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Home Equity Investments (HEI)

12 Months Ended

Dec. 31, 2024

Equity Method Investments and Joint Ventures [Abstract]

Home Equity Investments (HEI)

Home Equity Investments (HEI)

We invest in HEI contracts from third party originators and in the third quarter of 2023, we began to originate HEI directly. Each HEI provides the owner of such HEI the right to purchase a percentage ownership interest in an associated residential property, and the homeowner's obligations under the HEI are secured by a lien (primarily second liens) on the property created by recording a security instrument (e.g., deed of trust) with respect to the property. Our investments in HEI expose us to both home price appreciation and depreciation of the associated property.

We co-sponsored two HEI securitization entities that we consolidated in accordance with GAAP, and have elected to account for them under the CFE election. As such, market valuation changes for the securitized HEI are based on the fair value of the associated ABS issued by the entity, including the interest we own, and are reported in HEI income, net on our Consolidated statements of income.

The following table presents our HEI at December 31, 2024 and 2023.

Table 10.1 – Home Equity Investments

(In Thousands)						December 31, 2024						December 31, 2023
HEI at Redwood						$	257,315					$	244,719
HEI held at consolidated HEI securitization entities						332,470						305,717
Total Home Equity Investments						$	589,785					$	550,436

The following table details our HEI activity during the years ended December 31, 2024 and 2023.

Table 10.2 – Activity of HEI

						Year Ended December 31, 2024												Year Ended December 31, 2023
(In Thousands)						HEI at Redwood						Securitized HEI						HEI at Redwood						Securitized HEI
Fair value of HEI purchased and originated						$	2,043					$	—					$	136,445					$	—
Net market valuation gains (losses) recorded						28,739						57,948						30,750						23,177

The following table provides the components of HEI income, net for the years ended December 31, 2024, 2023 and 2022.

Table 10.3 – Components of HEI Income, net

						Years Ended December 31,
(In Thousands)						2024						2023						2022
Net market valuation gains (losses) recorded on HEI at Redwood						$	28,739					$	30,750					$	(201)
Net market valuation gains recorded on Securitized HEI						57,948						23,177						5,875
Net market valuation gains (losses) recorded on ABS Issued from HEI securitizations(1)						(21,686)						(11,020)						2,334
Net market valuation (losses) recorded on non-controlling interests in HEI securitizations						(23,170)						(7,790)						(5,294)
Total HEI income, net						$	41,831					$	35,117					$	2,714

(1)Amount includes interest expense associated with ABS issued, which totaled $12 million, $6 million and $5 million for 2024, 2023 and 2022, respectively.

The following tables present the geographic concentration of HEI recorded on our consolidated balance sheets at December 31, 2024 and 2023.

Table 10.4 – Geographic Concentration of HEI

						December 31, 2024
Geographic Concentration (by Investment Amount)						HEI at Redwood						Securitized HEI
California						49		%				47		%
Florida						12		%				7		%
Washington						6		%				7		%
Colorado						6		%				4		%
Arizona						5		%				6		%
New York						4		%				7		%
Other states (none greater than 5%)						18		%				22		%
Total						100		%				100		%

						December 31, 2023
Geographic Concentration (by Investment Amount)						HEI at Redwood						Securitized HEI
California						48		%				47		%
Florida						12		%				7		%
Washington						6		%				7		%
Colorado						6		%				4		%
Arizona						5		%				6		%
New York						4		%				7		%
Other states (none greater than 5%)						19		%				22		%
Total						100		%				100		%

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- Definition

The entire disclosure for certain real estate investment financial statements, real estate investment trust operating support agreements, real estate owned, retail land sales, time share transactions, as well as other real estate related disclosures.

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