during the first quarter of 2024.

In the second quarter of 2023, we established a joint venture with Oaktree Capital Management, L.P. ("Oaktree"), a global investment manager, to invest in residential investor bridge loans originated by our CoreVest subsidiary. During the three months ended March 31, 2024, we sold $52 million of residential investor bridge loans, net of $15 million of construction draws, to the joint venture and at March 31, 2024, the carrying value of our investment in the joint venture was $5 million. We account for our investment in the joint venture under the equity method of accounting as we have a 20% non-controlling interest, but are deemed to be able to exert significant influence over the affairs of the joint venture. We adjust the carrying value of our equity method investment for our share of earnings or losses, dividends or return of capital on a quarterly basis.

Excess MSRs

In association with our servicer advance investments described above, we (through our consolidated SA Buyers) invested in excess MSRs associated with the same portfolio of legacy residential mortgage-backed securitizations. Additionally, we own excess MSRs associated with specified pools of multifamily loans. We account for our excess MSRs at fair value and during the three months ended March 31, 2024, we recognized $3 million of interest income through Other interest income and we recorded net market valuation losses of $1 million through Investment fair value changes, net on our consolidated statements of income.

Mortgage Servicing Rights

We invest in mortgage servicing rights associated with residential mortgage loans and contract with licensed sub-servicers to perform all servicing functions for these loans. The majority of our investments in MSRs were made through the retention of servicing rights associated with the residential jumbo mortgage loans that we acquired and subsequently sold to third parties. During the three months ended March 31, 2024, we retained MSRs with an aggregate unpaid principal balance of $9 million from sales of residential loans to third parties. We hold our MSR investments at our taxable REIT subsidiaries.

At March 31, 2024 and December 31, 2023, our MSRs had a fair value of $27 million and $25 million, respectively, and were associated with loans with an aggregate principal balance of $2.00 billion and $2.19 billion, respectively. During the three months ended March 31, 2024, including net market valuation gains and losses on our MSRs, we recorded net income related to our MSRs of $4 million through Other income on our consolidated statements of income.