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Principles of Consolidation (Tables)

3 Months Ended

Mar. 31, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Consolidated VIEs

The following table presents a summary of the assets and liabilities of our consolidated VIEs.     

Table 4.1 – Assets and Liabilities of Consolidated VIEs

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.

The following tables present income (loss) from these VIEs for the three months ended March 31, 2024 and 2023.

Table 4.2 – Income (Loss) from Consolidated VIEs

						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

Schedule of Cash Flows Related to Unconsolidated Variable Interest Entity's Sponsored by Redwood

The following table summarizes the cash flows during the three months ended March 31, 2024 and 2023 between us and the unconsolidated VIEs sponsored by us and accounted for as sales since 2012.

Table 4.3 – Cash Flows Related to Unconsolidated VIEs Sponsored by Redwood

						Three Months Ended March 31,
(In Thousands)						2024						2023
MSR fees received						$	604					$	684
Funding of compensating interest, net						(124)						(1)
Cash flows received on retained securities						3,022						2,963

Schedule of Unconsolidated Variable Interest Entity's Sponsored by Redwood

The following table presents additional information at March 31, 2024 and December 31, 2023, related to unconsolidated VIEs sponsored by Redwood and accounted for as sales since 2012.

Table 4.4 – Unconsolidated VIEs Sponsored by Redwood

(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.

Schedule of Key Assumptions and Sensitivity Analysis for Assets Retained from Unconsolidated Variable Interest Entity's Sponsored by Redwood

The following table presents key economic assumptions for assets retained from unconsolidated VIEs and the sensitivity of their fair values to immediate adverse changes in those assumptions at March 31, 2024 and December 31, 2023.

Table 4.5 – Key Assumptions and Sensitivity Analysis for Assets Retained from Unconsolidated VIEs Sponsored by Redwood

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

(1)Senior securities are comprised entirely of interest-only securities at March 31, 2024 and at December 31, 2023.

(2)Expected life, prepayment speed assumption, discount rate assumption, and credit loss assumption presented in the tables above represent weighted averages.

Schedule of Third-Party Sponsored VIE Summary

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.

Table 4.6 – Third-Party Sponsored VIE Summary

(In Thousands)						March 31, 2024						December 31, 2023
Mortgage-Backed Securities
Senior						$	62,246					$	4,419
Mezzanine						9,219						—
Subordinate						17,486						12,746
Total Mortgage-Backed Securities						88,951						17,165
Excess MSR						4,848						5,224
Total Investments in Third-Party Sponsored VIEs						$	93,799					$	22,389

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Cash Flows between a transferor and a transferee attributable to transferred assets related to either a securitization 0r asset-backed financing arrangement in which the transferor has continuing involvement with the transferred financial assets underlying the transaction (including, but not limited to, servicing, recourse, and restrictions on transferor's interests in the transferred financial assets).

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Tabular disclosure of a transferor's continuing involvement with financial assets transferred to a transferee in a securitization, asset-backed financing arrangement, or similar transfer. Such disclosure would, at a minimum, contain information allowing for an assessment of the reasons for the transferor's continuing involvement, the risks related to the transferred financial assets to which the transferor continues to be exposed, and the extent of change to the transferor's risk profile due to the transfer (including, but not limited to, credit risk, interest rate risk, other).

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Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

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