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Principles of Consolidation
 9 Months Ended
Sep. 30, 2025
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Principles of Consolidation Principles of Consolidation
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. See Note 2 for further information on our accounting policies regarding our Principles of consolidation.
The GAAP principles we apply require us to reassess our requirement to consolidate VIEs each quarter and therefore our determination may change based upon new facts and circumstances pertaining to each VIE. This could result in a material impact to our consolidated financial statements during subsequent reporting periods.
Analysis of Consolidated VIEs
For certain of our consolidated VIEs, we have elected to account for the assets and liabilities of these entities pursuant to the measurement alternative available to CFEs. A CFE is a VIE 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. GAAP 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.
In addition to our consolidated VIEs for which we made the CFE election, we consolidate certain VIEs for which we did not make the CFE election and elected to account for the ABS issued by these entities at fair value or amortized cost. These include two CAFL bridge loan securitizations and a Freddie Mac SLST re-securitization for which the ABS are accounted at amortized cost and three Sequoia re-securitizations for which the ABS are accounted at fair value at September 30, 2025. See Note 17 for additional information regarding the Sequoia re-securitizations.
The following table presents a summary of the assets and liabilities of our consolidated VIEs at September 30, 2025 and December 31, 2024.
Table 16.1 – Assets and Liabilities of Consolidated VIEs
September 30, 2025
Sequoia (2)
CAFL(1)
Freddie Mac SLST(1) (5)
Freddie Mac K-Series (3)
Servicing Investment
HEI (4)
Total
Consolidated
VIEs
(Dollars in Thousands)
Residential consumer loans, held-for-investment$13,079,487 $— $1,248,236 $— $— $— $14,327,723 
Residential investor loans, held-for-investment— 3,074,326 — — — — 3,074,326 
Consolidated Agency multifamily loans— — — — — — — 
Real estate securities187,446 — — — — — 187,446 
Home equity investments— — — — — 192,067 192,067 
Other investments— — — — 247,842 — 247,842 
Cash and cash equivalents— — — — 26,379 — 26,379 
Restricted cash265 68,470 — — — 4,646 73,381 
Accrued interest receivable66,334 21,809 4,300 — 1,951 — 94,394 
Other assets1,984 53,533 2,272 — 2,508 278 60,575 
Total Assets$13,335,516 $3,218,138 $1,254,808 $— $278,680 $196,991 $18,284,133 
Debt Obligations$— $— $— $— $151,024 $— $151,024 
Accrued interest payable52,967 8,259 3,773 — 248 — 65,247 
Accrued expenses and other liabilities121 47,100 — — 32,255 44,045 123,521 
Asset-backed securities issued12,863,482 2,714,391 1,119,578 — — 127,568 16,825,019 
Total Liabilities$12,916,570 $2,769,750 $1,123,351 $— $183,527 $171,613 $17,164,811 
Value of our investments in VIEs (1)
$405,506 $446,511 $130,929 $— $95,153 $25,378 $1,103,477 
Number of VIEs67 22 3 — 3 1 96 
December 31, 2024
Sequoia (2)
CAFL (1)
Freddie Mac SLST(1)
Freddie Mac
K-Series		Servicing InvestmentHEITotal
Consolidated
VIEs
(Dollars in Thousands)
Residential consumer loans, held-for-investment$8,819,554 $— $1,244,722 $— $— $— $10,064,276 
Residential investor loans, held-for-investment— 3,308,172 — — — — 3,308,172 
Consolidated Agency multifamily loans— — — 424,597 — — 424,597 
Real estate securities79,285 — — — — — 79,285 
Home equity investments— — — — — 332,470 332,470 
Other investments— — — — 262,353 — 262,353 
Cash and cash equivalents— — — — 13,243 — 13,243 
Restricted cash248 22,385 — — — 8,403 31,036 
Accrued interest receivable43,503 19,998 4,510 1,245 2,078 — 71,334 
Other assets7 60,859 2,987 — 3,870 453 68,176 
Total Assets$8,942,597 $3,411,414 $1,252,219 $425,842 $281,544 $341,326 $14,654,942 
Debt Obligation$— $— $— $— $159,031 $— $159,031 
Accrued interest payable37,191 9,410 4,062 1,119 359 — 52,141 
Accrued expenses and other liabilities103 28,672 — — 27,167 82,921 138,863 
Asset-backed securities issued8,585,077 2,932,749 1,151,847 389,434 — 211,097 13,270,204 
Total Liabilities$8,622,371 $2,970,831 $1,155,909 $390,553 $186,557 $294,018 $13,620,239 
Value of our investments in VIEs (1)
$313,833 $438,590 $95,863 $35,163 $94,987 $47,308 $1,025,744 
Number of VIEs54 21 3 1 3 2 84 
Footnotes to table 16.1
(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, 2025 and December 31, 2024, the fair value of our interests in the CAFL term loan securitizations accounted for under the CFE election were $333 million and $326 million, respectively. At September 30, 2025 and December 31, 2024, the fair value of our interest in the CAFL bridge loan securitizations accounted for under the CFE election was $40 million and $29 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, 2025 and December 31, 2024, the fair value of our interests in the Freddie Mac SLST securitizations accounted for under the CFE election were $254 million and $242 million, respectively, with the difference from the tables above representing ABS issued and carried at amortized historical cost.
(2)Additionally, the ABS from three and one Sequoia re-securitizations at September 30, 2025 and December 31, 2024, respectively, are not accounted for under the CFE election and are accounted for at fair value (included within the Sequoia column at September 30, 2025 and December 31, 2024). At September 30, 2025 and December 31, 2024, the fair value of our interests in consolidated Sequoia securitizations accounted for under the CFE election was $650 million and $418 million, respectively, with the difference in value of our investments in these VIEs reflected in the September 30, 2025 and December 31, 2024 table above representing $187 million and $79 million, respectively, of consolidated Sequoia securities in the Sequoia re-securitizations and $432 million and $184 million, respectively, of ABS issued at fair value.
(3)During the three months ending September 30, 2025, the Freddie Mac K-Series securitization was called and the securities that we had retained from this VIE were paid off at par.
(4)During the three months ending September 30, 2025, we exercised our call right on one of our HEI securitizations. See additional information related to the call of this VIE in Note 10.
(5)See Note 24 for further discussion.
Unconsolidated VIEs with Continuing Involvement
We have transferred residential consumer loans to certain Sequoia securitization entities sponsored by us that are still outstanding as of September 30, 2025. We 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 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 transfers 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.
Additionally, at September 30, 2025, as part of our plans to accelerate the wind-down of the Legacy Investments portfolio, we transferred a portfolio totaling $484 million in fair value of legacy unsecuritized bridge loans and REO assets to the Legacy Trust. These transfers met the criteria to be accounted for as sales for financial reporting purposes, in accordance with GAAP. We determined that the Legacy Trust is a VIE, but that Redwood is not the primary beneficiary, as we do not have the power to direct the activities that most significantly affect the Legacy Trust’s economic performance. Accordingly, the Legacy Trust is not consolidated in our financial statements. As part of the transaction, we retained a $182 million subordinate beneficial interest in the Legacy Trust, which is recorded as an AFS real estate security on our Consolidated balance sheet, as well as $35 million funding commitment to provide capital support if the Legacy Trust’s portfolio loan-to-value ratios exceed specified thresholds. See Notes 8, 9 and 19 for further discussion on this transaction.
The following table presents additional information at September 30, 2025 and December 31, 2024, related to unconsolidated VIEs sponsored by Redwood and accounted for as sales.
Table 16.2 – Unconsolidated VIEs Sponsored by Redwood
(In Thousands)September 30, 2025December 31, 2024
On-balance sheet assets, at fair value:
Subordinate securities, classified as AFS$280,395 $91,221 
Interest-only, senior and subordinate securities, classified as trading34,163 36,811 
Mortgage servicing rights12,197 12,556 
Strategic investments, equity method10,263 — 
Funding commitment (1)
10,000 — 
Maximum loss exposure (2)
$347,018 $140,588 
(1)Represents Redwood’s agreement, entered into on September 30, 2025, to provide up to $35 million of capital support to a trust holding legacy unsecuritized bridge loans. We funded $10 million at closing, with up to $25 million remaining subject to specified portfolio triggers. Refer to Notes 8, 9, and 19 for additional information.
(2)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.