Commitments and Contingencies

12 Months Ended

Dec. 31, 2025

Commitments and Contingencies Disclosure [Abstract]

Lease Commitments

At December 31, 2025, we were obligated under 8 non-cancelable operating leases with expiration dates through 2031 for $12 million of cumulative lease payments. Our operating lease expense was $4 million, $5 million, and $5 million for the years ended December 31, 2025, 2024 and 2023, respectively.

The following table presents our future lease commitments at December 31, 2025.

Table 19.1 – Future Lease Commitments by Year


(In Thousands)	December 31, 2025
2026	$	4,468
2027	3,459
2028	1,888
2029	1,094
2030	762
2031 and thereafter	35
Total Lease Commitments	11,706
Less: Imputed interest	(1,040)
Operating Lease Liabilities	$	10,666

Leasehold improvements for our offices are amortized into expense over the lease term. There were $1 million of unamortized leasehold improvements at December 31, 2025. For each of the years ended December 31, 2025, 2024, and 2023, we recognized $0.5 million of leasehold amortization expense.

During the year ended December 31, 2025, we entered into three new office leases with a term greater than one year. At December 31, 2025, our operating lease liabilities were $11 million, which were a component of Accrued expenses and other liabilities, and our operating lease right-of-use assets were $9 million, which were a component of Other assets.

We determined that none of our leases contained an implicit interest rate and used a discount rate equal to our incremental borrowing rate on a collateralized basis to determine the present value of our total lease payments. As such, we determined the applicable discount rate for each of our leases using a swap rate plus an applicable spread for borrowing arrangements secured by our real estate loans and securities for a length of time equal to the remaining lease term on the lease commencement date. At December 31, 2025, the weighted-average remaining lease term and weighted-average discount rate for our leases was 3 years and 5.8%, respectively.

Commitment to Fund Residential Investor Bridge Loans

As of December 31, 2025, we had commitments to fund up to $258 million of additional advances on existing residential investor bridge loans, of which $92 million related to loans currently in securitizations co-sponsored by one of our joint ventures. 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 December 31, 2025, we carried a $0.1 million contingent liability related to these commitments to fund construction advances. During the year ended December 31, 2025, we recorded net market valuation income of $0.8 million related to this liability through Investment of fair value changes, net and on our consolidated statements of (loss) income.

In the third quarter of 2025, in connection with the sale of legacy unsecuritized bridge loans to the Legacy Trust, we entered into an agreement to provide up to $35 million of capital support if the Legacy Trust’s portfolio loan-to-value ratios exceed specified thresholds. We funded $10 million at closing, with up to $25 million in additional funding commitments if certain triggers are met. The arrangement was determined to have a fair value of zero initially and at December 31, 2025. The fair value of this funding commitment will be re-evaluated each reporting period. See Notes 8 and 9 for further discussion on this transaction.

Commitment to Fund Joint Venture

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 $140 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 December 31, 2025, we had contributed $42 million of capital, net 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 CoreVest. 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 December 31, 2025, we had contributed $5 million of capital to the joint venture.

Loss Contingencies — Repurchase Reserves

We maintain a repurchase reserve for potential obligations arising from representation and warranty violations related to residential consumer and residential investor loans we have sold to securitization trusts or third parties and for conforming residential consumer loans associated with MSRs 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. 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.

Loss Contingencies — Litigation, Claims and Demands

The Company may be involved in litigation, claims and demands in the ordinary course of the business. As of December 31, 2025, the Company was not involved in any legal proceedings that are expected to have a material effect on the Company’s results of operations, financial position, or liquidity.