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Principles of Consolidation (Tables)

9 Months Ended

Sep. 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

September 30, 2024												Sequoia(2)						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												$	8,476,004					$	—					$	1,318,806					$	—					$	—					$	—					$	9,794,810
Residential investor loans, held-for-investment												—						3,269,215						—						—						—						—						3,269,215
Consolidated Agency multifamily loans												—						—						—						425,648						—						—						425,648
Real estate securities												83,229						—						—						—						—						—						83,229
Home equity investments												—						—						—						—						—						334,559						334,559
Other investments												—						—						—						—						241,885						—						241,885
Cash and cash equivalents												—						—						—						—						24,632						—						24,632
Restricted cash												145						16,838						—						—						14,011						6,247						37,241
Accrued interest receivable												39,461						18,328						4,584						1,251						775						—						64,399
Other assets												—						25,440						2,843						—						8,357						414						37,054
Total Assets												$	8,598,839					$	3,329,821					$	1,326,233					$	426,899					$	289,660					$	341,220					$	14,312,672
Short-term debt												$	—					$	—					$	—					$	—					$	155,986					$	—					$	155,986
Accrued interest payable												35,096						9,455						4,161						1,125						356						—						50,193
Accrued expenses and other liabilities												1,263						7,683						—						—						38,994						80,863						128,803
Asset-backed securities issued												8,336,670						2,870,257						1,207,186						391,193						—						214,209						13,019,515
Total Liabilities												$	8,373,029					$	2,887,395					$	1,211,347					$	392,318					$	195,336					$	295,072					$	13,354,497
Value of our investments in VIEs(1)												$	222,631					$	440,160					$	114,463					$	34,455					$	94,324					$	46,148					$	952,181
Number of VIEs												52						21						3						1						3						2						82

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. At September 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 $339 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 $26 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. At September 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 $268 million and $274 million, respectively, with the difference from the tables above representing ABS issued and carried at amortized historical cost.

(2)Additionally, the ABS from a Sequoia re-securitization completed during the third quarter of 2024 are not accounted for under the CFE election and are accounted for at fair value (included within the Sequoia column at September 30, 2024). At September 30, 2024, the fair value of our interests in consolidated Sequoia securitizations accounted for under the CFE election was $332 million, with the difference in value of our investments in these VIEs reflected in the September 30, 2024 table above representing $194 million of ABS issued at fair value.

Schedule of Unconsolidated Variable Interest Entity's Sponsored by Redwood

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

Table 15.2 – Unconsolidated VIEs Sponsored by Redwood

(In Thousands)						September 30, 2024						December 31, 2023
On-balance sheet assets, at fair value:
Interest-only, senior and subordinate securities, classified as trading						$	33,743					$	31,690
Subordinate securities, classified as AFS						95,234						78,942
Mortgage servicing rights						11,401						10,885
Maximum loss exposure (1)						$	140,378					$	121,517

(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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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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