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Residential Investor Loans

6 Months Ended

Jun. 30, 2024

Residential Consumer Loans

We acquire residential consumer loans from third-party originators and may sell or securitize these loans or hold them for investment.

The following table summarizes the classifications and carrying values of the residential consumer loans owned at Redwood and at the consolidated Sequoia and Freddie Mac SLST entities at June 30, 2024 and December 31, 2023.

Table 7.1 – Classifications and Carrying Values of Residential Consumer Loans


June 30, 2024					Freddie Mac
(In Thousands)	Redwood		Sequoia		SLST		Total
Held-for-sale at fair value	$	962,548	$	—	$	—	$	962,548
Held-for-investment at fair value	—		6,950,586		1,297,022		8,247,608
Total Residential Consumer Loans	$	962,548	$	6,950,586	$	1,297,022	$	9,210,156


December 31, 2023					Freddie Mac
(In Thousands)	Redwood		Sequoia		SLST		Total
Held-for-sale at fair value	$	911,192	$	—	$	—	$	911,192
Held-for-investment at fair value	—		4,780,203		1,359,242		6,139,445
Total Residential Consumer Loans	$	911,192	$	4,780,203	$	1,359,242	$	7,050,637

At June 30, 2024, we owned mortgage servicing rights associated with $946 million (principal balance) of residential consumer loans owned at Redwood that were purchased from third-party originators. The value of these MSRs is included in the carrying value of the associated loans on our consolidated balance sheets. We contract with licensed sub-servicers that perform servicing functions for these loans.

Residential Consumer Loans Held-for-Sale

The following table summarizes the characteristics of residential consumer loans held-for-sale at June 30, 2024 and December 31, 2023.

Table 7.2 – Characteristics of Residential Consumer Loans Held-for-Sale


(Dollars in Thousands)	June 30, 2024			December 31, 2023

Unpaid principal balance	$	947,691		$	916,877
Fair value of loans	$	962,548		$	911,192
Market value of loans pledged as collateral under short-term borrowing agreements	$	957,143		$	907,742
Weighted average coupon	7.14		%	6.25		%

At both June 30, 2024 and December 31, 2023, there were no residential consumer loans held-for-sale that were 90 days or more delinquent or in foreclosure.

The following table provides the activity of residential consumer loans held-for-sale during the three and six months ended June 30, 2024 and 2023.

Table 7.3 – Activity of Residential Consumer Loans Held-for-Sale


	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2024		2023		2024		2023
Principal balance of loans acquired	$	1,874,201	$	181,972	$	2,873,987	$	235,018
Principal balance of loans sold	5,563		8,925		207,144		182,078
Principal balance of loans transferred from HFS to HFI	1,424,026		—		2,611,987		657,295
Net market valuation gains (losses) recorded (1)	6,535		(1,085)		9,032		6,093

(1)Net market valuation gains (losses) on residential consumer loans held-for-sale are recorded primarily through Mortgage banking activities, net on our consolidated statements of income.

Residential Consumer Loans Held-for-Investment at Fair Value

We invest in residential subordinate securities issued by Sequoia and Freddie Mac SLST securitization trusts and consolidate the underlying residential consumer loans owned by these entities for financial reporting purposes in accordance with GAAP. The following tables summarize the characteristics of the residential consumer loans owned at consolidated Sequoia and Freddie Mac SLST entities at June 30, 2024 and December 31, 2023.

Table 7.4 – Characteristics of Residential Consumer Loans Held-for-Investment


June 30, 2024				Freddie Mac
(Dollars in Thousands)	Sequoia			SLST

Unpaid principal balance	$	7,639,727		$	1,569,864
Average loan balance (UPB)	$	835		$	156
Fair value of loans (1)	$	6,950,586		$	1,297,022
Weighted average coupon	4.98		%	4.50		%

Delinquency information

Unpaid principal balance of loans with 90+ day delinquencies (2)	$	15,653		$	111,958


Average 90+ days delinquent balance (UPB)	$	460		$	174
Unpaid principal balance of loans in foreclosure	$	7,572		$	42,231
Average foreclosure balance (UPB)	$	527		$	164


December 31, 2023				Freddie Mac
(Dollars in Thousands)	Sequoia			SLST

Unpaid principal balance	$	5,398,913		$	1,614,974
Average loan balance (UPB)	$	757		$	157
Fair value of loans (1)	$	4,780,203		$	1,359,242
Weighted average coupon	4.15		%	4.50		%

Delinquency information

Unpaid principal balance of loans with 90+ day delinquencies (2)	$	13,023		$	132,307

Average 90+ days delinquent balance (UPB)	$	482		$	166

Unpaid principal balance of loans in foreclosure	$	5,234		$	47,654
Average foreclosure balance (UPB)	$	436		$	163

(1)The fair value of the loans held by consolidated entities was based on the fair value of the ABS issued by these entities, including securities we own, which we determined were more readily observable, in accordance with the accounting guidance for collateralized financing entities. The net impact to our income statement associated with our economic investment in these securitization entities is presented in Table 17.2.

(2)For loans held at consolidated entities, the number and unpaid principal balance of loans 90+ days delinquent includes loans in foreclosure.

For loans held at our consolidated Sequoia and Freddie Mac SLST entities, market value changes are based on the estimated fair value of the associated ABS issued, including securities we own, pursuant to the measurement alternative provided for collateralized financing entities, and are recorded in Investment fair value changes, net on our consolidated statements of income. The following table provides the activity of residential consumer loans held-for-investment at consolidated entities during the three and six months ended June 30, 2024 and 2023.

Table 7.5 – Activity of Residential Consumer Loans Held-for-Investment at Consolidated Entities

Three Months Ended June 30, 2024

Three Months Ended June 30, 2023

Freddie Mac

(In Thousands)

Sequoia

SLST

Sequoia

SLST

Principal value of loans transferred from HFS to HFI (1)

1,424,026

N/A

Net market valuation gains (losses) recorded

(48,590)

(11,171)

(47,047)

(44,147)

Six Months Ended June 30, 2024

Six Months Ended June 30, 2023

Freddie Mac

(In Thousands)

Sequoia

SLST

Sequoia

SLST

Principal value of loans transferred from HFS to HFI (1)

2,611,987

N/A

657,295

N/A

Net market valuation gains (losses) recorded

(103,399)

(15,401)

14,357

(11,710)

(1)Represents the transfer of loans from held-for-sale to held-for-investment associated with Sequoia securitizations.

Residential Investor Loans

We originate and invest in residential investor loans, including term loans and bridge loans. The following table summarizes the classifications and carrying values of the residential investor loans owned at Redwood and at consolidated CAFL entities at June 30, 2024 and December 31, 2023.

Table 8.1 – Classifications and Carrying Values of Residential Investor Loans


June 30, 2024	Residential Investor Term				Residential Investor Bridge
(In Thousands)	Redwood		CAFL		Redwood		CAFL		Total
Held-for-sale at fair value	$	217,761	—		$	41,722	$	—	$	259,483
Held-for-investment at fair value	—		2,737,467		1,197,073		685,627		4,620,167
Total Residential Investor Loans	$	217,761	$	2,737,467	$	1,238,795	$	685,627	$	4,879,650


December 31, 2023	Residential Investor Term				Residential Investor Bridge
(In Thousands)	Redwood		CAFL		Redwood		CAFL		Total
Held-for-sale at fair value	$	144,359	$	—	$	35,891	$	—	$	180,250
Held-for-investment at fair value	—		2,971,725		1,305,727		762,596		5,040,048
Total Residential Investor Loans	$	144,359	$	2,971,725	$	1,341,618	$	762,596	$	5,220,298

Nearly all of the outstanding residential investor term loans at June 30, 2024 were first-lien, fixed-rate loans with original maturities of three, five, seven, or ten years.

The outstanding residential investor bridge loans held-for-investment at June 30, 2024 were first-lien, interest-only loans with original maturities of 6 to 36 months and were comprised of 67% one-month SOFR-indexed adjustable-rate loans, and 33% fixed-rate loans.

At June 30, 2024, we had $448 million in commitments to fund residential investor bridge loans. See Note 18 for additional information on these commitments.

During the three months and six months ended June 30, 2024, we sold $135 million and $187 million, of residential investor bridge loans, net of $6 million and $21 million, respectively, of construction draws, to our joint ventures. See Note 12 for additional information on these joint ventures.

The following table provides the activity of residential investor loans at Redwood during the three and six months ended June 30, 2024 and 2023.

Table 8.2 – Activity of Residential Investor Loans at Redwood


	Three Months Ended June 30, 2024				Three Months Ended June 30, 2023
(In Thousands)	Term at Redwood		Bridge at Redwood		Term at Redwood	Bridge at Redwood
Principal balance of loans originated	$	217,538	$	234,115	128,622	269,713
Principal balance of loans acquired	648		—		—	8,149
Principal balance of loans sold to third parties (1)	252,424		156,294		180,404	19,260
Fair value of loans transferred (2)	—		(89,202)		—	(140,186)

Mortgage banking activities income (loss) recorded (3)	5,957		1,108		(1,132)	2,291
Investment fair value changes recorded	(337)		(13,992)		(13,625)	(8,778)


	Six Months Ended June 30, 2024		Six Months Ended June 30, 2023
(In Thousands)	Term at Redwood	Bridge at Redwood	Term at Redwood	Bridge at Redwood
Principal balance of loans originated	334,628	428,144	302,700	524,865
Principal balance of loans acquired	648	15,677	—	17,234
Principal balance of loans sold to third parties (1)	258,456	209,515	398,106	31,807
Fair value of loans transferred (2)	—	(187,933)	—	(220,978)

Mortgage banking activities income recorded (3)	5,661	2,054	11,534	3,453
Investment fair value changes recorded	(1,337)	(17,210)	(13,625)	(7,266)

(1)For the three and six months ended June 30, 2024 the principal balance of loans sold to third parties is net of $6 million and $21 million, respectively, related to construction draws on residential investor bridge loans sold to our joint ventures. See Note 12 for additional information on these joint ventures.

(2)For residential investor term at Redwood, represents the transfer of loans from held-for-sale to held-for-investment associated with CAFL term securitizations. For residential investor bridge at Redwood, represents the transfer of residential investor bridge loans from "Bridge at Redwood" to "Bridge at CAFL" resulting from their inclusion in one of our bridge loan securitizations, which generally have replenishment features.

(3)Represents net market valuation changes from the time a loan is originated to when it is sold, securitized or transferred to our investment portfolio. See Table 5.1 for additional detail on Mortgage banking activities income (loss).

Residential Investor Loans Held-for-Investment at CAFL

We invest in securities issued by CAFL securitizations sponsored by CoreVest and consolidate the underlying residential investor term loans and bridge loans owned by these entities. The following table provides the activity of residential investor loans held-for-investment at CAFL during the three and six months ended June 30, 2024 and 2023.

Table 8.3 – Activity of Residential Investor Loans Held-for-Investment at CAFL


	Three Months Ended June 30, 2024				Three Months Ended June 30, 2023
(In Thousands)	Term at CAFL		Bridge at CAFL		Term at CAFL		Bridge at CAFL
Net market valuation gains (losses) recorded(1)	$	3,530	$	(4,870)	$	(37,780)	$	1,192
Fair value of loans transferred to HFI	$	—	$	89,202	—		140,186


	Six Months Ended June 30, 2024				Six Months Ended June 30, 2023
(In Thousands)	Term at CAFL		Bridge at CAFL		Term at CAFL		Bridge at CAFL
Net market valuation gains (losses) recorded(1)	$	11,113	$	(1,180)	$	(601)	$	600
Fair value of loans transferred to HFI	$	—	$	187,933	—		220,978

(1)Net market valuation gains (losses) on residential investor loans held-for-investment at CAFL are recorded through Investment fair value changes, net on our consolidated statements of income. For loans held at our consolidated CAFL Term entities and one CAFL Bridge entity, market value changes are based on the estimated fair value of the associated ABS issued, including securities we own, pursuant to collateralized financing entity guidelines. The net impact associated with our economic investment in these securitization entities is presented in Tables 15.1 and 15.2. We did not elect to account for two of our CAFL Bridge securitizations under the collateralized financing entity guidelines but have elected to account for the loans in these securitizations at fair value, and changes in fair value for these loans are recorded through Investment fair value changes, net on our consolidated statements of income.

Residential Investor Loan Characteristics

The following tables summarize the characteristics of the residential investor loans owned at Redwood and at consolidated CAFL entities at June 30, 2024 and December 31, 2023.

Table 8.4 – Characteristics of Residential Investor Loans


June 30, 2024	Term at Redwood			Term at CAFL(1)			Bridge at Redwood			Bridge at CAFL
(Dollars in Thousands)


Unpaid principal balance	$	228,059		$	2,946,186		$	1,266,729		$	680,187
Average UPB of loans	$	2,887		$	3,044		$	7,917		$	2,001
Fair value of loans	$	217,761		$	2,737,466		$	1,238,795		$	685,627
Weighted average coupon	7.20		%	5.34		%	10.19		%	10.59		%
Weighted average remaining loan term (years)	7			5			1			1
Market value of loans pledged as collateral under debt facilities	$	166,221		N/A			$	1,201,822		N/A
Delinquency information


Unpaid principal balance of loans with 90+ day delinquencies (2)	$	27,529		$	139,628		$	107,094		$	20,593
Average UPB of 90+ days delinquent loans (2)	$	27,529		$	3,103		$	7,650		$	1,872
Fair value of loans with 90+ day delinquencies (2)	$	14,750		N/A			$	94,730		N/A


Unpaid principal balance of loans in foreclosure (3)	$	27,529		$	18,646		$	87,804		$	13,771
Average UPB of loans in foreclosure (3)	$	27,529		$	2,664		$	7,317		$	1,967
Fair value of loans in foreclosure (3)	$	14,750		N/A			$	76,299		N/A


December 31, 2023	Term at Redwood			Term at CAFL(1)			Bridge at Redwood			Bridge at CAFL
(Dollars in Thousands)


Unpaid principal balance	$	152,213		$	3,194,131		$	1,360,957		$	756,574
Average UPB of loans	$	4,006		$	3,028		$	8,453		$	2,162
Fair value of loans	$	144,359		$	2,971,725		$	1,341,618		$	762,596
Weighted average coupon	6.92		%	5.34		%	10.41		%	10.82		%
Weighted average remaining loan term (years)	7			5			1			1
Market value of loans pledged as collateral under debt facilities	$	124,934		N/A			$	1,298,198		N/A
Delinquency information


Unpaid principal balance of loans with 90+ day delinquencies (2)	$	28,263		$	143,623		$	96,934		$	10,646
Average UPB of 90+ days delinquent loans (2)	$	14,132		$	3,192		$	5,702		$	1,774
Fair value of loans with 90+ day delinquencies (2)	$	16,822		N/A			$	86,137		N/A


Unpaid principal balance of loans in foreclosure (3)	$	28,263		$	15,708		$	79,841		$	3,931
Average UPB of loans in foreclosure (3)	$	14,132		$	2,244		$	5,323		$	1,310
Fair value of loans in foreclosure (3)	$	16,822		N/A			$	69,046		N/A

(1)The fair value of the loans held by consolidated CAFL Term entities and one CAFL Bridge entity were based on the fair value of the ABS issued by these entities, including securities we own, which we determined were more readily observable in accordance with the accounting guidance for collateralized financing entities.

(2)The number of loans 90+ days delinquent includes loans in foreclosure.

(3)May include loans that are less than 90 days delinquent.

The following table presents the unpaid principal balance of business purpose loans recorded on our consolidated balance sheets at June 30, 2024 by collateral/strategy type.

Table 8.5 – Residential Investor Loans Collateral/Strategy Type


June 30, 2024	Term at Redwood		Term at CAFL(1)		Bridge at Redwood		Bridge at CAFL(1)
(Dollars in Thousands)
Term
Single family rental	137,347		2,296,676		—		—
Multifamily	90,712		649,510		—		—
Bridge
Renovate / Build for Rent ("BFR")(2)	—		—		548,841		374,262
Single Asset Bridge ("SAB")(3)	—		—		31,629		117,888
Multifamily(4)	—		—		664,680		186,637
Third-Party Originated	—		—		21,579		1,400
Total Residential Investor Loans	$	228,059	$	2,946,186	$	1,266,729	$	680,187

(2) Includes loans to finance acquisition and/or stabilization of existing housing stock or to finance new construction of residential properties for rent.

(3) Includes loans for light to moderate renovation of residential and small multifamily properties (generally less than 20 units).

(4) Includes loans for predominantly light to moderate rehabilitation projects on multifamily properties.

Loan Modifications

We may amend or modify a loan depending on the loan's specific facts and circumstances. These loan modifications typically include amendments and restructuring and include terms such as additional time for the borrower to refinance or sell the collateral property, interest rate reductions and/or deferral of scheduled principal and/or interest payments. In some instances, a loan amendment or restructuring may bring the loan out of delinquent status. In exchange for a modification, we may receive a partial repayment of principal, a short-term accrual of capitalized interest for a portion of interest due, a capital infusion to replenish interest or capital improvement reserves and/or termination of all or a portion of the remaining unfunded loan commitment.

For the three and six months ended June 30, 2024, we modified residential investor loans with an aggregate unpaid principal balance of $379 million and $429 million, respectively, with an aggregate fair value of $369 million and $417 million, respectively. At the time of modification, the weighted average length of time these loans were past due was under three months for both the three and six months ended June 30, 2024. Of the modified loans for the three months ending June 30, 2024, $43 million included loans in forbearance without a rate reduction and $335 million included reductions in interest rates (including, in certain cases, deferrals of interest), among other terms, and in certain cases, combined with infusions of fresh capital from either the existing sponsor or new sources. For the three and six months ended June 30, 2024, the average length of maturity extensions granted on residential investor bridge loans was just under five months and seven months, respectively.

Nonaccrual Loans

Interest income is accrued on loans in the period the coupon interest is contractually earned until such time a loan is placed on non-accrual status.

A loan is placed on non-accrual status when it is probable that all principal and interest due under the contractual terms will not be collected and a loan is past due more than 90 days. Income from non-accrual loans is generally recognized on a cash basis when it is received. At the time a loan is placed on non-accrual status, all previously accrued but uncollected interest is reversed against interest income and interest subsequently collected is recognized on a cash basis to the extent the loan balance is deemed collectible or until such time the loan qualifies to be placed back on accrual status.

Generally, a loan is placed back on accrual status when the loan becomes contractually current or the collection of past due and future payments is reasonably assured either through reinstatement by the borrower, estimated net equity in the underlying real estate property or both.

At June 30, 2024 and December 31, 2023, residential investor loans with an aggregate unpaid principal balance of $324 million and $340 million, respectively, and an aggregate fair value of $290 million and $312 million, respectively, were on non-accrual status. Of this balance, loans with an aggregate unpaid principal balance of $204 million and $207 million were less than 90 days past due (including loans that were contractually current) as of June 30, 2024 and December 31, 2023, respectively.

Consolidated Agency Multifamily Loans

We invest in multifamily subordinate securities issued by a Freddie Mac K-Series securitization trust and consolidate the underlying multifamily loans owned by this entity for financial reporting purposes in accordance with GAAP. The following table summarizes the characteristics of the multifamily loans consolidated at Redwood at June 30, 2024 and December 31, 2023.

Table 9.1 – Characteristics of Consolidated Agency Multifamily Loans


(Dollars in Thousands)	June 30, 2024			December 31, 2023

Unpaid principal balance	$	434,595		$	438,868
Fair value of loans	$	421,794		$	425,285
Weighted average coupon	4.25		%	4.25		%
Weighted average remaining loan term (years)	1			2

There were no consolidated agency multifamily loans with 90+ day delinquencies and no multifamily loans in foreclosure at June 30, 2024 and December 31, 2023.

The outstanding Consolidated Agency multifamily loans held-for-investment at the consolidated Freddie Mac K-Series entity at June 30, 2024 were first-lien, fixed-rate loans that were originated in 2015. The following table provides the activity of multifamily loans held-for-investment during the three and six months ended June 30, 2024 and 2023.

Table 9.2 – Activity of Consolidated Agency Multifamily Loans Held-for-Investment


	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2024		2023		2024		2023
Net market valuation gains (losses) recorded (1)	$	1,128	$	(4,471)	$	781	$	(311)

(1)Net market valuation gains (losses) on multifamily loans held-for-investment are recorded through Investment fair value changes, net on our consolidated statements of income. For loans held at our consolidated Freddie Mac K-Series entity, market value changes are based on the estimated fair value of the associated ABS issued, including securities we own, pursuant to collateralized financing entity guidelines. The net impact to our income statement associated with our economic investment in these securitization entities is presented in Table 15.2.