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Principles of Consolidation (Tables)

6 Months Ended

Jun. 30, 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 15.1 – Assets and Liabilities of Consolidated VIEs

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.

The following tables present income (loss) from these VIEs for the three and six months ended June 30, 2024 and 2023.

Table 15.2 – Income (Loss) from Consolidated VIEs

									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

Schedule of Unconsolidated Variable Interest Entity's Sponsored by Redwood

The following table presents additional information at June 30, 2024 and December 31, 2023, related to unconsolidated VIEs sponsored by Redwood and accounted for as sales since 2012.

Table 15.3 – Unconsolidated VIEs Sponsored by Redwood

(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.

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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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-Topic 860
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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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