Other Investments

3 Months Ended

Mar. 31, 2023

Investments, All Other Investments [Abstract]

Other investments at March 31, 2023 and December 31, 2022 are summarized in the following table.

Table 11.1 – Components of Other Investments


(In Thousands)	March 31, 2023		December 31, 2022
Servicer advance investments	$	260,378	$	269,259
Strategic investments	57,397		56,518
Excess MSRs	38,807		39,035
Mortgage servicing rights	24,831		25,421

Other	277		705
Total Other Investments	$	381,690	$	390,938

Servicer advance investments

We and a third-party co-investor, through two partnerships (“SA Buyers”) consolidated by us, purchased the outstanding servicer advances and excess MSRs related to portfolios of legacy residential mortgage-backed securitizations serviced by the co-investor. Refer to Note 11 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 for additional information regarding the transactions.

At March 31, 2023, our servicer advance investments had a carrying value of $260 million and were associated with specified pools of residential mortgage loans with an unpaid principal balance of $11.06 billion. The outstanding servicer advance receivables associated with this investment were $233 million at March 31, 2023, which were financed with short-term non-recourse securitization debt. See Note 14 for additional detail on this debt. The servicer advance receivables were comprised of the following types of advances at March 31, 2023 and December 31, 2022.

Table 11.2 – Components of Servicer Advance Receivables


(In Thousands)	March 31, 2023		December 31, 2022
Principal and interest advances	$	78,803	$	81,447
Escrow advances (taxes and insurance advances)	118,561		123,541
Corporate advances	35,471		35,377
Total Servicer Advance Receivables	$	232,835	$	240,365

We account for our servicer advance investments at fair value and during the three months ended March 31, 2023, we recorded $5 million of interest income, through Other interest income, and recorded a net market valuation loss of $1 million, through Investment fair value changes, net in our consolidated statements of income.

Strategic Investments

Strategic investments represent investments we made in companies either through our RWT Horizons venture investment platform or separately at a corporate level. At March 31, 2023, we had made a total of 31 investments in companies through RWT Horizons with a total carrying value of $23 million, as well as six corporate-level investments. During the three months ended March 31, 2023, we recognized a net mark-to-market valuation gain of zero on our strategic investments, which otherwise would have been recorded in Investment fair value changes, net on our consolidated statements of income. During the three months ended March 31, 2023, we recorded losses from our strategic investments of $20 thousand in Other income, net on our consolidated statements of income.

Excess MSRs

In association with our servicer advance investments described above, we (through our consolidated SA Buyers) invested in excess MSRs associated with the same portfolio of legacy residential mortgage-backed securitizations. Additionally, we own excess MSRs associated with specified pools of multifamily loans. We account for our excess MSRs at fair value and during the three months ended March 31, 2023, we recognized $4 million of interest income through Other interest income, and recorded net market valuation losses of $0.2 million through Investment fair value changes, net on our consolidated statements of income.

Mortgage Servicing Rights

We invest in mortgage servicing rights associated with residential mortgage loans and contract with licensed sub-servicers to perform all servicing functions for these loans. The majority of our investments in MSRs were made through the retention of servicing rights associated with the residential jumbo mortgage loans that we acquired and subsequently sold to third parties. During the three months ended March 31, 2023, we retained zero MSRs from sales of residential loans to third parties. We hold our MSR investments at our taxable REIT subsidiaries.

At March 31, 2023 and December 31, 2022, our MSRs had a fair value of $25 million and $25 million, respectively, and were associated with loans with an aggregate principal balance of $2.15 billion and $2.19 billion, respectively. During the three months ended March 31, 2023, including net market valuation gains and losses on our MSRs, we recorded net income related to our MSRs of $1 million through Other income on our consolidated statements of income.