Asset-Backed Securities Issued

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Asset-Backed Securities Issued

Asset-Backed Securities Issued

Through our Sequoia securitization program, we sponsor securitization transactions in which securities backed by residential mortgage loans (ABS) are issued by Sequoia entities. We consolidated the Legacy Sequoia and Sequoia Choice securitization entities, and beginning in 2018, certain third-party Freddie Mac K-Series and SLST securitization entities, that we determined were VIEs and for which we determined we were the primary beneficiary. Each consolidated securitization entity is independent of Redwood and of each other and the assets and liabilities are not owned by and are not legal obligations of Redwood. Our exposure to these entities is primarily through the financial interests we have retained, although we are exposed to certain financial risks associated with our role as a sponsor, servicing administrator, or depositor of these entities or as a result of our having sold assets directly or indirectly to these entities.

We account for the ABS issued under our consolidated entities at fair value, with periodic changes in fair value recorded in Investment fair value changes, net on our consolidated statements of income. Pursuant to the CFE guidelines, the market valuation changes on our loans are based on the estimated fair value of the associated ABS issued. The net impact to our income statement associated with our retained economic investment in each of these securitization entities is presented in Note 5.

The ABS issued by these entities consist of various classes of securities that pay interest on a monthly basis. All ABS issued by the Sequoia Choice and Freddie Mac K-Series, and Freddie Mac SLST entities pay fixed rates of interest and substantially all ABS issued by the Legacy Sequoia entities pay variable rates of interest, which are indexed to one-, three-, or six-month LIBOR. ABS issued also includes some interest-only classes with coupons set at a fixed spread to a benchmark rate, or set at a spread to the interest rates earned on the assets less the interest rates paid on the liabilities of a securitization entity.

The carrying values of ABS issued by Sequoia securitization entities we sponsored at September 30, 2019 and December 31, 2018, along with other selected information, are summarized in the following table.

Table 14.1 – Asset-Backed Securities Issued

September 30, 2019	Legacy Sequoia			Sequoia Choice		Freddie Mac SLST			Freddie Mac K-Series		Total
(Dollars in Thousands)
Certificates with principal balance	$	437,793		$	2,285,479	$	1,885,106		$	3,239,009	$	7,847,387
Interest-only certificates	1,486			16,619		28,758			202,730		249,593
Market valuation adjustments	(19,389		)	59,013		73,609			135,838		249,071
ABS Issued, Net	$	419,890		$	2,361,111	$	1,987,473		$	3,577,577	$	8,346,051
Range of weighted average interest rates, by series	2.22% to 3.49%			4.41% to 5.06%		3.50		%	3.39% to 4.20%
Stated maturities	2024 - 2036			2047 - 2049		2028 - 2029			2025 - 2049
Number of series	20			9		2			4

December 31, 2018	Legacy Sequoia			Sequoia Choice		Freddie Mac SLST			Freddie Mac K-Series			Total
(Dollars in Thousands)
Certificates with principal balance	$	540,456		$	1,838,758	$	993,659		$	1,936,691		$	5,309,564
Interest-only certificates	1,537			25,662		—			131,600			158,799
Market valuation adjustments	(29,753		)	20,590		89			(49,216		)	(58,290		)
ABS Issued, Net	$	512,240		$	1,885,010	$	993,748		$	2,019,075		$	5,410,073
Range of weighted average interest rates, by series	1.36% to 3.60%			4.46% to 4.97%		3.51		%	3.39% to 4.08%
Stated maturities	2024 - 2036			2047 - 2048		2028			2025 - 2049
Number of series	20			6		1			3

The actual maturity of each class of ABS issued is primarily determined by the rate of principal prepayments on the assets of the issuing entity. Each series is also subject to redemption prior to the stated maturity according to the terms of the respective governing documents of each ABS issuing entity. As a result, the actual maturity of ABS issued may occur earlier than its stated maturity. At September 30, 2019, all of the ABS issued and outstanding had contractual maturities beyond five years. The following table summarizes the accrued interest payable on ABS issued at September 30, 2019 and December 31, 2018. Interest due on consolidated ABS issued is payable monthly.

Table 14.2 – Accrued Interest Payable on Asset-Backed Securities Issued

(In Thousands)	September 30, 2019		December 31, 2018
Legacy Sequoia	$	456	$	571
Sequoia Choice	8,949		7,180
Freddie Mac SLST	5,498		2,907
Freddie Mac K-Series	10,805		6,239
Total Accrued Interest Payable on ABS Issued	$	25,708	$	16,897

The following table summarizes the carrying value components of the collateral for ABS issued and outstanding at September 30, 2019 and December 31, 2018.

Table 14.3 – Collateral for Asset-Backed Securities Issued

September 30, 2019	Legacy Sequoia		Sequoia Choice		Freddie Mac SLST		Freddie Mac K-Series		Total
(In Thousands)
Residential loans	$	429,159	$	2,618,316	$	2,441,223	$	—	$	5,488,698
Multifamily loans	—		—		—		3,791,622		3,791,622
Restricted cash	143		15		—		—		158
Accrued interest receivable	716		10,806		7,215		11,300		30,037
REO	460		—		84		—		544
Total Collateral for ABS Issued	$	430,478	$	2,629,137	$	2,448,522	$	3,802,922	$	9,311,059

December 31, 2018	Legacy Sequoia		Sequoia Choice		Freddie Mac SLST		Freddie Mac K-Series		Total
(In Thousands)
Residential loans	$	519,958	$	2,079,382	$	1,222,669	$	—	$	3,822,009
Multifamily loans	—		—		—		2,144,598		2,144,598
Restricted cash	146		1,022		—		—		1,168
Accrued interest receivable	822		8,988		3,926		6,595		20,331
REO	3,943		—		—		—		3,943
Total Collateral for ABS Issued	$	524,869	$	2,089,392	$	1,226,595	$	2,151,193	$	5,992,049