Principles of Consolidation (Tables)

6 Months Ended

Jun. 30, 2015

Variable Interest Entity [Line Items]

Securitization Activity Related to Unconsolidated Variable Interest Entity's Sponsored by Redwood

The following table presents information related to securitization transactions that occurred during the three and six months ended June 30, 2015 and 2014.

Securitization Activity Related to Unconsolidated VIEs Sponsored by Redwood



	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2015		2014		2015		2014
Principal balance of loans transferred	$	699,655	$	347,305	$	1,038,451	$	347,305
Trading securities retained, at fair value	29,966		69,563		33,389		69,563
AFS securities retained, at fair value	3,450		20,428		6,309		20,428
MSRs recognized	6,002		2,186		7,874		2,186

The following table summarizes the cash flows during the three and six months ended June 30, 2015 and 2014 between us and the unconsolidated VIEs sponsored by us.

Cash Flows Related to Unconsolidated VIEs Sponsored by Redwood



	Three Months Ended June 30,						Six Months Ended June 30,
(In Thousands)	2015			2014			2015			2014
Proceeds from new transfers	$	676,596		$	267,776		$	1,018,312		$	267,776
MSR fees received	3,700			3,624			7,470			7,047
Funding of compensating interest	(107		)	(43		)	(197		)	(76		)
Cash flows received on retained securities	10,706			15,924			23,351			28,227

MSR Assumptions Related to Unconsolidated Variable Interest Entity's Sponsored by Redwood

The following table presents the key weighted-average assumptions used to measure MSRs and securities retained at the date of securitization.

Assumptions Related to Assets Retained from Unconsolidated VIEs Sponsored by Redwood



	Issued During The
	Three Months Ended June 30, 2015						Six Months Ended June 30, 2015
At Date of Securitization	MSRs		Senior Securities		Subordinate Securities		MSRs		Senior Securities		Subordinate Securities
Prepayment rate	5 - 13%		8	%	8	%	5-15%		8	%	8	%
Discount rates	11	%	3	%	6	%	11	%	3	%	6	%
Credit loss assumptions	N/A		0.25	%	0.25	%	N/A		0.25	%	0.25	%



	Issued During The
	Three Months Ended June 30, 2014						Six Months Ended June 30, 2014
At Date of Securitization	MSRs		Senior Securities		Subordinate Securities		MSRs		Senior Securities		Subordinate Securities
Prepayment rate	5 - 15%		10	%	10	%	5 - 15%		10	%	10	%
Discount rates	11	%	3	%	5	%	11	%	3	%	5	%
Credit loss assumptions	N/A		0.25	%	0.25	%	N/A		0.25	%	0.25	%

Unconsolidated Variable Interest Entity's Sponsored by Redwood Summary

The following table presents additional information at June 30, 2015 and December 31, 2014, related to unconsolidated securitizations accounted for as sales since 2012.

Unconsolidated VIEs Sponsored by Redwood



(In Thousands)	June 30, 2015		December 31, 2014
On-balance sheet assets, at fair value:
Interest-only, senior and subordinate securities, classified as trading	$	72,505	$	93,802
Senior and subordinate securities, classified as AFS	294,040		460,990
Mortgage servicing rights	65,753		56,801
Maximum loss exposure ⁽¹⁾	432,298		611,593
Assets transferred:
Principal balance of loans outstanding	7,570,297		7,276,825
Principal balance of delinquent loans 30+ days delinquent	17,646		17,022

(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.

Key Assumptions and Sensitivity Analysis for Assets Retained from Unconsolidated Variable Interest Entity's Sponsored by Redwood

The following table presents key economic assumptions for assets retained from unconsolidated VIEs and the sensitivity of their fair values to immediate adverse changes in those assumptions at June 30, 2015 and December 31, 2014.

Key Assumptions and Sensitivity Analysis for Assets Retained from Unconsolidated VIEs Sponsored by Redwood



June 30, 2015	MSRs			Senior Securities ⁽¹⁾			Subordinate Securities
(Dollars in Thousands)	MSRs			Senior Securities ⁽¹⁾			Subordinate Securities
Fair value at June 30, 2015	$	65,753		$	62,427		$	304,118
Expected life (in years)⁽²⁾	8			7			12
Prepayment speed assumption (annual CPR)⁽²⁾	10		%	10		%	11		%
Decrease in fair value from:
10% adverse change	$	2,780		$	1,920		$	825
25% adverse change	6,242			4,543			2,114
Discount rate assumption⁽²⁾	11		%	9		%	6		%
Decrease in fair value from:
100 basis point increase	$	3,004		$	2,689		$	24,530
200 basis point increase	5,514			5,166			45,844
Credit loss assumption ⁽²⁾	N/A			0.25		%	0.25		%
Decrease in fair value from:
10% higher losses	N/A			$	241		$	19,746
25% higher losses	N/A			316			24,061



December 31, 2014	MSRs			Senior Securities ⁽¹⁾			Subordinate Securities
(Dollars in Thousands)	MSRs			Senior Securities ⁽¹⁾			Subordinate Securities
Fair value at December 31, 2014	$	56,801		$	93,802		$	460,990
Expected life (in years)⁽²⁾	7			6			10
Prepayment speed assumption (annual CPR)⁽²⁾	14		%	9		%	10		%
Decrease in fair value from:
10% adverse change	$	2,419		$	3,999		$	684
25% adverse change	5,639			9,475			2,355
Discount rate assumption⁽²⁾	11		%	8		%	5		%
Decrease in fair value from:
100 basis point increase	$	2,104		$	4,214		$	34,149
200 basis point increase	4,102			8,091			64,474
Credit loss assumption ⁽²⁾	N/A			0.25		%	0.25		%
Decrease in fair value from:
10% higher losses	N/A			$	126		$	3,169
25% higher losses	N/A			299			7,841


(1)	Senior securities include $40 million and $88 million of interest only securities as of June 30, 2015 and December 31, 2014, respectively.


(2)	Expected life, prepayment speed assumption, discount rate assumption, and credit loss assumption presented in the tables above represent weighted averages.

Variable Interest Entity, Primary Beneficiary

Variable Interest Entity [Line Items]

Schedule of Variable Interest Entities

The following table presents a summary of the assets and liabilities of these VIEs. Intercompany balances have been eliminated for purposes of this presentation.

Assets and Liabilities of Consolidated VIEs



June 30, 2015	Sequoia Entities		Residential Resecuritization		Commercial Securitization		Total
(Dollars in Thousands)	Sequoia Entities		Residential Resecuritization		Commercial Securitization		Total
Residential loans, held-for-investment	$	1,237,114	$	—	$	—	$	1,237,114
Commercial loans, held-for-investment	—		—		182,184		182,184
Real estate securities	—		195,278		—		195,278
Restricted cash	147		—		139		286
Accrued interest receivable	1,589		409		1,367		3,365
Other assets	4,409		—		—		4,409
Total Assets	$	1,243,259	$	195,687	$	183,690	$	1,622,636
Accrued interest payable	$	797	$	2	$	328	$	1,127
Asset-backed securities issued	1,173,336		18,872		69,914		1,262,122
Total Liabilities	$	1,174,133	$	18,874	$	70,242	$	1,263,249
Number of VIEs	24		1		1		26

Variable Interest Entity, Not Primary Beneficiary

Variable Interest Entity [Line Items]

Schedule of Variable Interest Entities

The following table presents a summary of our interests in third-party VIEs at June 30, 2015, grouped by security type.

Third-Party Sponsored VIE Summary



(Dollars in Thousands)	June 30, 2015
Residential Mortgage Backed Securities
Senior	$	452,041
Re-REMIC	169,084
Subordinate	169,928
Total Investments in Third-Party Sponsored VIEs	$	791,053

- Definition

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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