Commitments and Contingencies

6 Months Ended

Jun. 30, 2025

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Lease Commitments

At June 30, 2025, we were obligated under nine non-cancelable operating leases with expiration dates through 2031 for $14 million of cumulative lease payments. For both the six-months ended June 30, 2025 and 2024, our operating lease expense was $2 million.

During the six months ended June 30, 2025, we entered into two new office leases with a lease term of greater than one year.

At June 30, 2025, our operating lease liabilities were $12 million, which were a component of Accrued expenses and other liabilities, and our operating lease right-of-use assets were $10 million, which were a component of Other assets.

Commitment to Fund Residential Investor Bridge Loans

As of June 30, 2025, we had commitments to fund up to $435 million of additional advances on existing residential investor bridge loans. These commitments are generally subject to loan agreements with covenants regarding the financial performance of the borrower and other terms regarding advances that must be met before we fund the commitment. At June 30, 2025, we carried a $1 million contingent liability related to these commitments to fund construction advances. During the six months ended June 30, 2025, we recorded net market valuation income of $0.4 million, respectively, related to this liability through Investment of fair value changes, net and on our consolidated statements of income.

As of June 30, 2025, we had commitments to purchase $3 million of residential investor bridge loans from a third-party originator.

Commitment to Fund Joint Ventures

In the first quarter of 2024, we entered into a joint venture with an institutional investment manager pursuant to which we will offer to sell certain residential investor bridge and term loans we originate into joint venture entities that meet specified criteria at contractually pre-established prices. We have committed approximately $100 million of equity capital to be allocated to the joint venture entities and joint venture co-investments to be held in Redwood's investment portfolio. At June 30, 2025, we had contributed $25 million of capital to the joint venture.

In the second quarter of 2023, we entered into a joint venture with another institutional investment manager to invest in residential investor bridge loans originated by our CoreVest subsidiary. We have a commitment to contribute up to approximately $19 million to the joint venture to fund the joint venture's purchase of residential investor bridge loans, under the updated terms of the joint venture. At June 30, 2025, we had contributed $5 million of capital to the joint venture.

For additional information related to our commitments and contingencies, see Note 18 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2024.

Loss Contingencies — Repurchase Reserves

We maintain a repurchase reserve for potential obligations arising from representation and warranty violations related to residential consumer loans we have sold to securitization trusts or third parties, residential investor loans we have sold to third parties, and conforming residential consumer loans that we have purchased from third parties. We do not originate residential consumer loans and we believe the initial risk of loss due to loan repurchases (i.e., due to a breach of representations and warranties) would generally be a contingency to the companies from whom we acquired the loans, as applicable. However, in some cases, for example, where loans were acquired from companies that have since become insolvent, repurchase claims may result in our being liable for a repurchase obligation. At June 30, 2025, we were not aware of any material unsettled repurchase claims for these groups of sold loans.

For residential investor term loans sold to securitization trusts, we record estimated losses on loans we are required to repurchase through Investment fair value changes, net as a component of the loan fair value for the corresponding CFE. During the three months ended June 30, 2025, as a result of a repurchase claim from earlier in 2025, we repurchased two residential investor term loans from a securitization trust with an unpaid principal balance of $36 million. During the three months ended June 30, 2025, we recorded $13 million of valuation losses related to these loan repurchases through Investment fair value changes, net on our consolidated statements of income. At June 30, 2025, these residential investor terms loans were classified as held-for-sale on our consolidated balance sheets.

Loss Contingencies — Litigation, Claims and Demands

There is no significant update regarding the litigation matters described in Note 18 within the financial statements included in Redwood’s Annual Report on Form 10-K for the year ended December 31, 2024 under the heading “Loss Contingencies - Litigation, Claims and Demands.”

For additional information related to our commitments and contingencies, see Note 18 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2024.