Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2011

Aggregate Fair Value and Notional Amount by Entity of Derivative Financial Instruments

The following table presents the aggregate fair value and notional amount of derivative financial instruments held by Redwood and the consolidated Acacia entities at June 30, 2011 and December 31, 2010. The derivatives held at Acacia entities are not assets or obligations of Redwood.

June 30, 2011 (In Thousands)	Redwood					Acacia					Total
	Fair Value			Notional Amount		Fair Value			Notional Amount		Fair Value			Notional Amount
Assets – Risk Management Derivatives
Interest rate swaps	$	—		$	—	$	806		$	5,796	$	806		$	5,796
TBAs		274			69,000		—			—		274			69,000
Futures		2			44,000		—			—		2			44,000
Interest rate caps purchased		—			—		2,931			705,400		2,931			705,400
Total Assets		276			113,000		3,737			711,196		4,013			824,196
Liabilities – Cash Flow Hedges
Interest rate swaps		(13,823	)		165,000		—			—		(13,823	)		165,000
Liabilities – Risk Management Derivatives
Interest rate swaps		(1,624	)		89,500		(65,766	)		612,746		(67,390	)		702,246
TBAs		(1,036	)		56,000		—			—		(1,036	)		56,000
Futures		(390	)		568,000		—			—		(390	)		568,000
Total Liabilities		(16,873	)		878,500		(65,766	)		612,746		(82,639	)		1,491,246
Total Derivative Financial Instruments, Net	$	(16,597	)	$	991,500	$	(62,029	)	$	1,323,942	$	(78,626	)	$	2,315,442

	Redwood					Acacia					Total
December 31, 2010 (In Thousands)	Fair Value			Notional Amount		Fair Value			Notional Amount		Fair Value			Notional Amount
Assets – Risk Management Derivatives
Interest rate swaps	$	175		$	44,000	$	813		$	18,037	$	988		$	62,037
TBAs		348			35,000		—			—		348			35,000
Futures		703			433,000		—			—		703			433,000
Interest rate caps purchased		—			—		6,012			703,400		6,012			703,400
Total Assets		1,226			512,000		6,825			721,437		8,051			1,233,437
Liabilities – Cash Flow Hedges
Interest rate swaps		(11,449	)		155,500		—			—		(11,449	)		155,500
Liabilities – Risk Management Derivatives
Interest rate swaps		(1,283	)		26,000		(69,373	)		663,604		(70,656	)		689,604
TBAs		(951	)		124,000		—			—		(951	)		124,000
Futures		(59	)		225,000		—			—		(59	)		225,000
Total Liabilities		(13,742	)		530,500		(69,373	)		663,604		(83,115	)		1,194,104
Total Derivative Financial Instruments, Net	$	(12,516	)	$	1,042,500	$	(62,548	)	$	1,385,041	$	(75,064	)	$	2,427,541

Impact on Interest Income (Expense) of Interest Rate Agreements Accounted for as Cash Flow Hedges

The following table illustrates the impact on interest income (expense) of our interest rate agreements accounted for as cash flow hedges for the three and six months ended June 30, 2011 and 2010.

Impact on Interest Income (Expense) of Our Interest Rate Agreements Accounted for as Cash Flow Hedges

	Three Months Ended June 30,						Six Months Ended June 30,
(In Thousands)	2011			2010			2011			2010
Net interest expense on cash flow interest rate agreements	$	(1,628	)	$	(1,036	)	$	(3,166	)	$	(1,036	)
Realized net expense due to net ineffective portion of hedges		(12	)		(26	)		(13	)		(26	)
Realized net losses reclassified from other comprehensive income		(1,080	)		(1,051	)		(2,144	)		(1,546	)
Total Interest Expense	$	(2,720	)	$	(2,113	)	$	(5,323	)	$	(2,608	)