In the normal course of business, we enter into certain types of transactions with entities that are considered to be VIEs. The Company's primary involvement with VIEs has been related to its securitization transactions in which it transfers assets to securitization vehicles. We primarily securitize our acquired and originated loans, which provides a source of funding and has enabled us to transfer a certain portion of economic risk on loans or related debt securities to third parties. The entity that has a controlling financial interest in a VIE is referred to as the primary beneficiary and is required to consolidate the VIE.

We currently consolidate the assets and liabilities of variable interests in certain securitization vehicles in which we are the primary beneficiary. These include certain legacy Sequoia securitization entities issued prior to 2012, certain entities formed during and after 2012 in connection with the securitization of Redwood Select prime loans and Redwood Choice expanded-prime loans (all together referred to as "Sequoia"), entities formed in connection with the securitization of CoreVest residential investor term and bridge loans ("CAFL") and entities formed in connection with the securitization of HEI. We also consolidate the assets and liabilities of certain Freddie Mac K-series and Freddie Mac Seasoned Loans Structured Transaction ("SLST") securitizations (and re-securitization of such SLST securities) in which we have invested. Each securitization entity is independent of Redwood and of each other and the assets and liabilities are not owned by and are not legal obligations of Redwood Trust Inc. Our exposure to these entities is primarily through the financial interests we have purchased or retained, although for certain entities we are exposed to financial risks associated with our role as a sponsor or co-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 June 30, 2024, we held an 80% ownership interest in, and were responsible for the management of, each entity. See Note 12 for a further description of these entities and the investments they hold and Note 14 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 17 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 June 30, 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 11 for a further description of these entities and the investments it holds and Note 14 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.


June 30, 2024	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	$	6,950,586	$	—	$	1,297,022	$	—	$	—	$	—	$	8,247,608
Residential investor loans, held-for-investment	—		3,423,094		—		—		—		—		3,423,094
Consolidated Agency multifamily loans	—		—		—		421,794		—		—		421,794

Home equity investments	—		—		—		—		—		320,816		320,816
Other investments	—		—		—		—		257,676		—		257,676
Cash and cash equivalents	—		—		—		—		24,791		—		24,791
Restricted cash	149		22,280		—		—		—		10,918		33,347
Accrued interest receivable	31,821		18,481		4,678		1,257		2,383		—		58,620
Other assets	—		49,640		2,527		—		4,181		99		56,447
Total Assets	$	6,982,556	$	3,513,495	$	1,304,227	$	423,051	$	289,031	$	331,833	$	12,844,193
Short-term debt	$	—	$	—	$	—	$	—	$	145,785	$	—	$	145,785
Accrued interest payable	27,879		9,984		4,288		1,131		367		—		43,649
Accrued expenses and other liabilities	—		6,650		—		—		43,058		72,269		121,977
Asset-backed securities issued	6,686,531		3,058,191		1,204,835		387,791		—		218,203		11,555,551
Total Liabilities	$	6,714,410	$	3,074,825	$	1,209,123	$	388,922	$	189,210	$	290,472	$	11,866,962

Value of our investments in VIEs(1)	$	264,136	$	444,932	$	94,714	$	34,003	$	99,821	$	41,361	$	978,967
Number of VIEs	48		21		3		1		3		2		78


December 31, 2023	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	$	4,780,203	$	—	$	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	163		33,921		—		—		—		10,821		44,905
Accrued interest receivable	20,029		20,806		4,821		1,320		822		—		47,798
Other assets	—		14,886		3,158		—		6,337		62		24,443
Total Assets	$	4,800,395	$	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	16,293		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	4,568,660		3,362,978		1,265,777		391,977		—		222,488		9,811,880
Total Liabilities	$	4,584,953	$	3,377,249	$	1,270,273	$	393,167	$	188,426	$	282,240	$	10,096,308

Value of our investments in VIEs(1)	$	211,638	$	424,136	$	96,623	$	33,308	$	85,704	$	34,361	$	885,770
Number of VIEs	42		21		3		1		3		2		72

(1)The 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 June 30, 2024 and December 31, 2023, the fair value of our interests in the CAFL term loan securitizations accounted for under the CFE election were $337 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 $25 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 June 30, 2024 and December 31, 2023, the fair value of our interests in the Freddie Mac SLST securitizations accounted for under the CFE election were $258 million and $274 million, respectively, with the difference from the tables above representing ABS issued and carried at amortized historical cost.


	Three Months Ended June 30, 2024
		Sequoia		CAFL		Freddie Mac SLST		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Interest income		$	80,881	$	58,881	$	14,308	$	4,559	$	7,403	$	—	$	166,032
Interest expense		(74,373)		(41,279)		(13,610)		(4,177)		(3,142)		—		(136,581)
Net interest income		6,508		17,602		698		382		4,261		—		29,451
Non-interest income

Investment fair value changes, net		4,322		2,597		(5,137)		452		10,649		—		12,883
HEI income, net		—		—		—		—		—		4,176		4,176
Other income		—		428		—		—		—		—		428

Total non-interest income, net		4,322		3,025		(5,137)		452		10,649		4,176		17,487
General and administrative expenses		—		—		(14)		—		(39)		—		(53)
Other expenses		—		—		—		—		(2,974)		—		(2,974)

Income (loss) from Consolidated VIEs		$	10,830	$	20,627	$	(4,453)	$	834	$	11,897	$	4,176	$	43,911


	Six Months Ended June 30, 2024
		Sequoia		CAFL		Freddie Mac SLST		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Interest income		$	143,859	$	119,875	$	28,924	$	9,140	$	14,954	$	—	$	316,752
Interest expense		(133,195)		(84,562)		(27,591)		(8,376)		(6,361)		—		(260,085)
Net interest income		10,664		35,313		1,333		764		8,593		—		56,667
Non-interest income

Investment fair value changes, net		9,450		16,100		(1,407)		695		9,146		—		33,984
HEI income, net		—		—		—		—		—		7,064		7,064
Other income		—		733		—		—		—		—		733
Realized gains, net		—		314		—		—		—		—		314
Total non-interest income, net		9,450		17,147		(1,407)		695		9,146		7,064		42,095
General and administrative expenses		—		—		(28)		—		(90)		—		(118)
Other expenses		—		—		—		—		(3,530)		—		(3,530)

Income (loss) from Consolidated VIEs		$	20,114	$	52,460	$	(102)	$	1,459	$	14,119	$	7,064	$	95,114


	Three Months Ended June 30, 2023
		Sequoia		CAFL		Freddie Mac SLST		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Interest income		$	40,218	$	54,583	$	15,273	$	4,698	$	7,911	$	—	$	122,683
Interest expense		(36,653)		(38,545)		(10,650)		(4,311)		(3,796)		—		(93,955)
Net interest income		3,565		16,038		4,623		387		4,115		—		28,728
Non-interest income

Investment fair value changes, net		918		11,601		(16,563)		385		5,253		—		1,594
HEI income, net		—		—		—		—		—		453		453
Other income		—		212		—		—		—		—		212
Total non-interest income, net		918		11,813		(16,563)		385		5,253		453		2,259
General and administrative expenses		—		—		—		—		(3)		—		(3)
Other expenses		—		—		—		—		(1,904)		—		(1,904)

Income (loss) from Consolidated VIEs		$	4,483	$	27,851	$	(11,940)	$	772	$	7,461	$	453	$	29,080


	Six Months Ended June 30, 2023
		Sequoia		CAFL		Freddie Mac SLST		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Interest income		$	77,405	$	109,020	$	30,766	$	9,316	$	15,725	$	—	$	242,232
Interest expense		(69,212)		(78,087)		(21,868)		(8,552)		(7,644)		—		(185,363)
Net interest income		8,193		30,933		8,898		764		8,081		—		56,869
Non-interest income

Investment fair value changes, net		3,266		1,919		(7,629)		748		4,206		878		3,388

Other income		—		384		—		—		—		—		384
Total non-interest income, net		3,266		2,303		(7,629)		748		4,206		878		3,772
General and administrative expenses		—		—		—		—		7		—		7
Other expenses		—		—		—		—		(2,481)		—		(2,481)

Income (loss) from Consolidated VIEs		$	11,459	$	33,236	$	1,269	$	1,512	$	9,813	$	878	$	58,167

Since 2012, we have transferred residential consumer loans to 46 Sequoia securitization entities sponsored by us that are still outstanding as of June 30, 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)	June 30, 2024		December 31, 2023
On-balance sheet assets, at fair value:
Interest-only, senior and subordinate securities, classified as trading	$	35,632	$	31,690
Subordinate securities, classified as AFS	88,165		78,942
Mortgage servicing rights	12,301		10,885
Maximum loss exposure (1)	$	136,098	$	121,517
Assets transferred:
Principal balance of loans outstanding	$	3,627,578	$	3,758,914
Principal balance of loans 30+ days delinquent	14,278		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.