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Residential Consumer Loans | 6 Months Ended
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Jun. 30, 2025
Receivables [Abstract] |
Residential Consumer Loans | Residential Consumer Loans We acquire residential consumer loans from third-party originators and may sell or securitize these loans and hold a retained portion for investment. The following table summarizes the classifications and carrying values of the securitized and unsecuritized residential consumer loans owned at June 30, 2025 and December 31, 2024. Table 7.1 – Classifications and Carrying Values of Residential Consumer Loans
June 30, 2025 |  | Unsecuritized Jumbo Loans |  | Securitized Jumbo Loans |  | Securitized Re-Performing Loans |  |
(In Thousands) |  |  |  |  | Total
Held-for-sale at fair value |  | $ | 1,350,782 |  |  | $ | — |  |  | $ | 1,264,049 |  |  | $ | 2,614,831 |
Held-for-investment at fair value |  | — |  |  | 11,587,062 |  |  | — |  |  | 11,587,062 |
Total Residential Consumer Loans |  | $ | 1,350,782 |  |  | $ | 11,587,062 |  |  | $ | 1,264,049 |  |  | $ | 14,201,893 |
December 31, 2024 |  | Unsecuritized Jumbo Loans |  | Securitized Jumbo Loans |  | Securitized Re-Performing Loans |  |
(In Thousands) |  |  |  |  | Total
Held-for-sale at fair value |  | $ | 1,013,547 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,013,547 |
Held-for-investment at fair value |  | — |  |  | 8,819,554 |  |  | 1,244,722 |  |  | 10,064,276 |
Total Residential Consumer Loans |  | $ | 1,013,547 |  |  | $ | 8,819,554 |  |  | $ | 1,244,722 |  |  | $ | 11,077,823 |
At June 30, 2025, we owned mortgage servicing rights associated with $1.3 billion (principal balance) of residential consumer loans 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. Refer to Note 16 for further information on our consolidated VIEs. At June 30, 2025, we had $2.3 billion in commitments to fund residential consumer loans. See Note 13 for additional information on these commitments. Residential Consumer Loans Held-for-Sale The following table summarizes the characteristics of residential consumer loans held-for-sale at June 30, 2025 and December 31, 2024. Table 7.2 – Characteristics of Residential Consumer Loans Held-for-Sale
June 30, 2025 |  | Unsecuritized Jumbo Loans |  | Securitized Re-Performing Loans
(Dollars in Thousands) |  |
Unpaid principal balance ("UPB") |  | $ | 1,333,257 |  |  | $ | 1,471,356 |
Fair value of loans |  | $ | 1,350,782 |  |  | $ | 1,264,049 |
Market value of loans pledged as collateral under short-term borrowing agreements |  | $ | 1,349,510 |  |  | N/A
Weighted average coupon |  | 6.39 | % |  | 4.49 | %
Delinquency information |  |  |  |
Unpaid principal balance of loans with 90+ day delinquencies (2) |  | $ | 1,479 |  |  | $ | 99,420 |
Average 90+ days delinquent balance (UPB) |  | 740 |  |  | 171 |
Unpaid principal balance of loans in foreclosure |  | — |  |  | 36,626 |
Average foreclosure balance (UPB) |  | — |  |  | 176 |
December 31, 2024 |  | Unsecuritized Jumbo Loans |  |
(Dollars in Thousands) |  |
Unpaid principal balance ("UPB") |  | $ | 1,000,663 |  |  |
Fair value of loans |  | $ | 1,013,547 |  |  |
Market value of loans pledged as collateral under short-term borrowing agreements |  | $ | 1,005,926 |  |  |
Weighted average coupon |  | 6.56 | % |  |
Delinquency information |  |  |  |
Unpaid principal balance of loans with 90+ day delinquencies |  | $ | — |  |  |
Average UPB of 90+ days delinquent loans |  | — |  |  |
Unpaid principal balance of loans in foreclosure |  | — |  |  |
Average foreclosure balance (UPB) |  | — |  |  |
During the three and six months ended June 30, 2025 and 2024, mortgage banking activities, net were $24 million and $6 million and $47 million and $14 million, respectively, and included changes in fair value of residential consumer loans held-for-sale, loan purchase commitments, and related risk management derivatives in our Sequoia Mortgage Banking segment. See Note 5 for additional information. The following table provides the activity of residential consumer loans held-for-sale ("HFS") during the three and six months ended June 30, 2025 and 2024. Table 7.3 – Activity of Residential Consumer Loans Held-for-Sale
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(In Thousands) |  | 2025 |  | 2024 |  | 2025 |  | 2024
Principal balance of loans acquired |  | $ | 2,976,206 |  |  | $ | 1,874,201 |  |  | $ | 5,313,391 |  |  | $ | 2,873,987 |
Principal balance of loans sold |  | 841,238 |  |  | 5,563 |  |  | 1,261,751 |  |  | 207,144 |
Principal balance of loans transferred from HFS to HFI |  | 2,049,465 |  |  | 1,424,026 |  |  | 3,673,365 |  |  | 2,611,987 |
Residential Consumer Loans Held-for-Investment at Fair Value We invest in residential subordinate securities issued by Securitized Jumbo and Securitized Re-Performing Loans securitization trusts and consolidate the underlying residential consumer loans owned by these entities for financial reporting purposes in accordance with GAAP. During the three months ended June 30, 2025 we transferred our Securitized Re-Performing Loans to Held-for-Sale. The following tables summarize the characteristics of the securitized jumbo residential consumer loans at June 30, 2025 and December 31, 2024. Table 7.4 – Characteristics of Residential Consumer Loans Held-for-Investment
June 30, 2025 |  |  |  |  |  | Securitized Jumbo Loans
(Dollars in Thousands) |  |  |  |  |
UPB |  |  |  |  |  | $ | 12,013,426 |
Average loan balance (UPB) |  |  |  |  |  | $ | 875 |
Fair value of loans (1) |  |  |  |  |  | $ | 11,587,062 |
Weighted average coupon |  |  |  |  |  | 5.44 | %
Delinquency information |  |  |  |  |  |
Unpaid principal balance of loans with 90+ day delinquencies (2) |  |  |  |  |  | $ | 31,322 |
Average 90+ days delinquent balance (UPB) |  |  |  |  |  | 712 |
Unpaid principal balance of loans in foreclosure |  |  |  |  |  | 15,503 |
Average foreclosure balance (UPB) |  |  |  |  |  | 646 |
December 31, 2024 |  |  |  |  |  | Securitized Jumbo Loans |  | Securitized Re-Performing Loans
(Dollars in Thousands) |  |  |  |  |  |
UPB |  |  |  |  |  | $ | 9,350,286 |  |  | $ | 1,514,432 |
Average loan balance (UPB) |  |  |  |  |  | $ | 842 |  |  | $ | 155 |
Fair value of loans (1) |  |  |  |  |  | $ | 8,819,554 |  |  | $ | 1,244,722 |
Weighted average coupon |  |  |  |  |  | 5.35 | % |  | 4.49 | %
Delinquency information |  |  |  |  |  |  |  |
Unpaid principal balance of loans with 90+ day delinquencies (2) |  |  |  |  |  | $ | 19,480 |  |  | $ | 106,910 |
Average 90+ days delinquent balance (UPB) |  |  |  |  |  | $ | 573 |  |  | $ | 172 |
Unpaid principal balance of loans in foreclosure |  |  |  |  |  | $ | 10,493 |  |  | $ | 41,913 |
Average foreclosure balance (UPB) |  |  |  |  |  | $ | 552 |  |  | $ | 185 |
(1)The fair va lue 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 CFEs, and are recorded in Investment fair value changes, net on our consolidated statements of income (loss). (2)For loans held at consolidated entities, the number and unpaid pri ncipal balance of loans 90+ days delinquent includes loans in foreclosure. The following table provides the activity of securitized jumbo residential consumer loans held-for-investment during the three and six months ended June 30, 2025 and 2024. Table 7.5 – Activity of Residential Consumer Loans Held-for-Investment
|  |  |  | Three Months Ended June 30, |  | Six Months Ended June 30,
(In Thousands) |  |  |  | 2025 |  |  | 2024 |  | 2025 |  | 2024
Principal value of loans transferred from HFS to HFI (1) |  |  |  | $ | 2,049,465 |  |  |  |  |  | $ | 1,424,026 |  |  | $ | 3,673,365 |  |  |  |  | $ | 2,611,987 |
Net market valuation gains (losses) recorded |  |  |  | 52,453 |  |  |  |  |  | (48,590) |  |  | 134,137 |  |  |  |  | (103,399) |
(1)Represents the transfer of loans from held-for-sale to held-for-investment associated with jumbo securitization Residential Investor Loans We originate and invest in residential investor loans, including term loans and bridge loans. As of June 30, 2025, certain residential investor loans were classified as HFS in connection with our ongoing strategic realignment. In the three months ended June 30, 2025, we established Legacy Investments as a new reportable segment, to present financial results for assets that are managed separately based on how the CODM evaluates capital allocation decisions and assesses performance in accordance with our segment reporting framework. As of June 30, 2025, $886 million of legacy unsecuritized bridge loans and $50 million of legacy unsecuritized term loans were reported in the Legacy Investments segment. These loans are classified as HFS and are managed within the Legacy Investments segment due to their characteristics and strategic prioritization, consistent with how the CODM reviews and evaluates the business. See Note 4 for further discussion on our reportable segments, including the new Legacy Investments segment. The following table summarizes the classifications and carrying values of the securitized and unsecuritized residential investor loans at June 30, 2025 and December 31, 2024. Table 8.1 – Classifications and Carrying Values of Residential Investor Loans
June 30, 2025 |  | Residential Investor Term |  | Residential Investor Bridge |  |
(In Thousands) |  | Unsecuritized |  | Securitized |  | Unsecuritized |  | Securitized |  | Total
Held-for-sale at fair value (1)(2) |  | $ | 174,808 |  |  | $ | — |  |  | $ | 949,264 |  |  | $ | — |  |  | $ | 1,124,072 |
Held-for-investment at fair value |  | — |  |  | 2,270,879 |  |  | — |  |  | 944,217 |  |  | 3,215,096 |
Total Residential Investor Loans |  | $ | 174,808 |  |  | $ | 2,270,879 |  |  | $ | 949,264 |  |  | $ | 944,217 |  |  | $ | 4,339,168 |
December 31, 2024 |  | Residential Investor Term |  | Residential Investor Bridge |  |
(In Thousands) |  | Unsecuritized |  | Securitized |  | Unsecuritized |  | Securitized |  | Total
Held-for-sale at fair value |  | $ | 158,637 |  |  | $ | — |  |  | $ | 78,587 |  |  | $ | — |  |  | $ | 237,224 |
Held-for-investment at fair value |  | — |  |  | 2,485,069 |  |  | 1,041,694 |  |  | 823,103 |  |  | 4,349,866 |
Total Residential Investor Loans |  | $ | 158,637 |  |  | $ | 2,485,069 |  |  | $ | 1,120,281 |  |  | $ | 823,103 |  |  | $ | 4,587,090 |
(1)At June 30, 2025, Residential investor bridge loans held-for-sale include $25 million of loans recorded at the lower of cost or market value for which the carrying value approximates the fair value. (2)At June 30, 2025, held-for-sale loans include $886 million of unsecuritized bridge loans and $50 million of unsecuritized term loans that were reported in the Legacy Investments segment Nearly all of the outstanding residential investor term loans at June 30, 2025 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, 2025 were first-lien, interest-only loans with original maturities of 8 to 36 months and were comprised of 43% one-month SOFR-indexed adjustable-rate loans, and 57% fixed-rate loans. The change in fair value of residential investor loans from December 31, 2024 to June 30, 2025 reflects both realized and anticipated changes in portfolio performance and composition. The overall decline in fair value was primarily attributable to the unsecuritized residential investor bridge loan portfolio, which decreased to $949 million at June 30, 2025 from $1.12 billion at December 31, 2024. This decline was driven by fair value losses recognized during the period, which was the result of elevated delinquencies—particularly among 2021 and 2022 vintage bridge loans—and continued strategic sales and runoff of these loans as part of the Company's accelerated repositioning strategy. Fair value changes also reflect the impact of loan modifications during the period, particularly extensions and interest deferrals, which may have resulted in downward adjustments to loan valuations. These modifications were predominantly related to bridge loans with underlying project delays, borrower financial stress, or market-driven refinancing challenges. The fair value impact of such modifications is incorporated into the Company’s valuation models and contributed to the overall movement in loan values during the period. Refer to the Loan Modifications section of this footnote for further details on these modifications. At June 30, 2025, we had $435 million in commitments to fund additional advances on existing residential investor bridge loans. See Note 19 for additional information on these commitments. During the three and six months ended June 30, 2025, we sold $151 million and $302 million of residential investor bridge loans, net of $16 million and $32 million of construction draws to our joint ventures, respectively. See Note 12 for additional information on these joint ventures. During the three and six months ended June 30, 2025 and 2024, mortgage banking activities, net were $16 million and $27 million, and $13 million and $19 million, respectively, and included changes in fair value of residential investor loans held-for-sale, interest rate lock commitments, and related risk management derivatives in our CoreVest Mortgage Banking segment. See Note 5 for additional information. During the three and six months ended June 30, 2025, Fee income, net was $2 million and $5 million, respectively, and primarily included portfolio administration fees earned on term and bridge loans. The following table provides the activity of unsecuritized residential investor loans during the three and six months ended June 30, 2025 and 2024. Table 8.2 – Activity of Unsecuritized Residential Investor Loans
|  | Three Months Ended June 30,
|  | 2025 |  | 2024
(In Thousands) |  | Unsecuritized Term Loans |  | Unsecuritized Bridge Loans |  | Unsecuritized Term Loans |  | Unsecuritized Bridge Loans
Principal balance of loans originated |  | $ | 228,545 |  |  | $ | 141,756 |  |  | $ | 217,538 |  |  | $ | 234,115 |
Principal balance of loans acquired (1) |  | 36,237 |  |  | 25,233 |  |  | 648 |  |  | — |
Principal balance of loans sold to third parties (2) |  | 250,795 |  |  | 226,081 |  |  | 252,424 |  |  | 156,294 |
Transfer of loans between portfolios (3) |  | — |  |  | 75,994 |  |  | — |  |  | (89,202) |
|  | Six Months Ended June 30,
|  | 2025 |  | 2024
(In Thousands) |  | Unsecuritized Term Loans |  | Unsecuritized Bridge Loans |  | Unsecuritized Term Loans |  | Unsecuritized Bridge Loans
Principal balance of loans originated |  | $ | 416,763 |  |  | $ | 407,900 |  |  | $ | 334,628 |  |  | $ | 428,144 |
Principal balance of loans acquired (1) |  | 43,037 |  |  | 25,233 |  |  | 648 |  |  | 15,677 |
Principal balance of loans sold to third parties (2) |  | 433,210 |  |  | 382,574 |  |  | 258,456 |  |  | 209,515 |
Transfer of loans between portfolios (3) |  | — |  |  | 25,375 |  |  | — |  |  | (187,933) |
(1)For the three and six months ended June 30, 2025 and 2024, balance reflects loans acquired from a loan origination partner and loan repurchases. (2)For the three and six months ended June 30, 2025 and 2024 the principal balance of loans sold to third parties is net of $16 million and $6 million, and $32 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. (3)Transfers of unsecuritized residential investor term loans between portfolios represents the transfer of loans from held-for-sale to held-for-investment associated with consolidated term securitizations. Transfers of unsecuritized bridge loans, represents the transfer of residential investor bridge loans from "Unsecuritized Bridge" to "Securitized Bridge" resulting from their inclusion in one of our bridge loan securitizations, which generally have replenishment features for a set period of time from the closing. Securitized Residential Investor Loans Held-for-Investment We invest in securities issued by securitizations sponsored by CoreVest and consolidate the underlying residential investor term loans and bridge loans owned by these entities. For loans held at our consolidated securitization entities, market value changes are based on the fair value of the associated ABS issued, including securities we own, pursuant to CFE guidelines, and are recorded through Investment fair value changes, net on our consolidated statements of income (loss). We did not elect to account for three of our Bridge securitizations under the CFE 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. See further discussion in Note 16. Residential Investor Loan Characteristics The following table provides the activity of securitized residential investor loans held-for-investment during the three and six months ended June 30, 2025 and 2024. Table 8.3 – Activity of Securitized Residential Investor Loans Held-for-Investment
|  | Three Months Ended June 30,
|  | 2025 |  | 2024
(In Thousands) |  | Securitized Term |  | Securitized Bridge |  | Securitized Term |  | Securitized Bridge
Net market valuation gains (losses) recorded |  | $ | 14,122 |  |  | $ | (4,591) |  |  | $ | 3,530 |  |  | $ | (4,870) |
Fair value of loans transferred to HFI |  | — |  |  | 75,994 |  |  | — |  |  | 89,202 |
|  | Six Months Ended June 30,
|  | 2025 |  | 2024
(In Thousands) |  | Securitized Term |  | Securitized Bridge |  | Securitized Term |  | Securitized Bridge
Net market valuation gains (losses) recorded |  | $ | 14,053 |  |  | $ | (8,285) |  |  | $ | 11,113 |  |  | $ | (1,180) |
Fair value of loans transferred to HFI |  | — |  |  | 126,613 |  |  | — |  |  | 187,933 |
The following tables summarize the characteristics of securitized and unsecuritized residential investor loans at June 30, 2025 and December 31, 2024. Table 8.4 – Characteristics of Residential Investor Loans
June 30, 2025 |  | Unsecuritized Term |  | Securitized Term(1) |  | Unsecuritized Bridge |  | Securitized Bridge(1)
(Dollars in Thousands) |  |  |  |
Unpaid principal balance |  | $ | 200,916 |  |  | $ | 2,399,197 |  |  | $ | 1,056,296 |  |  | $ | 928,171 |
Average UPB of loans |  | 2,208 |  |  | 2,809 |  |  | 4,959 |  |  | 1,351 |
Fair value of loans |  | 174,808 |  |  | 2,270,878 |  |  | 949,264 |  |  | 944,217 |
Weighted average coupon |  | 6.95 | % |  | 5.31 | % |  | 9.22 | % |  | 9.49 | %
Weighted average remaining loan term (years) |  | 9 |  | 4 |  | 1 |  | 1
Market value of loans pledged as collateral under debt facilities |  | $ | 115,742 |  |  | N/A |  | $ | 897,085 |  |  | N/A
Delinquency information |  |  |  |  |  |  |  |
Unpaid principal balance of loans with 90+ day delinquencies (2) |  | $ | 77,396 |  |  | $ | 169,697 |  |  | $ | 196,370 |  |  | $ | 38,203 |
Average UPB of 90+ days delinquent loans (2) |  | 9,674 |  |  | 3,857 |  |  | 12,273 |  |  | 1,819 |
Fair value of loans with 90+ day delinquencies (2) |  | 46,477 |  |  | N/A |  | 139,780 |  |  | N/A
Unpaid principal balance of loans in foreclosure (3) |  | — |  |  | 17,111 |  |  | 77,221 |  |  | 24,769 |
Average UPB of loans in foreclosure (3) |  | — |  |  | 3,422 |  |  | 12,870 |  |  | 1,078 |
Fair value of loans in foreclosure (3) |  | — |  |  | N/A |  | 58,005 |  |  | N/A
December 31, 2024 |  | Unsecuritized Term |  | Securitized Term(1) |  | Unsecuritized Bridge |  | Securitized Bridge(1)
(Dollars in Thousands) |  |  |  |
Unpaid principal balance |  | $ | 177,618 |  |  | $ | 2,639,485 |  |  | $ | 1,166,213 |  |  | $ | 810,285 |
Average UPB of loans |  | 1,759 |  |  | 3,084 |  |  | 5,350 |  |  | 1,605 |
Fair value of loans |  | 158,637 |  |  | 2,485,069 |  |  | 1,120,281 |  |  | 823,103 |
Weighted average coupon |  | 6.84 | % |  | 5.35 | % |  | 9.11 | % |  | 9.76 | %
Weighted average remaining loan term (years) |  | 9 |  | 4 |  | 1 |  | 1
Market value of loans pledged as collateral under debt facilities |  | $ | 120,417 |  |  | N/A |  | $ | 1,070,327 |  |  | N/A
Delinquency information |  |  |  |  |  |  |  |
Unpaid principal balance of loans with 90+ day delinquencies (2) |  | $ | 33,065 |  |  | $ | 194,143 |  |  | $ | 129,229 |  |  | $ | 20,964 |
Average UPB of 90+ days delinquent loans (2) |  | 8,266 |  |  | 3,734 |  |  | 8,077 |  |  | 1,233 |
Fair value of loans with 90+ day delinquencies (2) |  | 12,366 |  |  | N/A |  | 102,321 |  |  | N/A
Unpaid principal balance of loans in foreclosure (3) |  | 27,529 |  |  | 24,648 |  |  | 86,260 |  |  | 3,663 |
Average UPB of loans in foreclosure (3) |  | 27,529 |  |  | 2,465 |  |  | 6,635 |  |  | 916 |
Fair value of loans in foreclosure (3) |  | 8,500 |  |  | N/A |  | 67,858 |  |  | N/A
(1)The fair value of the Term and Bridge loans held by consolidated entities 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 CFEs. (2)The number of loans 90+ days delinquent includes loans in foreclosure. (3)May include loans that are less than 90 days delinquent and loans where foreclosure is being pursued as a disposition strategy. The following table presents the unpaid principal balance of residential investor loans recorded on our consolidated balance sheets at June 30, 2025 by collateral/strategy type. Table 8.5 – Residential Investor Loans Collateral/Strategy Type
June 30, 2025 |  | Unsecuritized Term |  | Securitized Term |  | Unsecuritized Bridge |  | Securitized Bridge
(Dollars in Thousands) |  |  |  |
Term |  |  |  |  |  |  |  |
Single-family rental |  | $ | 104,258 |  |  | $ | 1,856,025 |  |  | $ | — |  |  | $ | — |
Multifamily |  | 96,658 |  |  | 543,172 |  |  | — |  |  | — |
Bridge |  |  |  |  |  |  |  |
Renovate / Build for Rent ("BFR") (1) |  | — |  |  | — |  |  | 442,211 |  |  | 368,583 |
Single Asset Bridge ("SAB") (2) |  | — |  |  | — |  |  | 38,001 |  |  | 411,342 |
Multifamily (3) |  | — |  |  | — |  |  | 544,605 |  |  | 147,191 |
Third-Party Originated |  | — |  |  | — |  |  | 31,480 |  |  | 1,055 |
Total Residential Investor Loans |  | $ | 200,916 |  |  | $ | 2,399,197 |  |  | $ | 1,056,297 |  |  | $ | 928,171 |
(1)Includes loans to finance acquisition and/or stabilization of existing housing stock or to finance new construction of residential properties for rent. (2)Includes loans for light to moderate renovation of residential and small multifamily properties (generally less than 20 units). (3)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 other instances, including in the case of Build for Rent ("BFR") loans, a loan modification may amend the project's underlying budget (including allocation of hard/soft costs, interest reserves, and other items) or construction or completion milestones, if warranted, based on progress versus the initial budget. Because they finance the construction of rental housing, many BFR projects do not generate net operating income until the later stages of the loan term. As such, BFR loans are sized to include allocations for interest expense as well as construction costs and other standard budget items. We utilize a rigorous and consistently implemented fair value process when evaluating these loans, which involves management’s review of updated appraisals, collateral performance, sales cost estimates, and independent market data when available. This approach, conducted in accordance with GAAP, is designed to ensure valuations reflect current conditions and project-specific risks. The actual amounts ultimately recovered—whether through foreclosure, collateral sale, or alternative resolutions, such as discounted payoffs or loan sales—may differ significantly from our estimates and could materially affect future earnings. 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 months ended June 30, 2025 and December 31, 2024, we made modifications to our legacy unsecuritized bridge and term loan portfolios. These modifications included adjustments to the contractual interest rates. In certain cases, these adjustments involve deferrals of interest. Some modifications are limited to extensions of loan maturities and/or covenant terms. We may also offer maturity extensions, subject to mandatory partial repayments during the loan term. In certain cases, we implement a hard cash management structure (enabling Redwood, as the lender, to control all cash flows at the property) and establish interest reserves to cover potential debt service shortfalls. Any shift in our intended exit strategy could have implications for the valuation of these loans. Additionally, we may further modify loans that were previously modified. These subsequent modifications may include changes to the contractual interest pay rate and deferred interest terms. In the three months ended June 30, 2025, consistent with our strategic transition away from non-core legacy assets, we classified certain modified and legacy loans as held-for-sale and evaluated these assets for impairment in accordance with applicable accounting guidance. These classifications and related fair value measurements reflect updated expectations regarding the timing and manner of recovery, and incorporate observable market data, recent comparable asset sales, and other valuation inputs, as appropriate. For the three months ended June 30, 2025 and December 31, 2024, we modified or put into forbearance loans with a total aggregate unpaid principal balance of $363 million and $353 million, respectively. This balance included modifications to the contractual interest rates (including, in certain cases, deferrals of interest) on loans, modifications involving only extensions of loan maturities and/or covenant terms and further modifications on loans that had been previously modified in a prior period. For the three months ended June 30, 2025 and December 31, 2024, we modified loans primarily involving adjustments to contractual interest pay rates (including, in certain cases, deferrals of interest) with an aggregate unpaid principal balance of $60 million and $167 million, respectively. Modifications on these loans maintained a contractual interest rate of approximately 8.91% and 8.64%, respectively, of which 3.72% and 5.39% represented deferred interest, respectively. Of this population, we further modified loans that had been previously modified in a prior period, with an aggregate unpaid principal balance of $25 million and $24 million, respectively. The further modifications on these loans involved one or more of: (i) additional amendments to the contractual interest pay rate and deferred interest, (ii) maturity extensions (subject to mandatory partial repayments during the loan term) and (iii) establishment of a hard cash management structure (enabling Redwood, as the lender, to control all cash flows at the property), along with funding interest reserves to cover debt service shortfalls. For the three months ended June 30, 2025 and December 31, 2024, we modified loans by extending maturities and/or covenant terms with an aggregate unpaid principal balance of $303 million and $186 million, respectively. Of this balance, we further modified loans that had been previously modified in a prior period. The aggregate unpaid principal balance of these loans totaled $169 million and $103 million, respectively. While we continue to actively engage with certain borrowers to address the impacts of rising interest rates, elongated project timelines, or other issues, further increases in delinquencies or modifications within our r esidential investor bridge loan portfolio could ultimately result in further decreases in net interest income and the fair value of our bridge loans held for investment, and further instances of borrower/sponsor financial stress could lead to realized credit losses. An increase in maturity extensions in the residential investor bridge portfolio would increase the expected time to repayment with a potential impact on fair values and credit losses. However, given the overall short duration nature of our bridge loans, a certain level of maturity extensions are a routine asset management outcome for these loans, irrespective of market conditions. When we provide these types of maturity extensions, our asset management function also seeks to charge a fee. For the second quarter of 2025 and fourth quarter of 2024, the average length of maturity extensions granted on residential investor bridge loans was under five months and four 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 generally 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. At the time a loan is placed on non-accrual status, all previously accrued but uncollected interest is written off against interest income and interest subsequently collected is recognized on a cash basis when it is received. A loan remains on non-accrual status until 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, recoverability on the estimated net equity in the underlying real estate property or both. At June 30, 2025, residential investor loans with an aggregate unpaid principal balance of $718 million and an aggregate fair value of $595 million, respectively, were on non-accrual status. Of this balance, loans with $261 million aggregate unpaid principal balance were on full non-accrual of the contractual coupon interest and loans with $457 million aggregate unpaid principal balance were on non-accrual of deferred interest. At December 31, 2024, residential investor loans with an aggregate unpaid principal balance of $343 million and an aggregate fair value of $282 million, respectively, were on non-accrual status. Of this balance, loans with $151 million aggregate unpaid principal balance were on full non-accrual of the contractual coupon interest and loans with $192 million aggregate unpaid principal balance were on non-accrual of deferred interest.

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