Principles of Consolidation

3 Months Ended

Mar. 31, 2026

Organization, Consolidation and Presentation of Financial Statements [Abstract]

In the normal course of business, we enter into certain types of transactions with entities that are considered to be VIEs. The Company's primary involvement with VIEs has been related to its securitization transactions in which it transfers assets to securitization vehicles. We primarily securitize our acquired and originated loans, which provides a source of funding and has enabled us to transfer a certain portion of economic risk on loans or related debt securities to third parties. The entity that has a controlling financial interest in a VIE is referred to as the primary beneficiary and is required to consolidate the VIE. See Note 2 for further information on our accounting policies regarding our Principles of consolidation.

The GAAP principles we apply require us to reassess our requirement to consolidate VIEs each quarter and therefore our determination may change based upon new facts and circumstances pertaining to each VIE. This could result in a material impact to our consolidated financial statements during subsequent reporting periods.

Analysis of Consolidated VIEs

For certain of our consolidated VIEs, we have elected to account for the assets and liabilities of these entities pursuant to the measurement alternative available to CFEs. A CFE is a VIE that holds financial assets and issues beneficial interests in those assets, and these beneficial interests have contractual recourse only to the related assets of the CFE. GAAP allows companies to elect to measure both the financial assets and financial liabilities of a CFE using the more observable of the fair value of the financial assets or fair value of the financial liabilities. Most of our VIEs are accounted for under the CFE election, under which net equity generally represents the fair value of our retained interests and related accrued interest receivable.

In addition to our consolidated VIEs for which we made the CFE election, we consolidate certain VIEs for which we did not make the CFE election and elected to account for the ABS issued by these entities at fair value or amortized cost. These include three Sequoia re-securitizations for which the ABS are accounted at fair value at March 31, 2026. See Note 17 for additional information regarding the Sequoia re-securitizations.

The following table presents a summary of the assets and liabilities of our consolidated VIEs at March 31, 2026 and December 31, 2025.

Table 16.1 – Assets and Liabilities of Consolidated VIEs


March 31, 2026	Sequoia(1)		CAFL(2)		Servicing Investment(2)		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Residential consumer loans, held-for-investment	$	18,236,463	$	—	$	—	$	—	$	18,236,463
Residential investor loans, held-for-investment	—		2,913,979		—		—		2,913,979
Real estate securities	174,251		—		—		—		174,251
Home equity investments	—		—		—		196,032		196,032
Other investments	—		—		256,639		—		256,639
Cash and cash equivalents	—		—		25,635		—		25,635
Restricted cash	435		48,719		—		5,404		54,558
Accrued interest receivable	87,201		26,189		1,888		—		115,278
Other assets	3,809		97,757		1,700		314		103,580
Total Assets	$	18,502,159	$	3,086,644	$	285,862	$	201,750	$	22,076,415
Debt Obligations	$	—	$	—	$	134,972	$	—	$	134,972
Accrued interest payable	68,806		9,839		275		—		78,920
Accrued expenses and other liabilities	103		66,813		38,338		47,471		152,725
Asset-backed securities issued	17,680,048		2,610,837		—		126,927		20,417,812
Total Liabilities	$	17,748,957	$	2,687,489	$	173,585	$	174,398	$	20,784,429

Value of our investments in VIEs (1)	$	734,731	$	397,658	$	112,277	$	27,352	$	1,272,018
Number of VIEs	80		21		3		1		105


December 31, 2025	Sequoia(1)		CAFL(2)		Servicing Investment(2)		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Residential consumer loans, held-for-investment	$	14,843,746	$	—	$	—	$	—	$	14,843,746
Residential investor loans, held-for-investment	—		3,103,311		—		—		3,103,311
Real estate securities	165,092		—		—		—		165,092
Home equity investments	—		—		—		191,121		191,121
Other investments	—		—		265,771		—		265,771
Cash and cash equivalents	—		—		32,408		—		32,408
Restricted cash	266		161,780		—		5,696		167,742
Accrued interest receivable	73,864		23,330		1,924		—		99,118
Other assets	1,984		54,667		1,833		301		58,785
Total Assets	$	15,084,952	$	3,343,088	$	301,936	$	197,118	$	18,927,094
Debt Obligations	$	—	$	—	$	152,293	$	—	$	152,293
Accrued interest payable	57,525		7,210		261		—		64,996
Accrued expenses and other liabilities	121		57,301		39,248		44,185		140,855
Asset-backed securities issued	14,540,397		2,824,159		—		127,475		17,492,031
Total Liabilities	$	14,598,043	$	2,888,670	$	191,802	$	171,660	$	17,850,175

Value of our investments in VIEs (1)	$	470,496	$	452,736	$	110,134	$	25,458	$	1,058,824
Number of VIEs	72		23		3		1		99

Footnotes to table 16.1

(1)The ABS from three Sequoia re-securitizations at March 31, 2026 and December 31, 2025, respectively, are not accounted for under the CFE election and are accounted for at fair value (included within the Sequoia column at March 31, 2026 and December 31, 2025). At March 31, 2026 and December 31, 2025, the fair value of our interests in consolidated Sequoia securitizations accounted for under the CFE election was $1.00 billion and $722 million, respectively, with the difference in value of our investments in these VIEs reflected in the March 31, 2026 and December 31, 2025 table above representing $174 million and $165 million, respectively, of consolidated Sequoia securities in the Sequoia re-securitizations and $444 million and $417 million, respectively, of ABS issued at fair value.

(2)At both March 31, 2026 and December 31, 2025, our Servicing Investment VIEs are not accounted for under the CFE election and their associated ABS issued are accounted for at amortized historical cost. At December 31, 2025, two CAFL bridge loan securitization VIEs (included within the CAFL column) were not accounted for under the CFE election and their associated ABS issued were accounted for at amortized historical cost. These two CAFL bridge loan securitization VIEs were called during the three months ended March 31, 2026 and the associated ABS were paid off.

The fair value of our interests in the CAFL term loan securitizations accounted for under the CFE election was $316 million and $330 million at March 31, 2026 and December 31, 2025, respectively. At March 31, 2026 and December 31, 2025, the fair value of our interest in the CAFL bridge loan securitizations accounted for under the CFE election was $66 million and $50 million, respectively, with the difference from the tables above generally representing ABS issued and carried at amortized historical cost and accrued interest on our economic interests.

Unconsolidated VIEs with Continuing Involvement

During the three months ended March 31, 2026, we completed Aspire's inaugural securitization through our SPIRE securitization program, pursuant to which $391 million in UPB of non-QM loans were transferred to a securitization trust that is not consolidated. Additionally, in prior years, we have transferred residential consumer loans to certain Sequoia securitization entities sponsored by us that are still outstanding as of March 31, 2026.

We determined we were not the primary beneficiary of these VIEs as we lacked the power to direct the activities that will have the most significant economic impact on the entities. For certain of the transferred loans where we held the servicing rights prior to the transfer and continued to hold the servicing rights following the transfer, we recorded mortgage servicing rights ("MSRs") on our consolidated balance sheets and classified those MSRs as Level 3 assets. We also retained IO, senior and subordinate securities in these transfers that we classified as Level 3 assets. Our continuing involvement in these securitizations is limited to customary servicing obligations associated with retaining servicing rights (which are performed by third-party sub-servicers) and the receipt of interest income associated with the securities we retained.

The following table presents additional information at March 31, 2026 and December 31, 2025, related to unconsolidated VIEs sponsored by Redwood and accounted for as sales.

Table 16.2 – Unconsolidated VIEs Sponsored by Redwood


(In Thousands)	March 31, 2026		December 31, 2025
On-balance sheet assets, at fair value:
Subordinate securities, classified as AFS	$	290,276	$	283,768
Interest-only, senior and subordinate securities, classified as trading	36,262		33,743
Mortgage servicing rights	12,803		12,029
Strategic investments, equity method	10,123		10,263
Funding commitment (1)	14,815		35,000
Maximum loss exposure (2)	$	364,279	$	374,803

(1)Represents Redwood’s agreement, entered into during 2025, to provide up to $35 million of capital support to a trust holding legacy unsecuritized bridge loans. As of March 31, 2026 we funded $20 million at closing, with up to $15 million remaining subject to specified portfolio triggers. Refer to Notes 8, 9, and 19 for additional information.

(2)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.