10-Q

UNITED STATES OF AMERICA

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended: June 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _______________ to _______________.

Commission File Number 1-13759

REDWOOD TRUST, INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland	68-0329422
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

One Belvedere Place,	Suite 300
Mill Valley,	California	94941
(Address of Principal Executive Offices)		(Zip Code)

(415) 389-7373

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	RWT	New York Stock Exchange

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Common Stock, $0.01 par value per share 116,765,789  shares outstanding as of August 2, 2022

REDWOOD TRUST, INC.

2022 FORM 10-Q REPORT

TABLE OF CONTENTS

		Page
PART I —	FINANCIAL INFORMATION
Item 1.	Financial Statements	2
	Consolidated Balance Sheets at June 30, 2022 (Unaudited) and December 31, 2021	2
	Consolidated Statements of Income (Loss) for the Three and Six Months Ended June 30, 2022 and 2021 (Unaudited)	3
	Consolidated Statements of Comprehensive (Loss) Income for the Three and Six Months Ended June 30, 2022 and 2021 (Unaudited)	4
	Consolidated Statements of Changes in Stockholders' Equity for the Three and Six Months Ended June 30, 2022 and 2021 (Unaudited)	5
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021 (Unaudited)	7
	Notes to Consolidated Financial Statements (Unaudited)	9
	Note 1. Organization	9
	Note 2. Basis of Presentation	9
	Note 3. Summary of Significant Accounting Policies	11
	Note 4. Principles of Consolidation	15
	Note 5. Fair Value of Financial Instruments	24
	Note 6. Residential Loans	32
	Note 7. Business Purpose Loans	35
	Note 8. Consolidated Agency Multifamily Loans	39
	Note 9. Real Estate Securities	40
	Note 10. Other Investments	45
	Note 11. Derivative Financial Instruments	47
	Note 12. Other Assets and Liabilities	48
	Note 13. Short-Term Debt	50
	Note 14. Asset-Backed Securities Issued	52
	Note 15. Long-Term Debt	55
	Note 16. Commitments and Contingencies	58
	Note 17. Equity	60
	Note 18. Equity Compensation Plans	63
	Note 19. Mortgage Banking Activities, Net	64
	Note 20. Other Income, Net	65
	Note 21. General and Administrative Expenses, Loan Acquisition Costs, and Other Expenses	66
	Note 22. Taxes	67
	Note 23. Segment Information	67
	Note 24. Subsequent Events	71
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	72
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	103
Item 4.	Controls and Procedures	103
PART II —	OTHER INFORMATION
Item 1.	Legal Proceedings	104
Item 1A.	Risk Factors	104
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	104
Item 3.	Defaults Upon Senior Securities	104
Item 4.	Mine Safety Disclosures (Not Applicable)	104
Item 5.	Other Information	104
Item 6.	Exhibits	105
Signatures		106

i

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

REDWOOD TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands, except Share Data) (Unaudited)	June 30, 2022		December 31, 2021
ASSETS (1)
Residential loans, held-for-sale, at fair value	$	1,213,067	$	1,845,282
Residential loans, held-for-investment, at fair value	5,365,532		5,747,150
Business purpose loans, held-for-sale, at fair value	505,171		358,309
Business purpose loans, held-for-investment, at fair value	4,697,766		4,432,680
Consolidated Agency multifamily loans, at fair value	443,114		473,514
Real estate securities, at fair value	284,278		377,411
Other investments	679,667		641,969
Cash and cash equivalents	371,296		450,485
Restricted cash	72,558		80,999
Intangible assets	34,720		41,561
Derivative assets	36,587		26,467
Other assets	171,780		231,117
Total Assets	$	13,875,536	$	14,706,944
LIABILITIES AND EQUITY (1)
Liabilities
Short-term debt, net	$	1,869,822	$	2,177,362
Derivative liabilities	6,591		3,317
Accrued expenses and other liabilities	190,825		245,788
Asset-backed securities issued (includes $7,993,953 and $8,843,147 at fair value), net	8,584,146		9,253,557
Long-term debt, net	1,966,061		1,640,833
Total liabilities	12,617,445		13,320,857
Commitments and Contingencies (see Note 16)
Equity
Common stock, par value $0.01 per share, 395,000,000 shares authorized; 116,753,174 and 114,892,309 issued and outstanding	1,168		1,149
Additional paid-in capital	2,363,709		2,316,799
Accumulated other comprehensive loss	(57,788)		(8,927)
Cumulative earnings	1,247,839		1,316,890
Cumulative distributions to stockholders	(2,296,837)		(2,239,824)
Total equity	1,258,091		1,386,087
Total Liabilities and Equity	$	13,875,536	$	14,706,944

——————

(1)Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At June 30, 2022 and December 31, 2021, assets of consolidated VIEs totaled $9,951,520 and $10,661,081, respectively. At June 30, 2022 and December 31, 2021, liabilities of consolidated VIEs totaled $8,899,020 and $9,619,347, respectively. See Note 4 for further discussion.

The accompanying notes are an integral part of these consolidated financial statements.

2

REDWOOD TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(In Thousands, except Share Data)	Three Months Ended June 30,				Six Months Ended June 30,
(Unaudited)	2022		2021		2022		2021
Interest Income
Residential loans	$	65,047	$	48,433	$	130,250	$	92,088
Business purpose loans	80,934		70,323		175,233		134,511
Multifamily loans	4,732		4,860		9,485		9,646
Real estate securities	7,828		9,279		23,783		18,942
Other interest income	8,914		5,800		18,104		11,813
Total interest income	167,455		138,695		356,855		267,000
Interest Expense
Short-term debt	(13,661)		(11,195)		(25,149)		(18,968)
Asset-backed securities issued	(88,859)		(76,419)		(194,554)		(148,980)
Long-term debt	(24,447)		(20,451)		(43,562)		(42,669)
Total interest expense	(126,967)		(108,065)		(263,265)		(210,617)
Net Interest Income	40,488		30,630		93,590		56,383
Non-interest (Loss) Income
Mortgage banking activities, net	(30,017)		54,419		(13,702)		137,026
Investment fair value changes, net	(87,972)		49,480		(94,092)		94,567
Other income, net	7,006		2,126		12,989		5,969
Realized gains, net	—		8,384		2,581		11,100
Total non-interest (loss) income, net	(110,983)		114,409		(92,224)		248,662
General and administrative expenses	(31,966)		(40,594)		(66,820)		(84,145)
Loan acquisition costs	(3,480)		(3,748)		(7,945)		(7,307)
Other expenses	(3,468)		(3,985)		(7,553)		(8,081)
Net (Loss) Income before Benefit from (Provision for) Income Taxes	(109,409)		96,712		(80,952)		205,512
Benefit from (provision for) income taxes	9,443		(6,687)		11,901		(18,230)
Net (Loss) Income	$	(99,966)	$	90,025	$	(69,051)	$	187,282
Basic (loss) earnings per common share	$	(0.85)	$	0.77	$	(0.60)	$	1.61
Diluted (loss) earnings per common share	$	(0.85)	$	0.66	$	(0.60)	$	1.38
Basic weighted average shares outstanding	119,660,173		112,921,070		119,771,554		112,337,984
Diluted weighted average shares outstanding	119,660,173		141,761,084		119,771,554		141,139,212

The accompanying notes are an integral part of these consolidated financial statements.

3

REDWOOD TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In Thousands)	Three Months Ended June 30,					Six Months Ended June 30,
(Unaudited)	2022		2021			2022		2021
Net (Loss) Income	$	(99,966)	$	90,025		$	(69,051)	$	187,282
Other comprehensive (loss) income:
Net unrealized (loss) gain on available-for-sale securities	(33,409)		11,224			(51,282)		22,210
Reclassification of unrealized loss (gain) on available-for-sale securities to net (loss) income	1,066		(7,500)			374		(10,295)
Reclassification of unrealized loss on interest rate agreements to net (loss) income	1,029		1,028			2,047		2,046
Total other comprehensive (loss) income	(31,314)		4,752		4752000	(48,861)		13,961
Total Comprehensive (Loss) Income	$	(131,280)	$	94,777		$	(117,912)	$	201,243

The accompanying notes are an integral part of these consolidated financial statements.

4

REDWOOD TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the Three Months Ended June 30, 2022

(In Thousands, except Share Data)	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive (Loss)		Cumulative  Earnings		Cumulative Distributions to Stockholders		Total
(Unaudited)	Shares	Amount
March 31, 2022	120,289,243	$	1,203	$	2,391,344	$	(26,474)	$	1,347,805	$	(2,268,612)	$	1,445,266
Net (loss)	—	—		—		—		(99,966)		—		(99,966)
Other comprehensive (loss)	—	—		—		(31,314)		—		—		(31,314)
Employee stock purchase and incentive plans	143,964	1		(135)		—		—		—		(134)
Non-cash equity award compensation	—	—		5,266		—		—		—		5,266
Share repurchases	(3,680,033)	(36)		(32,766)		—		—		—		(32,802)
Common dividends declared ($0.23 per share)	—	—		—		—		—		(28,225)		(28,225)
June 30, 2022	116,753,174	$	1,168	$	2,363,709	$	(57,788)	$	1,247,839	$	(2,296,837)	$	1,258,091

For the Six Months Ended June 30, 2022

(In Thousands, except Share Data)	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive (Loss)		Cumulative  Earnings		Cumulative Distributions to Stockholders		Total
(Unaudited)	Shares	Amount
December 31, 2021	114,892,309	$	1,149	$	2,316,799	$	(8,927)	$	1,316,890	$	(2,239,824)	$	1,386,087
Net (loss)	—	—		—		—		(69,051)		—		(69,051)
Other comprehensive (loss)	—	—		—		(48,861)		—		—		(48,861)
Issuance of common stock	5,232,869	52		67,423		—		—		—		67,475
Employee stock purchase and incentive plans	308,029	3		(1,183)		—		—		—		(1,180)
Non-cash equity award compensation	—	—		13,436		—		—		—		13,436
Share repurchases	(3,680,033)	(36)		(32,766)		—		—		—		(32,802)
Common dividends declared ($0.46 per share)	—	—		—		—		—		(57,013)		(57,013)
June 30, 2022	116,753,174	$	1,168	$	2,363,709	$	(57,788)	$	1,247,839	$	(2,296,837)	$	1,258,091

5

For the Three Months Ended June 30, 2021

(In Thousands, except Share Data)	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income		Cumulative  Earnings		Cumulative Distributions to Stockholders		Total
(Unaudited)	Shares	Amount
March 31, 2021	112,998,732	$	1,130	$	2,281,647	$	4,988	$	1,094,534	$	(2,166,724)	$	1,215,575
Net income	—	—		—		—		90,025		—		90,025
Other comprehensive income	—	—		—		4,752		—		—		4,752
Employee stock purchase and incentive plans	54,048	1		122		—		—		—		123
Non-cash equity award compensation	—	—		5,643		—		—		—		5,643
Common dividends declared ($0.18 per share)	—	—		—		—		—		(20,976)		(20,976)
June 30, 2021	113,052,780	$	1,131	$	2,287,412	$	9,740	$	1,184,559	$	(2,187,700)	$	1,295,142

For the Six Months Ended June 30, 2021

(In Thousands, except Share Data)	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Cumulative  Earnings		Cumulative Distributions to Stockholders		Total
(Unaudited)	Shares	Amount
December 31, 2020	112,090,006	$	1,121	$	2,264,874	$	(4,221)	$	997,277	$	(2,148,152)	$	1,110,899
Net income	—	—		—		—		187,282		—		187,282
Other comprehensive income	—	—		—		13,961		—		—		13,961
Issuance of common stock	806,068	8		13,366		—		—		—		13,374
Employee stock purchase and incentive plans	156,706	2		(689)		—		—		—		(687)
Non-cash equity award compensation	—	—		9,861		—		—		—		9,861
Common dividends declared ($0.34 per share)	—	—		—		—		—		(39,548)		(39,548)
June 30, 2021	113,052,780	$	1,131	$	2,287,412	$	9,740	$	1,184,559	$	(2,187,700)	$	1,295,142

The accompanying notes are an integral part of these consolidated financial statements.

6

REDWOOD TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands) (Unaudited)	Six Months Ended June 30,
	2022		2021
Cash Flows From Operating Activities:
Net (loss) income	$	(69,051)	$	187,282
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Amortization of premiums, discounts, and securities issuance costs, net	(2,538)		3,998
Depreciation and amortization of non-financial assets	7,710		8,405
Originations of held-for-sale loans	(766,852)		(567,546)
Purchases of held-for-sale loans	(3,395,459)		(6,682,864)
Proceeds from sales of held-for-sale loans	3,376,600		4,526,370
Principal payments on held-for-sale loans	114,731		19,856
Net settlements of derivatives	112,649		39,697
Non-cash equity award compensation expense	13,436		9,861
Market valuation adjustments	132,594		(213,641)
Realized gains, net	(2,581)		(11,100)
Net change in:
Accrued interest receivable and other assets	63,829		10,260
Accrued interest payable and accrued expenses and other liabilities	(75,856)		17,327
Net cash used in operating activities	(490,788)		(2,652,095)
Cash Flows From Investing Activities:
Originations of loan investments	(954,179)		(348,389)
Purchases of loan investments	(22,006)		—
Proceeds from sales of loan investments	—		9,231
Principal payments on loan investments	1,160,403		1,312,064
Purchases of real estate securities	(15,006)		(18,593)
Sales of securities held in consolidated securitization trusts	—		8,197
Proceeds from sales of real estate securities	23,329		36,735
Principal payments on real estate securities	26,033		29,786
Principal repayments from servicer advance investments	71,401		45,838
Purchases of HEIs	(97,389)		—
Principal payments on HEIs	25,826		—
Other investing activities, net	(14,573)		(5,025)
Net cash provided by investing activities	203,839		1,069,844
Cash Flows From Financing Activities:
Proceeds from borrowings on short-term debt	3,450,606		6,604,603
Repayments on short-term debt	(4,125,634)		(5,421,494)
Proceeds from issuance of asset-backed securities	1,167,711		1,629,218
Repayments on asset-backed securities issued	(954,136)		(1,088,809)
Proceeds from borrowings on long-term debt	1,424,088		487,975
Deferred long-term debt issuance costs paid	(17,363)		—
Repayments on long-term debt	(726,076)		(654,893)
Net payments on repurchase of common stock	(26,857)		—
Taxes paid on equity award distributions	(1,477)		(943)
Net proceeds from issuance of common stock	67,770		255
Dividends paid	(57,013)		(39,548)
Other financing activities, net	(2,300)		(2,292)
Net cash provided by financing activities	199,319		1,514,072
Net decrease in cash, cash equivalents and restricted cash	(87,630)		(68,179)
Cash, cash equivalents and restricted cash at beginning of period (1)	531,484		544,450
Cash, cash equivalents and restricted cash at end of period (1)	$	443,854	$	476,271

7

REDWOOD TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(In Thousands) (Unaudited)	Six Months Ended June 30,
	2022		2021
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest	$	247,968	$	198,364
Taxes paid	3,894		19,183
Supplemental Noncash Information:
Real estate securities retained from loan securitizations	$	—	$	9,374
Retention of mortgage servicing rights from loan securitizations and sales	4,543		—
Transfers from loans held-for-sale to loans held-for-investment	1,953,421		1,998,535
Transfers from loans held-for-investment to loans held-for-sale	—		44,922
Transfers from residential loans to real estate owned	3,132		15,827
Transfers from long-term debt to short-term debt	367,431		47,994
Right-of-use asset obtained in exchange for operating lease liability	—		1,135
Issuance of common stock for 5 Arches acquisition	—		13,375

(1)    Cash, cash equivalents, and restricted cash includes cash and cash equivalents of $371 million and restricted cash of $73 million at June 30, 2022, and includes cash and cash equivalents of $450 million and restricted cash of $81 million at December 31, 2021.

The accompanying notes are an integral part of these consolidated financial statements.

8

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 1. Organization

Redwood Trust, Inc., together with its subsidiaries, is a specialty finance company focused on several distinct areas of housing credit, with a mission to help make quality housing, whether rented or owned, accessible to all American households. Our operating platforms occupy a unique position in the housing finance value chain, providing liquidity to growing segments of the U.S. housing market not well served by government programs. We deliver customized housing credit investments to a diverse mix of investors through our best-in-class securitization platforms, whole-loan distribution activities and our publicly-traded securities. Our aggregation, origination and investment activities have evolved to incorporate a diverse mix of residential, business purpose and multifamily assets. Our goal is to provide attractive returns to shareholders through a stable and growing stream of earnings and dividends, capital appreciation, and a commitment to technological innovation that facilitates risk-minded scale. We operate our business in three segments: Residential Mortgage Banking, Business Purpose Mortgage Banking, and Investment Portfolio.

Our primary sources of income are net interest income from our investments and non-interest income from our mortgage banking activities. Net interest income primarily consists of the interest income we earn on investments less the interest expense we incur on borrowed funds and other liabilities. Income from mortgage banking activities is generated through the origination and acquisition of loans, and their subsequent sale, securitization, or transfer to our investment portfolios.

Redwood Trust, Inc. has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), beginning with its taxable year ended December 31, 1994. We generally refer, collectively, to Redwood Trust, Inc. and those of its subsidiaries that are generally not subject to subsidiary-level corporate income tax as “the REIT” or “our REIT.” We generally refer to subsidiaries of Redwood Trust, Inc. that are subject to subsidiary-level corporate income tax as “our taxable REIT subsidiaries” or “TRS.”

Redwood Trust, Inc. was incorporated in the State of Maryland on April 11, 1994, and commenced operations on August 19, 1994. References herein to “Redwood,” the “company,” “we,” “us,” and “our” include Redwood Trust, Inc. and its consolidated subsidiaries, unless the context otherwise requires.

Note 2. Basis of Presentation

The consolidated financial statements presented herein are at June 30, 2022 and December 31, 2021, and for the three and six months ended June 30, 2022 and 2021. These interim unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and note disclosures normally included in our annual financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") — as prescribed by the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) — have been condensed or omitted in these interim financial statements according to these SEC rules and regulations. Management believes that the disclosures included in these interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the company's Annual Report on Form 10-K for the year ended December 31, 2021. In the opinion of management, all normal and recurring adjustments have been made to present fairly the financial condition of the Company at June 30, 2022 and results of operations for all periods presented. The results of operations for the three and six months ended June 30, 2022 should not be construed as indicative of the results to be expected for the full year.

9

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 2. Basis of Presentation - (continued)

Principles of Consolidation

In accordance with GAAP, we determine whether we must consolidate transferred financial assets and variable interest entities (“VIEs”) for financial reporting purposes. We currently consolidate the assets and liabilities of certain Sequoia securitization entities issued prior to 2012 ("Legacy Sequoia"), certain entities formed during and after 2012 in connection with the securitization of Redwood Select prime loans and Redwood Choice expanded-prime loans ("Sequoia"), entities formed in connection with the securitization of CoreVest single-family rental and bridge loans ("CAFL") and an entity formed in connection with the securitization of home equity investment contracts ("HEIs"). We also consolidate the assets and liabilities of certain Freddie Mac K-Series and Freddie Mac Seasoned Loans Structured Transaction ("SLST") securitizations in which we have invested. Each securitization entity is independent of Redwood and of each other and the assets and liabilities are not owned by and are not legal obligations of Redwood Trust, Inc. Our exposure to these entities is primarily through the financial interests we have purchased or retained, although for certain entities we are exposed to financial risks associated with our role as a sponsor or co-sponsor, servicing administrator, collateral administrator or depositor of these entities or as a result of our having sold assets directly or indirectly to these entities.

For financial reporting purposes, the underlying loans owned at the consolidated Legacy Sequoia, Sequoia and Freddie Mac SLST entities are shown under Residential loans held-for-investment, at fair value, the underlying loans at the consolidated Freddie Mac K-Series entity are shown under Consolidated Agency multifamily loans, at fair value, the underlying single-family rental and bridge loans at the consolidated CAFL entities are shown under Business purpose loans held-for-investment, at fair value, and the underlying HEIs at the consolidated HEI securitization entity are shown under Other investments, at fair value on our consolidated balance sheets. The asset-backed securities (“ABS”) issued to third parties by these entities are shown under ABS issued. In our consolidated statements of income, we record interest income on the loans owned at these entities and interest expense on the ABS issued by these entities as well as fair value changes, other income and expenses associated with these entities' activities. See Note 14 for further discussion on ABS issued.

We also consolidate two partnerships ("Servicing Investment" entities) through which we have invested in servicing-related assets. We maintain an 80% ownership interest in each entity and have determined that we are the primary beneficiary of these partnerships.

See Note 4 for further discussion on principles of consolidation.

Use of Estimates

The preparation of financial statements requires us to make a number of significant estimates. These include estimates of fair value of certain assets and liabilities, amounts and timing of credit losses, prepayment rates, and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the consolidated financial statements and the reported amounts of certain revenues and expenses during the reported periods. It is likely that changes in these estimates (e.g., valuation changes due to supply and demand, credit performance, prepayments, interest rates, or other reasons) will occur in the near term. Our estimates are inherently subjective in nature and actual results could differ from our estimates and the differences could be material.

Acquisitions

Refer to Note 2 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021, for additional information regarding the acquisitions of 5 Arches, LLC ("5 Arches") and CoreVest American Finance Lender, LLC and certain affiliated entities ("CoreVest"), including purchase price allocations.

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REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 2. Basis of Presentation - (continued)

In connection with the acquisitions of 5 Arches and CoreVest in 2019, we identified and recorded finite-lived intangible assets totaling $25 million and $57 million, respectively. The table below presents the amortization period and carrying value of our intangible assets, net of accumulated amortization at June 30, 2022.

Table 2.1 – Intangible Assets – Activity

	Intangible Assets at Acquisition		Accumulated Amortization at June 30, 2022		Carrying Value at June 30, 2022		Weighted Average Amortization Period (in years)
(Dollars in Thousands)
Borrower network	$	45,300	$	(17,527)	$	27,773	7
Broker network	18,100		(12,067)		6,033		5
Non-compete agreements	9,500		(8,858)		642		3
Tradenames	4,000		(3,728)		272		3
Developed technology	1,800		(1,800)		—		2
Loan administration fees on existing loan assets	2,600		(2,600)		—		1
Total	$	81,300	$	(46,580)	$	34,720	6

All of our intangible assets are amortized on a straight-line basis. For each of the six months ended June 30, 2022 and 2021, we recorded intangible asset amortization expense of $7 million. Estimated future amortization expense is summarized in the table below.

Table 2.2 – Intangible Asset Amortization Expense by Year

(In Thousands)	June 30, 2022
2022 (6 months)	$	5,959
2023	10,091
2024	7,075
2025	6,471
2026	5,124
Total Future Intangible Asset Amortization	$	34,720

On a quarterly basis, we evaluate our finite-lived intangible assets for impairment indicators and additionally evaluate the useful lives of our intangible assets to determine if revisions to the remaining periods of amortization are warranted. We reviewed our finite-lived intangible assets and determined that the estimated lives were appropriate and that there were no indicators of impairment at June 30, 2022.

Note 3. Summary of Significant Accounting Policies

Significant Accounting Policies

Included in Note 3 to the Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2021 is a summary of our significant accounting policies.

Recent Accounting Pronouncements

Newly Adopted Accounting Standards Updates ("ASUs")

In August 2020, the FASB issued ASU 2020-06, "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40)." This new guidance simplifies the accounting for convertible debt by reducing the number of accounting models to separately present certain conversion features in equity. This new guidance was effective for fiscal years beginning after December 31, 2021. We adopted this guidance in the first quarter of 2022, which did not have a material impact on our consolidated financial statements.

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REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 3. Summary of Significant Accounting Policies - (continued)

Other Recent Accounting Pronouncements

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.” ASU 2022-03 was issued to (1) to clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The amendments in this update are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. We are evaluating the accounting and disclosure requirements of ASU 2022-03 and we plan to adopt this new guidance by the required date. We do not anticipate that this update will have a material impact on our financial statements.

In March 2022, the FASB issued ASU 2022-02, "Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures." ASU 2022-02 addresses areas identified by the FASB as part of its post-implementation review of the credit losses standard (ASU 2016-13) that introduced the current expected credit loss ("CECL") model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require a public business entity to disclose current-period gross writeoffs for financing receivables and net investment in leases by year of origination in the vintage disclosures. This guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. We plan to adopt this new guidance by the required date and do not anticipate that this update will have a material impact on our consolidated financial statements.

In March 2022, the FASB issued ASU 2022-01, "Derivatives and Hedging (Topic 815), Fair Value Hedging - Portfolio Layer Method," which will expand companies' abilities to hedge the benchmark interest rate risk of portfolios of financial assets (or beneficial interests) in a fair value hedge. The ASU expands the use of the portfolio layer method (previously referred to as the last-of-layer method) to allow multiple hedges of a single closed portfolio of assets using spot starting, forward starting, and amortizing-notional swaps. The ASU also permits both prepayable and non-prepayable financial assets to be included in the closed portfolio of assets hedged in a portfolio layer hedge. The ASU further requires that basis adjustments not be allocated to individual assets for active portfolio layer method hedges, but rather be maintained on the closed portfolio of assets as a whole. This guidance is effective for public business entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. We plan to adopt this new guidance by the required date and do not anticipate that this update will have a material impact on our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." This new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848): Scope." This new guidance clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. This new guidance is effective for all entities as of March 12, 2020 through December 31, 2022. We are currently evaluating the impact the adoption of this standard would have on our consolidated financial statements. Through June 30, 2022, we have not elected to apply the optional expedients and exceptions to any of our existing contracts, hedging relationships, or other transactions.

We have an established cross-functional group that has evaluated our exposure to LIBOR, reviewed relevant contracts and has monitored regulatory updates to assess the potential impact to our business, processes and technology from the ultimate full cessation of LIBOR in 2023, and has established a LIBOR transition plan to facilitate an orderly transition to alternative reference rates. We continue to remain on track with our LIBOR transition plan, which requires different solutions depending on the underlying asset or liability with LIBOR exposure. At June 30, 2022, our primary LIBOR exposure included the following: $868 million of repo or warehouse debt, $468 million of interest rate swaps, $740 million of bridge loans, and $140 million of trust preferred securities and subordinated notes debt. Since December 31, 2021, certain of our contracts, such as interest rate swaps, have experienced an orderly market transition and we have transitioned a substantial portion of our derivative positions off of LIBOR-benchmarks. Other contracts, such as warehouse debt agreements, require bilateral amendments, many of which we have amended or are currently in the process of amending.

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REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 3. Summary of Significant Accounting Policies - (continued)

We anticipate most of these facilities will be amended in 2022, with sufficient time remaining to resolve the remainder. In early 2022, we began benchmarking all newly originated bridge loans to the Secured Overnight Financing Rate (“SOFR”), and our existing portfolio of bridge loans are short-dated and we expect the vast majority to mature before the LIBOR cessation date in 2023. Additionally, as the result of legislation that was passed in the state of New York, our trust preferred securities and subordinated notes are expected to convert to SOFR upon the cessation of LIBOR.

Balance Sheet Netting

Certain of our derivatives and short-term debt are subject to master netting arrangements or similar agreements. Under GAAP, in certain circumstances we may elect to present certain financial assets, liabilities and related collateral subject to master netting arrangements in a net position on our consolidated balance sheets. However, we do not report any of these financial assets or liabilities on a net basis, and instead present them on a gross basis on our consolidated balance sheets.

The table below presents financial assets and liabilities that are subject to master netting arrangements or similar agreements categorized by financial instrument, together with corresponding financial instruments and corresponding collateral received or pledged at June 30, 2022 and December 31, 2021.

Table 3.1 – Offsetting of Financial Assets, Liabilities, and Collateral

	Gross Amounts of Recognized Assets (Liabilities)		Gross Amounts Offset in Consolidated Balance Sheet		Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet		Gross Amounts Not Offset in Consolidated Balance Sheet (1)				Net Amount
June 30, 2022 (In Thousands)							Financial Instruments		Cash Collateral (Received) Pledged
Assets (2)
Interest rate agreements	$	29,601	$	—	$	29,601	$	(2,445)	$	(6,451)	$	20,705
TBAs	3,104		—		3,104		(530)		(2,574)		—
Futures	1,875		—		1,875		(1,615)		(2)		258
Total Assets	$	34,580	$	—	$	34,580	$	(4,590)	$	(9,027)	$	20,963
Liabilities (2)
Interest rate agreements	$	(2,445)	$	—	$	(2,445)	$	2,445	$	—	$	—
TBAs	(2,004)		—		(2,004)		530		1,474		—
Futures	(1,615)		—		(1,615)		1,615		—		—
Loan warehouse debt	(423,619)		—		(423,619)		423,619		—		—
Total Liabilities	$	(429,683)	$	—	$	(429,683)	$	428,209	$	1,474	$	—

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REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 3. Summary of Significant Accounting Policies - (continued)

	Gross Amounts of Recognized Assets (Liabilities)		Gross Amounts Offset in Consolidated Balance Sheet		Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet		Gross Amounts Not Offset in Consolidated Balance Sheet (1)				Net Amount
December 31, 2021 (In Thousands)							Financial Instruments		Cash Collateral (Received) Pledged
Assets (2)
Interest rate agreements	$	18,929	$	—	$	18,929	$	(1,251)	$	(16,046)	$	1,632
TBAs	2,880		—		2,880		(633)		(704)		1,543
Futures	25		—		25		(25)		—		—
Total Assets	$	21,834	$	—	$	21,834	$	(1,909)	$	(16,750)	$	3,175
Liabilities (2)
Interest rate agreements	$	(1,251)	$	—	$	(1,251)	$	1,251	$	—	$	—
TBAs	$	(658)	$	—	$	(658)	$	633	$	15	$	(10)
Futures	(905)		—		(905)		25		880		—
Loan warehouse debt	(572,720)		—		(572,720)		572,720		—		—
Total Liabilities	$	(575,534)	$	—	$	(575,534)	$	574,629	$	895	$	(10)

(1)Amounts presented in these columns are limited in total to the net amount of assets or liabilities presented in the prior column by instrument. In certain cases, there is excess cash collateral or financial assets we have pledged to a counterparty (which may, in certain circumstances, be a clearinghouse) that exceed the financial liabilities subject to a master netting arrangement or similar agreement. Additionally, in certain cases, counterparties may have pledged excess cash collateral to us that exceeds our corresponding financial assets. In each case, any of these excess amounts are excluded from the table although they are separately reported in our consolidated balance sheets as assets or liabilities, respectively.

(2)Interest rate agreements and TBAs are components of derivatives instruments on our consolidated balance sheets. Loan warehouse debt, which is secured by certain residential and business purpose loans, and security repurchase agreements are components of Short-term debt and Long-term debt on our consolidated balance sheets.

For each category of financial instrument set forth in the table above, the assets and liabilities resulting from individual transactions within that category between us and a counterparty are subject to a master netting arrangement or similar agreement with that counterparty that provides for individual transactions to be aggregated and treated as a single transaction. For certain categories of these instruments, our transactions generally are cleared and settled through one or more clearinghouses that are substituted as our counterparty. References herein to master netting arrangements or similar agreements include the arrangements and agreements governing the clearing and settlement of these transactions through the clearinghouses. In the event of the termination and close-out of any of those transactions, the corresponding master netting agreement or similar agreement provides for settlement on a net basis. Any such settlement would include the proceeds of the liquidation of any corresponding collateral, subject to certain limitations on termination, settlement, and liquidation of collateral that may apply in the event of the bankruptcy or insolvency of a party. Such limitations should not inhibit the eventual practical realization of the principal benefits of those transactions or the corresponding master netting arrangement or similar agreement and any corresponding collateral.

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REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 4. Principles of Consolidation

GAAP requires us to consider whether securitizations we sponsor and other transfers of financial assets should be treated as sales or financings, as well as whether any VIEs that we hold variable interests in – for example, certain legal entities often used in securitization and other structured finance transactions – should be included in our consolidated financial statements. 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

At June 30, 2022, we consolidated Legacy Sequoia, Sequoia, CAFL, Freddie Mac SLST, Freddie Mac K-Series, and HEI securitization entities that we determined were VIEs and for which we determined we were the primary beneficiary. Each of these entities is independent of Redwood and of each other and the assets and liabilities of these entities are not owned by and are not legal obligations of ours. Our exposure to these entities is primarily through the financial interests we have retained, although for certain securitizations, we are exposed to financial risks associated with our role as a sponsor, servicing administrator, collateral administrator, or depositor of these entities or as a result of our having sold assets directly or indirectly to these entities.

We also consolidate two Servicing Investment entities formed to invest in servicing-related assets that we determined were VIEs and for which we determined we were the primary beneficiary. At June 30, 2022, we held an 80% ownership interest in, and were responsible for the management of, each entity. See Note 10 for a further description of these entities and the investments they hold and Note 12 for additional information on the minority partner’s non-controlling interest. Additionally, we consolidated an entity that was formed to finance servicer advances that we determined was a VIE and for which we, through our control of one of the aforementioned partnerships, were the primary beneficiary. The servicer advance financing consists of non-recourse short-term securitization debt, secured by servicer advances. We consolidate the securitization entity, but the securitization entity is independent of Redwood and the assets and liabilities are not owned by and are not legal obligations of Redwood. See Note 13 for additional information on the servicer advance financing.

During 2021, we consolidated a HEI securitization entity formed to invest in HEIs that we determined was a VIE and for which we determined we were the primary beneficiary. At June 30, 2022 and December 31, 2021, we owned a portion of the subordinate certificates issued by the entity and had certain decision making rights for the entity. See Note 10 for a further description of this entity and the investments it holds and Note 12 for additional information on non-controlling interests in the entity. We consolidate the HEI securitization entity, but the securitization entity is independent of Redwood and the assets and liabilities are not owned by and are not legal obligations of Redwood.

For certain of our consolidated VIEs, we have elected to account for the assets and liabilities of these entities as collateralized financing entities ("CFE"). A CFE is a variable interest entity 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. Accounting guidance for CFEs 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. The net equity in an entity accounted for under the CFE election effectively represents the fair value of the beneficial interests we own in the entity.

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 amortized cost. These include our CAFL Bridge securitizations, Freddie Mac SLST re-securitization, and Servicing Investment entities.

15

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 4. Principles of Consolidation - (continued)

The following table presents a summary of the assets and liabilities of our consolidated VIEs.     

Table 4.1 – Assets and Liabilities of Consolidated VIEs

June 30, 2022	Legacy Sequoia		Sequoia		CAFL(1)		Freddie Mac SLST(1)		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Residential loans, held-for-investment	$	208,788	$	3,525,459	$	—	$	1,631,285	$	—	$	—	$	—	$	5,365,532
Business purpose loans, held-for-investment	—		—		3,588,428		—		—		—		—		3,588,428
Consolidated Agency multifamily loans	—		—		—		—		443,114		—		—		443,114
Other investments	—		—		—		—		—		305,379		146,215		451,594
Cash and cash equivalents	—		—		—		—		—		14,399		—		14,399
Restricted cash	143		10		8,688		—		—		26,236		4,120		39,197
Accrued interest receivable	215		11,317		14,955		5,378		1,304		403		—		33,572
Other assets	410		—		5,320		2,299		—		7,605		50		15,684
Total Assets	$	209,556	$	3,536,786	$	3,617,391	$	1,638,962	$	444,418	$	354,022	$	150,385	$	9,951,520
Short-term debt	$	—	$	—	$	—	$	—	$	—	$	231,846	$	—	$	231,846
Accrued interest payable	171		9,232		10,610		3,720		1,178		223		—		25,134
Accrued expenses and other liabilities	—		10		6,996		—		—		25,466		25,422		57,894
Asset-backed securities issued	207,647		3,288,682		3,207,867		1,358,459		411,380		—		110,111		8,584,146
Total Liabilities	$	207,818	$	3,297,924	$	3,225,473	$	1,362,179	$	412,558	$	257,535	$	135,533	$	8,899,020
Value of our investments in VIEs(1)	$	1,552	$	236,777	$	388,849	$	275,127	$	31,732	$	96,487	$	14,852	$	1,045,376
Number of VIEs	20		17		18		3		1		3		1		63

16

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 4. Principles of Consolidation - (continued)

December 31, 2021	Legacy Sequoia		Sequoia		CAFL(1)		Freddie Mac SLST(1)		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Residential loans, held-for-investment	$	230,455	$	3,628,465	$	—	$	1,888,230	$	—	$	—	$	—	$	5,747,150
Business purpose loans, held-for-investment	—		—		3,766,316		—		—		—		—		3,766,316
Consolidated Agency multifamily loans	—		—		—		—		473,514		—		—		473,514
Other investments	—		—		—		—		—		384,754		159,553		544,307
Cash and cash equivalents	—		—		—		—		—		6,481		—		6,481
Restricted cash	148		5		15,221		—		—		25,420		5,292		46,086
Accrued interest receivable	210		10,885		15,737		5,792		1,315		1,462		—		35,401
Other assets	61		—		32,510		2,028		—		7,177		50		41,826
Total Assets	$	230,874	$	3,639,355	$	3,829,784	$	1,896,050	$	474,829	$	425,294	$	164,895	$	10,661,081
Short-term debt	$	—	$	—	$	—	$	—	$	—	$	294,447	$	—	$	294,447
Accrued interest payable	99		8,452		11,030		4,055		1,190		192		—		25,018
Accrued expenses and other liabilities	—		5		1,171		—		—		28,115		17,034		46,325
Asset-backed securities issued	227,881		3,383,048		3,474,898		1,588,463		441,857		—		137,410		9,253,557
Total Liabilities	$	227,980	$	3,391,505	$	3,487,099	$	1,592,518	$	443,047	$	322,754	$	154,444	$	9,619,347
Value of our investments in VIEs(1)	$	2,634	$	245,417	$	339,419	$	301,795	$	31,657	$	102,540	$	10,451	$	1,033,913
Number of VIEs	20		16		16		3		1		3		1		60

(1)Value of our investments in VIEs, as presented in this table, represent the fair value of our economic interests in the VIEs only for consolidated VIEs we account for under the CFE election. CAFL includes SFR loan securitizations we account for under the CFE election and two bridge loan securitizations for which we did not make the CFE election. As of June 30, 2022 and December 31, 2021, the fair value of our interests in the CAFL SFR securitizations were $307 million and $302 million, respectively, and the remaining values were associated with our interests in the CAFL Bridge securitizations, for which the ABS issued is carried at amortized historical cost. Freddie Mac SLST includes securitizations we account for under the CFE election and also includes ABS issued in relation to a resecuritization of the securities we own in the consolidated Freddie Mac SLST VIEs, that we account for at amortized historical cost. As of June 30, 2022 and December 31, 2021, the fair value of our interests in the Freddie Mac SLST securitizations accounted for under the CFE election were $390 million and $445 million, respectively, with the difference from the tables above representing ABS issued and carried at amortized historical cost.

17

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 4. Principles of Consolidation - (continued)

The following table presents income (loss) from these VIEs for the three and six months ended June 30, 2022 and 2021.

Table 4.2 – Income (Loss) from Consolidated VIEs

	Three Months Ended June 30, 2022
	Legacy Sequoia		Sequoia		CAFL		Freddie Mac SLST		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Interest income	$	1,108	$	31,923	$	56,608	$	16,553	$	4,732	$	7,568	$	—	$	118,492
Interest expense	(967)		(28,329)		(41,923)		(13,372)		(4,351)		(1,842)		—		(90,784)
Net interest income	141		3,594		14,685		3,181		381		5,726		—		27,708
Non-interest income
Investment fair value changes, net	(336)		(5,886)		(22,109)		(35,940)		(190)		(4,505)		1,201		(67,765)
Other income	—		—		255		—		—		—		—		255
Total non-interest income, net	(336)		(5,886)		(21,854)		(35,940)		(190)		(4,505)		1,201		(67,510)
General and administrative expenses	—		—		—		—		—		(44)		—		(44)
Other expenses	—		—		—		—		—		(235)		—		(235)
Income (loss) from Consolidated VIEs	$	(195)	$	(2,292)	$	(7,169)	$	(32,759)	$	191	$	942	$	1,201	$	(40,081)

	Six Months Ended June 30, 2022
	Legacy Sequoia		Sequoia		CAFL		Freddie Mac SLST		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Interest income	$	2,120	$	64,021	$	133,942	$	33,753	$	9,485	$	15,487	$	—	$	258,808
Interest expense	(1,668)		(56,500)		(100,403)		(27,457)		(8,722)		(3,504)		—		(198,254)
Net interest income	452		7,521		33,539		6,296		763		11,983		—		60,554
Non-interest income
Investment fair value changes, net	(1,050)		(9,708)		(19,445)		(32,904)		74		(7,973)		4,612		(66,394)
Other income	—		—		345		—		—		—		—		345
Total non-interest income, net	(1,050)		(9,708)		(19,100)		(32,904)		74		(7,973)		4,612		(66,049)
General and administrative expenses	—		—		—		—		—		(75)		—		(75)
Other expenses	—		—		—		—		—		(786)		—		(786)
Income (loss) from Consolidated VIEs	$	(598)	$	(2,187)	$	14,439	$	(26,608)	$	837	$	3,149	$	4,612	$	(6,356)

18

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 4. Principles of Consolidation - (continued)

	Three Months Ended June 30, 2021
	Legacy Sequoia		Sequoia		CAFL		Freddie Mac SLST		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Interest income	$	1,169	$	14,492	$	54,849	$	19,506	$	4,860	$	4,041	$	—	$	98,917
Interest expense	(755)		(11,374)		(43,201)		(16,611)		(4,478)		(1,110)		—		(77,529)
Net interest income	414		3,118		11,648		2,895		382		2,931		—		21,388
Non-interest income
Investment fair value changes, net	(216)		4,906		3,697		36,316		1,855		(2,320)		—		44,238
Total non-interest income, net	(216)		4,906		3,697		36,316		1,855		(2,320)		—		44,238
General and administrative expenses	—		—		—		—		—		(52)		—		(52)
Other expenses	—		—		—		—		—		(112)		—		(112)
Income (loss) from Consolidated VIEs	$	198	$	8,024	$	15,345	$	39,211	$	2,237	$	447	$	—	$	65,462

	Six Months Ended June 30, 2021
	Legacy Sequoia		Sequoia		CAFL		Freddie Mac SLST		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Interest income	$	2,517	$	29,975	$	103,722	$	39,665	$	9,646	$	8,263	$	—	$	193,788
Interest expense	(1,630)		(23,480)		(81,054)		(33,982)		(8,834)		(2,396)		—		(151,376)
Net interest income	887		6,495		22,668		5,683		812		5,867		—		42,412
Non-interest income
Investment fair value changes, net	(915)		9,804		3,411		40,433		10,776		(3,566)		—		59,943
Total non-interest income, net	(915)		9,804		3,411		40,433		10,776		(3,566)		—		59,943
General and administrative expenses	—		—		—		—		—		(90)		—		(90)
Other expenses	—		—		—		—		—		(442)		—		(442)
Income (loss) from Consolidated VIEs	$	(28)	$	16,299	$	26,079	$	46,116	$	11,588	$	1,769	$	—	$	101,823

19

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 4. Principles of Consolidation - (continued)

We consolidate the assets and liabilities of certain Sequoia, CAFL and HEI securitization entities, as we did not meet the GAAP sale criteria at the time we transferred financial assets to these entities. Our involvement in consolidated Sequoia, CAFL and HEI securitization entities continues in the following ways: (i) we continue to hold subordinate investments in each entity, and for certain entities, more senior investments; (ii) we maintain certain discretionary rights associated with our sponsorship of, or our subordinate investments in, each entity, including rights to direct loss mitigation activities; and (iii) we continue to hold a right to call the assets of certain entities (once they have been paid down below a specified threshold) at a price equal to, or in excess of, the current outstanding principal amount of the entity’s asset-backed securities issued. These factors have resulted in our continuing to consolidate the assets and liabilities of these Sequoia, CAFL and HEI securitization entities in accordance with GAAP.

We consolidate the assets and liabilities of certain Freddie Mac K-Series and SLST securitization trusts resulting from our investment in subordinate securities issued by these trusts, and in the case of certain CAFL securitizations, resulting from securities acquired through our acquisition of CoreVest. Additionally, we consolidate the assets and liabilities of Servicing Investment entities from our investment in servicer advance investments and excess MSRs. In each case, we maintain certain discretionary rights associated with the ownership of these investments that we determined reflected a controlling financial interest, as we have both the power to direct the activities that most significantly impact the economic performance of the VIEs and the right to receive benefits of and the obligation to absorb losses from the VIEs that could potentially be significant to the VIEs.

Analysis of Unconsolidated VIEs with Continuing Involvement

Since 2012, we have transferred residential loans to 46 Sequoia securitization entities sponsored by us that are still outstanding as of June 30, 2022, and accounted for these transfers as sales for financial reporting purposes, in accordance with ASC 860. We also 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 these transfers to securitization entities, for 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 senior and subordinate securities in these securitizations 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 we retain a third-party sub-servicer to perform) and the receipt of interest income associated with the securities we retained.

During the three months ended June 30, 2022, we did not call any of our unconsolidated Sequoia entities. During the six months ended June 30, 2022, we called three of our unconsolidated Sequoia entities, and purchased $102 million (unpaid principal balance) of loans from the securitization trusts. In association with these calls, we realized a $0.3 million gain on the securities we owned from these called securitizations, which was recognized through Realized gains, net on our consolidated statements of income (loss). At June 30, 2022, we held $222 million of loans for sale at fair value that were acquired following the calls.

20

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 4. Principles of Consolidation - (continued)

The following table presents information related to securitization transactions that occurred during the three and six months ended June 30, 2022 and 2021.

Table 4.3 – Securitization Activity Related to Unconsolidated VIEs Sponsored by Redwood

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Principal balance of loans transferred	$	—	$	355,924	$	—	$	1,231,803
Trading securities retained, at fair value	—		1,225		—		7,774
AFS securities retained, at fair value	—		522		—		1,600

The following table summarizes the cash flows during the three and six months ended June 30, 2022 and 2021 between us and the unconsolidated VIEs sponsored by us and accounted for as sales since 2012.

Table 4.4 – Cash Flows Related to Unconsolidated VIEs Sponsored by Redwood

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Proceeds from new transfers	$	—	$	361,673	$	—	$	1,266,063
MSR fees received	764		1,336		1,628		2,943
Funding of compensating interest, net	(14)		(70)		(30)		(170)
Cash flows received on retained securities	3,158		16,764		17,284		25,393

The following table presents the key weighted-average assumptions used to value securities retained at the date of securitization for securitizations completed during the three and six months ended June 30, 2022 and 2021.

Table 4.5 – Assumptions Related to Assets Retained from Unconsolidated VIEs Sponsored by Redwood

	Three Months Ended June 30, 2022		Three Months Ended June 30, 2021
At Date of Securitization	Senior IO Securities	Subordinate Securities	Senior IO Securities	Subordinate Securities
Prepayment rates	N/A	N/A	8 %	8 %
Discount rates	N/A	N/A	15 %	7 %
Credit loss assumptions	N/A	N/A	0.25 %	0.25 %

	Six Months Ended June 30, 2022		Six Months Ended June 30, 2021
At Date of Securitization	Senior IO Securities	Subordinate Securities	Senior IO Securities		Subordinate Securities
Prepayment rates	N/A	N/A	11	%	11 %
Discount rates	N/A	N/A	15 %		6 %
Credit loss assumptions	N/A	N/A	0.23 %		0.23 %

21

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 4. Principles of Consolidation - (continued)

The following table presents additional information at June 30, 2022 and December 31, 2021, related to unconsolidated VIEs sponsored by Redwood and accounted for as sales since 2012.

Table 4.6 – Unconsolidated VIEs Sponsored by Redwood

(In Thousands)	June 30, 2022		December 31, 2021
On-balance sheet assets, at fair value:
Interest-only, senior and subordinate securities, classified as trading	$	27,293	$	18,214
Subordinate securities, classified as AFS	85,269		127,542
Mortgage servicing rights	11,092		6,450
Maximum loss exposure (1)	$	123,654	$	152,206
Assets transferred:
Principal balance of loans outstanding	$	4,281,806	$	4,959,234
Principal balance of loans 30+ days delinquent	27,683		30,594

(1)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.

The following table presents key economic assumptions for assets retained from unconsolidated VIEs and the sensitivity of their fair values to immediate adverse changes in those assumptions at June 30, 2022 and December 31, 2021.

Table 4.7 – Key Assumptions and Sensitivity Analysis for Assets Retained from Unconsolidated VIEs Sponsored by Redwood

June 30, 2022	MSRs			Senior Securities (1)			Subordinate Securities
(Dollars in Thousands)
Fair value at June 30, 2022	$	11,092		$	27,293		$	85,269
Expected life (in years) (2)	6			6			15
Prepayment speed assumption (annual CPR) (2)	10		%	11		%	10		%
Decrease in fair value from:
10% adverse change	$	1,402		$	1,002		$	568
25% adverse change	3,405			2,406			1,323
Discount rate assumption (2)	11		%	12		%	8		%
Decrease in fair value from:
100 basis point increase	$	1,649		$	910		$	8,522
200 basis point increase	3,180			1,759			15,860
Credit loss assumption (2)	N/A			0.03		%	0.03		%
Decrease in fair value from:
10% higher losses	N/A			N/A			$	42
25% higher losses	N/A			N/A			103

22

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 4. Principles of Consolidation - (continued)

December 31, 2021	MSRs			Senior Securities (1)			Subordinate Securities
(Dollars in Thousands)
Fair value at December 31, 2021	$	6,450		$	18,214		$	127,542
Expected life (in years) (2)	3			4			5
Prepayment speed assumption (annual CPR) (2)	29		%	23		%	32 %
Decrease in fair value from:
10% adverse change	$	447		$	1,130		$	531
25% adverse change	1,020			2,596			1,440
Discount rate assumption (2)	12 %			16		%	5		%
Decrease in fair value from:
100 basis point increase	$	152		$	426		$	4,801
200 basis point increase	297			829			9,139
Credit loss assumption (2)	N/A			0.35		%	0.35		%
Decrease in fair value from:
10% higher losses	N/A			$	—		$	1,528
25% higher losses	N/A			—			3,819

(1)Senior securities included $27 million and $18 million of interest-only securities at June 30, 2022 and December 31, 2021, respectively.

(2)Expected life, prepayment speed assumption, discount rate assumption, and credit loss assumption presented in the tables above represent weighted averages.

Analysis of Unconsolidated Third-Party VIEs

Third-party VIEs are securitization entities in which we maintain an economic interest, but do not sponsor. Our economic interest may include several securities and other investments from the same third-party VIE, and in those cases, the analysis is performed in consideration of all of our interests. The following table presents a summary of our interests in third-party VIEs at June 30, 2022 and December 31, 2021, grouped by asset type.

Table 4.8 – Third-Party Sponsored VIE Summary

(In Thousands)	June 30, 2022		December 31, 2021
Mortgage-Backed Securities
Senior	$	4,205	$	3,572
Subordinate	167,512		228,083
Total Mortgage-Backed Securities	171,717		231,655
Excess MSR	8,633		10,400
Total Investments in Third-Party Sponsored VIEs	$	180,350	$	242,055

We determined that we are not the primary beneficiary of these third-party VIEs, as we do not have the required power to direct the activities that most significantly impact the economic performance of these entities. Specifically, we do not service or manage these entities or otherwise solely hold decision making powers that are significant. As a result of this assessment, we do not consolidate any of the underlying assets and liabilities of these third-party VIEs – we only account for our specific interests in them.

Our assessments of whether we are required to consolidate a VIE may change in subsequent reporting periods based upon changing facts and circumstances pertaining to each VIE. Any related accounting changes could result in a material impact to our financial statements.

23

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 5. Fair Value of Financial Instruments

For financial reporting purposes, we follow a fair value hierarchy established under GAAP that is used to determine the fair value of financial instruments. This hierarchy prioritizes relevant market inputs in order to determine an “exit price” at the measurement date, or the price at which an asset could be sold or a liability could be transferred in an orderly process that is not a forced liquidation or distressed sale. Level 1 inputs are observable inputs that reflect quoted prices for identical assets or liabilities in active markets. Level 2 inputs are observable inputs other than quoted prices for an asset or liability that are obtained through corroboration with observable market data. Level 3 inputs are unobservable inputs (e.g., our own data or assumptions) that are used when there is little, if any, relevant market activity for the asset or liability required to be measured at fair value.

In certain cases, inputs used to measure fair value fall into different levels of the fair value hierarchy. In such cases, the level at which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. Our assessment of the significance of a particular input requires judgment and considers factors specific to the asset or liability being measured.

24

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 5. Fair Value of Financial Instruments - (continued)

The following table presents the carrying values and estimated fair values of assets and liabilities that are required to be recorded or disclosed at fair value at June 30, 2022 and December 31, 2021.

Table 5.1 – Carrying Values and Fair Values of Assets and Liabilities

	June 30, 2022				December 31, 2021
	Carrying Value		Fair Value		Carrying Value		Fair Value
(In Thousands)
Assets
Residential loans, held-for-sale, at fair value	$	1,213,067	$	1,213,067	$	1,845,248	$	1,845,248
Residential loans, held-for-investment, at fair value	5,365,531		5,365,531		5,747,150		5,747,150
Business purpose loans, held-for-sale, at fair value	505,171		505,171		358,309		358,309
Business purpose loans, held-for-investment, at fair value	4,697,766		4,697,766		4,432,680		4,432,680
Consolidated Agency multifamily loans, at fair value	443,114		443,114		473,514		473,514
Real estate securities, at fair value	284,278		284,278		377,411		377,411
Servicer advance investments (1)	273,210		273,210		350,923		350,923
MSRs (1)	23,560		23,560		12,438		12,438
Excess MSRs (1)	40,803		40,803		44,231		44,231
HEIs (1)	276,366		276,366		192,740		192,740
Other investments (1)	10,869		10,869		12,663		12,663
Cash and cash equivalents	371,296		371,296		450,485		450,485
Restricted cash	72,558		72,558		80,999		80,999
Derivative assets	36,587		36,587		26,467		26,467
REO (2)	7,813		9,170		36,126		39,272
Margin receivable (2)	11,420		11,420		7,269		7,269
Liabilities
Short-term debt	$	1,869,822	$	1,869,822	$	2,177,362	$	2,177,362
Margin payable (3)	15,023		15,023		24,368		24,368
Guarantee obligations (3)	6,768		6,241		7,459		7,133
HEI securitization non-controlling interest	25,422		25,422		17,035		17,035
Derivative liabilities	6,591		6,591		3,317		3,317
ABS issued, net
At fair value	7,993,953		7,993,953		8,843,147		8,843,147
At amortized cost	590,193		569,731		410,410		410,471
Other long-term debt, net (4)	1,104,050		1,101,622		988,483		989,570
Convertible notes, net (4)	723,267		684,922		513,629		537,300
Trust preferred securities and subordinated notes, net (4)	138,744		83,700		138,721		97,650

(1)These investments are included in Other investments on our consolidated balance sheets.

(2)These assets are included in Other assets on our consolidated balance sheets.

(3)These liabilities are included in Accrued expenses and other liabilities on our consolidated balance sheets.

(4)These liabilities are included in Long-Term debt, net of our consolidated balance sheets.

During the three and six months ended June 30, 2022, we elected the fair value option for zero and $5 million of securities, respectively, $1.15 billion and $3.26 billion of residential loans (principal balance), respectively, and $923 million and $1.84 billion of business purpose loans (principal balance), respectively. Additionally, during the three and six months ended June 30, 2022, we elected the fair value option for $57 million and $97 million of HEIs, respectively, and $3 million and $8 million of Other Investments, respectively. We anticipate electing the fair value option for all future purchases of residential and business purpose loans that we intend to sell to third parties or transfer to securitizations, as well as for certain securities we purchase, including IO securities, fixed-rate securities rated investment grade or higher and HEIs.

25

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 5. Fair Value of Financial Instruments - (continued)

The following table presents the assets and liabilities that are reported at fair value on our consolidated balance sheets on a recurring basis at June 30, 2022 and December 31, 2021, as well as the fair value hierarchy of the valuation inputs used to measure fair value.

Table 5.2 – Assets and Liabilities Measured at Fair Value on a Recurring Basis

June 30, 2022	Carrying Value		Fair Value Measurements Using
(In Thousands)			Level 1		Level 2		Level 3
Assets
Residential loans	$	6,578,566	$	—	$	—	$	6,578,566
Business purpose loans	5,202,938		—		—		5,202,938
Consolidated Agency multifamily loans	443,114		—		—		443,114
Real estate securities	284,278		—		—		284,278
Servicer advance investments	273,210		—		—		273,210
MSRs	23,560		—		—		23,560
Excess MSRs	40,803		—		—		40,803
HEIs	276,366		—		—		276,366
Other investments	10,869		—		—		10,869
Derivative assets	36,587		4,979		29,601		2,007
Liabilities
HEI securitization non-controlling interest	$	25,422	$	—	$	—	$	25,422
Derivative liabilities	6,591		3,619		2,445		527
ABS issued	7,993,953		—		—		7,993,953

December 31, 2021	Carrying Value		Fair Value Measurements Using
(In Thousands)			Level 1		Level 2		Level 3
Assets
Residential loans	$	7,592,398	$	—	$	—	$	7,592,398
Business purpose loans	4,790,989		—		—		4,790,989
Consolidated Agency multifamily loans	473,514		—		—		473,514
Real estate securities	377,411		—		—		377,411
Servicer advance investments	350,923		—		—		350,923
MSRs	12,438		—		—		12,438
Excess MSRs	44,231		—		—		44,231
HEIs	192,740		—		—		192,740
Other investments	17,574		—		—		17,574
Derivative assets	26,467		2,906		18,928		4,633
Liabilities
HEI securitization non-controlling interest	$	17,035	$	—	$	—	$	17,035
Derivative liabilities	3,317		1,563		1,251		503
ABS issued	8,843,147		—		—		8,843,147

26

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 5. Fair Value of Financial Instruments - (continued)

The following table presents additional information about Level 3 assets and liabilities measured at fair value on a recurring basis for the six months ended June 30, 2022.

Table 5.3 – Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis

	Assets
	Residential Loans		Business Purpose Loans		Multifamily Loans		Trading Securities		AFS Securities		Servicer Advance Investments		Excess MSRs		HEIs		MSRs and Other Investments
(In Thousands)
Beginning balance -    December 31, 2021	$	7,592,398	$	4,790,989	$	473,514	$	170,619	$	206,792	$	350,923	$	44,231	$	192,740	$	25,101
Acquisitions	3,247,960		122,065		—		5,006		10,000		—		—		97,389		8,293
Originations	—		1,721,032		—		—		—		—		—		—		—
Sales	(3,050,759)		(331,750)		—		(23,329)		—		—		—		—		(2,231)
Principal paydowns	(551,470)		(719,690)		(3,971)		(1,018)		(25,015)		(71,401)		—		(25,826)		(30)
Gains (losses) in net income (loss), net	(657,601)		(378,745)		(26,429)		(17,498)		11,730		(6,312)		(3,428)		12,063		6,875
Unrealized losses in OCI, net	—		—		—		—		(53,009)		—		—		—		—
Other settlements, net (1)	(1,962)		(963)		—		—		—		—		—		—		(3,579)
Ending balance -   June 30, 2022	$	6,578,566	$	5,202,938	$	443,114	$	133,780	$	150,498	$	273,210	$	40,803	$	276,366	$	34,429

			Liabilities
	Derivatives (2)			HEI Securitization Non-Controlling Interest		ABS Issued
(In Thousands)
Beginning balance - December 31, 2021	$	4,130		$	17,035	$	8,843,147
Acquisitions	—			—		952,711
Principal paydowns	—			—		(925,650)
Gains (losses) in net income (loss), net	(51,265)			6,218		(876,255)
Other settlements, net (1)	48,615			—		—
Ending balance - June 30, 2022	$	1,480		$	23,253	$	7,993,953

(1)     Other settlements, net for residential and business purpose loans represents the transfer of loans to REO, and for derivatives, the transfer of the fair value of loan purchase and interest rate lock commitments at the time loans are acquired to the basis of residential and single-family rental business purpose loans, and for MSRs and other investments, primarily represents an investment that was exchanged into a new instrument that is no longer measured at fair value on a recurring basis.

(2)     For the purpose of this presentation, derivative assets and liabilities, which consist of loan purchase commitments, and interest rate lock commitments, are presented on a net basis.

27

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 5. Fair Value of Financial Instruments - (continued)

The following table presents the portion of fair value gains or losses included in our consolidated statements of income that were attributable to Level 3 assets and liabilities recorded at fair value on a recurring basis and held at June 30, 2022 and 2021. Gains or losses incurred on assets or liabilities sold, matured, called, or fully written down during the three and six months ended June 30, 2022 and 2021 are not included in this presentation.

Table 5.4 – Portion of Net Fair Value Gains (Losses) Attributable to Level 3 Assets and Liabilities Still Held at June 30, 2022 and 2021 Included in Net Income (Loss)

	Included in Net Income (Loss)
	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Assets
Residential loans at Redwood	$	(15,995)	$	14,130	$	(31,858)	$	10,481
Business purpose loans	(28,385)		28,404		(36,566)		40,003
Net investments in consolidated Sequoia entities (1)	(6,222)		4,693		(11,203)		8,893
Net investments in consolidated Freddie Mac SLST entities (1)	(36,014)		36,137		(33,074)		40,225
Net investments in consolidated Freddie Mac K-Series entities (1)	(190)		1,855		74		10,776
Net investments in consolidated CAFL SFR entities (1)	(21,828)		2,908		(17,780)		2,556
Net investment in consolidated HEI securitization entity (1)	3,371		—		13,000		—
Trading securities	(17,501)		1,772		(19,884)		2,262
Servicer advance investments	(3,231)		(940)		(6,313)		(1,100)
MSRs	4,248		(330)		7,644		273
Excess MSRs	(2,220)		(2,477)		(3,428)		(4,430)
HEIs at Redwood	1,549		2,080		2,701		7,395
Loan purchase and interest rate lock commitments	2,056		14,550		2,007		14,171
Liabilities
HEI securitization non-controlling interest	$	(2,170)	$	—	$	(8,388)	$	—
Loan purchase commitments	(488)		(696)		(527)		(724)

(1)    Represents the portion of net fair value gains or losses included in our consolidated statements of income (loss) related to securitized loans, securitized HEIs, and the associated ABS issued at our consolidated securitization entities held at June 30, 2022 and 2021, which netted together represent the change in value of our investments at the consolidated VIEs accounted for under CFE election, excluding REO.

The following table presents information on assets recorded at fair value on a non-recurring basis at June 30, 2022. This table does not include the carrying value and gains or losses associated with the asset types below that were not recorded at fair value on our consolidated balance sheets at June 30, 2022.

Table 5.5 – Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis at June 30, 2022

									Gain (Loss) for
June 30, 2022	Carrying Value		Fair Value Measurements Using						Three Months Ended		Six Months Ended
(In Thousands)			Level 1		Level 2		Level 3		June 30, 2022		June 30, 2022
Assets
REO	$	1,380	$	—	$	—	$	1,380	$	—	$	—
Strategic investments	17,240		—		—		17,240		9,990		9,990

28

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 5. Fair Value of Financial Instruments - (continued)

The following table presents the net market valuation gains and losses recorded in each line item of our consolidated statements of income for the three and six months ended June 30, 2022 and 2021.

Table 5.6 – Market Valuation Gains and Losses, Net

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Mortgage Banking Activities, Net
Residential loans held-for-sale, at fair value	$	(24,517)	$	24,988	$	(51,716)	$	48,100
Residential loan purchase commitments	(8,897)		51,919		(50,520)		(466)
Single-family rental loans held-for-sale, at fair value	(40,034)		25,222		(64,502)		35,470
Single-family rental loan interest rate lock commitments	40		744		(685)		744
Bridge loans	116		2,225		2,251		3,269
Trading securities (1)	1,315		(1,095)		4,101		(374)
Risk management derivatives, net	25,387		(58,244)		115,774		34,578
Total mortgage banking activities, net (2)	$	(46,590)	$	45,759	$	(45,297)	$	121,321
Investment Fair Value Changes, Net
Residential loans held-for-sale, at fair value (called Sequoia loans)	$	(8,010)	$	1,290	$	(12,262)	$	1,607
Bridge loans held-for-investment	(9,559)		(62)		(11,702)		3,242
Trading securities	(17,358)		2,893		(21,600)		23,521
Servicer advance investments	(3,231)		(940)		(6,312)		(1,100)
Excess MSRs	(2,220)		(2,477)		(3,428)		(4,430)
Net investments in Legacy Sequoia entities (3)	(336)		(216)		(1,050)		(915)
Net investments in Sequoia entities (3)	(5,886)		4,906		(9,708)		9,804
Net investments in Freddie Mac SLST entities (3)	(35,940)		36,316		(32,904)		40,433
Net investment in Freddie Mac K-Series entity (3)	(190)		1,855		74		10,776
Net investments in CAFL SFR entities (3)	(21,828)		3,697		(17,780)		3,411
Net investment in HEI securitization entity (3)	1,201		—		4,612		—
HEIs at Redwood	1,596		2,080		2,788		7,395
Other investments	10,460		125		10,583		435
Risk management derivatives, net	4,395		—		6,368		—
Credit (losses) recoveries on AFS securities	(1,066)		13		(1,771)		388
Total investment fair value changes, net	$	(87,972)	$	49,480	$	(94,092)	$	94,567
Other Income
MSRs	$	3,827	$	(1,381)	$	6,795	$	(2,247)
Total other income (4)	$	3,827	$	(1,381)	$	6,795	$	(2,247)
Total Market Valuation Gains (Losses), Net	$	(130,735)	$	93,858	$	(132,594)	$	213,641

(1)Represents fair value changes on trading securities that are being used along with risk management derivatives to manage the market risks associated with our residential mortgage banking operations.

(2)Mortgage banking activities, net presented above does not include fee income from loan originations or acquisitions, provisions for repurchases, and other expenses that are components of Mortgage banking activities, net presented on our consolidated statements of income, as these amounts do not represent market valuation changes.

(3)Includes changes in fair value of the residential loans held-for-investment, securitized HEIs, REO and the ABS issued at the entities, which netted together represent the change in value of our investments at the consolidated VIEs accounted for under the CFE election.

(4)Other income presented above does not include net MSR fee income or provisions for repurchases for MSRs, as these amounts do not represent market valuation adjustments.

29

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 5. Fair Value of Financial Instruments - (continued)

At June 30, 2022, our valuation policy and processes had not changed from those described in our Annual Report on Form 10-K for the year ended December 31, 2021.

The following table provides quantitative information about the significant unobservable inputs used in the valuation of our Level 3 assets and liabilities measured at fair value.

Table 5.7 – Fair Value Methodology for Level 3 Financial Instruments

June 30, 2022	Fair Value			Input Values
(Dollars in Thousands, except Input Values)			Unobservable Input	Range						Weighted Average(1)
Assets
Residential loans, at fair value:
Jumbo fixed-rate loans	$	714,777	Whole loan spread to swap rate	217		-	240		bps	221		bps
			Called loan dollar price	$	96	-	$	96		$	96
Jumbo loans committed to sell	498,258		Whole loan committed sales price	$	97	-	$	99		$	98
Loans held by Legacy Sequoia (2)	208,788		Liability price				N/A			N/A
Loans held by Sequoia (2)	3,525,459		Liability price				N/A			N/A
Loans held by Freddie Mac SLST (2)	1,631,285		Liability price				N/A			N/A
Business purpose loans:
Single-family rental loans	505,171		Senior credit spread	215		-	235		bps	220		bps
			Subordinate credit spread	260		-	1,099		bps	504		bps
			Senior credit support	39		-	40		%	39		%
			IO discount rate	8		-	13		%	9		%
			Prepayment rate (annual CPR)	3		-	25		%	6		%
			Non-securitizable loan dollar price	$	80	-	$	100		$	93
Single-family rental loans held by CAFL (2)	3,046,277		Liability price				N/A			N/A
Bridge loans	1,651,489		Whole loan discount rate	5		-	15		%	8		%
			Senior credit spread	325		-	325		bps	325		bps
			Subordinate credit discount rate	15		-	15		%	15		%
			Senior credit support	15		-	15		%	15		%
Multifamily loans held by Freddie Mac K-Series (2)	443,114		Liability price				N/A			N/A
Trading and AFS securities	284,278		Discount rate	4		-	18		%	9		%
			Prepayment rate (annual CPR)	6		-	65		%	13		%
			Default rate	—		-	11		%	1		%
			Loss severity	—		-	50		%	25		%
			CRT dollar price	$	74	-	$	88		$	83
Servicer advance investments	273,210		Discount rate	2		-	4		%	3		%
			Prepayment rate (annual CPR)	16		-	30		%	16		%
			Expected remaining life (3)	5		-	5		yrs	5		yrs
			Mortgage servicing income	—		-	18		bps	9		bps
MSRs	23,560		Discount rate	11		-	115		%	11		%
			Prepayment rate (annual CPR)	5		-	31		%	9		%
			Per loan annual cost to service	$	93	-	$	93		$	93

30

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 5. Fair Value of Financial Instruments - (continued)

Table 5.7 – Fair Value Methodology for Level 3 Financial Instruments (continued)

June 30, 2022	Fair Value		Input Values
(Dollars in Thousands, except Input Values)		Unobservable Input	Range						Weighted Average (1)
Assets (continued)
Excess MSRs	40,803	Discount rate	13		-	19		%	18		%
		Prepayment rate (annual CPR)	16		-	35		%	20		%
		Excess mortgage servicing income	8		-	18		bps	11		bps
HEI	130,151	Discount rate	10		-	10		%	10		%
		Prepayment rate (annual CPR)	1		-	24		%	17		%
		Home price appreciation	3		-	4		%	3		%
HEIs held by HEI securitization entity	146,215	Liability price	N/A			N/A			N/A
REO	1,380	Loss severity	12		-	25		%	20		%
Liabilities
Residential loan purchase commitments, net	1,500	Whole loan spread to swap rate	217		-	240		bps	224		bps
		Pull-through rate	18		-	100		%	68		%
		Committed sales price	$	97	-	$	102		$	97
ABS issued (2):
At consolidated Sequoia entities	3,496,329	Discount rate	4		-	18		%	6		%
		Prepayment rate (annual CPR)	5		-	27		%	14		%
		Default rate	—		-	22		%	1		%
		Loss severity	25		-	50		%	32		%
At consolidated CAFL SFR entities (4)	2,732,964	Discount rate	2		-	15		%	5		%
		Prepayment rate (annual CPR)	—		-	3		%	3		%
		Default rate	5		-	28		%	7		%
		Loss severity	30		-	30		%	30		%
At consolidated Freddie Mac SLST entities	1,243,167	Discount rate	4		-	7		%	5		%
		Prepayment rate (annual CPR)	6		-	8		%	6		%
		Default rate	7		-	9		%	8		%
		Loss severity	35		-	35		%	35		%
At consolidated Freddie Mac K-Series entities (4)	411,380	Discount rate	3		-	9		%	4		%
At consolidated HEI securitization entity (4)	110,111	Discount rate	8		-	13		%	9		%
		Prepayment rate (annual CPR)	20		-	20		%	20		%
		Default rate	12		-	12		%	12		%
		Loss severity	30		-	30		%	30		%
		Home price appreciation	3		-	4		%	3		%

31

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 5. Fair Value of Financial Instruments - (continued)

Footnotes to Table 5.7

(1)The weighted average input values for all loan types are based on the unpaid principal balance. The weighted average input values for all other assets and liabilities are based on relative fair value.

(2)The fair value of the loans and HEIs held by consolidated entities was based on the fair value of the ABS issued by these entities and the securities and other investments we own in those entities, which we determined were more readily observable in accordance with accounting guidance for collateralized financing entities. At June 30, 2022, the fair value of securities we owned at the consolidated Sequoia, CAFL SFR, Freddie Mac SLST, Freddie Mac K-Series, and HEI securitization entities was $238 million, $307 million, $390 million, $32 million, and $15 million, respectively.

(3)Represents the estimated average duration of outstanding servicer advances at a given point in time (not taking into account new advances made with respect to the pool).

(4)As a market convention, certain securities are priced to a no-loss yield and therefore do not include default and loss severity assumptions.

Determination of Fair Value

We generally use both market comparable information and discounted cash flow modeling techniques to determine the fair value of our Level 3 assets and liabilities. Use of these techniques requires determination of relevant inputs and assumptions, some of which represent significant unobservable inputs as indicated in the preceding table. Accordingly, a significant increase or decrease in any of these inputs - such as anticipated credit losses, prepayment rates, interest rates, or other valuation assumptions - in isolation would likely result in a significantly lower or higher fair value measurement.

Included in Note 5 to the Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2021 is a more detailed description of our financial instruments measured at fair value and their significant inputs, as well as the general classification of such instruments pursuant to the Level 1, Level 2, and Level 3 valuation hierarchy.

Certain of our Other investments (inclusive of strategic investments in early-stage start-up companies) are Level 3 financial instruments that we account for under the fair value option. These investments generally take the form of equity or debt with conversion features and do not have readily determinable fair values. We initially record these investments at cost and adjust their fair value based on observable price changes, such as follow-on capital raises or secondary sales, and will also evaluate impacts to valuation from changing market conditions and underlying business performance. As of June 30, 2022, the carrying value of these investments was $9 million, which was based on the investments' original cost.

Note 6. Residential Loans

We acquire residential loans from third-party originators and may sell or securitize these loans or hold them for investment. The following table summarizes the classifications and carrying values of the residential loans owned at Redwood and at consolidated Sequoia and Freddie Mac SLST entities at June 30, 2022 and December 31, 2021.

Table 6.1 – Classifications and Carrying Values of Residential Loans

June 30, 2022			Legacy				Freddie Mac
(In Thousands)	Redwood		Sequoia		Sequoia		SLST		Total
Held-for-sale at fair value	$	1,213,067	$	—	$	—	$	—	$	1,213,067
Held-for-investment at fair value	—		208,788		3,525,459		1,631,285		5,365,532
Total Residential Loans	$	1,213,067	$	208,788	$	3,525,459	$	1,631,285	$	6,578,599

December 31, 2021			Legacy				Freddie Mac
(In Thousands)	Redwood		Sequoia		Sequoia		SLST		Total
Held-for-sale at fair value	$	1,845,282	$	—	$	—	$	—	$	1,845,282
Held-for-investment at fair value	—		230,455		3,628,465		1,888,230		5,747,150
Total Residential Loans	$	1,845,282	$	230,455	$	3,628,465	$	1,888,230	$	7,592,432

32

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 6. Residential Loans - (continued)

At June 30, 2022, we owned mortgage servicing rights associated with $1.16 billion (principal balance) of residential loans owned at Redwood that were purchased from third-party originators. The value of these MSRs is included in the carrying value of the associated loans on our consolidated balance sheets. We contract with licensed sub-servicers that perform servicing functions for these loans.

Residential Loans Held-for-Sale

The following table summarizes the characteristics of residential loans held-for-sale at June 30, 2022 and December 31, 2021.

Table 6.2 – Characteristics of Residential Loans Held-for-Sale

(Dollars in Thousands)	June 30, 2022			December 31, 2021
Number of loans	1,469			2,196
Unpaid principal balance	$	1,238,469		$	1,813,865
Fair value of loans	$	1,213,067		$	1,845,282
Market value of loans pledged as collateral under short-term borrowing agreements	$	1,207,185		$	1,838,797
Weighted average coupon	4.47		%	3.27		%
Delinquency information
Number of loans with 90+ day delinquencies	1			3
Unpaid principal balance of loans with 90+ day delinquencies	$	211		$	2,923
Fair value of loans with 90+ day delinquencies	$	170		$	2,304
Number of loans in foreclosure	—			—

The following table provides the activity of residential loans held-for-sale during the three and six months ended June 30, 2022 and 2021.

Table 6.3 – Activity of Residential Loans Held-for-Sale

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Principal balance of loans acquired (1)	$	1,145,450	$	3,484,633	$	3,260,641	$	6,580,681
Principal balance of loans sold	1,238,327		3,324,919		3,065,691		5,600,751
Principal balance of loans transferred to HFI	—		—		687,192		—
Net market valuation gains (losses) recorded (2)	(32,527)		26,278		(63,978)		49,707

(1)For the three and six months ended June 30, 2022, includes zero and $102 million of loans acquired through calls of zero and three seasoned Sequoia securitizations, respectively.

(2)Net market valuation gains (losses) on residential loans held-for-sale are recorded primarily through Mortgage banking activities, net on our consolidated statements of income (loss).

33

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 6. Residential Loans - (continued)

Residential Loans Held-for-Investment at Fair Value

We invest in residential subordinate securities issued by Legacy Sequoia, Sequoia and Freddie Mac SLST securitization trusts and consolidate the underlying residential loans owned by these entities for financial reporting purposes in accordance with GAAP. The following tables summarize the characteristics of the residential loans owned at consolidated Sequoia and Freddie Mac SLST entities at June 30, 2022 and December 31, 2021.

Table 6.4 – Characteristics of Residential Loans Held-for-Investment

June 30, 2022	Legacy						Freddie Mac
(Dollars in Thousands)	Sequoia			Sequoia			SLST
Number of loans	1,447			4,738			11,285
Unpaid principal balance	$	234,213		$	3,988,148		$	1,796,594
Fair value of loans	$	208,788		$	3,525,459		$	1,631,285
Weighted average coupon	2.27		%	3.26		%	4.50		%
Delinquency information
Number of loans with 90+ day delinquencies (1)	29			14			1,370
Unpaid principal balance of loans with 90+ day delinquencies	$	5,107		$	12,008		$	236,941
Fair value of loans with 90+ day delinquencies (2)	N/A			N/A			N/A
Number of loans in foreclosure	11			5			257
Unpaid principal balance of loans in foreclosure	$	1,483		$	5,004		$	45,536

December 31, 2021	Legacy						Freddie Mac
(Dollars in Thousands)	Sequoia			Sequoia			SLST
Number of loans	1,583			4,300			11,986
Unpaid principal balance	$	264,057		$	3,605,469		$	1,932,241
Fair value of loans	$	230,455		$	3,628,465		$	1,888,230
Weighted average coupon	1.87		%	3.39		%	4.51		%
Delinquency information
Number of loans with 90+ day delinquencies (1)	32			18			1,208
Unpaid principal balance of loans with 90+ day delinquencies	$	7,482		$	15,124		$	212,961
Fair value of loans with 90+ day delinquencies (2)	N/A			N/A			N/A
Number of loans in foreclosure	10			2			241
Unpaid principal balance of loans in foreclosure	$	2,188		$	1,624		$	43,637

(1)For loans held at consolidated entities, the number of loans greater than 90 days delinquent includes loans in foreclosure.

(2)The fair value of the loans held by consolidated entities was based on the fair value of the ABS issued by these entities, including securities we own, which we determined were more readily observable, in accordance with accounting guidance for collateralized financing entities.

34

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 6. Residential Loans - (continued)

The following table provides the activity of residential loans held-for-investment at consolidated entities during the three and six months ended June 30, 2022 and 2021.

Table 6.5 – Activity of Residential Loans Held-for-Investment at Consolidated Entities

	Three Months Ended June 30, 2022				Three Months Ended June 30, 2021
	Legacy			Freddie Mac	Legacy			Freddie Mac
(In Thousands)	Sequoia	Sequoia		SLST	Sequoia	Sequoia		SLST
Fair value of loans transferred from HFS to HFI (1)	N/A	$	—	N/A	N/A	$	1,205,494	N/A
Net market valuation gains (losses) recorded (2)	779	(211,486)		(76,735)	4,863	(12,835)		22,579

	Six Months Ended June 30, 2022				Six Months Ended June 30, 2021
	Legacy			Freddie Mac	Legacy			Freddie Mac
(In Thousands)	Sequoia	Sequoia		SLST	Sequoia	Sequoia		SLST
Fair value of loans transferred from HFS to HFI (1)	N/A	$	684,491	N/A	N/A	$	1,205,494	N/A
Net market valuation gains (losses) recorded (2)	7,104	(482,217)		(120,503)	12,476	(15,413)		19,013

(1)Represents the transfer of loans from held-for-sale to held-for-investment associated with Sequoia securitizations.

(2)For loans held at our consolidated Legacy Sequoia, Sequoia, and Freddie Mac SLST entities, market value changes are based on the estimated fair value of the associated ABS issued, including securities we own, pursuant to collateralized financing entity guidelines, and are recorded in Investment fair value changes, net on our consolidated statements of income (loss). The net impact to our income statement associated with our economic investments in these securitization entities is presented in Table 4.2.

REO

See Note 12 for detail on residential loans transferred to REO during 2022.

Note 7. Business Purpose Loans

We originate and invest in business purpose loans, including single-family rental ("SFR") loans and bridge loans. The following table summarizes the classifications and carrying values of the business purpose loans owned at Redwood and at consolidated CAFL entities at June 30, 2022 and December 31, 2021.

Table 7.1 – Classifications and Carrying Values of Business Purpose Loans

June 30, 2022	Single-Family Rental				Bridge
(In Thousands)	Redwood		CAFL		Redwood		CAFL		Total
Held-for-sale at fair value	$	505,171	—		$	—	$	—	$	505,171
Held-for-investment at fair value	—		3,046,277		1,109,337		542,152		4,697,766
Total Business Purpose Loans	$	505,171	$	3,046,277	$	1,109,337	$	542,152	$	5,202,937

December 31, 2021	Single-Family Rental				Bridge
(In Thousands)	Redwood		CAFL		Redwood		CAFL		Total
Held-for-sale at fair value	$	358,309	$	—	$	—	$	—	$	358,309
Held-for-investment at fair value	—		3,488,074		666,364		278,242		4,432,680
Total Business Purpose Loans	$	358,309	$	3,488,074	$	666,364	$	278,242	$	4,790,989

35

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 7. Business Purpose Loans - (continued)

Nearly all of the outstanding single-family rental loans at June 30, 2022 were first-lien, fixed-rate loans with original maturities of five, seven, or ten years, with 3% having original maturities of 30 years. The outstanding bridge loans held-for-investment at June 30, 2022 were first-lien, interest-only loans with original maturities of six to 36 months and were comprised of 45% one-month LIBOR-indexed adjustable-rate loans, 39% one-month SOFR-indexed adjustable-rate loans, and 17% fixed-rate loans.

At June 30, 2022, we had a $835 million commitment to fund bridge loans. See Note 16 for additional information on this commitment.

The following table provides the activity of business purpose loans at Redwood during the three and six months ended June 30, 2022 and 2021.

Table 7.2 – Activity of Business Purpose Loans at Redwood

	Three Months Ended   June 30, 2022				Three Months Ended   June 30, 2021
(In Thousands)	SFR at Redwood		Bridge at Redwood		SFR at Redwood		Bridge at Redwood
Principal balance of loans originated	$	323,245	$	542,241	$	312,217	$	215,160
Principal balance of loans acquired	38,457		19,023		—		—
Principal balance of loans sold to third parties	—		—		—		354
Fair value of loans transferred (1)	295,037		306,313		297,301		—
Mortgage banking activities income (loss) recorded (2)	(40,034)		(1,136)		25,222		978
Investment fair value changes recorded (3)	—		(5,455)		—		(62)

	Six Months Ended   June 30, 2022				Six Months Ended   June 30, 2021
(In Thousands)	SFR at Redwood		Bridge at Redwood		SFR at Redwood		Bridge at Redwood
Principal balance of loans originated	$	765,972	$	954,179	$	565,315	$	348,389
Principal balance of loans acquired	100,349		22,006		—		—
Principal balance of loans sold to third parties	331,502		—		—		9,231
Fair value of loans transferred (1)	295,037		388,604		466,705		N/A
Mortgage banking activities income (loss) recorded (2)	(64,502)		1,239		35,470		1,520
Investment fair value changes recorded (3)	—		(6,214)		—		3,242

(1)For SFR at Redwood, represents the transfer of loans from held-for-sale to held-for-investment associated with CAFL SFR securitizations. For Bridge at Redwood, represents the transfer of bridge loans from "Bridge at Redwood" to "Bridge at CAFL" resulting from their securitization.

(2)Represents net market valuation changes from the time a loan is originated to when it is sold or transferred to our investment portfolio. Additionally, for the three and six months ended June 30, 2022, we recorded loan origination fee income of $12 million and $27 million, respectively, through Mortgage banking activities, net on our consolidated statements of income (loss).

(3)Represents net market valuation changes for loans classified as held-for-investment and associated interest-only strip liabilities.

36

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 7. Business Purpose Loans - (continued)

Business Purpose Loans Held-for-Investment at CAFL

    We invest in securities issued by CAFL securitizations sponsored by CoreVest and consolidate the underlying single-family rental loans and bridge loans owned by these entities. The following table provides the activity of business purpose loans held-for-investment at CAFL during the three and six months ended June 30, 2022 and 2021.

Table 7.3 – Activity of Business Purpose Loans Held-for-Investment at CAFL

	Three Months Ended   June 30, 2022				Three Months Ended   June 30, 2021
(In Thousands)	SFR at CAFL		Bridge at CAFL		SFR at CAFL		Bridge at CAFL
Net market valuation gains (losses) recorded (1)	$	(118,299)	$	(281)	$	(1,230)	$	—

	Six Months Ended   June 30, 2022				Six Months Ended   June 30, 2021
(In Thousands)	SFR at CAFL		Bridge at CAFL		SFR at CAFL		Bridge at CAFL
Net market valuation gains (losses) recorded (1)	$	(310,202)	$	(1,856)	$	(62,132)	$	—

(1)For loans held at our consolidated CAFL entities, market value changes are based on the estimated fair value of the associated ABS issued, including securities we own, pursuant to collateralized financing entity guidelines, and are recorded through Investment fair value changes, net on our consolidated statements of income (loss). The net impact to our income statement associated with our economic investments in these securitization entities is presented in Table 4.2.

REO

See Note 12 for detail on BPL loans transferred to REO during 2022.

37

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 7. Business Purpose Loans - (continued)

Business Purpose Loan Characteristics

The following tables summarize the characteristics of the business purpose loans owned at Redwood and at consolidated CAFL entities at June 30, 2022 and December 31, 2021.

Table 7.4 – Characteristics of Business Purpose Loans

June 30, 2022	SFR at Redwood			SFR at CAFL			Bridge at Redwood			Bridge at CAFL
(Dollars in Thousands)
Number of loans	355			1,154			1,131			2,268
Unpaid principal balance	$	536,344		$	3,227,172		$	1,116,582		$	541,677
Fair value of loans	$	505,171		$	3,046,277		$	1,109,337		$	542,152
Weighted average coupon	5.31		%	5.16		%	6.73		%	6.89		%
Weighted average remaining loan term (years)	14			6			2			1
Market value of loans pledged as collateral under short-term debt facilities	$	312,732		N/A			$	265,242		N/A
Market value of loans pledged as collateral under long-term debt facilities	$	180,482		N/A			$	779,467		N/A
Delinquency information
Number of loans with 90+ day delinquencies (1)	4			20			51			48
Unpaid principal balance of loans with 90+ day delinquencies	$	5,212		$	50,469		$	32,941		$	7,847
Fair value of loans with 90+ day delinquencies (2)	$	4,086		N/A			$	30,209		$	7,847
Number of loans in foreclosure (3)	4			7			53			3
Unpaid principal balance of loans in foreclosure	$	5,212		$	10,356		$	35,070		$	4,472
Fair value of loans in foreclosure (2)	$	4,086		N/A			$	32,338		$	4,472

December 31, 2021	SFR at Redwood			SFR at CAFL			Bridge at Redwood			Bridge at CAFL
(Dollars in Thousands)
Number of loans	245			1,173			1,134			1,640
Unpaid principal balance	$	348,232		$	3,340,949		$	670,392		$	274,617
Fair value of loans	$	358,309		$	3,488,074		$	666,364		$	278,242
Weighted average coupon	4.73		%	5.17		%	6.91		%	7.05		%
Weighted average remaining loan term (years)	12			6			1			1
Market value of loans pledged as collateral under short-term debt facilities	$	75,873		N/A			$	91,814		N/A
Market value of loans pledged as collateral under long-term debt facilities	$	244,703		N/A			$	554,597		N/A
Delinquency information
Number of loans with 90+ day delinquencies (1)	6			18			31			—
Unpaid principal balance of loans with 90+ day delinquencies	$	5,384		$	41,998		$	18,032		$	—
Fair value of loans with 90+ day delinquencies (2)	$	4,238		N/A			$	14,218		$	—
Number of loans in foreclosure (3)	7			9			28			—
Unpaid principal balance of loans in foreclosure	$	5,473		$	12,648		$	18,043		$	—
Fair value of loans in foreclosure (2)	$	4,305		N/A			$	14,257		$	—

38

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 7. Business Purpose Loans - (continued)

Footnotes to Table 7.4

(1)The number of loans greater than 90 days delinquent includes loans in foreclosure.

(2)The fair value of the loans held by consolidated CAFL entities was based on the fair value of the ABS issued by these entities, including securities we own, which we determined were more readily observable, in accordance with accounting guidance for collateralized financing entities.

(3)May include loans that are less than 90 days delinquent.

Note 8. Consolidated Agency Multifamily Loans

We invest in multifamily subordinate securities issued by a Freddie Mac K-Series securitization trust and consolidate the underlying multifamily loans owned by this entity for financial reporting purposes in accordance with GAAP. The following table summarizes the characteristics of our consolidated Agency multifamily loans at June 30, 2022 and December 31, 2021.

Table 8.1 – Characteristics of Consolidated Agency Multifamily Loans

(Dollars in Thousands)	June 30, 2022			December 31, 2021
Number of loans	28			28
Unpaid principal balance	$	451,197		$	455,168
Fair value of loans	$	443,114		$	473,514
Weighted average coupon	4.25		%	4.25		%
Weighted average remaining loan term (years)	3			4
Delinquency information
Number of loans with 90+ day delinquencies	—			—
Number of loans in foreclosure	—			—

The outstanding consolidated Agency multifamily loans held-for-investment at the consolidated Freddie Mac K-Series entity at June 30, 2022 were first-lien, fixed-rate loans that were originated in 2015. The following table provides the activity of multifamily loans held-for-investment during the three and six months ended June 30, 2022 and 2021.

Table 8.2 – Activity of Consolidated Agency Multifamily Loans Held-for-Investment

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Net market valuation gains (losses) recorded (1)	$	(6,748)	$	(2,528)	$	(26,429)	$	(3,258)

(1)Net market valuation gains (losses) on multifamily loans held-for-investment are recorded through Investment fair value changes, net on our consolidated statements of income (loss). For loans held at our consolidated Freddie Mac K-Series entity, market value changes are based on the estimated fair value of the associated ABS issued, including securities we own, pursuant to collateralized financing entity guidelines. The net impact to our income statement associated with our economic investment in these securitization entities is presented in Table 4.2.

39

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 9. Real Estate Securities

We invest in real estate securities that we create and retain from our Sequoia securitizations or acquire from third parties. The following table presents the fair values of our real estate securities by type at June 30, 2022 and December 31, 2021.

Table 9.1 – Fair Values of Real Estate Securities by Type

(In Thousands)	June 30, 2022		December 31, 2021
Trading	$	133,780	$	170,619
Available-for-sale	150,498		206,792
Total Real Estate Securities	$	284,278	$	377,411

Our real estate securities include mortgage-backed securities, which are presented in accordance with their general position within a securitization structure based on their rights to cash flows. Senior securities are those interests in a securitization that generally have the first right to cash flows and are last in line to absorb losses. Mezzanine securities are interests that are generally subordinate to senior securities in their rights to receive cash flows, and have subordinate securities below them that are first to absorb losses. Subordinate securities are all interests below mezzanine. Exclusive of our re-performing loan securities, nearly all of our residential securities are supported by collateral that was designated as prime at the time of issuance.

Trading Securities

We elected the fair value option for certain securities and classify them as trading securities. Our trading securities include both residential and multifamily mortgage-backed securities, and our residential securities also include securities backed by re-performing loans ("RPL"). The following table presents the fair value of trading securities by position and collateral type at June 30, 2022 and December 31, 2021.

Table 9.2 – Fair Value of Trading Securities by Position

(In Thousands)	June 30, 2022		December 31, 2021
Senior
Interest-only securities (1)	$	31,498	$	21,787
Total Senior	31,498		21,787
Subordinate
RPL securities	46,607		65,140
Multifamily securities	7,960		10,549
Other third-party residential securities	47,715		73,143
Total Subordinate	102,282		148,832
Total Trading Securities	$	133,780	$	170,619

(1)Includes $24 million and $15 million of Sequoia certificated mortgage servicing rights at June 30, 2022 and December 31, 2021, respectively.

The following table presents the unpaid principal balance of trading securities by position and collateral type at June 30, 2022 and December 31, 2021.

Table 9.3 – Unpaid Principal Balance of Trading Securities by Position

(In Thousands)	June 30, 2022		December 31, 2021
Senior (1)	$	—	$	—
Subordinate	221,473		235,306
Total Trading Securities	$	221,473	$	235,306

(1)Our senior trading securities include interest-only securities, for which there is no principal balance.

40

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 9. Real Estate Securities - (continued)

The following table provides the activity of trading securities during the three and six months ended June 30, 2022 and 2021.

Table 9.4 – Trading Securities Activity

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Principal balance of securities acquired (1)	$	—	$	1,750	$	—	$	17,630
Principal balance of securities sold (1)	12,716		18,068		12,716		52,811
Net market valuation gains (losses) recorded (2)	(16,042)		1,798		(17,498)		23,147

(1)For the three and six months ended June 30, 2022 and 2021, excludes zero and $2 million of securities bought and sold during the same quarter, respectively.

(2)Net market valuation gains (losses) on trading securities are recorded through Investment fair value changes, net and Mortgage banking activities, net on our consolidated statements of income.

AFS Securities

The following table presents the fair value of our available-for-sale securities by position and collateral type at June 30, 2022 and December 31, 2021.

Table 9.5 – Fair Value of Available-for-Sale Securities by Position

(In Thousands)	June 30, 2022		December 31, 2021
Subordinate
Sequoia securities	$	85,269	$	127,542
Multifamily securities	13,169		22,166
Other third-party residential securities	52,060		57,084
Total Subordinate	150,498		206,792
Total AFS Securities	$	150,498	$	206,792

The following table provides the activity of available-for-sale securities during the three and six months ended June 30, 2022 and 2021.

Table 9.6 – Available-for-Sale Securities Activity

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Fair value of securities acquired	$	—	$	522	$	10,000	$	1,600
Fair value of securities sold	—		2,585		—		4,785
Principal balance of securities called	—		1,307		14,486		1,507
Net unrealized (losses) gains on AFS securities (1)	(33,409)		11,224		(51,282)		22,210

(1)Net unrealized (losses) gains on AFS securities are recorded on our consolidated balance sheets through Accumulated other comprehensive loss.

We often purchase AFS securities at a discount to their outstanding principal balances. To the extent we purchase an AFS security that has a likelihood of incurring a loss, we do not amortize into income the portion of the purchase discount that we do not expect to collect due to the inherent credit risk of the security. We may also expense a portion of our investment in the security to the extent we believe that principal losses will exceed the purchase discount. We designate any amount of unpaid principal balance that we do not expect to receive and thus do not expect to earn or recover as a credit reserve on the security. Any remaining net unamortized discounts or premiums on the security are amortized into income over time using the effective yield method.

41

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 9. Real Estate Securities - (continued)

At June 30, 2022, we had $10 million of AFS securities with contractual maturities less than five years, $1 million with contractual maturities greater than five years but less than ten years, and the remainder of our AFS securities had contractual maturities greater than ten years.

The following table presents the components of carrying value (which equals fair value) of AFS securities at June 30, 2022 and December 31, 2021.

Table 9.7 – Carrying Value of AFS Securities

June 30, 2022
(In Thousands)	Total
Principal balance	$	227,911
Credit reserve	(30,619)
Unamortized discount, net	(61,303)
Amortized cost	135,989
Gross unrealized gains	25,930
Gross unrealized losses	(9,650)
CECL allowance	(1,771)
Carrying Value	$	150,498

December 31, 2021
(In Thousands)	Total
Principal balance	$	242,852
Credit reserve	(27,555)
Unamortized discount, net	(76,023)
Amortized cost	139,274
Gross unrealized gains	67,815
Gross unrealized losses	(297)
CECL allowance	—
Carrying Value	$	206,792

The following table presents the changes for the three and six months ended June 30, 2022, in unamortized discount and designated credit reserves on residential AFS securities.

Table 9.8 – Changes in Unamortized Discount and Designated Credit Reserves on AFS Securities

	Three Months Ended   June 30, 2022				Six Months Ended   June 30, 2022
	Credit Reserve		Unamortized Discount, Net		Credit Reserve		Unamortized Discount, Net
(In Thousands)
Beginning balance	$	29,901	$	63,206	$	27,555	$	76,023
Amortization of net discount	—		(1,347)		—		(9,817)
Realized credit recoveries (losses), net	162		—		74		—
Acquisitions	—		—		—		—
Sales, calls, other	—		—		(343)		(1,570)
Transfers to (release of) credit reserves, net	556		(556)		3,333		(3,333)
Ending Balance	$	30,619	$	61,303	$	30,619	$	61,303

42

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 9. Real Estate Securities - (continued)

AFS Securities with Unrealized Losses

The following table presents the total carrying value (fair value) and unrealized losses of residential AFS securities that were in a gross unrealized loss position at June 30, 2022 and December 31, 2021.

Table 9.9 – AFS Securities in Gross Unrealized Loss Position by Holding Periods

	Less Than 12 Consecutive Months				12 Consecutive Months or Longer
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
(In Thousands)
June 30, 2022	$	46,369	$	(9,456)	$	1,406	$	(194)
December 31, 2021	6,827		(251)		1,554		(46)

At June 30, 2022, after giving effect to purchases, sales, and extinguishment due to credit losses, our consolidated balance sheet included 82 AFS securities, of which 21 were in an unrealized loss position and one was in a continuous unrealized loss position for 12 consecutive months or longer. At December 31, 2021, our consolidated balance sheet included 85 AFS securities, of which four were in an unrealized loss position and one was in a continuous unrealized loss position for 12 consecutive months or longer.

Evaluating AFS Securities for Credit Losses

Gross unrealized losses on our AFS securities were $10 million at June 30, 2022. We evaluate all securities in an unrealized loss position to determine if the impairment is credit-related (resulting in an allowance for credit losses recorded in earnings) or non-credit-related (resulting in an unrealized loss through other comprehensive income). At June 30, 2022, we did not intend to sell any of our AFS securities that were in an unrealized loss position, and it is more likely than not that we will not be required to sell these securities before recovery of their amortized cost basis, which may be at their maturity. We review our AFS securities that are in an unrealized loss position to identify those securities with losses based on an assessment of changes in expected cash flows for such securities, which considers recent security performance and expected future performance of the underlying collateral.

At June 30, 2022, our current expected credit loss ("CECL") allowance related to our AFS securities was $1.8 million. AFS securities for which an allowance is recognized have experienced, or are expected to experience, adverse cash flow changes. In determining our estimate of cash flows for AFS securities we may consider factors such as structural credit enhancement, past and expected future performance of underlying mortgage loans, including timing of expected future cash flows, which are informed by prepayment rates, default rates, loss severities, delinquency rates, percentage of non-performing loans, FICO scores at loan origination, year of origination, loan-to-value ratios, and geographic concentrations, as well as general market assessments. Changes in our evaluation of these factors impacted the cash flows expected to be collected at the assessment date and were used to determine if there were credit-related adverse cash flows and if so, the amount of credit related losses. Significant judgment is used in both our analysis of the expected cash flows for our AFS securities and any determination of security credit losses.

The table below summarizes the weighted average of the significant credit quality indicators we used for the credit loss allowance on our AFS securities at June 30, 2022.

Table 9.10 – Significant Credit Quality Indicators

June 30, 2022	Subordinate Securities
Default rate	0.8%
Loss severity	20%

43

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 9. Real Estate Securities - (continued)

The following table details the activity related to the allowance for credit losses for AFS securities for the three and six months ended June 30, 2022.

Table 9.11 – Rollforward of Allowance for Credit Losses

	Three Months Ended June 30, 2022		Six Months Ended June 30, 2022
(In Thousands)
Beginning balance allowance for credit losses	$	705	$	—
Additions to allowance for credit losses on securities for which credit losses were not previously recorded	785		1,490
Additional increases (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period	281		281
Allowance on purchased financial assets with credit deterioration	—		—
Reduction to allowance for securities sold during the period	—		—
Reduction to allowance for securities we intend to sell or more likely than not will be required to sell	—		—
Write-offs charged against allowance	—		—
Recoveries of amounts previously written off	—		—
Ending balance of allowance for credit losses	$	1,771	$	1,771

Gains and losses from the sale of AFS securities are recorded as Realized gains, net, in our consolidated statements of income. The following table presents the gross realized gains and losses on sales and calls of AFS securities for the three and six months ended June 30, 2022 and 2021.

Table 9.12 – Gross Realized Gains and Losses on AFS Securities

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Gross realized gains - sales	$	—	$	1,307	$	—	$	1,507
Gross realized gains - calls	—		6,687		1,914		9,095
Gross realized losses - sales	—		—		—		—
Total Realized Gains on Sales and Calls of AFS Securities, net	$	—	$	7,994	$	1,914	$	10,602

During the six months ended June 30, 2022, we called three of our unconsolidated Sequoia entities, and purchased $102 million (unpaid principal balance) of loans from the securitization trusts. In association with these calls, we realized a $0.3 million gain on the securities we owned from these securitizations. The remaining realized gains were from third-party securities we owned that were called during the six months ended June 30, 2022.

44

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 10. Other Investments

Other investments at June 30, 2022 and December 31, 2021 are summarized in the following table.

Table 10.1 – Components of Other Investments

(In Thousands)	June 30, 2022		December 31, 2021
HEIs	$	276,366	$	192,740
Servicer advance investments	273,210		350,923
Strategic investments	63,860		35,702
Excess MSRs	40,803		44,231
Mortgage servicing rights	23,560		12,438
Other	1,868		5,935
Total Other Investments	$	679,667	$	641,969

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 a portfolio of legacy residential mortgage-backed securitizations serviced by the co-investor (Refer to Note 10 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 for additional information regarding the transactions). At June 30, 2022, we had funded $148 million of total capital to the SA Buyers (see Note 16 for additional detail).

At June 30, 2022, our servicer advance investments had a carrying value of $273 million and were associated with a portfolio of residential mortgage loans with an unpaid principal balance of $12.09 billion. The outstanding servicer advance receivables associated with this investment were $240 million at June 30, 2022, which were financed with short-term non-recourse securitization debt (see Note 13 for additional detail on this debt). The servicer advance receivables were comprised of the following types of advances at June 30, 2022 and December 31, 2021.

Table 10.2 – Components of Servicer Advance Receivables

(In Thousands)	June 30, 2022		December 31, 2021
Principal and interest advances	$	76,506	$	94,148
Escrow advances (taxes and insurance advances)	133,403		172,847
Corporate advances	29,643		43,958
Total Servicer Advance Receivables	$	239,552	$	310,953

We account for our servicer advance investments at fair value and during the three and six months ended June 30, 2022, we recorded $5 million and $10 million of interest income, respectively, through Other interest income, and recorded a net market valuation loss of $3 million and loss of $6 million, respectively, through Investment fair value changes, net in our consolidated statements of income.

45

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 10. Other Investments - (continued)

HEIs

We purchase home equity investment contracts from third party originators under flow purchase agreements. Each HEI provides the owner of such HEI the right to purchase a percentage ownership interest in an associated residential property, and the homeowner's obligations under the HEI are secured by a lien (primarily second liens) on the property created by a deed of trust or a mortgage. Our investments in HEIs allow us to share in both home price appreciation and depreciation of the associated property. At June 30, 2022, we had flow purchase agreements outstanding with $225 million of cumulative commitments remaining. See Note 16 for additional information on these commitments.

As of June 30, 2022, we owned $130 million of HEIs at Redwood and consolidated $146 million of HEIs through the HEI securitization entity. We account for these investments under the fair value option and during the three and six months ended June 30, 2022, we recorded net market valuation gains of $2 million and $3 million, respectively, related to HEIs owned at Redwood through Investment fair value changes, net on our consolidated statements of income (loss).

We consolidate the HEI securitization in accordance with GAAP and have elected to account for it under the CFE election. During the three and six months ended June 30, 2022, we recorded net market valuation gains of $1 million and $5 million (including $1 million and $2 million of interest expense), respectively, related to our net investment in the HEI securitization entity through Investment fair value changes, net on our consolidated statements of income (loss).

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 June 30, 2022, we had made a total of 24 investments in companies through RWT Horizons with a total carrying value of $24 million, as well as six corporate-level investments. During the three and six months ended June 30, 2022, we recognized a mark-to-market valuation gain of $10 million on one of our strategic investments, which was recorded in Investment fair value changes, net on our consolidated statements of income (loss). During the three months ended June 30, 2022, we recorded losses of $0.3 million in Other income from our strategic investments.

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 and six months ended June 30, 2022, we recognized $4 million and $8 million of interest income, respectively, through Other interest income, and recorded net market valuation losses of $2 million and $3 million, respectively, through Investment fair value changes, net on our consolidated statements of income (loss).

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 and six months ended June 30, 2022, we retained zero and $5 million, respectively, of MSRs from sales of residential loans to third parties. We hold our MSR investments at our taxable REIT subsidiaries.

At June 30, 2022 and December 31, 2021, our MSRs had a fair value of $24 million and $12 million, respectively, and were associated with loans with an aggregate principal balance of $2.28 billion and $2.12 billion, respectively. During the three and six months ended June 30, 2022, including net market valuation gains and losses on our MSRs, we recorded net income of $5 million and $10 million, respectively, through Other income on our consolidated statements of income (loss) related to our MSRs.

46

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 11. Derivative Financial Instruments

The following table presents the fair value and notional amount of our derivative financial instruments at June 30, 2022 and December 31, 2021.

Table 11.1 – Fair Value and Notional Amount of Derivative Financial Instruments

	June 30, 2022				December 31, 2021
	Fair Value		Notional Amount		Fair Value		Notional Amount
(In Thousands)
Assets - Risk Management Derivatives
Interest rate swaps	$	19,113	$	644,000	$	611	$	161,500
TBAs	3,104		455,000		2,880		2,440,000
Interest rate futures	1,875		273,600		25		9,000
Swaptions	10,488		620,000		18,318		1,660,000
Assets - Other Derivatives
Loan purchase and interest rate lock commitments	2,007		235,723		4,633		971,631
Total Assets	$	36,587	$	2,228,323	$	26,467	$	5,242,131
Liabilities - Risk Management Derivatives
Interest rate swaps	$	(2,445)	$	226,000	$	(1,251)	$	283,100
TBAs	(2,004)		405,000		(658)		870,000
Interest rate futures	(1,615)		115,000		(905)		62,500
Liabilities - Other Derivatives
Loan purchase and interest rate lock commitments	(527)		50,947		(503)		404,190
Total Liabilities	$	(6,591)	$	796,947	$	(3,317)	$	1,619,790
Total Derivative Financial Instruments, Net	$	29,996	$	3,025,270	$	23,150	$	6,861,921

Risk Management Derivatives

To manage, to varying degrees, risks associated with certain assets and liabilities on our consolidated balance sheets, we may enter into derivative contracts. At June 30, 2022, we were party to swaps and swaptions with an aggregate notional amount of $1.49 billion, TBA agreements with an aggregate notional amount of $860 million, and interest rate futures contracts with an aggregate notional amount of $389 million. At December 31, 2021, we were party to swaps and swaptions with an aggregate notional amount of $2.10 billion, futures with an aggregate notional amount of $72 million and TBA agreements with an aggregate notional amount of $3.31 billion.

For the three and six months ended June 30, 2022, risk management derivatives had a net market valuation gain of $30 million, and a net market valuation gain of $122 million, respectively. For the three and six months ended June 30, 2021, risk management derivatives had a net market valuation loss of $58 million, and a net market valuation gain of $35 million, respectively. Market valuation gains and losses are recorded in Mortgage banking activities, net, Investment fair value changes, net and Other income on our consolidated statements of income.

47

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 11. Derivative Financial Instruments - (continued)

Loan Purchase and Interest Rate Lock Commitments

Loan purchase commitments ("LPCs") and interest rate lock commitments ("IRLCs") that qualify as derivatives are recorded at their estimated fair values. For the three and six months ended June 30, 2022, LPCs and IRLCs had a net market valuation loss of $9 million and loss of $51 million, respectively, that were recorded in Mortgage banking activities, net on our consolidated statements of income.

Derivatives Designated as Cash Flow Hedges

For interest rate agreements previously designated as cash flow hedges, our total unrealized loss reported in Accumulated other comprehensive income was $74 million and $76 million at June 30, 2022 and December 31, 2021, respectively. We are amortizing this loss into interest expense over the remaining term of the debt they were originally hedging. As of June 30, 2022, we expect to amortize $4 million of realized losses related to terminated cash flow hedges into interest expense over the next twelve months.

The following table illustrates the impact on interest expense of our interest rate agreements accounted for as cash flow hedges for the three and six months ended June 30, 2022 and 2021.

Table 11.2 – Impact on Interest Expense of Interest Rate Agreements Accounted for as Cash Flow Hedges

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Net interest expense on cash flows hedges	$	—	$	—	$	—	$	—
Realized net losses reclassified from other comprehensive income	(1,029)		(1,028)		(2,047)		(2,046)
Total Interest Expense	$	(1,029)	$	(1,028)	$	(2,047)	$	(2,046)

Derivative Counterparty Credit Risk

As discussed in our Annual Report on Form 10-K for the year ended December 31, 2021, we consider counterparty risk as part of our fair value assessments of all derivative financial instruments at each quarter-end. At June 30, 2022, we assessed this risk as remote and did not record an associated specific valuation adjustment. At June 30, 2022, we were in compliance with our derivative counterparty ISDA agreements.

Note 12. Other Assets and Liabilities

Other assets at June 30, 2022 and December 31, 2021 are summarized in the following table.

Table 12.1 – Components of Other Assets

(In Thousands)	June 30, 2022		December 31, 2021
Accrued interest receivable	$	51,006	$	47,515
Investment receivable	25,688		82,781
Deferred tax asset	20,867		20,867
Operating lease right-of-use assets	17,074		18,772
Income tax receivables	15,573		22
Margin receivable	11,420		7,269
Fixed assets and leasehold improvements (1)	11,189		9,019
REO	7,813		36,126
Other	11,150		8,746
Total Other Assets	$	171,780	$	231,117

(1)Fixed assets and leasehold improvements had a basis of $20 million and accumulated depreciation of $9 million at June 30, 2022.

48

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 12. Other Assets and Liabilities - (continued)

Accrued expenses and other liabilities at June 30, 2022 and December 31, 2021 are summarized in the following table.

Table 12.2 – Components of Accrued Expenses and Other Liabilities

(In Thousands)	June 30, 2022		December 31, 2021
Payable to non-controlling interests	$	49,544	$	42,670
Accrued interest payable	42,548		39,297
Operating lease liabilities	19,448		20,960
Accrued compensation	17,765		74,636
Margin payable	15,023		24,368
Accrued operating expenses	8,743		4,377
Guarantee obligations	6,768		7,459
Residential loan and MSR repurchase reserve	5,678		9,306
Current accounts payable	5,518		8,273
Bridge loan holdbacks	3,983		3,109
Other	15,807		11,333
Total Accrued Expenses and Other Liabilities	$	190,825	$	245,788

Refer to Note 12 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 for additional descriptions of our other assets and liabilities.

Margin Receivable and Payable

Margin receivable and payable resulted from margin calls between us and our counterparties under derivatives, master repurchase agreements, and warehouse facilities, whereby we or the counterparty posted collateral. Through June 30, 2022, we had met all margin calls due.

REO

The following table summarizes the activity and carrying values of REO assets held at Redwood and at consolidated Legacy Sequoia, Freddie Mac SLST, and CAFL SFR entities during the six months ended June 30, 2022.

Table 12.3 – REO Activity

	Six Months Ended June 30, 2022
(In Thousands)	Bridge		Legacy Sequoia		Freddie Mac SLST		SFR at CAFL		Total
Balance at beginning of period	$	13,068	$	61	$	2,028	$	20,969	$	36,126
Transfers to REO	963		407		1,763		—		3,133
Liquidations (1)	(9,549)		(504)		(1,661)		(20,969)		(32,683)
Changes in fair value, net	625		443		169		—		1,237
Balance at End of Period	$	5,107	$	407	$	2,299	$	—	$	7,813

(1)For the six months ended June 30, 2022, REO liquidations resulted in $1 million of realized gains, which were recorded in Investment fair value changes, net on our consolidated statements of income.

49

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 12. Other Assets and Liabilities - (continued)

The following table provides the detail of REO assets at Redwood and at consolidated Legacy Sequoia, Freddie Mac SLST, and CAFL SFR entities at June 30, 2022 and December 31, 2021.

Table 12.4 – REO Assets

Number of REO assets	Bridge	Legacy Sequoia	Freddie Mac SLST	SFR at CAFL	Total
At June 30, 2022	3	1	21	—	25
At December 31, 2021	5	2	24	3	34

Note 13. Short-Term Debt

We enter into repurchase agreements ("repo"), loan warehouse agreements, and other forms of collateralized (and generally uncommitted) short-term borrowings with several banks and major investment banking firms. At June 30, 2022, we had outstanding agreements with several counterparties and we were in compliance with all of the related covenants.

The table below summarizes our short-term debt, including the facilities that are available to us, the outstanding balances, the weighted average interest rate, and the maturity information at June 30, 2022 and December 31, 2021.

Table 13.1 – Short-Term Debt

	June 30, 2022
(Dollars in Thousands)	Number of Facilities	Outstanding Balance		Limit		Weighted Average Interest Rate (1)		Maturity	Weighted Average Days Until Maturity
Facilities
Residential loan warehouse	7	$	1,085,802	$	2,750,000	3.28	%	8/2022-3/2023	213
Business purpose loan warehouse	3	456,887		1,200,000		4.21	%	3/2023-6/2023	258
Real estate securities repo	4	95,287		—		1.91	%	7/2022-9/2022	32
Total Short-Term Debt Facilities	14	1,637,976
Servicer advance financing	1	231,846		300,000		3.40	%	11/2022	125
Total Short-Term Debt		$	1,869,822

	December 31, 2021
(Dollars in Thousands)	Number of Facilities	Outstanding Balance		Limit		Weighted Average Interest Rate (1)		Maturity	Weighted Average Days Until Maturity
Facilities
Residential loan warehouse	7	$	1,669,344	$	2,900,000	1.87	%	1/2022-12/2022	153
Business purpose loan warehouse	2	138,746		350,000		3.34	%	3/2022-7/2022	105
Real estate securities repo	4	74,825		—		1.13	%	1/2022-3/2022	33
Total Short-Term Debt Facilities	13	1,882,915
Servicer advance financing	1	294,447		350,000		1.90	%	11/2022	306
Total Short-Term Debt		$	2,177,362

(1)Borrowings under our facilities generally are uncommitted and charged interest based on a specified margin over 1-month SOFR or 1- or 3-month LIBOR.

50

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 13. Short-Term Debt - (continued)

The following table below presents the value of loans, securities, and other assets pledged as collateral under our short-term debt at June 30, 2022 and December 31, 2021.

Table 13.2 – Collateral for Short-Term Debt

(In Thousands)	June 30, 2022		December 31, 2021
Collateral Type
Held-for-sale residential loans	$	1,207,185	$	1,838,797
Business purpose loans	577,974		167,687
Real estate securities
On balance sheet	10,014		5,823
Sequoia securitizations (1)	82,636		61,525
Freddie Mac K-Series securitization (1)	31,732		31,657
Total real estate securities owned	124,382		99,005
Restricted cash and other assets	2,512		1,962
Total Collateral for Short-Term Debt Facilities	1,912,053		2,107,451
Cash	14,381		6,480
Restricted cash	26,236		25,420
Servicer advances	273,210		310,953
Total Collateral for Servicer Advance Financing	313,827		342,853
Total Collateral for Short-Term Debt	$	2,225,880	$	2,450,304

(1)Represents securities we have retained from consolidated securitization entities. For GAAP purposes, we consolidate the loans and non-recourse ABS debt issued from these securitizations.

For the three and six months ended June 30, 2022, the average balance of our short-term debt facilities was $1.64 billion and $1.66 billion, respectively. At June 30, 2022 and December 31, 2021, accrued interest payable on our short-term debt facilities was $3 million and $2 million, respectively.

Servicer advance financing consists of non-recourse short-term securitization debt used to finance servicer advance investments. We consolidate the securitization entity that issued the debt, but the entity is independent of Redwood and the assets and liabilities are not owned by and are not legal obligations of Redwood. At June 30, 2022, the accrued interest payable balance on this financing was $0.2 million and the unamortized capitalized commitment costs were $0.3 million.

We also maintain a $10 million committed line of credit with a financial institution that is secured by certain mortgage-backed securities with a fair market value of $1 million at June 30, 2022. At both June 30, 2022 and December 31, 2021, we had no outstanding borrowings on this facility.

During the three months ended June 30, 2022, a business purpose loan warehouse facility with a borrowing limit of $450 million was reclassified to short-term debt from long-term debt as the maturity of this facility was less than one year at June 30, 2022.

51

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 13. Short-Term Debt - (continued)

Remaining Maturities of Short-Term Debt

The following table presents the remaining maturities of our secured short-term debt by the type of collateral securing the debt at June 30, 2022.

Table 13.3 – Short-Term Debt by Collateral Type and Remaining Maturities

	June 30, 2022
(In Thousands)	Within 30 days		31 to 90 days		Over 90 days		Total
Collateral Type
Held-for-sale residential loans	$	—	$	128,440	$	957,362	$	1,085,802
Business purpose loans	—		—		456,887		456,887
Real estate securities	57,323		37,964		—		95,287
Total Secured Short-Term Debt	57,323		166,404		1,414,249		1,637,976
Servicer advance financing	—		—		231,846		231,846
Total Short-Term Debt	$	57,323	$	166,404	$	1,646,095	$	1,869,822

Note 14. Asset-Backed Securities Issued

ABS issued represents securities issued by non-recourse securitization entities we consolidate under GAAP. The majority of our ABS issued is carried at fair value under the CFE election (see Note 4 for additional detail) with the remainder carried at amortized cost. The carrying values of ABS issued by our consolidated securitization entities at June 30, 2022 and December 31, 2021, along with other selected information, are summarized in the following table.

Table 14.1 – Asset-Backed Securities Issued

June 30, 2022	Legacy Sequoia		Sequoia		CAFL (1)		Freddie Mac SLST (2)		Freddie Mac K-Series			HEI			Total
(Dollars in Thousands)
Certificates with principal balance	$	229,651	$	3,733,955	$	3,303,312	$	1,392,244	$	414,729		$	117,581		$	9,191,472
Interest-only certificates	258		60,183		149,184		14,938		8,809			—			233,372
Market valuation adjustments	(22,262)		(505,456)		(244,629)		(48,723)		(12,158)			(7,470)			(840,698)
ABS Issued, Net	$	207,647	$	3,288,682	$	3,207,867	$	1,358,459	$	411,380		$	110,111		$	8,584,146
Range of weighted average interest rates, by series(3)	1.59% to 2.88%		2.52% to 5.00%		2.34% to 5.34%		3.50% to 4.75%		3.41		%	3.74		%
Stated maturities(3)	2024 - 2036		2047-2052		2027-2032		2028-2059		2025			2052
Number of series	20		17		18		3		1			1

52

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 14. Asset-Backed Securities Issued - (continued)

December 31, 2021	Legacy Sequoia		Sequoia		CAFL(1)		Freddie Mac SLST (2)		Freddie Mac K-Series			HEI			Total
(Dollars in Thousands)
Certificates with principal balance	$	259,505	$	3,353,073	$	3,264,766	$	1,535,638	$	418,700		$	138,792		$	8,970,474
Interest-only certificates	619		32,749		193,725		11,714		10,184			—			248,991
Market valuation adjustments	(32,243)		(2,774)		16,407		41,111		12,973			(1,382)			34,092
ABS Issued, Net	$	227,881	$	3,383,048	$	3,474,898	$	1,588,463	$	441,857		$	137,410		$	9,253,557
Range of weighted average interest rates, by series(3)	0.23% to 1.44%		2.40% to 5.03%		2.64% to 5.24%		3.50% to 4.75%		3.41		%	3.31		%
Stated maturities(3)	2024 - 2036		2047-2052		2027-2031		2028-2059		2025			2052
Number of series	20		16		16		3		1			1

(1)Includes $485 million and $270 million (principal balance) of ABS issued by two CAFL bridge securitization trusts sponsored by Redwood and accounted for at amortized cost at June 30, 2022 and December 31, 2021, respectively.

(2)Includes $117 million and $145 million (principal balance) of ABS issued by a re-securitization trust sponsored by Redwood and accounted for at amortized cost at June 30, 2022 and December 31, 2021, respectively.

(3)Certain ABS issued by CAFL, Freddie Mac SLST, and HEI securitization entities are subject to early redemption and interest rate step-ups as described below.

During the second quarter of 2022, we consolidated the assets and liabilities of a securitization entity formed in connection with the securitization of CoreVest bridge loans (presented within CAFL in table 14.1 above), which we determined was a VIE and for which we determined we are the primary beneficiary. At issuance, we sold $215 million (principal balance) of ABS issued to third parties and retained the remaining beneficial ownership interest in the trust. The ABS were issued at a discount and we have elected to account for the ABS issued at amortized cost. At June 30, 2022, the principal balance of the ABS issued was $215 million, and the unamortized debt discount and deferred issuance costs were $8 million in total, for a net carrying value of $207 million. The weighted average stated coupon of the ABS issued was 4.32% at issuance. The ABS issued by the CAFL bridge entity are subject to an optional redemption in May 2024, and beginning in June 2025, the interest rate on the ABS issued increases by 2% through final maturity in May 2029. The ABS issued by this securitization were backed by assets including $249 million of bridge loans and $1 million of restricted cash at June 30, 2022. The securitization is structured with $250 million of total funding capacity and a feature to allow reinvestment of loan payoffs for the first 24 months of the transaction (through May 2024), unless an amortization event occurs prior to the expiration of the 24-month reinvestment period. Amortization trigger events include, among other events, delinquency rates or default rates exceeding specified thresholds for three consecutive periods, or the effective advance rate exceeding a specified threshold.

During the third quarter of 2021, we consolidated the assets and liabilities of a securitization entity formed in connection with the securitization of CoreVest bridge loans (presented within CAFL in table 14.1 above), which we determined was a VIE and for which we determined we are the primary beneficiary. At issuance, we sold $270 million (principal balance) of ABS issued to third parties and retained the remaining beneficial ownership interest in the trust. The ABS were issued at a discount and we have elected to account for the ABS issued at amortized cost. At June 30, 2022, the principal balance of the ABS issued was $270 million, and the unamortized debt discount and deferred issuance costs were $2 million, for a net carrying value of $268 million. The weighted average stated coupon of the ABS issued was 2.34% at issuance. The ABS issued by the CAFL bridge entity are subject to an optional redemption in March 2024, and beginning in March 2025 the interest rate on the ABS issued increases by 2% through final maturity in March 2029. The ABS issued by this securitization were backed by assets including $293 million of bridge loans, $8 million of restricted cash and $7 million of other assets at June 30, 2022. The securitization is structured with $300 million of total funding capacity and a feature to allow reinvestment of loan payoffs for the first 30 months of the transaction (through March 2024), unless an amortization event occurs prior to the expiration of the 30-month reinvestment period. Amortization trigger events include, among other events, delinquency rates or default rates exceeding specified thresholds for three consecutive periods, or the effective advance rate exceeding a specified threshold.

53

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 14. Asset-Backed Securities Issued - (continued)

During the third quarter of 2021, we consolidated the assets and liabilities of the HEI securitization entity formed in connection with the securitization of HEIs, which we determined was a VIE and for which we determined we are the primary beneficiary. At issuance, we sold $146 million (principal balance) of ABS issued to third parties and retained a portion of the remaining beneficial ownership interest in the trust. We elected to account for the entity under the CFE election and account for the ABS issued at fair value, with the entire change in fair value of the ABS issued (including accrued interest) recorded through Investment fair value changes, net on our consolidated statements of income. The ABS issued by the HEI securitization entity are subject to an optional redemption in September 2023, and beginning in September 2024 the interest rate on the ABS issued increases by 2% through final maturity in 2052.

During the third quarter of 2020, we transferred all of the subordinate securities we owned from two consolidated re-performing loan securitization VIEs sponsored by Freddie Mac SLST to a re-securitization trust, which we determined was a VIE and for which we determined we are the primary beneficiary. At issuance, we sold $210 million (principal balance) of ABS issued to third parties and retained 100% of the remaining beneficial ownership interest in the trust through ownership of a subordinate security issued by the trust. The ABS was issued at a discount and we have elected to account for the ABS issued at amortized cost. At June 30, 2022, the principal balance of the ABS issued was $117 million, and the debt discount and deferred issuance costs totaled $1 million, for a net carrying value of $115 million. The stated coupon of the ABS issued was 4.75% at issuance and the final stated maturity occurs in July 2059. The ABS issued are subject to an optional redemption in July 2022 and in July 2023 the ABS interest rate steps up to 7.75%.

The actual maturity of each class of ABS issued is primarily determined by the rate of principal prepayments on the assets of the issuing entity. Each series is also subject to redemption prior to the stated maturity according to the terms of the respective governing documents of each ABS issuing entity. As a result, the actual maturity of ABS issued may occur earlier than the stated maturity. At June 30, 2022, the majority of the ABS issued and outstanding had contractual maturities beyond five years. See Note 4 for detail on the carrying value components of the collateral for ABS issued and outstanding. The following table summarizes the accrued interest payable on ABS issued at June 30, 2022 and December 31, 2021. Interest due on consolidated ABS issued is payable monthly.

Table 14.2 – Accrued Interest Payable on Asset-Backed Securities Issued

(In Thousands)	June 30, 2022		December 31, 2021
Legacy Sequoia	$	171	$	99
Sequoia	9,232		8,452
CAFL	10,611		11,030
Freddie Mac SLST (1)	4,182		4,630
Freddie Mac K-Series	1,178		1,190
Total Accrued Interest Payable on ABS Issued	$	25,374	$	25,401

(1)Includes accrued interest payable on ABS issued by a re-securitization trust sponsored by Redwood.

54

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 15. Long-Term Debt

The tables below summarize our long-term debt, including the facilities that are available to us, the outstanding balances, the weighted average interest rate, and the maturity information at June 30, 2022 and December 31, 2021.

Table 15.1 – Long-Term Debt

	June 30, 2022
(Dollars in Thousands)	Borrowings		Unamortized Deferred Issuance Costs / Discount		Net Carrying Value		Limit		Weighted Average Interest Rate (1)		Final Maturity
Facilities
Recourse Subordinate Securities Financing
Facility A	$	132,212	$	(104)	$	132,108	N/A		4.21	%	9/2024
CAFL
Facility B	102,018		(202)		101,816		N/A		4.21	%	2/2025
Facility C	76,195		(251)		75,944		N/A		4.75	%	6/2026
Non-Recourse BPL Financing
Facility D	500,608		(1,026)		499,582		$	600,000	L + 2.50%		N/A
Recourse BPL Financing
Facility E	294,702		(103)		294,599		450,000		SOFR + 2.25%		9/2023
Total Long-Term Debt Facilities	1,105,735		(1,686)		1,104,049
Convertible notes
4.75% convertible senior notes	198,629		(1,302)		197,327		N/A		4.75	%	8/2023
5.625% convertible senior notes	150,200		(1,683)		148,517		N/A		5.625	%	7/2024
5.75% exchangeable senior notes	172,092		(2,977)		169,115		N/A		5.75	%	10/2025
7.75% convertible senior notes	215,000		(6,691)		208,309		N/A		7.75	%	6/2027
Trust preferred securities and subordinated notes	139,500		(756)		138,744		N/A		L + 2.25%		7/2037
Total Long-Term Debt	$	1,981,156	$	(15,095)	$	1,966,061

55

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 15. Long-Term Debt - (continued)

	December 31, 2021
(Dollars in Thousands)	Borrowings		Unamortized Deferred Issuance Costs / Discount		Net Carrying Value		Limit		Weighted Average Interest Rate (1)		Final Maturity
Facilities
Recourse Subordinate Securities Financing
Facility A	$	144,385	$	(313)	$	144,072	N/A		4.21	%	9/2024
CAFL
Facility B	102,351		(353)		101,998		N/A		4.21	%	2/2025
Facility C	91,707		(376)		91,331		N/A		4.75	%	6/2026
Non-Recourse BPL Financing
Facility D	307,215		(507)		306,708		$	400,000	L + 2.75%		N/A
Recourse BPL Financing
Facility E	234,349		(123)		234,226		450,000		L + 2.21%		9/2023
Facility F	110,148		—		110,148		450,000		L + 3.35%		6/2023
Total Long-Term Debt Facilities	990,155		(1,672)		988,483
Convertible notes
4.75% convertible senior notes	198,629		(1,836)		196,793		N/A		4.75	%	8/2023
5.625% convertible senior notes	150,200		(2,072)		148,128		N/A		5.625	%	7/2024
5.75% exchangeable senior notes	172,092		(3,384)		168,708		N/A		5.75	%	10/2025
Trust preferred securities and subordinated notes	139,500		(779)		138,721		N/A		L + 2.25%		7/2037
Total Long-Term Debt	$	1,650,576	$	(9,743)	$	1,640,833

(1)Variable rate borrowings are based on 1- or 3-month LIBOR ("L" in the table above) or 1-month SOFR plus an applicable spread.

Refer to Note 15 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021, for a full description of our long-term debt.

Non-Recourse BPL Financing Facility

During the three months ended March 31, 2022, we amended facility D (see Table 15.1 above) to increase the borrowing limit from $400 million to $600 million.

Recourse BPL Financing Facilities

During the three months ended March 31, 2022, we amended the interest rate for Facilities E and F (see Table 15.1 above) to be indexed to a spread over one-month SOFR compared to a LIBOR-indexed spread at March 31, 2022.

During the three months ended June 30, 2022, Facility F was reclassified to short-term debt as the maturity of this facility was less than one year at June 30, 2022.

56

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 15. Long-Term Debt - (continued)

Convertible Notes

In June 2022, we issued $215 million principal amount of 7.75% convertible senior notes due 2027. These notes require semi-annual interest payments at a fixed annual coupon rate of 7.75% until maturity or conversion, which will be no later than June 15, 2027. After deducting the underwriting discount and offering costs, we received $208 million of net proceeds. Including amortization of deferred debt issuance costs, the effective interest expense yield on these notes was approximately 8.50% per annum. We may elect to settle conversions either entirely in cash or in a combination of cash and shares of common stock. Upon conversion, the conversion value will be paid in cash up to at least the principal amount of the notes being converted. The initial conversion rate of the notes is 95.6823 common shares per $1,000 principal amount of notes (equivalent to a conversion price of $10.45 per common share).

The following table below presents the value of loans, securities, and other assets pledged as collateral under our long-term debt at June 30, 2022 and December 31, 2021.

Table 15.2 – Collateral for Long-Term Debt

(In Thousands)	June 30, 2022		December 31, 2021
Collateral Type
Bridge loans	$	779,467	$	554,597
Single-family rental loans	180,482		244,703
Real estate securities
Sequoia securitizations (1)	198,640		247,227
CAFL securitizations (1)	247,106		260,405
Total Collateral for Long-Term Debt	$	1,405,695	$	1,306,932

(1)Represents securities we have retained from consolidated securitization entities. For GAAP purposes, we consolidate the loans and non-recourse ABS debt issued from these securitizations.

The following table summarizes the accrued interest payable on long-term debt at June 30, 2022 and December 31, 2021.

Table 15.3 – Accrued Interest Payable on Long-Term Debt

(In Thousands)	June 30, 2022		December 31, 2021
Long-term debt facilities	$	2,775	$	815
Convertible notes
4.75% convertible senior notes	3,564		3,564
5.625% convertible senior notes	3,896		3,896
5.75% exchangeable senior notes	2,474		2,474
7.75% convertible senior notes	1,018		—
Trust preferred securities and subordinated notes	850		581
Total Accrued Interest Payable on Long-Term Debt	$	14,577	$	11,330

57

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 16. Commitments and Contingencies

Lease Commitments

At June 30, 2022, we were obligated under seven non-cancelable operating leases with expiration dates through 2031 for $22 million of cumulative lease payments. Our operating lease expense was $2 million each for the six-month periods ended June 30, 2022 and 2021.

The following table presents our future lease commitments at June 30, 2022.

Table 16.1 – Future Lease Commitments by Year

(In Thousands)	June 30, 2022
2022 (6 months)	$	2,203
2023	4,428
2024	4,338
2025	3,475
2026	3,420
2027 and thereafter	4,553
Total Lease Commitments	22,417
Less: Imputed interest	(2,969)
Operating Lease Liabilities	$	19,448

During the six months ended June 30, 2022, we did not enter into any new office leases. At June 30, 2022, our operating lease liabilities were $19 million, which were a component of Accrued expenses and other liabilities, and our operating lease right-of-use assets were $17 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 date of adoption. At June 30, 2022, the weighted-average remaining lease term and weighted-average discount rate for our leases was 6 years and 5.1%, respectively.

Commitment to Fund Bridge Loans

As of June 30, 2022, we had commitments to fund up to $835 million of additional advances on existing 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, 2022, we carried a $4 million contingent liability related to these commitments to fund construction advances. During both the three and six months ended June 30, 2022, we recorded a net market valuation loss of $3 million related to this liability through Mortgage banking activities, net and Investment fair value changes, net on our consolidated statements of income (loss). During the three and six months ended June 30, 2021, we recorded a net market valuation gain of $1 million and $2 million, respectively, related to this liability through Mortgage banking activities, net on our consolidated statements of income (loss).

Commitment to Fund Partnerships

In 2018, we invested in two partnerships created to acquire and manage certain mortgage servicing related assets (see Note 10 for additional detail). In connection with this investment, we are required to fund future net servicer advances related to the underlying mortgage loans. The actual amount of net servicer advances we may fund in the future is subject to significant uncertainty and will be based on the credit and prepayment performance of the underlying loans.

58

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 16. Commitments and Contingencies - (continued)

Commitment to Acquire HEIs

During the second quarter of 2022, we entered into an additional flow purchase agreement to acquire $100 million home equity investment contracts from a third party. At June 30, 2022, we had outstanding flow purchase agreements with third parties, with an aggregate commitment to purchase $350 million of HEIs, of which $225 million of the commitments remained outstanding. We account for these investments under the fair value option. See Note 10 for additional detail on these investments.

Commitments to Fund Strategic Investments

In the first quarter of 2022, we entered into a $25 million commitment to an investment fund with the mission of providing quality workforce housing opportunities in several California urban communities, including the San Francisco Bay Area. At June 30, 2022, we had funded $9.4 million of this commitment. This investment is included in Other Investments on our Consolidated Balance Sheets.

In 2021, we entered into a commitment to fund a $5 million RWT Horizons investment. At June 30, 2022, we had funded $1 million of this commitment. This investment is included in Other Investments on our Consolidated Balance Sheets.

Loss Contingencies — Risk-Sharing

During 2015 and 2016, we sold conforming loans to the Agencies with an original unpaid principal balance of $3.19 billion, subject to our risk-sharing arrangements with the Agencies. At June 30, 2022, the maximum potential amount of future payments we could be required to make under these arrangements was $44 million and this amount was partially collateralized by assets we transferred to pledged accounts and is presented as pledged collateral in Other assets on our consolidated balance sheets. We have no recourse to any third parties that would allow us to recover any amounts related to our obligations under the arrangements. At June 30, 2022, we had incurred less than $100 thousand of cumulative losses under these arrangements. For the three and six months ended June 30, 2022, other income related to these arrangements was $0.3 million and $1 million, respectively.

All of the loans in the reference pools subject to these risk-sharing arrangements were originated in 2014 and 2015, and at June 30, 2022, the loans had an unpaid principal balance of $476 million and a weighted average FICO score of 756 (at origination) and LTV ratio of 74% (at origination). At June 30, 2022, $12 million of the loans were 90 days or more delinquent, of which four of these loans with an unpaid principal balance of $1 million were in foreclosure. At June 30, 2022, the carrying value of our guarantee obligation was $7 million and included $5 million designated as a non-amortizing credit reserve, which we believe is sufficient to cover current expected losses under these obligations.

Our consolidated balance sheets include assets of special purpose entities ("SPEs") associated with these risk-sharing arrangements (i.e., the "pledged collateral" referred to above) that can only be used to settle obligations of these SPEs for which the creditors of these SPEs (the Agencies) do not have recourse to us. At both June 30, 2022 and December 31, 2021, assets of such SPEs totaled $34 million, and liabilities of such SPEs totaled $7 million.

Loss Contingencies — Residential Repurchase Reserve

We maintain a repurchase reserve for potential obligations arising from representation and warranty violations related to residential loans we have sold to securitization trusts or third parties and for conforming residential loans associated with MSRs that we have purchased from third parties. We do not originate residential 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. Additionally, for certain loans we sold during the second quarter of 2020 that were previously held for investment, we have a direct obligation to repurchase these loans in the event of any early payment defaults (or "EPDs") by the underlying mortgage borrowers within certain specified periods following the sales.

At June 30, 2022 and December 31, 2021, our repurchase reserve associated with our residential loans and MSRs was $6 million and $9 million, respectively, and was recorded in Accrued expenses and other liabilities on our consolidated balance sheets. During the six months ended June 30, 2022 and 2021, we received three and one repurchase requests, respectively, and repurchased zero and one loan, respectively. During both the three and six months ended June 30, 2022, we recorded a reversal of repurchase provision

59

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 16. Commitments and Contingencies - (continued)

expense of $4 million, and during the three and six months ended June 30, 2021, we recorded repurchase provision expense of $0.2 million and $0.3 million, respectively, that were recorded in Mortgage banking activities, net, Investment fair value changes, net, and Other income on our consolidated statements of income.

Loss Contingencies — Litigation, Claims and Demands

There is no significant update regarding the litigation matters described in Note 16 within the financial statements included in Redwood’s Annual Report on Form 10-K for the year ended December 31, 2021 under the heading “Loss Contingencies - Litigation, Claims and Demands.” At June 30, 2022, the aggregate amount of loss contingency reserves established in respect of the FHLB-Seattle and Schwab litigation matters described in our Annual Report on Form 10-K for the year ended December 31, 2021 was $2 million.

Note 17. Equity

The following table provides a summary of changes to accumulated other comprehensive income (loss) by component for the three and six months ended June 30, 2022 and 2021.

Table 17.1 – Changes in Accumulated Other Comprehensive Income (Loss) by Component

	Three Months Ended June 30, 2022				Three Months Ended June 30, 2021
(In Thousands)	Available-for-Sale Securities		Interest Rate Agreements Accounted for as Cash Flow Hedges		Available-for-Sale Securities		Interest Rate Agreements Accounted for as Cash Flow Hedges
Balance at beginning of period	$	48,938	$	(75,412)	$	84,527	$	(79,539)
Other comprehensive (loss) income before reclassifications	(33,409)		—		11,224		—
Amounts reclassified from other accumulated comprehensive (income) loss	1,066		1,029		(7,500)		1,028
Net current-period other comprehensive (loss) income	(32,343)		1,029		3,724		1,028
Balance at End of Period	$	16,595	$	(74,383)	$	88,251	$	(78,511)

	Six Months Ended June 30, 2022				Six Months Ended June 30, 2021
(In Thousands)	Available-for-Sale Securities		Interest Rate Agreements Accounted for as Cash Flow Hedges		Available-for-Sale Securities		Interest Rate Agreements Accounted for as Cash Flow Hedges
Balance at beginning of period	$	67,503	$	(76,430)	$	76,336	$	(80,557)
Other comprehensive (loss) income before reclassifications	(51,282)		—		22,210		—
Amounts reclassified from other accumulated comprehensive (income) loss	374		2,047		(10,295)		2,046
Net current-period other comprehensive (loss) income	(50,908)		2,047		11,915		2,046
Balance at End of Period	$	16,595	$	(74,383)	$	88,251	$	(78,511)

60

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 17. Equity - (continued)

The following table provides a summary of reclassifications out of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2022 and 2021.

Table 17.2 – Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

		Amount Reclassified From Accumulated Other Comprehensive (Loss)
	Affected Line Item in the	Three Months Ended June 30,
(In Thousands)	Income Statement	2022		2021
Net Realized (Gain) Loss on AFS Securities
Increase (decrease) in allowance for credit losses on AFS securities	Investment fair value changes, net	$	1,066	$	(13)
Gain on sale of AFS securities	Realized gains, net	—		(7,487)
		$	1,066	$	(7,500)
Net Realized Loss on Interest Rate   Agreements Designated as Cash Flow Hedges
Amortization of deferred loss	Interest expense	$	1,029	$	1,028
		$	1,029	$	1,028

		Amount Reclassified From Accumulated Other Comprehensive (Loss)
	Affected Line Item in the	Six Months Ended June 30,
(In Thousands)	Income Statement	2022		2021
Net Realized (Gain) Loss on AFS Securities
Increase (decrease) in allowance for credit losses on AFS securities	Investment fair value changes, net	$	1,771	$	(388)
Gain on sale of AFS securities	Realized gains, net	(1,397)		(9,907)
		$	374	$	(10,295)
Net Realized Loss on Interest Rate   Agreements Designated as Cash Flow Hedges
Amortization of deferred loss	Interest expense	$	2,047	$	2,046
		$	2,047	$	2,046

Issuance of Common Stock

We have an established program to sell common stock from time to time in at-the-market ("ATM") offerings. During the six months ended June 30, 2022, we issued 5,232,869 common shares for net proceeds of $67 million under this program. During the three months ended March 31, 2022, we increased the capacity of this program to $175 million, all of which remained outstanding for future offerings under this program as of June 30, 2022.

Direct Stock Purchase and Dividend Reinvestment Plan

During the six months ended June 30, 2022, we did not issue any shares of common stock through our Direct Stock Purchase and Dividend Reinvestment Plan. At June 30, 2022, approximately 6 million shares remained outstanding for future offerings under this plan.

61

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 17. Equity - (continued)

Earnings per Common Share

The following table provides the basic and diluted (loss) earnings per common share computations for the three and six months ended June 30, 2022 and 2021.

Table 17.3 – Basic and Diluted Earnings per Common Share

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands, except Share Data)	2022		2021		2022		2021
Basic Earnings per Common Share:
Net (loss) income attributable to Redwood	$	(99,966)	$	90,025	$	(69,051)	$	187,282
Less: Dividends and undistributed earnings allocated to participating securities	(1,159)		(3,149)		(2,286)		(6,458)
Net (loss) income allocated to common shareholders	$	(101,125)	$	86,876	$	(71,337)	$	180,824
Basic weighted average common shares outstanding	119,660,173		112,921,070		119,771,554		112,337,984
Basic (Loss) Earnings per Common Share	$	(0.85)	$	0.77	$	(0.60)	$	1.61
Diluted Earnings per Common Share:
Net (loss) income attributable to Redwood	$	(99,966)	$	90,025	$	(69,051)	$	187,282
Less: Dividends and undistributed earnings allocated to participating securities	(1,159)		(2,869)		(2,286)		(5,829)
Add back: Interest expense on convertible notes for the period, net of tax	—		6,990		—		13,971
Net (loss) income allocated to common shareholders	$	(101,125)	$	94,146	$	(71,337)	$	195,424
Weighted average common shares outstanding	119,660,173		112,921,070		119,771,554		112,337,984
Net effect of dilutive equity awards	—		273,139		—		234,353
Net effect of assumed convertible notes conversion to common shares	—		28,566,875		—		28,566,875
Diluted weighted average common shares outstanding	119,660,173		141,761,084		119,771,554		141,139,212
Diluted (Loss) Earnings per Common Share	$	(0.85)	$	0.66	$	(0.60)	$	1.38

We included participating securities, which are certain equity awards that have non-forfeitable dividend participation rights, in the calculations of basic and diluted earnings per common share as we determined that the two-class method was more dilutive than the alternative treasury stock method for these shares. Dividends and undistributed earnings allocated to participating securities under the basic and diluted earnings per share calculations require specific shares to be included that may differ in certain circumstances.

During the three and six months ended June 30, 2021, certain of our convertible notes were determined to be dilutive and were included in the calculation of diluted EPS under the "if-converted" method. Under this method, the periodic interest expense (net of applicable taxes) for dilutive notes is added back to the numerator and the weighted average number of shares that the notes are entitled to (if converted, regardless of whether they are in or out of the money) are included in the denominator.

For the three and six months ended June 30, 2022, 33,992,377 and 31,294,614 of common shares, respectively, related to the assumed conversion of our convertible notes were antidilutive and were excluded in the calculation of diluted earnings per share. For the three and six months ended June 30, 2022, the number of outstanding equity awards that were antidilutive totaled 249,224 and 278,604, respectively. For the three and six months ended June 30, 2021, the number of outstanding equity awards that were antidilutive totaled 18,645 and 17,053, respectively.

62

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 17. Equity - (continued)

Stock Repurchases

Our Board of Directors previously approved an authorization for the repurchase of up to $100 million of our common stock, and also authorized the repurchase of outstanding debt securities, including convertible and exchangeable debt. This authorization has no expiration date and does not obligate us to acquire any specific number of shares or securities. During the three months ended June 30, 2022, we repurchased 3.7 million shares of our common stock for a total cost of $33 million. At June 30, 2022, $46 million of the current authorization remained available for the repurchase of shares of our common stock and we also continued to be authorized to repurchase outstanding debt securities. In July 2022, our Board of Directors approved a new repurchase authorization – see Note 24 for further discussion.

Note 18. Equity Compensation Plans

At June 30, 2022 and December 31, 2021, 5,551,039 and 5,958,390 shares of common stock, respectively, were available for grant under our Incentive Plan. The unamortized compensation cost of awards issued under the Incentive Plan, which are settled by delivery of shares of common stock and purchases under the Employee Stock Purchase Plan, totaled $39 million at June 30, 2022, as shown in the following table.

Table 18.1 – Activities of Equity Compensation Costs by Award Type

	Six Months Ended June 30, 2022
(In Thousands)	Restricted Stock Awards		Restricted Stock Units		Deferred Stock Units		Performance Stock Units		Employee Stock Purchase Plan		Total
Unrecognized compensation cost at beginning of period	$	84	$	3,589	$	26,473	$	12,237	$	—	$	42,383
Equity grants	—		2,684		4,350		—		323		7,357
Performance-based valuation adjustment	—		—		—		(1,719)		—		(1,719)
Equity grant forfeitures	(5)		(339)		—		—		—		(344)
Equity compensation expense	(72)		(1,049)		(5,782)		(1,988)		(162)		(9,053)
Unrecognized Compensation Cost at End of Period	$	7	$	4,885	$	25,041	$	8,530	$	161	$	38,624

At June 30, 2022, the weighted average amortization period remaining for all of our equity awards was less than two years.

Restricted Stock Awards ("RSAs")

At June 30, 2022 and December 31, 2021, there were 1,551 and 28,141 shares of RSAs outstanding, respectively. Restrictions on these shares lapse during 2022. During the six months ended June 30, 2022, there were no RSAs granted, restrictions on 26,249 RSAs lapsed and those shares were distributed, and 341 RSAs were forfeited.

Restricted Stock Units ("RSUs")

At June 30, 2022 and December 31, 2021, there were 486,546 and 431,072 RSUs outstanding, respectively. During the six months ended June 30, 2022, there were 206,179 RSUs granted, 120,154 RSUs distributed, and 30,551 RSUs forfeited. Unvested RSUs at June 30, 2022 vest through 2026.

Deferred Stock Units (“DSUs”)

At June 30, 2022 and December 31, 2021, there were 4,551,475 and 4,022,088 DSUs outstanding, respectively, of which 2,089,958 and 1,469,903, respectively, had vested. During the six months ended June 30, 2022, there were 824,875 DSUs granted, 295,488 DSUs distributed, and zero DSUs forfeited. Unvested DSUs at June 30, 2022 vest through 2026.

63

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 18. Equity Compensation Plans - (continued)

Performance Stock Units (“PSUs”)

At June 30, 2022 and December 31, 2021, the target number of PSUs that were unvested was 1,267,849 and 1,473,883, respectively. Vesting for PSUs generally occurs three years from their respective grant dates based on various total shareholder return performance calculations, as discussed in Note 18 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021. During the three months ended June 30, 2022, for PSUs granted in 2020 and 2021, we decreased the book value total shareholder return estimate for the 2022 performance period, reducing the future equity compensation expense related to these awards by $2 million.

For 206,034 target PSU awards that were granted in December 2018, the performance vesting period ended on January 1, 2022. These 2018 PSU awards failed to reach a threshold level under their performance-based vesting criteria and resulted in the vesting of no shares of our common stock underlying these PSUs.

Employee Stock Purchase Plan ("ESPP")

The ESPP allows a maximum of 850,000 shares of common stock to be purchased in aggregate for all employees. As of June 30, 2022 and December 31, 2021, 607,877 and 569,728 shares had been purchased, respectively, and there remained a negligible amount of uninvested employee contributions in the ESPP at June 30, 2022.

Note 19. Mortgage Banking Activities, Net

The following table presents the components of Mortgage banking activities, net, recorded in our consolidated statements of income for the three and six months ended June 30, 2022 and 2021.

Table 19.1 – Mortgage Banking Activities

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Residential Mortgage Banking Activities, Net
Changes in fair value of:
Residential loans, at fair value (1)	$	(33,414)	$	76,907	$	(102,236)	$	47,634
Trading securities (2)	1,315		(1,095)		4,101		(374)
Risk management derivatives (3)	9,900		(55,740)		83,254		33,224
Other income (expense), net (4)	4,412		1,193		5,029		2,216
Total residential mortgage banking activities, net	(17,787)		21,265		(9,852)		82,700
Business Purpose Mortgage Banking Activities, Net:
Changes in fair value of:
Single-family rental loans, at fair value (1)	(39,994)		25,966		(65,187)		36,214
Risk management derivatives (3)	15,487		(2,504)		32,520		1,354
Bridge loans, at fair value	116		2,225		2,251		3,269
Other income, net (5)	12,161		7,467		26,566		13,489
Total business purpose mortgage banking activities, net	(12,230)		33,154		(3,850)		54,326
Mortgage Banking Activities, Net	$	(30,017)	$	54,419	$	(13,702)	$	137,026

(1)For residential loans, includes changes in fair value for associated loan purchase and forward sale commitments. For single-family rental loans, includes changes in fair value for associated interest rate lock commitments.

(2)Represents fair value changes on trading securities that are being used as hedges to manage the mark-to-market risks associated with our residential mortgage banking operations.

(3)Represents market valuation changes of derivatives that were used to manage risks associated with our mortgage banking operations.

(4)Amounts in this line item include other fee income from loan acquisitions and provisions for repurchases, presented net.

(5)Amounts in this line item include other fee income from loan originations.

64

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 20. Other Income, Net

The following table presents the components of Other income recorded in our consolidated statements of income for the three and six months ended June 30, 2022 and 2021.

Table 20.1 – Other Income, Net

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
MSR income, net (1)	$	5,376	$	(43)	$	9,679	$	654
Bridge loan fees	1,473		911		2,463		1,604
Risk share income	323		861		783		1,743
Other	(166)		397		64		1,968
Other Income, Net	$	7,006	$	2,126	$	12,989	$	5,969

(1)Includes servicing fees and fair value changes for MSRs, net.

65

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 21. General and Administrative Expenses, Loan Acquisition Costs, and Other Expenses

Components of our general and administrative expenses, loan acquisition costs, and other expenses for the three and six months ended June 30, 2022 and 2021 are presented in the following table.

Table 21.1 – Components of General and Administrative Expenses, Loan Acquisition Costs, and Other Expenses

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
General and Administrative Expenses
Fixed compensation expense	$	12,110	$	11,269	$	26,738	$	23,074
Annual variable compensation expense	1,811		12,508		5,168		31,177
Long-term incentive award expense (1)	5,532		5,682		11,192		9,851
Acquisition-related equity compensation expense (2)	—		1,212		—		2,424
Systems and consulting	3,703		3,272		6,887		6,249
Office costs	2,083		2,024		4,108		3,832
Accounting and legal	1,576		1,221		3,251		1,935
Corporate costs	1,000		873		1,864		1,564
Other	4,151		2,533		7,612		4,039
Total General and Administrative Expenses	31,966		40,594		66,820		84,145
Loan Acquisition Costs
Commissions	2,116		1,661		4,730		2,924
Underwriting costs	1,096		1,836		2,468		3,521
Transfer and holding costs	268		251		747		862
Total Loan Acquisition Costs	3,480		3,748		7,945		7,307
Other Expenses
Amortization of purchase-related intangible assets	3,306		3,873		6,840		7,746
Other	162		112		713		335
Total Other Expenses	3,468		3,985		7,553		8,081
Total General and Administrative Expenses, Loan Acquisition Costs, and Other Expenses	$	38,914	$	48,327	$	82,318	$	99,533

(1)For the three months ended June 30, 2022 and 2021, long-term incentive award expense included $5 million and $4 million of expense for awards settleable in shares of our common stock, and $0.4 million and $1 million of expense for awards settleable in cash, respectively. For the six months ended June 30, 2022 and 2021, long-term incentive award expense included $10 million and $7 million of expense for awards settleable in shares of our common stock, and $1 million and $3 million of expense for awards settleable in cash, respectively.

(2)Acquisition-related equity compensation expense relates to 588,260 shares of restricted stock that were issued to members of CoreVest management as a component of the consideration paid to them for our purchase of their interests in CoreVest in 2019. The grant date fair value of these restricted stock awards was $10 million, which was recognized as compensation expense over the two-year vesting period on a straight-line basis in accordance with GAAP.

66

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 21. General and Administrative Expenses, Loan Acquisition Costs, and Other Expenses - (continued)

Long-Term Cash-Based Awards and Cash Settled Deferred Stock Units

During the six months ended June 30, 2022, $2 million of long-term cash-based retention awards were granted to employees that will vest and be paid over a three-year period, subject to continued employment through the vesting periods from 2022 through 2025. At both June 30, 2022 and December 31, 2021, the unamortized compensation cost of long-term cash-based awards was $4 million.

During the six months ended June 30, 2022, there were no cash-settled deferred stock units granted to employees. Cash-settled deferred stock units that were granted in 2020 and 2021 vest over four years through 2025. At June 30, 2022 and December 31, 2021, the unamortized compensation cost of cash settled deferred stock units was $3 million and $7 million, respectively. The unamortized compensation cost is adjusted for changes in the value of our common stock at the end of each reporting period.

Refer to Note 21 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021, for additional information regarding long-term cash-based awards and cash-settled deferred stock units.

Note 22. Taxes

We believe that we have met all requirements for qualification as a REIT for federal income tax purposes. To qualify as a REIT, the Company must distribute at least 90% of its annual REIT taxable income and meet certain other requirements that relate to, among others, the assets it holds, the income it generates, and the composition of its stockholders.

For the six months ended June 30, 2022 and 2021, we recognized a benefit from income taxes of $12 million and a provision for income taxes of $18 million, respectively. The following is a reconciliation of the statutory federal and state tax rates to our effective tax rate at June 30, 2022 and 2021.

Table 22.1 – Reconciliation of Statutory Tax Rate to Effective Tax Rate

	June 30, 2022		June 30, 2021
Federal statutory rate	21.0	%	21.0	%
State statutory rate, net of Federal tax effect	8.6	%	8.6	%
Differences in taxable (loss) income from GAAP income	(22.4)	%	(14.1)	%
Change in valuation allowance	(4.4)	%	(3.3)	%
Dividends paid deduction	11.9	%	(3.3)	%
Effective Tax Rate	14.7	%	8.9	%

We assessed our tax positions for all open tax years (i.e., Federal, 2018 to 2022, and State, 2017 to 2022) at June 30, 2022 and December 31, 2021, and concluded that we had no uncertain tax positions that resulted in material unrecognized tax benefits.

Note 23. Segment Information

Redwood operates in three segments: Residential Mortgage Banking, Business Purpose Mortgage Banking and Investment Portfolio. The accounting policies of the reportable segments are the same as those described in Note 3 — Summary of Significant Accounting Policies. For a full description of our segments, see Part I, Item 1—Business in our Annual Report on Form 10-K for the year ended December 31, 2021.

Segment contribution represents the measure of profit that management uses to assess the performance of our business segments and make resource allocation and operating decisions. Certain corporate expenses not directly assigned or allocated to one of our three segments, as well as activity from certain consolidated Sequoia entities, are included in the Corporate/Other column as reconciling items to our consolidated financial statements. These unallocated corporate expenses primarily include interest expense from our convertible notes and trust preferred securities, indirect general and administrative expenses and other expense.

The following tables present financial information by segment for the three and six months ended June 30, 2022 and 2021.

67

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 23. Segment Information - (continued)

Table 23.1 – Business Segment Financial Information

	Three Months Ended June 30, 2022
(In Thousands)	Residential Mortgage Banking		Business Purpose Mortgage Banking		Investment Portfolio		Corporate/ Other		Total
Interest income	$	13,199	$	8,586	$	144,478	$	1,192	$	167,455
Interest expense	(8,297)		(4,258)		(102,589)		(11,823)		(126,967)
Net interest income	4,902		4,328		41,889		(10,631)		40,488
Non-interest (loss) income
Mortgage banking activities, net	(17,787)		(12,230)		—		—		(30,017)
Investment fair value changes, net	—		—		(98,111)		10,139		(87,972)
Other income, net	—		1,054		6,235		(283)		7,006
Realized gains, net	—		—		—		—		—
Total non-interest (loss) income, net	(17,787)		(11,176)		(91,876)		9,856		(110,983)
General and administrative expenses	(6,082)		(11,069)		(3,041)		(11,774)		(31,966)
Loan acquisition costs	(881)		(2,599)		—		—		(3,480)
Other expenses	74		(3,306)		(236)		—		(3,468)
Benefit from (provision for) income taxes	5,588		3,169		686		—		9,443
Segment Contribution	$	(14,186)	$	(20,653)	$	(52,578)	$	(12,549)
Net (Loss)									$	(99,966)
Non-cash amortization (expense) income, net	$	(760)	$	(3,480)	$	(1,450)	$	(2,137)	$	(7,827)

	Six Months Ended June 30, 2022
(In Thousands)	Residential Mortgage Banking		Business Purpose Mortgage Banking		Investment Portfolio		Corporate/ Other		Total
Interest income	$	26,166	$	13,427	$	315,050	$	2,212	$	356,855
Interest expense	(15,233)		(6,826)		(219,171)		(22,035)		(263,265)
Net interest income	10,933		6,601		95,879		(19,823)		93,590
Non-interest (loss) income
Mortgage banking activities, net	(9,852)		(3,850)		—		—		(13,702)
Investment fair value changes, net	—		—		(103,517)		9,425		(94,092)
Other income, net	—		1,629		11,517		(157)		12,989
Realized gains, net	—		—		2,581		—		2,581
Total non-interest (loss) income, net	(9,852)		(2,221)		(89,419)		9,268		(92,224)
General and administrative expenses	(12,183)		(21,541)		(6,174)		(26,922)		(66,820)
Loan acquisition costs	(2,298)		(5,647)		—		—		(7,945)
Other expenses	74		(6,840)		(787)		—		(7,553)
Benefit from (provision for) income taxes	6,595		6,450		(1,144)		—		11,901
Segment Contribution	$	(6,731)	$	(23,198)	$	(1,645)	$	(37,477)
Net (Loss)									$	(69,051)
Non-cash amortization (expense) income, net	$	(298)	$	(7,370)	$	(9,644)	$	(4,170)	$	(21,482)

68

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 23. Segment Information - (continued)

	Three Months Ended June 30, 2021
(In Thousands)	Residential Mortgage Banking		Business Purpose Mortgage Banking		Investment Portfolio		Corporate/ Other		Total
Interest income	$	13,246	$	3,026	$	121,248	$	1,175	$	138,695
Interest expense	(7,618)		(1,521)		(88,693)		(10,233)		(108,065)
Net interest income	5,628		1,505		32,555		(9,058)		30,630
Non-interest income
Mortgage banking activities, net	21,265		33,154		—		—		54,419
Investment fair value changes, net	—		—		49,727		(247)		49,480
Other income, net	—		156		1,705		265		2,126
Realized gains, net	—		—		8,384		—		8,384
Total non-interest income, net	21,265		33,310		59,816		18		114,409
General and administrative expenses	(6,898)		(12,356)		(3,157)		(18,183)		(40,594)
Loan acquisition costs	(1,887)		(1,861)		—		—		(3,748)
Other expenses	—		(3,873)		(112)		—		(3,985)
Provision for income taxes	(3,725)		(2,182)		(780)		—		(6,687)
Segment Contribution	$	14,383	$	14,543	$	88,322	$	(27,223)
Net Income									$	90,025
Non-cash amortization (expense) income, net	$	(13)	$	(4,054)	$	7	$	(1,955)	$	(6,015)

	Six Months Ended June 30, 2021
(In Thousands)	Residential Mortgage Banking		Business Purpose Mortgage Banking		Investment Portfolio		Corporate/ Other		Total
Interest income	$	20,825	$	5,881	$	237,757	$	2,537	$	267,000
Interest expense	(12,365)		(3,120)		(174,638)		(20,494)		(210,617)
Net interest income	8,460		2,761		63,119		(17,957)		56,383
Non-interest income
Mortgage banking activities, net	82,700		54,326		—		—		137,026
Investment fair value changes, net	—		—		95,488		(921)		94,567
Other income, net	—		278		5,279		412		5,969
Realized gains, net	—		—		11,100		—		11,100
Total non-interest income (loss), net	82,700		54,604		111,867		(509)		248,662
General and administrative expenses	(19,587)		(22,550)		(6,321)		(35,687)		(84,145)
Loan acquisition costs	(3,291)		(3,353)		(659)		(4)		(7,307)
Other expenses	(6)		(7,650)		(442)		17		(8,081)
Provision for income taxes	(13,211)		(3,503)		(1,516)		—		(18,230)
Segment Contribution	$	55,065	$	20,309	$	166,048	$	(54,140)
Net Income									$	187,282
Non-cash amortization income (expense), net	$	(16)	$	(8,152)	$	(227)	$	(3,850)	$	(12,245)

69

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 23. Segment Information - (continued)

The following table presents the components of Corporate/Other for the three and six months ended June 30, 2022 and 2021.

Table 23.2 – Components of Corporate/Other

	Three Months Ended June 30,
	2022						2021
(In Thousands)	Legacy Consolidated VIEs (1)		Other		Total		Legacy Consolidated VIEs (1)		Other		Total
Interest income	$	1,108	$	84	$	1,192	$	1,169	$	6	$	1,175
Interest expense	(967)		(10,856)		(11,823)		(755)		(9,478)		(10,233)
Net interest income	141		(10,772)		(10,631)		414		(9,472)		(9,058)
Non-interest income
Investment fair value changes, net	(336)		10,475		10,139		(216)		(31)		(247)
Other income	—		(283)		(283)		—		265		265
Total non-interest income, net	(336)		10,192		9,856		(216)		234		18
General and administrative expenses	—		(11,774)		(11,774)		—		(18,183)		(18,183)
Loan acquisition costs	—		—		—		—		—		—
Other expenses	—		—		—		—		—		—
Total	$	(195)	$	(12,354)	$	(12,549)	$	198	$	(27,421)	$	(27,223)

	Six Months Ended June 30,
	2022						2021
(In Thousands)	Legacy Consolidated VIEs (1)		Other		Total		Legacy Consolidated VIEs (1)		Other		Total
Interest income	$	2,120	$	92	$	2,212	$	2,517	$	20	$	2,537
Interest expense	(1,668)		(20,367)		(22,035)		(1,630)		(18,864)		(20,494)
Net interest income	452		(20,275)		(19,823)		887		(18,844)		(17,957)
Non-interest income
Investment fair value changes, net	(1,050)		10,475		9,425		(915)		(6)		(921)
Other income	—		(157)		(157)		—		412		412
Realized gains, net	—		—		—		—		—		—
Total non-interest income, net	(1,050)		10,318		9,268		(915)		406		(509)
General and administrative expenses	—		(26,922)		(26,922)		—		(35,687)		(35,687)
Loan acquisition costs	—		—		—		—		(4)		(4)
Other expenses	—		—		—		—		17		17
Total	$	(598)	$	(36,879)	$	(37,477)	$	(28)	$	(54,112)	$	(54,140)

(1)     Legacy consolidated VIEs represent Legacy Sequoia entities that are consolidated for GAAP financial reporting purposes. See Note 4 for further discussion on VIEs.    

70

REDWOOD TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

Note 23. Segment Information - (continued)

The following table presents supplemental information by segment at June 30, 2022 and December 31, 2021.

Table 23.3 – Supplemental Segment Information

(In Thousands)	Residential Mortgage Banking		Business Purpose Lending Mortgage Banking		Investment Portfolio		Corporate/ Other		Total
June 30, 2022
Residential loans	$	990,924	$	—	$	5,378,886	$	208,789	$	6,578,599
Business purpose loans	—		503,945		4,698,992		—		5,202,937
Consolidated Agency multifamily loans	—		—		443,114		—		443,114
Real estate securities	3,994		—		280,284		—		284,278
Other investments	—		—		615,807		63,860		679,667
Intangible assets	—		34,720		—		—		34,720
Total assets	1,032,281		645,428		11,513,520		684,307		13,875,536
December 31, 2021
Residential loans	$	1,673,235	$	—	$	5,688,742	$	230,455	$	7,592,432
Business purpose loans	—		347,860		4,443,129		—		4,790,989
Consolidated Agency multifamily loans	—		—		473,514		—		473,514
Real estate securities	4,927		—		372,484		—		377,411
Other investments	—		—		606,267		35,702		641,969
Intangible assets	—		41,561		—		—		41,561
Total assets	1,716,285		464,967		11,770,486		755,206		14,706,944

Note 24. Subsequent Events

In July 2022, we completed the previously-announced acquisition of Riverbend Funding, LLC for an initial cash purchase price paid at closing of approximately $44 million (subject to certain adjustments including potential earnout consideration).

In July 2022, our Board of Directors approved an authorization for the repurchase of up to $125 million of our common stock, and also authorized the repurchase of outstanding debt securities, including convertible and exchangeable debt. This authorization replaced our previous $100 million stock repurchase authorization. This authorization has no expiration date and does not obligate us to acquire any specific number of shares or securities.

71

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in five main sections:

•    Overview

•    Results of Operations

–Consolidated Results of Operations

–Results of Operations by Segment

–Income Taxes

•    Liquidity and Capital Resources

•    Critical Accounting Estimates

•    Market and Other Risks

Our MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and in Part II, Item 8, Financial Statements and Supplementary Data in our most recent Annual Report on Form 10-K, as well as the sections entitled “Risk Factors” in Part I, Item 1A of our most recent Annual Report on Form 10-K and Part II, Item 1A of this Quarterly Report on Form 10-Q, as well as other cautionary statements and risks described elsewhere in this report and our most recent Annual Report on Form 10-K. The discussion in this MD&A contains forward-looking statements that involve substantial risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, such as those discussed in the Cautionary Statement below.

References herein to “Redwood,” the “company,” “we,” “us,” and “our” include Redwood Trust, Inc. and its consolidated subsidiaries, unless the context otherwise requires. Financial information concerning our business is set forth in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and notes thereto, which are included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Our website can be found at www.redwoodtrust.com. We make available, free of charge through the investor information section of our website, access to our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934, as well as proxy statements, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange Commission (“SEC”). We also make available, free of charge, access to our charters for our Audit Committee, Compensation Committee, and Governance and Nominating Committee, our Corporate Governance Standards, and our Code of Ethics governing our directors, officers, and employees. Within the time period required by the SEC and the New York Stock Exchange, we will post on our website any amendment to the Code of Ethics and any waiver applicable to any executive officer or director of Redwood. In addition, our website includes information concerning purchases and sales of our equity securities by our executive officers and directors, and may include disclosure relating to certain non-GAAP financial measures (as defined in the SEC’s Regulation G) that we may make public orally, telephonically, by webcast, by broadcast, or by similar means from time to time. The information on our website is not part of this Quarterly Report on Form 10-Q.

Our Investor Relations Department can be contacted at One Belvedere Place, Suite 300, Mill Valley, CA 94941, Attn: Investor Relations, telephone (866) 269-4976.

72

Our Business

Redwood Trust, Inc., together with its subsidiaries, is a specialty finance company focused on several distinct areas of housing credit, with a mission to help make quality housing, whether rented or owned, accessible to all American households. Our operating platforms occupy a unique position in the housing finance value chain, providing liquidity to growing segments of the U.S. housing market not well served by government programs. We deliver customized housing credit investments to a diverse mix of investors through our best-in-class securitization platforms, whole-loan distribution activities and our publicly-traded securities. Our aggregation, origination and investment activities have evolved to incorporate a diverse mix of residential, business purpose and multifamily assets. Our goal is to provide attractive returns to shareholders through a stable and growing stream of earnings and dividends, capital appreciation, and a commitment to technological innovation that facilitates risk-minded scale. We operate our business in three segments: Residential Mortgage Banking, Business Purpose Mortgage Banking, and Investment Portfolio. For a full description of our segments, see Part 1, Item 1—Business in our Annual Report on Form 10-K for the year ended December 31, 2021.

Cautionary Statement

This Quarterly Report on Form 10-Q and the documents incorporated by reference herein contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve numerous risks and uncertainties. Our actual results may differ from our beliefs, expectations, estimates, and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Forward-looking statements are not historical in nature and can be identified by words such as “anticipate,” “estimate,” “will,” “should,” “expect,” “believe,” “intend,” “seek,” “plan” and similar expressions or their negative forms, or by references to strategy, plans, or intentions. These forward-looking statements are subject to risks and uncertainties, including, among other things, those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, under the caption “Risk Factors.” Other risks, uncertainties, and factors that could cause actual results to differ materially from those projected may be described from time to time in reports we file with the SEC, including reports on Forms 10-Q and 8-K. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Statements regarding the following subjects, among others, are forward-looking by their nature: (i) statements we make regarding Redwood's business strategy and strategic focus, including statements relating to our overall market position, strategy and long-term prospects (including trends driving the flow of capital in the housing finance market, our strategic initiatives designed to capitalize on those trends, our ability to attract capital to finance those initiatives, our approach to raising capital, and our ability to pay dividends in the future); (ii) statements related to our financial outlook and expectations for 2022 and future years, including statements regarding the economic impact of inflation, supply chain disruptions, and war in Europe; (iii) statements regarding our expectations with respect to Riverbend’s integration into, and effect upon, the Redwood and CoreVest businesses; (iv) statements related to our opportunities for growth, including opportunities to grow and increase our market share for our residential and business purpose lending mortgage banking platforms; (v) statements related to our investment portfolio, including that there remains potential upside in our portfolio through market discount, and that at June 30, 2022, our securities portfolio had approximately $391 million of net discount to par (approximately $3.35 per share), which we have the potential to recover over time; (vi) statements related to RWT Horizons and our strategic investment initiatives; (vii) statements relating to our estimate of our available capital (including that we estimate our available capital at June 30, 2022 was approximately $190 million); (viii) statements relating to acquiring residential mortgage loans in the future that we have identified for purchase or plan to purchase, including the amount of such loans that we identified for purchase during the second quarter of 2022 and at June 30, 2022, expected fallout and the corresponding volume of residential mortgage loans expected to be available for purchase, and residential mortgage loans subject to forward sale commitments; (ix) statements we make regarding future dividends, including with respect to our regular quarterly dividends in 2022; and (x) statements regarding our expectations and estimates relating to the characterization for income tax purposes of our dividend distributions, our expectations and estimates relating to tax accounting, tax liabilities and tax savings, and GAAP tax provisions, and our estimates of REIT taxable income and TRS taxable income.

Many of the factors that could affect our actual results are summarized below. One of the most significant factors, however, is the ongoing impact of the pandemic on the United States economy, homeowners, renters of housing, the housing market, the mortgage finance markets and the broader financial markets. It is difficult to fully assess the impact of the pandemic at this time, including because of the uncertainty around the severity and duration of the pandemic domestically and internationally, as well as the uncertainty around the efficacy of Federal, State and local governments’ efforts to contain the spread of COVID-19 and respond to its direct and indirect impacts on many aspects of Americans’ lives and economic activity. Moreover, each of the factors summarized below is likely to also be impacted directly or indirectly by the ongoing impact of the pandemic and investors are cautioned to interpret substantially all of the risks identified in the Company’s previously published “Risk Factors” as being heightened as a result of the ongoing impact of the pandemic.

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Important factors, among others, that may affect our actual results include:

•the impact of the COVID-19 pandemic;

•general economic trends and the performance of the housing, real estate, mortgage finance, and broader financial markets;

•federal and state legislative and regulatory developments and the actions of governmental authorities and entities;

•changing benchmark interest rates, and the Federal Reserve’s actions and statements regarding monetary policy;

•our ability to compete successfully;

•our ability to adapt our business model and strategies to changing circumstances;

•strategic business and capital deployment decisions we make;

•our use of financial leverage;

•our exposure to a breach of our cybersecurity or data security;

•our exposure to credit risk and the timing of credit losses within our portfolio;

•the concentration of the credit risks we are exposed to, including due to the structure of assets we hold, the geographical concentration of real estate underlying assets we own, and our exposure to environmental and climate-related risks;

•the efficacy and expense of our efforts to manage or hedge credit risk, interest rate risk, and other financial and operational risks;

•changes in credit ratings on assets we own and changes in the rating agencies’ credit rating methodologies;

•changes in mortgage prepayment rates;

•changes in interest rates;

•our ability to redeploy our available capital into new investments;

•interest rate volatility, changes in credit spreads, and changes in liquidity in the market for real estate securities and loans;

•our ability to finance the acquisition of real estate-related assets with short-term debt;

•changes in the values of assets we own;

•the ability of counterparties to satisfy their obligations to us;

•our exposure to the discontinuation of LIBOR;

•our exposure to liquidity risk, risks associated with the use of leverage, and market risks;

•changes in the demand from investors for residential and business purpose mortgages and investments, and our ability to distribute residential and business purpose mortgages through our whole-loan distribution channel;

•our involvement in securitization transactions, the profitability of those transactions, and the risks we are exposed to in engaging in securitization transactions;

•exposure to claims and litigation, including litigation arising from our involvement in loan origination and securitization transactions;

•whether we have sufficient liquid assets to meet short-term needs;

•our ability to successfully retain or attract key personnel;

•changes in our investment, financing, and hedging strategies and new risks we may be exposed to if we expand our business activities;

•our exposure to a disruption of our technology infrastructure and systems;

•the impact on our reputation that could result from our actions or omissions or from those of others;

•our failure to maintain appropriate internal controls over financial reporting and disclosure controls and procedures;

•the termination of our captive insurance subsidiary’s membership in the Federal Home Loan Bank and the implications for our income generating abilities;

•the impact of changes to U.S. federal income tax laws on the U.S. housing market, mortgage finance markets, and our business;

•our failure to comply with applicable laws and regulation, including our ability to obtain or maintain the governmental licenses;

•our ability to maintain our status as a REIT for tax purposes;

•limitations imposed on our business due to our REIT status and our status as exempt from registration under the Investment Company Act of 1940;

•our common stock may experience price declines, volatility, and poor liquidity, and we may reduce our dividends in a variety of circumstances;

•decisions about raising, managing, and distributing capital;

•our exposure to broad market fluctuations; and

•other factors not presently identified.

This Quarterly Report on Form 10-Q may contain statistics and other data that in some cases have been obtained from or compiled from information made available by servicers and other third-party service providers.

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OVERVIEW

Business Update

The second quarter of 2022 was marked by volatility, the impact of inflation, and rising mortgage rates. The ongoing repricing of interest rate-sensitive assets accelerated during the quarter, impacting the value of mortgage-related investments. Our positioning became decisively more conservative in order to manage mortgage credit and market risk, as we prioritized loan pipeline turnover and strong liquidity. We ended the second quarter with $371 million of unrestricted cash, low leverage and significant unencumbered assets, strong credit performance from our investment portfolio, and conservative volume in our mortgage banking pipelines at quarter-end.

Our book value declined approximately 10% during the quarter to $10.78 per share at June 30, 2022, primarily reflecting negative fair value changes impacting our investment portfolio. Our overall decline in GAAP book value included $(1.02) per share of investment portfolio fair value changes that primarily reflect unrealized mark-to-market losses due to credit spread widening. These assets remain on our balance sheet and we generally expect to hold them for the long term. We observed very little deterioration in expected future cash flows during the quarter. As a result, much of the GAAP losses in our investment portfolio segment were non-cash. At June 30, 2022, our securities portfolio had approximately $391 million of net discount to par (approximately $3.35 per share), which we have the potential to recover over time, offset by any net losses on the underlying loans(1). While we have previously seen book value upside potential from call rights on outstanding RMBS transactions, we expect call activity will remain limited in the near term given the overall interest rate and prepayment environment.

During the second quarter of 2022, we actively managed our jumbo residential and single-family rental (“SFR”) mortgage loan pipelines as interest rate volatility increased, guiding residential loan acquisition volumes lower for interest rate-sensitive assets (such as residential jumbo and business purpose term loans), and adjusting interest rates within our SFR pipeline to reflect current market conditions. Coupled with hedging discipline, this activity allowed us to mitigate the impact of negative market price movements in the underlying securities. In our Residential business, for example, margin declines during the second quarter were less than half the underperformance of jumbo loans versus their benchmarks during the same period.

We also continued to strengthen our capital position during the second quarter of 2022, including through the issuance of $215 million in convertible notes in June 2022, and the extension or initiation since January 1, 2022 of approximately $3.8 billion of warehouse financing capacity, over 60% of which is non-marginable(2). This allowed us to remain opportunistic, and we deployed approximately $245 million of capital during the second quarter, including $33 million into share repurchases at a significant discount to our June 30, 2022 book value. The remainder of capital deployment was primarily related to business purpose lending (“BPL”) investments, including bridge loans with higher interest rates, and growth in our home equity investment (“HEI”) portfolio. For capital deployed during the second quarter, we were focused on investment opportunities with lower interest-rate sensitivity and target yields approximately in the range of 12% to 18%.(3)

Our mortgage banking platforms will remain focused on returning to profitability and maintaining a stable market presence. The functions we serve in the non-Agency mortgage finance ecosystem remain a critical source of market liquidity for hundreds of mortgage originators, thousands of real estate investors, and a deep cohort of whole loan and RMBS investors. While sentiment has begun to improve, most market participants remain uncertain around the direction of the economy, and we suspect that the sentiment of most will follow the Federal Reserve's monetary policy actions and the resulting path of interest rates. We will continue to prioritize the path to consistent profitability, which we expect to entail lower loan acquisition and origination volume levels in the near-term relative to our long-term strategic growth ambitions.

As a direct BPL lender, we leverage technology to serve our clients more quickly, and closely monitor our net cost to originate. We can also pivot efficiently to meet both borrower demand and appropriate risk and return thresholds for our capital. As such, approximately 60% of second quarter BPL originations were primarily floating-rate bridge loans. While second quarter BPL mortgage banking income was impacted by significant spread widening on our securitizations, we adjusted our loan pricing and interest rates and continued to observe strong demand for bridge loans, with borrowers accepting higher interest rates for shorter-term loans with more prepayment flexibility. While we expect BPL origination volume to likely slow in the second half of the year, we believe we can continue to serve our borrowers in ways many others cannot.

We have recently witnessed significant retrenchment by other market participants that we do not believe possess the liquidity or track record to survive a sustained market downturn. Many of these companies had only commenced operations in recent years, during the most accommodating period in the history of the mortgage market due to quantitative easing by the Federal Reserve and historically low mortgage rates. We expect this trend to bode well for Redwood, in terms of opportunities for both organic growth and further strategic acquisitions. We have already seen credit standards begin to tighten for a number of other lenders, offering us an opportunity to increase our competitive advantage and market share.

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We expect to continue to evaluate strategic merger and acquisition opportunities, with an emphasis on identifying leading platforms that can be potentially acquired at favorable prices compared to recent years. On July 1, 2022, we successfully closed the acquisition of Riverbend Funding, LLC (“Riverbend”). We anticipate full integration with Riverbend to be complete by the end of 2022. We believe Riverbend’s bridge loan origination capability will add valuable diversity to CoreVest’s existing loan product and geographic scope.

We continue to remain focused on the fundamentals supporting our long-term investment portfolio. Many of our assets are now well seasoned, with continued expectations of pay performance and low losses driven in part by recent home price appreciation. For instance, the loans underlying our SLST reperforming loan investments, which constitute approximately 20% of our investment portfolio (by capital), have over 15 years of seasoning, declining delinquencies (from issuance), cumulative losses of less than 0.2% and home price appreciation-adjusted loan-to-value ratios of approximately 45%. Overall, across our investment portfolio delinquencies remain low – at June 30, 2022, 90+ day delinquencies within our jumbo, SFR and bridge portfolios stood at 1.7%, 2.4% and 2.6%, respectively.

Following active use of our share repurchase program in the second quarter, in July 2022, we announced a new $125 million common stock repurchase program (replacing our previously approved repurchase plan from 2018) and continued our previous authorization for the repurchase of outstanding corporate debt. As we look towards the remainder of the year, we view current market challenges as significant long-term opportunities for Redwood. The housing market remains woefully undersupplied, creating a durable technical driver that supports investments in residential credit across a broad array of economic scenarios. We will continue to maintain a patient, long-term investor mindset, aggressively manage risk, and work diligently to enhance our franchise value while pursuing efficiencies.

Footnotes to Business update

_________________________________________________________________________________________________________

(1)    Based on our current estimates, we believe low realized losses and ultimate recovery of asset values will help us realize positive fair value changes for our investment portfolio over time. There are several factors that may impact our ability to recover all, or a portion, of these fair value changes which may be be out of our control, including credit performance and prepayment speeds, and which may cause our actual results to vary.

(2)    Not subject to margin calls based solely on the lender's determination, in its discretion, of the market value of the underlying collateral that is non-delinquent.

(3)    Target yields are based on our current market observations, estimates and assumptions, including our assumptions regarding credit losses, prepayment speeds, market interest rates, and discount rates, all of which are subject to significant uncertainty and which may cause our actual results to vary. We continue to believe that today’s investing environment is attractive and, over future quarters, we intend to deliberately deploy available capital into accretive opportunities across organic and third-party investments, including potential common stock repurchases.

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Second Quarter Overview

The following table presents key financial metrics for the three and six months ended June 30, 2022.

Table 1 – Key Financial Results and Metrics

	Three Months Ended		Six Months Ended
(In Thousands, except per Share Data)	June 30, 2022		June 30, 2022
Net (loss) income per diluted common share	$	(0.85)	$	(0.60)
Annualized GAAP return on equity	(28.8)%		(9.8)		%
Dividends per share	$	0.23	$	0.46
Book value per share	$	10.78	$	10.78
Economic return on book value (1)	(8.3)%		(6.8)%

(1)Economic return on book value is based on the periodic change in GAAP book value per common share plus dividends declared per common share during the period.

Operational Business Highlights

Investment Portfolio

•Deployed $166 million of capital into new, attractively priced organic and third-party investments

•Credit performance remained strong with stable delinquencies and continued home price appreciation

Business Purpose Mortgage Banking

•Funded $923 million in business purpose loans, essentially flat with first quarter 2022 fundings

◦Second quarter fundings included $561 million of bridge loans (up 35% from the first quarter) and $361 million of single-family rental loans (down 28% from the first quarter)

•Securitized $563 million of loans in two transactions (one backed by $313 million of SFR loans, and one backed by $250 million of bridge loans with a 24-month revolving feature)

•Received a special servicing ranking from DBRS Morningstar, acknowledging CoreVest's successful performance in loan management

Residential Mortgage Banking

•Distributed $1.2 billion of jumbo loans through whole loan sales; at June 30, 2022, total net jumbo loan exposure was $751 million, down 44% from the end of the first quarter

•Locked $1.0 billion of jumbo loans, down from $2.6 billion in first quarter 2022; loan purchase commitments were $0.5 billion, down from $2.0 billion in first quarter 2022

◦Second quarter lock mix was 82% purchase money loans and 18% refinancings

Financing Highlights

•Maintained robust balance sheet with unrestricted cash of $371 million and available capital of $190 million at June 30, 2022 (available capital reflects the subtraction of approximately $44 million for the initial cash purchase price paid at closing in connection with the acquisition of Riverbend following the end of the second quarter of 2022)

•Successfully closed new warehouse facility with up to $400 million of capacity to fund CLO-eligible multifamily bridge loans originated by CoreVest

•Raised $215 million of gross proceeds through a convertible notes offering with a 5-year term; use of proceeds includes opportunistic deployment of capital into attractive investments in our investment portfolio and operating businesses

•Repurchased 3.7 million shares of Redwood’s common stock at a cost of $33 million (including $25 million purchased in conjunction with RWT’s June convertible notes offering and an additional $8 million through open market purchases), resulting in $0.10 per share of book value accretion in the second quarter

RWT Horizons Highlights

•Completed three new investments in the second quarter of 2022

•Recognized approximately $10 million of pre-tax valuation gain from an early RWT Horizons investment

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RESULTS OF OPERATIONS

Within this Results of Operations section, we provide commentary that compares results year-over-year for 2022 and 2021. Most tables include a "change" column that shows the amount by which the results from 2022 are greater or less than the results from the respective period in 2021. Unless otherwise specified, references in this section to increases or decreases during the "three-month periods" refer to the change in results for the second quarter of 2022, compared to the second quarter of 2021, and increases or decreases during the "six-month periods" refer to the change in results for the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

Consolidated Results of Operations

The following table presents the components of our net (loss) income for the three and six months ended June 30, 2022 and 2021.

Table 2 – Net (Loss) Income

	Three Months Ended June 30,						Six Months Ended June 30,
(In Thousands, except per Share Data)	2022		2021		Change		2022		2021		Change
Net Interest Income	$	40,488	$	30,630	$	9,858	$	93,590	$	56,383	$	37,207
Non-interest Income
Mortgage banking activities, net	(30,017)		54,419		(84,436)		(13,702)		137,026		(150,728)
Investment fair value changes, net	(87,972)		49,480		(137,452)		(94,092)		94,567		(188,659)
Other income, net	7,006		2,126		4,880		12,989		5,969		7,020
Realized gains, net	—		8,384		(8,384)		2,581		11,100		(8,519)
Total non-interest (loss) income, net	(110,983)		114,409		(225,392)		(92,224)		248,662		(340,886)
General and administrative expenses	(31,966)		(40,594)		8,628		(66,820)		(84,145)		17,325
Loan acquisition costs	(3,480)		(3,748)		268		(7,945)		(7,307)		(638)
Other expenses	(3,468)		(3,985)		517		(7,553)		(8,081)		528
Net (loss) income before income taxes	(109,409)		96,712		(206,121)		(80,952)		205,512		(286,464)
Benefit from (provision for) income taxes	9,443		(6,687)		16,130		11,901		(18,230)		30,131
Net (Loss) Income	$	(99,966)	$	90,025	$	(189,991)	$	(69,051)	$	187,282	$	(256,333)
Diluted (loss) earnings per common share	$	(0.85)	$	0.66	$	(1.51)	$	(0.60)	$	1.38	$	(1.98)

Net Interest Income

The increase in net interest income during the three- and six-month periods was primarily attributable to the performance of our investment portfolio, which accounted for $9 million and $33 million of the increase, respectively, and generally resulted from higher average asset balances in 2022, as we increased our investments in bridge loans and bonds we retained from CoreVest SFR securitizations during the prior twelve months. Additionally, we recognized elevated levels of discount accretion on our available-for-sale securities and yield maintenance income on our SFR securities during the first quarter of 2022. In association with a rise in interest rates during 2022 that accelerated into the second quarter, prepayment speeds on many of our assets slowed and discount accretion on our available-for-sale securities decreased meaningfully and we also experienced lower yield maintenance income on our SFR securities in the second quarter.

The increase in net interest income during the three- and six-month periods was also attributable to higher average balances of SFR loans held in inventory at our business purpose mortgage banking business, which accounted for $3 million and $4 million of the increase, respectively. Net interest income from residential mortgage banking activities increased by $2 million for the six-month periods, but decreased by $0.7 million during the three months periods, as we conservatively positioned our pipeline in the second quarter of 2022 given the challenging market backdrop.

While our overall weighted average cost of funds declined during the three- and six-month periods, given rising benchmark interest rates, we expect our borrowing costs in general to increase in the near-term. However, given our relative balance of fixed and floating rate assets and liabilities, we expect the net impact to net interest income to be muted. Additionally, in June we issued new convertible notes that will negatively impact net interest income in the near term, until the capital is deployed into interest earning assets.

Additional detail on net interest income is provided in the “Net Interest Income” section that follows.

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Mortgage Banking Activities, Net

The decrease in income from mortgage banking activities during the three-month periods was attributable to a $39 million decrease from our Residential Mortgage Banking operations and a $45 million decrease from our Business Purpose Mortgage Banking operations. The decrease in income from mortgage banking activities during the six-month periods was attributable to a $93 million decrease from our Residential Mortgage Banking operations and a $58 million decrease from our Business Purpose Mortgage Banking operations.

The decreases from Residential Mortgage Banking operations were attributable to lower acquisition volumes as well as decreased margins during 2022. A sharp increase in mortgage rates during the first half of 2022 resulted in a decrease in residential mortgage origination activity industry-wide, which also negatively impacted our loan acquisition volumes. Additionally, given market volatility, we focused on risk management and were deliberate in moderating volume and transferring financial risk quickly in the second quarter of 2022. Margins and profitability during the first half of 2022 were impacted by wider credit spreads for securitizations and whole loans, as well as increased rate volatility, which resulted in higher hedging costs.

Despite record volumes during the first half of 2022, Business Purpose Mortgage Banking activities produced losses as continued market volatility and extreme credit spread widening, which accelerated into the second quarter of 2022, negatively impacted valuations of our loan inventory held-for-sale and resulted in lower margins for SFR loans we originated during the quarter.

A more detailed analysis of the changes in this line item is included in the “Results of Operations by Segment” section that follows.

Investment Fair Value Changes, Net

Investment fair value changes, net, is primarily comprised of the change in fair values of our portfolio investments accounted for under the fair value option. During the three and six months ended June 30, 2022, negative investment fair value changes reflected extreme levels of credit spread widening across many of our investments, partially offset by fair value increases in our IO securities and MSRs, which benefited from rising interest rates, and our home equity investments, which benefited from continued home price appreciation. Negative fair value changes primarily reflected unrealized mark-to-market losses, while fundamental credit performance, including delinquencies and LTVs, remained stable across most of our portfolio.

During the three and six months ended June 30, 2021, positive investment fair value changes reflected improvements in credit performance and credit spread tightening across our investment portfolio.

Additional detail on our investment fair value changes during 2022 is included in the “Results of Operations by Segment” section that follows as well as Table 5.6 of our Notes to Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Other Income

The increase in other income for the three- and six-month periods primarily resulted from higher income on our MSR investments, which accounted for $5 million and $9 million of the increase, respectively. The increase in income from MSRs was primarily due to positive valuation changes resulting from a slowdown in prepayment speeds during the first half of 2022 as interest rates rose.

Additional detail on our other income is presented in Table 20.1 of our Notes to Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Realized Gains, Net

During the three and six months ended June 30, 2022, we realized gains of zero and $3 million, primarily resulting from calls associated with third-party available-for-sale ("AFS") securities during the first quarter of 2022. During the three and six months ended June 30, 2021, we realized gains of $8 million and $11 million, respectively, primarily resulting from the call of one and four seasoned Sequoia securitizations, respectively.

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General and Administrative Expenses

General and administration expenses decreased for the three- and six-month periods, primarily due to $11 million and $26 million decreases in variable compensation expense, respectively, associated with the decreases in earnings during the respective periods. While variable compensation expenses have been lower in the first half of 2022 compared to the first half of 2021, we anticipate incurring increased compensation expense in the second half of 2022 to the extent we provide retention-based compensation to employees. Fixed compensation expense in the second quarter of 2022 included a $2 million benefit from a payroll tax refund related to a prior year that was realized during the quarter. These decreases were partially offset by higher compensation expenses associated with an increased headcount in 2022 and higher per-employee costs.

Additional detail on our General and administrative expenses is presented in Table 21.1 of our Notes to Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Loan Acquisition Costs

Loan acquisition costs for our business purpose mortgage banking operations increased $1 million and $2 million for the three- and six-month periods, respectively, as a result of higher loan origination volumes in 2022. These increases were offset by a decrease in loan origination costs of $1 million during the second quarter of 2022 at our residential mortgage banking operations, as a result of lower acquisition volumes during the quarter.

Provision for Income Taxes

Our provision for income taxes is almost entirely related to activity at our taxable REIT subsidiaries, which primarily includes our mortgage banking activities and MSR investments, as well as certain other investment and hedging activities. The switch to a tax benefit from a tax provision year-over-year was primarily the result of GAAP losses at our TRS during the first half of 2022 versus GAAP income earned during the same periods in 2021.

For additional detail on income taxes, see the “Taxable Income and Tax Provision” section that follows.

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Net Interest Income

The following table presents the components of net interest income for the three and six months ended June 30, 2022 and 2021.

Table 3 – Net Interest Income

	Three Months Ended June 30,
	2022						2021
(Dollars in Thousands)	Interest Income/ (Expense)		Average    Balance (1)		Yield		Interest Income/ (Expense)		Average    Balance (1)		Yield
Interest Income
Residential loans, held-for-sale	$	15,463	$	1,507,928	4.1	%	$	13,266	$	1,825,086	2.9	%
Residential loans - HFI at Legacy Sequoia (2)	1,108		213,793		2.1	%	1,169		263,735		1.8	%
Residential loans - HFI at Sequoia (2)	31,923		3,778,552		3.4	%	14,492		1,444,831		4.0	%
Residential loans - HFI at Freddie Mac SLST (2)	16,553		1,725,030		3.8	%	19,506		2,111,445		3.7	%
Business purpose loans - HFS	8,715		602,597		5.8	%	3,167		252,233		5.0	%
Business purpose loans - HFI	15,611		978,086		6.4	%	12,307		667,956		7.4	%
Single-family rental loans - HFI at CAFL (2)	49,878		2,976,988		6.7	%	54,849		3,336,773		6.6	%
Bridge loans - HFI at CAFL (2)	6,730		416,288		6.5	%	—		—		—	%
Multifamily loans at Freddie Mac K-Series (2)	4,732		448,002		4.2	%	4,860		488,715		4.0	%
Trading securities	4,327		155,168		11.2	%	5,527		140,115		15.8	%
Available-for-sale securities	3,501		137,179		10.2	%	3,752		128,413		11.7	%
Other interest income	8,914		870,538		4.1	%	5,800		779,236		3.0	%
Total interest income	167,455		13,810,149		4.9	%	138,695		11,438,538		4.9	%
Interest Expense
Short-term debt facilities	(11,819)		1,598,593		(3.0)	%	(10,085)		1,850,913		(2.2)	%
Short-term debt - servicer advance financing	(1,842)		232,942		(3.2)	%	(1,110)		164,154		(2.7)	%
ABS issued - Legacy Sequoia (2)	(967)		212,033		(1.8)	%	(755)		260,857		(1.2)	%
ABS issued - Sequoia (2)	(28,329)		3,536,911		(3.2)	%	(11,374)		1,220,211		(3.7)	%
ABS issued - Freddie Mac SLST (2)	(13,372)		1,419,538		(3.8)	%	(16,611)		1,864,842		(3.6)	%
ABS issued - Freddie Mac K-Series (2)	(4,351)		416,148		(4.2)	%	(4,478)		459,344		(3.9)	%
ABS issued - CAFL (2)	(41,840)		2,984,375		(5.6)	%	(43,201)		3,087,741		(5.6)	%
Long-term debt facilities	(13,592)		1,405,431		(3.9)	%	(10,972)		674,306		(6.5)	%
Long-term debt - corporate	(10,855)		703,810		(6.2)	%	(9,479)		650,953		(5.8)	%
Total interest expense	(126,967)		12,509,781		(4.1)	%	(108,065)		10,233,321		(4.2)	%
Net Interest Income	$	40,488					$	30,630

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	Six Months Ended June 30,
	2022						2021
(Dollars in Thousands)	Interest Income/ (Expense)		Average    Balance (1)		Yield		Interest Income/ (Expense)		Average    Balance (1)		Yield
Interest Income
Residential loans, held-for-sale	$	30,356	$	1,620,642	3.7	%	$	19,931	$	1,381,960	2.9	%
Residential loans - HFI at Legacy Sequoia (2)	$	2,120	$	218,032	1.9	%	2,517		268,724		1.9	%
Residential loans - HFI at Sequoia (2)	$	64,021	$	3,865,980	3.3	%	29,975		1,414,397		4.2	%
Residential loans - HFI at Freddie Mac SLST (2)	$	33,753	$	1,777,180	3.8	%	39,665		2,143,942		3.7	%
Business purpose loans - HFS	$	13,753	$	537,053	5.1	%	6,014		258,600		4.7	%
Business purpose loans - HFI	$	27,538	$	844,682	6.5	%	24,775		649,943		7.6	%
Single-family rental loans - HFI at CAFL (2)	$	122,671	$	3,127,065	7.8	%	103,722		3,296,042		6.3	%
Bridge loans - HFI at CAFL(2)	$	11,271	$	353,181	6.4	%	—		—		—	%
Multifamily loans at Freddie Mac K-Series (2)	$	9,485	$	457,750	4.1	%	9,646		491,282		3.9	%
Trading securities	9,596		162,202		11.8	%	11,423		136,336		16.8	%
Available-for-sale securities	14,187		137,608		20.6	%	7,519		132,823		11.3	%
Other interest income	18,104		928,072		3.9	%	11,813		801,270		2.9	%
Total interest income	356,855		14,029,447		5.1	%	267,000		10,975,319		4.9	%
Interest Expense
Short-term debt facilities	(21,645)		1,662,458		(2.6)	%	(16,572)		1,423,017		(2.3)	%
Short-term debt - servicer advance financing	(3,504)		250,009		(2.8)	%	(2,396)		175,132		(2.7)	%
ABS issued - Legacy Sequoia (2)	(1,668)		215,911		(1.5)	%	(1,630)		265,430		(1.2)	%
ABS issued - Sequoia (2)	(56,500)		3,622,067		(3.1)	%	(23,480)		1,192,582		(3.9)	%
ABS issued - Freddie Mac SLST (2)	(27,457)		1,473,896		(3.7)	%	(33,982)		1,906,613		(3.6)	%
ABS issued - Freddie Mac K-Series (2)	(8,722)		425,946		(4.1)	%	(8,834)		462,962		(3.8)	%
ABS issued - CAFL (2)	(100,207)		3,120,553		(6.4)	%	(81,054)		3,046,141		(5.3)	%
Long-term debt facilities	(23,200)		1,272,918		(3.6)	%	(23,804)		723,861		(6.6)	%
Long-term debt - FHLBC	—		—		—	%	(2)		558		(0.7)	%
Long-term debt - corporate	(20,362)		678,442		(6.0)	%	(18,863)		650,508		(5.8)	%
Total interest expense	(263,265)		12,936,978		(4.1)	%	(210,617)		9,846,804		(4.3)	%
Net Interest Income	$	93,590					$	56,383

(1)Average balances for residential loans held-for-sale, residential loans held-for-investment, business purpose loans, multifamily loans held-for-investment, and trading securities are calculated based upon carrying values, which represent estimated fair values. Average balances for available-for-sale securities and debt are calculated based upon amortized historical cost, except for certain ABS issued, which is based upon fair value.

(2)Interest income from residential loans held-for-investment ("HFI") at Legacy Sequoia and the interest expense from ABS issued - Legacy Sequoia represent activity from our consolidated Legacy Sequoia entities. Interest income from residential loans - HFI at Sequoia and the interest expense from ABS issued - Sequoia represent activity from our consolidated Sequoia entities. Interest income from residential loans - HFI at Freddie Mac SLST and the interest expense from ABS issued - Freddie Mac SLST represent activity from our consolidated Freddie Mac SLST entities. Interest income from multifamily loans at Freddie Mac K-Series and the interest expense from ABS issued - Freddie Mac K-Series represent activity from our consolidated Freddie Mac K-Series entities. Interest income from single-family rental loans - HFI at CAFL, bridge loans - HFI at CAFL and the interest expense from ABS issued - CAFL represent activity from our consolidated CAFL entities.

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Results of Operations by Segment

We report on our business using three segments: Residential Mortgage Banking, Business Purpose Mortgage Banking, and Investment Portfolio. For additional information on our segments, refer to Note 23 of our Notes to Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

The following table presents the segment contribution from our three segments reconciled to our consolidated net (loss) income for the three and six months ended June 30, 2022 and 2021.

Table 4 – Segment Results Summary

	Three Months Ended June 30,						Six Months Ended June 30,
(In Thousands)	2022		2021		Change		2022		2021		Change
Segment Contribution from:
Residential Mortgage Banking	$	(14,186)	$	14,383	$	(28,569)	$	(6,731)	$	55,065	$	(61,796)
Business Purpose Mortgage Banking	(20,653)		14,543		(35,196)		(23,198)		20,309		(43,507)
Investment Portfolio	(52,578)		88,322		(140,900)		(1,645)		166,048		(167,693)
Corporate/Other	(12,549)		(27,223)		14,674		(37,477)		(54,140)		16,663
Net (Loss) Income	$	(99,966)	$	90,025	$	(189,991)	$	(69,051)	$	187,282	$	(256,333)

The sections that follow provide further detail for our three business segments and their results of operations for the three and six months ended June 30, 2022.

Corporate/Other

The decrease in net expense from Corporate/Other for the three- and six-month periods was primarily due to $6 million and $9 million, respectively, of lower compensation expense for corporate employees, primarily related to variable compensation, which decreased in association with lower earnings year-over-year. In addition, other income increased by approximately $10 million, resulting from pre-tax valuation gains recognized in the second quarter of 2022 from an early RWT Horizons investment. These decreases were partially offset by increased net interest expense of $2 million in the second quarter of 2022, primarily related to the issuance of new convertible notes in June 2022.

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Residential Mortgage Banking Segment

Our Residential Mortgage Banking segment consists of a mortgage loan conduit that acquires residential loans from third-party originators for subsequent sale, securitization through our Sequoia private-label securitization program, or transfer into our investment portfolio. We typically acquire prime jumbo mortgages and the related mortgage servicing rights on a flow basis from our network of loan sellers. This segment also includes various derivative financial instruments that we utilize to manage certain risks associated with our inventory of residential loans held-for-sale within this segment. This segment’s main source of mortgage banking income is net interest income from its inventory of loans held-for-sale, as well as income from mortgage banking activities, which includes valuation increases (or gains) on loans we acquire and subsequently sell, securitize, or transfer into our investment portfolio, and the hedges used to manage risks associated with these activities. Direct operating expenses and tax expenses associated with these activities are also included in this segment.

Net income from this segment is primarily comprised of net interest income earned on loans while they are held in inventory, mortgage banking activities income (including mark-to-market adjustments on loans from the time they are purchased to when they are sold or securitized, mark-to-market adjustments on new and outstanding loan purchase commitments and gains/losses from associated hedges), and all direct expenses associated with these activities. Subordinate securities that we retain from our Sequoia securitizations (many of which we consolidate for GAAP purposes) are transferred to and held in our Investment Portfolio segment.

The following table provides the activity of residential loans held in inventory for sale at our mortgage banking business during the three and six months ended June 30, 2022.

Table 5 – Loan Inventory for Residential Mortgage Banking Operations — Activity

	Three Months Ended		Six Months Ended
(In Thousands)	June 30, 2022		June 30, 2022
Balance at beginning of period	$	1,101,006	$	1,673,236
Acquisitions	1,137,466		3,145,911
Sales	(1,200,885)		(3,050,759)
Transfers between segments (1)	—		(684,491)
Principal repayments	(22,146)		(43,285)
Changes in fair value, net	(24,517)		(49,688)
Balance at End of Period	$	990,924	$	990,924

(1)Represents the fair value of the net transfers of loans from held-for-sale to held-for-investment within our Residential Lending investment portfolio, associated with securitizations we sponsored that we consolidate under GAAP.

During the three and six months ended June 30, 2022, our residential mortgage loan conduit locked $1.01 billion and $3.64 billion of loans ($0.54 billion and $2.49 billion adjusted for expected pipeline fallout - i.e., loan purchase commitments), including $824 million and $3.21 billion of Select loans and $188 million and $430 million of Choice loans, and purchased $1.14 billion and $3.15 billion of loans, respectively. During the three and six months ended June 30, 2022, approximately 82% and 69% of locked loans were purchase-money loans and 18% and 31% were refinancings, respectively. During the three and six months ended June 30, 2022, we distributed $1.24 billion and $3.07 billion of loans (unpaid principal balance) through whole loan sales, respectively. During the six months ended June 30, 2022, we completed one securitization backed by $687 million of loans (unpaid principal balance).

During the second quarter of 2022, we focused on transferring financial risk and selling our lower-coupon inventory expediently to whole loan investors. When markets normalize, we expect securitization activity to pick up, particularly as banks seek a place to invest deposits. At June 30, 2022, we had total net loan exposure of $751 million (down 44% from March 31, 2022), including $991 million of loans in inventory on our balance sheet, $285 million of loans identified for purchase (locked loans, unadjusted for fallout), and $541 million of forward sale agreements for loans. As of June 30, 2022, we had sold substantially all of our lower coupon jumbo mortgages, and our remaining mortgage banking loan inventory had an average mortgage rate over 5%.

We utilize a combination of capital and our residential loan warehouse facilities to manage our inventory of residential loans held-for-sale. At June 30, 2022, we had residential warehouse facilities outstanding with seven different counterparties, with $2.75 billion of total capacity and $1.66 billion of available capacity. These included non-marginable facilities (i.e., not subject to margin calls based solely on the lender's determination, in its discretion, of the market value of the underlying collateral that is non-delinquent) with $1.38 billion of total capacity and marginable facilities with $1.38 billion of total capacity.

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The following table presents key earnings and operating metrics for our Residential Mortgage Banking segment during the three and six months ended June 30, 2022.

Table 6 – Residential Mortgage Banking Earnings Summary and Operating Metrics

	Three Months Ended June 30,						Six Months Ended June 30,
(In Thousands)	2022		2021		Change		2022		2021		Change
Mortgage banking (loss) income	$	(12,885)	$	26,893	$	(39,778)	$	1,081	$	91,160	$	(90,079)
Operating expenses	(6,889)		(8,785)		1,896		(14,407)		(22,884)		8,477
Benefit from (provision for) income taxes	5,588		(3,725)		9,313		6,595		(13,211)		19,806
Segment Contribution	$	(14,186)	$	14,383	$	(28,569)	$	(6,731)	$	55,065	$	(61,796)
Loan purchase commitments (loan locks, adjusted for expected fallout)	$	537,925	$	2,743,105	$	(2,205,180)	$	2,493,866	$	6,253,397	$	(3,759,531)

Residential mortgage banking income presented in the table above is comprised of net interest income from residential loans held-for-sale in inventory and mortgage banking activities, net from this segment (see Note 19 of our Notes to Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further detail on the composition of mortgage banking activities, net). Operating expenses presented in the table above includes general and administrative expenses, loan acquisition costs and other expenses for this segment.

The decrease in contribution from our residential mortgage banking operations during the three- and six-month periods was primarily attributable to lower mortgage banking activities income, as discussed in the preceding Consolidated Results of Operations section of this MD&A. These decreases in income were partially offset by lower general and administrative expenses, which declined during the three- and six-month periods, primarily due to lower variable compensation expenses.

Our gross margin (mortgage banking income earned in the period divided by loan purchase commitments entered into during the period) for the second quarter of 2022 was negative 240 basis points, a decrease from 71 basis points during the first quarter of 2022. As discussed previously, our margins during the second quarter of 2022 were negatively impacted by wider credit spreads during the quarter, and in particular from the impact of spread widening on our inventory from March 31, 2022 that we carried into the second quarter. While we began to see some stabilization in interest rates and credit spread moderation during July 2022, a re-widening of credit spreads or further rate volatility could continue to negatively impact our margins and profitability.

Activity at this segment is performed within our taxable REIT subsidiary and subject to federal and state income taxes. The benefit from income taxes for the second quarter of 2022 was due to an overall GAAP loss incurred at our TRS during that period.

Business Purpose Mortgage Banking Segment

Our Business Purpose Mortgage Banking segment consists of a platform that originates and acquires business purpose loans (consisting of SFR loans and bridge loans) for subsequent securitization, sale, or transfer into our investment portfolio. SFR loans are business purpose mortgage loans to investors in single-family (primarily 1-4 unit) rental properties. Bridge loans are business purpose mortgage loans to investors rehabilitating and subsequently reselling or renting residential and multifamily properties. We typically originate SFR loans and distribute most of our SFR loans through our CAFL private-label securitization program and on occasion will sell as whole loans. We originate and acquire bridge loans and typically transfer these loans into our Investment Portfolio where they will be retained for investment, and on occasion may sell as whole loans. This segment also includes various derivative financial instruments that we utilize to manage certain risks associated with our inventory of single-family rental loans held-for-sale.

Net income from this segment is primarily comprised of net interest income earned on loans while they are held in inventory, mortgage banking activities income (including mark-to-market adjustments on loans from the time they are purchased to when they are sold, securitized or transferred into our investment portfolio, fee income earned on originations and gains/losses from associated hedges), and all direct expenses associated with these activities. Subordinate securities that we retain from our CAFL securitizations (which we consolidate for GAAP purposes) and bridge loans we originate in this segment are transferred to and held in our Investment Portfolio segment.

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On July 1, 2022, we closed the previously announced acquisition of Riverbend, a private mortgage lender to investors in transitional residential and multifamily real estate. This acquisition adds capacity, product breadth and geographic footprint to our existing bridge loan origination platform.

The following table provides business purpose loan origination activity at Redwood during the three and six months ended June 30, 2022.

Table 7 – Business Purpose Loans — Funding Activity

	Three Months Ended June 30, 2022						Six Months Ended June 30, 2022
(In Thousands)	Single-Family Rental		Bridge (1)		Total		Single-Family Rental		Bridge (1)		Total
Fair value at beginning of period	$	505,889	$	—	$	505,889	$	358,309	$	—	$	358,309
Fundings	361,731		561,264		922,995		866,912		976,185		1,843,097
Sales	—		—		—		(331,750)		—		(331,750)
Transfers between segments (2)	(295,037)		(560,128)		(855,165)		(295,037)		(977,424)		(1,272,461)
Principal repayments	(30,201)		—		(30,201)		(31,584)		—		(31,584)
Changes in fair value, net	(37,211)		(1,136)		(38,347)		(61,679)		1,239		(60,440)
Fair Value at End of Period	$	505,171	$	—	$	505,171	$	505,171	$	—	$	505,171

(1)We originate bridge loans at our TRS and then transfer them to our REIT. Origination fees and any fair value changes on these loans prior to transfer are recognized within Mortgage banking activities, net on our consolidated statements of income. Once the loans are transferred to our REIT, they are classified as held-for-investment, with subsequent fair value changes generally recorded through Investment fair value changes, net on our consolidated statements of income. For bridge loans held at our REIT that are transferred into our CAFL bridge securitizations, we record any changes in fair value from the date of origination or purchase to the time of securitization as Mortgage banking activities, net on our consolidated statements of income. Once loans are transferred into a securitization, any changes in fair value are recorded through Investment fair value changes, net on our consolidated statements of income. For the carrying value and activity of our bridge loans held-for-investment, see the Investment Portfolio section that follows.

(2)For single-family rental loans, amounts represent transfers of loans from held-for-sale at our Business Purpose Mortgage Banking segment to held-for-investment at our Investment Portfolio segment, associated with securitizations we sponsored that we consolidate under GAAP. Bridge loan amounts represent the transfer of loans originated or acquired by our Business purpose mortgage banking group at our TRS and transferred to our Investment Portfolio segment at our REIT as described in preceding footnote.

Single-family rental loan fundings for the three and six months ended June 30, 2022 included $38 million and $100 million of loans acquired from third parties, respectively. Bridge loan fundings for the three and six months ended June 30, 2022 included $19 million and $22 million of loans acquired from third parties, respectively. During the three and six months ended June 30, 2022, we completed two business purpose loan securitizations, one backed by approximately $250 million of bridge loans that includes a 24-month revolving feature, and one backed by $313 million of SFR loans. At June 30, 2022, we had $505 million of single-family rental loans in inventory on our balance sheet.

During the second quarter of 2022, demand for business purpose loans remained strong as rates moved higher. Given continued rate volatility, our borrowers opted for short-term fully prepayable bridge loans relative to term loans, leading to strong volumes in bridge (up 35% from the first quarter of 2022) – particularly in multifamily (up 31% from the first quarter of 2022) and renovate/build-to-rent (up 74% from the first quarter of 2022).

We utilize a combination of capital and loan warehouse facilities to manage our inventory of single-family rental loans that we hold for sale. At June 30, 2022, we had business purpose warehouse facilities outstanding with five different counterparties, with $2.25 billion of total capacity (used for both SFR and bridge loans) and $997 million of available capacity (inclusive of capacity on non-recourse facilities). All of these facilities are non-marginable (i.e., not subject to margin calls based solely on the lender's determination, in its discretion, of the market value of the underlying collateral that is non-delinquent).

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The following table presents an earnings summary for our Business Purpose Mortgage Banking segment for the three and six months ended June 30, 2022.

Table 8 – Business Purpose Mortgage Banking Earnings Summary

	Three Months Ended June 30,						Six Months Ended June 30,
(In Thousands)	2022		2021		Change		2022		2021		Change
Mortgage banking income	$	(6,848)	$	34,815	$	(41,663)	$	4,380	$	57,365	$	(52,985)
Operating expenses	(16,974)		(18,090)		1,116		(34,028)		(33,553)		(475)
Benefit from income taxes	3,169		(2,182)		5,351		6,450		(3,503)		9,953
Segment Contribution	$	(20,653)	$	14,543	$	(35,196)	$	(23,198)	$	20,309	$	(43,507)

Business Purpose Mortgage Banking income presented in the table above is comprised of net interest income from single-family rental ("SFR") loans held-for-sale in inventory, mortgage banking activities, net (see Note 19 of our Notes to Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further detail on the composition of mortgage banking activities), and other income, net for this segment. Operating expenses presented in the table above includes general and administrative expenses, loan acquisition costs and other expenses for this segment.

The decrease in contribution from our business purpose mortgage banking operations during the three- and six-month periods was primarily attributable to lower mortgage banking activities income. While higher loan origination volumes during 2022 contributed to increased origination fees and higher net interest income earned on loan inventory during the first half of 2022, severe credit spread widening significantly impacted margins and profitability. Continued rate volatility or a further widening of spreads would continue to impact our margins and profitability at this business.

General and administrative expenses declined during the three- and six-month periods, primarily due to lower variable compensation expenses. These decreases were partially offset by higher fixed compensation and other costs associated with an increased headcount during 2022. Additionally, higher funding volumes in the first half of 2022 resulted in higher loan acquisition costs relative to 2021.

Activity at this segment is performed within our taxable REIT subsidiary and subject to federal and state income taxes. The benefit from income taxes for the first half of 2022 was due to an overall GAAP loss incurred at our TRS during that period.

Investment Portfolio Segment

Our Investment Portfolio segment consists of investments sourced through our residential and business purpose mortgage banking operations, including primarily securities retained from our residential and business purpose securitization activities (some of which we consolidate for GAAP purposes), business purpose residential and multifamily bridge loans, as well as third-party investments including RMBS issued by third parties (including Agency CRT securities), investments in Freddie Mac K-Series multifamily loan securitizations and reperforming loan securitizations (both of which we consolidate for GAAP purposes), servicer advance investments, HEIs, and other housing-related investments. This segment’s main sources of income are net interest income and other income from investments, changes in fair value of investments and associated hedges, and realized gains and losses upon the sale of securities. Direct operating expenses and tax provisions associated with these activities are also included in this segment.

The following table presents details of our Investment Portfolio at June 30, 2022 and December 31, 2021 organized by investments organically created through our mortgage banking segments and acquired from third-parties. Amounts presented in the table represent our retained economic investments in consolidated Sequoia, CAFL SFR, Freddie Mac SLST, Freddie Mac K-Series, Servicing Investment and HEI securitizations as noted.

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Table 9 – Investment Portfolio - Detail of Economic Interests

(In Thousands)	June 30, 2022		December 31, 2021
Organic Residential Investments
Residential loans at Redwood (1)	$	222,143	$	172,047
Residential securities at Redwood (2)	112,562		143,838
Residential securities at consolidated Sequoia entities (3)	236,777		245,417
Other investments (4)	50,150		12,438
Organic Business Purpose Investments
Bridge loans	1,651,489		944,606
Single-family rental securities at consolidated CAFL SFR entities (5)	307,413		301,506
Other investments	1,869		5,935
Third-Party Investments
Residential securities at Redwood	146,382		195,930
Residential securities at consolidated Freddie Mac SLST entities (6)	390,417		444,751
Multifamily securities at Redwood	21,129		32,715
Multifamily securities at consolidated Freddie Mac K-Series entities (7)	31,732		31,657
Servicing investments (8)	96,487		102,540
HEIs (9)	145,003		43,638
Other investments	8,633		10,400
Total Segment Investments	$	3,422,186	$	2,687,418

(1)Balance comprised of loans called from Sequoia securitizations.

(2)Excludes $4 million of trading securities that are designated as hedges for our mortgage banking operations and are not considered part of our investment portfolio.

(3)Represents our retained economic investment in securities issued by consolidated Sequoia securitization VIEs. For GAAP purposes, we consolidated $3.53 billion of loans and $3.29 billion of ABS issued associated with these investments at June 30, 2022. We consolidated $3.63 billion of loans and $3.38 billion of ABS issued associated with these investments at December 31, 2021.

(4)Organic residential other investments at June 30, 2022 includes net risk share investments of $27 million, representing $34 million of restricted cash and other assets, net of other liabilities of $7 million.

(5)Represents our retained economic investment in securities issued by consolidated CAFL SFR securitization VIEs. For GAAP purposes, we consolidated $3.05 billion of loans and $2.73 billion of ABS issued associated with these investments at June 30, 2022. We consolidated $3.49 billion of loans and $3.21 billion of ABS issued associated with these investments at December 31, 2021.

(6)Represents our economic investment in securities issued by consolidated Freddie Mac SLST securitization entities. For GAAP purposes, we consolidated $1.63 billion of loans and $1.24 billion of ABS issued associated with these investments at June 30, 2022. We consolidated $1.89 billion of loans and $1.45 billion of ABS issued associated with these investments at December 31, 2021.

(7)Represents our economic investment in securities issued by consolidated Freddie Mac K-Series securitization entities. For GAAP purposes, we consolidated $443 million of loans and $411 million of ABS issued associated with these investments at June 30, 2022. We consolidated $474 million of loans and $442 million of ABS issued associated with these investments at December 31, 2021.

(8)Represents our economic investment in consolidated Servicing Investment variable interest entities. At June 30, 2022, for GAAP purposes, we consolidated $305 million of servicing investments and $232 million of non-recourse short-term securitization debt, as well as other assets and liabilities for these entities. At December 31, 2021, for GAAP purposes, we consolidated $385 million of servicing investments and $294 million of non-recourse short-term securitization debt, as well as other assets and liabilities for these entities.

(9)At June 30, 2022 and December 31, 2021, represents HEIs owned at Redwood of $130 million and $33 million, respectively, and our retained economic investment in securities issued by the consolidated HEI securitization entity of $15 million and $10 million, respectively. At June 30, 2022, for GAAP purposes, we consolidated $146 million of HEIs and $110 million of ABS issued, as well as other assets and liabilities for this entity. At December 31, 2021, for GAAP purposes, we consolidated $160 million of HEIs and $137 million of ABS issued, as well as other assets and liabilities for this entity.

The growth in our Investment Portfolio during the first half of 2022 was primarily attributable to a net increase in business purpose bridge loans, the acquisition of residential jumbo loans from calls and incremental investments in HEIs through a third-party flow purchase agreement. See the Investments Detail and Activity section that follows for additional detail on our portfolio investments and their associated borrowings.

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The following table presents an earnings summary for our Investment Portfolio segment for the three and six months ended June 30, 2022.

Table 10 – Investment Portfolio Earnings Summary

	Three Months Ended June 30,						Six Months Ended June 30,
(In Thousands)	2022		2021		Change		2022		2021		Change
Net interest income	$41,889		$32,555		$	9,334	$	95,879	$	63,119	$	32,760
Investment fair value changes, net	(98,111)		49,727		(147,838)		(103,517)		95,488		(199,005)
Other income, net	6,235		1,705		4,530		11,517		5,279		6,238
Realized gains, net	—		8,384		(8,384)		2,581		11,100		(8,519)
Operating expenses	(3,277)		(3,269)		(8)		(6,961)		(7,422)		461
Benefit from (provision for) income taxes	686		(780)		1,466		(1,144)		(1,516)		372
Segment Contribution	$	(52,578)	$	88,322	$	(140,900)	$	(1,645)	$	166,048	$	(167,693)

The decrease in contribution from the investment portfolio during the three- and six-month periods was primarily attributable to negative investment fair value changes, as discussed in the preceding Consolidated Results of Operations section of this MD&A. These decreases were partially offset by higher net interest income and other income during the three- and six-month periods, each as discussed in the Consolidated Results of Operations section of this MD&A.

Net interest income during the first quarter of 2022 included approximately $8 million of yield maintenance income (triggered by prepayments) received on retained SFR securities. During the second quarter of 2022, interest rates increased sharply, prepayments slowed and yield maintenance income on retained SFR securities declined to $4 million. Additionally, during the first quarter of 2022, we recorded $8 million of discount accretion for AFS securities, much of which was associated with securities we expected to be called given high prepayment speeds experienced during 2021. As a result of interest rate increases during the first half of 2022, expected call dates were extended for certain available-for-sale securities and discount accretion income from these securities declined, resulting in $1 million of total discount accretion in the second quarter of 2022.

Investment fair value changes is primarily comprised of the change in fair value (both realized and unrealized) of our portfolio investments accounted for under the fair value option and hedges associated with these investments (see Table 5.6 in Note 5 in Part I, Item 1 of this Quarterly Report on Form 10-Q for further detail on the composition of investment fair value changes – difference in amount from the table above to Table 5.6 in the notes to our consolidated financial statements relates to fair value changes for investments held at corporate/other). The negative investment fair value changes in the first half of 2022 were nearly all unrealized and resulted primarily from credit spread widening across many of our investments, which began in the first quarter and increased sharply during the end of the second quarter. Rising interest rates and slower actual and expected prepayment speeds resulted in positive fair value changes for our interest only securities, and hedges allocated to our investment portfolio, and credit improvements benefited several of our investments, including in particular our retained CAFL SFR securities and bridge loans. While our investments generally continue to experience stable credit performance, further spread widening or a deterioration in credit could result in additional negative investment fair value changes for our investments.

Other income within this segment is primarily comprised of income (loss) from our MSR investments, bridge loan extension fees, and risk share investment income. Details on the composition of Other income is included in Note 20 in Part I, Item 1 of this Quarterly Report on Form 10-Q. Realized gains generally result from sales or calls of available-for-sale securities we own. Refer to the analysis of this line item in the Consolidated Results of Operations section of this MD&A for an explanation of current year activity. Operating expenses at this segment are primarily attributable to compensation expense and remained relatively consistent during the three- and six-month periods, as decreases in variable compensation were partially offset by higher fixed compensation costs resulting from higher headcount in 2022.

We hold certain of our investments, primarily our MSRs, at our taxable REIT subsidiary. Our Provision for income taxes at this segment is primarily driven by the amount of income earned from these assets and, for the first half of 2022, reflects positive net income earned from investment portfolio activities at our taxable REIT subsidiary.

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Investments Detail and Activity

This section presents additional details on our investments and their activity during the three and six months ended June 30, 2022.

Real Estate Securities Portfolio

The following table sets forth our real estate securities activity by collateral type for the three and six months ended June 30, 2022.

Table 11 – Real Estate Securities Activity by Collateral Type (1)

Three Months Ended June 30, 2022	Residential				Multifamily		Total
(In Thousands)	Senior		Subordinate		Mezzanine
Beginning fair value	$	34,206	$	300,352	$	24,324	$	358,882
Acquisitions:
Sequoia securities	—		—		—		—
Third-party securities	—		—		—		—
Sales:
Sequoia securities	(3,855)		—		—		(3,855)
Third-party securities	(6,337)		(13,137)		—		(19,474)
Gains on sales and calls, net	—		—		—		—
Effect of principal payments (2)	—		(753)		(2,009)		(2,762)
Change in fair value, net	7,482		(54,810)		(1,185)		(48,513)
Ending Fair Value	$	31,496	$	231,652	$	21,130	$	284,278

Six Months Ended June 30, 2022	Residential				Multifamily		Total
(In Thousands)	Senior		Subordinate		Mezzanine
Beginning fair value	$	21,787	$	322,909	$	32,715	$	377,411
Acquisitions:	—		—		—
Sequoia securities	—		—		—		—
Third-party securities	5,006		10,000		—		15,006
Sales:	—		—		—
Sequoia securities	(3,855)		—		—		(3,855)
Third-party securities	(6,337)		(13,137)		—		(19,474)
Gains on sales and calls, net	—		1,914		—		1,914
Effect of principal payments (2)	—		(15,677)		(8,688)		(24,365)
Change in fair value, net	14,895		(74,357)		(2,897)		(62,359)
Ending Fair Value	$	31,496	$	231,652	$	21,130	$	284,278

(1)Amounts presented in this table include securities reported on our balance sheet and does not include securities we own in consolidated entities. See the following table for a presentation of all securities we own, including those in consolidated entities.

(2)The effect of principal payments reflects the change in fair value due to principal payments, which is calculated as the cash principal received on a given security during the period multiplied by the prior quarter ending price or acquisition price for that security.

At June 30, 2022, our securities at Redwood (exclusive of securities owned in consolidated entities) consisted of fixed-rate assets (91%), adjustable-rate assets (6%), and hybrid assets that reset within the next year (3%).

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The following table sets forth activity in our real estate securities portfolio for the three and six months ended June 30, 2022, organized by investments organically created through our mortgage banking segments and acquired from third-parties. This table includes both our securities held on balance sheet and our economic interest in securities we own in securitizations we consolidate in accordance with GAAP.

Table 12 – Activity of Real Estate Securities Owned at Redwood and in Consolidated Entities

Three Months Ended June 30, 2022	Residential Organic				Business Purpose Organic		Third-Party Investments						Total
	Sequoia Securities on Balance Sheet		Consolidated Sequoia Securities		Consolidated CAFL Securities		Consolidated SLST Securities		Consolidated Multifamily Securities		Other Third-Party Securities
(In Thousands)
Beginning fair value	$	133,014	$	244,396	$	305,554	$	436,677	$	31,921	$	225,868	$	1,377,430
Acquisitions(1)	—		—		23,687		—		—		—		23,687
Sales	(3,854)		(612)		—		—		—		(19,475)		(23,941)
Gains on sales and calls, net	—		—		—		—		—		—		—
Effect of principal payments (2)	(193)		(1,095)		—		(10,424)		—		(2,569)		(14,281)
Change in fair value, net	(16,405)		(5,912)		(21,828)		(35,837)		(189)		(32,108)		(112,279)
Ending Fair Value (3)	$	112,562	$	236,777	$	307,413	$	390,416	$	31,732	$	171,716	$	1,250,616

Six Months Ended June 30, 2022	Residential Organic				Business Purpose Organic		Third-Party Investments						Total
	Sequoia Securities on Balance Sheet		Consolidated Sequoia Securities		Consolidated CAFL Securities		Consolidated SLST Securities		Consolidated Multifamily Securities		Other Third-Party Securities
(In Thousands)
Beginning fair value	$	145,757	$	245,417	$	301,506	$	444,751	$	31,657	$	231,654	$	1,400,742
Acquisitions(1)	—		3,742		23,687		—		—		15,006		42,435
Sales	(3,854)		(612)		—		—		—		(19,475)		(23,941)
Gains on sales and calls, net	284		—		—		—		—		1,630		1,914
Effect of principal payments (2)	(10,632)		(2,033)		—		(21,572)		—		(13,733)		(47,970)
Change in fair value, net	(18,993)		(9,737)		(17,780)		(32,763)		75		(43,366)		(122,564)
Ending Fair Value (3)	$	112,562	$	236,777	$	307,413	$	390,416	$	31,732	$	171,716	$	1,250,616

(1)During the six months ended June 30, 2022, we retained $4 million of securities from one Sequoia securitization.

(2)The effect of principal payments reflects the change in fair value due to principal payments, which is calculated as the cash principal received on a given security during the period multiplied by the prior quarter ending price or acquisition price for that security.

(3)At June 30, 2022, $4 million of securities within the "Other third-party securities" column of this table were used as hedges for our residential mortgage banking operations. These same securities are presented as a component of securities within our residential lending segment on our segment balance sheet.

At June 30, 2022, our securities (both those held on our balance sheet and our economic interests in consolidated VIEs) consisted of fixed-rate assets (98%), adjustable-rate assets (1%) and hybrid assets that reset within the next year (1%).

We directly finance our holdings of real estate securities with a combination of non-recourse debt, non-marginable term debt and marginable debt in the form of repurchase (or “repo”) financing. At June 30, 2022, real estate securities with a fair value of $446 million (including securities owned in consolidated Sequoia and CAFL securitization entities) were financed with $310 million of long-term, non-marginable recourse debt through our subordinate securities financing facilities, re-performing loan securities with a fair value of $390 million were financed with $115 million of non-recourse securitization debt, and real estate securities with a fair value of $124 million (including securities owned in consolidated securitization entities) were financed with $95 million of short-term debt incurred through repurchase facilities with four different counterparties. The remaining $290 million of our securities, including certain securities we own that were issued by consolidated securitization entities, were financed with capital.

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The following table summarizes the credit characteristics of our entire real estate securities portfolio by collateral type at June 30, 2022. This table includes both our securities held on balance sheet and our economic interests in securities we own in securitizations we consolidate in accordance with GAAP.

Table 13 – Credit Statistics of Real Estate Securities Owned at Redwood and in Consolidated Entities

June 30, 2022							Weighted Average Values
	Market Value - IO Securities		Market Value - Non-IO  Securities		Principal Balance - Non-IO Securities		Gross Weighted Average Coupon		90+ Delinquency		3-Month Prepayment Rate		Investment Thickness(1)
(Dollars in Thousands)
Sequoia securities on balance sheet	$	27,293	$	85,269	$	140,270	3.8	%	0.5	%	18	%	7	%
Consolidated Sequoia securities	23,452		213,325		248,551		4.7	%	2.0	%	25	%	40	%
Total Sequoia Securities	50,745		298,594		388,821		4.4	%	1.5	%	23	%	29	%
Consolidated Freddie Mac SLST securities	10,854		379,562		511,195		4.5	%	13.3	%	12	%	29	%
RPL securities on balance sheet	209		46,608		143,169		4.3	%	3.7	%	12	%	2	%
Total RPL Securities	11,063		426,170		654,364		4.5	%	12.3	%	12	%	26	%
Consolidated Freddie Mac K-Series securities	—		31,732		36,468		4.3	%	—	%	—	%	10	%
Multifamily securities on balance sheet	179		20,950		22,809		3.3	%	—	%	23	%	9	%
Total Multifamily Securities	179		52,682		59,277		3.9	%	—	%	9	%	10	%
Consolidated CAFL securities	40,383		267,030		402,960		5.3	%	2.4	%	19	%	15	%
Other third-party securities	4,010		99,760		143,136		3.3	%	0.7	%	15	%	2	%
Total Securities	$	106,380	$	1,144,236	$	1,648,558

(1)Investment thickness represents the average size of the subordinate securities we own as investments in securitizations, relative to the average overall size of the securitizations. For example, if our investment thickness (of first-loss securities) with respect to a particular securitization is 10%, we have exposure to the first 10% of credit losses resulting from loans underlying that securitization. We generally own first loss positions in Sequoia, RPL and CAFL securities. We own both first loss and mezzanine positions (positions credit enhanced by subordinate securities) in multifamily and other third-party securities.

We primarily target investments that have a sensitivity to housing credit risk, typically sourced through our operating businesses where we control the underwriting and review of underlying collateral. During the first half of 2022, our investment portfolio continued to demonstrate strong performance across a range of credit metrics, including loan delinquencies which generally remained stable, and loan-to-value ratios (LTVs), which continued to decline or remain stable. Given the seasoned nature of our investments (particularly within our RPL securities and Sequoia securities), many of these investments are supported by substantial home price appreciation and borrower equity in the underlying homes.

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Bridge Loans Held-for-Investment

The following table provides the activity of bridge loans held-for-investment during the three and six months ended June 30, 2022.

Table 14 – Bridge Loans Held-for-Investment - Activity

	Three Months Ended		Six Months Ended
(In Thousands)	June 30, 2022		June 30, 2022
Fair value at beginning of period	$	1,209,950	$	944,606
Transfers between portfolios (1)	560,128		977,424
Transfers to REO	(691)		(963)
Principal repayments	(112,162)		(261,538)
Changes in fair value, net	(5,736)		(8,040)
Fair Value at End of Period	$	1,651,489	$	1,651,489

(1)We originate bridge loans at our TRS and then transfer them to our REIT. Origination fees and any fair value changes on these loans prior to transfer are recognized within Mortgage banking activities, net on our consolidated statements of income. Once the loans are transferred to our REIT, they are classified as held-for-investment, with subsequent fair value changes generally recorded through Investment fair value changes, net on our consolidated statements of income. For bridge loans held at our REIT that are transferred into our CAFL bridge securitization, we record any changes in fair value from the date of origination or purchase to the time of securitization as Mortgage banking activities, net on our consolidated statements of income. Once loans are transferred into this securitization, any changes in fair value are recorded through Investment fair value changes, net on our consolidated statements of income.

Our $1.65 billion of bridge loans held-for-investment at June 30, 2022 were comprised of first-lien, interest-only loans with a weighted average coupon of 6.78% and original maturities of six to 36 months. At origination, the weighted average FICO score of borrowers backing these loans was 744 and the weighted average LTV ratio of these loans was 67%. At June 30, 2022, of the 3,399 loans in this portfolio, 56 of these loans with an aggregate fair value of $37 million and an aggregate unpaid principal balance of $40 million were in foreclosure and 99 loans with an aggregate fair value of $38 million and an unpaid principal balance of $41 million were greater than 90 days delinquent (certain loans in foreclosure were also 90 days delinquent).

We finance our bridge loans with a combination of recourse, non-marginable warehouse facilities, non-recourse, non-marginable warehouse facilities, and non-recourse securitization debt. During the second quarter of 2022, we completed our second bridge loan securitization. This bridge loan securitizations includes a 24-month revolving feature allowing us to add additional loans as loans within the structure pay down. These two structures have $550 million of total capacity. At June 30, 2022, we had: $196 million of debt incurred through short-term warehouse facilities with three counterparties, which was secured by $265 million of business purpose bridge loans; $635 million of debt incurred through long-term facilities with two different counterparties, which was secured by $779 million of business purpose bridge loans; and $485 million of securitization debt secured by $542 million of business purpose bridge loans and $9 million of restricted cash.

The following table provides the composition of bridge loans held-for-investment by product type as of June 30, 2022 and December 31, 2021.

Table 15 – Bridge Loans Held-for-Investment - By Product Type

(In Thousands)	June 30, 2022		December 31, 2021
Multifamily	$	786,556	$	326,004
Renovate / Build to rent	670,070		375,729
Fix and Flip	133,964		150,928
Other	60,899		91,945
Fair Value at End of Period	$	1,651,489	$	944,606

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Residential Loans

The following table provides the activity of residential loans held at our investment portfolio during the three and six months ended June 30, 2022.

Table 16 – Investment Portfolio Residential Loans - Activity

	Three Months Ended		Six Months Ended
(In Thousands)	June 30, 2022		June 30, 2022
Fair value at beginning of period	$	246,064	$	172,048
Acquisitions	—		102,258
Principal repayments	(15,874)		(39,864)
Changes in fair value, net	(8,046)		(12,298)
Fair Value at End of Period	$	222,144	$	222,144

(1)Represents the net transfers of loans into or out of our investment portfolio and their reclassification between held-for-sale to held-for-investment.

During six months ended June 30, 2022, we called three of our unconsolidated Sequoia securitizations and purchased $102 million (unpaid principal balance) of loans from the securitization trusts.

Other Investments

The following table sets forth our other investments activity at our Investment Portfolio segment by significant asset type for the three and six months ended June 30, 2022.

Table 17 – Other Investments at Investment Portfolio Segment - Activity

Three Months Ended June 30, 2022	Servicing Investments(1)		Home Equity Investments(2)		MSRs and Excess Servicing		Other		Total
(In Thousands)
Balance at beginning of period	$	302,837	$	227,133	$	62,762	$	2,324	$	595,056
New/additional investments	—		57,248		—		—		57,248
Sales/distribution	—		—		—		(469)		(469)
Reductions in investments	(26,396)		(13,155)		—		—		(39,551)
Changes in fair value, net	(3,231)		5,140		1,601		13		3,523
Other	—		—		—		—		—
Balance at End of Period	$	273,210	$	276,366	$	64,363	$	1,868	$	615,807

Six Months Ended June 30, 2022	Servicing Investments(1)			Home Equity Investments(2)			MSRs and Excess Servicing				Other		Total
(In Thousands)
Balance at beginning of period	$	350,923	0	$	192,740	0	$	56,669	$	—	$	5,935	$	606,267
New/additional investments	—			97,389			4,543				—		101,932
Sales/distribution	—			—			—				(4,769)		(4,769)
Reductions in investments	(71,401)			(25,826)			—				(30)		(97,257)
Changes in fair value, net	(6,312)			12,063			3,360				732		9,843
Other	—			—			(209)				—		(209)
Balance at End of Period	$	273,210		$	276,366		$	64,363			$	1,868	$	615,807

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Footnotes for Table 16

(1)Our servicing investments are owned through our consolidated Servicing Investment entities. At June 30, 2022, our economic investment in these entities was $96 million (for GAAP purposes, we consolidated $305 million of servicing investments, $232 million of non-recourse short-term securitization debt, as well as other assets and liabilities for these entities). At December 31, 2021, our economic investment in these entities was $103 million (for GAAP purposes, we consolidated $385 million of servicing investments, $294 million of non-recourse short-term securitization debt, as well as other assets and liabilities for these entities).

(2)Our home equity investments presented in this table as of June 30, 2022, include $146 million of HEIs owned in our consolidated HEI securitization entity and $130 million of HEIs owned directly at Redwood. At June 30, 2022, our economic investment in the consolidated HEI securitization entity was $15 million (for GAAP purposes, we consolidated $146 million of HEIs and $110 million of ABS issued, as well as other assets and liabilities for this entity).

Reductions in investments for our servicing investments primarily represent recoveries of servicing advances within our consolidated servicing VIEs. Positive changes in fair value for HEIs in 2022 primarily reflect improvements in home prices (positive HPA). Changes in fair value for MSRs and excess servicing for 2022 include a reduction in basis from the regular receipt of scheduled cash flows, which was more than offset by a positive impact to fair value from a decrease in forecasted prepayment speeds.

Additional details on our other investments is included in Note 10 of our Notes to Consolidated Financial Statements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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Income Taxes

Taxable Income, REIT Status and Dividend Characterization

As a REIT, under the Internal Revenue Code, Redwood is required to distribute to shareholders at least 90% of its annual REIT taxable income, excluding net capital gains, and meet certain other requirements that relate to, among other matters, the assets it holds, the income it generates, and the composition of its stockholders. To the extent Redwood retains REIT taxable income, including net capital gains, it is taxed at corporate tax rates. Redwood also earns taxable income at its taxable REIT subsidiaries (TRS), which it is not required to distribute under the Internal Revenue Code.

In June 2022, our Board of Directors declared a regular dividend of $0.23 per share for the second quarter of 2022, which was paid on June 30, 2022 to shareholders of record on June 23, 2022. As of June 30, 2022, our year-to-date dividend distributions of $0.46 per share exceeded our minimum distribution requirements and we believe that we have met all requirements for qualification as a REIT for federal income tax purposes. Many requirements for qualification as a REIT are complex and require analysis of particular facts and circumstances. Often there is only limited judicial or administrative interpretive guidance and as such there can be no assurance that the Internal Revenue Service or courts would agree with our various tax positions. If we were to fail to meet all the requirements for qualification as a REIT and the requirements for statutory relief, we would be subject to federal corporate income tax on our taxable income and we would not be able to elect to be taxed as a REIT for four years thereafter. Such an outcome could have a material adverse impact on our consolidated financial statements.

While our minimum REIT dividend requirement is generally 90% of our annual REIT taxable income, we carried a $37 million federal net operating loss carry forward (NOL) into 2022 at our REIT that affords us the ability to retain REIT taxable income up to the NOL amount, tax free, rather than distributing it as dividends. Federal income tax rules require the dividends paid deduction to be applied to reduce REIT taxable income before the applicability of NOLs is considered; therefore, REIT taxable income must exceed our dividend distribution for us to utilize a portion of our NOL and any remaining NOL amount will carry forward into future years.

While the exact amount is uncertain at this time, we currently expect a significant portion of our 2022 dividend distributions to be taxable as ordinary income for federal income tax purposes. Any remaining amount is currently expected to be characterized as a return of capital, which in general is nontaxable (provided it does not exceed a shareholder's tax basis in Redwood shares) and reduces a shareholder's basis in Redwood shares (but not below zero). To the extent such distributions exceed a shareholder's basis in Redwood shares, such excess amount would be taxable as capital gain. Under the federal income tax rules applicable to REITs, none of Redwood’s 2022 dividend distributions are currently expected to be characterized as long-term capital gain dividends. The income or loss generated at our TRS will not directly affect the tax characterization of our 2022 dividends; however, any dividends paid from our TRS to our REIT would allow a portion of our REIT’s dividends to be classified as qualified dividends.

Tax Provision under GAAP

For the three and six months ended June 30, 2022, we recorded tax benefits of $9 million and $12 million, respectively. For the three and six months ended June 30, 2021, we recorded tax provisions of $7 million and $18 million, respectively. Our tax provision is primarily derived from the activities at our TRS as we do not book a material tax provision associated with income generated at our REIT. The switch to a tax benefit from a tax provision year-over-year was primarily the result of GAAP income being recorded at our TRS in 2021 versus GAAP losses being recorded at our TRS in 2022.

Realization of our deferred tax assets ("DTAs") is dependent on many factors, including generating sufficient taxable income prior to the expiration of NOL carryforwards and generating sufficient capital gains in future periods prior to the expiration of capital loss carryforwards. To the extent we determine it is more likely than not that we will not be able to realize a deferred tax asset, we establish a valuation allowance accordingly. At December 31, 2021, we reported net federal ordinary and capital DTAs with no valuation allowance recorded against them. We continue to believe it is more likely than not that we will realize all of our federal deferred tax assets; therefore, there continues to be no valuation allowance recorded against our net federal DTAs. As we have experienced GAAP losses at our TRS the past two quarters, we are continuing to monitor our estimate of the realizability of our net deferred tax assets and will reassess the need for a valuation allowance, in whole or in part, in future periods.

Consistent with prior periods, we continued to maintain a valuation allowance against the majority of our net state DTAs as realization of our state DTAs is dependent on generating sufficient taxable income in the same jurisdictions in which the DTAs exist and we project most of our state DTAs will expire prior to their utilization.

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LIQUIDITY AND CAPITAL RESOURCES

Summary

In addition to the proceeds from equity and debt capital-raising transactions, our principal sources of cash and liquidity consist of borrowings under mortgage loan warehouse facilities, secured term financing facilities, securities repurchase agreements, payments of principal and interest we receive from our investment portfolio assets, proceeds from the sale of investment portfolio assets, and cash generated from our operating activities. Our most significant uses of cash are to purchase and originate mortgage loans for our mortgage banking operations and manage hedges associated with those activities, to purchase investment securities and make other investments, to repay principal and interest on our debt, to meet margin calls associated with our debt and other obligations, to make dividend payments on our capital stock, and to fund our operations.

At June 30, 2022, our total capital was $2.12 billion and included $1.26 billion of equity capital and $862 million of convertible notes and long-term debt on our consolidated balance sheet, including $199 million of convertible debt due in 2023, $150 million of convertible debt due in 2024, $172 million of exchangeable debt due in 2025, $215 million of convertible debt due in 2027 and $140 million of trust-preferred securities due in 2037.

As of June 30, 2022, our unrestricted cash was $371 million, and we estimate we had approximately $190 million of available capital (available capital reflects the subtraction of approximately $44 million for the initial cash purchase price paid at closing in connection with the acquisition of Riverbend following the end of the second quarter of 2022). While we believe our available cash is sufficient to fund our operations, we may raise equity or debt capital from time to time to increase our unrestricted cash and liquidity, to repay existing debt, to make long-term portfolio investments, to fund strategic acquisitions and investments, or for other purposes. To the extent we seek to raise additional capital, our approach will continue to be based on what we believe to be in the best interests of the company.

In the discussion that follows and throughout this document, we distinguish between marginable and non-marginable debt. When we refer to non-marginable debt and marginable debt, we are referring to whether or not such debt is subject to margin calls based solely on the lender's determination, in its discretion, of the market value of the underlying collateral that is non-delinquent. If a mortgage loan is financed under a marginable warehouse facility, to the extent the market value of the loan declines (which market value is determined by the counterparty under the facility), we will be subject to a margin call, meaning we will be required to either immediately reacquire the loan or meet a margin requirement to pledge additional collateral, such as cash or additional mortgage loans, in an amount at least equal to the decline in value. Non-marginable debt may be subject to a margin call due to delinquency or another credit event related to the mortgage or security being financed, a decline in the value of the underlying asset securing the collateral, or a change in the interest rate of a specified reference security relative to a base interest rate amount. For example, we could be subject to a margin call on non-marginable debt if an appraisal or broker price opinion indicates a decline in the estimated value of the property securing the mortgage loan that is financed by us under a loan warehouse facility, or based on the occurrence of a triggering credit event impacting the financed collateral which is followed by a decline in the market value of the financed collateral (as determined by the lender).

We also distinguish between recourse and non-recourse debt. When we refer to non-recourse debt, we mean debt that is payable solely from the assets pledged to secure such debt, and under which debt no creditor or lender has direct or indirect recourse to us, or any other entity or person (except for customary exceptions for fraud, acts of insolvency, or other "bad acts"), if such assets are inadequate or unavailable to pay off such debt.

We are subject to risks relating to our liquidity and capital resources, including risks relating to incurring debt under loan warehouse facilities, securities repurchase facilities, and other short- and long-term debt facilities and other risks relating to our use of derivatives. A further discussion of these risks is set forth below under the heading “Risks Relating to Debt Incurred under Short-and Long-Term Borrowing Facilities."

Repurchase Authorization

Our Board of Directors previously approved an authorization for the repurchase of up to $100 million of our common stock, and also authorized the repurchase of outstanding debt securities, including convertible and exchangeable debt. Under this authorization, shares or securities may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. During the three and six months ended June 30, 2022, we repurchased 3.7 million shares of our common stock. At June 30, 2022, $46 million of the authorization remained available for the repurchase of shares of our common stock and we also continued to be authorized to repurchase outstanding debt securities.

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In July 2022, our Board of Directors authorized the repurchase of up to $125 million of common stock. This common stock repurchase authorization replaced the $100 million common stock repurchase authorization approved by the Board of Directors in 2018, has no time limit, may be modified, suspended or discontinued at any time, and does not obligate us to acquire any specific number of shares or securities. The Board of Directors also continued its previous authorization for the repurchase of outstanding debt securities. Like other investments we may make, any repurchases of our common stock or debt securities under this authorization would reduce our available capital and unrestricted cash described above.

Cash Flows and Liquidity for the Six Months Ended June 30, 2022

Cash flows from our mortgage banking activities and our investments can be volatile from quarter to quarter depending on many factors, including the profitability of mortgage banking activities, the timing and amount of securities acquisitions, sales and repayments, as well as changes in interest rates, prepayments, and credit losses. Therefore, cash flows generated in the current period are not necessarily reflective of the long-term cash flows we will receive from these investments or activities.

Cash Flows from Operating Activities

Cash flows from operating activities were negative $491 million during the six months ended June 30, 2022. This amount includes the net cash utilized during the period from the purchase and sale of residential mortgage loans and the origination and sale of our business purpose loans associated with our mortgage banking activities. Purchases of loans are financed to a large extent with short-term and long-term debt, for which changes in cash are included as a component of financing activities. During the first six months of 2022, excluding cash flows from the purchase, origination, sale, principal payments of loans classified as held-for-sale and the settlement of associated derivatives (which cumulatively totaled $558 million), cash flows from operating activities were positive $68 million.

Cash Flows from Investing Activities

During the six months ended June 30, 2022, our net cash provided by investing activities was $204 million and primarily resulted from proceeds from principal payments on loans held-for-investment. Because many of our investment securities and loans are financed through various borrowing agreements, a significant portion of the proceeds from any sales or principal payments of these assets are generally used to repay balances under these financing sources. Similarly, all or a significant portion of cash flows from principal payments of loans at consolidated securitization entities would generally be used to repay ABS issued by those entities.

Although we generally intend to hold our loans and investment securities as long-term investments, we may sell certain of these assets in order to manage our liquidity needs and interest rate risk, to meet other operating objectives, and to adapt to market conditions.

As presented in the "Supplemental Noncash Information" subsection of our consolidated statements of cash flows, during the six months ended June 30, 2022, we transferred loans between held-for-sale and held-for-investment classification and retained securities from securitizations we sponsored, which represent significant non-cash transactions that were not included in cash flows from investing activities.

Cash Flows from Financing Activities

During the six months ended June 30, 2022, our net cash provided by financing activities was $199 million. This primarily resulted from net long-term debt borrowings of $681 million, which included the issuance of $215 million of convertible debt during three months ended June 30, 2022, as well as $214 million of net borrowings under ABS issued, including from the issuance of CAFL SFR, CAFL bridge and Sequoia ABS securitizations during the six months ended June 30, 2022. These amounts were partially offset by $675 million of net paydowns on short-term borrowings, resulting primarily from a reduction in financed loan inventory at our residential mortgage banking business at June 30, 2022, as well as the payment of our two quarterly dividends totaling $57 million. Cash raised through stock issuances under our ATM program of $68 million during the first quarter of 2022 were partially offset by stock repurchases of $27 million during the second quarter of 2022.

During the six months ended June 30, 2022, we declared dividends of $0.46 per common share. On June 9, 2022, the Board of Directors declared a regular dividend of $0.23 per share for the second quarter of 2022, which was paid on June 30, 2022 to shareholders of record on June 23, 2022.

In accordance with the terms of our outstanding deferred stock units, cash-settled deferred stock units, and restricted stock units, which are generally long-term compensation awards, each time we declare and pay a dividend on our common stock, we are required to make a dividend equivalent cash payment in that same per share amount on each outstanding deferred stock unit, cash-settled deferred stock unit, and restricted stock unit.

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Material Cash Requirements

In the normal course of business, we enter into transactions that may require future cash payments. As required by GAAP, some of these obligations are recorded on the balance sheet, while others are off-balance sheet or recorded on the balance sheet in amounts different from the full contract or notional amount of the transaction.

Our material cash requirements from known contractual and other obligations during the twelve months following June 30, 2022 include maturing short-term debt, interest payments on short-term and long-term debt, payments on operating leases, and funding commitments for bridge loans and under HEI flow purchase agreements. Our material cash requirements from known contractual and other obligations beyond the twelve months following June 30, 2022 include maturing long-term debt, interest payments on long-term debt, payments on operating leases and funding commitments for bridge loans and under HEI flow purchase agreements.

For additional information regarding our material cash requirements, see Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021 under the caption Contractual Obligations. For additional information on commitments and contingencies as of June 30, 2022 that could impact our liquidity and capital resources, see Note 16 of our Notes to Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, which supplements the disclosures included in Note 16 to the Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Several of our loan warehouse facilities were established with initial one-year terms and are regularly amended on an annual basis to extend the terms for an additional year ahead of their maturity. We renewed several of these facilities in the first half of 2022 and have other such facilities with scheduled maturities during the next twelve months. While there is no assurance of our ability to renew these facilities, given current market conditions we would expect to extend these in the normal course of business.

We expect to meet our obligations coming due in less than one year from June 30, 2022, through a combination of cash on hand, payments of principal and interest we receive from our investment portfolio assets, proceeds from the sale of investment portfolio assets, cash generated from our operating activities, or incremental borrowings under existing, new or amended financing arrangements. As of June 30, 2022, we had approximately $500 million of pledgeable and unencumbered assets.

During the first six months of 2022, the highest balance of our short-term debt outstanding was $2.39 billion. See Note 13 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information on our short-term debt. See Note 15 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information on our long-term debt.

Liquidity Needs for our Mortgage Banking Activities

We generally use loan warehouse facilities to finance the residential loans we acquire and the business purpose loans we originate or acquire in our mortgage banking operations while we aggregate the loans for sale or securitization. These facilities may be designated as short-term or long-term for financial reporting purposes, depending on the remaining maturity of the facility or the amount of time individual borrowings may remain outstanding on a facility.

At June 30, 2022, we had residential warehouse facilities outstanding with seven different counterparties, with $2.75 billion of total capacity and $1.66 billion of available capacity. These included non-marginable facilities with $1.38 billion of total capacity and marginable facilities with $1.38 billion of total capacity.

At June 30, 2022, we had business purpose warehouse facilities outstanding with four different counterparties, with $2.25 billion of total capacity and $997 million of available capacity. All of these facilities are non-marginable.

Several of these facilities have variable interest rates based on LIBOR or SOFR benchmarks and recent policy statements from the Federal Reserve indicate the likelihood of further increases in the federal funds rate, which would result in higher benchmark rates and interest costs for us under certain of our debt facilities.

As discussed above, several of the facilities we use to finance our mortgage banking loan inventory are short-term in nature and will require renewals. Additionally, because several of our warehouse facilities are uncommitted, at any given time we may not be able to obtain additional financing under them when we need it, exposing us to, among other things, liquidity risks. Additional information regarding risks related to the debt we use to finance our mortgage banking operations can be found under the heading "Risks Relating to Debt Incurred under Short- and Long-Term Borrowing Facilities" that follows within this section.

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Liquidity Needs for our Investment Portfolio

We use various forms of secured recourse and non-recourse debt to finance assets in our investment portfolio. We distinguish our debt between recourse and non-recourse, as our non-recourse debt is mostly comprised of ABS issued, which has unique characteristics that differentiate it in important ways from our recourse debt. When we refer to non-recourse debt, we mean debt that is payable solely from the assets pledged to secure such debt, and under which debt no creditor or lender has direct or indirect recourse to us, or any other entity or person (except for customary exceptions for fraud, acts of insolvency, or other "bad acts"), if such assets are inadequate or unavailable to pay off such debt.

ABS issued represents debt of securitization entities that we consolidate for GAAP reporting purposes. Our exposure to these entities is primarily through the financial interests we have purchased or retained from these entities (typically subordinate securities and interest only securities). Each securitization entity is independent of Redwood and of each other and the assets and liabilities are not owned by and are not legal obligations of Redwood. As the debt issued by these entities is not a direct obligation of Redwood, and since the debt generally can remain outstanding for the full term of the loans it is financing within each securitization, this debt effectively provides permanent financing for these assets. See Notes 4 and 14, respectively, in Part I, Item 1 of this Quarterly Report on Form 10-Q, for additional information on our principles of consolidation and our asset-backed securities issued.

Separately, we use non-recourse debt in the form of non-marginable term facilities to finance a portion of our business purpose bridge loan portfolio. While this debt is non-recourse to Redwood, it does have fixed terms with prepayment options that allows us to refinance this debt or ultimately repay it upon maturity. The remainder of the debt we use to finance our investments is recourse debt. For securities we have financed, the majority of our financing is in the form of recourse non-marginable secured term debt, with the smaller remaining amount being marginable securities repurchase debt. Additionally, a portion of our business purpose bridge loan portfolio is financed with recourse non-marginable secured term debt.

We use a balanced combination of fixed and floating rate debt to finance our fixed and floating rate investments. Recent policy statements from the Federal Reserve indicate the likelihood of further increases in the federal funds rate, which if enacted could result in lower net interest income to the extent our variable rate assets and liabilities are not aligned. Additionally, to the extent interest rates remain elevated or increase further, certain fixed-rate term borrowings that mature in the coming quarters could have to be refinanced at higher interest rates, which could cause a reduction in net interest income.

At June 30, 2022, in aggregate, we had $3.12 billion of secured recourse debt outstanding, financing our mortgage banking and investment portfolio, of which $662 million was marginable and $2.46 billion was non-marginable.

Corporate Capital

In addition to secured recourse and non-recourse debt we use specifically in association with our mortgage banking operations and within our investment portfolio, we also use unsecured recourse debt to finance our overall operations. This is generally in the form of convertible debt securities we issue in the public markets and also includes trust preferred securities. See Note 15 in Part II, Item 8 of our Annual Report on Form 10-K, for additional information on our long-term debt.

Risks Relating to Debt Incurred Under Short- and Long-Term Borrowing Facilities

As described above under the heading “Results of Operations,” in the ordinary course of our business, we use debt financing obtained through several different types of borrowing facilities to, among other things, finance the acquisition and/or origination of residential and business purpose mortgage loans (including those we acquire or originate in anticipation of sale or securitization), and finance investments in securities and other investments. We may also use short- and long-term borrowings to fund other aspects of our business and operations, including the repurchase of shares of our common stock. Recourse debt incurred under these facilities is generally either the direct obligation of Redwood Trust, Inc., or the direct obligation of subsidiaries of Redwood Trust, Inc. and guaranteed by Redwood Trust, Inc. Risks relating to debt incurred under these facilities are described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021, under the caption(s) “Risks Relating to Debt Incurred under Short- and Long-Term Borrowing Facilities,” and “Our use of financial leverage exposes us to increased risks, including liquidity risks from margin calls and potential breaches of the financial covenants under our borrowing facilities, which could result in our being required to immediately repay all outstanding amounts borrowed under these facilities and these facilities being unavailable to use for future financing needs, as well as triggering cross-defaults under other debt agreements.”

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Our sources of debt financing include secured borrowings under residential and business purpose mortgage loan warehouse facilities (including recourse and non-recourse warehouse facilities), short-term securities repurchase facilities, a $10 million committed line of short-term secured credit from a bank, short-term servicer advance financing, a secured, revolving debt facility collateralized by mortgage servicing rights, and subordinate securities financing facilities.

Aggregate borrowing limits are stated under certain of these facilities, and certain other facilities have no stated borrowing limit, but many of the facilities are uncommitted, which means that any request we make to borrow funds under these uncommitted facilities may be declined by the lender for any reason, even if at the time of the borrowing request we have then-outstanding borrowings that are less than the borrowing limits under these facilities. In general, financing under these facilities is obtained by transferring or pledging mortgage loans or securities to the counterparty in exchange for cash proceeds (in an amount less than 100% of the principal amount of the transferred or pledged assets).

Under many of our mortgage loan warehouse facilities and our short-term securities repurchase facilities, while transferred or pledged assets are financed under the facility, to the extent the value of the assets, or the collateral underlying those assets, declines, we are generally required to either immediately reacquire the assets or meet a margin requirement to transfer or pledge additional assets or cash in an amount at least equal to the decline in value. We refer to borrowing facilities with margin call provisions based solely on the lender's determination, in its discretion, of changes in the market value of transferred or pledged assets, as marginable debt. Borrowing facilities that we refer to as non-marginable debt may be subject to a margin call due to delinquency or another credit event related to the mortgage or security being financed, a decline in the value of the underlying asset securing the collateral, or a change in the interest rate of a specified reference security relative to a base interest rate amount. For example, we could be subject to a margin call on non-marginable debt if an appraisal or broker price opinion indicates a decline in the estimated value of the property securing the mortgage loan that is financed by us under a loan warehouse facility, or based on the occurrence of a triggering credit event impacting the financed collateral which is followed by a decline in the market value of the financed collateral (as determined by the lender), in which case the creditor may demand that we transfer additional collateral to the creditor (in the form of cash, U.S. Treasury obligations (in certain cases), or additional mortgage loans) with a value equal to the amount of the decline. Of our active financing arrangements with outstanding balances at June 30, 2022, only our short-term securities repurchase facilities (with $95 million of borrowings outstanding at June 30, 2022), and four of our residential mortgage loan warehouse facilities (with $567 million of borrowings outstanding at June 30, 2022) retain market-value based margin call provisions based solely on the lender's determination of market value and, as such, are considered marginable.

Margin call provisions under these facilities are further described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021 under the caption “Risks Relating to Debt Incurred under Short- and Long-Term Borrowing Facilities - Margin Call Provisions Associated with Short-Term Debt and Other Debt Financing.” Financial covenants included in these facilities are further described Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021 under the caption “Risks Relating to Debt Incurred under Short- and Long-Term Borrowing Facilities - Financial Covenants Associated with Short-Term Debt and Other Debt Financing.”

Because many of these borrowing facilities are uncommitted, at any given time we may not be able to obtain additional financing under them when we need it, exposing us to, among other things, liquidity risks of the types described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021 under the heading “Risk Factors,” and in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2021 under the heading “Market Risks.” In addition, with respect to mortgage loans that at any given time are already being financed through these warehouse facilities, we are exposed to market, credit, liquidity, and other risks of the types described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021 under the heading “Risk Factors,” and in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2021 under the heading “Market Risks,” if and when those loans or securities become ineligible to be financed, decline in value, or have been financed for the maximum term permitted under the applicable facility.

At June 30, 2022, and through the date of this Quarterly Report on Form 10-Q, we were in compliance with the financial covenants associated with our short-term debt and other debt financing facilities. In particular, with respect to: (i) financial covenants that require us to maintain a minimum dollar amount of stockholders’ equity or tangible net worth at Redwood, at June 30, 2022 our level of stockholders’ equity and tangible net worth resulted in our being in compliance with these covenants by more than $200 million; and (ii) financial covenants that require us to maintain recourse indebtedness below a specified ratio at Redwood, at June 30, 2022 our level of recourse indebtedness resulted in our being in compliance with these covenants at a level such that we could incur at least $600 million in additional recourse indebtedness.

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CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates. A discussion of critical accounting policies and the possible effects of changes in estimates on our consolidated financial statements is included in Note 2 — Basis of Presentation and Note 3 — Summary of Significant Accounting Policies included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

We have elected the fair value option of accounting for a significant portion of the assets and some of the liabilities on our balance sheet, and the majority of these assets and liabilities utilize Level 3 valuation inputs, which require a significant level of estimation uncertainty. See Note 5 in Part I, Item 1 of this Quarterly Report on Form 10-Q, for additional information on our assets and liabilities accounted for at fair value at June 30, 2022, including the significant inputs used to estimate their fair values and the impact the changes in their fair values had to our financial condition and results of operations. See Note 5 in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2021, incorporated herein by reference, for the same information on these assets and liabilities as of December 31, 2021. Periodic fluctuations in the values of these assets and liabilities are inherently volatile and thus can lead to significant period-to-period GAAP earnings volatility.

Additional detail on our critical accounting estimates is included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021, under the heading "Critical Accounting Estimates."

MARKET AND OTHER RISKS

We seek to manage risks inherent in our business — including but not limited to credit risk, interest rate risk, prepayment risk, liquidity risk, and fair value risk — in a prudent manner designed to enhance our earnings and dividends and preserve our capital. In general, we seek to assume risks that can be quantified from historical experience, to actively manage such risks, and to maintain capital levels consistent with these risks. Information concerning the risks we are managing, how these risks are changing over time, and potential GAAP earnings and taxable income volatility we may experience as a result of these risks is discussed in Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

In addition to the market risks described above, our business and results of operations are subject to a variety of types of risks and uncertainties, including, among other things, those described under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Information concerning market risk is incorporated herein by reference to Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as supplemented by the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Market Risks” within Item 2 above. Other than the developments described thereunder, including changes in the fair values of our assets, there have been no other material changes in our quantitative or qualitative exposure to market risk since December 31, 2021.

Item 4. Controls and Procedures

We have adopted and maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed on our reports under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms and that the information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) of the Exchange Act, we have carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level.

There have been no changes in our internal control over financial reporting during the second quarter of 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For information on our legal proceedings, see Note 16 to the Financial Statements within this Quarterly Report on Form 10-Q under the heading "Loss Contingencies - Litigation, Claims and Demands," which supplements the disclosures included in Note 16 to the Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 under the heading “Loss Contingencies - Litigation, Claims and Demands.”

Item 1A. Risk Factors

Our risk factors are discussed under Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended June 30, 2022, we did not sell any equity securities that were not registered under the Securities Act of 1933, as amended.

In February 2018, our Board of Directors approved an authorization for the repurchase of our common stock, increasing the total amount authorized for repurchases of common stock to $100 million, and also authorized the repurchase of outstanding debt securities, including convertible and exchangeable debt. This authorization increased the previous share repurchase authorization approved in February 2016 and has no expiration date. This repurchase authorization does not obligate us to acquire any specific number of shares or securities. Under this authorization, shares or securities may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. During the three months ended June 30, 2022, we repurchased 3,680,795 shares of our common stock. At June 30, 2022, $46 million of this current authorization remained available for the repurchase of shares of our common stock and we also continued to be authorized to repurchase outstanding debt securities.

In July 2022, our Board of Directors authorized the repurchase of up to $125 million of common stock. This common stock repurchase authorization replaces the $100 million common stock repurchase authorization approved by the Board of Directors in 2018, has no time limit and may be modified, suspended or discontinued at any time. The Board of Directors also continued its previous authorization for the repurchase of outstanding debt securities.

The following table contains information on the shares of our common stock that we purchased or otherwise acquired during the three months ended June 30, 2022.

	Total Number of Shares Purchased or Acquired	Average Price per Share Paid		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or approximate dollar value) of Shares that May Yet be Purchased under the Plans or Programs
(In Thousands, except per Share Data)
April 1, 2022 - April 30, 2022	—	$	—	—	$	—
May 1, 2022 - May 31, 2022	—	$	—	—	$	—
June 1, 2022 - June 30, 2022	3,681	$	8.87	—	$	45,727
Total	3,681	$	8.87	—	$	45,727

Item 3. Defaults Upon Senior Securities

None.

Item 4. Not Applicable

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit Number	Exhibit
3.1	Articles of Amendment and Restatement of the Registrant, effective July 6, 1994 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit 3.1, filed on August 6, 2008)
3.1.1	Articles Supplementary of the Registrant, effective August 10, 1994 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit 3.1.1, filed on August 6, 2008)
3.1.2	Articles Supplementary of the Registrant, effective August 11, 1995 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit 3.1.2, filed on August 6, 2008)
3.1.3	Articles Supplementary of the Registrant, effective August 9, 1996 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit 3.1.3, filed on August 6, 2008)
3.1.4	Certificate of Amendment of the Registrant, effective June 30, 1998 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit 3.1.4, filed on August 6, 2008)
3.1.5	Articles Supplementary of the Registrant, effective April 7, 2003 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit 3.1.5, filed on August 6, 2008)
3.1.6	Articles of Amendment of the Registrant, effective June 12, 2008 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit 3.1.6, filed on August 6, 2008)
3.1.7	Articles of Amendment of the Registrant, effective May 19, 2009 (incorporated by reference to the Registrant’s Current Report on Form 8-K, Exhibit 3.1, filed on May 21, 2009)
3.1.8	Articles of Amendment of the Registrant, effective May 24, 2011 (incorporated by reference to the Registrant’s Current Report on Form 8-K, Exhibit 3.1, filed on May 20, 2011)
3.1.9	Articles of Amendment of the Registrant, effective May 18, 2012 (incorporated by reference to the Registrant’s Current Report on Form 8-K, Exhibit 3.1, filed on May 21, 2012)
3.1.10	Articles of Amendment of the Registrant, effective May 16, 2013 (incorporated by reference to the Registrant’s Current Report on Form 8-K, Exhibit 3.1, filed on May 21, 2013)
3.1.11	Articles of Amendment of the Registrant, effective May 16, 2019 (incorporated by reference to the Registrant's Current Report on Form 8-K, Exhibit 3.1, filed on May 17, 2019)
3.1.12	Articles of Amendment of the Registrant, effective June 15, 2020 (incorporated by reference to the Registrant’s Current Report on Form 8-K, Exhibit 3.1, filed on June 15, 2020)
3.2.1	Amended and Restated Bylaws of the Registrant, as adopted on November 3, 2021 (incorporated by reference to the Registrant's Quarterly Report on Form 10-Q, Exhibit 3.2.1, filed on November 4, 2021)
4.1	Indenture, by and among Redwood Trust, Inc. and Wilmington Trust, National Association, as Trustee, dated as of June 9, 2022 (including the form of 7.75% Convertible Senior Note due 2027) (incorporated by reference to the Registrant’s Current Report on Form 8-K, Exhibit 4.1, filed June 9, 2022)
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	Pursuant to Rule 405 of Regulation S-T, the following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2022, is filed in inline XBRL-formatted interactive data files:   (i) Consolidated Balance Sheets at June 30, 2022 and December 31, 2021; (ii) Consolidated Statements of Income (Loss) for the three and six months ended June 30, 2022 and 2021; (iii) Statements of Consolidated Comprehensive Income (Loss) for the three and six months ended June 30, 2022 and 2021; (iv) Consolidated Statements of Changes in Stockholders' Equity for the three and six months ended June 30, 2022 and 2021; (v) Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021; and (vi) Notes to Consolidated Financial Statements.
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

______________________

* Indicates exhibits that include management contracts or compensatory plan arrangements.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		REDWOOD TRUST, INC.
Date:	August 5, 2022	By:	/s/ Christopher J. Abate
			Christopher J. Abate
			Chief Executive Officer
			(Principal Executive Officer)
Date:	August 5, 2022	By:	/s/ Brooke E. Carillo
			Brooke E. Carillo
			Chief Financial Officer
			(Principal Financial Officer)
Date:	August 5, 2022	By:	/s/ Collin L. Cochrane
			Collin L. Cochrane
			Chief Accounting Officer
			(Principal Accounting Officer)

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EX-31.1

EXHIBIT 31.1

CHIEF EXECUTIVE OFFICER CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Christopher J. Abate, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Redwood Trust, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over the financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2022	/s/ Christopher J. Abate
	Christopher J. Abate
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CHIEF FINANCIAL OFFICER CERTIFICATION PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Brooke E. Carillo, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Redwood Trust, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over the financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2022	/s/ Brooke E. Carillo
	Brooke E. Carillo
	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION

Pursuant to 18 U.S.C. §1350, the undersigned officer of Redwood Trust, Inc. (the “Registrant”) hereby certifies that the Registrant’s Quarterly Report on Form 10-Q for the three months ended June 30, 2022 (the “Quarterly Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date: August 5, 2022	/s/ Christopher J. Abate
	Christopher J. Abate
	Chief Executive Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. §1350 and is not being filed as part of the Quarterly Report or as a separate disclosure document.

EX-32.2

EXHIBIT 32.2

CERTIFICATION

Pursuant to 18 U.S.C. §1350, the undersigned officer of Redwood Trust, Inc. (the “Registrant”) hereby certifies that the Registrant’s Quarterly Report on Form 10-Q for the three months ended June 30, 2022 (the “Quarterly Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date: August 5, 2022	/s/ Brooke E. Carillo
	Brooke E. Carillo
	Chief Financial Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. §1350 and is not being filed as part of the Quarterly Report or as a separate disclosure document.

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Cover Page - shares	6 Months Ended
	Jun. 30, 2022	Aug. 02, 2022
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2022
Document Transition Report	false
Entity File Number	1-13759
Entity Registrant Name	REDWOOD TRUST, INC.
Entity Incorporation, State or Country Code	MD
Entity Tax Identification Number	68-0329422
Entity Address Address Line One	One Belvedere Place,
Entity Address, Address Line Two	Suite 300
Entity Address City Or Town	Mill Valley,
Entity Address, State or Province	CA
Entity Address Postal Zip Code	94941
City Area Code	415
Local Phone Number	389-7373
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity small business	false
Emerging growth company	false
Entity Shell Company	false
Title of 12(b) Security	Common stock, par value $0.01 per share
Trading Symbol	RWT
Security Exchange Name	NYSE
Entity Common Stock, Shares Outstanding		116,765,789
Amendment Flag	false
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q2
Entity Central Index Key	0000930236
Current Fiscal Year End Date	--12-31

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CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands		Jun. 30, 2022	Dec. 31, 2021
ASSETS
Real estate securities, at fair value	[1]	$ 284,278	$ 377,411
Other investments	[1]	679,667	641,969
Cash and cash equivalents	[1]	371,296	450,485
Restricted cash	[1]	72,558	80,999
Intangible assets	[1]	34,720	41,561
Derivative assets	[1]	36,587	26,467
Other assets	[1]	171,780	231,117
Total Assets	[1]	13,875,536	14,706,944
Liabilities
Short-term debt, net	[1]	1,869,822	2,177,362
Derivative liabilities	[1]	6,591	3,317
Accrued expenses and other liabilities	[1]	190,825	245,788
Asset-backed securities issued (includes $7,993,953 and $8,843,147 at fair value), net	[1]	8,584,146	9,253,557
Long-term debt, net	[1]	1,966,061	1,640,833
Total liabilities	[1]	12,617,445	13,320,857
Commitments and Contingencies (see Note 16)	[1]
Equity
Common stock, par value $0.01 per share, 395,000,000 shares authorized; 116,753,174 and 114,892,309 issued and outstanding	[1]	1,168	1,149
Additional paid-in capital	[1]	2,363,709	2,316,799
Accumulated other comprehensive loss	[1]	(57,788)	(8,927)
Cumulative earnings	[1]	1,247,839	1,316,890
Cumulative distributions to stockholders	[1]	(2,296,837)	(2,239,824)
Total equity	[1]	1,258,091	1,386,087
Total Liabilities and Equity	[1]	13,875,536	14,706,944
Residential loans, held-for-sale, at fair value
ASSETS
Fair value of loans	[1]	1,213,067	1,845,282
Residential loans, held-for-investment, at fair value
ASSETS
Fair value of loans	[1]	5,365,532	5,747,150
Business purpose loans, held-for-sale, at fair value
ASSETS
Fair value of loans	[1]	505,171	358,309
Business purpose loans, held-for-investment, at fair value
ASSETS
Fair value of loans	[1]	4,697,766	4,432,680
Consolidated Agency multifamily loans, at fair value
ASSETS
Fair value of loans	[1]	$ 443,114	$ 473,514

[1] Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At June 30, 2022 and December 31, 2021, assets of consolidated VIEs totaled $9,951,520 and $10,661,081, respectively. At June 30, 2022 and December 31, 2021, liabilities of consolidated VIEs totaled $8,899,020 and $9,619,347, respectively. See Note 4 for further discussion.

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CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) - USD ($) $ in Thousands		Jun. 30, 2022	Dec. 31, 2021
ABS issued, net, At fair value		$ 7,993,953	$ 8,843,147
Common stock, par value (usd per share)		$ 0.01	$ 0.01
Common stock, authorized (in shares)		395,000,000	395,000,000
Common stock, issued (in shares)		116,753,174	114,892,309
Common stock, outstanding (in shares)		116,753,174	114,892,309
Assets	[1]	$ 13,875,536	$ 14,706,944
Liabilities	[1]	12,617,445	13,320,857
Variable Interest Entity, Primary Beneficiary
Assets		9,951,520	10,661,081
Liabilities		$ 8,899,020	$ 9,619,347

[1] Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At June 30, 2022 and December 31, 2021, assets of consolidated VIEs totaled $9,951,520 and $10,661,081, respectively. At June 30, 2022 and December 31, 2021, liabilities of consolidated VIEs totaled $8,899,020 and $9,619,347, respectively. See Note 4 for further discussion.

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CONSOLIDATED STATEMENTS OF INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Interest Income
Residential loans	$ 65,047	$ 48,433	$ 130,250	$ 92,088
Business purpose loans	80,934	70,323	175,233	134,511
Multifamily loans	4,732	4,860	9,485	9,646
Real estate securities	7,828	9,279	23,783	18,942
Other interest income	8,914	5,800	18,104	11,813
Total interest income	167,455	138,695	356,855	267,000
Interest Expense
Short-term debt	(13,661)	(11,195)	(25,149)	(18,968)
Asset-backed securities issued	(88,859)	(76,419)	(194,554)	(148,980)
Long-term debt	(24,447)	(20,451)	(43,562)	(42,669)
Total interest expense	(126,967)	(108,065)	(263,265)	(210,617)
Net Interest Income	40,488	30,630	93,590	56,383
Non-interest (Loss) Income
Mortgage banking activities, net	(30,017)	54,419	(13,702)	137,026
Investment fair value changes, net	(87,972)	49,480	(94,092)	94,567
Other income, net	7,006	2,126	12,989	5,969
Realized gains, net	0	8,384	2,581	11,100
Total non-interest (loss) income, net	(110,983)	114,409	(92,224)	248,662
General and administrative expenses	(31,966)	(40,594)	(66,820)	(84,145)
Loan acquisition costs	(3,480)	(3,748)	(7,945)	(7,307)
Other expenses	(3,468)	(3,985)	(7,553)	(8,081)
Net (Loss) Income before Benefit from (Provision for) Income Taxes	(109,409)	96,712	(80,952)	205,512
Benefit from (provision for) income taxes	9,443	(6,687)	11,901	(18,230)
Net (Loss) Income	$ (99,966)	$ 90,025	$ (69,051)	$ 187,282
Basic (loss) earnings per common share (in dollars per share)	$ (0.85)	$ 0.77	$ (0.60)	$ 1.61
Diluted (loss) earnings per common share (in dollars per share)	$ (0.85)	$ 0.66	$ (0.60)	$ 1.38
Basic weighted average shares outstanding (in shares)	119,660,173	112,921,070	119,771,554	112,337,984
Diluted weighted average shares outstanding (in shares)	119,660,173	141,761,084	119,771,554	141,139,212

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Statement of Comprehensive Income [Abstract]
Net (Loss) Income	$ (99,966)	$ 90,025	$ (69,051)	$ 187,282
Other comprehensive (loss) income:
Net unrealized (loss) gain on available-for-sale securities	(33,409)	11,224	(51,282)	22,210
Reclassification of unrealized loss (gain) on available-for-sale securities to net (loss) income	1,066	(7,500)	374	(10,295)
Reclassification of unrealized loss on interest rate agreements to net (loss) income	1,029	1,028	2,047	2,046
Total other comprehensive (loss) income	(31,314)	4,752	(48,861)	13,961
Total Comprehensive (Loss) Income	$ (131,280)	$ 94,777	$ (117,912)	$ 201,243

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive (Loss) Income	Cumulative Earnings	Cumulative Distributions to Stockholders
Beginning balance (in shares) at Dec. 31, 2020		112,090,006
Balance at beginning of period at Dec. 31, 2020	$ 1,110,899	$ 1,121	$ 2,264,874	$ (4,221)	$ 997,277	$ (2,148,152)
Increase (Decrease) in Stockholders' Equity
Net (Loss) Income	187,282				187,282
Other comprehensive income (loss)	13,961			13,961
Issuance of common stock (in shares)		806,068
Issuance of common stock	13,374	$ 8	13,366
Employee stock purchase and incentive plans (in shares)		156,706
Employee stock purchase and incentive plans	(687)	$ 2	(689)
Non-cash equity award compensation	9,861		9,861
Common dividends declared	(39,548)					(39,548)
Ending balance (in shares) at Jun. 30, 2021		113,052,780
Balance at End of Period at Jun. 30, 2021	1,295,142	$ 1,131	2,287,412	9,740	1,184,559	(2,187,700)
Beginning balance (in shares) at Mar. 31, 2021		112,998,732
Balance at beginning of period at Mar. 31, 2021	1,215,575	$ 1,130	2,281,647	4,988	1,094,534	(2,166,724)
Increase (Decrease) in Stockholders' Equity
Net (Loss) Income	90,025				90,025
Other comprehensive income (loss)	4,752			4,752
Employee stock purchase and incentive plans (in shares)		54,048
Employee stock purchase and incentive plans	123	$ 1	122
Non-cash equity award compensation	5,643		5,643
Common dividends declared	(20,976)					(20,976)
Ending balance (in shares) at Jun. 30, 2021		113,052,780
Balance at End of Period at Jun. 30, 2021	1,295,142	$ 1,131	2,287,412	9,740	1,184,559	(2,187,700)
Beginning balance (in shares) at Dec. 31, 2021		114,892,309
Balance at beginning of period at Dec. 31, 2021	1,386,087	$ 1,149	2,316,799	(8,927)	1,316,890	(2,239,824)
Increase (Decrease) in Stockholders' Equity
Net (Loss) Income	(69,051)				(69,051)
Other comprehensive income (loss)	(48,861)			(48,861)
Issuance of common stock (in shares)		5,232,869
Issuance of common stock	67,475	$ 52	67,423
Employee stock purchase and incentive plans (in shares)		308,029
Employee stock purchase and incentive plans	(1,180)	$ 3	(1,183)
Non-cash equity award compensation	13,436		13,436
Share repurchases (in shares)		(3,680,033)
Share repurchases	(32,802)	$ (36)	(32,766)
Common dividends declared	(57,013)					(57,013)
Ending balance (in shares) at Jun. 30, 2022		116,753,174
Balance at End of Period at Jun. 30, 2022	1,258,091	$ 1,168	2,363,709	(57,788)	1,247,839	(2,296,837)
Beginning balance (in shares) at Mar. 31, 2022		120,289,243
Balance at beginning of period at Mar. 31, 2022	1,445,266	$ 1,203	2,391,344	(26,474)	1,347,805	(2,268,612)
Increase (Decrease) in Stockholders' Equity
Net (Loss) Income	(99,966)				(99,966)
Other comprehensive income (loss)	(31,314)			(31,314)
Employee stock purchase and incentive plans (in shares)		143,964
Employee stock purchase and incentive plans	(134)	$ 1	(135)
Non-cash equity award compensation	5,266		5,266
Share repurchases (in shares)		(3,680,033)
Share repurchases	(32,802)	$ (36)	(32,766)
Common dividends declared	(28,225)					(28,225)
Ending balance (in shares) at Jun. 30, 2022		116,753,174
Balance at End of Period at Jun. 30, 2022	$ 1,258,091	$ 1,168	$ 2,363,709	$ (57,788)	$ 1,247,839	$ (2,296,837)

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Statement of Stockholders' Equity [Abstract]
Common dividends declared (in dollars per share)	$ 0.23	$ 0.18	$ 0.46	$ 0.34

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands		6 Months Ended
		Jun. 30, 2022	Jun. 30, 2021
Cash Flows From Operating Activities:
Net (Loss) Income		$ (69,051)	$ 187,282
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Amortization of premiums, discounts, and securities issuance costs, net		(2,538)	3,998
Depreciation and amortization of non-financial assets		7,710	8,405
Originations of held-for-sale loans		(766,852)	(567,546)
Purchases of held-for-sale loans		(3,395,459)	(6,682,864)
Proceeds from sales of held-for-sale loans		3,376,600	4,526,370
Principal payments on held-for-sale loans		114,731	19,856
Net settlements of derivatives		112,649	39,697
Non-cash equity award compensation expense		13,436	9,861
Market valuation adjustments		132,594	(213,641)
Realized gains, net		(2,581)	(11,100)
Net change in:
Accrued interest receivable and other assets		63,829	10,260
Accrued interest payable and accrued expenses and other liabilities		(75,856)	17,327
Net cash used in operating activities		(490,788)	(2,652,095)
Cash Flows From Investing Activities:
Originations of loan investments		(954,179)	(348,389)
Purchases of loan investments		(22,006)	0
Proceeds from sales of loan investments		0	9,231
Principal payments on loan investments		1,160,403	1,312,064
Purchases of real estate securities		(15,006)	(18,593)
Sales of securities held in consolidated securitization trusts		0	8,197
Proceeds from sales of real estate securities		23,329	36,735
Principal payments on real estate securities		26,033	29,786
Principal repayments from servicer advance investments		71,401	45,838
Purchases of HEIs		(97,389)	0
Principal payments on HEIs		25,826	0
Other investing activities, net		(14,573)	(5,025)
Net cash provided by investing activities		203,839	1,069,844
Cash Flows From Financing Activities:
Proceeds from borrowings on short-term debt		3,450,606	6,604,603
Repayments on short-term debt		(4,125,634)	(5,421,494)
Proceeds from issuance of asset-backed securities		1,167,711	1,629,218
Repayments on asset-backed securities issued		(954,136)	(1,088,809)
Proceeds from borrowings on long-term debt		1,424,088	487,975
Deferred long-term debt issuance costs paid		(17,363)	0
Repayments on long-term debt		(726,076)	(654,893)
Net payments on repurchase of common stock		(26,857)	0
Taxes paid on equity award distributions		(1,477)	(943)
Net proceeds from issuance of common stock		67,770	255
Dividends paid		(57,013)	(39,548)
Other financing activities, net		(2,300)	(2,292)
Net cash provided by financing activities		199,319	1,514,072
Net decrease in cash, cash equivalents and restricted cash		(87,630)	(68,179)
Cash, cash equivalents and restricted cash at beginning of period	[1]	531,484	544,450
Cash, cash equivalents, and restricted cash at end of period	[1]	443,854	476,271
Cash paid during the period for:
Interest		247,968	198,364
Taxes paid		3,894	19,183
Supplemental Noncash Information:
Real estate securities retained from loan securitizations		0	9,374
Retention of mortgage servicing rights from loan securitizations and sales		4,543	0
Transfers from loans held-for-sale to loans held-for-investment		1,953,421	1,998,535
Transfers from loans held-for-investment to loans held-for-sale		0	44,922
Transfers from residential loans to real estate owned		3,132	15,827
Transfers from long-term debt to short-term debt		367,431	47,994
Right-of-use asset obtained in exchange for operating lease liability		0	1,135
Issuance of common stock for 5 Arches acquisition		$ 0	$ 13,375

[1] Cash, cash equivalents, and restricted cash includes cash and cash equivalents of $371 million and restricted cash of $73 million at June 30, 2022, and includes cash and cash equivalents of $450 million and restricted cash of $81 million at December 31, 2021.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Thousands		Jun. 30, 2022	Dec. 31, 2021
Statement of Cash Flows [Abstract]
Cash and cash equivalents	[1]	$ 371,296	$ 450,485
Restricted cash	[1]	$ 72,558	$ 80,999

[1] Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At June 30, 2022 and December 31, 2021, assets of consolidated VIEs totaled $9,951,520 and $10,661,081, respectively. At June 30, 2022 and December 31, 2021, liabilities of consolidated VIEs totaled $8,899,020 and $9,619,347, respectively. See Note 4 for further discussion.

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Organization

6 Months Ended

Jun. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization

Organization

Redwood Trust, Inc., together with its subsidiaries, is a specialty finance company focused on several distinct areas of housing credit, with a mission to help make quality housing, whether rented or owned, accessible to all American households. Our operating platforms occupy a unique position in the housing finance value chain, providing liquidity to growing segments of the U.S. housing market not well served by government programs. We deliver customized housing credit investments to a diverse mix of investors through our best-in-class securitization platforms, whole-loan distribution activities and our publicly-traded securities. Our aggregation, origination and investment activities have evolved to incorporate a diverse mix of residential, business purpose and multifamily assets. Our goal is to provide attractive returns to shareholders through a stable and growing stream of earnings and dividends, capital appreciation, and a commitment to technological innovation that facilitates risk-minded scale. We operate our business in three segments: Residential Mortgage Banking, Business Purpose Mortgage Banking, and Investment Portfolio.

Our primary sources of income are net interest income from our investments and non-interest income from our mortgage banking activities. Net interest income primarily consists of the interest income we earn on investments less the interest expense we incur on borrowed funds and other liabilities. Income from mortgage banking activities is generated through the origination and acquisition of loans, and their subsequent sale, securitization, or transfer to our investment portfolios.

Redwood Trust, Inc. has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), beginning with its taxable year ended December 31, 1994. We generally refer, collectively, to Redwood Trust, Inc. and those of its subsidiaries that are generally not subject to subsidiary-level corporate income tax as “the REIT” or “our REIT.” We generally refer to subsidiaries of Redwood Trust, Inc. that are subject to subsidiary-level corporate income tax as “our taxable REIT subsidiaries” or “TRS.”

Redwood Trust, Inc. was incorporated in the State of Maryland on April 11, 1994, and commenced operations on August 19, 1994. References herein to “Redwood,” the “company,” “we,” “us,” and “our” include Redwood Trust, Inc. and its consolidated subsidiaries, unless the context otherwise requires.

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Basis of Presentation

6 Months Ended

Jun. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of PresentationThe consolidated financial statements presented herein are at June 30, 2022 and December 31, 2021, and for the three and six months ended June 30, 2022 and 2021. These interim unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and note disclosures normally included in our annual financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") — as prescribed by the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) — have been condensed or omitted in these interim financial statements according to these SEC rules and regulations. Management believes that the disclosures included in these interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the company's Annual Report on Form 10-K for the year ended December 31, 2021. In the opinion of management, all normal and recurring adjustments have been made to present fairly the financial condition of the Company at June 30, 2022 and results of operations for all periods presented. The results of operations for the three and six months ended June 30, 2022 should not be construed as indicative of the results to be expected for the full year.

Principles of Consolidation

In accordance with GAAP, we determine whether we must consolidate transferred financial assets and variable interest entities (“VIEs”) for financial reporting purposes. We currently consolidate the assets and liabilities of certain Sequoia securitization entities issued prior to 2012 ("Legacy Sequoia"), certain entities formed during and after 2012 in connection with the securitization of Redwood Select prime loans and Redwood Choice expanded-prime loans ("Sequoia"), entities formed in connection with the securitization of CoreVest single-family rental and bridge loans ("CAFL") and an entity formed in connection with the securitization of home equity investment contracts ("HEIs"). We also consolidate the assets and liabilities of certain Freddie Mac K-Series and Freddie Mac Seasoned Loans Structured Transaction ("SLST") securitizations in which we have invested. Each securitization entity is independent of Redwood and of each other and the assets and liabilities are not owned by and are not legal obligations of Redwood Trust, Inc. Our exposure to these entities is primarily through the financial interests we have purchased or retained, although for certain entities we are exposed to financial risks associated with our role as a sponsor or co-sponsor, servicing administrator, collateral administrator or depositor of these entities or as a result of our having sold assets directly or indirectly to these entities.

For financial reporting purposes, the underlying loans owned at the consolidated Legacy Sequoia, Sequoia and Freddie Mac SLST entities are shown under Residential loans held-for-investment, at fair value, the underlying loans at the consolidated Freddie Mac K-Series entity are shown under Consolidated Agency multifamily loans, at fair value, the underlying single-family rental and bridge loans at the consolidated CAFL entities are shown under Business purpose loans held-for-investment, at fair value, and the underlying HEIs at the consolidated HEI securitization entity are shown under Other investments, at fair value on our consolidated balance sheets. The asset-backed securities (“ABS”) issued to third parties by these entities are shown under ABS issued. In our consolidated statements of income, we record interest income on the loans owned at these entities and interest expense on the ABS issued by these entities as well as fair value changes, other income and expenses associated with these entities' activities. See Note 14 for further discussion on ABS issued.

We also consolidate two partnerships ("Servicing Investment" entities) through which we have invested in servicing-related assets. We maintain an 80% ownership interest in each entity and have determined that we are the primary beneficiary of these partnerships.

See Note 4 for further discussion on principles of consolidation.

Use of Estimates

The preparation of financial statements requires us to make a number of significant estimates. These include estimates of fair value of certain assets and liabilities, amounts and timing of credit losses, prepayment rates, and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the consolidated financial statements and the reported amounts of certain revenues and expenses during the reported periods. It is likely that changes in these estimates (e.g., valuation changes due to supply and demand, credit performance, prepayments, interest rates, or other reasons) will occur in the near term. Our estimates are inherently subjective in nature and actual results could differ from our estimates and the differences could be material.

Acquisitions

Refer to Note 2 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021, for additional information regarding the acquisitions of 5 Arches, LLC ("5 Arches") and CoreVest American Finance Lender, LLC and certain affiliated entities ("CoreVest"), including purchase price allocations.

In connection with the acquisitions of 5 Arches and CoreVest in 2019, we identified and recorded finite-lived intangible assets totaling $25 million and $57 million, respectively. The table below presents the amortization period and carrying value of our intangible assets, net of accumulated amortization at June 30, 2022.

Table 2.1 – Intangible Assets – Activity

	Intangible Assets at Acquisition		Accumulated Amortization at June 30, 2022		Carrying Value at June 30, 2022		Weighted Average Amortization Period (in years)
(Dollars in Thousands)
Borrower network	$	45,300	$	(17,527)	$	27,773	7
Broker network	18,100		(12,067)		6,033		5
Non-compete agreements	9,500		(8,858)		642		3
Tradenames	4,000		(3,728)		272		3
Developed technology	1,800		(1,800)		—		2
Loan administration fees on existing loan assets	2,600		(2,600)		—		1
Total	$	81,300	$	(46,580)	$	34,720	6

All of our intangible assets are amortized on a straight-line basis. For each of the six months ended June 30, 2022 and 2021, we recorded intangible asset amortization expense of $7 million. Estimated future amortization expense is summarized in the table below.

Table 2.2 – Intangible Asset Amortization Expense by Year

(In Thousands)	June 30, 2022
2022 (6 months)	$	5,959
2023	10,091
2024	7,075
2025	6,471
2026	5,124
Total Future Intangible Asset Amortization	$	34,720

On a quarterly basis, we evaluate our finite-lived intangible assets for impairment indicators and additionally evaluate the useful lives of our intangible assets to determine if revisions to the remaining periods of amortization are warranted. We reviewed our finite-lived intangible assets and determined that the estimated lives were appropriate and that there were no indicators of impairment at June 30, 2022.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Significant Accounting Policies

Included in Note 3 to the Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2021 is a summary of our significant accounting policies.

Recent Accounting Pronouncements

Newly Adopted Accounting Standards Updates ("ASUs")

In August 2020, the FASB issued ASU 2020-06, "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40)." This new guidance simplifies the accounting for convertible debt by reducing the number of accounting models to separately present certain conversion features in equity. This new guidance was effective for fiscal years beginning after December 31, 2021. We adopted this guidance in the first quarter of 2022, which did not have a material impact on our consolidated financial statements.

Other Recent Accounting Pronouncements

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.” ASU 2022-03 was issued to (1) to clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The amendments in this update are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. We are evaluating the accounting and disclosure requirements of ASU 2022-03 and we plan to adopt this new guidance by the required date. We do not anticipate that this update will have a material impact on our financial statements.

In March 2022, the FASB issued ASU 2022-02, "Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures." ASU 2022-02 addresses areas identified by the FASB as part of its post-implementation review of the credit losses standard (ASU 2016-13) that introduced the current expected credit loss ("CECL") model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require a public business entity to disclose current-period gross writeoffs for financing receivables and net investment in leases by year of origination in the vintage disclosures. This guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. We plan to adopt this new guidance by the required date and do not anticipate that this update will have a material impact on our consolidated financial statements.

In March 2022, the FASB issued ASU 2022-01, "Derivatives and Hedging (Topic 815), Fair Value Hedging - Portfolio Layer Method," which will expand companies' abilities to hedge the benchmark interest rate risk of portfolios of financial assets (or beneficial interests) in a fair value hedge. The ASU expands the use of the portfolio layer method (previously referred to as the last-of-layer method) to allow multiple hedges of a single closed portfolio of assets using spot starting, forward starting, and amortizing-notional swaps. The ASU also permits both prepayable and non-prepayable financial assets to be included in the closed portfolio of assets hedged in a portfolio layer hedge. The ASU further requires that basis adjustments not be allocated to individual assets for active portfolio layer method hedges, but rather be maintained on the closed portfolio of assets as a whole. This guidance is effective for public business entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. We plan to adopt this new guidance by the required date and do not anticipate that this update will have a material impact on our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." This new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848): Scope." This new guidance clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. This new guidance is effective for all entities as of March 12, 2020 through December 31, 2022. We are currently evaluating the impact the adoption of this standard would have on our consolidated financial statements. Through June 30, 2022, we have not elected to apply the optional expedients and exceptions to any of our existing contracts, hedging relationships, or other transactions.

We have an established cross-functional group that has evaluated our exposure to LIBOR, reviewed relevant contracts and has monitored regulatory updates to assess the potential impact to our business, processes and technology from the ultimate full cessation of LIBOR in 2023, and has established a LIBOR transition plan to facilitate an orderly transition to alternative reference rates. We continue to remain on track with our LIBOR transition plan, which requires different solutions depending on the underlying asset or liability with LIBOR exposure. At June 30, 2022, our primary LIBOR exposure included the following: $868 million of repo or warehouse debt, $468 million of interest rate swaps, $740 million of bridge loans, and $140 million of trust preferred securities and subordinated notes debt. Since December 31, 2021, certain of our contracts, such as interest rate swaps, have experienced an orderly market transition and we have transitioned a substantial portion of our derivative positions off of LIBOR-benchmarks. Other contracts, such as warehouse debt agreements, require bilateral amendments, many of which we have amended or are currently in the process of amending.

We anticipate most of these facilities will be amended in 2022, with sufficient time remaining to resolve the remainder. In early 2022, we began benchmarking all newly originated bridge loans to the Secured Overnight Financing Rate (“SOFR”), and our existing portfolio of bridge loans are short-dated and we expect the vast majority to mature before the LIBOR cessation date in 2023. Additionally, as the result of legislation that was passed in the state of New York, our trust preferred securities and subordinated notes are expected to convert to SOFR upon the cessation of LIBOR.

Balance Sheet Netting

Certain of our derivatives and short-term debt are subject to master netting arrangements or similar agreements. Under GAAP, in certain circumstances we may elect to present certain financial assets, liabilities and related collateral subject to master netting arrangements in a net position on our consolidated balance sheets. However, we do not report any of these financial assets or liabilities on a net basis, and instead present them on a gross basis on our consolidated balance sheets.

The table below presents financial assets and liabilities that are subject to master netting arrangements or similar agreements categorized by financial instrument, together with corresponding financial instruments and corresponding collateral received or pledged at June 30, 2022 and December 31, 2021.

Table 3.1 – Offsetting of Financial Assets, Liabilities, and Collateral

	Gross Amounts of Recognized Assets (Liabilities)		Gross Amounts Offset in Consolidated Balance Sheet		Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet		Gross Amounts Not Offset in Consolidated Balance Sheet (1)				Net Amount
June 30, 2022 (In Thousands)							Financial Instruments		Cash Collateral (Received) Pledged
Assets (2)
Interest rate agreements	$	29,601	$	—	$	29,601	$	(2,445)	$	(6,451)	$	20,705
TBAs	3,104		—		3,104		(530)		(2,574)		—
Futures	1,875		—		1,875		(1,615)		(2)		258
Total Assets	$	34,580	$	—	$	34,580	$	(4,590)	$	(9,027)	$	20,963
Liabilities (2)
Interest rate agreements	$	(2,445)	$	—	$	(2,445)	$	2,445	$	—	$	—
TBAs	(2,004)		—		(2,004)		530		1,474		—
Futures	(1,615)		—		(1,615)		1,615		—		—
Loan warehouse debt	(423,619)		—		(423,619)		423,619		—		—
Total Liabilities	$	(429,683)	$	—	$	(429,683)	$	428,209	$	1,474	$	—

	Gross Amounts of Recognized Assets (Liabilities)		Gross Amounts Offset in Consolidated Balance Sheet		Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet		Gross Amounts Not Offset in Consolidated Balance Sheet (1)				Net Amount
December 31, 2021 (In Thousands)							Financial Instruments		Cash Collateral (Received) Pledged
Assets (2)
Interest rate agreements	$	18,929	$	—	$	18,929	$	(1,251)	$	(16,046)	$	1,632
TBAs	2,880		—		2,880		(633)		(704)		1,543
Futures	25		—		25		(25)		—		—
Total Assets	$	21,834	$	—	$	21,834	$	(1,909)	$	(16,750)	$	3,175
Liabilities (2)
Interest rate agreements	$	(1,251)	$	—	$	(1,251)	$	1,251	$	—	$	—
TBAs	$	(658)	$	—	$	(658)	$	633	$	15	$	(10)
Futures	(905)		—		(905)		25		880		—
Loan warehouse debt	(572,720)		—		(572,720)		572,720		—		—
Total Liabilities	$	(575,534)	$	—	$	(575,534)	$	574,629	$	895	$	(10)

(1)Amounts presented in these columns are limited in total to the net amount of assets or liabilities presented in the prior column by instrument. In certain cases, there is excess cash collateral or financial assets we have pledged to a counterparty (which may, in certain circumstances, be a clearinghouse) that exceed the financial liabilities subject to a master netting arrangement or similar agreement. Additionally, in certain cases, counterparties may have pledged excess cash collateral to us that exceeds our corresponding financial assets. In each case, any of these excess amounts are excluded from the table although they are separately reported in our consolidated balance sheets as assets or liabilities, respectively.

(2)Interest rate agreements and TBAs are components of derivatives instruments on our consolidated balance sheets. Loan warehouse debt, which is secured by certain residential and business purpose loans, and security repurchase agreements are components of Short-term debt and Long-term debt on our consolidated balance sheets.

For each category of financial instrument set forth in the table above, the assets and liabilities resulting from individual transactions within that category between us and a counterparty are subject to a master netting arrangement or similar agreement with that counterparty that provides for individual transactions to be aggregated and treated as a single transaction. For certain categories of these instruments, our transactions generally are cleared and settled through one or more clearinghouses that are substituted as our counterparty. References herein to master netting arrangements or similar agreements include the arrangements and agreements governing the clearing and settlement of these transactions through the clearinghouses. In the event of the termination and close-out of any of those transactions, the corresponding master netting agreement or similar agreement provides for settlement on a net basis. Any such settlement would include the proceeds of the liquidation of any corresponding collateral, subject to certain limitations on termination, settlement, and liquidation of collateral that may apply in the event of the bankruptcy or insolvency of a party. Such limitations should not inhibit the eventual practical realization of the principal benefits of those transactions or the corresponding master netting arrangement or similar agreement and any corresponding collateral.

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Principles of Consolidation

6 Months Ended

Jun. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Principles of Consolidation

Principles of Consolidation

GAAP requires us to consider whether securitizations we sponsor and other transfers of financial assets should be treated as sales or financings, as well as whether any VIEs that we hold variable interests in – for example, certain legal entities often used in securitization and other structured finance transactions – should be included in our consolidated financial statements. 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

At June 30, 2022, we consolidated Legacy Sequoia, Sequoia, CAFL, Freddie Mac SLST, Freddie Mac K-Series, and HEI securitization entities that we determined were VIEs and for which we determined we were the primary beneficiary. Each of these entities is independent of Redwood and of each other and the assets and liabilities of these entities are not owned by and are not legal obligations of ours. Our exposure to these entities is primarily through the financial interests we have retained, although for certain securitizations, we are exposed to financial risks associated with our role as a sponsor, servicing administrator, collateral administrator, or depositor of these entities or as a result of our having sold assets directly or indirectly to these entities.

We also consolidate two Servicing Investment entities formed to invest in servicing-related assets that we determined were VIEs and for which we determined we were the primary beneficiary. At June 30, 2022, we held an 80% ownership interest in, and were responsible for the management of, each entity. See Note 10 for a further description of these entities and the investments they hold and Note 12 for additional information on the minority partner’s non-controlling interest. Additionally, we consolidated an entity that was formed to finance servicer advances that we determined was a VIE and for which we, through our control of one of the aforementioned partnerships, were the primary beneficiary. The servicer advance financing consists of non-recourse short-term securitization debt, secured by servicer advances. We consolidate the securitization entity, but the securitization entity is independent of Redwood and the assets and liabilities are not owned by and are not legal obligations of Redwood. See Note 13 for additional information on the servicer advance financing.

During 2021, we consolidated a HEI securitization entity formed to invest in HEIs that we determined was a VIE and for which we determined we were the primary beneficiary. At June 30, 2022 and December 31, 2021, we owned a portion of the subordinate certificates issued by the entity and had certain decision making rights for the entity. See Note 10 for a further description of this entity and the investments it holds and Note 12 for additional information on non-controlling interests in the entity. We consolidate the HEI securitization entity, but the securitization entity is independent of Redwood and the assets and liabilities are not owned by and are not legal obligations of Redwood.

For certain of our consolidated VIEs, we have elected to account for the assets and liabilities of these entities as collateralized financing entities ("CFE"). A CFE is a variable interest entity 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. Accounting guidance for CFEs 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. The net equity in an entity accounted for under the CFE election effectively represents the fair value of the beneficial interests we own in the entity.

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 amortized cost. These include our CAFL Bridge securitizations, Freddie Mac SLST re-securitization, and Servicing Investment entities.

The following table presents a summary of the assets and liabilities of our consolidated VIEs.     

Table 4.1 – Assets and Liabilities of Consolidated VIEs

June 30, 2022	Legacy Sequoia		Sequoia		CAFL(1)		Freddie Mac SLST(1)		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Residential loans, held-for-investment	$	208,788	$	3,525,459	$	—	$	1,631,285	$	—	$	—	$	—	$	5,365,532
Business purpose loans, held-for-investment	—		—		3,588,428		—		—		—		—		3,588,428
Consolidated Agency multifamily loans	—		—		—		—		443,114		—		—		443,114
Other investments	—		—		—		—		—		305,379		146,215		451,594
Cash and cash equivalents	—		—		—		—		—		14,399		—		14,399
Restricted cash	143		10		8,688		—		—		26,236		4,120		39,197
Accrued interest receivable	215		11,317		14,955		5,378		1,304		403		—		33,572
Other assets	410		—		5,320		2,299		—		7,605		50		15,684
Total Assets	$	209,556	$	3,536,786	$	3,617,391	$	1,638,962	$	444,418	$	354,022	$	150,385	$	9,951,520
Short-term debt	$	—	$	—	$	—	$	—	$	—	$	231,846	$	—	$	231,846
Accrued interest payable	171		9,232		10,610		3,720		1,178		223		—		25,134
Accrued expenses and other liabilities	—		10		6,996		—		—		25,466		25,422		57,894
Asset-backed securities issued	207,647		3,288,682		3,207,867		1,358,459		411,380		—		110,111		8,584,146
Total Liabilities	$	207,818	$	3,297,924	$	3,225,473	$	1,362,179	$	412,558	$	257,535	$	135,533	$	8,899,020
Value of our investments in VIEs(1)	$	1,552	$	236,777	$	388,849	$	275,127	$	31,732	$	96,487	$	14,852	$	1,045,376
Number of VIEs	20		17		18		3		1		3		1		63

December 31, 2021	Legacy Sequoia		Sequoia		CAFL(1)		Freddie Mac SLST(1)		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Residential loans, held-for-investment	$	230,455	$	3,628,465	$	—	$	1,888,230	$	—	$	—	$	—	$	5,747,150
Business purpose loans, held-for-investment	—		—		3,766,316		—		—		—		—		3,766,316
Consolidated Agency multifamily loans	—		—		—		—		473,514		—		—		473,514
Other investments	—		—		—		—		—		384,754		159,553		544,307
Cash and cash equivalents	—		—		—		—		—		6,481		—		6,481
Restricted cash	148		5		15,221		—		—		25,420		5,292		46,086
Accrued interest receivable	210		10,885		15,737		5,792		1,315		1,462		—		35,401
Other assets	61		—		32,510		2,028		—		7,177		50		41,826
Total Assets	$	230,874	$	3,639,355	$	3,829,784	$	1,896,050	$	474,829	$	425,294	$	164,895	$	10,661,081
Short-term debt	$	—	$	—	$	—	$	—	$	—	$	294,447	$	—	$	294,447
Accrued interest payable	99		8,452		11,030		4,055		1,190		192		—		25,018
Accrued expenses and other liabilities	—		5		1,171		—		—		28,115		17,034		46,325
Asset-backed securities issued	227,881		3,383,048		3,474,898		1,588,463		441,857		—		137,410		9,253,557
Total Liabilities	$	227,980	$	3,391,505	$	3,487,099	$	1,592,518	$	443,047	$	322,754	$	154,444	$	9,619,347
Value of our investments in VIEs(1)	$	2,634	$	245,417	$	339,419	$	301,795	$	31,657	$	102,540	$	10,451	$	1,033,913
Number of VIEs	20		16		16		3		1		3		1		60

(1)Value of our investments in VIEs, as presented in this table, represent the fair value of our economic interests in the VIEs only for consolidated VIEs we account for under the CFE election. CAFL includes SFR loan securitizations we account for under the CFE election and two bridge loan securitizations for which we did not make the CFE election. As of June 30, 2022 and December 31, 2021, the fair value of our interests in the CAFL SFR securitizations were $307 million and $302 million, respectively, and the remaining values were associated with our interests in the CAFL Bridge securitizations, for which the ABS issued is carried at amortized historical cost. Freddie Mac SLST includes securitizations we account for under the CFE election and also includes ABS issued in relation to a resecuritization of the securities we own in the consolidated Freddie Mac SLST VIEs, that we account for at amortized historical cost. As of June 30, 2022 and December 31, 2021, the fair value of our interests in the Freddie Mac SLST securitizations accounted for under the CFE election were $390 million and $445 million, respectively, with the difference from the tables above representing ABS issued and carried at amortized historical cost.

The following table presents income (loss) from these VIEs for the three and six months ended June 30, 2022 and 2021.

Table 4.2 – Income (Loss) from Consolidated VIEs

	Three Months Ended June 30, 2022
	Legacy Sequoia		Sequoia		CAFL		Freddie Mac SLST		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Interest income	$	1,108	$	31,923	$	56,608	$	16,553	$	4,732	$	7,568	$	—	$	118,492
Interest expense	(967)		(28,329)		(41,923)		(13,372)		(4,351)		(1,842)		—		(90,784)
Net interest income	141		3,594		14,685		3,181		381		5,726		—		27,708
Non-interest income
Investment fair value changes, net	(336)		(5,886)		(22,109)		(35,940)		(190)		(4,505)		1,201		(67,765)
Other income	—		—		255		—		—		—		—		255
Total non-interest income, net	(336)		(5,886)		(21,854)		(35,940)		(190)		(4,505)		1,201		(67,510)
General and administrative expenses	—		—		—		—		—		(44)		—		(44)
Other expenses	—		—		—		—		—		(235)		—		(235)
Income (loss) from Consolidated VIEs	$	(195)	$	(2,292)	$	(7,169)	$	(32,759)	$	191	$	942	$	1,201	$	(40,081)

	Six Months Ended June 30, 2022
	Legacy Sequoia		Sequoia		CAFL		Freddie Mac SLST		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Interest income	$	2,120	$	64,021	$	133,942	$	33,753	$	9,485	$	15,487	$	—	$	258,808
Interest expense	(1,668)		(56,500)		(100,403)		(27,457)		(8,722)		(3,504)		—		(198,254)
Net interest income	452		7,521		33,539		6,296		763		11,983		—		60,554
Non-interest income
Investment fair value changes, net	(1,050)		(9,708)		(19,445)		(32,904)		74		(7,973)		4,612		(66,394)
Other income	—		—		345		—		—		—		—		345
Total non-interest income, net	(1,050)		(9,708)		(19,100)		(32,904)		74		(7,973)		4,612		(66,049)
General and administrative expenses	—		—		—		—		—		(75)		—		(75)
Other expenses	—		—		—		—		—		(786)		—		(786)
Income (loss) from Consolidated VIEs	$	(598)	$	(2,187)	$	14,439	$	(26,608)	$	837	$	3,149	$	4,612	$	(6,356)

	Three Months Ended June 30, 2021
	Legacy Sequoia		Sequoia		CAFL		Freddie Mac SLST		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Interest income	$	1,169	$	14,492	$	54,849	$	19,506	$	4,860	$	4,041	$	—	$	98,917
Interest expense	(755)		(11,374)		(43,201)		(16,611)		(4,478)		(1,110)		—		(77,529)
Net interest income	414		3,118		11,648		2,895		382		2,931		—		21,388
Non-interest income
Investment fair value changes, net	(216)		4,906		3,697		36,316		1,855		(2,320)		—		44,238
Total non-interest income, net	(216)		4,906		3,697		36,316		1,855		(2,320)		—		44,238
General and administrative expenses	—		—		—		—		—		(52)		—		(52)
Other expenses	—		—		—		—		—		(112)		—		(112)
Income (loss) from Consolidated VIEs	$	198	$	8,024	$	15,345	$	39,211	$	2,237	$	447	$	—	$	65,462

	Six Months Ended June 30, 2021
	Legacy Sequoia		Sequoia		CAFL		Freddie Mac SLST		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Interest income	$	2,517	$	29,975	$	103,722	$	39,665	$	9,646	$	8,263	$	—	$	193,788
Interest expense	(1,630)		(23,480)		(81,054)		(33,982)		(8,834)		(2,396)		—		(151,376)
Net interest income	887		6,495		22,668		5,683		812		5,867		—		42,412
Non-interest income
Investment fair value changes, net	(915)		9,804		3,411		40,433		10,776		(3,566)		—		59,943
Total non-interest income, net	(915)		9,804		3,411		40,433		10,776		(3,566)		—		59,943
General and administrative expenses	—		—		—		—		—		(90)		—		(90)
Other expenses	—		—		—		—		—		(442)		—		(442)
Income (loss) from Consolidated VIEs	$	(28)	$	16,299	$	26,079	$	46,116	$	11,588	$	1,769	$	—	$	101,823

We consolidate the assets and liabilities of certain Sequoia, CAFL and HEI securitization entities, as we did not meet the GAAP sale criteria at the time we transferred financial assets to these entities. Our involvement in consolidated Sequoia, CAFL and HEI securitization entities continues in the following ways: (i) we continue to hold subordinate investments in each entity, and for certain entities, more senior investments; (ii) we maintain certain discretionary rights associated with our sponsorship of, or our subordinate investments in, each entity, including rights to direct loss mitigation activities; and (iii) we continue to hold a right to call the assets of certain entities (once they have been paid down below a specified threshold) at a price equal to, or in excess of, the current outstanding principal amount of the entity’s asset-backed securities issued. These factors have resulted in our continuing to consolidate the assets and liabilities of these Sequoia, CAFL and HEI securitization entities in accordance with GAAP.

We consolidate the assets and liabilities of certain Freddie Mac K-Series and SLST securitization trusts resulting from our investment in subordinate securities issued by these trusts, and in the case of certain CAFL securitizations, resulting from securities acquired through our acquisition of CoreVest. Additionally, we consolidate the assets and liabilities of Servicing Investment entities from our investment in servicer advance investments and excess MSRs. In each case, we maintain certain discretionary rights associated with the ownership of these investments that we determined reflected a controlling financial interest, as we have both the power to direct the activities that most significantly impact the economic performance of the VIEs and the right to receive benefits of and the obligation to absorb losses from the VIEs that could potentially be significant to the VIEs.

Analysis of Unconsolidated VIEs with Continuing Involvement

Since 2012, we have transferred residential loans to 46 Sequoia securitization entities sponsored by us that are still outstanding as of June 30, 2022, and accounted for these transfers as sales for financial reporting purposes, in accordance with ASC 860. We also 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 these transfers to securitization entities, for 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 senior and subordinate securities in these securitizations 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 we retain a third-party sub-servicer to perform) and the receipt of interest income associated with the securities we retained.

During the three months ended June 30, 2022, we did not call any of our unconsolidated Sequoia entities. During the six months ended June 30, 2022, we called three of our unconsolidated Sequoia entities, and purchased $102 million (unpaid principal balance) of loans from the securitization trusts. In association with these calls, we realized a $0.3 million gain on the securities we owned from these called securitizations, which was recognized through Realized gains, net on our consolidated statements of income (loss). At June 30, 2022, we held $222 million of loans for sale at fair value that were acquired following the calls.

The following table presents information related to securitization transactions that occurred during the three and six months ended June 30, 2022 and 2021.

Table 4.3 – Securitization Activity Related to Unconsolidated VIEs Sponsored by Redwood

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Principal balance of loans transferred	$	—	$	355,924	$	—	$	1,231,803
Trading securities retained, at fair value	—		1,225		—		7,774
AFS securities retained, at fair value	—		522		—		1,600

The following table summarizes the cash flows during the three and six months ended June 30, 2022 and 2021 between us and the unconsolidated VIEs sponsored by us and accounted for as sales since 2012.

Table 4.4 – Cash Flows Related to Unconsolidated VIEs Sponsored by Redwood

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Proceeds from new transfers	$	—	$	361,673	$	—	$	1,266,063
MSR fees received	764		1,336		1,628		2,943
Funding of compensating interest, net	(14)		(70)		(30)		(170)
Cash flows received on retained securities	3,158		16,764		17,284		25,393

The following table presents the key weighted-average assumptions used to value securities retained at the date of securitization for securitizations completed during the three and six months ended June 30, 2022 and 2021.

Table 4.5 – Assumptions Related to Assets Retained from Unconsolidated VIEs Sponsored by Redwood

	Three Months Ended June 30, 2022		Three Months Ended June 30, 2021
At Date of Securitization	Senior IO Securities	Subordinate Securities	Senior IO Securities	Subordinate Securities
Prepayment rates	N/A	N/A	8 %	8 %
Discount rates	N/A	N/A	15 %	7 %
Credit loss assumptions	N/A	N/A	0.25 %	0.25 %

	Six Months Ended June 30, 2022		Six Months Ended June 30, 2021
At Date of Securitization	Senior IO Securities	Subordinate Securities	Senior IO Securities		Subordinate Securities
Prepayment rates	N/A	N/A	11	%	11 %
Discount rates	N/A	N/A	15 %		6 %
Credit loss assumptions	N/A	N/A	0.23 %		0.23 %

The following table presents additional information at June 30, 2022 and December 31, 2021, related to unconsolidated VIEs sponsored by Redwood and accounted for as sales since 2012.

Table 4.6 – Unconsolidated VIEs Sponsored by Redwood

(In Thousands)	June 30, 2022		December 31, 2021
On-balance sheet assets, at fair value:
Interest-only, senior and subordinate securities, classified as trading	$	27,293	$	18,214
Subordinate securities, classified as AFS	85,269		127,542
Mortgage servicing rights	11,092		6,450
Maximum loss exposure (1)	$	123,654	$	152,206
Assets transferred:
Principal balance of loans outstanding	$	4,281,806	$	4,959,234
Principal balance of loans 30+ days delinquent	27,683		30,594

(1)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.

The following table presents key economic assumptions for assets retained from unconsolidated VIEs and the sensitivity of their fair values to immediate adverse changes in those assumptions at June 30, 2022 and December 31, 2021.

Table 4.7 – Key Assumptions and Sensitivity Analysis for Assets Retained from Unconsolidated VIEs Sponsored by Redwood

June 30, 2022	MSRs			Senior Securities (1)			Subordinate Securities
(Dollars in Thousands)
Fair value at June 30, 2022	$	11,092		$	27,293		$	85,269
Expected life (in years) (2)	6			6			15
Prepayment speed assumption (annual CPR) (2)	10		%	11		%	10		%
Decrease in fair value from:
10% adverse change	$	1,402		$	1,002		$	568
25% adverse change	3,405			2,406			1,323
Discount rate assumption (2)	11		%	12		%	8		%
Decrease in fair value from:
100 basis point increase	$	1,649		$	910		$	8,522
200 basis point increase	3,180			1,759			15,860
Credit loss assumption (2)	N/A			0.03		%	0.03		%
Decrease in fair value from:
10% higher losses	N/A			N/A			$	42
25% higher losses	N/A			N/A			103

December 31, 2021	MSRs			Senior Securities (1)			Subordinate Securities
(Dollars in Thousands)
Fair value at December 31, 2021	$	6,450		$	18,214		$	127,542
Expected life (in years) (2)	3			4			5
Prepayment speed assumption (annual CPR) (2)	29		%	23		%	32 %
Decrease in fair value from:
10% adverse change	$	447		$	1,130		$	531
25% adverse change	1,020			2,596			1,440
Discount rate assumption (2)	12 %			16		%	5		%
Decrease in fair value from:
100 basis point increase	$	152		$	426		$	4,801
200 basis point increase	297			829			9,139
Credit loss assumption (2)	N/A			0.35		%	0.35		%
Decrease in fair value from:
10% higher losses	N/A			$	—		$	1,528
25% higher losses	N/A			—			3,819

(1)Senior securities included $27 million and $18 million of interest-only securities at June 30, 2022 and December 31, 2021, respectively.

(2)Expected life, prepayment speed assumption, discount rate assumption, and credit loss assumption presented in the tables above represent weighted averages.

Analysis of Unconsolidated Third-Party VIEs

Third-party VIEs are securitization entities in which we maintain an economic interest, but do not sponsor. Our economic interest may include several securities and other investments from the same third-party VIE, and in those cases, the analysis is performed in consideration of all of our interests. The following table presents a summary of our interests in third-party VIEs at June 30, 2022 and December 31, 2021, grouped by asset type.

Table 4.8 – Third-Party Sponsored VIE Summary

(In Thousands)	June 30, 2022		December 31, 2021
Mortgage-Backed Securities
Senior	$	4,205	$	3,572
Subordinate	167,512		228,083
Total Mortgage-Backed Securities	171,717		231,655
Excess MSR	8,633		10,400
Total Investments in Third-Party Sponsored VIEs	$	180,350	$	242,055

We determined that we are not the primary beneficiary of these third-party VIEs, as we do not have the required power to direct the activities that most significantly impact the economic performance of these entities. Specifically, we do not service or manage these entities or otherwise solely hold decision making powers that are significant. As a result of this assessment, we do not consolidate any of the underlying assets and liabilities of these third-party VIEs – we only account for our specific interests in them.

Our assessments of whether we are required to consolidate a VIE may change in subsequent reporting periods based upon changing facts and circumstances pertaining to each VIE. Any related accounting changes could result in a material impact to our financial statements.

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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

For financial reporting purposes, we follow a fair value hierarchy established under GAAP that is used to determine the fair value of financial instruments. This hierarchy prioritizes relevant market inputs in order to determine an “exit price” at the measurement date, or the price at which an asset could be sold or a liability could be transferred in an orderly process that is not a forced liquidation or distressed sale. Level 1 inputs are observable inputs that reflect quoted prices for identical assets or liabilities in active markets. Level 2 inputs are observable inputs other than quoted prices for an asset or liability that are obtained through corroboration with observable market data. Level 3 inputs are unobservable inputs (e.g., our own data or assumptions) that are used when there is little, if any, relevant market activity for the asset or liability required to be measured at fair value.

In certain cases, inputs used to measure fair value fall into different levels of the fair value hierarchy. In such cases, the level at which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. Our assessment of the significance of a particular input requires judgment and considers factors specific to the asset or liability being measured.

The following table presents the carrying values and estimated fair values of assets and liabilities that are required to be recorded or disclosed at fair value at June 30, 2022 and December 31, 2021.

Table 5.1 – Carrying Values and Fair Values of Assets and Liabilities

	June 30, 2022				December 31, 2021
	Carrying Value		Fair Value		Carrying Value		Fair Value
(In Thousands)
Assets
Residential loans, held-for-sale, at fair value	$	1,213,067	$	1,213,067	$	1,845,248	$	1,845,248
Residential loans, held-for-investment, at fair value	5,365,531		5,365,531		5,747,150		5,747,150
Business purpose loans, held-for-sale, at fair value	505,171		505,171		358,309		358,309
Business purpose loans, held-for-investment, at fair value	4,697,766		4,697,766		4,432,680		4,432,680
Consolidated Agency multifamily loans, at fair value	443,114		443,114		473,514		473,514
Real estate securities, at fair value	284,278		284,278		377,411		377,411
Servicer advance investments (1)	273,210		273,210		350,923		350,923
MSRs (1)	23,560		23,560		12,438		12,438
Excess MSRs (1)	40,803		40,803		44,231		44,231
HEIs (1)	276,366		276,366		192,740		192,740
Other investments (1)	10,869		10,869		12,663		12,663
Cash and cash equivalents	371,296		371,296		450,485		450,485
Restricted cash	72,558		72,558		80,999		80,999
Derivative assets	36,587		36,587		26,467		26,467
REO (2)	7,813		9,170		36,126		39,272
Margin receivable (2)	11,420		11,420		7,269		7,269
Liabilities
Short-term debt	$	1,869,822	$	1,869,822	$	2,177,362	$	2,177,362
Margin payable (3)	15,023		15,023		24,368		24,368
Guarantee obligations (3)	6,768		6,241		7,459		7,133
HEI securitization non-controlling interest	25,422		25,422		17,035		17,035
Derivative liabilities	6,591		6,591		3,317		3,317
ABS issued, net
At fair value	7,993,953		7,993,953		8,843,147		8,843,147
At amortized cost	590,193		569,731		410,410		410,471
Other long-term debt, net (4)	1,104,050		1,101,622		988,483		989,570
Convertible notes, net (4)	723,267		684,922		513,629		537,300
Trust preferred securities and subordinated notes, net (4)	138,744		83,700		138,721		97,650

(1)These investments are included in Other investments on our consolidated balance sheets.

(2)These assets are included in Other assets on our consolidated balance sheets.

(3)These liabilities are included in Accrued expenses and other liabilities on our consolidated balance sheets.

(4)These liabilities are included in Long-Term debt, net of our consolidated balance sheets.

During the three and six months ended June 30, 2022, we elected the fair value option for zero and $5 million of securities, respectively, $1.15 billion and $3.26 billion of residential loans (principal balance), respectively, and $923 million and $1.84 billion of business purpose loans (principal balance), respectively. Additionally, during the three and six months ended June 30, 2022, we elected the fair value option for $57 million and $97 million of HEIs, respectively, and $3 million and $8 million of Other Investments, respectively. We anticipate electing the fair value option for all future purchases of residential and business purpose loans that we intend to sell to third parties or transfer to securitizations, as well as for certain securities we purchase, including IO securities, fixed-rate securities rated investment grade or higher and HEIs.

The following table presents the assets and liabilities that are reported at fair value on our consolidated balance sheets on a recurring basis at June 30, 2022 and December 31, 2021, as well as the fair value hierarchy of the valuation inputs used to measure fair value.

Table 5.2 – Assets and Liabilities Measured at Fair Value on a Recurring Basis

June 30, 2022	Carrying Value		Fair Value Measurements Using
(In Thousands)			Level 1		Level 2		Level 3
Assets
Residential loans	$	6,578,566	$	—	$	—	$	6,578,566
Business purpose loans	5,202,938		—		—		5,202,938
Consolidated Agency multifamily loans	443,114		—		—		443,114
Real estate securities	284,278		—		—		284,278
Servicer advance investments	273,210		—		—		273,210
MSRs	23,560		—		—		23,560
Excess MSRs	40,803		—		—		40,803
HEIs	276,366		—		—		276,366
Other investments	10,869		—		—		10,869
Derivative assets	36,587		4,979		29,601		2,007
Liabilities
HEI securitization non-controlling interest	$	25,422	$	—	$	—	$	25,422
Derivative liabilities	6,591		3,619		2,445		527
ABS issued	7,993,953		—		—		7,993,953

December 31, 2021	Carrying Value		Fair Value Measurements Using
(In Thousands)			Level 1		Level 2		Level 3
Assets
Residential loans	$	7,592,398	$	—	$	—	$	7,592,398
Business purpose loans	4,790,989		—		—		4,790,989
Consolidated Agency multifamily loans	473,514		—		—		473,514
Real estate securities	377,411		—		—		377,411
Servicer advance investments	350,923		—		—		350,923
MSRs	12,438		—		—		12,438
Excess MSRs	44,231		—		—		44,231
HEIs	192,740		—		—		192,740
Other investments	17,574		—		—		17,574
Derivative assets	26,467		2,906		18,928		4,633
Liabilities
HEI securitization non-controlling interest	$	17,035	$	—	$	—	$	17,035
Derivative liabilities	3,317		1,563		1,251		503
ABS issued	8,843,147		—		—		8,843,147

The following table presents additional information about Level 3 assets and liabilities measured at fair value on a recurring basis for the six months ended June 30, 2022.

Table 5.3 – Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis

	Assets
	Residential Loans		Business Purpose Loans		Multifamily Loans		Trading Securities		AFS Securities		Servicer Advance Investments		Excess MSRs		HEIs		MSRs and Other Investments
(In Thousands)
Beginning balance -    December 31, 2021	$	7,592,398	$	4,790,989	$	473,514	$	170,619	$	206,792	$	350,923	$	44,231	$	192,740	$	25,101
Acquisitions	3,247,960		122,065		—		5,006		10,000		—		—		97,389		8,293
Originations	—		1,721,032		—		—		—		—		—		—		—
Sales	(3,050,759)		(331,750)		—		(23,329)		—		—		—		—		(2,231)
Principal paydowns	(551,470)		(719,690)		(3,971)		(1,018)		(25,015)		(71,401)		—		(25,826)		(30)
Gains (losses) in net income (loss), net	(657,601)		(378,745)		(26,429)		(17,498)		11,730		(6,312)		(3,428)		12,063		6,875
Unrealized losses in OCI, net	—		—		—		—		(53,009)		—		—		—		—
Other settlements, net (1)	(1,962)		(963)		—		—		—		—		—		—		(3,579)
Ending balance -   June 30, 2022	$	6,578,566	$	5,202,938	$	443,114	$	133,780	$	150,498	$	273,210	$	40,803	$	276,366	$	34,429

			Liabilities
	Derivatives (2)			HEI Securitization Non-Controlling Interest		ABS Issued
(In Thousands)
Beginning balance - December 31, 2021	$	4,130		$	17,035	$	8,843,147
Acquisitions	—			—		952,711
Principal paydowns	—			—		(925,650)
Gains (losses) in net income (loss), net	(51,265)			6,218		(876,255)
Other settlements, net (1)	48,615			—		—
Ending balance - June 30, 2022	$	1,480		$	23,253	$	7,993,953

(1)     Other settlements, net for residential and business purpose loans represents the transfer of loans to REO, and for derivatives, the transfer of the fair value of loan purchase and interest rate lock commitments at the time loans are acquired to the basis of residential and single-family rental business purpose loans, and for MSRs and other investments, primarily represents an investment that was exchanged into a new instrument that is no longer measured at fair value on a recurring basis.

(2)     For the purpose of this presentation, derivative assets and liabilities, which consist of loan purchase commitments, and interest rate lock commitments, are presented on a net basis.

The following table presents the portion of fair value gains or losses included in our consolidated statements of income that were attributable to Level 3 assets and liabilities recorded at fair value on a recurring basis and held at June 30, 2022 and 2021. Gains or losses incurred on assets or liabilities sold, matured, called, or fully written down during the three and six months ended June 30, 2022 and 2021 are not included in this presentation.

Table 5.4 – Portion of Net Fair Value Gains (Losses) Attributable to Level 3 Assets and Liabilities Still Held at June 30, 2022 and 2021 Included in Net Income (Loss)

	Included in Net Income (Loss)
	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Assets
Residential loans at Redwood	$	(15,995)	$	14,130	$	(31,858)	$	10,481
Business purpose loans	(28,385)		28,404		(36,566)		40,003
Net investments in consolidated Sequoia entities (1)	(6,222)		4,693		(11,203)		8,893
Net investments in consolidated Freddie Mac SLST entities (1)	(36,014)		36,137		(33,074)		40,225
Net investments in consolidated Freddie Mac K-Series entities (1)	(190)		1,855		74		10,776
Net investments in consolidated CAFL SFR entities (1)	(21,828)		2,908		(17,780)		2,556
Net investment in consolidated HEI securitization entity (1)	3,371		—		13,000		—
Trading securities	(17,501)		1,772		(19,884)		2,262
Servicer advance investments	(3,231)		(940)		(6,313)		(1,100)
MSRs	4,248		(330)		7,644		273
Excess MSRs	(2,220)		(2,477)		(3,428)		(4,430)
HEIs at Redwood	1,549		2,080		2,701		7,395
Loan purchase and interest rate lock commitments	2,056		14,550		2,007		14,171
Liabilities
HEI securitization non-controlling interest	$	(2,170)	$	—	$	(8,388)	$	—
Loan purchase commitments	(488)		(696)		(527)		(724)

(1)    Represents the portion of net fair value gains or losses included in our consolidated statements of income (loss) related to securitized loans, securitized HEIs, and the associated ABS issued at our consolidated securitization entities held at June 30, 2022 and 2021, which netted together represent the change in value of our investments at the consolidated VIEs accounted for under CFE election, excluding REO.

The following table presents information on assets recorded at fair value on a non-recurring basis at June 30, 2022. This table does not include the carrying value and gains or losses associated with the asset types below that were not recorded at fair value on our consolidated balance sheets at June 30, 2022.

Table 5.5 – Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis at June 30, 2022

									Gain (Loss) for
June 30, 2022	Carrying Value		Fair Value Measurements Using						Three Months Ended		Six Months Ended
(In Thousands)			Level 1		Level 2		Level 3		June 30, 2022		June 30, 2022
Assets
REO	$	1,380	$	—	$	—	$	1,380	$	—	$	—
Strategic investments	17,240		—		—		17,240		9,990		9,990

The following table presents the net market valuation gains and losses recorded in each line item of our consolidated statements of income for the three and six months ended June 30, 2022 and 2021.

Table 5.6 – Market Valuation Gains and Losses, Net

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Mortgage Banking Activities, Net
Residential loans held-for-sale, at fair value	$	(24,517)	$	24,988	$	(51,716)	$	48,100
Residential loan purchase commitments	(8,897)		51,919		(50,520)		(466)
Single-family rental loans held-for-sale, at fair value	(40,034)		25,222		(64,502)		35,470
Single-family rental loan interest rate lock commitments	40		744		(685)		744
Bridge loans	116		2,225		2,251		3,269
Trading securities (1)	1,315		(1,095)		4,101		(374)
Risk management derivatives, net	25,387		(58,244)		115,774		34,578
Total mortgage banking activities, net (2)	$	(46,590)	$	45,759	$	(45,297)	$	121,321
Investment Fair Value Changes, Net
Residential loans held-for-sale, at fair value (called Sequoia loans)	$	(8,010)	$	1,290	$	(12,262)	$	1,607
Bridge loans held-for-investment	(9,559)		(62)		(11,702)		3,242
Trading securities	(17,358)		2,893		(21,600)		23,521
Servicer advance investments	(3,231)		(940)		(6,312)		(1,100)
Excess MSRs	(2,220)		(2,477)		(3,428)		(4,430)
Net investments in Legacy Sequoia entities (3)	(336)		(216)		(1,050)		(915)
Net investments in Sequoia entities (3)	(5,886)		4,906		(9,708)		9,804
Net investments in Freddie Mac SLST entities (3)	(35,940)		36,316		(32,904)		40,433
Net investment in Freddie Mac K-Series entity (3)	(190)		1,855		74		10,776
Net investments in CAFL SFR entities (3)	(21,828)		3,697		(17,780)		3,411
Net investment in HEI securitization entity (3)	1,201		—		4,612		—
HEIs at Redwood	1,596		2,080		2,788		7,395
Other investments	10,460		125		10,583		435
Risk management derivatives, net	4,395		—		6,368		—
Credit (losses) recoveries on AFS securities	(1,066)		13		(1,771)		388
Total investment fair value changes, net	$	(87,972)	$	49,480	$	(94,092)	$	94,567
Other Income
MSRs	$	3,827	$	(1,381)	$	6,795	$	(2,247)
Total other income (4)	$	3,827	$	(1,381)	$	6,795	$	(2,247)
Total Market Valuation Gains (Losses), Net	$	(130,735)	$	93,858	$	(132,594)	$	213,641

(1)Represents fair value changes on trading securities that are being used along with risk management derivatives to manage the market risks associated with our residential mortgage banking operations.

(2)Mortgage banking activities, net presented above does not include fee income from loan originations or acquisitions, provisions for repurchases, and other expenses that are components of Mortgage banking activities, net presented on our consolidated statements of income, as these amounts do not represent market valuation changes.

(3)Includes changes in fair value of the residential loans held-for-investment, securitized HEIs, REO and the ABS issued at the entities, which netted together represent the change in value of our investments at the consolidated VIEs accounted for under the CFE election.

(4)Other income presented above does not include net MSR fee income or provisions for repurchases for MSRs, as these amounts do not represent market valuation adjustments.

At June 30, 2022, our valuation policy and processes had not changed from those described in our Annual Report on Form 10-K for the year ended December 31, 2021.

The following table provides quantitative information about the significant unobservable inputs used in the valuation of our Level 3 assets and liabilities measured at fair value.

Table 5.7 – Fair Value Methodology for Level 3 Financial Instruments

June 30, 2022	Fair Value			Input Values
(Dollars in Thousands, except Input Values)			Unobservable Input	Range						Weighted Average(1)
Assets
Residential loans, at fair value:
Jumbo fixed-rate loans	$	714,777	Whole loan spread to swap rate	217		-	240		bps	221		bps
			Called loan dollar price	$	96	-	$	96		$	96
Jumbo loans committed to sell	498,258		Whole loan committed sales price	$	97	-	$	99		$	98
Loans held by Legacy Sequoia (2)	208,788		Liability price				N/A			N/A
Loans held by Sequoia (2)	3,525,459		Liability price				N/A			N/A
Loans held by Freddie Mac SLST (2)	1,631,285		Liability price				N/A			N/A
Business purpose loans:
Single-family rental loans	505,171		Senior credit spread	215		-	235		bps	220		bps
			Subordinate credit spread	260		-	1,099		bps	504		bps
			Senior credit support	39		-	40		%	39		%
			IO discount rate	8		-	13		%	9		%
			Prepayment rate (annual CPR)	3		-	25		%	6		%
			Non-securitizable loan dollar price	$	80	-	$	100		$	93
Single-family rental loans held by CAFL (2)	3,046,277		Liability price				N/A			N/A
Bridge loans	1,651,489		Whole loan discount rate	5		-	15		%	8		%
			Senior credit spread	325		-	325		bps	325		bps
			Subordinate credit discount rate	15		-	15		%	15		%
			Senior credit support	15		-	15		%	15		%
Multifamily loans held by Freddie Mac K-Series (2)	443,114		Liability price				N/A			N/A
Trading and AFS securities	284,278		Discount rate	4		-	18		%	9		%
			Prepayment rate (annual CPR)	6		-	65		%	13		%
			Default rate	—		-	11		%	1		%
			Loss severity	—		-	50		%	25		%
			CRT dollar price	$	74	-	$	88		$	83
Servicer advance investments	273,210		Discount rate	2		-	4		%	3		%
			Prepayment rate (annual CPR)	16		-	30		%	16		%
			Expected remaining life (3)	5		-	5		yrs	5		yrs
			Mortgage servicing income	—		-	18		bps	9		bps
MSRs	23,560		Discount rate	11		-	115		%	11		%
			Prepayment rate (annual CPR)	5		-	31		%	9		%
			Per loan annual cost to service	$	93	-	$	93		$	93

Table 5.7 – Fair Value Methodology for Level 3 Financial Instruments (continued)

June 30, 2022	Fair Value		Input Values
(Dollars in Thousands, except Input Values)		Unobservable Input	Range						Weighted Average (1)
Assets (continued)
Excess MSRs	40,803	Discount rate	13		-	19		%	18		%
		Prepayment rate (annual CPR)	16		-	35		%	20		%
		Excess mortgage servicing income	8		-	18		bps	11		bps
HEI	130,151	Discount rate	10		-	10		%	10		%
		Prepayment rate (annual CPR)	1		-	24		%	17		%
		Home price appreciation	3		-	4		%	3		%
HEIs held by HEI securitization entity	146,215	Liability price	N/A			N/A			N/A
REO	1,380	Loss severity	12		-	25		%	20		%
Liabilities
Residential loan purchase commitments, net	1,500	Whole loan spread to swap rate	217		-	240		bps	224		bps
		Pull-through rate	18		-	100		%	68		%
		Committed sales price	$	97	-	$	102		$	97
ABS issued (2):
At consolidated Sequoia entities	3,496,329	Discount rate	4		-	18		%	6		%
		Prepayment rate (annual CPR)	5		-	27		%	14		%
		Default rate	—		-	22		%	1		%
		Loss severity	25		-	50		%	32		%
At consolidated CAFL SFR entities (4)	2,732,964	Discount rate	2		-	15		%	5		%
		Prepayment rate (annual CPR)	—		-	3		%	3		%
		Default rate	5		-	28		%	7		%
		Loss severity	30		-	30		%	30		%
At consolidated Freddie Mac SLST entities	1,243,167	Discount rate	4		-	7		%	5		%
		Prepayment rate (annual CPR)	6		-	8		%	6		%
		Default rate	7		-	9		%	8		%
		Loss severity	35		-	35		%	35		%
At consolidated Freddie Mac K-Series entities (4)	411,380	Discount rate	3		-	9		%	4		%
At consolidated HEI securitization entity (4)	110,111	Discount rate	8		-	13		%	9		%
		Prepayment rate (annual CPR)	20		-	20		%	20		%
		Default rate	12		-	12		%	12		%
		Loss severity	30		-	30		%	30		%
		Home price appreciation	3		-	4		%	3		%

Footnotes to Table 5.7

(1)The weighted average input values for all loan types are based on the unpaid principal balance. The weighted average input values for all other assets and liabilities are based on relative fair value.

(2)The fair value of the loans and HEIs held by consolidated entities was based on the fair value of the ABS issued by these entities and the securities and other investments we own in those entities, which we determined were more readily observable in accordance with accounting guidance for collateralized financing entities. At June 30, 2022, the fair value of securities we owned at the consolidated Sequoia, CAFL SFR, Freddie Mac SLST, Freddie Mac K-Series, and HEI securitization entities was $238 million, $307 million, $390 million, $32 million, and $15 million, respectively.

(3)Represents the estimated average duration of outstanding servicer advances at a given point in time (not taking into account new advances made with respect to the pool).

(4)As a market convention, certain securities are priced to a no-loss yield and therefore do not include default and loss severity assumptions.

Determination of Fair Value

We generally use both market comparable information and discounted cash flow modeling techniques to determine the fair value of our Level 3 assets and liabilities. Use of these techniques requires determination of relevant inputs and assumptions, some of which represent significant unobservable inputs as indicated in the preceding table. Accordingly, a significant increase or decrease in any of these inputs - such as anticipated credit losses, prepayment rates, interest rates, or other valuation assumptions - in isolation would likely result in a significantly lower or higher fair value measurement.

Included in Note 5 to the Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2021 is a more detailed description of our financial instruments measured at fair value and their significant inputs, as well as the general classification of such instruments pursuant to the Level 1, Level 2, and Level 3 valuation hierarchy.

Certain of our Other investments (inclusive of strategic investments in early-stage start-up companies) are Level 3 financial instruments that we account for under the fair value option. These investments generally take the form of equity or debt with conversion features and do not have readily determinable fair values. We initially record these investments at cost and adjust their fair value based on observable price changes, such as follow-on capital raises or secondary sales, and will also evaluate impacts to valuation from changing market conditions and underlying business performance. As of June 30, 2022, the carrying value of these investments was $9 million, which was based on the investments' original cost.

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Residential Loans

6 Months Ended

Jun. 30, 2022

Receivables [Abstract]

Residential Loans

Residential Loans

We acquire residential loans from third-party originators and may sell or securitize these loans or hold them for investment. The following table summarizes the classifications and carrying values of the residential loans owned at Redwood and at consolidated Sequoia and Freddie Mac SLST entities at June 30, 2022 and December 31, 2021.

Table 6.1 – Classifications and Carrying Values of Residential Loans

June 30, 2022			Legacy				Freddie Mac
(In Thousands)	Redwood		Sequoia		Sequoia		SLST		Total
Held-for-sale at fair value	$	1,213,067	$	—	$	—	$	—	$	1,213,067
Held-for-investment at fair value	—		208,788		3,525,459		1,631,285		5,365,532
Total Residential Loans	$	1,213,067	$	208,788	$	3,525,459	$	1,631,285	$	6,578,599

December 31, 2021			Legacy				Freddie Mac
(In Thousands)	Redwood		Sequoia		Sequoia		SLST		Total
Held-for-sale at fair value	$	1,845,282	$	—	$	—	$	—	$	1,845,282
Held-for-investment at fair value	—		230,455		3,628,465		1,888,230		5,747,150
Total Residential Loans	$	1,845,282	$	230,455	$	3,628,465	$	1,888,230	$	7,592,432

At June 30, 2022, we owned mortgage servicing rights associated with $1.16 billion (principal balance) of residential loans owned at Redwood that were purchased from third-party originators. The value of these MSRs is included in the carrying value of the associated loans on our consolidated balance sheets. We contract with licensed sub-servicers that perform servicing functions for these loans.

Residential Loans Held-for-Sale

The following table summarizes the characteristics of residential loans held-for-sale at June 30, 2022 and December 31, 2021.

Table 6.2 – Characteristics of Residential Loans Held-for-Sale

(Dollars in Thousands)	June 30, 2022			December 31, 2021
Number of loans	1,469			2,196
Unpaid principal balance	$	1,238,469		$	1,813,865
Fair value of loans	$	1,213,067		$	1,845,282
Market value of loans pledged as collateral under short-term borrowing agreements	$	1,207,185		$	1,838,797
Weighted average coupon	4.47		%	3.27		%
Delinquency information
Number of loans with 90+ day delinquencies	1			3
Unpaid principal balance of loans with 90+ day delinquencies	$	211		$	2,923
Fair value of loans with 90+ day delinquencies	$	170		$	2,304
Number of loans in foreclosure	—			—

The following table provides the activity of residential loans held-for-sale during the three and six months ended June 30, 2022 and 2021.

Table 6.3 – Activity of Residential Loans Held-for-Sale

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Principal balance of loans acquired (1)	$	1,145,450	$	3,484,633	$	3,260,641	$	6,580,681
Principal balance of loans sold	1,238,327		3,324,919		3,065,691		5,600,751
Principal balance of loans transferred to HFI	—		—		687,192		—
Net market valuation gains (losses) recorded (2)	(32,527)		26,278		(63,978)		49,707

(1)For the three and six months ended June 30, 2022, includes zero and $102 million of loans acquired through calls of zero and three seasoned Sequoia securitizations, respectively.

(2)Net market valuation gains (losses) on residential loans held-for-sale are recorded primarily through Mortgage banking activities, net on our consolidated statements of income (loss).

Residential Loans Held-for-Investment at Fair Value

We invest in residential subordinate securities issued by Legacy Sequoia, Sequoia and Freddie Mac SLST securitization trusts and consolidate the underlying residential loans owned by these entities for financial reporting purposes in accordance with GAAP. The following tables summarize the characteristics of the residential loans owned at consolidated Sequoia and Freddie Mac SLST entities at June 30, 2022 and December 31, 2021.

Table 6.4 – Characteristics of Residential Loans Held-for-Investment

June 30, 2022	Legacy						Freddie Mac
(Dollars in Thousands)	Sequoia			Sequoia			SLST
Number of loans	1,447			4,738			11,285
Unpaid principal balance	$	234,213		$	3,988,148		$	1,796,594
Fair value of loans	$	208,788		$	3,525,459		$	1,631,285
Weighted average coupon	2.27		%	3.26		%	4.50		%
Delinquency information
Number of loans with 90+ day delinquencies (1)	29			14			1,370
Unpaid principal balance of loans with 90+ day delinquencies	$	5,107		$	12,008		$	236,941
Fair value of loans with 90+ day delinquencies (2)	N/A			N/A			N/A
Number of loans in foreclosure	11			5			257
Unpaid principal balance of loans in foreclosure	$	1,483		$	5,004		$	45,536

December 31, 2021	Legacy						Freddie Mac
(Dollars in Thousands)	Sequoia			Sequoia			SLST
Number of loans	1,583			4,300			11,986
Unpaid principal balance	$	264,057		$	3,605,469		$	1,932,241
Fair value of loans	$	230,455		$	3,628,465		$	1,888,230
Weighted average coupon	1.87		%	3.39		%	4.51		%
Delinquency information
Number of loans with 90+ day delinquencies (1)	32			18			1,208
Unpaid principal balance of loans with 90+ day delinquencies	$	7,482		$	15,124		$	212,961
Fair value of loans with 90+ day delinquencies (2)	N/A			N/A			N/A
Number of loans in foreclosure	10			2			241
Unpaid principal balance of loans in foreclosure	$	2,188		$	1,624		$	43,637

(1)For loans held at consolidated entities, the number of loans greater than 90 days delinquent includes loans in foreclosure.

(2)The fair value of the loans held by consolidated entities was based on the fair value of the ABS issued by these entities, including securities we own, which we determined were more readily observable, in accordance with accounting guidance for collateralized financing entities.

The following table provides the activity of residential loans held-for-investment at consolidated entities during the three and six months ended June 30, 2022 and 2021.

Table 6.5 – Activity of Residential Loans Held-for-Investment at Consolidated Entities

	Three Months Ended June 30, 2022				Three Months Ended June 30, 2021
	Legacy			Freddie Mac	Legacy			Freddie Mac
(In Thousands)	Sequoia	Sequoia		SLST	Sequoia	Sequoia		SLST
Fair value of loans transferred from HFS to HFI (1)	N/A	$	—	N/A	N/A	$	1,205,494	N/A
Net market valuation gains (losses) recorded (2)	779	(211,486)		(76,735)	4,863	(12,835)		22,579

	Six Months Ended June 30, 2022				Six Months Ended June 30, 2021
	Legacy			Freddie Mac	Legacy			Freddie Mac
(In Thousands)	Sequoia	Sequoia		SLST	Sequoia	Sequoia		SLST
Fair value of loans transferred from HFS to HFI (1)	N/A	$	684,491	N/A	N/A	$	1,205,494	N/A
Net market valuation gains (losses) recorded (2)	7,104	(482,217)		(120,503)	12,476	(15,413)		19,013

(1)Represents the transfer of loans from held-for-sale to held-for-investment associated with Sequoia securitizations.

(2)For loans held at our consolidated Legacy Sequoia, Sequoia, and Freddie Mac SLST entities, market value changes are based on the estimated fair value of the associated ABS issued, including securities we own, pursuant to collateralized financing entity guidelines, and are recorded in Investment fair value changes, net on our consolidated statements of income (loss). The net impact to our income statement associated with our economic investments in these securitization entities is presented in Table 4.2.

REO

See Note 12 for detail on residential loans transferred to REO during 2022.

Business Purpose Loans

We originate and invest in business purpose loans, including single-family rental ("SFR") loans and bridge loans. The following table summarizes the classifications and carrying values of the business purpose loans owned at Redwood and at consolidated CAFL entities at June 30, 2022 and December 31, 2021.

Table 7.1 – Classifications and Carrying Values of Business Purpose Loans

June 30, 2022	Single-Family Rental				Bridge
(In Thousands)	Redwood		CAFL		Redwood		CAFL		Total
Held-for-sale at fair value	$	505,171	—		$	—	$	—	$	505,171
Held-for-investment at fair value	—		3,046,277		1,109,337		542,152		4,697,766
Total Business Purpose Loans	$	505,171	$	3,046,277	$	1,109,337	$	542,152	$	5,202,937

December 31, 2021	Single-Family Rental				Bridge
(In Thousands)	Redwood		CAFL		Redwood		CAFL		Total
Held-for-sale at fair value	$	358,309	$	—	$	—	$	—	$	358,309
Held-for-investment at fair value	—		3,488,074		666,364		278,242		4,432,680
Total Business Purpose Loans	$	358,309	$	3,488,074	$	666,364	$	278,242	$	4,790,989

Nearly all of the outstanding single-family rental loans at June 30, 2022 were first-lien, fixed-rate loans with original maturities of five, seven, or ten years, with 3% having original maturities of 30 years. The outstanding bridge loans held-for-investment at June 30, 2022 were first-lien, interest-only loans with original maturities of six to 36 months and were comprised of 45% one-month LIBOR-indexed adjustable-rate loans, 39% one-month SOFR-indexed adjustable-rate loans, and 17% fixed-rate loans.

At June 30, 2022, we had a $835 million commitment to fund bridge loans. See Note 16 for additional information on this commitment.

The following table provides the activity of business purpose loans at Redwood during the three and six months ended June 30, 2022 and 2021.

Table 7.2 – Activity of Business Purpose Loans at Redwood

	Three Months Ended   June 30, 2022				Three Months Ended   June 30, 2021
(In Thousands)	SFR at Redwood		Bridge at Redwood		SFR at Redwood		Bridge at Redwood
Principal balance of loans originated	$	323,245	$	542,241	$	312,217	$	215,160
Principal balance of loans acquired	38,457		19,023		—		—
Principal balance of loans sold to third parties	—		—		—		354
Fair value of loans transferred (1)	295,037		306,313		297,301		—
Mortgage banking activities income (loss) recorded (2)	(40,034)		(1,136)		25,222		978
Investment fair value changes recorded (3)	—		(5,455)		—		(62)

	Six Months Ended   June 30, 2022				Six Months Ended   June 30, 2021
(In Thousands)	SFR at Redwood		Bridge at Redwood		SFR at Redwood		Bridge at Redwood
Principal balance of loans originated	$	765,972	$	954,179	$	565,315	$	348,389
Principal balance of loans acquired	100,349		22,006		—		—
Principal balance of loans sold to third parties	331,502		—		—		9,231
Fair value of loans transferred (1)	295,037		388,604		466,705		N/A
Mortgage banking activities income (loss) recorded (2)	(64,502)		1,239		35,470		1,520
Investment fair value changes recorded (3)	—		(6,214)		—		3,242

(1)For SFR at Redwood, represents the transfer of loans from held-for-sale to held-for-investment associated with CAFL SFR securitizations. For Bridge at Redwood, represents the transfer of bridge loans from "Bridge at Redwood" to "Bridge at CAFL" resulting from their securitization.

(2)Represents net market valuation changes from the time a loan is originated to when it is sold or transferred to our investment portfolio. Additionally, for the three and six months ended June 30, 2022, we recorded loan origination fee income of $12 million and $27 million, respectively, through Mortgage banking activities, net on our consolidated statements of income (loss).

(3)Represents net market valuation changes for loans classified as held-for-investment and associated interest-only strip liabilities.

Business Purpose Loans Held-for-Investment at CAFL

    We invest in securities issued by CAFL securitizations sponsored by CoreVest and consolidate the underlying single-family rental loans and bridge loans owned by these entities. The following table provides the activity of business purpose loans held-for-investment at CAFL during the three and six months ended June 30, 2022 and 2021.

Table 7.3 – Activity of Business Purpose Loans Held-for-Investment at CAFL

	Three Months Ended   June 30, 2022				Three Months Ended   June 30, 2021
(In Thousands)	SFR at CAFL		Bridge at CAFL		SFR at CAFL		Bridge at CAFL
Net market valuation gains (losses) recorded (1)	$	(118,299)	$	(281)	$	(1,230)	$	—

	Six Months Ended   June 30, 2022				Six Months Ended   June 30, 2021
(In Thousands)	SFR at CAFL		Bridge at CAFL		SFR at CAFL		Bridge at CAFL
Net market valuation gains (losses) recorded (1)	$	(310,202)	$	(1,856)	$	(62,132)	$	—

(1)For loans held at our consolidated CAFL entities, market value changes are based on the estimated fair value of the associated ABS issued, including securities we own, pursuant to collateralized financing entity guidelines, and are recorded through Investment fair value changes, net on our consolidated statements of income (loss). The net impact to our income statement associated with our economic investments in these securitization entities is presented in Table 4.2.

REO

See Note 12 for detail on BPL loans transferred to REO during 2022.

Business Purpose Loan Characteristics

The following tables summarize the characteristics of the business purpose loans owned at Redwood and at consolidated CAFL entities at June 30, 2022 and December 31, 2021.

Table 7.4 – Characteristics of Business Purpose Loans

June 30, 2022	SFR at Redwood			SFR at CAFL			Bridge at Redwood			Bridge at CAFL
(Dollars in Thousands)
Number of loans	355			1,154			1,131			2,268
Unpaid principal balance	$	536,344		$	3,227,172		$	1,116,582		$	541,677
Fair value of loans	$	505,171		$	3,046,277		$	1,109,337		$	542,152
Weighted average coupon	5.31		%	5.16		%	6.73		%	6.89		%
Weighted average remaining loan term (years)	14			6			2			1
Market value of loans pledged as collateral under short-term debt facilities	$	312,732		N/A			$	265,242		N/A
Market value of loans pledged as collateral under long-term debt facilities	$	180,482		N/A			$	779,467		N/A
Delinquency information
Number of loans with 90+ day delinquencies (1)	4			20			51			48
Unpaid principal balance of loans with 90+ day delinquencies	$	5,212		$	50,469		$	32,941		$	7,847
Fair value of loans with 90+ day delinquencies (2)	$	4,086		N/A			$	30,209		$	7,847
Number of loans in foreclosure (3)	4			7			53			3
Unpaid principal balance of loans in foreclosure	$	5,212		$	10,356		$	35,070		$	4,472
Fair value of loans in foreclosure (2)	$	4,086		N/A			$	32,338		$	4,472

December 31, 2021	SFR at Redwood			SFR at CAFL			Bridge at Redwood			Bridge at CAFL
(Dollars in Thousands)
Number of loans	245			1,173			1,134			1,640
Unpaid principal balance	$	348,232		$	3,340,949		$	670,392		$	274,617
Fair value of loans	$	358,309		$	3,488,074		$	666,364		$	278,242
Weighted average coupon	4.73		%	5.17		%	6.91		%	7.05		%
Weighted average remaining loan term (years)	12			6			1			1
Market value of loans pledged as collateral under short-term debt facilities	$	75,873		N/A			$	91,814		N/A
Market value of loans pledged as collateral under long-term debt facilities	$	244,703		N/A			$	554,597		N/A
Delinquency information
Number of loans with 90+ day delinquencies (1)	6			18			31			—
Unpaid principal balance of loans with 90+ day delinquencies	$	5,384		$	41,998		$	18,032		$	—
Fair value of loans with 90+ day delinquencies (2)	$	4,238		N/A			$	14,218		$	—
Number of loans in foreclosure (3)	7			9			28			—
Unpaid principal balance of loans in foreclosure	$	5,473		$	12,648		$	18,043		$	—
Fair value of loans in foreclosure (2)	$	4,305		N/A			$	14,257		$	—

Footnotes to Table 7.4

(1)The number of loans greater than 90 days delinquent includes loans in foreclosure.

(2)The fair value of the loans held by consolidated CAFL entities was based on the fair value of the ABS issued by these entities, including securities we own, which we determined were more readily observable, in accordance with accounting guidance for collateralized financing entities.

(3)May include loans that are less than 90 days delinquent.

Consolidated Agency Multifamily Loans

We invest in multifamily subordinate securities issued by a Freddie Mac K-Series securitization trust and consolidate the underlying multifamily loans owned by this entity for financial reporting purposes in accordance with GAAP. The following table summarizes the characteristics of our consolidated Agency multifamily loans at June 30, 2022 and December 31, 2021.

Table 8.1 – Characteristics of Consolidated Agency Multifamily Loans

(Dollars in Thousands)	June 30, 2022			December 31, 2021
Number of loans	28			28
Unpaid principal balance	$	451,197		$	455,168
Fair value of loans	$	443,114		$	473,514
Weighted average coupon	4.25		%	4.25		%
Weighted average remaining loan term (years)	3			4
Delinquency information
Number of loans with 90+ day delinquencies	—			—
Number of loans in foreclosure	—			—

The outstanding consolidated Agency multifamily loans held-for-investment at the consolidated Freddie Mac K-Series entity at June 30, 2022 were first-lien, fixed-rate loans that were originated in 2015. The following table provides the activity of multifamily loans held-for-investment during the three and six months ended June 30, 2022 and 2021.

Table 8.2 – Activity of Consolidated Agency Multifamily Loans Held-for-Investment

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Net market valuation gains (losses) recorded (1)	$	(6,748)	$	(2,528)	$	(26,429)	$	(3,258)

(1)Net market valuation gains (losses) on multifamily loans held-for-investment are recorded through Investment fair value changes, net on our consolidated statements of income (loss). For loans held at our consolidated Freddie Mac K-Series entity, market value changes are based on the estimated fair value of the associated ABS issued, including securities we own, pursuant to collateralized financing entity guidelines. The net impact to our income statement associated with our economic investment in these securitization entities is presented in Table 4.2.

XML

Business Purpose Loans

6 Months Ended

Jun. 30, 2022

Receivables [Abstract]

Business Purpose Loans

Residential Loans

We acquire residential loans from third-party originators and may sell or securitize these loans or hold them for investment. The following table summarizes the classifications and carrying values of the residential loans owned at Redwood and at consolidated Sequoia and Freddie Mac SLST entities at June 30, 2022 and December 31, 2021.

Table 6.1 – Classifications and Carrying Values of Residential Loans

June 30, 2022			Legacy				Freddie Mac
(In Thousands)	Redwood		Sequoia		Sequoia		SLST		Total
Held-for-sale at fair value	$	1,213,067	$	—	$	—	$	—	$	1,213,067
Held-for-investment at fair value	—		208,788		3,525,459		1,631,285		5,365,532
Total Residential Loans	$	1,213,067	$	208,788	$	3,525,459	$	1,631,285	$	6,578,599

December 31, 2021			Legacy				Freddie Mac
(In Thousands)	Redwood		Sequoia		Sequoia		SLST		Total
Held-for-sale at fair value	$	1,845,282	$	—	$	—	$	—	$	1,845,282
Held-for-investment at fair value	—		230,455		3,628,465		1,888,230		5,747,150
Total Residential Loans	$	1,845,282	$	230,455	$	3,628,465	$	1,888,230	$	7,592,432

At June 30, 2022, we owned mortgage servicing rights associated with $1.16 billion (principal balance) of residential loans owned at Redwood that were purchased from third-party originators. The value of these MSRs is included in the carrying value of the associated loans on our consolidated balance sheets. We contract with licensed sub-servicers that perform servicing functions for these loans.

Residential Loans Held-for-Sale

The following table summarizes the characteristics of residential loans held-for-sale at June 30, 2022 and December 31, 2021.

Table 6.2 – Characteristics of Residential Loans Held-for-Sale

(Dollars in Thousands)	June 30, 2022			December 31, 2021
Number of loans	1,469			2,196
Unpaid principal balance	$	1,238,469		$	1,813,865
Fair value of loans	$	1,213,067		$	1,845,282
Market value of loans pledged as collateral under short-term borrowing agreements	$	1,207,185		$	1,838,797
Weighted average coupon	4.47		%	3.27		%
Delinquency information
Number of loans with 90+ day delinquencies	1			3
Unpaid principal balance of loans with 90+ day delinquencies	$	211		$	2,923
Fair value of loans with 90+ day delinquencies	$	170		$	2,304
Number of loans in foreclosure	—			—

The following table provides the activity of residential loans held-for-sale during the three and six months ended June 30, 2022 and 2021.

Table 6.3 – Activity of Residential Loans Held-for-Sale

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Principal balance of loans acquired (1)	$	1,145,450	$	3,484,633	$	3,260,641	$	6,580,681
Principal balance of loans sold	1,238,327		3,324,919		3,065,691		5,600,751
Principal balance of loans transferred to HFI	—		—		687,192		—
Net market valuation gains (losses) recorded (2)	(32,527)		26,278		(63,978)		49,707

(1)For the three and six months ended June 30, 2022, includes zero and $102 million of loans acquired through calls of zero and three seasoned Sequoia securitizations, respectively.

(2)Net market valuation gains (losses) on residential loans held-for-sale are recorded primarily through Mortgage banking activities, net on our consolidated statements of income (loss).

Residential Loans Held-for-Investment at Fair Value

We invest in residential subordinate securities issued by Legacy Sequoia, Sequoia and Freddie Mac SLST securitization trusts and consolidate the underlying residential loans owned by these entities for financial reporting purposes in accordance with GAAP. The following tables summarize the characteristics of the residential loans owned at consolidated Sequoia and Freddie Mac SLST entities at June 30, 2022 and December 31, 2021.

Table 6.4 – Characteristics of Residential Loans Held-for-Investment

June 30, 2022	Legacy						Freddie Mac
(Dollars in Thousands)	Sequoia			Sequoia			SLST
Number of loans	1,447			4,738			11,285
Unpaid principal balance	$	234,213		$	3,988,148		$	1,796,594
Fair value of loans	$	208,788		$	3,525,459		$	1,631,285
Weighted average coupon	2.27		%	3.26		%	4.50		%
Delinquency information
Number of loans with 90+ day delinquencies (1)	29			14			1,370
Unpaid principal balance of loans with 90+ day delinquencies	$	5,107		$	12,008		$	236,941
Fair value of loans with 90+ day delinquencies (2)	N/A			N/A			N/A
Number of loans in foreclosure	11			5			257
Unpaid principal balance of loans in foreclosure	$	1,483		$	5,004		$	45,536

December 31, 2021	Legacy						Freddie Mac
(Dollars in Thousands)	Sequoia			Sequoia			SLST
Number of loans	1,583			4,300			11,986
Unpaid principal balance	$	264,057		$	3,605,469		$	1,932,241
Fair value of loans	$	230,455		$	3,628,465		$	1,888,230
Weighted average coupon	1.87		%	3.39		%	4.51		%
Delinquency information
Number of loans with 90+ day delinquencies (1)	32			18			1,208
Unpaid principal balance of loans with 90+ day delinquencies	$	7,482		$	15,124		$	212,961
Fair value of loans with 90+ day delinquencies (2)	N/A			N/A			N/A
Number of loans in foreclosure	10			2			241
Unpaid principal balance of loans in foreclosure	$	2,188		$	1,624		$	43,637

(1)For loans held at consolidated entities, the number of loans greater than 90 days delinquent includes loans in foreclosure.

(2)The fair value of the loans held by consolidated entities was based on the fair value of the ABS issued by these entities, including securities we own, which we determined were more readily observable, in accordance with accounting guidance for collateralized financing entities.

The following table provides the activity of residential loans held-for-investment at consolidated entities during the three and six months ended June 30, 2022 and 2021.

Table 6.5 – Activity of Residential Loans Held-for-Investment at Consolidated Entities

	Three Months Ended June 30, 2022				Three Months Ended June 30, 2021
	Legacy			Freddie Mac	Legacy			Freddie Mac
(In Thousands)	Sequoia	Sequoia		SLST	Sequoia	Sequoia		SLST
Fair value of loans transferred from HFS to HFI (1)	N/A	$	—	N/A	N/A	$	1,205,494	N/A
Net market valuation gains (losses) recorded (2)	779	(211,486)		(76,735)	4,863	(12,835)		22,579

	Six Months Ended June 30, 2022				Six Months Ended June 30, 2021
	Legacy			Freddie Mac	Legacy			Freddie Mac
(In Thousands)	Sequoia	Sequoia		SLST	Sequoia	Sequoia		SLST
Fair value of loans transferred from HFS to HFI (1)	N/A	$	684,491	N/A	N/A	$	1,205,494	N/A
Net market valuation gains (losses) recorded (2)	7,104	(482,217)		(120,503)	12,476	(15,413)		19,013

(1)Represents the transfer of loans from held-for-sale to held-for-investment associated with Sequoia securitizations.

(2)For loans held at our consolidated Legacy Sequoia, Sequoia, and Freddie Mac SLST entities, market value changes are based on the estimated fair value of the associated ABS issued, including securities we own, pursuant to collateralized financing entity guidelines, and are recorded in Investment fair value changes, net on our consolidated statements of income (loss). The net impact to our income statement associated with our economic investments in these securitization entities is presented in Table 4.2.

REO

See Note 12 for detail on residential loans transferred to REO during 2022.

Business Purpose Loans

We originate and invest in business purpose loans, including single-family rental ("SFR") loans and bridge loans. The following table summarizes the classifications and carrying values of the business purpose loans owned at Redwood and at consolidated CAFL entities at June 30, 2022 and December 31, 2021.

Table 7.1 – Classifications and Carrying Values of Business Purpose Loans

June 30, 2022	Single-Family Rental				Bridge
(In Thousands)	Redwood		CAFL		Redwood		CAFL		Total
Held-for-sale at fair value	$	505,171	—		$	—	$	—	$	505,171
Held-for-investment at fair value	—		3,046,277		1,109,337		542,152		4,697,766
Total Business Purpose Loans	$	505,171	$	3,046,277	$	1,109,337	$	542,152	$	5,202,937

December 31, 2021	Single-Family Rental				Bridge
(In Thousands)	Redwood		CAFL		Redwood		CAFL		Total
Held-for-sale at fair value	$	358,309	$	—	$	—	$	—	$	358,309
Held-for-investment at fair value	—		3,488,074		666,364		278,242		4,432,680
Total Business Purpose Loans	$	358,309	$	3,488,074	$	666,364	$	278,242	$	4,790,989

Nearly all of the outstanding single-family rental loans at June 30, 2022 were first-lien, fixed-rate loans with original maturities of five, seven, or ten years, with 3% having original maturities of 30 years. The outstanding bridge loans held-for-investment at June 30, 2022 were first-lien, interest-only loans with original maturities of six to 36 months and were comprised of 45% one-month LIBOR-indexed adjustable-rate loans, 39% one-month SOFR-indexed adjustable-rate loans, and 17% fixed-rate loans.

At June 30, 2022, we had a $835 million commitment to fund bridge loans. See Note 16 for additional information on this commitment.

The following table provides the activity of business purpose loans at Redwood during the three and six months ended June 30, 2022 and 2021.

Table 7.2 – Activity of Business Purpose Loans at Redwood

	Three Months Ended   June 30, 2022				Three Months Ended   June 30, 2021
(In Thousands)	SFR at Redwood		Bridge at Redwood		SFR at Redwood		Bridge at Redwood
Principal balance of loans originated	$	323,245	$	542,241	$	312,217	$	215,160
Principal balance of loans acquired	38,457		19,023		—		—
Principal balance of loans sold to third parties	—		—		—		354
Fair value of loans transferred (1)	295,037		306,313		297,301		—
Mortgage banking activities income (loss) recorded (2)	(40,034)		(1,136)		25,222		978
Investment fair value changes recorded (3)	—		(5,455)		—		(62)

	Six Months Ended   June 30, 2022				Six Months Ended   June 30, 2021
(In Thousands)	SFR at Redwood		Bridge at Redwood		SFR at Redwood		Bridge at Redwood
Principal balance of loans originated	$	765,972	$	954,179	$	565,315	$	348,389
Principal balance of loans acquired	100,349		22,006		—		—
Principal balance of loans sold to third parties	331,502		—		—		9,231
Fair value of loans transferred (1)	295,037		388,604		466,705		N/A
Mortgage banking activities income (loss) recorded (2)	(64,502)		1,239		35,470		1,520
Investment fair value changes recorded (3)	—		(6,214)		—		3,242

(1)For SFR at Redwood, represents the transfer of loans from held-for-sale to held-for-investment associated with CAFL SFR securitizations. For Bridge at Redwood, represents the transfer of bridge loans from "Bridge at Redwood" to "Bridge at CAFL" resulting from their securitization.

(2)Represents net market valuation changes from the time a loan is originated to when it is sold or transferred to our investment portfolio. Additionally, for the three and six months ended June 30, 2022, we recorded loan origination fee income of $12 million and $27 million, respectively, through Mortgage banking activities, net on our consolidated statements of income (loss).

(3)Represents net market valuation changes for loans classified as held-for-investment and associated interest-only strip liabilities.

Business Purpose Loans Held-for-Investment at CAFL

    We invest in securities issued by CAFL securitizations sponsored by CoreVest and consolidate the underlying single-family rental loans and bridge loans owned by these entities. The following table provides the activity of business purpose loans held-for-investment at CAFL during the three and six months ended June 30, 2022 and 2021.

Table 7.3 – Activity of Business Purpose Loans Held-for-Investment at CAFL

	Three Months Ended   June 30, 2022				Three Months Ended   June 30, 2021
(In Thousands)	SFR at CAFL		Bridge at CAFL		SFR at CAFL		Bridge at CAFL
Net market valuation gains (losses) recorded (1)	$	(118,299)	$	(281)	$	(1,230)	$	—

	Six Months Ended   June 30, 2022				Six Months Ended   June 30, 2021
(In Thousands)	SFR at CAFL		Bridge at CAFL		SFR at CAFL		Bridge at CAFL
Net market valuation gains (losses) recorded (1)	$	(310,202)	$	(1,856)	$	(62,132)	$	—

(1)For loans held at our consolidated CAFL entities, market value changes are based on the estimated fair value of the associated ABS issued, including securities we own, pursuant to collateralized financing entity guidelines, and are recorded through Investment fair value changes, net on our consolidated statements of income (loss). The net impact to our income statement associated with our economic investments in these securitization entities is presented in Table 4.2.

REO

See Note 12 for detail on BPL loans transferred to REO during 2022.

Business Purpose Loan Characteristics

The following tables summarize the characteristics of the business purpose loans owned at Redwood and at consolidated CAFL entities at June 30, 2022 and December 31, 2021.

Table 7.4 – Characteristics of Business Purpose Loans

June 30, 2022	SFR at Redwood			SFR at CAFL			Bridge at Redwood			Bridge at CAFL
(Dollars in Thousands)
Number of loans	355			1,154			1,131			2,268
Unpaid principal balance	$	536,344		$	3,227,172		$	1,116,582		$	541,677
Fair value of loans	$	505,171		$	3,046,277		$	1,109,337		$	542,152
Weighted average coupon	5.31		%	5.16		%	6.73		%	6.89		%
Weighted average remaining loan term (years)	14			6			2			1
Market value of loans pledged as collateral under short-term debt facilities	$	312,732		N/A			$	265,242		N/A
Market value of loans pledged as collateral under long-term debt facilities	$	180,482		N/A			$	779,467		N/A
Delinquency information
Number of loans with 90+ day delinquencies (1)	4			20			51			48
Unpaid principal balance of loans with 90+ day delinquencies	$	5,212		$	50,469		$	32,941		$	7,847
Fair value of loans with 90+ day delinquencies (2)	$	4,086		N/A			$	30,209		$	7,847
Number of loans in foreclosure (3)	4			7			53			3
Unpaid principal balance of loans in foreclosure	$	5,212		$	10,356		$	35,070		$	4,472
Fair value of loans in foreclosure (2)	$	4,086		N/A			$	32,338		$	4,472

December 31, 2021	SFR at Redwood			SFR at CAFL			Bridge at Redwood			Bridge at CAFL
(Dollars in Thousands)
Number of loans	245			1,173			1,134			1,640
Unpaid principal balance	$	348,232		$	3,340,949		$	670,392		$	274,617
Fair value of loans	$	358,309		$	3,488,074		$	666,364		$	278,242
Weighted average coupon	4.73		%	5.17		%	6.91		%	7.05		%
Weighted average remaining loan term (years)	12			6			1			1
Market value of loans pledged as collateral under short-term debt facilities	$	75,873		N/A			$	91,814		N/A
Market value of loans pledged as collateral under long-term debt facilities	$	244,703		N/A			$	554,597		N/A
Delinquency information
Number of loans with 90+ day delinquencies (1)	6			18			31			—
Unpaid principal balance of loans with 90+ day delinquencies	$	5,384		$	41,998		$	18,032		$	—
Fair value of loans with 90+ day delinquencies (2)	$	4,238		N/A			$	14,218		$	—
Number of loans in foreclosure (3)	7			9			28			—
Unpaid principal balance of loans in foreclosure	$	5,473		$	12,648		$	18,043		$	—
Fair value of loans in foreclosure (2)	$	4,305		N/A			$	14,257		$	—

Footnotes to Table 7.4

(1)The number of loans greater than 90 days delinquent includes loans in foreclosure.

(2)The fair value of the loans held by consolidated CAFL entities was based on the fair value of the ABS issued by these entities, including securities we own, which we determined were more readily observable, in accordance with accounting guidance for collateralized financing entities.

(3)May include loans that are less than 90 days delinquent.

Consolidated Agency Multifamily Loans

We invest in multifamily subordinate securities issued by a Freddie Mac K-Series securitization trust and consolidate the underlying multifamily loans owned by this entity for financial reporting purposes in accordance with GAAP. The following table summarizes the characteristics of our consolidated Agency multifamily loans at June 30, 2022 and December 31, 2021.

Table 8.1 – Characteristics of Consolidated Agency Multifamily Loans

(Dollars in Thousands)	June 30, 2022			December 31, 2021
Number of loans	28			28
Unpaid principal balance	$	451,197		$	455,168
Fair value of loans	$	443,114		$	473,514
Weighted average coupon	4.25		%	4.25		%
Weighted average remaining loan term (years)	3			4
Delinquency information
Number of loans with 90+ day delinquencies	—			—
Number of loans in foreclosure	—			—

The outstanding consolidated Agency multifamily loans held-for-investment at the consolidated Freddie Mac K-Series entity at June 30, 2022 were first-lien, fixed-rate loans that were originated in 2015. The following table provides the activity of multifamily loans held-for-investment during the three and six months ended June 30, 2022 and 2021.

Table 8.2 – Activity of Consolidated Agency Multifamily Loans Held-for-Investment

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Net market valuation gains (losses) recorded (1)	$	(6,748)	$	(2,528)	$	(26,429)	$	(3,258)

(1)Net market valuation gains (losses) on multifamily loans held-for-investment are recorded through Investment fair value changes, net on our consolidated statements of income (loss). For loans held at our consolidated Freddie Mac K-Series entity, market value changes are based on the estimated fair value of the associated ABS issued, including securities we own, pursuant to collateralized financing entity guidelines. The net impact to our income statement associated with our economic investment in these securitization entities is presented in Table 4.2.

XML

Consolidated Agency Multifamily Loans

6 Months Ended

Jun. 30, 2022

Receivables [Abstract]

Consolidated Agency Multifamily Loans

Residential Loans

We acquire residential loans from third-party originators and may sell or securitize these loans or hold them for investment. The following table summarizes the classifications and carrying values of the residential loans owned at Redwood and at consolidated Sequoia and Freddie Mac SLST entities at June 30, 2022 and December 31, 2021.

Table 6.1 – Classifications and Carrying Values of Residential Loans

June 30, 2022			Legacy				Freddie Mac
(In Thousands)	Redwood		Sequoia		Sequoia		SLST		Total
Held-for-sale at fair value	$	1,213,067	$	—	$	—	$	—	$	1,213,067
Held-for-investment at fair value	—		208,788		3,525,459		1,631,285		5,365,532
Total Residential Loans	$	1,213,067	$	208,788	$	3,525,459	$	1,631,285	$	6,578,599

December 31, 2021			Legacy				Freddie Mac
(In Thousands)	Redwood		Sequoia		Sequoia		SLST		Total
Held-for-sale at fair value	$	1,845,282	$	—	$	—	$	—	$	1,845,282
Held-for-investment at fair value	—		230,455		3,628,465		1,888,230		5,747,150
Total Residential Loans	$	1,845,282	$	230,455	$	3,628,465	$	1,888,230	$	7,592,432

At June 30, 2022, we owned mortgage servicing rights associated with $1.16 billion (principal balance) of residential loans owned at Redwood that were purchased from third-party originators. The value of these MSRs is included in the carrying value of the associated loans on our consolidated balance sheets. We contract with licensed sub-servicers that perform servicing functions for these loans.

Residential Loans Held-for-Sale

The following table summarizes the characteristics of residential loans held-for-sale at June 30, 2022 and December 31, 2021.

Table 6.2 – Characteristics of Residential Loans Held-for-Sale

(Dollars in Thousands)	June 30, 2022			December 31, 2021
Number of loans	1,469			2,196
Unpaid principal balance	$	1,238,469		$	1,813,865
Fair value of loans	$	1,213,067		$	1,845,282
Market value of loans pledged as collateral under short-term borrowing agreements	$	1,207,185		$	1,838,797
Weighted average coupon	4.47		%	3.27		%
Delinquency information
Number of loans with 90+ day delinquencies	1			3
Unpaid principal balance of loans with 90+ day delinquencies	$	211		$	2,923
Fair value of loans with 90+ day delinquencies	$	170		$	2,304
Number of loans in foreclosure	—			—

The following table provides the activity of residential loans held-for-sale during the three and six months ended June 30, 2022 and 2021.

Table 6.3 – Activity of Residential Loans Held-for-Sale

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Principal balance of loans acquired (1)	$	1,145,450	$	3,484,633	$	3,260,641	$	6,580,681
Principal balance of loans sold	1,238,327		3,324,919		3,065,691		5,600,751
Principal balance of loans transferred to HFI	—		—		687,192		—
Net market valuation gains (losses) recorded (2)	(32,527)		26,278		(63,978)		49,707

(1)For the three and six months ended June 30, 2022, includes zero and $102 million of loans acquired through calls of zero and three seasoned Sequoia securitizations, respectively.

(2)Net market valuation gains (losses) on residential loans held-for-sale are recorded primarily through Mortgage banking activities, net on our consolidated statements of income (loss).

Residential Loans Held-for-Investment at Fair Value

We invest in residential subordinate securities issued by Legacy Sequoia, Sequoia and Freddie Mac SLST securitization trusts and consolidate the underlying residential loans owned by these entities for financial reporting purposes in accordance with GAAP. The following tables summarize the characteristics of the residential loans owned at consolidated Sequoia and Freddie Mac SLST entities at June 30, 2022 and December 31, 2021.

Table 6.4 – Characteristics of Residential Loans Held-for-Investment

June 30, 2022	Legacy						Freddie Mac
(Dollars in Thousands)	Sequoia			Sequoia			SLST
Number of loans	1,447			4,738			11,285
Unpaid principal balance	$	234,213		$	3,988,148		$	1,796,594
Fair value of loans	$	208,788		$	3,525,459		$	1,631,285
Weighted average coupon	2.27		%	3.26		%	4.50		%
Delinquency information
Number of loans with 90+ day delinquencies (1)	29			14			1,370
Unpaid principal balance of loans with 90+ day delinquencies	$	5,107		$	12,008		$	236,941
Fair value of loans with 90+ day delinquencies (2)	N/A			N/A			N/A
Number of loans in foreclosure	11			5			257
Unpaid principal balance of loans in foreclosure	$	1,483		$	5,004		$	45,536

December 31, 2021	Legacy						Freddie Mac
(Dollars in Thousands)	Sequoia			Sequoia			SLST
Number of loans	1,583			4,300			11,986
Unpaid principal balance	$	264,057		$	3,605,469		$	1,932,241
Fair value of loans	$	230,455		$	3,628,465		$	1,888,230
Weighted average coupon	1.87		%	3.39		%	4.51		%
Delinquency information
Number of loans with 90+ day delinquencies (1)	32			18			1,208
Unpaid principal balance of loans with 90+ day delinquencies	$	7,482		$	15,124		$	212,961
Fair value of loans with 90+ day delinquencies (2)	N/A			N/A			N/A
Number of loans in foreclosure	10			2			241
Unpaid principal balance of loans in foreclosure	$	2,188		$	1,624		$	43,637

(1)For loans held at consolidated entities, the number of loans greater than 90 days delinquent includes loans in foreclosure.

(2)The fair value of the loans held by consolidated entities was based on the fair value of the ABS issued by these entities, including securities we own, which we determined were more readily observable, in accordance with accounting guidance for collateralized financing entities.

The following table provides the activity of residential loans held-for-investment at consolidated entities during the three and six months ended June 30, 2022 and 2021.

Table 6.5 – Activity of Residential Loans Held-for-Investment at Consolidated Entities

	Three Months Ended June 30, 2022				Three Months Ended June 30, 2021
	Legacy			Freddie Mac	Legacy			Freddie Mac
(In Thousands)	Sequoia	Sequoia		SLST	Sequoia	Sequoia		SLST
Fair value of loans transferred from HFS to HFI (1)	N/A	$	—	N/A	N/A	$	1,205,494	N/A
Net market valuation gains (losses) recorded (2)	779	(211,486)		(76,735)	4,863	(12,835)		22,579

	Six Months Ended June 30, 2022				Six Months Ended June 30, 2021
	Legacy			Freddie Mac	Legacy			Freddie Mac
(In Thousands)	Sequoia	Sequoia		SLST	Sequoia	Sequoia		SLST
Fair value of loans transferred from HFS to HFI (1)	N/A	$	684,491	N/A	N/A	$	1,205,494	N/A
Net market valuation gains (losses) recorded (2)	7,104	(482,217)		(120,503)	12,476	(15,413)		19,013

(1)Represents the transfer of loans from held-for-sale to held-for-investment associated with Sequoia securitizations.

(2)For loans held at our consolidated Legacy Sequoia, Sequoia, and Freddie Mac SLST entities, market value changes are based on the estimated fair value of the associated ABS issued, including securities we own, pursuant to collateralized financing entity guidelines, and are recorded in Investment fair value changes, net on our consolidated statements of income (loss). The net impact to our income statement associated with our economic investments in these securitization entities is presented in Table 4.2.

REO

See Note 12 for detail on residential loans transferred to REO during 2022.

Business Purpose Loans

We originate and invest in business purpose loans, including single-family rental ("SFR") loans and bridge loans. The following table summarizes the classifications and carrying values of the business purpose loans owned at Redwood and at consolidated CAFL entities at June 30, 2022 and December 31, 2021.

Table 7.1 – Classifications and Carrying Values of Business Purpose Loans

June 30, 2022	Single-Family Rental				Bridge
(In Thousands)	Redwood		CAFL		Redwood		CAFL		Total
Held-for-sale at fair value	$	505,171	—		$	—	$	—	$	505,171
Held-for-investment at fair value	—		3,046,277		1,109,337		542,152		4,697,766
Total Business Purpose Loans	$	505,171	$	3,046,277	$	1,109,337	$	542,152	$	5,202,937

December 31, 2021	Single-Family Rental				Bridge
(In Thousands)	Redwood		CAFL		Redwood		CAFL		Total
Held-for-sale at fair value	$	358,309	$	—	$	—	$	—	$	358,309
Held-for-investment at fair value	—		3,488,074		666,364		278,242		4,432,680
Total Business Purpose Loans	$	358,309	$	3,488,074	$	666,364	$	278,242	$	4,790,989

Nearly all of the outstanding single-family rental loans at June 30, 2022 were first-lien, fixed-rate loans with original maturities of five, seven, or ten years, with 3% having original maturities of 30 years. The outstanding bridge loans held-for-investment at June 30, 2022 were first-lien, interest-only loans with original maturities of six to 36 months and were comprised of 45% one-month LIBOR-indexed adjustable-rate loans, 39% one-month SOFR-indexed adjustable-rate loans, and 17% fixed-rate loans.

At June 30, 2022, we had a $835 million commitment to fund bridge loans. See Note 16 for additional information on this commitment.

The following table provides the activity of business purpose loans at Redwood during the three and six months ended June 30, 2022 and 2021.

Table 7.2 – Activity of Business Purpose Loans at Redwood

	Three Months Ended   June 30, 2022				Three Months Ended   June 30, 2021
(In Thousands)	SFR at Redwood		Bridge at Redwood		SFR at Redwood		Bridge at Redwood
Principal balance of loans originated	$	323,245	$	542,241	$	312,217	$	215,160
Principal balance of loans acquired	38,457		19,023		—		—
Principal balance of loans sold to third parties	—		—		—		354
Fair value of loans transferred (1)	295,037		306,313		297,301		—
Mortgage banking activities income (loss) recorded (2)	(40,034)		(1,136)		25,222		978
Investment fair value changes recorded (3)	—		(5,455)		—		(62)

	Six Months Ended   June 30, 2022				Six Months Ended   June 30, 2021
(In Thousands)	SFR at Redwood		Bridge at Redwood		SFR at Redwood		Bridge at Redwood
Principal balance of loans originated	$	765,972	$	954,179	$	565,315	$	348,389
Principal balance of loans acquired	100,349		22,006		—		—
Principal balance of loans sold to third parties	331,502		—		—		9,231
Fair value of loans transferred (1)	295,037		388,604		466,705		N/A
Mortgage banking activities income (loss) recorded (2)	(64,502)		1,239		35,470		1,520
Investment fair value changes recorded (3)	—		(6,214)		—		3,242

(1)For SFR at Redwood, represents the transfer of loans from held-for-sale to held-for-investment associated with CAFL SFR securitizations. For Bridge at Redwood, represents the transfer of bridge loans from "Bridge at Redwood" to "Bridge at CAFL" resulting from their securitization.

(2)Represents net market valuation changes from the time a loan is originated to when it is sold or transferred to our investment portfolio. Additionally, for the three and six months ended June 30, 2022, we recorded loan origination fee income of $12 million and $27 million, respectively, through Mortgage banking activities, net on our consolidated statements of income (loss).

(3)Represents net market valuation changes for loans classified as held-for-investment and associated interest-only strip liabilities.

Business Purpose Loans Held-for-Investment at CAFL

    We invest in securities issued by CAFL securitizations sponsored by CoreVest and consolidate the underlying single-family rental loans and bridge loans owned by these entities. The following table provides the activity of business purpose loans held-for-investment at CAFL during the three and six months ended June 30, 2022 and 2021.

Table 7.3 – Activity of Business Purpose Loans Held-for-Investment at CAFL

	Three Months Ended   June 30, 2022				Three Months Ended   June 30, 2021
(In Thousands)	SFR at CAFL		Bridge at CAFL		SFR at CAFL		Bridge at CAFL
Net market valuation gains (losses) recorded (1)	$	(118,299)	$	(281)	$	(1,230)	$	—

	Six Months Ended   June 30, 2022				Six Months Ended   June 30, 2021
(In Thousands)	SFR at CAFL		Bridge at CAFL		SFR at CAFL		Bridge at CAFL
Net market valuation gains (losses) recorded (1)	$	(310,202)	$	(1,856)	$	(62,132)	$	—

(1)For loans held at our consolidated CAFL entities, market value changes are based on the estimated fair value of the associated ABS issued, including securities we own, pursuant to collateralized financing entity guidelines, and are recorded through Investment fair value changes, net on our consolidated statements of income (loss). The net impact to our income statement associated with our economic investments in these securitization entities is presented in Table 4.2.

REO

See Note 12 for detail on BPL loans transferred to REO during 2022.

Business Purpose Loan Characteristics

The following tables summarize the characteristics of the business purpose loans owned at Redwood and at consolidated CAFL entities at June 30, 2022 and December 31, 2021.

Table 7.4 – Characteristics of Business Purpose Loans

June 30, 2022	SFR at Redwood			SFR at CAFL			Bridge at Redwood			Bridge at CAFL
(Dollars in Thousands)
Number of loans	355			1,154			1,131			2,268
Unpaid principal balance	$	536,344		$	3,227,172		$	1,116,582		$	541,677
Fair value of loans	$	505,171		$	3,046,277		$	1,109,337		$	542,152
Weighted average coupon	5.31		%	5.16		%	6.73		%	6.89		%
Weighted average remaining loan term (years)	14			6			2			1
Market value of loans pledged as collateral under short-term debt facilities	$	312,732		N/A			$	265,242		N/A
Market value of loans pledged as collateral under long-term debt facilities	$	180,482		N/A			$	779,467		N/A
Delinquency information
Number of loans with 90+ day delinquencies (1)	4			20			51			48
Unpaid principal balance of loans with 90+ day delinquencies	$	5,212		$	50,469		$	32,941		$	7,847
Fair value of loans with 90+ day delinquencies (2)	$	4,086		N/A			$	30,209		$	7,847
Number of loans in foreclosure (3)	4			7			53			3
Unpaid principal balance of loans in foreclosure	$	5,212		$	10,356		$	35,070		$	4,472
Fair value of loans in foreclosure (2)	$	4,086		N/A			$	32,338		$	4,472

December 31, 2021	SFR at Redwood			SFR at CAFL			Bridge at Redwood			Bridge at CAFL
(Dollars in Thousands)
Number of loans	245			1,173			1,134			1,640
Unpaid principal balance	$	348,232		$	3,340,949		$	670,392		$	274,617
Fair value of loans	$	358,309		$	3,488,074		$	666,364		$	278,242
Weighted average coupon	4.73		%	5.17		%	6.91		%	7.05		%
Weighted average remaining loan term (years)	12			6			1			1
Market value of loans pledged as collateral under short-term debt facilities	$	75,873		N/A			$	91,814		N/A
Market value of loans pledged as collateral under long-term debt facilities	$	244,703		N/A			$	554,597		N/A
Delinquency information
Number of loans with 90+ day delinquencies (1)	6			18			31			—
Unpaid principal balance of loans with 90+ day delinquencies	$	5,384		$	41,998		$	18,032		$	—
Fair value of loans with 90+ day delinquencies (2)	$	4,238		N/A			$	14,218		$	—
Number of loans in foreclosure (3)	7			9			28			—
Unpaid principal balance of loans in foreclosure	$	5,473		$	12,648		$	18,043		$	—
Fair value of loans in foreclosure (2)	$	4,305		N/A			$	14,257		$	—

Footnotes to Table 7.4

(1)The number of loans greater than 90 days delinquent includes loans in foreclosure.

(2)The fair value of the loans held by consolidated CAFL entities was based on the fair value of the ABS issued by these entities, including securities we own, which we determined were more readily observable, in accordance with accounting guidance for collateralized financing entities.

(3)May include loans that are less than 90 days delinquent.

Consolidated Agency Multifamily Loans

We invest in multifamily subordinate securities issued by a Freddie Mac K-Series securitization trust and consolidate the underlying multifamily loans owned by this entity for financial reporting purposes in accordance with GAAP. The following table summarizes the characteristics of our consolidated Agency multifamily loans at June 30, 2022 and December 31, 2021.

Table 8.1 – Characteristics of Consolidated Agency Multifamily Loans

(Dollars in Thousands)	June 30, 2022			December 31, 2021
Number of loans	28			28
Unpaid principal balance	$	451,197		$	455,168
Fair value of loans	$	443,114		$	473,514
Weighted average coupon	4.25		%	4.25		%
Weighted average remaining loan term (years)	3			4
Delinquency information
Number of loans with 90+ day delinquencies	—			—
Number of loans in foreclosure	—			—

The outstanding consolidated Agency multifamily loans held-for-investment at the consolidated Freddie Mac K-Series entity at June 30, 2022 were first-lien, fixed-rate loans that were originated in 2015. The following table provides the activity of multifamily loans held-for-investment during the three and six months ended June 30, 2022 and 2021.

Table 8.2 – Activity of Consolidated Agency Multifamily Loans Held-for-Investment

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Net market valuation gains (losses) recorded (1)	$	(6,748)	$	(2,528)	$	(26,429)	$	(3,258)

(1)Net market valuation gains (losses) on multifamily loans held-for-investment are recorded through Investment fair value changes, net on our consolidated statements of income (loss). For loans held at our consolidated Freddie Mac K-Series entity, market value changes are based on the estimated fair value of the associated ABS issued, including securities we own, pursuant to collateralized financing entity guidelines. The net impact to our income statement associated with our economic investment in these securitization entities is presented in Table 4.2.

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Real Estate Securities

6 Months Ended

Jun. 30, 2022

Investments, Debt and Equity Securities [Abstract]

Real Estate Securities

Real Estate Securities

We invest in real estate securities that we create and retain from our Sequoia securitizations or acquire from third parties. The following table presents the fair values of our real estate securities by type at June 30, 2022 and December 31, 2021.

Table 9.1 – Fair Values of Real Estate Securities by Type

(In Thousands)	June 30, 2022		December 31, 2021
Trading	$	133,780	$	170,619
Available-for-sale	150,498		206,792
Total Real Estate Securities	$	284,278	$	377,411

Our real estate securities include mortgage-backed securities, which are presented in accordance with their general position within a securitization structure based on their rights to cash flows. Senior securities are those interests in a securitization that generally have the first right to cash flows and are last in line to absorb losses. Mezzanine securities are interests that are generally subordinate to senior securities in their rights to receive cash flows, and have subordinate securities below them that are first to absorb losses. Subordinate securities are all interests below mezzanine. Exclusive of our re-performing loan securities, nearly all of our residential securities are supported by collateral that was designated as prime at the time of issuance.

Trading Securities

We elected the fair value option for certain securities and classify them as trading securities. Our trading securities include both residential and multifamily mortgage-backed securities, and our residential securities also include securities backed by re-performing loans ("RPL"). The following table presents the fair value of trading securities by position and collateral type at June 30, 2022 and December 31, 2021.

Table 9.2 – Fair Value of Trading Securities by Position

(In Thousands)	June 30, 2022		December 31, 2021
Senior
Interest-only securities (1)	$	31,498	$	21,787
Total Senior	31,498		21,787
Subordinate
RPL securities	46,607		65,140
Multifamily securities	7,960		10,549
Other third-party residential securities	47,715		73,143
Total Subordinate	102,282		148,832
Total Trading Securities	$	133,780	$	170,619

(1)Includes $24 million and $15 million of Sequoia certificated mortgage servicing rights at June 30, 2022 and December 31, 2021, respectively.

The following table presents the unpaid principal balance of trading securities by position and collateral type at June 30, 2022 and December 31, 2021.

Table 9.3 – Unpaid Principal Balance of Trading Securities by Position

(In Thousands)	June 30, 2022		December 31, 2021
Senior (1)	$	—	$	—
Subordinate	221,473		235,306
Total Trading Securities	$	221,473	$	235,306

(1)Our senior trading securities include interest-only securities, for which there is no principal balance.

The following table provides the activity of trading securities during the three and six months ended June 30, 2022 and 2021.

Table 9.4 – Trading Securities Activity

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Principal balance of securities acquired (1)	$	—	$	1,750	$	—	$	17,630
Principal balance of securities sold (1)	12,716		18,068		12,716		52,811
Net market valuation gains (losses) recorded (2)	(16,042)		1,798		(17,498)		23,147

(1)For the three and six months ended June 30, 2022 and 2021, excludes zero and $2 million of securities bought and sold during the same quarter, respectively.

(2)Net market valuation gains (losses) on trading securities are recorded through Investment fair value changes, net and Mortgage banking activities, net on our consolidated statements of income.

AFS Securities

The following table presents the fair value of our available-for-sale securities by position and collateral type at June 30, 2022 and December 31, 2021.

Table 9.5 – Fair Value of Available-for-Sale Securities by Position

(In Thousands)	June 30, 2022		December 31, 2021
Subordinate
Sequoia securities	$	85,269	$	127,542
Multifamily securities	13,169		22,166
Other third-party residential securities	52,060		57,084
Total Subordinate	150,498		206,792
Total AFS Securities	$	150,498	$	206,792

The following table provides the activity of available-for-sale securities during the three and six months ended June 30, 2022 and 2021.

Table 9.6 – Available-for-Sale Securities Activity

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Fair value of securities acquired	$	—	$	522	$	10,000	$	1,600
Fair value of securities sold	—		2,585		—		4,785
Principal balance of securities called	—		1,307		14,486		1,507
Net unrealized (losses) gains on AFS securities (1)	(33,409)		11,224		(51,282)		22,210

(1)Net unrealized (losses) gains on AFS securities are recorded on our consolidated balance sheets through Accumulated other comprehensive loss.

We often purchase AFS securities at a discount to their outstanding principal balances. To the extent we purchase an AFS security that has a likelihood of incurring a loss, we do not amortize into income the portion of the purchase discount that we do not expect to collect due to the inherent credit risk of the security. We may also expense a portion of our investment in the security to the extent we believe that principal losses will exceed the purchase discount. We designate any amount of unpaid principal balance that we do not expect to receive and thus do not expect to earn or recover as a credit reserve on the security. Any remaining net unamortized discounts or premiums on the security are amortized into income over time using the effective yield method.

At June 30, 2022, we had $10 million of AFS securities with contractual maturities less than five years, $1 million with contractual maturities greater than five years but less than ten years, and the remainder of our AFS securities had contractual maturities greater than ten years.

The following table presents the components of carrying value (which equals fair value) of AFS securities at June 30, 2022 and December 31, 2021.

Table 9.7 – Carrying Value of AFS Securities

June 30, 2022
(In Thousands)	Total
Principal balance	$	227,911
Credit reserve	(30,619)
Unamortized discount, net	(61,303)
Amortized cost	135,989
Gross unrealized gains	25,930
Gross unrealized losses	(9,650)
CECL allowance	(1,771)
Carrying Value	$	150,498

December 31, 2021
(In Thousands)	Total
Principal balance	$	242,852
Credit reserve	(27,555)
Unamortized discount, net	(76,023)
Amortized cost	139,274
Gross unrealized gains	67,815
Gross unrealized losses	(297)
CECL allowance	—
Carrying Value	$	206,792

The following table presents the changes for the three and six months ended June 30, 2022, in unamortized discount and designated credit reserves on residential AFS securities.

Table 9.8 – Changes in Unamortized Discount and Designated Credit Reserves on AFS Securities

	Three Months Ended   June 30, 2022				Six Months Ended   June 30, 2022
	Credit Reserve		Unamortized Discount, Net		Credit Reserve		Unamortized Discount, Net
(In Thousands)
Beginning balance	$	29,901	$	63,206	$	27,555	$	76,023
Amortization of net discount	—		(1,347)		—		(9,817)
Realized credit recoveries (losses), net	162		—		74		—
Acquisitions	—		—		—		—
Sales, calls, other	—		—		(343)		(1,570)
Transfers to (release of) credit reserves, net	556		(556)		3,333		(3,333)
Ending Balance	$	30,619	$	61,303	$	30,619	$	61,303

AFS Securities with Unrealized Losses

The following table presents the total carrying value (fair value) and unrealized losses of residential AFS securities that were in a gross unrealized loss position at June 30, 2022 and December 31, 2021.

Table 9.9 – AFS Securities in Gross Unrealized Loss Position by Holding Periods

	Less Than 12 Consecutive Months				12 Consecutive Months or Longer
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
(In Thousands)
June 30, 2022	$	46,369	$	(9,456)	$	1,406	$	(194)
December 31, 2021	6,827		(251)		1,554		(46)

At June 30, 2022, after giving effect to purchases, sales, and extinguishment due to credit losses, our consolidated balance sheet included 82 AFS securities, of which 21 were in an unrealized loss position and one was in a continuous unrealized loss position for 12 consecutive months or longer. At December 31, 2021, our consolidated balance sheet included 85 AFS securities, of which four were in an unrealized loss position and one was in a continuous unrealized loss position for 12 consecutive months or longer.

Evaluating AFS Securities for Credit Losses

Gross unrealized losses on our AFS securities were $10 million at June 30, 2022. We evaluate all securities in an unrealized loss position to determine if the impairment is credit-related (resulting in an allowance for credit losses recorded in earnings) or non-credit-related (resulting in an unrealized loss through other comprehensive income). At June 30, 2022, we did not intend to sell any of our AFS securities that were in an unrealized loss position, and it is more likely than not that we will not be required to sell these securities before recovery of their amortized cost basis, which may be at their maturity. We review our AFS securities that are in an unrealized loss position to identify those securities with losses based on an assessment of changes in expected cash flows for such securities, which considers recent security performance and expected future performance of the underlying collateral.

At June 30, 2022, our current expected credit loss ("CECL") allowance related to our AFS securities was $1.8 million. AFS securities for which an allowance is recognized have experienced, or are expected to experience, adverse cash flow changes. In determining our estimate of cash flows for AFS securities we may consider factors such as structural credit enhancement, past and expected future performance of underlying mortgage loans, including timing of expected future cash flows, which are informed by prepayment rates, default rates, loss severities, delinquency rates, percentage of non-performing loans, FICO scores at loan origination, year of origination, loan-to-value ratios, and geographic concentrations, as well as general market assessments. Changes in our evaluation of these factors impacted the cash flows expected to be collected at the assessment date and were used to determine if there were credit-related adverse cash flows and if so, the amount of credit related losses. Significant judgment is used in both our analysis of the expected cash flows for our AFS securities and any determination of security credit losses.

The table below summarizes the weighted average of the significant credit quality indicators we used for the credit loss allowance on our AFS securities at June 30, 2022.

Table 9.10 – Significant Credit Quality Indicators

June 30, 2022	Subordinate Securities
Default rate	0.8%
Loss severity	20%

The following table details the activity related to the allowance for credit losses for AFS securities for the three and six months ended June 30, 2022.

Table 9.11 – Rollforward of Allowance for Credit Losses

	Three Months Ended June 30, 2022		Six Months Ended June 30, 2022
(In Thousands)
Beginning balance allowance for credit losses	$	705	$	—
Additions to allowance for credit losses on securities for which credit losses were not previously recorded	785		1,490
Additional increases (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period	281		281
Allowance on purchased financial assets with credit deterioration	—		—
Reduction to allowance for securities sold during the period	—		—
Reduction to allowance for securities we intend to sell or more likely than not will be required to sell	—		—
Write-offs charged against allowance	—		—
Recoveries of amounts previously written off	—		—
Ending balance of allowance for credit losses	$	1,771	$	1,771

Gains and losses from the sale of AFS securities are recorded as Realized gains, net, in our consolidated statements of income. The following table presents the gross realized gains and losses on sales and calls of AFS securities for the three and six months ended June 30, 2022 and 2021.

Table 9.12 – Gross Realized Gains and Losses on AFS Securities

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Gross realized gains - sales	$	—	$	1,307	$	—	$	1,507
Gross realized gains - calls	—		6,687		1,914		9,095
Gross realized losses - sales	—		—		—		—
Total Realized Gains on Sales and Calls of AFS Securities, net	$	—	$	7,994	$	1,914	$	10,602

During the six months ended June 30, 2022, we called three of our unconsolidated Sequoia entities, and purchased $102 million (unpaid principal balance) of loans from the securitization trusts. In association with these calls, we realized a $0.3 million gain on the securities we owned from these securitizations. The remaining realized gains were from third-party securities we owned that were called during the six months ended June 30, 2022.

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Other Investments

6 Months Ended

Jun. 30, 2022

Investments, All Other Investments [Abstract]

Other Investments

Other Investments

Other investments at June 30, 2022 and December 31, 2021 are summarized in the following table.

Table 10.1 – Components of Other Investments

(In Thousands)	June 30, 2022		December 31, 2021
HEIs	$	276,366	$	192,740
Servicer advance investments	273,210		350,923
Strategic investments	63,860		35,702
Excess MSRs	40,803		44,231
Mortgage servicing rights	23,560		12,438
Other	1,868		5,935
Total Other Investments	$	679,667	$	641,969

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 a portfolio of legacy residential mortgage-backed securitizations serviced by the co-investor (Refer to Note 10 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 for additional information regarding the transactions). At June 30, 2022, we had funded $148 million of total capital to the SA Buyers (see Note 16 for additional detail).

At June 30, 2022, our servicer advance investments had a carrying value of $273 million and were associated with a portfolio of residential mortgage loans with an unpaid principal balance of $12.09 billion. The outstanding servicer advance receivables associated with this investment were $240 million at June 30, 2022, which were financed with short-term non-recourse securitization debt (see Note 13 for additional detail on this debt). The servicer advance receivables were comprised of the following types of advances at June 30, 2022 and December 31, 2021.

Table 10.2 – Components of Servicer Advance Receivables

(In Thousands)	June 30, 2022		December 31, 2021
Principal and interest advances	$	76,506	$	94,148
Escrow advances (taxes and insurance advances)	133,403		172,847
Corporate advances	29,643		43,958
Total Servicer Advance Receivables	$	239,552	$	310,953

We account for our servicer advance investments at fair value and during the three and six months ended June 30, 2022, we recorded $5 million and $10 million of interest income, respectively, through Other interest income, and recorded a net market valuation loss of $3 million and loss of $6 million, respectively, through Investment fair value changes, net in our consolidated statements of income.

HEIs

We purchase home equity investment contracts from third party originators under flow purchase agreements. Each HEI provides the owner of such HEI the right to purchase a percentage ownership interest in an associated residential property, and the homeowner's obligations under the HEI are secured by a lien (primarily second liens) on the property created by a deed of trust or a mortgage. Our investments in HEIs allow us to share in both home price appreciation and depreciation of the associated property. At June 30, 2022, we had flow purchase agreements outstanding with $225 million of cumulative commitments remaining. See Note 16 for additional information on these commitments.

As of June 30, 2022, we owned $130 million of HEIs at Redwood and consolidated $146 million of HEIs through the HEI securitization entity. We account for these investments under the fair value option and during the three and six months ended June 30, 2022, we recorded net market valuation gains of $2 million and $3 million, respectively, related to HEIs owned at Redwood through Investment fair value changes, net on our consolidated statements of income (loss).

We consolidate the HEI securitization in accordance with GAAP and have elected to account for it under the CFE election. During the three and six months ended June 30, 2022, we recorded net market valuation gains of $1 million and $5 million (including $1 million and $2 million of interest expense), respectively, related to our net investment in the HEI securitization entity through Investment fair value changes, net on our consolidated statements of income (loss).

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 June 30, 2022, we had made a total of 24 investments in companies through RWT Horizons with a total carrying value of $24 million, as well as six corporate-level investments. During the three and six months ended June 30, 2022, we recognized a mark-to-market valuation gain of $10 million on one of our strategic investments, which was recorded in Investment fair value changes, net on our consolidated statements of income (loss). During the three months ended June 30, 2022, we recorded losses of $0.3 million in Other income from our strategic investments.

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 and six months ended June 30, 2022, we recognized $4 million and $8 million of interest income, respectively, through Other interest income, and recorded net market valuation losses of $2 million and $3 million, respectively, through Investment fair value changes, net on our consolidated statements of income (loss).

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 and six months ended June 30, 2022, we retained zero and $5 million, respectively, of MSRs from sales of residential loans to third parties. We hold our MSR investments at our taxable REIT subsidiaries.

At June 30, 2022 and December 31, 2021, our MSRs had a fair value of $24 million and $12 million, respectively, and were associated with loans with an aggregate principal balance of $2.28 billion and $2.12 billion, respectively. During the three and six months ended June 30, 2022, including net market valuation gains and losses on our MSRs, we recorded net income of $5 million and $10 million, respectively, through Other income on our consolidated statements of income (loss) related to our MSRs.

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Derivative Financial Instruments

6 Months Ended

Jun. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

The following table presents the fair value and notional amount of our derivative financial instruments at June 30, 2022 and December 31, 2021.

Table 11.1 – Fair Value and Notional Amount of Derivative Financial Instruments

	June 30, 2022				December 31, 2021
	Fair Value		Notional Amount		Fair Value		Notional Amount
(In Thousands)
Assets - Risk Management Derivatives
Interest rate swaps	$	19,113	$	644,000	$	611	$	161,500
TBAs	3,104		455,000		2,880		2,440,000
Interest rate futures	1,875		273,600		25		9,000
Swaptions	10,488		620,000		18,318		1,660,000
Assets - Other Derivatives
Loan purchase and interest rate lock commitments	2,007		235,723		4,633		971,631
Total Assets	$	36,587	$	2,228,323	$	26,467	$	5,242,131
Liabilities - Risk Management Derivatives
Interest rate swaps	$	(2,445)	$	226,000	$	(1,251)	$	283,100
TBAs	(2,004)		405,000		(658)		870,000
Interest rate futures	(1,615)		115,000		(905)		62,500
Liabilities - Other Derivatives
Loan purchase and interest rate lock commitments	(527)		50,947		(503)		404,190
Total Liabilities	$	(6,591)	$	796,947	$	(3,317)	$	1,619,790
Total Derivative Financial Instruments, Net	$	29,996	$	3,025,270	$	23,150	$	6,861,921

Risk Management Derivatives

To manage, to varying degrees, risks associated with certain assets and liabilities on our consolidated balance sheets, we may enter into derivative contracts. At June 30, 2022, we were party to swaps and swaptions with an aggregate notional amount of $1.49 billion, TBA agreements with an aggregate notional amount of $860 million, and interest rate futures contracts with an aggregate notional amount of $389 million. At December 31, 2021, we were party to swaps and swaptions with an aggregate notional amount of $2.10 billion, futures with an aggregate notional amount of $72 million and TBA agreements with an aggregate notional amount of $3.31 billion.

For the three and six months ended June 30, 2022, risk management derivatives had a net market valuation gain of $30 million, and a net market valuation gain of $122 million, respectively. For the three and six months ended June 30, 2021, risk management derivatives had a net market valuation loss of $58 million, and a net market valuation gain of $35 million, respectively. Market valuation gains and losses are recorded in Mortgage banking activities, net, Investment fair value changes, net and Other income on our consolidated statements of income.

Loan Purchase and Interest Rate Lock Commitments

Loan purchase commitments ("LPCs") and interest rate lock commitments ("IRLCs") that qualify as derivatives are recorded at their estimated fair values. For the three and six months ended June 30, 2022, LPCs and IRLCs had a net market valuation loss of $9 million and loss of $51 million, respectively, that were recorded in Mortgage banking activities, net on our consolidated statements of income.

Derivatives Designated as Cash Flow Hedges

For interest rate agreements previously designated as cash flow hedges, our total unrealized loss reported in Accumulated other comprehensive income was $74 million and $76 million at June 30, 2022 and December 31, 2021, respectively. We are amortizing this loss into interest expense over the remaining term of the debt they were originally hedging. As of June 30, 2022, we expect to amortize $4 million of realized losses related to terminated cash flow hedges into interest expense over the next twelve months.

The following table illustrates the impact on interest expense of our interest rate agreements accounted for as cash flow hedges for the three and six months ended June 30, 2022 and 2021.

Table 11.2 – Impact on Interest Expense of Interest Rate Agreements Accounted for as Cash Flow Hedges

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Net interest expense on cash flows hedges	$	—	$	—	$	—	$	—
Realized net losses reclassified from other comprehensive income	(1,029)		(1,028)		(2,047)		(2,046)
Total Interest Expense	$	(1,029)	$	(1,028)	$	(2,047)	$	(2,046)

Derivative Counterparty Credit Risk

As discussed in our Annual Report on Form 10-K for the year ended December 31, 2021, we consider counterparty risk as part of our fair value assessments of all derivative financial instruments at each quarter-end. At June 30, 2022, we assessed this risk as remote and did not record an associated specific valuation adjustment. At June 30, 2022, we were in compliance with our derivative counterparty ISDA agreements.

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Other Assets and Liabilities

6 Months Ended

Jun. 30, 2022

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Other Assets and Liabilities

Other Assets and Liabilities

Other assets at June 30, 2022 and December 31, 2021 are summarized in the following table.

Table 12.1 – Components of Other Assets

(In Thousands)	June 30, 2022		December 31, 2021
Accrued interest receivable	$	51,006	$	47,515
Investment receivable	25,688		82,781
Deferred tax asset	20,867		20,867
Operating lease right-of-use assets	17,074		18,772
Income tax receivables	15,573		22
Margin receivable	11,420		7,269
Fixed assets and leasehold improvements (1)	11,189		9,019
REO	7,813		36,126
Other	11,150		8,746
Total Other Assets	$	171,780	$	231,117

(1)Fixed assets and leasehold improvements had a basis of $20 million and accumulated depreciation of $9 million at June 30, 2022.

Accrued expenses and other liabilities at June 30, 2022 and December 31, 2021 are summarized in the following table.

Table 12.2 – Components of Accrued Expenses and Other Liabilities

(In Thousands)	June 30, 2022		December 31, 2021
Payable to non-controlling interests	$	49,544	$	42,670
Accrued interest payable	42,548		39,297
Operating lease liabilities	19,448		20,960
Accrued compensation	17,765		74,636
Margin payable	15,023		24,368
Accrued operating expenses	8,743		4,377
Guarantee obligations	6,768		7,459
Residential loan and MSR repurchase reserve	5,678		9,306
Current accounts payable	5,518		8,273
Bridge loan holdbacks	3,983		3,109
Other	15,807		11,333
Total Accrued Expenses and Other Liabilities	$	190,825	$	245,788

Refer to Note 12 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 for additional descriptions of our other assets and liabilities.

Margin Receivable and Payable

Margin receivable and payable resulted from margin calls between us and our counterparties under derivatives, master repurchase agreements, and warehouse facilities, whereby we or the counterparty posted collateral. Through June 30, 2022, we had met all margin calls due.

REO

The following table summarizes the activity and carrying values of REO assets held at Redwood and at consolidated Legacy Sequoia, Freddie Mac SLST, and CAFL SFR entities during the six months ended June 30, 2022.

Table 12.3 – REO Activity

	Six Months Ended June 30, 2022
(In Thousands)	Bridge		Legacy Sequoia		Freddie Mac SLST		SFR at CAFL		Total
Balance at beginning of period	$	13,068	$	61	$	2,028	$	20,969	$	36,126
Transfers to REO	963		407		1,763		—		3,133
Liquidations (1)	(9,549)		(504)		(1,661)		(20,969)		(32,683)
Changes in fair value, net	625		443		169		—		1,237
Balance at End of Period	$	5,107	$	407	$	2,299	$	—	$	7,813

(1)For the six months ended June 30, 2022, REO liquidations resulted in $1 million of realized gains, which were recorded in Investment fair value changes, net on our consolidated statements of income.

The following table provides the detail of REO assets at Redwood and at consolidated Legacy Sequoia, Freddie Mac SLST, and CAFL SFR entities at June 30, 2022 and December 31, 2021.

Table 12.4 – REO Assets

Number of REO assets	Bridge	Legacy Sequoia	Freddie Mac SLST	SFR at CAFL	Total
At June 30, 2022	3	1	21	—	25
At December 31, 2021	5	2	24	3	34

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Short-Term Debt

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Short-Term Debt

Short-Term Debt

We enter into repurchase agreements ("repo"), loan warehouse agreements, and other forms of collateralized (and generally uncommitted) short-term borrowings with several banks and major investment banking firms. At June 30, 2022, we had outstanding agreements with several counterparties and we were in compliance with all of the related covenants.

The table below summarizes our short-term debt, including the facilities that are available to us, the outstanding balances, the weighted average interest rate, and the maturity information at June 30, 2022 and December 31, 2021.

Table 13.1 – Short-Term Debt

	June 30, 2022
(Dollars in Thousands)	Number of Facilities	Outstanding Balance		Limit		Weighted Average Interest Rate (1)		Maturity	Weighted Average Days Until Maturity
Facilities
Residential loan warehouse	7	$	1,085,802	$	2,750,000	3.28	%	8/2022-3/2023	213
Business purpose loan warehouse	3	456,887		1,200,000		4.21	%	3/2023-6/2023	258
Real estate securities repo	4	95,287		—		1.91	%	7/2022-9/2022	32
Total Short-Term Debt Facilities	14	1,637,976
Servicer advance financing	1	231,846		300,000		3.40	%	11/2022	125
Total Short-Term Debt		$	1,869,822

	December 31, 2021
(Dollars in Thousands)	Number of Facilities	Outstanding Balance		Limit		Weighted Average Interest Rate (1)		Maturity	Weighted Average Days Until Maturity
Facilities
Residential loan warehouse	7	$	1,669,344	$	2,900,000	1.87	%	1/2022-12/2022	153
Business purpose loan warehouse	2	138,746		350,000		3.34	%	3/2022-7/2022	105
Real estate securities repo	4	74,825		—		1.13	%	1/2022-3/2022	33
Total Short-Term Debt Facilities	13	1,882,915
Servicer advance financing	1	294,447		350,000		1.90	%	11/2022	306
Total Short-Term Debt		$	2,177,362

(1)Borrowings under our facilities generally are uncommitted and charged interest based on a specified margin over 1-month SOFR or 1- or 3-month LIBOR.

The following table below presents the value of loans, securities, and other assets pledged as collateral under our short-term debt at June 30, 2022 and December 31, 2021.

Table 13.2 – Collateral for Short-Term Debt

(In Thousands)	June 30, 2022		December 31, 2021
Collateral Type
Held-for-sale residential loans	$	1,207,185	$	1,838,797
Business purpose loans	577,974		167,687
Real estate securities
On balance sheet	10,014		5,823
Sequoia securitizations (1)	82,636		61,525
Freddie Mac K-Series securitization (1)	31,732		31,657
Total real estate securities owned	124,382		99,005
Restricted cash and other assets	2,512		1,962
Total Collateral for Short-Term Debt Facilities	1,912,053		2,107,451
Cash	14,381		6,480
Restricted cash	26,236		25,420
Servicer advances	273,210		310,953
Total Collateral for Servicer Advance Financing	313,827		342,853
Total Collateral for Short-Term Debt	$	2,225,880	$	2,450,304

(1)Represents securities we have retained from consolidated securitization entities. For GAAP purposes, we consolidate the loans and non-recourse ABS debt issued from these securitizations.

For the three and six months ended June 30, 2022, the average balance of our short-term debt facilities was $1.64 billion and $1.66 billion, respectively. At June 30, 2022 and December 31, 2021, accrued interest payable on our short-term debt facilities was $3 million and $2 million, respectively.

Servicer advance financing consists of non-recourse short-term securitization debt used to finance servicer advance investments. We consolidate the securitization entity that issued the debt, but the entity is independent of Redwood and the assets and liabilities are not owned by and are not legal obligations of Redwood. At June 30, 2022, the accrued interest payable balance on this financing was $0.2 million and the unamortized capitalized commitment costs were $0.3 million.

We also maintain a $10 million committed line of credit with a financial institution that is secured by certain mortgage-backed securities with a fair market value of $1 million at June 30, 2022. At both June 30, 2022 and December 31, 2021, we had no outstanding borrowings on this facility.

During the three months ended June 30, 2022, a business purpose loan warehouse facility with a borrowing limit of $450 million was reclassified to short-term debt from long-term debt as the maturity of this facility was less than one year at June 30, 2022.

Remaining Maturities of Short-Term Debt

The following table presents the remaining maturities of our secured short-term debt by the type of collateral securing the debt at June 30, 2022.

Table 13.3 – Short-Term Debt by Collateral Type and Remaining Maturities

	June 30, 2022
(In Thousands)	Within 30 days		31 to 90 days		Over 90 days		Total
Collateral Type
Held-for-sale residential loans	$	—	$	128,440	$	957,362	$	1,085,802
Business purpose loans	—		—		456,887		456,887
Real estate securities	57,323		37,964		—		95,287
Total Secured Short-Term Debt	57,323		166,404		1,414,249		1,637,976
Servicer advance financing	—		—		231,846		231,846
Total Short-Term Debt	$	57,323	$	166,404	$	1,646,095	$	1,869,822

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Asset-Backed Securities Issued

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Asset-Backed Securities Issued

Asset-Backed Securities Issued

ABS issued represents securities issued by non-recourse securitization entities we consolidate under GAAP. The majority of our ABS issued is carried at fair value under the CFE election (see Note 4 for additional detail) with the remainder carried at amortized cost. The carrying values of ABS issued by our consolidated securitization entities at June 30, 2022 and December 31, 2021, along with other selected information, are summarized in the following table.

Table 14.1 – Asset-Backed Securities Issued

June 30, 2022	Legacy Sequoia		Sequoia		CAFL (1)		Freddie Mac SLST (2)		Freddie Mac K-Series			HEI			Total
(Dollars in Thousands)
Certificates with principal balance	$	229,651	$	3,733,955	$	3,303,312	$	1,392,244	$	414,729		$	117,581		$	9,191,472
Interest-only certificates	258		60,183		149,184		14,938		8,809			—			233,372
Market valuation adjustments	(22,262)		(505,456)		(244,629)		(48,723)		(12,158)			(7,470)			(840,698)
ABS Issued, Net	$	207,647	$	3,288,682	$	3,207,867	$	1,358,459	$	411,380		$	110,111		$	8,584,146
Range of weighted average interest rates, by series(3)	1.59% to 2.88%		2.52% to 5.00%		2.34% to 5.34%		3.50% to 4.75%		3.41		%	3.74		%
Stated maturities(3)	2024 - 2036		2047-2052		2027-2032		2028-2059		2025			2052
Number of series	20		17		18		3		1			1

December 31, 2021	Legacy Sequoia		Sequoia		CAFL(1)		Freddie Mac SLST (2)		Freddie Mac K-Series			HEI			Total
(Dollars in Thousands)
Certificates with principal balance	$	259,505	$	3,353,073	$	3,264,766	$	1,535,638	$	418,700		$	138,792		$	8,970,474
Interest-only certificates	619		32,749		193,725		11,714		10,184			—			248,991
Market valuation adjustments	(32,243)		(2,774)		16,407		41,111		12,973			(1,382)			34,092
ABS Issued, Net	$	227,881	$	3,383,048	$	3,474,898	$	1,588,463	$	441,857		$	137,410		$	9,253,557
Range of weighted average interest rates, by series(3)	0.23% to 1.44%		2.40% to 5.03%		2.64% to 5.24%		3.50% to 4.75%		3.41		%	3.31		%
Stated maturities(3)	2024 - 2036		2047-2052		2027-2031		2028-2059		2025			2052
Number of series	20		16		16		3		1			1

(1)Includes $485 million and $270 million (principal balance) of ABS issued by two CAFL bridge securitization trusts sponsored by Redwood and accounted for at amortized cost at June 30, 2022 and December 31, 2021, respectively.

(2)Includes $117 million and $145 million (principal balance) of ABS issued by a re-securitization trust sponsored by Redwood and accounted for at amortized cost at June 30, 2022 and December 31, 2021, respectively.

(3)Certain ABS issued by CAFL, Freddie Mac SLST, and HEI securitization entities are subject to early redemption and interest rate step-ups as described below.

During the second quarter of 2022, we consolidated the assets and liabilities of a securitization entity formed in connection with the securitization of CoreVest bridge loans (presented within CAFL in table 14.1 above), which we determined was a VIE and for which we determined we are the primary beneficiary. At issuance, we sold $215 million (principal balance) of ABS issued to third parties and retained the remaining beneficial ownership interest in the trust. The ABS were issued at a discount and we have elected to account for the ABS issued at amortized cost. At June 30, 2022, the principal balance of the ABS issued was $215 million, and the unamortized debt discount and deferred issuance costs were $8 million in total, for a net carrying value of $207 million. The weighted average stated coupon of the ABS issued was 4.32% at issuance. The ABS issued by the CAFL bridge entity are subject to an optional redemption in May 2024, and beginning in June 2025, the interest rate on the ABS issued increases by 2% through final maturity in May 2029. The ABS issued by this securitization were backed by assets including $249 million of bridge loans and $1 million of restricted cash at June 30, 2022. The securitization is structured with $250 million of total funding capacity and a feature to allow reinvestment of loan payoffs for the first 24 months of the transaction (through May 2024), unless an amortization event occurs prior to the expiration of the 24-month reinvestment period. Amortization trigger events include, among other events, delinquency rates or default rates exceeding specified thresholds for three consecutive periods, or the effective advance rate exceeding a specified threshold.

During the third quarter of 2021, we consolidated the assets and liabilities of a securitization entity formed in connection with the securitization of CoreVest bridge loans (presented within CAFL in table 14.1 above), which we determined was a VIE and for which we determined we are the primary beneficiary. At issuance, we sold $270 million (principal balance) of ABS issued to third parties and retained the remaining beneficial ownership interest in the trust. The ABS were issued at a discount and we have elected to account for the ABS issued at amortized cost. At June 30, 2022, the principal balance of the ABS issued was $270 million, and the unamortized debt discount and deferred issuance costs were $2 million, for a net carrying value of $268 million. The weighted average stated coupon of the ABS issued was 2.34% at issuance. The ABS issued by the CAFL bridge entity are subject to an optional redemption in March 2024, and beginning in March 2025 the interest rate on the ABS issued increases by 2% through final maturity in March 2029. The ABS issued by this securitization were backed by assets including $293 million of bridge loans, $8 million of restricted cash and $7 million of other assets at June 30, 2022. The securitization is structured with $300 million of total funding capacity and a feature to allow reinvestment of loan payoffs for the first 30 months of the transaction (through March 2024), unless an amortization event occurs prior to the expiration of the 30-month reinvestment period. Amortization trigger events include, among other events, delinquency rates or default rates exceeding specified thresholds for three consecutive periods, or the effective advance rate exceeding a specified threshold.

During the third quarter of 2021, we consolidated the assets and liabilities of the HEI securitization entity formed in connection with the securitization of HEIs, which we determined was a VIE and for which we determined we are the primary beneficiary. At issuance, we sold $146 million (principal balance) of ABS issued to third parties and retained a portion of the remaining beneficial ownership interest in the trust. We elected to account for the entity under the CFE election and account for the ABS issued at fair value, with the entire change in fair value of the ABS issued (including accrued interest) recorded through Investment fair value changes, net on our consolidated statements of income. The ABS issued by the HEI securitization entity are subject to an optional redemption in September 2023, and beginning in September 2024 the interest rate on the ABS issued increases by 2% through final maturity in 2052.

During the third quarter of 2020, we transferred all of the subordinate securities we owned from two consolidated re-performing loan securitization VIEs sponsored by Freddie Mac SLST to a re-securitization trust, which we determined was a VIE and for which we determined we are the primary beneficiary. At issuance, we sold $210 million (principal balance) of ABS issued to third parties and retained 100% of the remaining beneficial ownership interest in the trust through ownership of a subordinate security issued by the trust. The ABS was issued at a discount and we have elected to account for the ABS issued at amortized cost. At June 30, 2022, the principal balance of the ABS issued was $117 million, and the debt discount and deferred issuance costs totaled $1 million, for a net carrying value of $115 million. The stated coupon of the ABS issued was 4.75% at issuance and the final stated maturity occurs in July 2059. The ABS issued are subject to an optional redemption in July 2022 and in July 2023 the ABS interest rate steps up to 7.75%.

The actual maturity of each class of ABS issued is primarily determined by the rate of principal prepayments on the assets of the issuing entity. Each series is also subject to redemption prior to the stated maturity according to the terms of the respective governing documents of each ABS issuing entity. As a result, the actual maturity of ABS issued may occur earlier than the stated maturity. At June 30, 2022, the majority of the ABS issued and outstanding had contractual maturities beyond five years. See Note 4 for detail on the carrying value components of the collateral for ABS issued and outstanding. The following table summarizes the accrued interest payable on ABS issued at June 30, 2022 and December 31, 2021. Interest due on consolidated ABS issued is payable monthly.

Table 14.2 – Accrued Interest Payable on Asset-Backed Securities Issued

(In Thousands)	June 30, 2022		December 31, 2021
Legacy Sequoia	$	171	$	99
Sequoia	9,232		8,452
CAFL	10,611		11,030
Freddie Mac SLST (1)	4,182		4,630
Freddie Mac K-Series	1,178		1,190
Total Accrued Interest Payable on ABS Issued	$	25,374	$	25,401

(1)Includes accrued interest payable on ABS issued by a re-securitization trust sponsored by Redwood.

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Long-Term Debt

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

The tables below summarize our long-term debt, including the facilities that are available to us, the outstanding balances, the weighted average interest rate, and the maturity information at June 30, 2022 and December 31, 2021.

Table 15.1 – Long-Term Debt

	June 30, 2022
(Dollars in Thousands)	Borrowings		Unamortized Deferred Issuance Costs / Discount		Net Carrying Value		Limit		Weighted Average Interest Rate (1)		Final Maturity
Facilities
Recourse Subordinate Securities Financing
Facility A	$	132,212	$	(104)	$	132,108	N/A		4.21	%	9/2024
CAFL
Facility B	102,018		(202)		101,816		N/A		4.21	%	2/2025
Facility C	76,195		(251)		75,944		N/A		4.75	%	6/2026
Non-Recourse BPL Financing
Facility D	500,608		(1,026)		499,582		$	600,000	L + 2.50%		N/A
Recourse BPL Financing
Facility E	294,702		(103)		294,599		450,000		SOFR + 2.25%		9/2023
Total Long-Term Debt Facilities	1,105,735		(1,686)		1,104,049
Convertible notes
4.75% convertible senior notes	198,629		(1,302)		197,327		N/A		4.75	%	8/2023
5.625% convertible senior notes	150,200		(1,683)		148,517		N/A		5.625	%	7/2024
5.75% exchangeable senior notes	172,092		(2,977)		169,115		N/A		5.75	%	10/2025
7.75% convertible senior notes	215,000		(6,691)		208,309		N/A		7.75	%	6/2027
Trust preferred securities and subordinated notes	139,500		(756)		138,744		N/A		L + 2.25%		7/2037
Total Long-Term Debt	$	1,981,156	$	(15,095)	$	1,966,061

	December 31, 2021
(Dollars in Thousands)	Borrowings		Unamortized Deferred Issuance Costs / Discount		Net Carrying Value		Limit		Weighted Average Interest Rate (1)		Final Maturity
Facilities
Recourse Subordinate Securities Financing
Facility A	$	144,385	$	(313)	$	144,072	N/A		4.21	%	9/2024
CAFL
Facility B	102,351		(353)		101,998		N/A		4.21	%	2/2025
Facility C	91,707		(376)		91,331		N/A		4.75	%	6/2026
Non-Recourse BPL Financing
Facility D	307,215		(507)		306,708		$	400,000	L + 2.75%		N/A
Recourse BPL Financing
Facility E	234,349		(123)		234,226		450,000		L + 2.21%		9/2023
Facility F	110,148		—		110,148		450,000		L + 3.35%		6/2023
Total Long-Term Debt Facilities	990,155		(1,672)		988,483
Convertible notes
4.75% convertible senior notes	198,629		(1,836)		196,793		N/A		4.75	%	8/2023
5.625% convertible senior notes	150,200		(2,072)		148,128		N/A		5.625	%	7/2024
5.75% exchangeable senior notes	172,092		(3,384)		168,708		N/A		5.75	%	10/2025
Trust preferred securities and subordinated notes	139,500		(779)		138,721		N/A		L + 2.25%		7/2037
Total Long-Term Debt	$	1,650,576	$	(9,743)	$	1,640,833

(1)Variable rate borrowings are based on 1- or 3-month LIBOR ("L" in the table above) or 1-month SOFR plus an applicable spread.

Refer to Note 15 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021, for a full description of our long-term debt.

Non-Recourse BPL Financing Facility

During the three months ended March 31, 2022, we amended facility D (see Table 15.1 above) to increase the borrowing limit from $400 million to $600 million.

Recourse BPL Financing Facilities

During the three months ended March 31, 2022, we amended the interest rate for Facilities E and F (see Table 15.1 above) to be indexed to a spread over one-month SOFR compared to a LIBOR-indexed spread at March 31, 2022.

During the three months ended June 30, 2022, Facility F was reclassified to short-term debt as the maturity of this facility was less than one year at June 30, 2022.

Convertible Notes

In June 2022, we issued $215 million principal amount of 7.75% convertible senior notes due 2027. These notes require semi-annual interest payments at a fixed annual coupon rate of 7.75% until maturity or conversion, which will be no later than June 15, 2027. After deducting the underwriting discount and offering costs, we received $208 million of net proceeds. Including amortization of deferred debt issuance costs, the effective interest expense yield on these notes was approximately 8.50% per annum. We may elect to settle conversions either entirely in cash or in a combination of cash and shares of common stock. Upon conversion, the conversion value will be paid in cash up to at least the principal amount of the notes being converted. The initial conversion rate of the notes is 95.6823 common shares per $1,000 principal amount of notes (equivalent to a conversion price of $10.45 per common share).

The following table below presents the value of loans, securities, and other assets pledged as collateral under our long-term debt at June 30, 2022 and December 31, 2021.

Table 15.2 – Collateral for Long-Term Debt

(In Thousands)	June 30, 2022		December 31, 2021
Collateral Type
Bridge loans	$	779,467	$	554,597
Single-family rental loans	180,482		244,703
Real estate securities
Sequoia securitizations (1)	198,640		247,227
CAFL securitizations (1)	247,106		260,405
Total Collateral for Long-Term Debt	$	1,405,695	$	1,306,932

(1)Represents securities we have retained from consolidated securitization entities. For GAAP purposes, we consolidate the loans and non-recourse ABS debt issued from these securitizations.

The following table summarizes the accrued interest payable on long-term debt at June 30, 2022 and December 31, 2021.

Table 15.3 – Accrued Interest Payable on Long-Term Debt

(In Thousands)	June 30, 2022		December 31, 2021
Long-term debt facilities	$	2,775	$	815
Convertible notes
4.75% convertible senior notes	3,564		3,564
5.625% convertible senior notes	3,896		3,896
5.75% exchangeable senior notes	2,474		2,474
7.75% convertible senior notes	1,018		—
Trust preferred securities and subordinated notes	850		581
Total Accrued Interest Payable on Long-Term Debt	$	14,577	$	11,330

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Lease Commitments

At June 30, 2022, we were obligated under seven non-cancelable operating leases with expiration dates through 2031 for $22 million of cumulative lease payments. Our operating lease expense was $2 million each for the six-month periods ended June 30, 2022 and 2021.

The following table presents our future lease commitments at June 30, 2022.

Table 16.1 – Future Lease Commitments by Year

(In Thousands)	June 30, 2022
2022 (6 months)	$	2,203
2023	4,428
2024	4,338
2025	3,475
2026	3,420
2027 and thereafter	4,553
Total Lease Commitments	22,417
Less: Imputed interest	(2,969)
Operating Lease Liabilities	$	19,448

During the six months ended June 30, 2022, we did not enter into any new office leases. At June 30, 2022, our operating lease liabilities were $19 million, which were a component of Accrued expenses and other liabilities, and our operating lease right-of-use assets were $17 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 date of adoption. At June 30, 2022, the weighted-average remaining lease term and weighted-average discount rate for our leases was 6 years and 5.1%, respectively.

Commitment to Fund Bridge Loans

As of June 30, 2022, we had commitments to fund up to $835 million of additional advances on existing 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, 2022, we carried a $4 million contingent liability related to these commitments to fund construction advances. During both the three and six months ended June 30, 2022, we recorded a net market valuation loss of $3 million related to this liability through Mortgage banking activities, net and Investment fair value changes, net on our consolidated statements of income (loss). During the three and six months ended June 30, 2021, we recorded a net market valuation gain of $1 million and $2 million, respectively, related to this liability through Mortgage banking activities, net on our consolidated statements of income (loss).

Commitment to Fund Partnerships

In 2018, we invested in two partnerships created to acquire and manage certain mortgage servicing related assets (see Note 10 for additional detail). In connection with this investment, we are required to fund future net servicer advances related to the underlying mortgage loans. The actual amount of net servicer advances we may fund in the future is subject to significant uncertainty and will be based on the credit and prepayment performance of the underlying loans.

Commitment to Acquire HEIs

During the second quarter of 2022, we entered into an additional flow purchase agreement to acquire $100 million home equity investment contracts from a third party. At June 30, 2022, we had outstanding flow purchase agreements with third parties, with an aggregate commitment to purchase $350 million of HEIs, of which $225 million of the commitments remained outstanding. We account for these investments under the fair value option. See Note 10 for additional detail on these investments.

Commitments to Fund Strategic Investments

In the first quarter of 2022, we entered into a $25 million commitment to an investment fund with the mission of providing quality workforce housing opportunities in several California urban communities, including the San Francisco Bay Area. At June 30, 2022, we had funded $9.4 million of this commitment. This investment is included in Other Investments on our Consolidated Balance Sheets.

In 2021, we entered into a commitment to fund a $5 million RWT Horizons investment. At June 30, 2022, we had funded $1 million of this commitment. This investment is included in Other Investments on our Consolidated Balance Sheets.

Loss Contingencies — Risk-Sharing

During 2015 and 2016, we sold conforming loans to the Agencies with an original unpaid principal balance of $3.19 billion, subject to our risk-sharing arrangements with the Agencies. At June 30, 2022, the maximum potential amount of future payments we could be required to make under these arrangements was $44 million and this amount was partially collateralized by assets we transferred to pledged accounts and is presented as pledged collateral in Other assets on our consolidated balance sheets. We have no recourse to any third parties that would allow us to recover any amounts related to our obligations under the arrangements. At June 30, 2022, we had incurred less than $100 thousand of cumulative losses under these arrangements. For the three and six months ended June 30, 2022, other income related to these arrangements was $0.3 million and $1 million, respectively.

All of the loans in the reference pools subject to these risk-sharing arrangements were originated in 2014 and 2015, and at June 30, 2022, the loans had an unpaid principal balance of $476 million and a weighted average FICO score of 756 (at origination) and LTV ratio of 74% (at origination). At June 30, 2022, $12 million of the loans were 90 days or more delinquent, of which four of these loans with an unpaid principal balance of $1 million were in foreclosure. At June 30, 2022, the carrying value of our guarantee obligation was $7 million and included $5 million designated as a non-amortizing credit reserve, which we believe is sufficient to cover current expected losses under these obligations.

Our consolidated balance sheets include assets of special purpose entities ("SPEs") associated with these risk-sharing arrangements (i.e., the "pledged collateral" referred to above) that can only be used to settle obligations of these SPEs for which the creditors of these SPEs (the Agencies) do not have recourse to us. At both June 30, 2022 and December 31, 2021, assets of such SPEs totaled $34 million, and liabilities of such SPEs totaled $7 million.

Loss Contingencies — Residential Repurchase Reserve

We maintain a repurchase reserve for potential obligations arising from representation and warranty violations related to residential loans we have sold to securitization trusts or third parties and for conforming residential loans associated with MSRs that we have purchased from third parties. We do not originate residential 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. Additionally, for certain loans we sold during the second quarter of 2020 that were previously held for investment, we have a direct obligation to repurchase these loans in the event of any early payment defaults (or "EPDs") by the underlying mortgage borrowers within certain specified periods following the sales.

At June 30, 2022 and December 31, 2021, our repurchase reserve associated with our residential loans and MSRs was $6 million and $9 million, respectively, and was recorded in Accrued expenses and other liabilities on our consolidated balance sheets. During the six months ended June 30, 2022 and 2021, we received three and one repurchase requests, respectively, and repurchased zero and one loan, respectively. During both the three and six months ended June 30, 2022, we recorded a reversal of repurchase provision

expense of $4 million, and during the three and six months ended June 30, 2021, we recorded repurchase provision expense of $0.2 million and $0.3 million, respectively, that were recorded in Mortgage banking activities, net, Investment fair value changes, net, and Other income on our consolidated statements of income.

Loss Contingencies — Litigation, Claims and Demands

There is no significant update regarding the litigation matters described in Note 16 within the financial statements included in Redwood’s Annual Report on Form 10-K for the year ended December 31, 2021 under the heading “Loss Contingencies - Litigation, Claims and Demands.” At June 30, 2022, the aggregate amount of loss contingency reserves established in respect of the FHLB-Seattle and Schwab litigation matters described in our Annual Report on Form 10-K for the year ended December 31, 2021 was $2 million.

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Equity

6 Months Ended

Jun. 30, 2022

Equity [Abstract]

Equity

Equity

The following table provides a summary of changes to accumulated other comprehensive income (loss) by component for the three and six months ended June 30, 2022 and 2021.

Table 17.1 – Changes in Accumulated Other Comprehensive Income (Loss) by Component

	Three Months Ended June 30, 2022				Three Months Ended June 30, 2021
(In Thousands)	Available-for-Sale Securities		Interest Rate Agreements Accounted for as Cash Flow Hedges		Available-for-Sale Securities		Interest Rate Agreements Accounted for as Cash Flow Hedges
Balance at beginning of period	$	48,938	$	(75,412)	$	84,527	$	(79,539)
Other comprehensive (loss) income before reclassifications	(33,409)		—		11,224		—
Amounts reclassified from other accumulated comprehensive (income) loss	1,066		1,029		(7,500)		1,028
Net current-period other comprehensive (loss) income	(32,343)		1,029		3,724		1,028
Balance at End of Period	$	16,595	$	(74,383)	$	88,251	$	(78,511)

	Six Months Ended June 30, 2022				Six Months Ended June 30, 2021
(In Thousands)	Available-for-Sale Securities		Interest Rate Agreements Accounted for as Cash Flow Hedges		Available-for-Sale Securities		Interest Rate Agreements Accounted for as Cash Flow Hedges
Balance at beginning of period	$	67,503	$	(76,430)	$	76,336	$	(80,557)
Other comprehensive (loss) income before reclassifications	(51,282)		—		22,210		—
Amounts reclassified from other accumulated comprehensive (income) loss	374		2,047		(10,295)		2,046
Net current-period other comprehensive (loss) income	(50,908)		2,047		11,915		2,046
Balance at End of Period	$	16,595	$	(74,383)	$	88,251	$	(78,511)

The following table provides a summary of reclassifications out of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2022 and 2021.

Table 17.2 – Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

		Amount Reclassified From Accumulated Other Comprehensive (Loss)
	Affected Line Item in the	Three Months Ended June 30,
(In Thousands)	Income Statement	2022		2021
Net Realized (Gain) Loss on AFS Securities
Increase (decrease) in allowance for credit losses on AFS securities	Investment fair value changes, net	$	1,066	$	(13)
Gain on sale of AFS securities	Realized gains, net	—		(7,487)
		$	1,066	$	(7,500)
Net Realized Loss on Interest Rate   Agreements Designated as Cash Flow Hedges
Amortization of deferred loss	Interest expense	$	1,029	$	1,028
		$	1,029	$	1,028

		Amount Reclassified From Accumulated Other Comprehensive (Loss)
	Affected Line Item in the	Six Months Ended June 30,
(In Thousands)	Income Statement	2022		2021
Net Realized (Gain) Loss on AFS Securities
Increase (decrease) in allowance for credit losses on AFS securities	Investment fair value changes, net	$	1,771	$	(388)
Gain on sale of AFS securities	Realized gains, net	(1,397)		(9,907)
		$	374	$	(10,295)
Net Realized Loss on Interest Rate   Agreements Designated as Cash Flow Hedges
Amortization of deferred loss	Interest expense	$	2,047	$	2,046
		$	2,047	$	2,046

Issuance of Common Stock

We have an established program to sell common stock from time to time in at-the-market ("ATM") offerings. During the six months ended June 30, 2022, we issued 5,232,869 common shares for net proceeds of $67 million under this program. During the three months ended March 31, 2022, we increased the capacity of this program to $175 million, all of which remained outstanding for future offerings under this program as of June 30, 2022.

Direct Stock Purchase and Dividend Reinvestment Plan

During the six months ended June 30, 2022, we did not issue any shares of common stock through our Direct Stock Purchase and Dividend Reinvestment Plan. At June 30, 2022, approximately 6 million shares remained outstanding for future offerings under this plan.

Earnings per Common Share

The following table provides the basic and diluted (loss) earnings per common share computations for the three and six months ended June 30, 2022 and 2021.

Table 17.3 – Basic and Diluted Earnings per Common Share

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands, except Share Data)	2022		2021		2022		2021
Basic Earnings per Common Share:
Net (loss) income attributable to Redwood	$	(99,966)	$	90,025	$	(69,051)	$	187,282
Less: Dividends and undistributed earnings allocated to participating securities	(1,159)		(3,149)		(2,286)		(6,458)
Net (loss) income allocated to common shareholders	$	(101,125)	$	86,876	$	(71,337)	$	180,824
Basic weighted average common shares outstanding	119,660,173		112,921,070		119,771,554		112,337,984
Basic (Loss) Earnings per Common Share	$	(0.85)	$	0.77	$	(0.60)	$	1.61
Diluted Earnings per Common Share:
Net (loss) income attributable to Redwood	$	(99,966)	$	90,025	$	(69,051)	$	187,282
Less: Dividends and undistributed earnings allocated to participating securities	(1,159)		(2,869)		(2,286)		(5,829)
Add back: Interest expense on convertible notes for the period, net of tax	—		6,990		—		13,971
Net (loss) income allocated to common shareholders	$	(101,125)	$	94,146	$	(71,337)	$	195,424
Weighted average common shares outstanding	119,660,173		112,921,070		119,771,554		112,337,984
Net effect of dilutive equity awards	—		273,139		—		234,353
Net effect of assumed convertible notes conversion to common shares	—		28,566,875		—		28,566,875
Diluted weighted average common shares outstanding	119,660,173		141,761,084		119,771,554		141,139,212
Diluted (Loss) Earnings per Common Share	$	(0.85)	$	0.66	$	(0.60)	$	1.38

We included participating securities, which are certain equity awards that have non-forfeitable dividend participation rights, in the calculations of basic and diluted earnings per common share as we determined that the two-class method was more dilutive than the alternative treasury stock method for these shares. Dividends and undistributed earnings allocated to participating securities under the basic and diluted earnings per share calculations require specific shares to be included that may differ in certain circumstances.

During the three and six months ended June 30, 2021, certain of our convertible notes were determined to be dilutive and were included in the calculation of diluted EPS under the "if-converted" method. Under this method, the periodic interest expense (net of applicable taxes) for dilutive notes is added back to the numerator and the weighted average number of shares that the notes are entitled to (if converted, regardless of whether they are in or out of the money) are included in the denominator.

For the three and six months ended June 30, 2022, 33,992,377 and 31,294,614 of common shares, respectively, related to the assumed conversion of our convertible notes were antidilutive and were excluded in the calculation of diluted earnings per share. For the three and six months ended June 30, 2022, the number of outstanding equity awards that were antidilutive totaled 249,224 and 278,604, respectively. For the three and six months ended June 30, 2021, the number of outstanding equity awards that were antidilutive totaled 18,645 and 17,053, respectively.

Stock Repurchases

Our Board of Directors previously approved an authorization for the repurchase of up to $100 million of our common stock, and also authorized the repurchase of outstanding debt securities, including convertible and exchangeable debt. This authorization has no expiration date and does not obligate us to acquire any specific number of shares or securities. During the three months ended June 30, 2022, we repurchased 3.7 million shares of our common stock for a total cost of $33 million. At June 30, 2022, $46 million of the current authorization remained available for the repurchase of shares of our common stock and we also continued to be authorized to repurchase outstanding debt securities. In July 2022, our Board of Directors approved a new repurchase authorization – see Note 24 for further discussion.

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Equity Compensation Plans

6 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

Equity Compensation Plans

Equity Compensation Plans

At June 30, 2022 and December 31, 2021, 5,551,039 and 5,958,390 shares of common stock, respectively, were available for grant under our Incentive Plan. The unamortized compensation cost of awards issued under the Incentive Plan, which are settled by delivery of shares of common stock and purchases under the Employee Stock Purchase Plan, totaled $39 million at June 30, 2022, as shown in the following table.

Table 18.1 – Activities of Equity Compensation Costs by Award Type

	Six Months Ended June 30, 2022
(In Thousands)	Restricted Stock Awards		Restricted Stock Units		Deferred Stock Units		Performance Stock Units		Employee Stock Purchase Plan		Total
Unrecognized compensation cost at beginning of period	$	84	$	3,589	$	26,473	$	12,237	$	—	$	42,383
Equity grants	—		2,684		4,350		—		323		7,357
Performance-based valuation adjustment	—		—		—		(1,719)		—		(1,719)
Equity grant forfeitures	(5)		(339)		—		—		—		(344)
Equity compensation expense	(72)		(1,049)		(5,782)		(1,988)		(162)		(9,053)
Unrecognized Compensation Cost at End of Period	$	7	$	4,885	$	25,041	$	8,530	$	161	$	38,624

At June 30, 2022, the weighted average amortization period remaining for all of our equity awards was less than two years.

Restricted Stock Awards ("RSAs")

At June 30, 2022 and December 31, 2021, there were 1,551 and 28,141 shares of RSAs outstanding, respectively. Restrictions on these shares lapse during 2022. During the six months ended June 30, 2022, there were no RSAs granted, restrictions on 26,249 RSAs lapsed and those shares were distributed, and 341 RSAs were forfeited.

Restricted Stock Units ("RSUs")

At June 30, 2022 and December 31, 2021, there were 486,546 and 431,072 RSUs outstanding, respectively. During the six months ended June 30, 2022, there were 206,179 RSUs granted, 120,154 RSUs distributed, and 30,551 RSUs forfeited. Unvested RSUs at June 30, 2022 vest through 2026.

Deferred Stock Units (“DSUs”)

At June 30, 2022 and December 31, 2021, there were 4,551,475 and 4,022,088 DSUs outstanding, respectively, of which 2,089,958 and 1,469,903, respectively, had vested. During the six months ended June 30, 2022, there were 824,875 DSUs granted, 295,488 DSUs distributed, and zero DSUs forfeited. Unvested DSUs at June 30, 2022 vest through 2026.

Performance Stock Units (“PSUs”)

At June 30, 2022 and December 31, 2021, the target number of PSUs that were unvested was 1,267,849 and 1,473,883, respectively. Vesting for PSUs generally occurs three years from their respective grant dates based on various total shareholder return performance calculations, as discussed in Note 18 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021. During the three months ended June 30, 2022, for PSUs granted in 2020 and 2021, we decreased the book value total shareholder return estimate for the 2022 performance period, reducing the future equity compensation expense related to these awards by $2 million.

For 206,034 target PSU awards that were granted in December 2018, the performance vesting period ended on January 1, 2022. These 2018 PSU awards failed to reach a threshold level under their performance-based vesting criteria and resulted in the vesting of no shares of our common stock underlying these PSUs.

Employee Stock Purchase Plan ("ESPP")

The ESPP allows a maximum of 850,000 shares of common stock to be purchased in aggregate for all employees. As of June 30, 2022 and December 31, 2021, 607,877 and 569,728 shares had been purchased, respectively, and there remained a negligible amount of uninvested employee contributions in the ESPP at June 30, 2022.

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Mortgage Banking Activities, Net

6 Months Ended

Jun. 30, 2022

Mortgage Banking [Abstract]

Mortgage Banking Activities, Net

Mortgage Banking Activities, Net

The following table presents the components of Mortgage banking activities, net, recorded in our consolidated statements of income for the three and six months ended June 30, 2022 and 2021.

Table 19.1 – Mortgage Banking Activities

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Residential Mortgage Banking Activities, Net
Changes in fair value of:
Residential loans, at fair value (1)	$	(33,414)	$	76,907	$	(102,236)	$	47,634
Trading securities (2)	1,315		(1,095)		4,101		(374)
Risk management derivatives (3)	9,900		(55,740)		83,254		33,224
Other income (expense), net (4)	4,412		1,193		5,029		2,216
Total residential mortgage banking activities, net	(17,787)		21,265		(9,852)		82,700
Business Purpose Mortgage Banking Activities, Net:
Changes in fair value of:
Single-family rental loans, at fair value (1)	(39,994)		25,966		(65,187)		36,214
Risk management derivatives (3)	15,487		(2,504)		32,520		1,354
Bridge loans, at fair value	116		2,225		2,251		3,269
Other income, net (5)	12,161		7,467		26,566		13,489
Total business purpose mortgage banking activities, net	(12,230)		33,154		(3,850)		54,326
Mortgage Banking Activities, Net	$	(30,017)	$	54,419	$	(13,702)	$	137,026

(1)For residential loans, includes changes in fair value for associated loan purchase and forward sale commitments. For single-family rental loans, includes changes in fair value for associated interest rate lock commitments.

(2)Represents fair value changes on trading securities that are being used as hedges to manage the mark-to-market risks associated with our residential mortgage banking operations.

(3)Represents market valuation changes of derivatives that were used to manage risks associated with our mortgage banking operations.

(4)Amounts in this line item include other fee income from loan acquisitions and provisions for repurchases, presented net.

(5)Amounts in this line item include other fee income from loan originations.

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Other Income, Net

6 Months Ended

Jun. 30, 2022

Other Income and Expenses [Abstract]

Other Income, Net

Other Income, Net

The following table presents the components of Other income recorded in our consolidated statements of income for the three and six months ended June 30, 2022 and 2021.

Table 20.1 – Other Income, Net

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
MSR income, net (1)	$	5,376	$	(43)	$	9,679	$	654
Bridge loan fees	1,473		911		2,463		1,604
Risk share income	323		861		783		1,743
Other	(166)		397		64		1,968
Other Income, Net	$	7,006	$	2,126	$	12,989	$	5,969

(1)Includes servicing fees and fair value changes for MSRs, net.

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General and Administrative Expenses, Loan Acquisition Costs, and Other Expenses

6 Months Ended

Jun. 30, 2022

Other Income and Expenses [Abstract]

General and Administrative Expenses, Loan Acquisition Costs, and Other Expenses

General and Administrative Expenses, Loan Acquisition Costs, and Other Expenses

Components of our general and administrative expenses, loan acquisition costs, and other expenses for the three and six months ended June 30, 2022 and 2021 are presented in the following table.

Table 21.1 – Components of General and Administrative Expenses, Loan Acquisition Costs, and Other Expenses

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
General and Administrative Expenses
Fixed compensation expense	$	12,110	$	11,269	$	26,738	$	23,074
Annual variable compensation expense	1,811		12,508		5,168		31,177
Long-term incentive award expense (1)	5,532		5,682		11,192		9,851
Acquisition-related equity compensation expense (2)	—		1,212		—		2,424
Systems and consulting	3,703		3,272		6,887		6,249
Office costs	2,083		2,024		4,108		3,832
Accounting and legal	1,576		1,221		3,251		1,935
Corporate costs	1,000		873		1,864		1,564
Other	4,151		2,533		7,612		4,039
Total General and Administrative Expenses	31,966		40,594		66,820		84,145
Loan Acquisition Costs
Commissions	2,116		1,661		4,730		2,924
Underwriting costs	1,096		1,836		2,468		3,521
Transfer and holding costs	268		251		747		862
Total Loan Acquisition Costs	3,480		3,748		7,945		7,307
Other Expenses
Amortization of purchase-related intangible assets	3,306		3,873		6,840		7,746
Other	162		112		713		335
Total Other Expenses	3,468		3,985		7,553		8,081
Total General and Administrative Expenses, Loan Acquisition Costs, and Other Expenses	$	38,914	$	48,327	$	82,318	$	99,533

(1)For the three months ended June 30, 2022 and 2021, long-term incentive award expense included $5 million and $4 million of expense for awards settleable in shares of our common stock, and $0.4 million and $1 million of expense for awards settleable in cash, respectively. For the six months ended June 30, 2022 and 2021, long-term incentive award expense included $10 million and $7 million of expense for awards settleable in shares of our common stock, and $1 million and $3 million of expense for awards settleable in cash, respectively.

(2)Acquisition-related equity compensation expense relates to 588,260 shares of restricted stock that were issued to members of CoreVest management as a component of the consideration paid to them for our purchase of their interests in CoreVest in 2019. The grant date fair value of these restricted stock awards was $10 million, which was recognized as compensation expense over the two-year vesting period on a straight-line basis in accordance with GAAP.

Long-Term Cash-Based Awards and Cash Settled Deferred Stock Units

During the six months ended June 30, 2022, $2 million of long-term cash-based retention awards were granted to employees that will vest and be paid over a three-year period, subject to continued employment through the vesting periods from 2022 through 2025. At both June 30, 2022 and December 31, 2021, the unamortized compensation cost of long-term cash-based awards was $4 million.

During the six months ended June 30, 2022, there were no cash-settled deferred stock units granted to employees. Cash-settled deferred stock units that were granted in 2020 and 2021 vest over four years through 2025. At June 30, 2022 and December 31, 2021, the unamortized compensation cost of cash settled deferred stock units was $3 million and $7 million, respectively. The unamortized compensation cost is adjusted for changes in the value of our common stock at the end of each reporting period.

Refer to Note 21 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021, for additional information regarding long-term cash-based awards and cash-settled deferred stock units.

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Taxes

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Taxes

Taxes

We believe that we have met all requirements for qualification as a REIT for federal income tax purposes. To qualify as a REIT, the Company must distribute at least 90% of its annual REIT taxable income and meet certain other requirements that relate to, among others, the assets it holds, the income it generates, and the composition of its stockholders.

For the six months ended June 30, 2022 and 2021, we recognized a benefit from income taxes of $12 million and a provision for income taxes of $18 million, respectively. The following is a reconciliation of the statutory federal and state tax rates to our effective tax rate at June 30, 2022 and 2021.

Table 22.1 – Reconciliation of Statutory Tax Rate to Effective Tax Rate

	June 30, 2022		June 30, 2021
Federal statutory rate	21.0	%	21.0	%
State statutory rate, net of Federal tax effect	8.6	%	8.6	%
Differences in taxable (loss) income from GAAP income	(22.4)	%	(14.1)	%
Change in valuation allowance	(4.4)	%	(3.3)	%
Dividends paid deduction	11.9	%	(3.3)	%
Effective Tax Rate	14.7	%	8.9	%

We assessed our tax positions for all open tax years (i.e., Federal, 2018 to 2022, and State, 2017 to 2022) at June 30, 2022 and December 31, 2021, and concluded that we had no uncertain tax positions that resulted in material unrecognized tax benefits.

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Segment Information

6 Months Ended

Jun. 30, 2022

Segment Reporting [Abstract]

Segment Information

Segment Information

Redwood operates in three segments: Residential Mortgage Banking, Business Purpose Mortgage Banking and Investment Portfolio. The accounting policies of the reportable segments are the same as those described in Note 3 — Summary of Significant Accounting Policies. For a full description of our segments, see Part I, Item 1—Business in our Annual Report on Form 10-K for the year ended December 31, 2021.

Segment contribution represents the measure of profit that management uses to assess the performance of our business segments and make resource allocation and operating decisions. Certain corporate expenses not directly assigned or allocated to one of our three segments, as well as activity from certain consolidated Sequoia entities, are included in the Corporate/Other column as reconciling items to our consolidated financial statements. These unallocated corporate expenses primarily include interest expense from our convertible notes and trust preferred securities, indirect general and administrative expenses and other expense.

The following tables present financial information by segment for the three and six months ended June 30, 2022 and 2021.

Table 23.1 – Business Segment Financial Information

	Three Months Ended June 30, 2022
(In Thousands)	Residential Mortgage Banking		Business Purpose Mortgage Banking		Investment Portfolio		Corporate/ Other		Total
Interest income	$	13,199	$	8,586	$	144,478	$	1,192	$	167,455
Interest expense	(8,297)		(4,258)		(102,589)		(11,823)		(126,967)
Net interest income	4,902		4,328		41,889		(10,631)		40,488
Non-interest (loss) income
Mortgage banking activities, net	(17,787)		(12,230)		—		—		(30,017)
Investment fair value changes, net	—		—		(98,111)		10,139		(87,972)
Other income, net	—		1,054		6,235		(283)		7,006
Realized gains, net	—		—		—		—		—
Total non-interest (loss) income, net	(17,787)		(11,176)		(91,876)		9,856		(110,983)
General and administrative expenses	(6,082)		(11,069)		(3,041)		(11,774)		(31,966)
Loan acquisition costs	(881)		(2,599)		—		—		(3,480)
Other expenses	74		(3,306)		(236)		—		(3,468)
Benefit from (provision for) income taxes	5,588		3,169		686		—		9,443
Segment Contribution	$	(14,186)	$	(20,653)	$	(52,578)	$	(12,549)
Net (Loss)									$	(99,966)
Non-cash amortization (expense) income, net	$	(760)	$	(3,480)	$	(1,450)	$	(2,137)	$	(7,827)

	Six Months Ended June 30, 2022
(In Thousands)	Residential Mortgage Banking		Business Purpose Mortgage Banking		Investment Portfolio		Corporate/ Other		Total
Interest income	$	26,166	$	13,427	$	315,050	$	2,212	$	356,855
Interest expense	(15,233)		(6,826)		(219,171)		(22,035)		(263,265)
Net interest income	10,933		6,601		95,879		(19,823)		93,590
Non-interest (loss) income
Mortgage banking activities, net	(9,852)		(3,850)		—		—		(13,702)
Investment fair value changes, net	—		—		(103,517)		9,425		(94,092)
Other income, net	—		1,629		11,517		(157)		12,989
Realized gains, net	—		—		2,581		—		2,581
Total non-interest (loss) income, net	(9,852)		(2,221)		(89,419)		9,268		(92,224)
General and administrative expenses	(12,183)		(21,541)		(6,174)		(26,922)		(66,820)
Loan acquisition costs	(2,298)		(5,647)		—		—		(7,945)
Other expenses	74		(6,840)		(787)		—		(7,553)
Benefit from (provision for) income taxes	6,595		6,450		(1,144)		—		11,901
Segment Contribution	$	(6,731)	$	(23,198)	$	(1,645)	$	(37,477)
Net (Loss)									$	(69,051)
Non-cash amortization (expense) income, net	$	(298)	$	(7,370)	$	(9,644)	$	(4,170)	$	(21,482)

	Three Months Ended June 30, 2021
(In Thousands)	Residential Mortgage Banking		Business Purpose Mortgage Banking		Investment Portfolio		Corporate/ Other		Total
Interest income	$	13,246	$	3,026	$	121,248	$	1,175	$	138,695
Interest expense	(7,618)		(1,521)		(88,693)		(10,233)		(108,065)
Net interest income	5,628		1,505		32,555		(9,058)		30,630
Non-interest income
Mortgage banking activities, net	21,265		33,154		—		—		54,419
Investment fair value changes, net	—		—		49,727		(247)		49,480
Other income, net	—		156		1,705		265		2,126
Realized gains, net	—		—		8,384		—		8,384
Total non-interest income, net	21,265		33,310		59,816		18		114,409
General and administrative expenses	(6,898)		(12,356)		(3,157)		(18,183)		(40,594)
Loan acquisition costs	(1,887)		(1,861)		—		—		(3,748)
Other expenses	—		(3,873)		(112)		—		(3,985)
Provision for income taxes	(3,725)		(2,182)		(780)		—		(6,687)
Segment Contribution	$	14,383	$	14,543	$	88,322	$	(27,223)
Net Income									$	90,025
Non-cash amortization (expense) income, net	$	(13)	$	(4,054)	$	7	$	(1,955)	$	(6,015)

	Six Months Ended June 30, 2021
(In Thousands)	Residential Mortgage Banking		Business Purpose Mortgage Banking		Investment Portfolio		Corporate/ Other		Total
Interest income	$	20,825	$	5,881	$	237,757	$	2,537	$	267,000
Interest expense	(12,365)		(3,120)		(174,638)		(20,494)		(210,617)
Net interest income	8,460		2,761		63,119		(17,957)		56,383
Non-interest income
Mortgage banking activities, net	82,700		54,326		—		—		137,026
Investment fair value changes, net	—		—		95,488		(921)		94,567
Other income, net	—		278		5,279		412		5,969
Realized gains, net	—		—		11,100		—		11,100
Total non-interest income (loss), net	82,700		54,604		111,867		(509)		248,662
General and administrative expenses	(19,587)		(22,550)		(6,321)		(35,687)		(84,145)
Loan acquisition costs	(3,291)		(3,353)		(659)		(4)		(7,307)
Other expenses	(6)		(7,650)		(442)		17		(8,081)
Provision for income taxes	(13,211)		(3,503)		(1,516)		—		(18,230)
Segment Contribution	$	55,065	$	20,309	$	166,048	$	(54,140)
Net Income									$	187,282
Non-cash amortization income (expense), net	$	(16)	$	(8,152)	$	(227)	$	(3,850)	$	(12,245)

The following table presents the components of Corporate/Other for the three and six months ended June 30, 2022 and 2021.

Table 23.2 – Components of Corporate/Other

	Three Months Ended June 30,
	2022						2021
(In Thousands)	Legacy Consolidated VIEs (1)		Other		Total		Legacy Consolidated VIEs (1)		Other		Total
Interest income	$	1,108	$	84	$	1,192	$	1,169	$	6	$	1,175
Interest expense	(967)		(10,856)		(11,823)		(755)		(9,478)		(10,233)
Net interest income	141		(10,772)		(10,631)		414		(9,472)		(9,058)
Non-interest income
Investment fair value changes, net	(336)		10,475		10,139		(216)		(31)		(247)
Other income	—		(283)		(283)		—		265		265
Total non-interest income, net	(336)		10,192		9,856		(216)		234		18
General and administrative expenses	—		(11,774)		(11,774)		—		(18,183)		(18,183)
Loan acquisition costs	—		—		—		—		—		—
Other expenses	—		—		—		—		—		—
Total	$	(195)	$	(12,354)	$	(12,549)	$	198	$	(27,421)	$	(27,223)

	Six Months Ended June 30,
	2022						2021
(In Thousands)	Legacy Consolidated VIEs (1)		Other		Total		Legacy Consolidated VIEs (1)		Other		Total
Interest income	$	2,120	$	92	$	2,212	$	2,517	$	20	$	2,537
Interest expense	(1,668)		(20,367)		(22,035)		(1,630)		(18,864)		(20,494)
Net interest income	452		(20,275)		(19,823)		887		(18,844)		(17,957)
Non-interest income
Investment fair value changes, net	(1,050)		10,475		9,425		(915)		(6)		(921)
Other income	—		(157)		(157)		—		412		412
Realized gains, net	—		—		—		—		—		—
Total non-interest income, net	(1,050)		10,318		9,268		(915)		406		(509)
General and administrative expenses	—		(26,922)		(26,922)		—		(35,687)		(35,687)
Loan acquisition costs	—		—		—		—		(4)		(4)
Other expenses	—		—		—		—		17		17
Total	$	(598)	$	(36,879)	$	(37,477)	$	(28)	$	(54,112)	$	(54,140)

(1)     Legacy consolidated VIEs represent Legacy Sequoia entities that are consolidated for GAAP financial reporting purposes. See Note 4 for further discussion on VIEs.    

The following table presents supplemental information by segment at June 30, 2022 and December 31, 2021.

Table 23.3 – Supplemental Segment Information

(In Thousands)	Residential Mortgage Banking		Business Purpose Lending Mortgage Banking		Investment Portfolio		Corporate/ Other		Total
June 30, 2022
Residential loans	$	990,924	$	—	$	5,378,886	$	208,789	$	6,578,599
Business purpose loans	—		503,945		4,698,992		—		5,202,937
Consolidated Agency multifamily loans	—		—		443,114		—		443,114
Real estate securities	3,994		—		280,284		—		284,278
Other investments	—		—		615,807		63,860		679,667
Intangible assets	—		34,720		—		—		34,720
Total assets	1,032,281		645,428		11,513,520		684,307		13,875,536
December 31, 2021
Residential loans	$	1,673,235	$	—	$	5,688,742	$	230,455	$	7,592,432
Business purpose loans	—		347,860		4,443,129		—		4,790,989
Consolidated Agency multifamily loans	—		—		473,514		—		473,514
Real estate securities	4,927		—		372,484		—		377,411
Other investments	—		—		606,267		35,702		641,969
Intangible assets	—		41,561		—		—		41,561
Total assets	1,716,285		464,967		11,770,486		755,206		14,706,944

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Subsequent Events	6 Months Ended
	Jun. 30, 2022
Subsequent Events [Abstract]
Subsequent Events	Subsequent EventsIn July 2022, we completed the previously-announced acquisition of Riverbend Funding, LLC for an initial cash purchase price paid at closing of approximately $44 million (subject to certain adjustments including potential earnout consideration).In July 2022, our Board of Directors approved an authorization for the repurchase of up to $125 million of our common stock, and also authorized the repurchase of outstanding debt securities, including convertible and exchangeable debt. This authorization replaced our previous $100 million stock repurchase authorization. This authorization has no expiration date and does not obligate us to acquire any specific number of shares or securities.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Basis of Presentation

Basis of PresentationThe consolidated financial statements presented herein are at June 30, 2022 and December 31, 2021, and for the three and six months ended June 30, 2022 and 2021. These interim unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and note disclosures normally included in our annual financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") — as prescribed by the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) — have been condensed or omitted in these interim financial statements according to these SEC rules and regulations. Management believes that the disclosures included in these interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the company's Annual Report on Form 10-K for the year ended December 31, 2021. In the opinion of management, all normal and recurring adjustments have been made to present fairly the financial condition of the Company at June 30, 2022 and results of operations for all periods presented. The results of operations for the three and six months ended June 30, 2022 should not be construed as indicative of the results to be expected for the full year.

Principles of Consolidation

Principles of Consolidation

In accordance with GAAP, we determine whether we must consolidate transferred financial assets and variable interest entities (“VIEs”) for financial reporting purposes. We currently consolidate the assets and liabilities of certain Sequoia securitization entities issued prior to 2012 ("Legacy Sequoia"), certain entities formed during and after 2012 in connection with the securitization of Redwood Select prime loans and Redwood Choice expanded-prime loans ("Sequoia"), entities formed in connection with the securitization of CoreVest single-family rental and bridge loans ("CAFL") and an entity formed in connection with the securitization of home equity investment contracts ("HEIs"). We also consolidate the assets and liabilities of certain Freddie Mac K-Series and Freddie Mac Seasoned Loans Structured Transaction ("SLST") securitizations in which we have invested. Each securitization entity is independent of Redwood and of each other and the assets and liabilities are not owned by and are not legal obligations of Redwood Trust, Inc. Our exposure to these entities is primarily through the financial interests we have purchased or retained, although for certain entities we are exposed to financial risks associated with our role as a sponsor or co-sponsor, servicing administrator, collateral administrator or depositor of these entities or as a result of our having sold assets directly or indirectly to these entities.

For financial reporting purposes, the underlying loans owned at the consolidated Legacy Sequoia, Sequoia and Freddie Mac SLST entities are shown under Residential loans held-for-investment, at fair value, the underlying loans at the consolidated Freddie Mac K-Series entity are shown under Consolidated Agency multifamily loans, at fair value, the underlying single-family rental and bridge loans at the consolidated CAFL entities are shown under Business purpose loans held-for-investment, at fair value, and the underlying HEIs at the consolidated HEI securitization entity are shown under Other investments, at fair value on our consolidated balance sheets. The asset-backed securities (“ABS”) issued to third parties by these entities are shown under ABS issued. In our consolidated statements of income, we record interest income on the loans owned at these entities and interest expense on the ABS issued by these entities as well as fair value changes, other income and expenses associated with these entities' activities. See Note 14 for further discussion on ABS issued.

We also consolidate two partnerships ("Servicing Investment" entities) through which we have invested in servicing-related assets. We maintain an 80% ownership interest in each entity and have determined that we are the primary beneficiary of these partnerships.

Use of Estimates

Use of Estimates

The preparation of financial statements requires us to make a number of significant estimates. These include estimates of fair value of certain assets and liabilities, amounts and timing of credit losses, prepayment rates, and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the consolidated financial statements and the reported amounts of certain revenues and expenses during the reported periods. It is likely that changes in these estimates (e.g., valuation changes due to supply and demand, credit performance, prepayments, interest rates, or other reasons) will occur in the near term. Our estimates are inherently subjective in nature and actual results could differ from our estimates and the differences could be material.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Newly Adopted Accounting Standards Updates ("ASUs")

In August 2020, the FASB issued ASU 2020-06, "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40)." This new guidance simplifies the accounting for convertible debt by reducing the number of accounting models to separately present certain conversion features in equity. This new guidance was effective for fiscal years beginning after December 31, 2021. We adopted this guidance in the first quarter of 2022, which did not have a material impact on our consolidated financial statements.

Other Recent Accounting Pronouncements

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.” ASU 2022-03 was issued to (1) to clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The amendments in this update are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. We are evaluating the accounting and disclosure requirements of ASU 2022-03 and we plan to adopt this new guidance by the required date. We do not anticipate that this update will have a material impact on our financial statements.

In March 2022, the FASB issued ASU 2022-02, "Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures." ASU 2022-02 addresses areas identified by the FASB as part of its post-implementation review of the credit losses standard (ASU 2016-13) that introduced the current expected credit loss ("CECL") model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require a public business entity to disclose current-period gross writeoffs for financing receivables and net investment in leases by year of origination in the vintage disclosures. This guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. We plan to adopt this new guidance by the required date and do not anticipate that this update will have a material impact on our consolidated financial statements.

In March 2022, the FASB issued ASU 2022-01, "Derivatives and Hedging (Topic 815), Fair Value Hedging - Portfolio Layer Method," which will expand companies' abilities to hedge the benchmark interest rate risk of portfolios of financial assets (or beneficial interests) in a fair value hedge. The ASU expands the use of the portfolio layer method (previously referred to as the last-of-layer method) to allow multiple hedges of a single closed portfolio of assets using spot starting, forward starting, and amortizing-notional swaps. The ASU also permits both prepayable and non-prepayable financial assets to be included in the closed portfolio of assets hedged in a portfolio layer hedge. The ASU further requires that basis adjustments not be allocated to individual assets for active portfolio layer method hedges, but rather be maintained on the closed portfolio of assets as a whole. This guidance is effective for public business entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. We plan to adopt this new guidance by the required date and do not anticipate that this update will have a material impact on our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." This new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848): Scope." This new guidance clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. This new guidance is effective for all entities as of March 12, 2020 through December 31, 2022. We are currently evaluating the impact the adoption of this standard would have on our consolidated financial statements. Through June 30, 2022, we have not elected to apply the optional expedients and exceptions to any of our existing contracts, hedging relationships, or other transactions.

We have an established cross-functional group that has evaluated our exposure to LIBOR, reviewed relevant contracts and has monitored regulatory updates to assess the potential impact to our business, processes and technology from the ultimate full cessation of LIBOR in 2023, and has established a LIBOR transition plan to facilitate an orderly transition to alternative reference rates. We continue to remain on track with our LIBOR transition plan, which requires different solutions depending on the underlying asset or liability with LIBOR exposure. At June 30, 2022, our primary LIBOR exposure included the following: $868 million of repo or warehouse debt, $468 million of interest rate swaps, $740 million of bridge loans, and $140 million of trust preferred securities and subordinated notes debt. Since December 31, 2021, certain of our contracts, such as interest rate swaps, have experienced an orderly market transition and we have transitioned a substantial portion of our derivative positions off of LIBOR-benchmarks. Other contracts, such as warehouse debt agreements, require bilateral amendments, many of which we have amended or are currently in the process of amending.

We anticipate most of these facilities will be amended in 2022, with sufficient time remaining to resolve the remainder. In early 2022, we began benchmarking all newly originated bridge loans to the Secured Overnight Financing Rate (“SOFR”), and our existing portfolio of bridge loans are short-dated and we expect the vast majority to mature before the LIBOR cessation date in 2023. Additionally, as the result of legislation that was passed in the state of New York, our trust preferred securities and subordinated notes are expected to convert to SOFR upon the cessation of LIBOR.

Balance Sheet Netting

Balance Sheet Netting Certain of our derivatives and short-term debt are subject to master netting arrangements or similar agreements. Under GAAP, in certain circumstances we may elect to present certain financial assets, liabilities and related collateral subject to master netting arrangements in a net position on our consolidated balance sheets. However, we do not report any of these financial assets or liabilities on a net basis, and instead present them on a gross basis on our consolidated balance sheets.

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Basis of Presentation (Tables)

6 Months Ended

Jun. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Finite-Lived Intangible Assets

The table below presents the amortization period and carrying value of our intangible assets, net of accumulated amortization at June 30, 2022.

Table 2.1 – Intangible Assets – Activity

	Intangible Assets at Acquisition		Accumulated Amortization at June 30, 2022		Carrying Value at June 30, 2022		Weighted Average Amortization Period (in years)
(Dollars in Thousands)
Borrower network	$	45,300	$	(17,527)	$	27,773	7
Broker network	18,100		(12,067)		6,033		5
Non-compete agreements	9,500		(8,858)		642		3
Tradenames	4,000		(3,728)		272		3
Developed technology	1,800		(1,800)		—		2
Loan administration fees on existing loan assets	2,600		(2,600)		—		1
Total	$	81,300	$	(46,580)	$	34,720	6

Finite-lived Intangible Assets Amortization Expense

. Estimated future amortization expense is summarized in the table below.

Table 2.2 – Intangible Asset Amortization Expense by Year

(In Thousands)	June 30, 2022
2022 (6 months)	$	5,959
2023	10,091
2024	7,075
2025	6,471
2026	5,124
Total Future Intangible Asset Amortization	$	34,720

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Offsetting of Financial Assets, Liabilities, and Collateral

The table below presents financial assets and liabilities that are subject to master netting arrangements or similar agreements categorized by financial instrument, together with corresponding financial instruments and corresponding collateral received or pledged at June 30, 2022 and December 31, 2021.

Table 3.1 – Offsetting of Financial Assets, Liabilities, and Collateral

	Gross Amounts of Recognized Assets (Liabilities)		Gross Amounts Offset in Consolidated Balance Sheet		Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet		Gross Amounts Not Offset in Consolidated Balance Sheet (1)				Net Amount
June 30, 2022 (In Thousands)							Financial Instruments		Cash Collateral (Received) Pledged
Assets (2)
Interest rate agreements	$	29,601	$	—	$	29,601	$	(2,445)	$	(6,451)	$	20,705
TBAs	3,104		—		3,104		(530)		(2,574)		—
Futures	1,875		—		1,875		(1,615)		(2)		258
Total Assets	$	34,580	$	—	$	34,580	$	(4,590)	$	(9,027)	$	20,963
Liabilities (2)
Interest rate agreements	$	(2,445)	$	—	$	(2,445)	$	2,445	$	—	$	—
TBAs	(2,004)		—		(2,004)		530		1,474		—
Futures	(1,615)		—		(1,615)		1,615		—		—
Loan warehouse debt	(423,619)		—		(423,619)		423,619		—		—
Total Liabilities	$	(429,683)	$	—	$	(429,683)	$	428,209	$	1,474	$	—

	Gross Amounts of Recognized Assets (Liabilities)		Gross Amounts Offset in Consolidated Balance Sheet		Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet		Gross Amounts Not Offset in Consolidated Balance Sheet (1)				Net Amount
December 31, 2021 (In Thousands)							Financial Instruments		Cash Collateral (Received) Pledged
Assets (2)
Interest rate agreements	$	18,929	$	—	$	18,929	$	(1,251)	$	(16,046)	$	1,632
TBAs	2,880		—		2,880		(633)		(704)		1,543
Futures	25		—		25		(25)		—		—
Total Assets	$	21,834	$	—	$	21,834	$	(1,909)	$	(16,750)	$	3,175
Liabilities (2)
Interest rate agreements	$	(1,251)	$	—	$	(1,251)	$	1,251	$	—	$	—
TBAs	$	(658)	$	—	$	(658)	$	633	$	15	$	(10)
Futures	(905)		—		(905)		25		880		—
Loan warehouse debt	(572,720)		—		(572,720)		572,720		—		—
Total Liabilities	$	(575,534)	$	—	$	(575,534)	$	574,629	$	895	$	(10)

(1)Amounts presented in these columns are limited in total to the net amount of assets or liabilities presented in the prior column by instrument. In certain cases, there is excess cash collateral or financial assets we have pledged to a counterparty (which may, in certain circumstances, be a clearinghouse) that exceed the financial liabilities subject to a master netting arrangement or similar agreement. Additionally, in certain cases, counterparties may have pledged excess cash collateral to us that exceeds our corresponding financial assets. In each case, any of these excess amounts are excluded from the table although they are separately reported in our consolidated balance sheets as assets or liabilities, respectively.

(2)Interest rate agreements and TBAs are components of derivatives instruments on our consolidated balance sheets. Loan warehouse debt, which is secured by certain residential and business purpose loans, and security repurchase agreements are components of Short-term debt and Long-term debt on our consolidated balance sheets.

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Principles of Consolidation (Tables)

6 Months Ended

Jun. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Consolidated VIEs

The following table presents a summary of the assets and liabilities of our consolidated VIEs.     

Table 4.1 – Assets and Liabilities of Consolidated VIEs

June 30, 2022	Legacy Sequoia		Sequoia		CAFL(1)		Freddie Mac SLST(1)		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Residential loans, held-for-investment	$	208,788	$	3,525,459	$	—	$	1,631,285	$	—	$	—	$	—	$	5,365,532
Business purpose loans, held-for-investment	—		—		3,588,428		—		—		—		—		3,588,428
Consolidated Agency multifamily loans	—		—		—		—		443,114		—		—		443,114
Other investments	—		—		—		—		—		305,379		146,215		451,594
Cash and cash equivalents	—		—		—		—		—		14,399		—		14,399
Restricted cash	143		10		8,688		—		—		26,236		4,120		39,197
Accrued interest receivable	215		11,317		14,955		5,378		1,304		403		—		33,572
Other assets	410		—		5,320		2,299		—		7,605		50		15,684
Total Assets	$	209,556	$	3,536,786	$	3,617,391	$	1,638,962	$	444,418	$	354,022	$	150,385	$	9,951,520
Short-term debt	$	—	$	—	$	—	$	—	$	—	$	231,846	$	—	$	231,846
Accrued interest payable	171		9,232		10,610		3,720		1,178		223		—		25,134
Accrued expenses and other liabilities	—		10		6,996		—		—		25,466		25,422		57,894
Asset-backed securities issued	207,647		3,288,682		3,207,867		1,358,459		411,380		—		110,111		8,584,146
Total Liabilities	$	207,818	$	3,297,924	$	3,225,473	$	1,362,179	$	412,558	$	257,535	$	135,533	$	8,899,020
Value of our investments in VIEs(1)	$	1,552	$	236,777	$	388,849	$	275,127	$	31,732	$	96,487	$	14,852	$	1,045,376
Number of VIEs	20		17		18		3		1		3		1		63

December 31, 2021	Legacy Sequoia		Sequoia		CAFL(1)		Freddie Mac SLST(1)		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Residential loans, held-for-investment	$	230,455	$	3,628,465	$	—	$	1,888,230	$	—	$	—	$	—	$	5,747,150
Business purpose loans, held-for-investment	—		—		3,766,316		—		—		—		—		3,766,316
Consolidated Agency multifamily loans	—		—		—		—		473,514		—		—		473,514
Other investments	—		—		—		—		—		384,754		159,553		544,307
Cash and cash equivalents	—		—		—		—		—		6,481		—		6,481
Restricted cash	148		5		15,221		—		—		25,420		5,292		46,086
Accrued interest receivable	210		10,885		15,737		5,792		1,315		1,462		—		35,401
Other assets	61		—		32,510		2,028		—		7,177		50		41,826
Total Assets	$	230,874	$	3,639,355	$	3,829,784	$	1,896,050	$	474,829	$	425,294	$	164,895	$	10,661,081
Short-term debt	$	—	$	—	$	—	$	—	$	—	$	294,447	$	—	$	294,447
Accrued interest payable	99		8,452		11,030		4,055		1,190		192		—		25,018
Accrued expenses and other liabilities	—		5		1,171		—		—		28,115		17,034		46,325
Asset-backed securities issued	227,881		3,383,048		3,474,898		1,588,463		441,857		—		137,410		9,253,557
Total Liabilities	$	227,980	$	3,391,505	$	3,487,099	$	1,592,518	$	443,047	$	322,754	$	154,444	$	9,619,347
Value of our investments in VIEs(1)	$	2,634	$	245,417	$	339,419	$	301,795	$	31,657	$	102,540	$	10,451	$	1,033,913
Number of VIEs	20		16		16		3		1		3		1		60

(1)Value of our investments in VIEs, as presented in this table, represent the fair value of our economic interests in the VIEs only for consolidated VIEs we account for under the CFE election. CAFL includes SFR loan securitizations we account for under the CFE election and two bridge loan securitizations for which we did not make the CFE election. As of June 30, 2022 and December 31, 2021, the fair value of our interests in the CAFL SFR securitizations were $307 million and $302 million, respectively, and the remaining values were associated with our interests in the CAFL Bridge securitizations, for which the ABS issued is carried at amortized historical cost. Freddie Mac SLST includes securitizations we account for under the CFE election and also includes ABS issued in relation to a resecuritization of the securities we own in the consolidated Freddie Mac SLST VIEs, that we account for at amortized historical cost. As of June 30, 2022 and December 31, 2021, the fair value of our interests in the Freddie Mac SLST securitizations accounted for under the CFE election were $390 million and $445 million, respectively, with the difference from the tables above representing ABS issued and carried at amortized historical cost.

The following table presents income (loss) from these VIEs for the three and six months ended June 30, 2022 and 2021.

Table 4.2 – Income (Loss) from Consolidated VIEs

	Three Months Ended June 30, 2022
	Legacy Sequoia		Sequoia		CAFL		Freddie Mac SLST		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Interest income	$	1,108	$	31,923	$	56,608	$	16,553	$	4,732	$	7,568	$	—	$	118,492
Interest expense	(967)		(28,329)		(41,923)		(13,372)		(4,351)		(1,842)		—		(90,784)
Net interest income	141		3,594		14,685		3,181		381		5,726		—		27,708
Non-interest income
Investment fair value changes, net	(336)		(5,886)		(22,109)		(35,940)		(190)		(4,505)		1,201		(67,765)
Other income	—		—		255		—		—		—		—		255
Total non-interest income, net	(336)		(5,886)		(21,854)		(35,940)		(190)		(4,505)		1,201		(67,510)
General and administrative expenses	—		—		—		—		—		(44)		—		(44)
Other expenses	—		—		—		—		—		(235)		—		(235)
Income (loss) from Consolidated VIEs	$	(195)	$	(2,292)	$	(7,169)	$	(32,759)	$	191	$	942	$	1,201	$	(40,081)

	Six Months Ended June 30, 2022
	Legacy Sequoia		Sequoia		CAFL		Freddie Mac SLST		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Interest income	$	2,120	$	64,021	$	133,942	$	33,753	$	9,485	$	15,487	$	—	$	258,808
Interest expense	(1,668)		(56,500)		(100,403)		(27,457)		(8,722)		(3,504)		—		(198,254)
Net interest income	452		7,521		33,539		6,296		763		11,983		—		60,554
Non-interest income
Investment fair value changes, net	(1,050)		(9,708)		(19,445)		(32,904)		74		(7,973)		4,612		(66,394)
Other income	—		—		345		—		—		—		—		345
Total non-interest income, net	(1,050)		(9,708)		(19,100)		(32,904)		74		(7,973)		4,612		(66,049)
General and administrative expenses	—		—		—		—		—		(75)		—		(75)
Other expenses	—		—		—		—		—		(786)		—		(786)
Income (loss) from Consolidated VIEs	$	(598)	$	(2,187)	$	14,439	$	(26,608)	$	837	$	3,149	$	4,612	$	(6,356)

	Three Months Ended June 30, 2021
	Legacy Sequoia		Sequoia		CAFL		Freddie Mac SLST		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Interest income	$	1,169	$	14,492	$	54,849	$	19,506	$	4,860	$	4,041	$	—	$	98,917
Interest expense	(755)		(11,374)		(43,201)		(16,611)		(4,478)		(1,110)		—		(77,529)
Net interest income	414		3,118		11,648		2,895		382		2,931		—		21,388
Non-interest income
Investment fair value changes, net	(216)		4,906		3,697		36,316		1,855		(2,320)		—		44,238
Total non-interest income, net	(216)		4,906		3,697		36,316		1,855		(2,320)		—		44,238
General and administrative expenses	—		—		—		—		—		(52)		—		(52)
Other expenses	—		—		—		—		—		(112)		—		(112)
Income (loss) from Consolidated VIEs	$	198	$	8,024	$	15,345	$	39,211	$	2,237	$	447	$	—	$	65,462

	Six Months Ended June 30, 2021
	Legacy Sequoia		Sequoia		CAFL		Freddie Mac SLST		Freddie Mac K-Series		Servicing Investment		HEI		Total Consolidated VIEs
(Dollars in Thousands)
Interest income	$	2,517	$	29,975	$	103,722	$	39,665	$	9,646	$	8,263	$	—	$	193,788
Interest expense	(1,630)		(23,480)		(81,054)		(33,982)		(8,834)		(2,396)		—		(151,376)
Net interest income	887		6,495		22,668		5,683		812		5,867		—		42,412
Non-interest income
Investment fair value changes, net	(915)		9,804		3,411		40,433		10,776		(3,566)		—		59,943
Total non-interest income, net	(915)		9,804		3,411		40,433		10,776		(3,566)		—		59,943
General and administrative expenses	—		—		—		—		—		(90)		—		(90)
Other expenses	—		—		—		—		—		(442)		—		(442)
Income (loss) from Consolidated VIEs	$	(28)	$	16,299	$	26,079	$	46,116	$	11,588	$	1,769	$	—	$	101,823

Securitization Activity Related to Unconsolidated Variable Interest Entity's Sponsored by Redwood

The following table presents information related to securitization transactions that occurred during the three and six months ended June 30, 2022 and 2021.

Table 4.3 – Securitization Activity Related to Unconsolidated VIEs Sponsored by Redwood

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Principal balance of loans transferred	$	—	$	355,924	$	—	$	1,231,803
Trading securities retained, at fair value	—		1,225		—		7,774
AFS securities retained, at fair value	—		522		—		1,600

Cash Flows Related to Unconsolidated Variable Interest Entity's Sponsored by Redwood

The following table summarizes the cash flows during the three and six months ended June 30, 2022 and 2021 between us and the unconsolidated VIEs sponsored by us and accounted for as sales since 2012.

Table 4.4 – Cash Flows Related to Unconsolidated VIEs Sponsored by Redwood

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Proceeds from new transfers	$	—	$	361,673	$	—	$	1,266,063
MSR fees received	764		1,336		1,628		2,943
Funding of compensating interest, net	(14)		(70)		(30)		(170)
Cash flows received on retained securities	3,158		16,764		17,284		25,393

Assumptions Related to Assets Retained from Unconsolidated Variable Interest Entity's Sponsored by Redwood

The following table presents the key weighted-average assumptions used to value securities retained at the date of securitization for securitizations completed during the three and six months ended June 30, 2022 and 2021.

Table 4.5 – Assumptions Related to Assets Retained from Unconsolidated VIEs Sponsored by Redwood

	Three Months Ended June 30, 2022		Three Months Ended June 30, 2021
At Date of Securitization	Senior IO Securities	Subordinate Securities	Senior IO Securities	Subordinate Securities
Prepayment rates	N/A	N/A	8 %	8 %
Discount rates	N/A	N/A	15 %	7 %
Credit loss assumptions	N/A	N/A	0.25 %	0.25 %

	Six Months Ended June 30, 2022		Six Months Ended June 30, 2021
At Date of Securitization	Senior IO Securities	Subordinate Securities	Senior IO Securities		Subordinate Securities
Prepayment rates	N/A	N/A	11	%	11 %
Discount rates	N/A	N/A	15 %		6 %
Credit loss assumptions	N/A	N/A	0.23 %		0.23 %

Unconsolidated Variable Interest Entity's Sponsored by Redwood

The following table presents additional information at June 30, 2022 and December 31, 2021, related to unconsolidated VIEs sponsored by Redwood and accounted for as sales since 2012.

Table 4.6 – Unconsolidated VIEs Sponsored by Redwood

(In Thousands)	June 30, 2022		December 31, 2021
On-balance sheet assets, at fair value:
Interest-only, senior and subordinate securities, classified as trading	$	27,293	$	18,214
Subordinate securities, classified as AFS	85,269		127,542
Mortgage servicing rights	11,092		6,450
Maximum loss exposure (1)	$	123,654	$	152,206
Assets transferred:
Principal balance of loans outstanding	$	4,281,806	$	4,959,234
Principal balance of loans 30+ days delinquent	27,683		30,594

(1)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.

Key Assumptions and Sensitivity Analysis for Assets Retained from Unconsolidated Variable Interest Entity's Sponsored by Redwood

The following table presents key economic assumptions for assets retained from unconsolidated VIEs and the sensitivity of their fair values to immediate adverse changes in those assumptions at June 30, 2022 and December 31, 2021.

Table 4.7 – Key Assumptions and Sensitivity Analysis for Assets Retained from Unconsolidated VIEs Sponsored by Redwood

June 30, 2022	MSRs			Senior Securities (1)			Subordinate Securities
(Dollars in Thousands)
Fair value at June 30, 2022	$	11,092		$	27,293		$	85,269
Expected life (in years) (2)	6			6			15
Prepayment speed assumption (annual CPR) (2)	10		%	11		%	10		%
Decrease in fair value from:
10% adverse change	$	1,402		$	1,002		$	568
25% adverse change	3,405			2,406			1,323
Discount rate assumption (2)	11		%	12		%	8		%
Decrease in fair value from:
100 basis point increase	$	1,649		$	910		$	8,522
200 basis point increase	3,180			1,759			15,860
Credit loss assumption (2)	N/A			0.03		%	0.03		%
Decrease in fair value from:
10% higher losses	N/A			N/A			$	42
25% higher losses	N/A			N/A			103

December 31, 2021	MSRs			Senior Securities (1)			Subordinate Securities
(Dollars in Thousands)
Fair value at December 31, 2021	$	6,450		$	18,214		$	127,542
Expected life (in years) (2)	3			4			5
Prepayment speed assumption (annual CPR) (2)	29		%	23		%	32 %
Decrease in fair value from:
10% adverse change	$	447		$	1,130		$	531
25% adverse change	1,020			2,596			1,440
Discount rate assumption (2)	12 %			16		%	5		%
Decrease in fair value from:
100 basis point increase	$	152		$	426		$	4,801
200 basis point increase	297			829			9,139
Credit loss assumption (2)	N/A			0.35		%	0.35		%
Decrease in fair value from:
10% higher losses	N/A			$	—		$	1,528
25% higher losses	N/A			—			3,819

(1)Senior securities included $27 million and $18 million of interest-only securities at June 30, 2022 and December 31, 2021, respectively.

(2)Expected life, prepayment speed assumption, discount rate assumption, and credit loss assumption presented in the tables above represent weighted averages.

Schedule of Third-Party Sponsored VIE Summary

The following table presents a summary of our interests in third-party VIEs at June 30, 2022 and December 31, 2021, grouped by asset type.

Table 4.8 – Third-Party Sponsored VIE Summary

(In Thousands)	June 30, 2022		December 31, 2021
Mortgage-Backed Securities
Senior	$	4,205	$	3,572
Subordinate	167,512		228,083
Total Mortgage-Backed Securities	171,717		231,655
Excess MSR	8,633		10,400
Total Investments in Third-Party Sponsored VIEs	$	180,350	$	242,055

XML

Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Carrying Values and Fair Values of Assets and Liabilities

The following table presents the carrying values and estimated fair values of assets and liabilities that are required to be recorded or disclosed at fair value at June 30, 2022 and December 31, 2021.

Table 5.1 – Carrying Values and Fair Values of Assets and Liabilities

	June 30, 2022				December 31, 2021
	Carrying Value		Fair Value		Carrying Value		Fair Value
(In Thousands)
Assets
Residential loans, held-for-sale, at fair value	$	1,213,067	$	1,213,067	$	1,845,248	$	1,845,248
Residential loans, held-for-investment, at fair value	5,365,531		5,365,531		5,747,150		5,747,150
Business purpose loans, held-for-sale, at fair value	505,171		505,171		358,309		358,309
Business purpose loans, held-for-investment, at fair value	4,697,766		4,697,766		4,432,680		4,432,680
Consolidated Agency multifamily loans, at fair value	443,114		443,114		473,514		473,514
Real estate securities, at fair value	284,278		284,278		377,411		377,411
Servicer advance investments (1)	273,210		273,210		350,923		350,923
MSRs (1)	23,560		23,560		12,438		12,438
Excess MSRs (1)	40,803		40,803		44,231		44,231
HEIs (1)	276,366		276,366		192,740		192,740
Other investments (1)	10,869		10,869		12,663		12,663
Cash and cash equivalents	371,296		371,296		450,485		450,485
Restricted cash	72,558		72,558		80,999		80,999
Derivative assets	36,587		36,587		26,467		26,467
REO (2)	7,813		9,170		36,126		39,272
Margin receivable (2)	11,420		11,420		7,269		7,269
Liabilities
Short-term debt	$	1,869,822	$	1,869,822	$	2,177,362	$	2,177,362
Margin payable (3)	15,023		15,023		24,368		24,368
Guarantee obligations (3)	6,768		6,241		7,459		7,133
HEI securitization non-controlling interest	25,422		25,422		17,035		17,035
Derivative liabilities	6,591		6,591		3,317		3,317
ABS issued, net
At fair value	7,993,953		7,993,953		8,843,147		8,843,147
At amortized cost	590,193		569,731		410,410		410,471
Other long-term debt, net (4)	1,104,050		1,101,622		988,483		989,570
Convertible notes, net (4)	723,267		684,922		513,629		537,300
Trust preferred securities and subordinated notes, net (4)	138,744		83,700		138,721		97,650

(1)These investments are included in Other investments on our consolidated balance sheets.

(2)These assets are included in Other assets on our consolidated balance sheets.

(3)These liabilities are included in Accrued expenses and other liabilities on our consolidated balance sheets.

(4)These liabilities are included in Long-Term debt, net of our consolidated balance sheets.

Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table presents the assets and liabilities that are reported at fair value on our consolidated balance sheets on a recurring basis at June 30, 2022 and December 31, 2021, as well as the fair value hierarchy of the valuation inputs used to measure fair value.

Table 5.2 – Assets and Liabilities Measured at Fair Value on a Recurring Basis

June 30, 2022	Carrying Value		Fair Value Measurements Using
(In Thousands)			Level 1		Level 2		Level 3
Assets
Residential loans	$	6,578,566	$	—	$	—	$	6,578,566
Business purpose loans	5,202,938		—		—		5,202,938
Consolidated Agency multifamily loans	443,114		—		—		443,114
Real estate securities	284,278		—		—		284,278
Servicer advance investments	273,210		—		—		273,210
MSRs	23,560		—		—		23,560
Excess MSRs	40,803		—		—		40,803
HEIs	276,366		—		—		276,366
Other investments	10,869		—		—		10,869
Derivative assets	36,587		4,979		29,601		2,007
Liabilities
HEI securitization non-controlling interest	$	25,422	$	—	$	—	$	25,422
Derivative liabilities	6,591		3,619		2,445		527
ABS issued	7,993,953		—		—		7,993,953

December 31, 2021	Carrying Value		Fair Value Measurements Using
(In Thousands)			Level 1		Level 2		Level 3
Assets
Residential loans	$	7,592,398	$	—	$	—	$	7,592,398
Business purpose loans	4,790,989		—		—		4,790,989
Consolidated Agency multifamily loans	473,514		—		—		473,514
Real estate securities	377,411		—		—		377,411
Servicer advance investments	350,923		—		—		350,923
MSRs	12,438		—		—		12,438
Excess MSRs	44,231		—		—		44,231
HEIs	192,740		—		—		192,740
Other investments	17,574		—		—		17,574
Derivative assets	26,467		2,906		18,928		4,633
Liabilities
HEI securitization non-controlling interest	$	17,035	$	—	$	—	$	17,035
Derivative liabilities	3,317		1,563		1,251		503
ABS issued	8,843,147		—		—		8,843,147

Changes in Level 3 Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table presents additional information about Level 3 assets and liabilities measured at fair value on a recurring basis for the six months ended June 30, 2022.

Table 5.3 – Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis

	Assets
	Residential Loans		Business Purpose Loans		Multifamily Loans		Trading Securities		AFS Securities		Servicer Advance Investments		Excess MSRs		HEIs		MSRs and Other Investments
(In Thousands)
Beginning balance -    December 31, 2021	$	7,592,398	$	4,790,989	$	473,514	$	170,619	$	206,792	$	350,923	$	44,231	$	192,740	$	25,101
Acquisitions	3,247,960		122,065		—		5,006		10,000		—		—		97,389		8,293
Originations	—		1,721,032		—		—		—		—		—		—		—
Sales	(3,050,759)		(331,750)		—		(23,329)		—		—		—		—		(2,231)
Principal paydowns	(551,470)		(719,690)		(3,971)		(1,018)		(25,015)		(71,401)		—		(25,826)		(30)
Gains (losses) in net income (loss), net	(657,601)		(378,745)		(26,429)		(17,498)		11,730		(6,312)		(3,428)		12,063		6,875
Unrealized losses in OCI, net	—		—		—		—		(53,009)		—		—		—		—
Other settlements, net (1)	(1,962)		(963)		—		—		—		—		—		—		(3,579)
Ending balance -   June 30, 2022	$	6,578,566	$	5,202,938	$	443,114	$	133,780	$	150,498	$	273,210	$	40,803	$	276,366	$	34,429

			Liabilities
	Derivatives (2)			HEI Securitization Non-Controlling Interest		ABS Issued
(In Thousands)
Beginning balance - December 31, 2021	$	4,130		$	17,035	$	8,843,147
Acquisitions	—			—		952,711
Principal paydowns	—			—		(925,650)
Gains (losses) in net income (loss), net	(51,265)			6,218		(876,255)
Other settlements, net (1)	48,615			—		—
Ending balance - June 30, 2022	$	1,480		$	23,253	$	7,993,953

(1)     Other settlements, net for residential and business purpose loans represents the transfer of loans to REO, and for derivatives, the transfer of the fair value of loan purchase and interest rate lock commitments at the time loans are acquired to the basis of residential and single-family rental business purpose loans, and for MSRs and other investments, primarily represents an investment that was exchanged into a new instrument that is no longer measured at fair value on a recurring basis.

(2)     For the purpose of this presentation, derivative assets and liabilities, which consist of loan purchase commitments, and interest rate lock commitments, are presented on a net basis.

Portion of Net Gains (Losses) Attributable to Level 3 Assets and Liabilities Still Held and Included in Net Income

The following table presents the portion of fair value gains or losses included in our consolidated statements of income that were attributable to Level 3 assets and liabilities recorded at fair value on a recurring basis and held at June 30, 2022 and 2021. Gains or losses incurred on assets or liabilities sold, matured, called, or fully written down during the three and six months ended June 30, 2022 and 2021 are not included in this presentation.

Table 5.4 – Portion of Net Fair Value Gains (Losses) Attributable to Level 3 Assets and Liabilities Still Held at June 30, 2022 and 2021 Included in Net Income (Loss)

	Included in Net Income (Loss)
	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Assets
Residential loans at Redwood	$	(15,995)	$	14,130	$	(31,858)	$	10,481
Business purpose loans	(28,385)		28,404		(36,566)		40,003
Net investments in consolidated Sequoia entities (1)	(6,222)		4,693		(11,203)		8,893
Net investments in consolidated Freddie Mac SLST entities (1)	(36,014)		36,137		(33,074)		40,225
Net investments in consolidated Freddie Mac K-Series entities (1)	(190)		1,855		74		10,776
Net investments in consolidated CAFL SFR entities (1)	(21,828)		2,908		(17,780)		2,556
Net investment in consolidated HEI securitization entity (1)	3,371		—		13,000		—
Trading securities	(17,501)		1,772		(19,884)		2,262
Servicer advance investments	(3,231)		(940)		(6,313)		(1,100)
MSRs	4,248		(330)		7,644		273
Excess MSRs	(2,220)		(2,477)		(3,428)		(4,430)
HEIs at Redwood	1,549		2,080		2,701		7,395
Loan purchase and interest rate lock commitments	2,056		14,550		2,007		14,171
Liabilities
HEI securitization non-controlling interest	$	(2,170)	$	—	$	(8,388)	$	—
Loan purchase commitments	(488)		(696)		(527)		(724)

(1)    Represents the portion of net fair value gains or losses included in our consolidated statements of income (loss) related to securitized loans, securitized HEIs, and the associated ABS issued at our consolidated securitization entities held at June 30, 2022 and 2021, which netted together represent the change in value of our investments at the consolidated VIEs accounted for under CFE election, excluding REO.

Assets and Liabilities Measured at Fair Value on Non-Recurring Basis

The following table presents information on assets recorded at fair value on a non-recurring basis at June 30, 2022. This table does not include the carrying value and gains or losses associated with the asset types below that were not recorded at fair value on our consolidated balance sheets at June 30, 2022.

Table 5.5 – Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis at June 30, 2022

									Gain (Loss) for
June 30, 2022	Carrying Value		Fair Value Measurements Using						Three Months Ended		Six Months Ended
(In Thousands)			Level 1		Level 2		Level 3		June 30, 2022		June 30, 2022
Assets
REO	$	1,380	$	—	$	—	$	1,380	$	—	$	—
Strategic investments	17,240		—		—		17,240		9,990		9,990

Market Valuation Gains and Losses, Net

The following table presents the net market valuation gains and losses recorded in each line item of our consolidated statements of income for the three and six months ended June 30, 2022 and 2021.

Table 5.6 – Market Valuation Gains and Losses, Net

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Mortgage Banking Activities, Net
Residential loans held-for-sale, at fair value	$	(24,517)	$	24,988	$	(51,716)	$	48,100
Residential loan purchase commitments	(8,897)		51,919		(50,520)		(466)
Single-family rental loans held-for-sale, at fair value	(40,034)		25,222		(64,502)		35,470
Single-family rental loan interest rate lock commitments	40		744		(685)		744
Bridge loans	116		2,225		2,251		3,269
Trading securities (1)	1,315		(1,095)		4,101		(374)
Risk management derivatives, net	25,387		(58,244)		115,774		34,578
Total mortgage banking activities, net (2)	$	(46,590)	$	45,759	$	(45,297)	$	121,321
Investment Fair Value Changes, Net
Residential loans held-for-sale, at fair value (called Sequoia loans)	$	(8,010)	$	1,290	$	(12,262)	$	1,607
Bridge loans held-for-investment	(9,559)		(62)		(11,702)		3,242
Trading securities	(17,358)		2,893		(21,600)		23,521
Servicer advance investments	(3,231)		(940)		(6,312)		(1,100)
Excess MSRs	(2,220)		(2,477)		(3,428)		(4,430)
Net investments in Legacy Sequoia entities (3)	(336)		(216)		(1,050)		(915)
Net investments in Sequoia entities (3)	(5,886)		4,906		(9,708)		9,804
Net investments in Freddie Mac SLST entities (3)	(35,940)		36,316		(32,904)		40,433
Net investment in Freddie Mac K-Series entity (3)	(190)		1,855		74		10,776
Net investments in CAFL SFR entities (3)	(21,828)		3,697		(17,780)		3,411
Net investment in HEI securitization entity (3)	1,201		—		4,612		—
HEIs at Redwood	1,596		2,080		2,788		7,395
Other investments	10,460		125		10,583		435
Risk management derivatives, net	4,395		—		6,368		—
Credit (losses) recoveries on AFS securities	(1,066)		13		(1,771)		388
Total investment fair value changes, net	$	(87,972)	$	49,480	$	(94,092)	$	94,567
Other Income
MSRs	$	3,827	$	(1,381)	$	6,795	$	(2,247)
Total other income (4)	$	3,827	$	(1,381)	$	6,795	$	(2,247)
Total Market Valuation Gains (Losses), Net	$	(130,735)	$	93,858	$	(132,594)	$	213,641

(1)Represents fair value changes on trading securities that are being used along with risk management derivatives to manage the market risks associated with our residential mortgage banking operations.

(2)Mortgage banking activities, net presented above does not include fee income from loan originations or acquisitions, provisions for repurchases, and other expenses that are components of Mortgage banking activities, net presented on our consolidated statements of income, as these amounts do not represent market valuation changes.

(3)Includes changes in fair value of the residential loans held-for-investment, securitized HEIs, REO and the ABS issued at the entities, which netted together represent the change in value of our investments at the consolidated VIEs accounted for under the CFE election.

(4)Other income presented above does not include net MSR fee income or provisions for repurchases for MSRs, as these amounts do not represent market valuation adjustments.

Quantitative Information about Significant Unobservable Inputs Used in Valuation of Level 3 Assets and Liabilities Measured at Fair Value

The following table provides quantitative information about the significant unobservable inputs used in the valuation of our Level 3 assets and liabilities measured at fair value.

Table 5.7 – Fair Value Methodology for Level 3 Financial Instruments

June 30, 2022	Fair Value			Input Values
(Dollars in Thousands, except Input Values)			Unobservable Input	Range						Weighted Average(1)
Assets
Residential loans, at fair value:
Jumbo fixed-rate loans	$	714,777	Whole loan spread to swap rate	217		-	240		bps	221		bps
			Called loan dollar price	$	96	-	$	96		$	96
Jumbo loans committed to sell	498,258		Whole loan committed sales price	$	97	-	$	99		$	98
Loans held by Legacy Sequoia (2)	208,788		Liability price				N/A			N/A
Loans held by Sequoia (2)	3,525,459		Liability price				N/A			N/A
Loans held by Freddie Mac SLST (2)	1,631,285		Liability price				N/A			N/A
Business purpose loans:
Single-family rental loans	505,171		Senior credit spread	215		-	235		bps	220		bps
			Subordinate credit spread	260		-	1,099		bps	504		bps
			Senior credit support	39		-	40		%	39		%
			IO discount rate	8		-	13		%	9		%
			Prepayment rate (annual CPR)	3		-	25		%	6		%
			Non-securitizable loan dollar price	$	80	-	$	100		$	93
Single-family rental loans held by CAFL (2)	3,046,277		Liability price				N/A			N/A
Bridge loans	1,651,489		Whole loan discount rate	5		-	15		%	8		%
			Senior credit spread	325		-	325		bps	325		bps
			Subordinate credit discount rate	15		-	15		%	15		%
			Senior credit support	15		-	15		%	15		%
Multifamily loans held by Freddie Mac K-Series (2)	443,114		Liability price				N/A			N/A
Trading and AFS securities	284,278		Discount rate	4		-	18		%	9		%
			Prepayment rate (annual CPR)	6		-	65		%	13		%
			Default rate	—		-	11		%	1		%
			Loss severity	—		-	50		%	25		%
			CRT dollar price	$	74	-	$	88		$	83
Servicer advance investments	273,210		Discount rate	2		-	4		%	3		%
			Prepayment rate (annual CPR)	16		-	30		%	16		%
			Expected remaining life (3)	5		-	5		yrs	5		yrs
			Mortgage servicing income	—		-	18		bps	9		bps
MSRs	23,560		Discount rate	11		-	115		%	11		%
			Prepayment rate (annual CPR)	5		-	31		%	9		%
			Per loan annual cost to service	$	93	-	$	93		$	93

Table 5.7 – Fair Value Methodology for Level 3 Financial Instruments (continued)

June 30, 2022	Fair Value		Input Values
(Dollars in Thousands, except Input Values)		Unobservable Input	Range						Weighted Average (1)
Assets (continued)
Excess MSRs	40,803	Discount rate	13		-	19		%	18		%
		Prepayment rate (annual CPR)	16		-	35		%	20		%
		Excess mortgage servicing income	8		-	18		bps	11		bps
HEI	130,151	Discount rate	10		-	10		%	10		%
		Prepayment rate (annual CPR)	1		-	24		%	17		%
		Home price appreciation	3		-	4		%	3		%
HEIs held by HEI securitization entity	146,215	Liability price	N/A			N/A			N/A
REO	1,380	Loss severity	12		-	25		%	20		%
Liabilities
Residential loan purchase commitments, net	1,500	Whole loan spread to swap rate	217		-	240		bps	224		bps
		Pull-through rate	18		-	100		%	68		%
		Committed sales price	$	97	-	$	102		$	97
ABS issued (2):
At consolidated Sequoia entities	3,496,329	Discount rate	4		-	18		%	6		%
		Prepayment rate (annual CPR)	5		-	27		%	14		%
		Default rate	—		-	22		%	1		%
		Loss severity	25		-	50		%	32		%
At consolidated CAFL SFR entities (4)	2,732,964	Discount rate	2		-	15		%	5		%
		Prepayment rate (annual CPR)	—		-	3		%	3		%
		Default rate	5		-	28		%	7		%
		Loss severity	30		-	30		%	30		%
At consolidated Freddie Mac SLST entities	1,243,167	Discount rate	4		-	7		%	5		%
		Prepayment rate (annual CPR)	6		-	8		%	6		%
		Default rate	7		-	9		%	8		%
		Loss severity	35		-	35		%	35		%
At consolidated Freddie Mac K-Series entities (4)	411,380	Discount rate	3		-	9		%	4		%
At consolidated HEI securitization entity (4)	110,111	Discount rate	8		-	13		%	9		%
		Prepayment rate (annual CPR)	20		-	20		%	20		%
		Default rate	12		-	12		%	12		%
		Loss severity	30		-	30		%	30		%
		Home price appreciation	3		-	4		%	3		%

Footnotes to Table 5.7

(1)The weighted average input values for all loan types are based on the unpaid principal balance. The weighted average input values for all other assets and liabilities are based on relative fair value.

(2)The fair value of the loans and HEIs held by consolidated entities was based on the fair value of the ABS issued by these entities and the securities and other investments we own in those entities, which we determined were more readily observable in accordance with accounting guidance for collateralized financing entities. At June 30, 2022, the fair value of securities we owned at the consolidated Sequoia, CAFL SFR, Freddie Mac SLST, Freddie Mac K-Series, and HEI securitization entities was $238 million, $307 million, $390 million, $32 million, and $15 million, respectively.

(3)Represents the estimated average duration of outstanding servicer advances at a given point in time (not taking into account new advances made with respect to the pool).

(4)As a market convention, certain securities are priced to a no-loss yield and therefore do not include default and loss severity assumptions.

XML

Residential Loans (Tables)

6 Months Ended

Jun. 30, 2022

Receivables [Abstract]

Classifications and Carrying Value of Loans

The following table summarizes the classifications and carrying values of the residential loans owned at Redwood and at consolidated Sequoia and Freddie Mac SLST entities at June 30, 2022 and December 31, 2021.

Table 6.1 – Classifications and Carrying Values of Residential Loans

June 30, 2022			Legacy				Freddie Mac
(In Thousands)	Redwood		Sequoia		Sequoia		SLST		Total
Held-for-sale at fair value	$	1,213,067	$	—	$	—	$	—	$	1,213,067
Held-for-investment at fair value	—		208,788		3,525,459		1,631,285		5,365,532
Total Residential Loans	$	1,213,067	$	208,788	$	3,525,459	$	1,631,285	$	6,578,599

December 31, 2021			Legacy				Freddie Mac
(In Thousands)	Redwood		Sequoia		Sequoia		SLST		Total
Held-for-sale at fair value	$	1,845,282	$	—	$	—	$	—	$	1,845,282
Held-for-investment at fair value	—		230,455		3,628,465		1,888,230		5,747,150
Total Residential Loans	$	1,845,282	$	230,455	$	3,628,465	$	1,888,230	$	7,592,432

The following table summarizes the classifications and carrying values of the business purpose loans owned at Redwood and at consolidated CAFL entities at June 30, 2022 and December 31, 2021.

Table 7.1 – Classifications and Carrying Values of Business Purpose Loans

June 30, 2022	Single-Family Rental				Bridge
(In Thousands)	Redwood		CAFL		Redwood		CAFL		Total
Held-for-sale at fair value	$	505,171	—		$	—	$	—	$	505,171
Held-for-investment at fair value	—		3,046,277		1,109,337		542,152		4,697,766
Total Business Purpose Loans	$	505,171	$	3,046,277	$	1,109,337	$	542,152	$	5,202,937

December 31, 2021	Single-Family Rental				Bridge
(In Thousands)	Redwood		CAFL		Redwood		CAFL		Total
Held-for-sale at fair value	$	358,309	$	—	$	—	$	—	$	358,309
Held-for-investment at fair value	—		3,488,074		666,364		278,242		4,432,680
Total Business Purpose Loans	$	358,309	$	3,488,074	$	666,364	$	278,242	$	4,790,989

Nearly all of the outstanding single-family rental loans at June 30, 2022 were first-lien, fixed-rate loans with original maturities of five, seven, or ten years, with 3% having original maturities of 30 years. The outstanding bridge loans held-for-investment at June 30, 2022 were first-lien, interest-only loans with original maturities of six to 36 months and were comprised of 45% one-month LIBOR-indexed adjustable-rate loans, 39% one-month SOFR-indexed adjustable-rate loans, and 17% fixed-rate loans.

At June 30, 2022, we had a $835 million commitment to fund bridge loans. See Note 16 for additional information on this commitment.

The following table provides the activity of business purpose loans at Redwood during the three and six months ended June 30, 2022 and 2021.

Table 7.2 – Activity of Business Purpose Loans at Redwood

	Three Months Ended   June 30, 2022				Three Months Ended   June 30, 2021
(In Thousands)	SFR at Redwood		Bridge at Redwood		SFR at Redwood		Bridge at Redwood
Principal balance of loans originated	$	323,245	$	542,241	$	312,217	$	215,160
Principal balance of loans acquired	38,457		19,023		—		—
Principal balance of loans sold to third parties	—		—		—		354
Fair value of loans transferred (1)	295,037		306,313		297,301		—
Mortgage banking activities income (loss) recorded (2)	(40,034)		(1,136)		25,222		978
Investment fair value changes recorded (3)	—		(5,455)		—		(62)

	Six Months Ended   June 30, 2022				Six Months Ended   June 30, 2021
(In Thousands)	SFR at Redwood		Bridge at Redwood		SFR at Redwood		Bridge at Redwood
Principal balance of loans originated	$	765,972	$	954,179	$	565,315	$	348,389
Principal balance of loans acquired	100,349		22,006		—		—
Principal balance of loans sold to third parties	331,502		—		—		9,231
Fair value of loans transferred (1)	295,037		388,604		466,705		N/A
Mortgage banking activities income (loss) recorded (2)	(64,502)		1,239		35,470		1,520
Investment fair value changes recorded (3)	—		(6,214)		—		3,242

(1)For SFR at Redwood, represents the transfer of loans from held-for-sale to held-for-investment associated with CAFL SFR securitizations. For Bridge at Redwood, represents the transfer of bridge loans from "Bridge at Redwood" to "Bridge at CAFL" resulting from their securitization.

(2)Represents net market valuation changes from the time a loan is originated to when it is sold or transferred to our investment portfolio. Additionally, for the three and six months ended June 30, 2022, we recorded loan origination fee income of $12 million and $27 million, respectively, through Mortgage banking activities, net on our consolidated statements of income (loss).

(3)Represents net market valuation changes for loans classified as held-for-investment and associated interest-only strip liabilities.

The following table provides the activity of business purpose loans held-for-investment at CAFL during the three and six months ended June 30, 2022 and 2021.

Table 7.3 – Activity of Business Purpose Loans Held-for-Investment at CAFL

	Three Months Ended   June 30, 2022				Three Months Ended   June 30, 2021
(In Thousands)	SFR at CAFL		Bridge at CAFL		SFR at CAFL		Bridge at CAFL
Net market valuation gains (losses) recorded (1)	$	(118,299)	$	(281)	$	(1,230)	$	—

	Six Months Ended   June 30, 2022				Six Months Ended   June 30, 2021
(In Thousands)	SFR at CAFL		Bridge at CAFL		SFR at CAFL		Bridge at CAFL
Net market valuation gains (losses) recorded (1)	$	(310,202)	$	(1,856)	$	(62,132)	$	—

(1)For loans held at our consolidated CAFL entities, market value changes are based on the estimated fair value of the associated ABS issued, including securities we own, pursuant to collateralized financing entity guidelines, and are recorded through Investment fair value changes, net on our consolidated statements of income (loss). The net impact to our income statement associated with our economic investments in these securitization entities is presented in Table 4.2.

The following tables summarize the characteristics of the business purpose loans owned at Redwood and at consolidated CAFL entities at June 30, 2022 and December 31, 2021.

Table 7.4 – Characteristics of Business Purpose Loans

June 30, 2022	SFR at Redwood			SFR at CAFL			Bridge at Redwood			Bridge at CAFL
(Dollars in Thousands)
Number of loans	355			1,154			1,131			2,268
Unpaid principal balance	$	536,344		$	3,227,172		$	1,116,582		$	541,677
Fair value of loans	$	505,171		$	3,046,277		$	1,109,337		$	542,152
Weighted average coupon	5.31		%	5.16		%	6.73		%	6.89		%
Weighted average remaining loan term (years)	14			6			2			1
Market value of loans pledged as collateral under short-term debt facilities	$	312,732		N/A			$	265,242		N/A
Market value of loans pledged as collateral under long-term debt facilities	$	180,482		N/A			$	779,467		N/A
Delinquency information
Number of loans with 90+ day delinquencies (1)	4			20			51			48
Unpaid principal balance of loans with 90+ day delinquencies	$	5,212		$	50,469		$	32,941		$	7,847
Fair value of loans with 90+ day delinquencies (2)	$	4,086		N/A			$	30,209		$	7,847
Number of loans in foreclosure (3)	4			7			53			3
Unpaid principal balance of loans in foreclosure	$	5,212		$	10,356		$	35,070		$	4,472
Fair value of loans in foreclosure (2)	$	4,086		N/A			$	32,338		$	4,472

December 31, 2021	SFR at Redwood			SFR at CAFL			Bridge at Redwood			Bridge at CAFL
(Dollars in Thousands)
Number of loans	245			1,173			1,134			1,640
Unpaid principal balance	$	348,232		$	3,340,949		$	670,392		$	274,617
Fair value of loans	$	358,309		$	3,488,074		$	666,364		$	278,242
Weighted average coupon	4.73		%	5.17		%	6.91		%	7.05		%
Weighted average remaining loan term (years)	12			6			1			1
Market value of loans pledged as collateral under short-term debt facilities	$	75,873		N/A			$	91,814		N/A
Market value of loans pledged as collateral under long-term debt facilities	$	244,703		N/A			$	554,597		N/A
Delinquency information
Number of loans with 90+ day delinquencies (1)	6			18			31			—
Unpaid principal balance of loans with 90+ day delinquencies	$	5,384		$	41,998		$	18,032		$	—
Fair value of loans with 90+ day delinquencies (2)	$	4,238		N/A			$	14,218		$	—
Number of loans in foreclosure (3)	7			9			28			—
Unpaid principal balance of loans in foreclosure	$	5,473		$	12,648		$	18,043		$	—
Fair value of loans in foreclosure (2)	$	4,305		N/A			$	14,257		$	—

Footnotes to Table 7.4

(1)The number of loans greater than 90 days delinquent includes loans in foreclosure.

(2)The fair value of the loans held by consolidated CAFL entities was based on the fair value of the ABS issued by these entities, including securities we own, which we determined were more readily observable, in accordance with accounting guidance for collateralized financing entities.

(3)May include loans that are less than 90 days delinquent.

Characteristics of Residential Loans Held-For-Sale

The following table summarizes the characteristics of residential loans held-for-sale at June 30, 2022 and December 31, 2021.

Table 6.2 – Characteristics of Residential Loans Held-for-Sale

(Dollars in Thousands)	June 30, 2022			December 31, 2021
Number of loans	1,469			2,196
Unpaid principal balance	$	1,238,469		$	1,813,865
Fair value of loans	$	1,213,067		$	1,845,282
Market value of loans pledged as collateral under short-term borrowing agreements	$	1,207,185		$	1,838,797
Weighted average coupon	4.47		%	3.27		%
Delinquency information
Number of loans with 90+ day delinquencies	1			3
Unpaid principal balance of loans with 90+ day delinquencies	$	211		$	2,923
Fair value of loans with 90+ day delinquencies	$	170		$	2,304
Number of loans in foreclosure	—			—

Quarterly Activity of Residential Loans Held-for-Sale

The following table provides the activity of residential loans held-for-sale during the three and six months ended June 30, 2022 and 2021.

Table 6.3 – Activity of Residential Loans Held-for-Sale

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Principal balance of loans acquired (1)	$	1,145,450	$	3,484,633	$	3,260,641	$	6,580,681
Principal balance of loans sold	1,238,327		3,324,919		3,065,691		5,600,751
Principal balance of loans transferred to HFI	—		—		687,192		—
Net market valuation gains (losses) recorded (2)	(32,527)		26,278		(63,978)		49,707

(1)For the three and six months ended June 30, 2022, includes zero and $102 million of loans acquired through calls of zero and three seasoned Sequoia securitizations, respectively.

(2)Net market valuation gains (losses) on residential loans held-for-sale are recorded primarily through Mortgage banking activities, net on our consolidated statements of income (loss).

Characteristics of Residential Loans Held-for-Investment

The following tables summarize the characteristics of the residential loans owned at consolidated Sequoia and Freddie Mac SLST entities at June 30, 2022 and December 31, 2021.

Table 6.4 – Characteristics of Residential Loans Held-for-Investment

June 30, 2022	Legacy						Freddie Mac
(Dollars in Thousands)	Sequoia			Sequoia			SLST
Number of loans	1,447			4,738			11,285
Unpaid principal balance	$	234,213		$	3,988,148		$	1,796,594
Fair value of loans	$	208,788		$	3,525,459		$	1,631,285
Weighted average coupon	2.27		%	3.26		%	4.50		%
Delinquency information
Number of loans with 90+ day delinquencies (1)	29			14			1,370
Unpaid principal balance of loans with 90+ day delinquencies	$	5,107		$	12,008		$	236,941
Fair value of loans with 90+ day delinquencies (2)	N/A			N/A			N/A
Number of loans in foreclosure	11			5			257
Unpaid principal balance of loans in foreclosure	$	1,483		$	5,004		$	45,536

December 31, 2021	Legacy						Freddie Mac
(Dollars in Thousands)	Sequoia			Sequoia			SLST
Number of loans	1,583			4,300			11,986
Unpaid principal balance	$	264,057		$	3,605,469		$	1,932,241
Fair value of loans	$	230,455		$	3,628,465		$	1,888,230
Weighted average coupon	1.87		%	3.39		%	4.51		%
Delinquency information
Number of loans with 90+ day delinquencies (1)	32			18			1,208
Unpaid principal balance of loans with 90+ day delinquencies	$	7,482		$	15,124		$	212,961
Fair value of loans with 90+ day delinquencies (2)	N/A			N/A			N/A
Number of loans in foreclosure	10			2			241
Unpaid principal balance of loans in foreclosure	$	2,188		$	1,624		$	43,637

(1)For loans held at consolidated entities, the number of loans greater than 90 days delinquent includes loans in foreclosure.

(2)The fair value of the loans held by consolidated entities was based on the fair value of the ABS issued by these entities, including securities we own, which we determined were more readily observable, in accordance with accounting guidance for collateralized financing entities.

Quarterly Activity of Residential Loans Held-for-Investment

The following table provides the activity of residential loans held-for-investment at consolidated entities during the three and six months ended June 30, 2022 and 2021.

Table 6.5 – Activity of Residential Loans Held-for-Investment at Consolidated Entities

	Three Months Ended June 30, 2022				Three Months Ended June 30, 2021
	Legacy			Freddie Mac	Legacy			Freddie Mac
(In Thousands)	Sequoia	Sequoia		SLST	Sequoia	Sequoia		SLST
Fair value of loans transferred from HFS to HFI (1)	N/A	$	—	N/A	N/A	$	1,205,494	N/A
Net market valuation gains (losses) recorded (2)	779	(211,486)		(76,735)	4,863	(12,835)		22,579

	Six Months Ended June 30, 2022				Six Months Ended June 30, 2021
	Legacy			Freddie Mac	Legacy			Freddie Mac
(In Thousands)	Sequoia	Sequoia		SLST	Sequoia	Sequoia		SLST
Fair value of loans transferred from HFS to HFI (1)	N/A	$	684,491	N/A	N/A	$	1,205,494	N/A
Net market valuation gains (losses) recorded (2)	7,104	(482,217)		(120,503)	12,476	(15,413)		19,013

(1)Represents the transfer of loans from held-for-sale to held-for-investment associated with Sequoia securitizations.

(2)For loans held at our consolidated Legacy Sequoia, Sequoia, and Freddie Mac SLST entities, market value changes are based on the estimated fair value of the associated ABS issued, including securities we own, pursuant to collateralized financing entity guidelines, and are recorded in Investment fair value changes, net on our consolidated statements of income (loss). The net impact to our income statement associated with our economic investments in these securitization entities is presented in Table 4.2.

XML

Business Purpose Loans (Tables)

6 Months Ended

Jun. 30, 2022

Receivables [Abstract]

Classifications and Carrying Value of Loans

The following table summarizes the classifications and carrying values of the residential loans owned at Redwood and at consolidated Sequoia and Freddie Mac SLST entities at June 30, 2022 and December 31, 2021.

Table 6.1 – Classifications and Carrying Values of Residential Loans

June 30, 2022			Legacy				Freddie Mac
(In Thousands)	Redwood		Sequoia		Sequoia		SLST		Total
Held-for-sale at fair value	$	1,213,067	$	—	$	—	$	—	$	1,213,067
Held-for-investment at fair value	—		208,788		3,525,459		1,631,285		5,365,532
Total Residential Loans	$	1,213,067	$	208,788	$	3,525,459	$	1,631,285	$	6,578,599

December 31, 2021			Legacy				Freddie Mac
(In Thousands)	Redwood		Sequoia		Sequoia		SLST		Total
Held-for-sale at fair value	$	1,845,282	$	—	$	—	$	—	$	1,845,282
Held-for-investment at fair value	—		230,455		3,628,465		1,888,230		5,747,150
Total Residential Loans	$	1,845,282	$	230,455	$	3,628,465	$	1,888,230	$	7,592,432

The following table summarizes the classifications and carrying values of the business purpose loans owned at Redwood and at consolidated CAFL entities at June 30, 2022 and December 31, 2021.

Table 7.1 – Classifications and Carrying Values of Business Purpose Loans

June 30, 2022	Single-Family Rental				Bridge
(In Thousands)	Redwood		CAFL		Redwood		CAFL		Total
Held-for-sale at fair value	$	505,171	—		$	—	$	—	$	505,171
Held-for-investment at fair value	—		3,046,277		1,109,337		542,152		4,697,766
Total Business Purpose Loans	$	505,171	$	3,046,277	$	1,109,337	$	542,152	$	5,202,937

December 31, 2021	Single-Family Rental				Bridge
(In Thousands)	Redwood		CAFL		Redwood		CAFL		Total
Held-for-sale at fair value	$	358,309	$	—	$	—	$	—	$	358,309
Held-for-investment at fair value	—		3,488,074		666,364		278,242		4,432,680
Total Business Purpose Loans	$	358,309	$	3,488,074	$	666,364	$	278,242	$	4,790,989

Nearly all of the outstanding single-family rental loans at June 30, 2022 were first-lien, fixed-rate loans with original maturities of five, seven, or ten years, with 3% having original maturities of 30 years. The outstanding bridge loans held-for-investment at June 30, 2022 were first-lien, interest-only loans with original maturities of six to 36 months and were comprised of 45% one-month LIBOR-indexed adjustable-rate loans, 39% one-month SOFR-indexed adjustable-rate loans, and 17% fixed-rate loans.

At June 30, 2022, we had a $835 million commitment to fund bridge loans. See Note 16 for additional information on this commitment.

The following table provides the activity of business purpose loans at Redwood during the three and six months ended June 30, 2022 and 2021.

Table 7.2 – Activity of Business Purpose Loans at Redwood

	Three Months Ended   June 30, 2022				Three Months Ended   June 30, 2021
(In Thousands)	SFR at Redwood		Bridge at Redwood		SFR at Redwood		Bridge at Redwood
Principal balance of loans originated	$	323,245	$	542,241	$	312,217	$	215,160
Principal balance of loans acquired	38,457		19,023		—		—
Principal balance of loans sold to third parties	—		—		—		354
Fair value of loans transferred (1)	295,037		306,313		297,301		—
Mortgage banking activities income (loss) recorded (2)	(40,034)		(1,136)		25,222		978
Investment fair value changes recorded (3)	—		(5,455)		—		(62)

	Six Months Ended   June 30, 2022				Six Months Ended   June 30, 2021
(In Thousands)	SFR at Redwood		Bridge at Redwood		SFR at Redwood		Bridge at Redwood
Principal balance of loans originated	$	765,972	$	954,179	$	565,315	$	348,389
Principal balance of loans acquired	100,349		22,006		—		—
Principal balance of loans sold to third parties	331,502		—		—		9,231
Fair value of loans transferred (1)	295,037		388,604		466,705		N/A
Mortgage banking activities income (loss) recorded (2)	(64,502)		1,239		35,470		1,520
Investment fair value changes recorded (3)	—		(6,214)		—		3,242

(1)For SFR at Redwood, represents the transfer of loans from held-for-sale to held-for-investment associated with CAFL SFR securitizations. For Bridge at Redwood, represents the transfer of bridge loans from "Bridge at Redwood" to "Bridge at CAFL" resulting from their securitization.

(2)Represents net market valuation changes from the time a loan is originated to when it is sold or transferred to our investment portfolio. Additionally, for the three and six months ended June 30, 2022, we recorded loan origination fee income of $12 million and $27 million, respectively, through Mortgage banking activities, net on our consolidated statements of income (loss).

(3)Represents net market valuation changes for loans classified as held-for-investment and associated interest-only strip liabilities.

The following table provides the activity of business purpose loans held-for-investment at CAFL during the three and six months ended June 30, 2022 and 2021.

Table 7.3 – Activity of Business Purpose Loans Held-for-Investment at CAFL

	Three Months Ended   June 30, 2022				Three Months Ended   June 30, 2021
(In Thousands)	SFR at CAFL		Bridge at CAFL		SFR at CAFL		Bridge at CAFL
Net market valuation gains (losses) recorded (1)	$	(118,299)	$	(281)	$	(1,230)	$	—

	Six Months Ended   June 30, 2022				Six Months Ended   June 30, 2021
(In Thousands)	SFR at CAFL		Bridge at CAFL		SFR at CAFL		Bridge at CAFL
Net market valuation gains (losses) recorded (1)	$	(310,202)	$	(1,856)	$	(62,132)	$	—

(1)For loans held at our consolidated CAFL entities, market value changes are based on the estimated fair value of the associated ABS issued, including securities we own, pursuant to collateralized financing entity guidelines, and are recorded through Investment fair value changes, net on our consolidated statements of income (loss). The net impact to our income statement associated with our economic investments in these securitization entities is presented in Table 4.2.

The following tables summarize the characteristics of the business purpose loans owned at Redwood and at consolidated CAFL entities at June 30, 2022 and December 31, 2021.

Table 7.4 – Characteristics of Business Purpose Loans

June 30, 2022	SFR at Redwood			SFR at CAFL			Bridge at Redwood			Bridge at CAFL
(Dollars in Thousands)
Number of loans	355			1,154			1,131			2,268
Unpaid principal balance	$	536,344		$	3,227,172		$	1,116,582		$	541,677
Fair value of loans	$	505,171		$	3,046,277		$	1,109,337		$	542,152
Weighted average coupon	5.31		%	5.16		%	6.73		%	6.89		%
Weighted average remaining loan term (years)	14			6			2			1
Market value of loans pledged as collateral under short-term debt facilities	$	312,732		N/A			$	265,242		N/A
Market value of loans pledged as collateral under long-term debt facilities	$	180,482		N/A			$	779,467		N/A
Delinquency information
Number of loans with 90+ day delinquencies (1)	4			20			51			48
Unpaid principal balance of loans with 90+ day delinquencies	$	5,212		$	50,469		$	32,941		$	7,847
Fair value of loans with 90+ day delinquencies (2)	$	4,086		N/A			$	30,209		$	7,847
Number of loans in foreclosure (3)	4			7			53			3
Unpaid principal balance of loans in foreclosure	$	5,212		$	10,356		$	35,070		$	4,472
Fair value of loans in foreclosure (2)	$	4,086		N/A			$	32,338		$	4,472

December 31, 2021	SFR at Redwood			SFR at CAFL			Bridge at Redwood			Bridge at CAFL
(Dollars in Thousands)
Number of loans	245			1,173			1,134			1,640
Unpaid principal balance	$	348,232		$	3,340,949		$	670,392		$	274,617
Fair value of loans	$	358,309		$	3,488,074		$	666,364		$	278,242
Weighted average coupon	4.73		%	5.17		%	6.91		%	7.05		%
Weighted average remaining loan term (years)	12			6			1			1
Market value of loans pledged as collateral under short-term debt facilities	$	75,873		N/A			$	91,814		N/A
Market value of loans pledged as collateral under long-term debt facilities	$	244,703		N/A			$	554,597		N/A
Delinquency information
Number of loans with 90+ day delinquencies (1)	6			18			31			—
Unpaid principal balance of loans with 90+ day delinquencies	$	5,384		$	41,998		$	18,032		$	—
Fair value of loans with 90+ day delinquencies (2)	$	4,238		N/A			$	14,218		$	—
Number of loans in foreclosure (3)	7			9			28			—
Unpaid principal balance of loans in foreclosure	$	5,473		$	12,648		$	18,043		$	—
Fair value of loans in foreclosure (2)	$	4,305		N/A			$	14,257		$	—

Footnotes to Table 7.4

(1)The number of loans greater than 90 days delinquent includes loans in foreclosure.

(2)The fair value of the loans held by consolidated CAFL entities was based on the fair value of the ABS issued by these entities, including securities we own, which we determined were more readily observable, in accordance with accounting guidance for collateralized financing entities.

(3)May include loans that are less than 90 days delinquent.

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Consolidated Agency Multifamily Loans (Tables)

6 Months Ended

Jun. 30, 2022

Receivables [Abstract]

Schedule of Multifamily Loans

The following table summarizes the characteristics of our consolidated Agency multifamily loans at June 30, 2022 and December 31, 2021.

Table 8.1 – Characteristics of Consolidated Agency Multifamily Loans

(Dollars in Thousands)	June 30, 2022			December 31, 2021
Number of loans	28			28
Unpaid principal balance	$	451,197		$	455,168
Fair value of loans	$	443,114		$	473,514
Weighted average coupon	4.25		%	4.25		%
Weighted average remaining loan term (years)	3			4
Delinquency information
Number of loans with 90+ day delinquencies	—			—
Number of loans in foreclosure	—			—

The outstanding consolidated Agency multifamily loans held-for-investment at the consolidated Freddie Mac K-Series entity at June 30, 2022 were first-lien, fixed-rate loans that were originated in 2015. The following table provides the activity of multifamily loans held-for-investment during the three and six months ended June 30, 2022 and 2021.

Table 8.2 – Activity of Consolidated Agency Multifamily Loans Held-for-Investment

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Net market valuation gains (losses) recorded (1)	$	(6,748)	$	(2,528)	$	(26,429)	$	(3,258)

(1)Net market valuation gains (losses) on multifamily loans held-for-investment are recorded through Investment fair value changes, net on our consolidated statements of income (loss). For loans held at our consolidated Freddie Mac K-Series entity, market value changes are based on the estimated fair value of the associated ABS issued, including securities we own, pursuant to collateralized financing entity guidelines. The net impact to our income statement associated with our economic investment in these securitization entities is presented in Table 4.2.

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Real Estate Securities (Tables)

6 Months Ended

Jun. 30, 2022

Investments, Debt and Equity Securities [Abstract]

Fair Values of Real Estate Securities by Type

The following table presents the fair values of our real estate securities by type at June 30, 2022 and December 31, 2021.

Table 9.1 – Fair Values of Real Estate Securities by Type

(In Thousands)	June 30, 2022		December 31, 2021
Trading	$	133,780	$	170,619
Available-for-sale	150,498		206,792
Total Real Estate Securities	$	284,278	$	377,411

Trading Securities by Collateral Type

The following table presents the fair value of trading securities by position and collateral type at June 30, 2022 and December 31, 2021.

Table 9.2 – Fair Value of Trading Securities by Position

(In Thousands)	June 30, 2022		December 31, 2021
Senior
Interest-only securities (1)	$	31,498	$	21,787
Total Senior	31,498		21,787
Subordinate
RPL securities	46,607		65,140
Multifamily securities	7,960		10,549
Other third-party residential securities	47,715		73,143
Total Subordinate	102,282		148,832
Total Trading Securities	$	133,780	$	170,619

(1)Includes $24 million and $15 million of Sequoia certificated mortgage servicing rights at June 30, 2022 and December 31, 2021, respectively.

The following table presents the unpaid principal balance of trading securities by position and collateral type at June 30, 2022 and December 31, 2021.

Table 9.3 – Unpaid Principal Balance of Trading Securities by Position

(In Thousands)	June 30, 2022		December 31, 2021
Senior (1)	$	—	$	—
Subordinate	221,473		235,306
Total Trading Securities	$	221,473	$	235,306

(1)Our senior trading securities include interest-only securities, for which there is no principal balance.

The following table provides the activity of trading securities during the three and six months ended June 30, 2022 and 2021.

Table 9.4 – Trading Securities Activity

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Principal balance of securities acquired (1)	$	—	$	1,750	$	—	$	17,630
Principal balance of securities sold (1)	12,716		18,068		12,716		52,811
Net market valuation gains (losses) recorded (2)	(16,042)		1,798		(17,498)		23,147

(1)For the three and six months ended June 30, 2022 and 2021, excludes zero and $2 million of securities bought and sold during the same quarter, respectively.

(2)Net market valuation gains (losses) on trading securities are recorded through Investment fair value changes, net and Mortgage banking activities, net on our consolidated statements of income.

Available-for-Sale Securities by Collateral Type

The following table presents the fair value of our available-for-sale securities by position and collateral type at June 30, 2022 and December 31, 2021.

Table 9.5 – Fair Value of Available-for-Sale Securities by Position

(In Thousands)	June 30, 2022		December 31, 2021
Subordinate
Sequoia securities	$	85,269	$	127,542
Multifamily securities	13,169		22,166
Other third-party residential securities	52,060		57,084
Total Subordinate	150,498		206,792
Total AFS Securities	$	150,498	$	206,792

The following table provides the activity of available-for-sale securities during the three and six months ended June 30, 2022 and 2021.

Table 9.6 – Available-for-Sale Securities Activity

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Fair value of securities acquired	$	—	$	522	$	10,000	$	1,600
Fair value of securities sold	—		2,585		—		4,785
Principal balance of securities called	—		1,307		14,486		1,507
Net unrealized (losses) gains on AFS securities (1)	(33,409)		11,224		(51,282)		22,210

(1)Net unrealized (losses) gains on AFS securities are recorded on our consolidated balance sheets through Accumulated other comprehensive loss.

Carrying Value of Residential Available for Sale Securities

The following table presents the components of carrying value (which equals fair value) of AFS securities at June 30, 2022 and December 31, 2021.

Table 9.7 – Carrying Value of AFS Securities

June 30, 2022
(In Thousands)	Total
Principal balance	$	227,911
Credit reserve	(30,619)
Unamortized discount, net	(61,303)
Amortized cost	135,989
Gross unrealized gains	25,930
Gross unrealized losses	(9,650)
CECL allowance	(1,771)
Carrying Value	$	150,498

December 31, 2021
(In Thousands)	Total
Principal balance	$	242,852
Credit reserve	(27,555)
Unamortized discount, net	(76,023)
Amortized cost	139,274
Gross unrealized gains	67,815
Gross unrealized losses	(297)
CECL allowance	—
Carrying Value	$	206,792

Changes of Unamortized Discount and Designated Credit Reserves on Residential Available for Sale Securities

The following table presents the changes for the three and six months ended June 30, 2022, in unamortized discount and designated credit reserves on residential AFS securities.

Table 9.8 – Changes in Unamortized Discount and Designated Credit Reserves on AFS Securities

	Three Months Ended   June 30, 2022				Six Months Ended   June 30, 2022
	Credit Reserve		Unamortized Discount, Net		Credit Reserve		Unamortized Discount, Net
(In Thousands)
Beginning balance	$	29,901	$	63,206	$	27,555	$	76,023
Amortization of net discount	—		(1,347)		—		(9,817)
Realized credit recoveries (losses), net	162		—		74		—
Acquisitions	—		—		—		—
Sales, calls, other	—		—		(343)		(1,570)
Transfers to (release of) credit reserves, net	556		(556)		3,333		(3,333)
Ending Balance	$	30,619	$	61,303	$	30,619	$	61,303

Components of Fair Value of Available for Sale Securities by Holding Periods

The following table presents the total carrying value (fair value) and unrealized losses of residential AFS securities that were in a gross unrealized loss position at June 30, 2022 and December 31, 2021.

Table 9.9 – AFS Securities in Gross Unrealized Loss Position by Holding Periods

	Less Than 12 Consecutive Months				12 Consecutive Months or Longer
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
(In Thousands)
June 30, 2022	$	46,369	$	(9,456)	$	1,406	$	(194)
December 31, 2021	6,827		(251)		1,554		(46)

Summary of Significant Valuation Assumptions for Available for Sale Securities Credit Loss

The table below summarizes the weighted average of the significant credit quality indicators we used for the credit loss allowance on our AFS securities at June 30, 2022.

Table 9.10 – Significant Credit Quality Indicators

June 30, 2022	Subordinate Securities
Default rate	0.8%
Loss severity	20%

Activity of Allowance for Credit Losses for Available-for-sale Securities

The following table details the activity related to the allowance for credit losses for AFS securities for the three and six months ended June 30, 2022.

Table 9.11 – Rollforward of Allowance for Credit Losses

	Three Months Ended June 30, 2022		Six Months Ended June 30, 2022
(In Thousands)
Beginning balance allowance for credit losses	$	705	$	—
Additions to allowance for credit losses on securities for which credit losses were not previously recorded	785		1,490
Additional increases (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period	281		281
Allowance on purchased financial assets with credit deterioration	—		—
Reduction to allowance for securities sold during the period	—		—
Reduction to allowance for securities we intend to sell or more likely than not will be required to sell	—		—
Write-offs charged against allowance	—		—
Recoveries of amounts previously written off	—		—
Ending balance of allowance for credit losses	$	1,771	$	1,771

Gross Realized Gains and Losses on Available for Sale Securities

The following table presents the gross realized gains and losses on sales and calls of AFS securities for the three and six months ended June 30, 2022 and 2021.

Table 9.12 – Gross Realized Gains and Losses on AFS Securities

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Gross realized gains - sales	$	—	$	1,307	$	—	$	1,507
Gross realized gains - calls	—		6,687		1,914		9,095
Gross realized losses - sales	—		—		—		—
Total Realized Gains on Sales and Calls of AFS Securities, net	$	—	$	7,994	$	1,914	$	10,602

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Other Investments (Tables)

6 Months Ended

Jun. 30, 2022

Investments, All Other Investments [Abstract]

Summary of Other Investments

Other investments at June 30, 2022 and December 31, 2021 are summarized in the following table.

Table 10.1 – Components of Other Investments

(In Thousands)	June 30, 2022		December 31, 2021
HEIs	$	276,366	$	192,740
Servicer advance investments	273,210		350,923
Strategic investments	63,860		35,702
Excess MSRs	40,803		44,231
Mortgage servicing rights	23,560		12,438
Other	1,868		5,935
Total Other Investments	$	679,667	$	641,969

Components of Servicer Advance Investments

The servicer advance receivables were comprised of the following types of advances at June 30, 2022 and December 31, 2021.

Table 10.2 – Components of Servicer Advance Receivables

(In Thousands)	June 30, 2022		December 31, 2021
Principal and interest advances	$	76,506	$	94,148
Escrow advances (taxes and insurance advances)	133,403		172,847
Corporate advances	29,643		43,958
Total Servicer Advance Receivables	$	239,552	$	310,953

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Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair Value and Notional Amount of Derivative Financial Instruments

The following table presents the fair value and notional amount of our derivative financial instruments at June 30, 2022 and December 31, 2021.

Table 11.1 – Fair Value and Notional Amount of Derivative Financial Instruments

	June 30, 2022				December 31, 2021
	Fair Value		Notional Amount		Fair Value		Notional Amount
(In Thousands)
Assets - Risk Management Derivatives
Interest rate swaps	$	19,113	$	644,000	$	611	$	161,500
TBAs	3,104		455,000		2,880		2,440,000
Interest rate futures	1,875		273,600		25		9,000
Swaptions	10,488		620,000		18,318		1,660,000
Assets - Other Derivatives
Loan purchase and interest rate lock commitments	2,007		235,723		4,633		971,631
Total Assets	$	36,587	$	2,228,323	$	26,467	$	5,242,131
Liabilities - Risk Management Derivatives
Interest rate swaps	$	(2,445)	$	226,000	$	(1,251)	$	283,100
TBAs	(2,004)		405,000		(658)		870,000
Interest rate futures	(1,615)		115,000		(905)		62,500
Liabilities - Other Derivatives
Loan purchase and interest rate lock commitments	(527)		50,947		(503)		404,190
Total Liabilities	$	(6,591)	$	796,947	$	(3,317)	$	1,619,790
Total Derivative Financial Instruments, Net	$	29,996	$	3,025,270	$	23,150	$	6,861,921

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

The following table illustrates the impact on interest expense of our interest rate agreements accounted for as cash flow hedges for the three and six months ended June 30, 2022 and 2021.

Table 11.2 – Impact on Interest Expense of Interest Rate Agreements Accounted for as Cash Flow Hedges

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Net interest expense on cash flows hedges	$	—	$	—	$	—	$	—
Realized net losses reclassified from other comprehensive income	(1,029)		(1,028)		(2,047)		(2,046)
Total Interest Expense	$	(1,029)	$	(1,028)	$	(2,047)	$	(2,046)

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Other Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2022

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Components of Other Assets

Other assets at June 30, 2022 and December 31, 2021 are summarized in the following table.

Table 12.1 – Components of Other Assets

(In Thousands)	June 30, 2022		December 31, 2021
Accrued interest receivable	$	51,006	$	47,515
Investment receivable	25,688		82,781
Deferred tax asset	20,867		20,867
Operating lease right-of-use assets	17,074		18,772
Income tax receivables	15,573		22
Margin receivable	11,420		7,269
Fixed assets and leasehold improvements (1)	11,189		9,019
REO	7,813		36,126
Other	11,150		8,746
Total Other Assets	$	171,780	$	231,117

(1)Fixed assets and leasehold improvements had a basis of $20 million and accumulated depreciation of $9 million at June 30, 2022.

Components of Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities at June 30, 2022 and December 31, 2021 are summarized in the following table.

Table 12.2 – Components of Accrued Expenses and Other Liabilities

(In Thousands)	June 30, 2022		December 31, 2021
Payable to non-controlling interests	$	49,544	$	42,670
Accrued interest payable	42,548		39,297
Operating lease liabilities	19,448		20,960
Accrued compensation	17,765		74,636
Margin payable	15,023		24,368
Accrued operating expenses	8,743		4,377
Guarantee obligations	6,768		7,459
Residential loan and MSR repurchase reserve	5,678		9,306
Current accounts payable	5,518		8,273
Bridge loan holdbacks	3,983		3,109
Other	15,807		11,333
Total Accrued Expenses and Other Liabilities	$	190,825	$	245,788

Other Real Estate

The following table summarizes the activity and carrying values of REO assets held at Redwood and at consolidated Legacy Sequoia, Freddie Mac SLST, and CAFL SFR entities during the six months ended June 30, 2022.

Table 12.3 – REO Activity

	Six Months Ended June 30, 2022
(In Thousands)	Bridge		Legacy Sequoia		Freddie Mac SLST		SFR at CAFL		Total
Balance at beginning of period	$	13,068	$	61	$	2,028	$	20,969	$	36,126
Transfers to REO	963		407		1,763		—		3,133
Liquidations (1)	(9,549)		(504)		(1,661)		(20,969)		(32,683)
Changes in fair value, net	625		443		169		—		1,237
Balance at End of Period	$	5,107	$	407	$	2,299	$	—	$	7,813

(1)For the six months ended June 30, 2022, REO liquidations resulted in $1 million of realized gains, which were recorded in Investment fair value changes, net on our consolidated statements of income.

The following table provides the detail of REO assets at Redwood and at consolidated Legacy Sequoia, Freddie Mac SLST, and CAFL SFR entities at June 30, 2022 and December 31, 2021.

Table 12.4 – REO Assets

Number of REO assets	Bridge	Legacy Sequoia	Freddie Mac SLST	SFR at CAFL	Total
At June 30, 2022	3	1	21	—	25
At December 31, 2021	5	2	24	3	34

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Short-Term Debt (Tables)

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Short-Term Debt Facilities

The table below summarizes our short-term debt, including the facilities that are available to us, the outstanding balances, the weighted average interest rate, and the maturity information at June 30, 2022 and December 31, 2021.

Table 13.1 – Short-Term Debt

	June 30, 2022
(Dollars in Thousands)	Number of Facilities	Outstanding Balance		Limit		Weighted Average Interest Rate (1)		Maturity	Weighted Average Days Until Maturity
Facilities
Residential loan warehouse	7	$	1,085,802	$	2,750,000	3.28	%	8/2022-3/2023	213
Business purpose loan warehouse	3	456,887		1,200,000		4.21	%	3/2023-6/2023	258
Real estate securities repo	4	95,287		—		1.91	%	7/2022-9/2022	32
Total Short-Term Debt Facilities	14	1,637,976
Servicer advance financing	1	231,846		300,000		3.40	%	11/2022	125
Total Short-Term Debt		$	1,869,822

	December 31, 2021
(Dollars in Thousands)	Number of Facilities	Outstanding Balance		Limit		Weighted Average Interest Rate (1)		Maturity	Weighted Average Days Until Maturity
Facilities
Residential loan warehouse	7	$	1,669,344	$	2,900,000	1.87	%	1/2022-12/2022	153
Business purpose loan warehouse	2	138,746		350,000		3.34	%	3/2022-7/2022	105
Real estate securities repo	4	74,825		—		1.13	%	1/2022-3/2022	33
Total Short-Term Debt Facilities	13	1,882,915
Servicer advance financing	1	294,447		350,000		1.90	%	11/2022	306
Total Short-Term Debt		$	2,177,362

(1)Borrowings under our facilities generally are uncommitted and charged interest based on a specified margin over 1-month SOFR or 1- or 3-month LIBOR.

Collateral for Short-Term Debt Facilities

The following table below presents the value of loans, securities, and other assets pledged as collateral under our short-term debt at June 30, 2022 and December 31, 2021.

Table 13.2 – Collateral for Short-Term Debt

(In Thousands)	June 30, 2022		December 31, 2021
Collateral Type
Held-for-sale residential loans	$	1,207,185	$	1,838,797
Business purpose loans	577,974		167,687
Real estate securities
On balance sheet	10,014		5,823
Sequoia securitizations (1)	82,636		61,525
Freddie Mac K-Series securitization (1)	31,732		31,657
Total real estate securities owned	124,382		99,005
Restricted cash and other assets	2,512		1,962
Total Collateral for Short-Term Debt Facilities	1,912,053		2,107,451
Cash	14,381		6,480
Restricted cash	26,236		25,420
Servicer advances	273,210		310,953
Total Collateral for Servicer Advance Financing	313,827		342,853
Total Collateral for Short-Term Debt	$	2,225,880	$	2,450,304

(1)Represents securities we have retained from consolidated securitization entities. For GAAP purposes, we consolidate the loans and non-recourse ABS debt issued from these securitizations.

Short-Term Debt by Collateral Type and Remaining Maturities

The following table presents the remaining maturities of our secured short-term debt by the type of collateral securing the debt at June 30, 2022.

Table 13.3 – Short-Term Debt by Collateral Type and Remaining Maturities

	June 30, 2022
(In Thousands)	Within 30 days		31 to 90 days		Over 90 days		Total
Collateral Type
Held-for-sale residential loans	$	—	$	128,440	$	957,362	$	1,085,802
Business purpose loans	—		—		456,887		456,887
Real estate securities	57,323		37,964		—		95,287
Total Secured Short-Term Debt	57,323		166,404		1,414,249		1,637,976
Servicer advance financing	—		—		231,846		231,846
Total Short-Term Debt	$	57,323	$	166,404	$	1,646,095	$	1,869,822

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Asset-Backed Securities Issued (Tables)

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Asset-Backed Securities Issued

The carrying values of ABS issued by our consolidated securitization entities at June 30, 2022 and December 31, 2021, along with other selected information, are summarized in the following table.

Table 14.1 – Asset-Backed Securities Issued

June 30, 2022	Legacy Sequoia		Sequoia		CAFL (1)		Freddie Mac SLST (2)		Freddie Mac K-Series			HEI			Total
(Dollars in Thousands)
Certificates with principal balance	$	229,651	$	3,733,955	$	3,303,312	$	1,392,244	$	414,729		$	117,581		$	9,191,472
Interest-only certificates	258		60,183		149,184		14,938		8,809			—			233,372
Market valuation adjustments	(22,262)		(505,456)		(244,629)		(48,723)		(12,158)			(7,470)			(840,698)
ABS Issued, Net	$	207,647	$	3,288,682	$	3,207,867	$	1,358,459	$	411,380		$	110,111		$	8,584,146
Range of weighted average interest rates, by series(3)	1.59% to 2.88%		2.52% to 5.00%		2.34% to 5.34%		3.50% to 4.75%		3.41		%	3.74		%
Stated maturities(3)	2024 - 2036		2047-2052		2027-2032		2028-2059		2025			2052
Number of series	20		17		18		3		1			1

December 31, 2021	Legacy Sequoia		Sequoia		CAFL(1)		Freddie Mac SLST (2)		Freddie Mac K-Series			HEI			Total
(Dollars in Thousands)
Certificates with principal balance	$	259,505	$	3,353,073	$	3,264,766	$	1,535,638	$	418,700		$	138,792		$	8,970,474
Interest-only certificates	619		32,749		193,725		11,714		10,184			—			248,991
Market valuation adjustments	(32,243)		(2,774)		16,407		41,111		12,973			(1,382)			34,092
ABS Issued, Net	$	227,881	$	3,383,048	$	3,474,898	$	1,588,463	$	441,857		$	137,410		$	9,253,557
Range of weighted average interest rates, by series(3)	0.23% to 1.44%		2.40% to 5.03%		2.64% to 5.24%		3.50% to 4.75%		3.41		%	3.31		%
Stated maturities(3)	2024 - 2036		2047-2052		2027-2031		2028-2059		2025			2052
Number of series	20		16		16		3		1			1

(1)Includes $485 million and $270 million (principal balance) of ABS issued by two CAFL bridge securitization trusts sponsored by Redwood and accounted for at amortized cost at June 30, 2022 and December 31, 2021, respectively.

(2)Includes $117 million and $145 million (principal balance) of ABS issued by a re-securitization trust sponsored by Redwood and accounted for at amortized cost at June 30, 2022 and December 31, 2021, respectively.

(3)Certain ABS issued by CAFL, Freddie Mac SLST, and HEI securitization entities are subject to early redemption and interest rate step-ups as described below.

Accrued Interest Payable on Asset-Backed Securities Issued

The following table summarizes the accrued interest payable on ABS issued at June 30, 2022 and December 31, 2021. Interest due on consolidated ABS issued is payable monthly.

Table 14.2 – Accrued Interest Payable on Asset-Backed Securities Issued

(In Thousands)	June 30, 2022		December 31, 2021
Legacy Sequoia	$	171	$	99
Sequoia	9,232		8,452
CAFL	10,611		11,030
Freddie Mac SLST (1)	4,182		4,630
Freddie Mac K-Series	1,178		1,190
Total Accrued Interest Payable on ABS Issued	$	25,374	$	25,401

(1)Includes accrued interest payable on ABS issued by a re-securitization trust sponsored by Redwood.

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Long-Term Debt (Tables)

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments

The tables below summarize our long-term debt, including the facilities that are available to us, the outstanding balances, the weighted average interest rate, and the maturity information at June 30, 2022 and December 31, 2021.

Table 15.1 – Long-Term Debt

	June 30, 2022
(Dollars in Thousands)	Borrowings		Unamortized Deferred Issuance Costs / Discount		Net Carrying Value		Limit		Weighted Average Interest Rate (1)		Final Maturity
Facilities
Recourse Subordinate Securities Financing
Facility A	$	132,212	$	(104)	$	132,108	N/A		4.21	%	9/2024
CAFL
Facility B	102,018		(202)		101,816		N/A		4.21	%	2/2025
Facility C	76,195		(251)		75,944		N/A		4.75	%	6/2026
Non-Recourse BPL Financing
Facility D	500,608		(1,026)		499,582		$	600,000	L + 2.50%		N/A
Recourse BPL Financing
Facility E	294,702		(103)		294,599		450,000		SOFR + 2.25%		9/2023
Total Long-Term Debt Facilities	1,105,735		(1,686)		1,104,049
Convertible notes
4.75% convertible senior notes	198,629		(1,302)		197,327		N/A		4.75	%	8/2023
5.625% convertible senior notes	150,200		(1,683)		148,517		N/A		5.625	%	7/2024
5.75% exchangeable senior notes	172,092		(2,977)		169,115		N/A		5.75	%	10/2025
7.75% convertible senior notes	215,000		(6,691)		208,309		N/A		7.75	%	6/2027
Trust preferred securities and subordinated notes	139,500		(756)		138,744		N/A		L + 2.25%		7/2037
Total Long-Term Debt	$	1,981,156	$	(15,095)	$	1,966,061

	December 31, 2021
(Dollars in Thousands)	Borrowings		Unamortized Deferred Issuance Costs / Discount		Net Carrying Value		Limit		Weighted Average Interest Rate (1)		Final Maturity
Facilities
Recourse Subordinate Securities Financing
Facility A	$	144,385	$	(313)	$	144,072	N/A		4.21	%	9/2024
CAFL
Facility B	102,351		(353)		101,998		N/A		4.21	%	2/2025
Facility C	91,707		(376)		91,331		N/A		4.75	%	6/2026
Non-Recourse BPL Financing
Facility D	307,215		(507)		306,708		$	400,000	L + 2.75%		N/A
Recourse BPL Financing
Facility E	234,349		(123)		234,226		450,000		L + 2.21%		9/2023
Facility F	110,148		—		110,148		450,000		L + 3.35%		6/2023
Total Long-Term Debt Facilities	990,155		(1,672)		988,483
Convertible notes
4.75% convertible senior notes	198,629		(1,836)		196,793		N/A		4.75	%	8/2023
5.625% convertible senior notes	150,200		(2,072)		148,128		N/A		5.625	%	7/2024
5.75% exchangeable senior notes	172,092		(3,384)		168,708		N/A		5.75	%	10/2025
Trust preferred securities and subordinated notes	139,500		(779)		138,721		N/A		L + 2.25%		7/2037
Total Long-Term Debt	$	1,650,576	$	(9,743)	$	1,640,833

(1)Variable rate borrowings are based on 1- or 3-month LIBOR ("L" in the table above) or 1-month SOFR plus an applicable spread.

The following table summarizes the accrued interest payable on long-term debt at June 30, 2022 and December 31, 2021.

Table 15.3 – Accrued Interest Payable on Long-Term Debt

(In Thousands)	June 30, 2022		December 31, 2021
Long-term debt facilities	$	2,775	$	815
Convertible notes
4.75% convertible senior notes	3,564		3,564
5.625% convertible senior notes	3,896		3,896
5.75% exchangeable senior notes	2,474		2,474
7.75% convertible senior notes	1,018		—
Trust preferred securities and subordinated notes	850		581
Total Accrued Interest Payable on Long-Term Debt	$	14,577	$	11,330

Schedule of Financial Instruments Owned and Pledged as Collateral

The following table below presents the value of loans, securities, and other assets pledged as collateral under our long-term debt at June 30, 2022 and December 31, 2021.

Table 15.2 – Collateral for Long-Term Debt

(In Thousands)	June 30, 2022		December 31, 2021
Collateral Type
Bridge loans	$	779,467	$	554,597
Single-family rental loans	180,482		244,703
Real estate securities
Sequoia securitizations (1)	198,640		247,227
CAFL securitizations (1)	247,106		260,405
Total Collateral for Long-Term Debt	$	1,405,695	$	1,306,932

(1)Represents securities we have retained from consolidated securitization entities. For GAAP purposes, we consolidate the loans and non-recourse ABS debt issued from these securitizations.

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Future Lease Commitments by Year

The following table presents our future lease commitments at June 30, 2022.

Table 16.1 – Future Lease Commitments by Year

(In Thousands)	June 30, 2022
2022 (6 months)	$	2,203
2023	4,428
2024	4,338
2025	3,475
2026	3,420
2027 and thereafter	4,553
Total Lease Commitments	22,417
Less: Imputed interest	(2,969)
Operating Lease Liabilities	$	19,448

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Equity (Tables)

6 Months Ended

Jun. 30, 2022

Equity [Abstract]

Changes to Accumulated Other Comprehensive Income by Component

The following table provides a summary of changes to accumulated other comprehensive income (loss) by component for the three and six months ended June 30, 2022 and 2021.

Table 17.1 – Changes in Accumulated Other Comprehensive Income (Loss) by Component

	Three Months Ended June 30, 2022				Three Months Ended June 30, 2021
(In Thousands)	Available-for-Sale Securities		Interest Rate Agreements Accounted for as Cash Flow Hedges		Available-for-Sale Securities		Interest Rate Agreements Accounted for as Cash Flow Hedges
Balance at beginning of period	$	48,938	$	(75,412)	$	84,527	$	(79,539)
Other comprehensive (loss) income before reclassifications	(33,409)		—		11,224		—
Amounts reclassified from other accumulated comprehensive (income) loss	1,066		1,029		(7,500)		1,028
Net current-period other comprehensive (loss) income	(32,343)		1,029		3,724		1,028
Balance at End of Period	$	16,595	$	(74,383)	$	88,251	$	(78,511)

	Six Months Ended June 30, 2022				Six Months Ended June 30, 2021
(In Thousands)	Available-for-Sale Securities		Interest Rate Agreements Accounted for as Cash Flow Hedges		Available-for-Sale Securities		Interest Rate Agreements Accounted for as Cash Flow Hedges
Balance at beginning of period	$	67,503	$	(76,430)	$	76,336	$	(80,557)
Other comprehensive (loss) income before reclassifications	(51,282)		—		22,210		—
Amounts reclassified from other accumulated comprehensive (income) loss	374		2,047		(10,295)		2,046
Net current-period other comprehensive (loss) income	(50,908)		2,047		11,915		2,046
Balance at End of Period	$	16,595	$	(74,383)	$	88,251	$	(78,511)

Reclassifications out of Accumulated Other Comprehensive Income

The following table provides a summary of reclassifications out of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2022 and 2021.

Table 17.2 – Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

		Amount Reclassified From Accumulated Other Comprehensive (Loss)
	Affected Line Item in the	Three Months Ended June 30,
(In Thousands)	Income Statement	2022		2021
Net Realized (Gain) Loss on AFS Securities
Increase (decrease) in allowance for credit losses on AFS securities	Investment fair value changes, net	$	1,066	$	(13)
Gain on sale of AFS securities	Realized gains, net	—		(7,487)
		$	1,066	$	(7,500)
Net Realized Loss on Interest Rate   Agreements Designated as Cash Flow Hedges
Amortization of deferred loss	Interest expense	$	1,029	$	1,028
		$	1,029	$	1,028

		Amount Reclassified From Accumulated Other Comprehensive (Loss)
	Affected Line Item in the	Six Months Ended June 30,
(In Thousands)	Income Statement	2022		2021
Net Realized (Gain) Loss on AFS Securities
Increase (decrease) in allowance for credit losses on AFS securities	Investment fair value changes, net	$	1,771	$	(388)
Gain on sale of AFS securities	Realized gains, net	(1,397)		(9,907)
		$	374	$	(10,295)
Net Realized Loss on Interest Rate   Agreements Designated as Cash Flow Hedges
Amortization of deferred loss	Interest expense	$	2,047	$	2,046
		$	2,047	$	2,046

Basic and Diluted Earnings Per Common Share

The following table provides the basic and diluted (loss) earnings per common share computations for the three and six months ended June 30, 2022 and 2021.

Table 17.3 – Basic and Diluted Earnings per Common Share

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands, except Share Data)	2022		2021		2022		2021
Basic Earnings per Common Share:
Net (loss) income attributable to Redwood	$	(99,966)	$	90,025	$	(69,051)	$	187,282
Less: Dividends and undistributed earnings allocated to participating securities	(1,159)		(3,149)		(2,286)		(6,458)
Net (loss) income allocated to common shareholders	$	(101,125)	$	86,876	$	(71,337)	$	180,824
Basic weighted average common shares outstanding	119,660,173		112,921,070		119,771,554		112,337,984
Basic (Loss) Earnings per Common Share	$	(0.85)	$	0.77	$	(0.60)	$	1.61
Diluted Earnings per Common Share:
Net (loss) income attributable to Redwood	$	(99,966)	$	90,025	$	(69,051)	$	187,282
Less: Dividends and undistributed earnings allocated to participating securities	(1,159)		(2,869)		(2,286)		(5,829)
Add back: Interest expense on convertible notes for the period, net of tax	—		6,990		—		13,971
Net (loss) income allocated to common shareholders	$	(101,125)	$	94,146	$	(71,337)	$	195,424
Weighted average common shares outstanding	119,660,173		112,921,070		119,771,554		112,337,984
Net effect of dilutive equity awards	—		273,139		—		234,353
Net effect of assumed convertible notes conversion to common shares	—		28,566,875		—		28,566,875
Diluted weighted average common shares outstanding	119,660,173		141,761,084		119,771,554		141,139,212
Diluted (Loss) Earnings per Common Share	$	(0.85)	$	0.66	$	(0.60)	$	1.38

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Equity Compensation Plans (Tables)

6 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

Equity Compensation Costs by Award Type

The unamortized compensation cost of awards issued under the Incentive Plan, which are settled by delivery of shares of common stock and purchases under the Employee Stock Purchase Plan, totaled $39 million at June 30, 2022, as shown in the following table.

Table 18.1 – Activities of Equity Compensation Costs by Award Type

	Six Months Ended June 30, 2022
(In Thousands)	Restricted Stock Awards		Restricted Stock Units		Deferred Stock Units		Performance Stock Units		Employee Stock Purchase Plan		Total
Unrecognized compensation cost at beginning of period	$	84	$	3,589	$	26,473	$	12,237	$	—	$	42,383
Equity grants	—		2,684		4,350		—		323		7,357
Performance-based valuation adjustment	—		—		—		(1,719)		—		(1,719)
Equity grant forfeitures	(5)		(339)		—		—		—		(344)
Equity compensation expense	(72)		(1,049)		(5,782)		(1,988)		(162)		(9,053)
Unrecognized Compensation Cost at End of Period	$	7	$	4,885	$	25,041	$	8,530	$	161	$	38,624

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Mortgage Banking Activities, Net (Tables)

6 Months Ended

Jun. 30, 2022

Mortgage Banking [Abstract]

Mortgage Banking Activities

The following table presents the components of Mortgage banking activities, net, recorded in our consolidated statements of income for the three and six months ended June 30, 2022 and 2021.

Table 19.1 – Mortgage Banking Activities

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
Residential Mortgage Banking Activities, Net
Changes in fair value of:
Residential loans, at fair value (1)	$	(33,414)	$	76,907	$	(102,236)	$	47,634
Trading securities (2)	1,315		(1,095)		4,101		(374)
Risk management derivatives (3)	9,900		(55,740)		83,254		33,224
Other income (expense), net (4)	4,412		1,193		5,029		2,216
Total residential mortgage banking activities, net	(17,787)		21,265		(9,852)		82,700
Business Purpose Mortgage Banking Activities, Net:
Changes in fair value of:
Single-family rental loans, at fair value (1)	(39,994)		25,966		(65,187)		36,214
Risk management derivatives (3)	15,487		(2,504)		32,520		1,354
Bridge loans, at fair value	116		2,225		2,251		3,269
Other income, net (5)	12,161		7,467		26,566		13,489
Total business purpose mortgage banking activities, net	(12,230)		33,154		(3,850)		54,326
Mortgage Banking Activities, Net	$	(30,017)	$	54,419	$	(13,702)	$	137,026

(1)For residential loans, includes changes in fair value for associated loan purchase and forward sale commitments. For single-family rental loans, includes changes in fair value for associated interest rate lock commitments.

(2)Represents fair value changes on trading securities that are being used as hedges to manage the mark-to-market risks associated with our residential mortgage banking operations.

(3)Represents market valuation changes of derivatives that were used to manage risks associated with our mortgage banking operations.

(4)Amounts in this line item include other fee income from loan acquisitions and provisions for repurchases, presented net.

(5)Amounts in this line item include other fee income from loan originations.

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Other Income, Net (Tables)

6 Months Ended

Jun. 30, 2022

Other Income and Expenses [Abstract]

Schedule of Other Income, Net

The following table presents the components of Other income recorded in our consolidated statements of income for the three and six months ended June 30, 2022 and 2021.

Table 20.1 – Other Income, Net

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
MSR income, net (1)	$	5,376	$	(43)	$	9,679	$	654
Bridge loan fees	1,473		911		2,463		1,604
Risk share income	323		861		783		1,743
Other	(166)		397		64		1,968
Other Income, Net	$	7,006	$	2,126	$	12,989	$	5,969

(1)Includes servicing fees and fair value changes for MSRs, net.

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General and Administrative Expenses, Loan Acquisition Costs, and Other Expenses (Tables)

6 Months Ended

Jun. 30, 2022

Other Income and Expenses [Abstract]

Components of General and Administrative Expenses and Other Expenses

Components of our general and administrative expenses, loan acquisition costs, and other expenses for the three and six months ended June 30, 2022 and 2021 are presented in the following table.

Table 21.1 – Components of General and Administrative Expenses, Loan Acquisition Costs, and Other Expenses

	Three Months Ended June 30,				Six Months Ended June 30,
(In Thousands)	2022		2021		2022		2021
General and Administrative Expenses
Fixed compensation expense	$	12,110	$	11,269	$	26,738	$	23,074
Annual variable compensation expense	1,811		12,508		5,168		31,177
Long-term incentive award expense (1)	5,532		5,682		11,192		9,851
Acquisition-related equity compensation expense (2)	—		1,212		—		2,424
Systems and consulting	3,703		3,272		6,887		6,249
Office costs	2,083		2,024		4,108		3,832
Accounting and legal	1,576		1,221		3,251		1,935
Corporate costs	1,000		873		1,864		1,564
Other	4,151		2,533		7,612		4,039
Total General and Administrative Expenses	31,966		40,594		66,820		84,145
Loan Acquisition Costs
Commissions	2,116		1,661		4,730		2,924
Underwriting costs	1,096		1,836		2,468		3,521
Transfer and holding costs	268		251		747		862
Total Loan Acquisition Costs	3,480		3,748		7,945		7,307
Other Expenses
Amortization of purchase-related intangible assets	3,306		3,873		6,840		7,746
Other	162		112		713		335
Total Other Expenses	3,468		3,985		7,553		8,081
Total General and Administrative Expenses, Loan Acquisition Costs, and Other Expenses	$	38,914	$	48,327	$	82,318	$	99,533

(1)For the three months ended June 30, 2022 and 2021, long-term incentive award expense included $5 million and $4 million of expense for awards settleable in shares of our common stock, and $0.4 million and $1 million of expense for awards settleable in cash, respectively. For the six months ended June 30, 2022 and 2021, long-term incentive award expense included $10 million and $7 million of expense for awards settleable in shares of our common stock, and $1 million and $3 million of expense for awards settleable in cash, respectively.

(2)Acquisition-related equity compensation expense relates to 588,260 shares of restricted stock that were issued to members of CoreVest management as a component of the consideration paid to them for our purchase of their interests in CoreVest in 2019. The grant date fair value of these restricted stock awards was $10 million, which was recognized as compensation expense over the two-year vesting period on a straight-line basis in accordance with GAAP.

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Taxes (Tables)

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Reconciliation of Statutory Tax Rate to Effective Tax Rate

The following is a reconciliation of the statutory federal and state tax rates to our effective tax rate at June 30, 2022 and 2021.

Table 22.1 – Reconciliation of Statutory Tax Rate to Effective Tax Rate

	June 30, 2022		June 30, 2021
Federal statutory rate	21.0	%	21.0	%
State statutory rate, net of Federal tax effect	8.6	%	8.6	%
Differences in taxable (loss) income from GAAP income	(22.4)	%	(14.1)	%
Change in valuation allowance	(4.4)	%	(3.3)	%
Dividends paid deduction	11.9	%	(3.3)	%
Effective Tax Rate	14.7	%	8.9	%

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2022

Segment Reporting [Abstract]

Business Segment Financial Information

The following tables present financial information by segment for the three and six months ended June 30, 2022 and 2021.

Table 23.1 – Business Segment Financial Information

	Three Months Ended June 30, 2022
(In Thousands)	Residential Mortgage Banking		Business Purpose Mortgage Banking		Investment Portfolio		Corporate/ Other		Total
Interest income	$	13,199	$	8,586	$	144,478	$	1,192	$	167,455
Interest expense	(8,297)		(4,258)		(102,589)		(11,823)		(126,967)
Net interest income	4,902		4,328		41,889		(10,631)		40,488
Non-interest (loss) income
Mortgage banking activities, net	(17,787)		(12,230)		—		—		(30,017)
Investment fair value changes, net	—		—		(98,111)		10,139		(87,972)
Other income, net	—		1,054		6,235		(283)		7,006
Realized gains, net	—		—		—		—		—
Total non-interest (loss) income, net	(17,787)		(11,176)		(91,876)		9,856		(110,983)
General and administrative expenses	(6,082)		(11,069)		(3,041)		(11,774)		(31,966)
Loan acquisition costs	(881)		(2,599)		—		—		(3,480)
Other expenses	74		(3,306)		(236)		—		(3,468)
Benefit from (provision for) income taxes	5,588		3,169		686		—		9,443
Segment Contribution	$	(14,186)	$	(20,653)	$	(52,578)	$	(12,549)
Net (Loss)									$	(99,966)
Non-cash amortization (expense) income, net	$	(760)	$	(3,480)	$	(1,450)	$	(2,137)	$	(7,827)

	Six Months Ended June 30, 2022
(In Thousands)	Residential Mortgage Banking		Business Purpose Mortgage Banking		Investment Portfolio		Corporate/ Other		Total
Interest income	$	26,166	$	13,427	$	315,050	$	2,212	$	356,855
Interest expense	(15,233)		(6,826)		(219,171)		(22,035)		(263,265)
Net interest income	10,933		6,601		95,879		(19,823)		93,590
Non-interest (loss) income
Mortgage banking activities, net	(9,852)		(3,850)		—		—		(13,702)
Investment fair value changes, net	—		—		(103,517)		9,425		(94,092)
Other income, net	—		1,629		11,517		(157)		12,989
Realized gains, net	—		—		2,581		—		2,581
Total non-interest (loss) income, net	(9,852)		(2,221)		(89,419)		9,268		(92,224)
General and administrative expenses	(12,183)		(21,541)		(6,174)		(26,922)		(66,820)
Loan acquisition costs	(2,298)		(5,647)		—		—		(7,945)
Other expenses	74		(6,840)		(787)		—		(7,553)
Benefit from (provision for) income taxes	6,595		6,450		(1,144)		—		11,901
Segment Contribution	$	(6,731)	$	(23,198)	$	(1,645)	$	(37,477)
Net (Loss)									$	(69,051)
Non-cash amortization (expense) income, net	$	(298)	$	(7,370)	$	(9,644)	$	(4,170)	$	(21,482)

	Three Months Ended June 30, 2021
(In Thousands)	Residential Mortgage Banking		Business Purpose Mortgage Banking		Investment Portfolio		Corporate/ Other		Total
Interest income	$	13,246	$	3,026	$	121,248	$	1,175	$	138,695
Interest expense	(7,618)		(1,521)		(88,693)		(10,233)		(108,065)
Net interest income	5,628		1,505		32,555		(9,058)		30,630
Non-interest income
Mortgage banking activities, net	21,265		33,154		—		—		54,419
Investment fair value changes, net	—		—		49,727		(247)		49,480
Other income, net	—		156		1,705		265		2,126
Realized gains, net	—		—		8,384		—		8,384
Total non-interest income, net	21,265		33,310		59,816		18		114,409
General and administrative expenses	(6,898)		(12,356)		(3,157)		(18,183)		(40,594)
Loan acquisition costs	(1,887)		(1,861)		—		—		(3,748)
Other expenses	—		(3,873)		(112)		—		(3,985)
Provision for income taxes	(3,725)		(2,182)		(780)		—		(6,687)
Segment Contribution	$	14,383	$	14,543	$	88,322	$	(27,223)
Net Income									$	90,025
Non-cash amortization (expense) income, net	$	(13)	$	(4,054)	$	7	$	(1,955)	$	(6,015)

	Six Months Ended June 30, 2021
(In Thousands)	Residential Mortgage Banking		Business Purpose Mortgage Banking		Investment Portfolio		Corporate/ Other		Total
Interest income	$	20,825	$	5,881	$	237,757	$	2,537	$	267,000
Interest expense	(12,365)		(3,120)		(174,638)		(20,494)		(210,617)
Net interest income	8,460		2,761		63,119		(17,957)		56,383
Non-interest income
Mortgage banking activities, net	82,700		54,326		—		—		137,026
Investment fair value changes, net	—		—		95,488		(921)		94,567
Other income, net	—		278		5,279		412		5,969
Realized gains, net	—		—		11,100		—		11,100
Total non-interest income (loss), net	82,700		54,604		111,867		(509)		248,662
General and administrative expenses	(19,587)		(22,550)		(6,321)		(35,687)		(84,145)
Loan acquisition costs	(3,291)		(3,353)		(659)		(4)		(7,307)
Other expenses	(6)		(7,650)		(442)		17		(8,081)
Provision for income taxes	(13,211)		(3,503)		(1,516)		—		(18,230)
Segment Contribution	$	55,065	$	20,309	$	166,048	$	(54,140)
Net Income									$	187,282
Non-cash amortization income (expense), net	$	(16)	$	(8,152)	$	(227)	$	(3,850)	$	(12,245)

Components of Corporate and Other

The following table presents the components of Corporate/Other for the three and six months ended June 30, 2022 and 2021.

Table 23.2 – Components of Corporate/Other

	Three Months Ended June 30,
	2022						2021
(In Thousands)	Legacy Consolidated VIEs (1)		Other		Total		Legacy Consolidated VIEs (1)		Other		Total
Interest income	$	1,108	$	84	$	1,192	$	1,169	$	6	$	1,175
Interest expense	(967)		(10,856)		(11,823)		(755)		(9,478)		(10,233)
Net interest income	141		(10,772)		(10,631)		414		(9,472)		(9,058)
Non-interest income
Investment fair value changes, net	(336)		10,475		10,139		(216)		(31)		(247)
Other income	—		(283)		(283)		—		265		265
Total non-interest income, net	(336)		10,192		9,856		(216)		234		18
General and administrative expenses	—		(11,774)		(11,774)		—		(18,183)		(18,183)
Loan acquisition costs	—		—		—		—		—		—
Other expenses	—		—		—		—		—		—
Total	$	(195)	$	(12,354)	$	(12,549)	$	198	$	(27,421)	$	(27,223)

	Six Months Ended June 30,
	2022						2021
(In Thousands)	Legacy Consolidated VIEs (1)		Other		Total		Legacy Consolidated VIEs (1)		Other		Total
Interest income	$	2,120	$	92	$	2,212	$	2,517	$	20	$	2,537
Interest expense	(1,668)		(20,367)		(22,035)		(1,630)		(18,864)		(20,494)
Net interest income	452		(20,275)		(19,823)		887		(18,844)		(17,957)
Non-interest income
Investment fair value changes, net	(1,050)		10,475		9,425		(915)		(6)		(921)
Other income	—		(157)		(157)		—		412		412
Realized gains, net	—		—		—		—		—		—
Total non-interest income, net	(1,050)		10,318		9,268		(915)		406		(509)
General and administrative expenses	—		(26,922)		(26,922)		—		(35,687)		(35,687)
Loan acquisition costs	—		—		—		—		(4)		(4)
Other expenses	—		—		—		—		17		17
Total	$	(598)	$	(36,879)	$	(37,477)	$	(28)	$	(54,112)	$	(54,140)

(1)     Legacy consolidated VIEs represent Legacy Sequoia entities that are consolidated for GAAP financial reporting purposes. See Note 4 for further discussion on VIEs.

Supplemental Information by Segment

The following table presents supplemental information by segment at June 30, 2022 and December 31, 2021.

Table 23.3 – Supplemental Segment Information

(In Thousands)	Residential Mortgage Banking		Business Purpose Lending Mortgage Banking		Investment Portfolio		Corporate/ Other		Total
June 30, 2022
Residential loans	$	990,924	$	—	$	5,378,886	$	208,789	$	6,578,599
Business purpose loans	—		503,945		4,698,992		—		5,202,937
Consolidated Agency multifamily loans	—		—		443,114		—		443,114
Real estate securities	3,994		—		280,284		—		284,278
Other investments	—		—		615,807		63,860		679,667
Intangible assets	—		34,720		—		—		34,720
Total assets	1,032,281		645,428		11,513,520		684,307		13,875,536
December 31, 2021
Residential loans	$	1,673,235	$	—	$	5,688,742	$	230,455	$	7,592,432
Business purpose loans	—		347,860		4,443,129		—		4,790,989
Consolidated Agency multifamily loans	—		—		473,514		—		473,514
Real estate securities	4,927		—		372,484		—		377,411
Other investments	—		—		606,267		35,702		641,969
Intangible assets	—		41,561		—		—		41,561
Total assets	1,716,285		464,967		11,770,486		755,206		14,706,944

XML

Organization (Details)	6 Months Ended
	Jun. 30, 2022 segment
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of operating segments	3

XML

Basis of Presentation - Narrative (Details) $ in Millions	6 Months Ended
	Jun. 30, 2022 USD ($) partnership	Jun. 30, 2021 USD ($)	Dec. 31, 2019 USD ($)
Variable Interest Entity [Line Items]
Number of partnerships consolidated | partnership	2
VIE, ownership interest rate (as a percent)	80.00%
Amortization of intangible assets	$ 7	$ 7
Variable Interest Entity, Primary Beneficiary
Variable Interest Entity [Line Items]
Number of partnerships consolidated | partnership	2
5 Arches
Variable Interest Entity [Line Items]
Intangible assets			$ 25
CAFL
Variable Interest Entity [Line Items]
Intangible assets			$ 57

XML

Basis of Presentation - Intangible Assets – Activity (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Dec. 31, 2021
Finite-Lived Intangible Assets [Line Items]
Intangible Assets at Acquisition	$ 34,720
Carrying value	34,720
5 Arches LLC and CoreVest
Finite-Lived Intangible Assets [Line Items]
Intangible Assets at Acquisition	34,720	$ 81,300
Accumulated amortization	(46,580)
Carrying value	$ 34,720	81,300
Weighted Average Amortization Period (in years)	6 years
5 Arches LLC and CoreVest | Borrower network
Finite-Lived Intangible Assets [Line Items]
Intangible Assets at Acquisition	$ 27,773	45,300
Accumulated amortization	(17,527)
Carrying value	$ 27,773	45,300
Weighted Average Amortization Period (in years)	7 years
5 Arches LLC and CoreVest | Broker network
Finite-Lived Intangible Assets [Line Items]
Intangible Assets at Acquisition	$ 6,033	18,100
Accumulated amortization	(12,067)
Carrying value	$ 6,033	18,100
Weighted Average Amortization Period (in years)	5 years
5 Arches LLC and CoreVest | Non-compete agreements
Finite-Lived Intangible Assets [Line Items]
Intangible Assets at Acquisition	$ 642	9,500
Accumulated amortization	(8,858)
Carrying value	$ 642	9,500
Weighted Average Amortization Period (in years)	3 years
5 Arches LLC and CoreVest | Tradenames
Finite-Lived Intangible Assets [Line Items]
Intangible Assets at Acquisition	$ 272	4,000
Accumulated amortization	(3,728)
Carrying value	$ 272	4,000
Weighted Average Amortization Period (in years)	3 years
5 Arches LLC and CoreVest | Developed technology
Finite-Lived Intangible Assets [Line Items]
Intangible Assets at Acquisition	$ 0	1,800
Accumulated amortization	(1,800)
Carrying value	$ 0	1,800
Weighted Average Amortization Period (in years)	2 years
5 Arches LLC and CoreVest | Loan administration fees on existing loan assets
Finite-Lived Intangible Assets [Line Items]
Intangible Assets at Acquisition	$ 0	2,600
Accumulated amortization	(2,600)
Carrying value	$ 0	$ 2,600
Weighted Average Amortization Period (in years)	1 year

XML

Basis of Presentation - Intangible Asset Amortization Expense by Year (Details) $ in Thousands	Jun. 30, 2022 USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]
2022 (6 months)	$ 5,959
2023	10,091
2024	7,075
2025	6,471
2026	5,124
Total Future Intangible Asset Amortization	$ 34,720

XML

Summary of Significant Accounting Policies - Narrative (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Debt Instrument [Line Items]
Borrowings	$ 1,981,156	$ 1,650,576
Notional Amount	3,025,270	6,861,921
Interest rate contract
Debt Instrument [Line Items]
Notional Amount	468,000	$ 2,100,000
Repo or Warehouse Debt
Debt Instrument [Line Items]
Borrowings	868,000
Bridge Loan
Debt Instrument [Line Items]
Borrowings	740,000
Trust Preferred Securities and Subordinated Notes
Debt Instrument [Line Items]
Borrowings	$ 140,000

XML

Summary of Significant Accounting Policies - Offsetting of Financial Assets, Liabilities, and Collateral (Details) - USD ($) $ in Thousands		Jun. 30, 2022	Dec. 31, 2021
Assets
Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet	[1]	$ 36,587	$ 26,467
Liabilities
Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet	[1]	(6,591)	(3,317)
Total Liabilities
Gross Amounts of Recognized Assets (Liabilities)		(429,683)	(575,534)
Gross Amounts Offset in Consolidated Balance Sheet		0	0
Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet		(429,683)	(575,534)
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments		428,209	574,629
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral (Received) Pledged		1,474	895
Net Amount		0	(10)
Interest rate agreements
Assets
Gross Amounts of Recognized Assets (Liabilities)		29,601	18,929
Gross Amounts Offset in Consolidated Balance Sheet		0	0
Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet		29,601	18,929
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments		(2,445)	(1,251)
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral (Received) Pledged		(6,451)	(16,046)
Net Amount		20,705	1,632
Liabilities
Gross Amounts of Recognized Assets (Liabilities)		(2,445)	(1,251)
Gross Amounts Offset in Consolidated Balance Sheet		0	0
Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet		(2,445)	(1,251)
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments		2,445	1,251
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral (Received) Pledged		0	0
Net Amount		0	0
TBAs
Assets
Gross Amounts of Recognized Assets (Liabilities)		3,104	2,880
Gross Amounts Offset in Consolidated Balance Sheet		0	0
Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet		3,104	2,880
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments		(530)	(633)
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral (Received) Pledged		(2,574)	(704)
Net Amount		0	1,543
Liabilities
Gross Amounts of Recognized Assets (Liabilities)		(2,004)	(658)
Gross Amounts Offset in Consolidated Balance Sheet		0	0
Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet		(2,004)	(658)
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments		530	633
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral (Received) Pledged		1,474	15
Net Amount		0	(10)
Futures
Assets
Gross Amounts of Recognized Assets (Liabilities)		1,875	25
Gross Amounts Offset in Consolidated Balance Sheet		0	0
Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet		1,875	25
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments		(1,615)	(25)
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral (Received) Pledged		(2)	0
Net Amount		258	0
Liabilities
Gross Amounts of Recognized Assets (Liabilities)		(1,615)	(905)
Gross Amounts Offset in Consolidated Balance Sheet		0	0
Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet		(1,615)	(905)
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments		1,615	25
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral (Received) Pledged		0	880
Net Amount		0	0
Interest Rate Agreement, TBAs, and Futures
Assets
Gross Amounts of Recognized Assets (Liabilities)		34,580	21,834
Gross Amounts Offset in Consolidated Balance Sheet		0	0
Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet		34,580	21,834
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments		(4,590)	(1,909)
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral (Received) Pledged		(9,027)	(16,750)
Net Amount		20,963	3,175
Loan warehouse debt
Loan warehouse debt and Security repurchase agreement
Gross Amounts of Recognized Assets (Liabilities)		(423,619)	(572,720)
Gross Amounts Offset in Consolidated Balance Sheet		0	0
Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet		(423,619)	(572,720)
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments		423,619	572,720
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral (Received) Pledged		0	0
Net Amount		$ 0	$ 0

[1] Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At June 30, 2022 and December 31, 2021, assets of consolidated VIEs totaled $9,951,520 and $10,661,081, respectively. At June 30, 2022 and December 31, 2021, liabilities of consolidated VIEs totaled $8,899,020 and $9,619,347, respectively. See Note 4 for further discussion.

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Principles of Consolidation - Additional Information (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2022 USD ($) partnership entity	Dec. 31, 2021 USD ($)
Variable Interest Entity [Line Items]
Number of partnerships consolidated | partnership	2
VIE, ownership interest rate (as a percent)	80.00%
Mortgage servicing rights	$ 239,552	$ 310,953
Loans for sale at fair value that were acquired	$ 222,000
Variable Interest Entity, Primary Beneficiary
Variable Interest Entity [Line Items]
Number of partnerships consolidated | partnership	2
Variable Interest Entity, Not Primary Beneficiary
Variable Interest Entity [Line Items]
Number of securitization entities to which asset transferred (in entities) | entity	46
Number of entities called | entity	3
Unpaid principal balance of loans purchased	$ 102,000
Gain related to called security	$ 300

XML

Principles of Consolidation - Assets and Liabilities of Consolidated Variable Interest Entities Accounted for as Collateralized Financing Entities (Details) $ in Thousands		Jun. 30, 2022 USD ($) investment	Dec. 31, 2021 USD ($) investment
Variable Interest Entity [Line Items]
Other investments	[1]	$ 679,667	$ 641,969
Cash and cash equivalents	[1]	371,296	450,485
Restricted cash	[1]	72,558	80,999
Accrued interest receivable		51,006	47,515
Other assets	[1]	171,780	231,117
Total Assets	[1]	13,875,536	14,706,944
Short-term debt	[1]	1,869,822	2,177,362
Accrued interest payable		42,548	39,297
Accrued expenses and other liabilities	[1]	190,825	245,788
Asset-backed securities issued	[1]	8,584,146	9,253,557
Total liabilities	[1]	12,617,445	13,320,857
CAFL
Variable Interest Entity [Line Items]
Fair value of securities owned		307,000	302,000
Freddie Mac SLST
Variable Interest Entity [Line Items]
Fair value of securities owned		390,000	445,000
Variable Interest Entity, Primary Beneficiary
Variable Interest Entity [Line Items]
Total Assets		9,951,520	10,661,081
Total liabilities		8,899,020	9,619,347
Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Other investments		451,594	544,307
Cash and cash equivalents		14,399	6,481
Restricted cash		39,197	46,086
Accrued interest receivable		33,572	35,401
Other assets		15,684	41,826
Total Assets		9,951,520	10,661,081
Short-term debt		231,846	294,447
Accrued interest payable		25,134	25,018
Accrued expenses and other liabilities		57,894	46,325
Asset-backed securities issued		8,584,146	9,253,557
Total liabilities		8,899,020	9,619,347
Value of our investments in VIEs		$ 1,045,376	$ 1,033,913
Number of VIEs | investment		63	60
Residential loans, held-for-investment | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Fair value of loans		$ 5,365,532	$ 5,747,150
Business purpose loans, held-for-investment
Variable Interest Entity [Line Items]
Fair value of loans	[1]	4,697,766	4,432,680
Business purpose loans, held-for-investment | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Fair value of loans		3,588,428	3,766,316
Consolidated Agency multifamily loans | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Fair value of loans		443,114	473,514
Legacy Sequoia | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Other investments		0	0
Cash and cash equivalents		0	0
Restricted cash		143	148
Accrued interest receivable		215	210
Other assets		410	61
Total Assets		209,556	230,874
Short-term debt		0	0
Accrued interest payable		171	99
Accrued expenses and other liabilities		0	0
Asset-backed securities issued		207,647	227,881
Total liabilities		207,818	227,980
Value of our investments in VIEs		$ 1,552	$ 2,634
Number of VIEs | investment		20	20
Legacy Sequoia | Residential loans, held-for-investment | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Fair value of loans		$ 208,788	$ 230,455
Legacy Sequoia | Business purpose loans, held-for-investment | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Fair value of loans		0	0
Legacy Sequoia | Consolidated Agency multifamily loans | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Fair value of loans		0	0
Sequoia | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Other investments		0	0
Cash and cash equivalents		0	0
Restricted cash		10	5
Accrued interest receivable		11,317	10,885
Other assets		0	0
Total Assets		3,536,786	3,639,355
Short-term debt		0	0
Accrued interest payable		9,232	8,452
Accrued expenses and other liabilities		10	5
Asset-backed securities issued		3,288,682	3,383,048
Total liabilities		3,297,924	3,391,505
Value of our investments in VIEs		$ 236,777	$ 245,417
Number of VIEs | investment		17	16
Sequoia | Residential loans, held-for-investment | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Fair value of loans		$ 3,525,459	$ 3,628,465
Sequoia | Business purpose loans, held-for-investment | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Fair value of loans		0	0
Sequoia | Consolidated Agency multifamily loans | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Fair value of loans		0	0
CAFL | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Other investments		0	0
Cash and cash equivalents		0	0
Restricted cash		8,688	15,221
Accrued interest receivable		14,955	15,737
Other assets		5,320	32,510
Total Assets		3,617,391	3,829,784
Short-term debt		0	0
Accrued interest payable		10,610	11,030
Accrued expenses and other liabilities		6,996	1,171
Asset-backed securities issued		3,207,867	3,474,898
Total liabilities		3,225,473	3,487,099
Value of our investments in VIEs		$ 388,849	$ 339,419
Number of VIEs | investment		18	16
CAFL | Residential loans, held-for-investment | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Fair value of loans		$ 0	$ 0
CAFL | Business purpose loans, held-for-investment | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Fair value of loans		3,588,428	3,766,316
CAFL | Consolidated Agency multifamily loans | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Fair value of loans		0	0
Freddie Mac SLST | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Other investments		0	0
Cash and cash equivalents		0	0
Restricted cash		0	0
Accrued interest receivable		5,378	5,792
Other assets		2,299	2,028
Total Assets		1,638,962	1,896,050
Short-term debt		0	0
Accrued interest payable		3,720	4,055
Accrued expenses and other liabilities		0	0
Asset-backed securities issued		1,358,459	1,588,463
Total liabilities		1,362,179	1,592,518
Value of our investments in VIEs		$ 275,127	$ 301,795
Number of VIEs | investment		3	3
Freddie Mac SLST | Residential loans, held-for-investment | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Fair value of loans		$ 1,631,285	$ 1,888,230
Freddie Mac SLST | Business purpose loans, held-for-investment | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Fair value of loans		0	0
Freddie Mac SLST | Consolidated Agency multifamily loans | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Fair value of loans		0	0
Freddie Mac K-Series | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Other investments		0	0
Cash and cash equivalents		0	0
Restricted cash		0	0
Accrued interest receivable		1,304	1,315
Other assets		0	0
Total Assets		444,418	474,829
Short-term debt		0	0
Accrued interest payable		1,178	1,190
Accrued expenses and other liabilities		0	0
Asset-backed securities issued		411,380	441,857
Total liabilities		412,558	443,047
Value of our investments in VIEs		$ 31,732	$ 31,657
Number of VIEs | investment		1	1
Freddie Mac K-Series | Residential loans, held-for-investment | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Fair value of loans		$ 0	$ 0
Freddie Mac K-Series | Business purpose loans, held-for-investment | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Fair value of loans		0	0
Freddie Mac K-Series | Consolidated Agency multifamily loans | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Fair value of loans		443,114	473,514
Servicing Investment | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Other investments		305,379	384,754
Cash and cash equivalents		14,399	6,481
Restricted cash		26,236	25,420
Accrued interest receivable		403	1,462
Other assets		7,605	7,177
Total Assets		354,022	425,294
Short-term debt		231,846	294,447
Accrued interest payable		223	192
Accrued expenses and other liabilities		25,466	28,115
Asset-backed securities issued		0	0
Total liabilities		257,535	322,754
Value of our investments in VIEs		$ 96,487	$ 102,540
Number of VIEs | investment		3	3
Servicing Investment | Residential loans, held-for-investment | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Fair value of loans		$ 0	$ 0
Servicing Investment | Business purpose loans, held-for-investment | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Fair value of loans		0	0
Servicing Investment | Consolidated Agency multifamily loans | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Fair value of loans		0	0
HEI | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Other investments		146,215	159,553
Cash and cash equivalents		0	0
Restricted cash		4,120	5,292
Accrued interest receivable		0	0
Other assets		50	50
Total Assets		150,385	164,895
Short-term debt		0	0
Accrued interest payable		0	0
Accrued expenses and other liabilities		25,422	17,034
Asset-backed securities issued		110,111	137,410
Total liabilities		135,533	154,444
Value of our investments in VIEs		$ 14,852	$ 10,451
Number of VIEs | investment		1	1
Fair value of securities owned		$ 15,000
HEI | Residential loans, held-for-investment | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Fair value of loans		0	$ 0
HEI | Business purpose loans, held-for-investment | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Fair value of loans		0	0
HEI | Consolidated Agency multifamily loans | Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities
Variable Interest Entity [Line Items]
Fair value of loans		$ 0	$ 0

[1] Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At June 30, 2022 and December 31, 2021, assets of consolidated VIEs totaled $9,951,520 and $10,661,081, respectively. At June 30, 2022 and December 31, 2021, liabilities of consolidated VIEs totaled $8,899,020 and $9,619,347, respectively. See Note 4 for further discussion.

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Principles of Consolidation - Income (Loss) from Consolidated VIEs Accounted for as Collateralized Financing Entities (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Variable Interest Entity [Line Items]
Interest income	$ 167,455	$ 138,695	$ 356,855	$ 267,000
Interest expense	(126,967)	(108,065)	(263,265)	(210,617)
Net Interest Income	40,488	30,630	93,590	56,383
Investment fair value changes, net	(87,972)	49,480	(94,092)	94,567
Total non-interest (loss) income, net	(110,983)	114,409	(92,224)	248,662
General and administrative expenses	(31,966)	(40,594)	(66,820)	(84,145)
Net (Loss) Income	(99,966)	90,025	(69,051)	187,282
Variable Interest Entity, Primary Beneficiary
Variable Interest Entity [Line Items]
Interest income	118,492	98,917	258,808	193,788
Interest expense	(90,784)	(77,529)	(198,254)	(151,376)
Net Interest Income	27,708	21,388	60,554	42,412
Investment fair value changes, net	(67,765)	44,238	(66,394)	59,943
Other income	255		345
Total non-interest (loss) income, net	(67,510)	44,238	(66,049)	59,943
General and administrative expenses	(44)	(52)	(75)	(90)
Other expenses	(235)	(112)	(786)	(442)
Net (Loss) Income	(40,081)	65,462	(6,356)	101,823
Legacy Sequoia | Variable Interest Entity, Primary Beneficiary
Variable Interest Entity [Line Items]
Interest income	1,108	1,169	2,120	2,517
Interest expense	(967)	(755)	(1,668)	(1,630)
Net Interest Income	141	414	452	887
Investment fair value changes, net	(336)	(216)	(1,050)	(915)
Other income	0		0
Total non-interest (loss) income, net	(336)	(216)	(1,050)	(915)
General and administrative expenses	0	0	0	0
Other expenses	0	0	0	0
Net (Loss) Income	(195)	198	(598)	(28)
Sequoia | Variable Interest Entity, Primary Beneficiary
Variable Interest Entity [Line Items]
Interest income	31,923	14,492	64,021	29,975
Interest expense	(28,329)	(11,374)	(56,500)	(23,480)
Net Interest Income	3,594	3,118	7,521	6,495
Investment fair value changes, net	(5,886)	4,906	(9,708)	9,804
Other income	0		0
Total non-interest (loss) income, net	(5,886)	4,906	(9,708)	9,804
General and administrative expenses	0	0	0	0
Other expenses	0	0	0	0
Net (Loss) Income	(2,292)	8,024	(2,187)	16,299
CAFL | Variable Interest Entity, Primary Beneficiary
Variable Interest Entity [Line Items]
Interest income	56,608	54,849	133,942	103,722
Interest expense	(41,923)	(43,201)	(100,403)	(81,054)
Net Interest Income	14,685	11,648	33,539	22,668
Investment fair value changes, net	(22,109)	3,697	(19,445)	3,411
Other income	255		345
Total non-interest (loss) income, net	(21,854)	3,697	(19,100)	3,411
General and administrative expenses	0	0	0	0
Other expenses	0	0	0	0
Net (Loss) Income	(7,169)	15,345	14,439	26,079
Freddie Mac SLST | Variable Interest Entity, Primary Beneficiary
Variable Interest Entity [Line Items]
Interest income	16,553	19,506	33,753	39,665
Interest expense	(13,372)	(16,611)	(27,457)	(33,982)
Net Interest Income	3,181	2,895	6,296	5,683
Investment fair value changes, net	(35,940)	36,316	(32,904)	40,433
Other income	0		0
Total non-interest (loss) income, net	(35,940)	36,316	(32,904)	40,433
General and administrative expenses	0	0	0	0
Other expenses	0	0	0	0
Net (Loss) Income	(32,759)	39,211	(26,608)	46,116
Freddie Mac K-Series | Variable Interest Entity, Primary Beneficiary
Variable Interest Entity [Line Items]
Interest income	4,732	4,860	9,485	9,646
Interest expense	(4,351)	(4,478)	(8,722)	(8,834)
Net Interest Income	381	382	763	812
Investment fair value changes, net	(190)	1,855	74	10,776
Other income	0		0
Total non-interest (loss) income, net	(190)	1,855	74	10,776
General and administrative expenses	0	0	0	0
Other expenses	0	0	0	0
Net (Loss) Income	191	2,237	837	11,588
Servicing Investment | Variable Interest Entity, Primary Beneficiary
Variable Interest Entity [Line Items]
Interest income	7,568	4,041	15,487	8,263
Interest expense	(1,842)	(1,110)	(3,504)	(2,396)
Net Interest Income	5,726	2,931	11,983	5,867
Investment fair value changes, net	(4,505)	(2,320)	(7,973)	(3,566)
Other income	0		0
Total non-interest (loss) income, net	(4,505)	(2,320)	(7,973)	(3,566)
General and administrative expenses	(44)	(52)	(75)	(90)
Other expenses	(235)	(112)	(786)	(442)
Net (Loss) Income	942	447	3,149	1,769
HEI | Variable Interest Entity, Primary Beneficiary
Variable Interest Entity [Line Items]
Interest income	0	0	0	0
Interest expense	0	0	0	0
Net Interest Income	0	0	0	0
Investment fair value changes, net	1,201	0	4,612	0
Other income	0		0
Total non-interest (loss) income, net	1,201	0	4,612	0
General and administrative expenses	0	0	0	0
Other expenses	0	0	0	0
Net (Loss) Income	$ 1,201	$ 0	$ 4,612	$ 0

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Principles of Consolidation - Securitization Activity Related to Unconsolidated Variable Interest Entity's Sponsored by Redwood (Details) - Variable Interest Entity, Not Primary Beneficiary - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Variable Interest Entity [Line Items]
Principal balance of loans transferred	$ 0	$ 355,924	$ 0	$ 1,231,803
Trading securities retained, at fair value
Variable Interest Entity [Line Items]
Securities retained, at fair value	0	1,225	0	7,774
AFS securities retained, at fair value
Variable Interest Entity [Line Items]
Securities retained, at fair value	$ 0	$ 522	$ 0	$ 1,600

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Principles of Consolidation - Cash Flows Related to Unconsolidated Variable Interest Entity's Sponsored by Redwood (Details) - Variable Interest Entity, Not Primary Beneficiary - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Variable Interest Entity [Line Items]
Proceeds from new transfers	$ 0	$ 361,673	$ 0	$ 1,266,063
MSR fees received	764	1,336	1,628	2,943
Funding of compensating interest, net	(14)	(70)	(30)	(170)
Cash flows received on retained securities	$ 3,158	$ 16,764	$ 17,284	$ 25,393

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Principles of Consolidation - Assumptions Related to Unconsolidated Variable Interest Entity's Sponsored by Redwood (Details) - Variable Interest Entity, Not Primary Beneficiary	3 Months Ended	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2021
Senior IO Securities
Fair Value Assumption, Date of Securitization or Asset-backed Financing Arrangement, Transferor's Continuing Involvement, Servicing Assets or Liabilities [Line Items]
Prepayment rates	8.00%	11.00%
Discount rates	15.00%	15.00%
Credit loss assumptions	0.25%	0.23%
Subordinate Securities
Fair Value Assumption, Date of Securitization or Asset-backed Financing Arrangement, Transferor's Continuing Involvement, Servicing Assets or Liabilities [Line Items]
Prepayment rates	8.00%	11.00%
Discount rates	7.00%	6.00%
Credit loss assumptions	0.25%	0.23%

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Principles of Consolidation - Summary of Unconsolidated Variable Interest Entity's Sponsored by Redwood (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
On-balance sheet assets, at fair value:
Subordinate securities, classified as AFS	$ 150,498	$ 206,792
Mortgage servicing rights	239,552	310,953
Total Subordinate Investment Securities
On-balance sheet assets, at fair value:
Subordinate securities, classified as AFS	150,498	206,792
Variable Interest Entity, Not Primary Beneficiary
On-balance sheet assets, at fair value:
Maximum loss exposure	123,654	152,206
Assets transferred:
Principal balance of loans outstanding	4,281,806	4,959,234
Principal balance of loans 30+ days delinquent	27,683	30,594
Variable Interest Entity, Not Primary Beneficiary | Total Subordinate Investment Securities
On-balance sheet assets, at fair value:
Subordinate securities, classified as AFS	85,269	127,542
Interest-only, senior and subordinate securities, classified as trading | Variable Interest Entity, Not Primary Beneficiary
On-balance sheet assets, at fair value:
Interest-only, senior and subordinate securities, classified as trading	27,293	18,214
Mortgage servicing rights
On-balance sheet assets, at fair value:
Mortgage servicing rights	23,560	12,438
Mortgage servicing rights | Variable Interest Entity, Not Primary Beneficiary
On-balance sheet assets, at fair value:
Mortgage servicing rights	$ 11,092	$ 6,450

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Principles of Consolidation - Key Assumptions and Sensitivity Analysis for Assets Retained from Unconsolidated Variable Interest Entity's Sponsored by Redwood (Details) - Variable Interest Entity, Not Primary Beneficiary - USD ($) $ in Thousands	3 Months Ended	6 Months Ended	12 Months Ended
	Mar. 31, 2022	Jun. 30, 2022	Dec. 31, 2021
MSRs
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items]
Fair value		$ 11,092	$ 6,450
Expected life (in years)		6 years	3 years
Prepayment speed assumption (annual CPR) (as a percent)		10.00%	29.00%
Decrease in fair value from:
10% adverse change		$ 1,402	$ 447
25% adverse change		$ 3,405	$ 1,020
Discount rate assumption		11.00%	12.00%
Decrease in fair value from:
100 basis point increase		$ 1,649	$ 152
200 basis point increase		3,180	297
Senior Securities
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items]
Fair value		$ 27,293	$ 18,214
Expected life (in years)		6 years	4 years
Prepayment speed assumption (annual CPR) (as a percent)		11.00%	23.00%
Decrease in fair value from:
10% adverse change		$ 1,002	$ 1,130
25% adverse change		$ 2,406	$ 2,596
Discount rate assumption		12.00%	16.00%
Decrease in fair value from:
100 basis point increase		$ 910	$ 426
200 basis point increase		$ 1,759	$ 829
Credit loss assumption		0.03%	0.35%
Decrease in fair value from:
10% higher losses			$ 0
25% higher losses			0
Subordinate Securities
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items]
Fair value		$ 85,269	$ 127,542
Expected life (in years)		15 years	5 years
Prepayment speed assumption (annual CPR) (as a percent)		10.00%	32.00%
Decrease in fair value from:
10% adverse change		$ 568	$ 531
25% adverse change		$ 1,323	$ 1,440
Discount rate assumption		8.00%	5.00%
Decrease in fair value from:
100 basis point increase		$ 8,522	$ 4,801
200 basis point increase		$ 15,860	$ 9,139
Credit loss assumption		0.03%	0.35%
Decrease in fair value from:
10% higher losses		$ 42	$ 1,528
25% higher losses		$ 103	$ 3,819
Minimum | MSRs
Decrease in fair value from:
Impact of adverse change in prepayment speed	10.00%	10.00%
Impact of increase in discount rate assumption	1.00%	1.00%
Impact of adverse change in expected credit losses	10.00%	10.00%
Minimum | Senior Securities
Decrease in fair value from:
Impact of adverse change in prepayment speed	10.00%	10.00%
Impact of increase in discount rate assumption	1.00%	1.00%
Impact of adverse change in expected credit losses	10.00%	10.00%
Minimum | Subordinate Securities
Decrease in fair value from:
Impact of adverse change in prepayment speed	10.00%	10.00%
Impact of increase in discount rate assumption	1.00%	1.00%
Impact of adverse change in expected credit losses	10.00%	10.00%
Maximum | MSRs
Decrease in fair value from:
Impact of adverse change in prepayment speed	25.00%	25.00%
Impact of increase in discount rate assumption	2.00%	2.00%
Impact of adverse change in expected credit losses	25.00%	25.00%
Maximum | Senior Securities
Decrease in fair value from:
Impact of adverse change in prepayment speed	25.00%	25.00%
Impact of increase in discount rate assumption	2.00%	2.00%
Impact of adverse change in expected credit losses	25.00%	25.00%
Maximum | Subordinate Securities
Decrease in fair value from:
Impact of adverse change in prepayment speed	25.00%	25.00%
Impact of increase in discount rate assumption	2.00%	2.00%
Impact of adverse change in expected credit losses	25.00%	25.00%

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Principles of Consolidation - Summary of Redwood's Interest in Third-Party Variable Interest Entity's (Details) - USD ($) $ in Thousands		Jun. 30, 2022	Dec. 31, 2021
Variable Interest Entity [Line Items]
Real estate securities	[1]	$ 284,278	$ 377,411
Other assets | Variable Interest Entity, Not Primary Beneficiary
Variable Interest Entity [Line Items]
Real estate securities		180,350	242,055
Other assets | Senior | Variable Interest Entity, Not Primary Beneficiary
Variable Interest Entity [Line Items]
Real estate securities		4,205	3,572
Other assets | Subordinate | Variable Interest Entity, Not Primary Beneficiary
Variable Interest Entity [Line Items]
Real estate securities		167,512	228,083
Other assets | Total Mortgage-Backed Securities | Variable Interest Entity, Not Primary Beneficiary
Variable Interest Entity [Line Items]
Real estate securities		171,717	231,655
Other assets | Excess MSR | Variable Interest Entity, Not Primary Beneficiary
Variable Interest Entity [Line Items]
Real estate securities		$ 8,633	$ 10,400

[1] Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At June 30, 2022 and December 31, 2021, assets of consolidated VIEs totaled $9,951,520 and $10,661,081, respectively. At June 30, 2022 and December 31, 2021, liabilities of consolidated VIEs totaled $8,899,020 and $9,619,347, respectively. See Note 4 for further discussion.

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Fair Value of Financial Instruments - Carrying Values and Estimated Fair Values of Assets and Liabilities (Details) - USD ($) $ in Thousands		Jun. 30, 2022	Dec. 31, 2021
Assets
Real estate securities, at fair value		$ 133,780	$ 170,619
MSRs		239,552	310,953
Derivative assets	[1]	36,587	26,467
Liabilities
Derivative liabilities	[1]	6,591	3,317
ABS issued, net, At fair value		7,993,953	8,843,147
Residential loans, held-for-sale, at fair value
Assets
Loans receivable, fair value		1,207,185	1,838,797
Servicer advance investments
Assets
MSRs		273,210	350,923
Carrying Value
Assets
Real estate securities, at fair value		284,278	377,411
Other financial instruments		10,869	12,663
Cash and cash equivalents		371,296	450,485
Restricted cash		72,558	80,999
Derivative assets		36,587	26,467
Margin receivable		11,420	7,269
Liabilities
Margin payable		15,023	24,368
Guarantee obligation		6,768	7,459
Derivative liabilities		6,591	3,317
ABS issued, net, At fair value		7,993,953	8,843,147
ABS issued, net, At amortized cost		590,193	410,410
Other long-term debt, net		1,104,050	988,483
Convertible notes, net		723,267	513,629
Trust preferred securities and subordinated notes, net		138,744	138,721
Carrying Value | Servicer Advance Investments
Assets
MSRs		273,210	350,923
Carrying Value | MSRs
Assets
MSRs		23,560	12,438
Carrying Value | Excess MSRs
Assets
REO		40,803	44,231
Carrying Value | REO
Assets
REO		7,813	36,126
Carrying Value | Short-term debt
Liabilities
Short-term debt		1,869,822	2,177,362
Carrying Value | Servicer advance investments | Residential loans, held-for-sale, at fair value
Assets
Loans, held-for-sale		1,213,067	1,845,248
Carrying Value | Servicer advance investments | Residential loans, held-for-investment, at fair value
Assets
Loans receivable, fair value		5,365,531	5,747,150
Carrying Value | Servicer advance investments | Business purpose loans, held-for-sale, at fair value
Assets
Loans, held-for-sale		505,171	358,309
Carrying Value | Servicer advance investments | Business purpose loans, held-for-investment, at fair value
Assets
Loans receivable, fair value		4,697,766	4,432,680
Carrying Value | Servicer advance investments | Consolidated Agency multifamily loans, at fair value
Assets
Loans receivable, fair value		443,114	473,514
Fair Value
Assets
Real estate securities, at fair value		284,278	377,411
Other financial instruments		10,869	12,663
Cash and cash equivalents		371,296	450,485
Restricted cash		72,558	80,999
Derivative assets		36,587	26,467
Margin receivable		11,420	7,269
Liabilities
Margin payable		15,023	24,368
Guarantee obligation		6,241	7,133
Derivative liabilities		6,591	3,317
ABS issued, net, At fair value		7,993,953	8,843,147
ABS issued, net, At amortized cost		569,731	410,471
Other long-term debt, net		1,101,622	989,570
Convertible notes, net		684,922	537,300
Trust preferred securities and subordinated notes, net		83,700	97,650
Fair Value | Servicer Advance Investments
Assets
MSRs		273,210	350,923
Fair Value | MSRs
Assets
MSRs		23,560	12,438
Fair Value | Excess MSRs
Assets
REO		40,803	44,231
Fair Value | REO
Assets
REO		9,170	39,272
Fair Value | Short-term debt
Liabilities
Short-term debt		1,869,822	2,177,362
Fair Value | Servicer advance investments | Residential loans, held-for-sale, at fair value
Assets
Loans, held-for-sale		1,213,067	1,845,248
Fair Value | Servicer advance investments | Residential loans, held-for-investment, at fair value
Assets
Loans receivable, fair value		5,365,531	5,747,150
Fair Value | Servicer advance investments | Business purpose loans, held-for-sale, at fair value
Assets
Loans, held-for-sale		505,171	358,309
Fair Value | Servicer advance investments | Business purpose loans, held-for-investment, at fair value
Assets
Loans receivable, fair value		4,697,766	4,432,680
Fair Value | Servicer advance investments | Consolidated Agency multifamily loans, at fair value
Assets
Loans receivable, fair value		443,114	473,514
HEIs at Redwood | Carrying Value
Assets
Shared home appreciation options		276,366	192,740
Liabilities
HEI securitization non-controlling interest		25,422	17,035
HEIs at Redwood | Fair Value
Assets
Shared home appreciation options		276,366	192,740
Liabilities
HEI securitization non-controlling interest		$ 25,422	$ 17,035

[1] Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At June 30, 2022 and December 31, 2021, assets of consolidated VIEs totaled $9,951,520 and $10,661,081, respectively. At June 30, 2022 and December 31, 2021, liabilities of consolidated VIEs totaled $8,899,020 and $9,619,347, respectively. See Note 4 for further discussion.

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Fair Value of Financial Instruments - Additional Information (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2022 USD ($)	Jun. 30, 2022 USD ($)
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Investments	$ 9,000	$ 9,000
Securities
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Fair value option elected aggregate carrying amount, asset	0	5,000
Residential loans
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Fair value option elected aggregate carrying amount, asset	1,150,000	3,260,000
Business purpose loans
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Fair value option elected aggregate carrying amount, asset	923,000	1,840,000
Acquisitions		122,065
HEIs
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Acquisitions	57,000	97,000
MSRs
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Acquisitions	$ 3,000	$ 8,293

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Fair Value of Financial Instruments - Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands		Jun. 30, 2022	Dec. 31, 2021
Assets
Real estate securities, at fair value		$ 133,780	$ 170,619
MSRs		239,552	310,953
Other investments	[1]	679,667	641,969
Derivative assets	[1]	36,587	26,467
Liabilities
Derivative liabilities	[1]	6,591	3,317
ABS issued		7,993,953	8,843,147
Fair Value, Measurements, Recurring
Assets
Business purpose loans		5,202,938	4,790,989
Consolidated Agency multifamily loans		443,114	473,514
Real estate securities, at fair value		284,278	377,411
Servicer advance investments		273,210	350,923
MSRs		23,560	12,438
Excess MSRs		40,803	44,231
HEIs		276,366	192,740
Other investments		10,869	17,574
Derivative assets		36,587	26,467
Liabilities
HEI securitization non-controlling interest		25,422	17,035
Derivative liabilities		6,591	3,317
ABS issued		7,993,953	8,843,147
Fair Value, Measurements, Recurring | Residential Loans
Assets
Residential loans		6,578,566	7,592,398
Fair Value, Measurements, Recurring | Level 1
Assets
Business purpose loans		0	0
Consolidated Agency multifamily loans		0	0
Real estate securities, at fair value		0	0
Servicer advance investments		0	0
MSRs		0	0
Excess MSRs		0	0
HEIs		0	0
Other investments		0	0
Derivative assets		4,979	2,906
Liabilities
HEI securitization non-controlling interest		0	0
Derivative liabilities		3,619	1,563
ABS issued		0	0
Fair Value, Measurements, Recurring | Level 1 | Residential Loans
Assets
Residential loans		0	0
Fair Value, Measurements, Recurring | Level 2
Assets
Business purpose loans		0	0
Consolidated Agency multifamily loans		0	0
Real estate securities, at fair value		0	0
Servicer advance investments		0	0
MSRs		0	0
Excess MSRs		0	0
HEIs		0	0
Other investments		0	0
Derivative assets		29,601	18,928
Liabilities
HEI securitization non-controlling interest		0	0
Derivative liabilities		2,445	1,251
ABS issued		0	0
Fair Value, Measurements, Recurring | Level 2 | Residential Loans
Assets
Residential loans		0	0
Fair Value, Measurements, Recurring | Level 3
Assets
Business purpose loans		5,202,938	4,790,989
Consolidated Agency multifamily loans		443,114	473,514
Real estate securities, at fair value		284,278	377,411
Servicer advance investments		273,210	350,923
MSRs		23,560	12,438
Excess MSRs		40,803	44,231
HEIs		276,366	192,740
Other investments		10,869	17,574
Derivative assets		2,007	4,633
Liabilities
HEI securitization non-controlling interest		25,422	17,035
Derivative liabilities		527	503
ABS issued		7,993,953	8,843,147
Fair Value, Measurements, Recurring | Level 3 | Residential Loans
Assets
Residential loans		$ 6,578,566	$ 7,592,398

[1] Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At June 30, 2022 and December 31, 2021, assets of consolidated VIEs totaled $9,951,520 and $10,661,081, respectively. At June 30, 2022 and December 31, 2021, liabilities of consolidated VIEs totaled $8,899,020 and $9,619,347, respectively. See Note 4 for further discussion.

XML

Fair Value of Financial Instruments - Changes in Level 3 Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2022
Point Noncontrolling Interest
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance - December 31, 2021		$ 17,035
Acquisitions		0
Principal paydowns		0
Gains (losses) in net income (loss), net		6,218
Other settlements, net		0
Ending balance - June 30, 2022	$ 23,253	23,253
ABS Issued
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance - December 31, 2021		8,843,147
Acquisitions		952,711
Principal paydowns		(925,650)
Gains (losses) in net income (loss), net		(876,255)
Other settlements, net		0
Ending balance - June 30, 2022	7,993,953	7,993,953
Residential Loans
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance - December 31, 2021		7,592,398
Acquisitions		3,247,960
Originations		0
Sales		(3,050,759)
Principal paydowns		(551,470)
Gains (losses) in net income (loss), net		(657,601)
Unrealized losses in OCI, net		0
Other settlements, net		(1,962)
Ending balance - June 30, 2022	6,578,566	6,578,566
Business purpose loans
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance - December 31, 2021		4,790,989
Acquisitions		122,065
Originations		1,721,032
Sales		(331,750)
Principal paydowns		(719,690)
Gains (losses) in net income (loss), net		(378,745)
Unrealized losses in OCI, net		0
Other settlements, net		(963)
Ending balance - June 30, 2022	5,202,938	5,202,938
Consolidated Agency multifamily loans
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance - December 31, 2021		473,514
Acquisitions		0
Originations		0
Sales		0
Principal paydowns		(3,971)
Gains (losses) in net income (loss), net		(26,429)
Unrealized losses in OCI, net		0
Other settlements, net		0
Ending balance - June 30, 2022	443,114	443,114
Trading Securities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance - December 31, 2021		170,619
Acquisitions		5,006
Originations		0
Sales		(23,329)
Principal paydowns		(1,018)
Gains (losses) in net income (loss), net		(17,498)
Unrealized losses in OCI, net		0
Other settlements, net		0
Ending balance - June 30, 2022	133,780	133,780
AFS Securities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance - December 31, 2021		206,792
Acquisitions		10,000
Originations		0
Sales		0
Principal paydowns		(25,015)
Gains (losses) in net income (loss), net		11,730
Unrealized losses in OCI, net		(53,009)
Other settlements, net		0
Ending balance - June 30, 2022	150,498	150,498
Servicer Advance Investments
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance - December 31, 2021		350,923
Acquisitions		0
Originations		0
Sales		0
Principal paydowns		(71,401)
Gains (losses) in net income (loss), net		(6,312)
Unrealized losses in OCI, net		0
Other settlements, net		0
Ending balance - June 30, 2022	273,210	273,210
Excess MSRs
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance - December 31, 2021		44,231
Acquisitions		0
Originations		0
Sales		0
Principal paydowns		0
Gains (losses) in net income (loss), net		(3,428)
Unrealized losses in OCI, net		0
Other settlements, net		0
Ending balance - June 30, 2022	40,803	40,803
HEIs
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance - December 31, 2021		192,740
Acquisitions		97,389
Originations		0
Sales		0
Principal paydowns		(25,826)
Gains (losses) in net income (loss), net		12,063
Unrealized losses in OCI, net		0
Other settlements, net		0
Ending balance - June 30, 2022	276,366	276,366
MSRs
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance - December 31, 2021		25,101
Acquisitions	3,000	8,293
Originations		0
Sales		(2,231)
Principal paydowns		(30)
Gains (losses) in net income (loss), net		6,875
Unrealized losses in OCI, net		0
Other settlements, net		(3,579)
Ending balance - June 30, 2022	34,429	34,429
Derivatives
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance - December 31, 2021		4,130
Acquisitions		0
Principal paydowns		0
Gains (losses) in net income (loss), net		(51,265)
Other settlements, net		(48,615)
Ending balance - June 30, 2022	$ 1,480	$ 1,480

XML

Fair Value of Financial Instruments - Portion of Net Gains (Losses) Attributable to Level 3 Assets and Liabilities Still Held Included in Net Income (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Residential loan purchase commitments, net
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Net gains (losses) attributable to level 3 liabilities still held included in net income	$ (488)	$ (696)	$ (527)	$ (724)
Point HEI Noncontrolling Interest
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Net gains (losses) attributable to level 3 liabilities still held included in net income	(2,170)	0	(8,388)	0
Point Entities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Net gains (losses) attributable to level 3 assets still held included in net income	3,371	0	13,000	0
Held-for-investment at fair value | Residential loans at Redwood
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Net gains (losses) attributable to level 3 assets still held included in net income	(15,995)	14,130	(31,858)	10,481
Held-for-investment at fair value | Sequoia
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Net gains (losses) attributable to level 3 assets still held included in net income	(6,222)	4,693	(11,203)	8,893
Held-for-investment at fair value | Freddie Mac SLST
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Net gains (losses) attributable to level 3 assets still held included in net income	(36,014)	36,137	(33,074)	40,225
Business purpose loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Net gains (losses) attributable to level 3 assets still held included in net income	(28,385)	28,404	(36,566)	40,003
Consolidated Agency multifamily loans | Freddie Mac K-Series
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Net gains (losses) attributable to level 3 assets still held included in net income	(190)	1,855	74	10,776
Single family rental loans | CAFL
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Net gains (losses) attributable to level 3 assets still held included in net income	(21,828)	2,908	(17,780)	2,556
Trading Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Net gains (losses) attributable to level 3 assets still held included in net income	(17,501)	1,772	(19,884)	2,262
Servicer Advance Investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Net gains (losses) attributable to level 3 assets still held included in net income	(3,231)	(940)	(6,313)	(1,100)
MSRs
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Net gains (losses) attributable to level 3 assets still held included in net income	4,248	(330)	7,644	273
Excess MSRs
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Net gains (losses) attributable to level 3 assets still held included in net income	(2,220)	(2,477)	(3,428)	(4,430)
HEIs at Redwood
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Net gains (losses) attributable to level 3 assets still held included in net income	1,549	2,080	2,701	7,395
Residential loan purchase commitments, net
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Net gains (losses) attributable to level 3 assets still held included in net income	$ 2,056	$ 14,550	$ 2,007	$ 14,171

XML

Fair Value of Financial Instruments - Assets and Liabilities Measured at Fair Value on Non-Recurring Basis (Details) - Fair Value, Measurements, Nonrecurring $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2022 USD ($)	Jun. 30, 2022 USD ($)
REO
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
REO	$ 1,380	$ 1,380
Gain (Loss) on assets measured at fair value on a non-recurring basis	0	0
REO | Level 1
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
REO	0	0
REO | Level 2
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
REO	0	0
REO | Level 3
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
REO	1,380	1,380
Strategic investments
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
REO	17,240	17,240
Gain (Loss) on assets measured at fair value on a non-recurring basis	9,990	9,990
Strategic investments | Level 1
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
REO	0	0
Strategic investments | Level 2
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
REO	0	0
Strategic investments | Level 3
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
REO	$ 17,240	$ 17,240

XML

Fair Value of Financial Instruments - Market Valuation Adjustments, Net (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Income	$ 5,376	$ (43)	$ 9,679	$ 654
Total Market Valuation Gains (Losses), Net	(130,735)	93,858	(132,594)	213,641
Mortgage Banking Activities, Net
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Changes in fair value of assets	(46,590)	45,759	(45,297)	121,321
Mortgage Banking Activities, Net | Residential loans, held-for-sale, at fair value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Changes in fair value of assets	(24,517)	24,988	(51,716)	48,100
Mortgage Banking Activities, Net | Residential loan purchase commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Changes in fair value of assets	(8,897)	51,919	(50,520)	(466)
Mortgage Banking Activities, Net | Single-family rental loans held-for-sale, at fair value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Changes in fair value of assets	(40,034)	25,222	(64,502)	35,470
Mortgage Banking Activities, Net | Single-family rental loan interest rate lock commitments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Changes in fair value of assets	40	744	(685)	744
Mortgage Banking Activities, Net | Bridge loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Changes in fair value of assets	116	2,225	2,251	3,269
Mortgage Banking Activities, Net | Trading securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Changes in fair value of assets	1,315	(1,095)	4,101	(374)
Mortgage Banking Activities, Net | Risk management derivatives
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Changes in fair value of assets	25,387	(58,244)	115,774	34,578
Investment Fair Value Changes, Net
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Changes in fair value of assets	(87,972)	49,480	(94,092)	94,567
Investment Fair Value Changes, Net | Trading securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Changes in fair value of assets	(17,358)	2,893	(21,600)	23,521
Investment Fair Value Changes, Net | Risk management derivatives
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Changes in fair value of assets	4,395	0	6,368	0
Investment Fair Value Changes, Net | Residential loans held-for-sale, at fair value (called Sequoia loans)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Changes in fair value of assets	(8,010)	1,290	(12,262)	1,607
Investment Fair Value Changes, Net | Bridge loans held-for-investment
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Changes in fair value of assets	(9,559)	(62)	(11,702)	3,242
Investment Fair Value Changes, Net | Servicer Advance Investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Changes in fair value of assets	(3,231)	(940)	(6,312)	(1,100)
Investment Fair Value Changes, Net | Excess MSRs
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Changes in fair value of assets	(2,220)	(2,477)	(3,428)	(4,430)
Investment Fair Value Changes, Net | Legacy Sequoia
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Changes in fair value of assets	(336)	(216)	(1,050)	(915)
Investment Fair Value Changes, Net | Sequoia
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Changes in fair value of assets	(5,886)	4,906	(9,708)	9,804
Investment Fair Value Changes, Net | Freddie Mac SLST
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Changes in fair value of assets	(35,940)	36,316	(32,904)	40,433
Investment Fair Value Changes, Net | Freddie Mac K-Series
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Changes in fair value of assets	(190)	1,855	74	10,776
Investment Fair Value Changes, Net | CAFL
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Changes in fair value of assets	(21,828)	3,697	(17,780)	3,411
Investment Fair Value Changes, Net | Point Entities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Changes in fair value of assets	1,201	0	4,612	0
Investment Fair Value Changes, Net | HEIs at Redwood
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Changes in fair value of assets	1,596	2,080	2,788	7,395
Investment Fair Value Changes, Net | Other investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Changes in fair value of assets	10,460	125	10,583	435
Investment Fair Value Changes, Net | Credit (losses) recoveries on AFS securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Changes in fair value of assets	(1,066)	13	(1,771)	388
Other Income
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Income	3,827	(1,381)	6,795	(2,247)
Other Income | MSRs
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Income	$ 3,827	$ (1,381)	$ 6,795	$ (2,247)

XML

Fair Value of Financial Instruments - Quantitative Information about Significant Unobservable Inputs Used in Valuation of Level 3 Assets and Liabilities Measured at Fair Value (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2022 USD ($) $ / loan	Dec. 31, 2021 USD ($)
Assets
ABS issued, net, At fair value | $	$ 7,993,953	$ 8,843,147
Variable Interest Entity, Primary Beneficiary | Collateralized Financing Entities | HEI
Liabilities
Fair value of securities owned | $	$ 15,000
Residential loan purchase commitments, net
Assets
Loans receivable, measurement input	0.68
Loan purchase commitments, net | $	$ 1,500
Residential loan purchase commitments, net | Maximum
Assets
Loans receivable, measurement input	1
Residential loan purchase commitments, net | Prepayment rate (annual CPR)
Assets
Loans receivable, measurement input	0.0224
Residential loan purchase commitments, net | Prepayment rate (annual CPR) | Minimum
Assets
Loans receivable, measurement input	0.0217
Residential loan purchase commitments, net | Prepayment rate (annual CPR) | Maximum
Assets
Loans receivable, measurement input	0.0240
Residential loan purchase commitments, net | Pull-through rate | Minimum
Assets
Loans receivable, measurement input	0.18
Residential loan purchase commitments, net | Committed sales price
Assets
Loans receivable, measurement input	97
Residential loan purchase commitments, net | Committed sales price | Minimum
Assets
Loans receivable, measurement input	97
Residential loan purchase commitments, net | Committed sales price | Maximum
Assets
Loans receivable, measurement input	102
ABS Issued
Liabilities
ABS issued | $	$ 3,496,329
ABS Issued | Prepayment rate (annual CPR) | Minimum
Liabilities
ABS issued, measurement input	0.05
ABS Issued | Prepayment rate (annual CPR) | Maximum
Liabilities
ABS issued, measurement input	0.27
ABS Issued | Prepayment rate (annual CPR) | Weighted Average
Liabilities
ABS issued, measurement input	0.14
ABS Issued | Whole loan discount rate | Minimum
Liabilities
ABS issued, measurement input	0.04
ABS Issued | Whole loan discount rate | Maximum
Liabilities
ABS issued, measurement input	0.18
ABS Issued | Whole loan discount rate | Weighted Average
Liabilities
ABS issued, measurement input	0.06
ABS Issued | Default rate | Minimum
Liabilities
ABS issued, measurement input	0
ABS Issued | Default rate | Maximum
Liabilities
ABS issued, measurement input	0.22
ABS Issued | Default rate | Weighted Average
Liabilities
ABS issued, measurement input	0.01
ABS Issued | Loss severity | Minimum
Liabilities
ABS issued, measurement input	0.25
ABS Issued | Loss severity | Maximum
Liabilities
ABS issued, measurement input	0.50
ABS Issued | Loss severity | Weighted Average
Liabilities
ABS issued, measurement input	0.32
CAFL
Liabilities
ABS issued | $	$ 2,732,964
CAFL | Prepayment rate (annual CPR) | Minimum
Liabilities
ABS issued, measurement input	0
CAFL | Prepayment rate (annual CPR) | Maximum
Liabilities
ABS issued, measurement input	0.03
CAFL | Prepayment rate (annual CPR) | Weighted Average
Liabilities
ABS issued, measurement input	0.03
CAFL | Whole loan discount rate | Minimum
Liabilities
ABS issued, measurement input	0.02
CAFL | Whole loan discount rate | Maximum
Liabilities
ABS issued, measurement input	0.15
CAFL | Whole loan discount rate | Weighted Average
Liabilities
ABS issued, measurement input	0.05
CAFL | Default rate | Minimum
Liabilities
ABS issued, measurement input	0.05
CAFL | Default rate | Maximum
Liabilities
ABS issued, measurement input	0.28
CAFL | Default rate | Weighted Average
Liabilities
ABS issued, measurement input	0.07
CAFL | Loss severity | Minimum
Liabilities
ABS issued, measurement input	0.30
CAFL | Loss severity | Maximum
Liabilities
ABS issued, measurement input	0.30
CAFL | Loss severity | Weighted Average
Liabilities
ABS issued, measurement input	0.30
Freddie Mac SLST
Liabilities
ABS issued | $	$ 1,243,167
Freddie Mac SLST | Prepayment rate (annual CPR) | Minimum
Liabilities
ABS issued, measurement input	0.06
Freddie Mac SLST | Prepayment rate (annual CPR) | Maximum
Liabilities
ABS issued, measurement input	0.08
Freddie Mac SLST | Prepayment rate (annual CPR) | Weighted Average
Liabilities
ABS issued, measurement input	0.06
Freddie Mac SLST | Whole loan discount rate | Minimum
Liabilities
ABS issued, measurement input	0.04
Freddie Mac SLST | Whole loan discount rate | Maximum
Liabilities
ABS issued, measurement input	0.07
Freddie Mac SLST | Whole loan discount rate | Weighted Average
Liabilities
ABS issued, measurement input	0.05
Freddie Mac SLST | Default rate | Minimum
Liabilities
ABS issued, measurement input	0.07
Freddie Mac SLST | Default rate | Maximum
Liabilities
ABS issued, measurement input	0.09
Freddie Mac SLST | Default rate | Weighted Average
Liabilities
ABS issued, measurement input	0.08
Freddie Mac SLST | Loss severity | Minimum
Liabilities
ABS issued, measurement input	0.35
Freddie Mac SLST | Loss severity | Maximum
Liabilities
ABS issued, measurement input	0.35
Freddie Mac SLST | Loss severity | Weighted Average
Liabilities
ABS issued, measurement input	0.35
Freddie Mac K-Series
Liabilities
ABS issued | $	$ 411,380
Freddie Mac K-Series | Whole loan discount rate | Minimum
Liabilities
ABS issued, measurement input	0.03
Freddie Mac K-Series | Whole loan discount rate | Maximum
Liabilities
ABS issued, measurement input	0.09
Freddie Mac K-Series | Whole loan discount rate | Weighted Average
Liabilities
ABS issued, measurement input	0.04
Consolidated Point Entities
Liabilities
ABS issued | $	$ 110,111
Consolidated Point Entities | Prepayment rate (annual CPR) | Minimum
Liabilities
ABS issued, measurement input	0.20
Consolidated Point Entities | Prepayment rate (annual CPR) | Maximum
Liabilities
ABS issued, measurement input	0.20
Consolidated Point Entities | Prepayment rate (annual CPR) | Weighted Average
Liabilities
ABS issued, measurement input	0.20
Consolidated Point Entities | Whole loan discount rate | Minimum
Liabilities
ABS issued, measurement input	0.08
Consolidated Point Entities | Whole loan discount rate | Maximum
Liabilities
ABS issued, measurement input	0.13
Consolidated Point Entities | Whole loan discount rate | Weighted Average
Liabilities
ABS issued, measurement input	0.09
Consolidated Point Entities | Default rate | Minimum
Liabilities
ABS issued, measurement input	0.12
Consolidated Point Entities | Default rate | Maximum
Liabilities
ABS issued, measurement input	0.12
Consolidated Point Entities | Default rate | Weighted Average
Liabilities
ABS issued, measurement input	0.12
Consolidated Point Entities | Loss severity | Minimum
Liabilities
ABS issued, measurement input	0.30
Consolidated Point Entities | Loss severity | Maximum
Liabilities
ABS issued, measurement input	0.30
Consolidated Point Entities | Loss severity | Weighted Average
Liabilities
ABS issued, measurement input	0.30
Consolidated Point Entities | Home price appreciation | Minimum
Liabilities
ABS issued, measurement input	0.03
Consolidated Point Entities | Home price appreciation | Maximum
Liabilities
ABS issued, measurement input	0.04
Consolidated Point Entities | Home price appreciation | Weighted Average
Liabilities
ABS issued, measurement input	0.03
Jumbo fixed-rate loans
Assets
ABS issued, net, At fair value | $	$ 714,777
Jumbo fixed-rate loans | Whole loan spread to swap rate
Assets
Loans held-for-sale, measurement input	0.0221
Jumbo fixed-rate loans | Whole loan spread to swap rate | Minimum
Assets
Loans held-for-sale, measurement input	0.0217
Jumbo fixed-rate loans | Whole loan spread to swap rate | Maximum
Assets
Loans held-for-sale, measurement input	0.0240
Jumbo fixed-rate loans | CRT dollar price
Assets
Loans held-for-sale, measurement input	96
Jumbo fixed-rate loans | CRT dollar price | Minimum
Assets
Loans held-for-sale, measurement input	96
Jumbo fixed-rate loans | CRT dollar price | Maximum
Assets
Loans held-for-sale, measurement input	96
Jumbo loans committed to sell
Assets
Loans receivable, fair value | $	$ 498,258
Jumbo loans committed to sell | Whole loan committed sales price | Minimum
Assets
Loans held-for-sale, measurement input	97
Jumbo loans committed to sell | Whole loan committed sales price | Maximum
Assets
Loans held-for-sale, measurement input	99
Jumbo loans committed to sell | Whole loan committed sales price | Weighted Average
Assets
Loans held-for-sale, measurement input	98
Legacy Sequoia
Assets
Loans receivable, fair value | $	$ 208,788
Sequoia
Assets
Loans receivable, fair value | $	3,525,459
Liabilities
Fair value of securities owned | $	238,000
Freddie Mac SLST
Assets
Loans receivable, fair value | $	1,631,285
Liabilities
Fair value of securities owned | $	390,000	445,000
Single-family rental loans
Assets
Loans receivable, fair value | $	$ 505,171
Single-family rental loans | Senior credit spread | Minimum
Assets
Loans receivable, measurement input	0.0215
Single-family rental loans | Senior credit spread | Maximum
Assets
Loans receivable, measurement input	0.0235
Single-family rental loans | Senior credit spread | Weighted Average
Assets
Loans receivable, measurement input	0.0220
Single-family rental loans | Subordinate credit spread | Minimum
Assets
Loans receivable, measurement input	0.0260
Single-family rental loans | Subordinate credit spread | Maximum
Assets
Loans receivable, measurement input	0.1099
Single-family rental loans | Subordinate credit spread | Weighted Average
Assets
Loans receivable, measurement input	0.0504
Single-family rental loans | Senior credit support | Minimum
Assets
Loans receivable, measurement input	0.39
Single-family rental loans | Senior credit support | Maximum
Assets
Loans receivable, measurement input	0.40
Single-family rental loans | Senior credit support | Weighted Average
Assets
Loans receivable, measurement input	0.39
Single-family rental loans | IO discount rate | Minimum
Assets
Loans receivable, measurement input	0.08
Single-family rental loans | IO discount rate | Maximum
Assets
Loans receivable, measurement input	0.13
Single-family rental loans | IO discount rate | Weighted Average
Assets
Loans receivable, measurement input	0.09
Single-family rental loans | Prepayment rate (annual CPR) | Minimum
Assets
Loans receivable, measurement input	0.03
Single-family rental loans | Prepayment rate (annual CPR) | Maximum
Assets
Loans receivable, measurement input	0.25
Single-family rental loans | Prepayment rate (annual CPR) | Weighted Average
Assets
Loans receivable, measurement input	0.06
Single-family rental loans | Non-securitizable loan dollar price | Minimum
Assets
Loans receivable, measurement input	80
Single-family rental loans | Non-securitizable loan dollar price | Maximum
Assets
Loans receivable, measurement input	100
Single-family rental loans | Non-securitizable loan dollar price | Weighted Average
Assets
Loans receivable, measurement input	93
CAFL
Assets
Loans receivable, fair value | $	$ 3,046,277
Liabilities
Fair value of securities owned | $	307,000	$ 302,000
Bridge loans
Assets
Loans receivable, fair value | $	$ 1,651,489
Bridge loans | Senior credit spread | Minimum
Assets
Loans held-for-investment, measurement input	0.0325
Bridge loans | Senior credit spread | Maximum
Assets
Loans held-for-investment, measurement input	0.0325
Bridge loans | Senior credit spread | Weighted Average
Assets
Loans held-for-investment, measurement input	0.0325
Bridge loans | Subordinate credit spread | Minimum
Assets
Loans held-for-investment, measurement input	0.15
Bridge loans | Subordinate credit spread | Maximum
Assets
Loans held-for-investment, measurement input	0.15
Bridge loans | Subordinate credit spread | Weighted Average
Assets
Loans held-for-investment, measurement input	0.15
Bridge loans | Senior credit support | Minimum
Assets
Loans held-for-investment, measurement input	0.15
Bridge loans | Senior credit support | Maximum
Assets
Loans held-for-investment, measurement input	0.15
Bridge loans | Senior credit support | Weighted Average
Assets
Loans held-for-investment, measurement input	0.15
Bridge loans | Whole loan discount rate | Minimum
Assets
Loans held-for-investment, measurement input	0.05
Bridge loans | Whole loan discount rate | Maximum
Assets
Loans held-for-investment, measurement input	0.15
Bridge loans | Whole loan discount rate | Weighted Average
Assets
Loans held-for-investment, measurement input	0.08
Freddie Mac K-Series
Assets
Loans receivable, fair value | $	$ 443,114
Liabilities
Fair value of securities owned | $	32,000
Trading and AFS securities
Assets
Trading and AFS securities | $	$ 284,278
Trading and AFS securities | CRT dollar price | Minimum
Assets
Trading and AFS securities	74
Trading and AFS securities | CRT dollar price | Maximum
Assets
Trading and AFS securities	88
Trading and AFS securities | CRT dollar price | Weighted Average
Assets
Trading and AFS securities	83
Trading and AFS securities | Prepayment rate (annual CPR) | Minimum
Assets
Trading and AFS securities	0.06
Trading and AFS securities | Prepayment rate (annual CPR) | Maximum
Assets
Trading and AFS securities	0.65
Trading and AFS securities | Prepayment rate (annual CPR) | Weighted Average
Assets
Trading and AFS securities	0.13
Trading and AFS securities | Whole loan discount rate | Minimum
Assets
Trading and AFS securities	0.04
Trading and AFS securities | Whole loan discount rate | Maximum
Assets
Trading and AFS securities	0.18
Trading and AFS securities | Whole loan discount rate | Weighted Average
Assets
Trading and AFS securities	0.09
Trading and AFS securities | Default rate | Minimum
Assets
Trading and AFS securities	0
Trading and AFS securities | Default rate | Maximum
Assets
Trading and AFS securities	0.11
Trading and AFS securities | Default rate | Weighted Average
Assets
Trading and AFS securities	0.01
Trading and AFS securities | Loss severity | Minimum
Assets
Trading and AFS securities	0
Trading and AFS securities | Loss severity | Maximum
Assets
Trading and AFS securities	0.50
Trading and AFS securities | Loss severity | Weighted Average
Assets
Trading and AFS securities	0.25
Servicer Advance Investments
Assets
Servicing asset | $	$ 273,210
Servicer Advance Investments | Minimum
Assets
Expected remaining life	5 years
Servicer Advance Investments | Maximum
Assets
Expected remaining life	5 years
Servicer Advance Investments | Weighted Average
Assets
Expected remaining life	5 years
Servicer Advance Investments | Prepayment rate (annual CPR) | Minimum
Assets
Servicing asset, measurement input	0.16
Servicer Advance Investments | Prepayment rate (annual CPR) | Maximum
Assets
Servicing asset, measurement input	0.30
Servicer Advance Investments | Prepayment rate (annual CPR) | Weighted Average
Assets
Servicing asset, measurement input	0.16
Servicer Advance Investments | Whole loan discount rate | Minimum
Assets
Servicing asset, measurement input	0.02
Servicer Advance Investments | Whole loan discount rate | Maximum
Assets
Servicing asset, measurement input	0.04
Servicer Advance Investments | Whole loan discount rate | Weighted Average
Assets
Servicing asset, measurement input	0.03
Servicer Advance Investments | Mortgage servicing income | Minimum
Assets
Servicing asset, measurement input	0
Servicer Advance Investments | Mortgage servicing income | Maximum
Assets
Servicing asset, measurement input	0.0018
Servicer Advance Investments | Mortgage servicing income | Weighted Average
Assets
Servicing asset, measurement input	0.0009
MSRs
Assets
Servicing asset | $	$ 23,560
MSRs | Prepayment rate (annual CPR) | Minimum
Assets
Servicing asset, measurement input	0.05
MSRs | Prepayment rate (annual CPR) | Maximum
Assets
Servicing asset, measurement input	0.31
MSRs | Prepayment rate (annual CPR) | Weighted Average
Assets
Servicing asset, measurement input	0.09
MSRs | Whole loan discount rate | Minimum
Assets
Servicing asset, measurement input	0.11
MSRs | Whole loan discount rate | Maximum
Assets
Servicing asset, measurement input	1.15
MSRs | Whole loan discount rate | Weighted Average
Assets
Servicing asset, measurement input	0.11
MSRs | Per loan annual cost to service | Minimum
Assets
Servicing asset, measurement input	93
MSRs | Per loan annual cost to service | Maximum
Assets
Servicing asset, measurement input	93
MSRs | Per loan annual cost to service | Weighted Average
Assets
Servicing asset, measurement input	93
Excess MSRs
Assets
Servicing asset | $	$ 40,803
Excess MSRs | Prepayment rate (annual CPR) | Minimum
Assets
Servicing asset, measurement input	0.16
Excess MSRs | Prepayment rate (annual CPR) | Maximum
Assets
Servicing asset, measurement input	0.35
Excess MSRs | Prepayment rate (annual CPR) | Weighted Average
Assets
Servicing asset, measurement input	0.20
Excess MSRs | Whole loan discount rate | Minimum
Assets
Servicing asset, measurement input	0.13
Excess MSRs | Whole loan discount rate | Maximum
Assets
Servicing asset, measurement input	0.19
Excess MSRs | Whole loan discount rate | Weighted Average
Assets
Servicing asset, measurement input	0.18
Excess MSRs | Excess mortgage servicing income | Minimum
Assets
Servicing asset, measurement input	0.0008
Excess MSRs | Excess mortgage servicing income | Maximum
Assets
Servicing asset, measurement input	0.0018
Excess MSRs | Excess mortgage servicing income | Weighted Average
Assets
Servicing asset, measurement input	0.0011
Home Appreciation Option
Assets
HEIs | $	$ 130,151
Home Appreciation Option | Prepayment rate (annual CPR) | Minimum
Assets
HEIs, Measurement input	0.01
Home Appreciation Option | Prepayment rate (annual CPR) | Maximum
Assets
HEIs, Measurement input	0.24
Home Appreciation Option | Prepayment rate (annual CPR) | Weighted Average
Assets
HEIs, Measurement input	0.17
Home Appreciation Option | Whole loan discount rate | Minimum
Assets
HEIs, Measurement input	0.10
Home Appreciation Option | Whole loan discount rate | Maximum
Assets
HEIs, Measurement input	0.10
Home Appreciation Option | Whole loan discount rate | Weighted Average
Assets
HEIs, Measurement input	0.10
Home Appreciation Option | Home price appreciation | Minimum
Assets
HEIs, Measurement input	0.03
Home Appreciation Option | Home price appreciation | Maximum
Assets
HEIs, Measurement input	0.04
Home Appreciation Option | Home price appreciation | Weighted Average
Assets
HEIs, Measurement input	0.03
HEIs held by Point HEI entity
Assets
HEIs | $	$ 146,215
REO
Assets
REO | $	$ 1,380
REO | Loss severity | Minimum
Assets
REO, measurement input	0.12
REO | Loss severity | Maximum
Assets
REO, measurement input	0.25
REO | Loss severity | Weighted Average
Assets
REO, measurement input	0.20

XML

Residential Loans - Summary of Classifications and Carrying Value of Residential Loans (Details) - USD ($) $ in Thousands		Jun. 30, 2022	Dec. 31, 2021
Held-for-sale at fair value
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans	[1]	$ 1,213,067	$ 1,845,282
Held-for-investment at fair value | Legacy Sequoia
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans		208,788	230,455
Held-for-investment at fair value | Sequoia
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans		3,525,459	3,628,465
Held-for-investment at fair value | Freddie Mac SLST
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans		1,631,285	1,888,230
Servicer advance investments
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans		6,578,599	7,592,432
Servicer advance investments | Legacy Sequoia
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans		208,788	230,455
Servicer advance investments | Sequoia
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans		3,525,459	3,628,465
Servicer advance investments | Freddie Mac SLST
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans		1,631,285	1,888,230
Servicer advance investments | Held-for-sale at fair value
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans		1,213,067	1,845,282
Servicer advance investments | Held-for-sale at fair value | Legacy Sequoia
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans		0	0
Servicer advance investments | Held-for-sale at fair value | Sequoia
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans		0	0
Servicer advance investments | Held-for-sale at fair value | Freddie Mac SLST
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans		0	0
Servicer advance investments | Held-for-investment at fair value
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans		5,365,532	5,747,150
Servicer advance investments | Held-for-investment at fair value | Legacy Sequoia
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans		208,788	230,455
Servicer advance investments | Held-for-investment at fair value | Sequoia
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans		3,525,459	3,628,465
Servicer advance investments | Held-for-investment at fair value | Freddie Mac SLST
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans		1,631,285	1,888,230
Servicer advance investments | Redwood
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans		1,213,067	1,845,282
Servicer advance investments | Redwood | Held-for-sale at fair value
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans		1,213,067	1,845,282
Servicer advance investments | Redwood | Held-for-investment at fair value
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans		$ 0	$ 0

[1] Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At June 30, 2022 and December 31, 2021, assets of consolidated VIEs totaled $9,951,520 and $10,661,081, respectively. At June 30, 2022 and December 31, 2021, liabilities of consolidated VIEs totaled $8,899,020 and $9,619,347, respectively. See Note 4 for further discussion.

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Residential Loans - Additional Information (Details) $ in Millions	Jun. 30, 2022 USD ($)
MSRs
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Mortgage servicing rights, at amortized cost	$ 1,160

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Residential Loans - Characteristics of Residential Loans Held-for-Sale (Details) - Residential Loans $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2022 USD ($) loan	Dec. 31, 2021 USD ($) loan
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of loans | loan	1,469	2,196
Unpaid principal balance	$ 1,238,469	$ 1,813,865
Fair value of loans	1,213,067	1,845,282
Market value of loans pledged as collateral under short-term borrowing agreements	$ 1,207,185	$ 1,838,797
Weighted average coupon (as a percent)	4.47%	3.27%
Number of loans in foreclosure | loan	0	0
Financing Receivables, Equal to Greater than 90 Days Past Due
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans	$ 211	$ 2,923
Number of loans with 90+ day delinquencies | loan	1	3
Fair value of loans with 90+ day delinquencies	$ 170	$ 2,304

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Residential Loans - Quarterly Activity of Residential Loans Held-for-Sale (Details) - Residential Loans $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022 USD ($) securitization	Jun. 30, 2021 USD ($)	Jun. 30, 2022 USD ($) securitization	Jun. 30, 2021 USD ($)
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Principal balance of loans acquired	$ 1,145,450	$ 3,484,633	$ 3,260,641	$ 6,580,681
Principal balance of loans sold	1,238,327	3,324,919	3,065,691	5,600,751
Principal balance of loans transferred to HFI	0	0	687,192	0
Net market valuation gains (losses) recorded	(32,527)	$ 26,278	(63,978)	$ 49,707
Legacy Sequoia
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Principal balance of loans acquired	$ 0		$ 102,000
Number of seasoned securities | securitization	0		3

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Residential Loans - Characteristics of Loans Held-for-Investment (Details) - Held-for-investment at fair value $ in Thousands	3 Months Ended	12 Months Ended
	Jun. 30, 2022 USD ($) loan	Dec. 31, 2021 USD ($) loan
Legacy Sequoia
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of loans | loan	1,447	1,583
Unpaid principal balance	$ 234,213	$ 264,057
Fair value of loans	$ 208,788	$ 230,455
Weighted average coupon (as a percent)	2.27%	1.87%
Number of loans in foreclosure | loan	11	10
Unpaid principal balance of loans in foreclosure	$ 1,483	$ 2,188
Sequoia
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of loans | loan	4,738	4,300
Unpaid principal balance	$ 3,988,148	$ 3,605,469
Fair value of loans	$ 3,525,459	$ 3,628,465
Weighted average coupon (as a percent)	3.26%	3.39%
Number of loans in foreclosure | loan	5	2
Unpaid principal balance of loans in foreclosure	$ 5,004	$ 1,624
Freddie Mac SLST
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of loans | loan	11,285	11,986
Unpaid principal balance	$ 1,796,594	$ 1,932,241
Fair value of loans	$ 1,631,285	$ 1,888,230
Weighted average coupon (as a percent)	4.50%	4.51%
Number of loans in foreclosure | loan	257	241
Unpaid principal balance of loans in foreclosure	$ 45,536	$ 43,637
Financing Receivables, Equal to Greater than 90 Days Past Due | Legacy Sequoia
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of loans with 90+ day delinquencies | loan	29	32
Fair value of loans with 90+ day delinquencies	$ 5,107	$ 7,482
Financing Receivables, Equal to Greater than 90 Days Past Due | Sequoia
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of loans with 90+ day delinquencies | loan	14	18
Fair value of loans with 90+ day delinquencies	$ 12,008	$ 15,124
Financing Receivables, Equal to Greater than 90 Days Past Due | Freddie Mac SLST
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of loans with 90+ day delinquencies | loan	1,370	1,208
Fair value of loans with 90+ day delinquencies	$ 236,941	$ 212,961

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Residential Loans - Quarterly Activity of Residential Loans Held-for-Investment (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Transfers from loans held-for-sale to loans held-for-investment			$ 1,953,421	$ 1,998,535
Held-for-investment at fair value | Sequoia
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Net market valuation gain (loss)	$ (211,486)	$ (12,835)	(482,217)	(15,413)
Held-for-investment at fair value | Freddie Mac SLST
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Net market valuation gain (loss)	(76,735)	22,579	(120,503)	19,013
Held-for-investment at fair value | Legacy Sequoia
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Net market valuation gain (loss)	779	4,863	7,104	12,476
Held-for-investment at fair value | Sequoia
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Transfers from loans held-for-sale to loans held-for-investment	$ 0	$ 1,205,494	$ 684,491	$ 1,205,494

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Business Purpose Loans - Classifications and Carrying Values of Business Purpose Residential Loans (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Dec. 31, 2021
Accounts, Notes, Loans and Financing Receivable [Line Items]
Real estate amount, amount with original maturity of thirty years (as a percent)	3.00%
LIBOR
Accounts, Notes, Loans and Financing Receivable [Line Items]
Real estate owned, rate (as a percent)	45.00%
Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Real estate owned, rate (as a percent)	39.00%
Fixed Rate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Real estate owned, rate (as a percent)	17.00%
Commitment To Fund Residential Bridge Loan
Accounts, Notes, Loans and Financing Receivable [Line Items]
Commitment to fund loan	$ 835,000
Residential Bridge, Held-for-sale at fair value
Accounts, Notes, Loans and Financing Receivable [Line Items]
Fair value of loans	0	$ 0
Bridge loans held-for-investment
Accounts, Notes, Loans and Financing Receivable [Line Items]
Fair value of loans	1,109,337	666,364
Residential bridge loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Fair value of loans	$ 1,109,337	666,364
Bridge Loans | Minimum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Residential bridge loans held-for-investment, original maturities (in months)	6 months
Bridge Loans | Maximum
Accounts, Notes, Loans and Financing Receivable [Line Items]
Residential bridge loans held-for-investment, original maturities (in months)	36 months
Held-for-sale at fair value, Total
Accounts, Notes, Loans and Financing Receivable [Line Items]
Fair value of loans	$ 505,171	358,309
Held-for-investment at fair value, Total
Accounts, Notes, Loans and Financing Receivable [Line Items]
Fair value of loans	4,697,766	4,432,680
Business Purpose Loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Fair value of loans	5,202,937	4,790,989
Redwood | Single-family rental loans, held-for-sale
Accounts, Notes, Loans and Financing Receivable [Line Items]
Fair value of loans	505,171	358,309
Redwood | Single Family Rental Loans Held For Investment At Fair Value
Accounts, Notes, Loans and Financing Receivable [Line Items]
Fair value of loans	0	0
Redwood | Single family rental loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Fair value of loans	505,171	358,309
CAFL | Single-family rental loans, held-for-sale
Accounts, Notes, Loans and Financing Receivable [Line Items]
Fair value of loans	0	0
CAFL | Single Family Rental Loans Held For Investment At Fair Value
Accounts, Notes, Loans and Financing Receivable [Line Items]
Fair value of loans	3,046,277	3,488,074
CAFL | Single family rental loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Fair value of loans	3,046,277	3,488,074
CAFL | Bridge Loans, Held-For-Sale At Fair Value
Accounts, Notes, Loans and Financing Receivable [Line Items]
Fair value of loans	0	0
CAFL | Bridge Loans Held For Investment At Fair Value
Accounts, Notes, Loans and Financing Receivable [Line Items]
Fair value of loans	542,152	278,242
CAFL | Bridge Loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Fair value of loans	$ 542,152	$ 278,242

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Business Purpose Loans - Activity and Characteristics of Business Purpose Loans (Details) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2022 USD ($) loan	Jun. 30, 2021 USD ($)	Jun. 30, 2022 USD ($) loan	Jun. 30, 2021 USD ($)	Dec. 31, 2021 USD ($) loan
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Purchases of held-for-sale loans			$ 3,395,459	$ 6,682,864
Principal balance of loans sold to third parties			26,033	29,786
Fair value of loans transferred			1,953,421	1,998,535
Single-family rental loans, held-for-sale | Redwood
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Purchases of held-for-sale loans	$ 323,245	$ 312,217	765,972	565,315
Principal balance of loans acquired	38,457	0	100,349	0
Principal balance of loans sold to third parties	0	0	331,502	0
Fair value of loans transferred	295,037	297,301	295,037	466,705
Gain (loss) on investments	0	0	0	0
Fair value of loans	505,171		505,171		$ 358,309
Single-family rental loans, held-for-sale | Redwood | Business Purpose Mortgage Banking Activities, Net:
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Gain (loss) on investments	(40,034)	25,222	(64,502)	35,470
Bridge loans held-for-investment
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Purchases of held-for-sale loans	542,241	215,160	954,179	348,389
Principal balance of loans acquired	19,023	0	22,006	0
Principal balance of loans sold to third parties	0	354	0	9,231
Gain (loss) on investments	(5,455)	(62)	(6,214)	3,242
Fair value of loans	1,109,337		1,109,337		666,364
Bridge loans held-for-investment | Business Purpose Mortgage Banking Activities, Net:
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Gain (loss) on investments	(1,136)	978	1,239	1,520
Bridge loans held-for-investment | Redwood
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans transferred	306,313	0	388,604
Business Purpose Loans
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fee income	12,000		27,000
Fair value of loans	5,202,937		5,202,937		4,790,989
Single Family Rental Loans Held For Investment At Fair Value | Redwood
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans	0		0		$ 0
Single Family Rental Loans Held For Investment At Fair Value | CAFL
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Gain (loss) on investments	(118,299)	(1,230)	$ (310,202)	(62,132)
Number of loans | loan			1,154		1,173
Unpaid principal balance	3,227,172		$ 3,227,172		$ 3,340,949
Fair value of loans	$ 3,046,277		$ 3,046,277		$ 3,488,074
Weighted average coupon rate (as a percent)	5.16%		5.16%		5.17%
Weighted average remaining loan term (years)			6 years		6 years
Fair value of loans with 90+ day delinquencies	$ 10,356		$ 10,356		$ 12,648
Number of loans in foreclosure | loan	7		7		9
Single Family Rental Loans Held For Investment At Fair Value | CAFL | Financing Receivables, Equal to Greater than 90 Days Past Due
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of loans with 90+ day delinquencies | loan	20		20		18
Fair value of loans with 90+ day delinquencies	$ 50,469		$ 50,469		$ 41,998
Bridge Loans Held For Investment At Fair Value | CAFL
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Gain (loss) on investments	(281)	$ 0	$ (1,856)	$ 0
Single-Family Rental Loans, Held-For-Sale | Redwood
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of loans | loan			355		245
Unpaid principal balance	536,344		$ 536,344		$ 348,232
Fair value of loans	$ 505,171		$ 505,171		$ 358,309
Weighted average coupon rate (as a percent)	5.31%		5.31%		4.73%
Weighted average remaining loan term (years)			14 years		12 years
Fair value of loans with 90+ day delinquencies	$ 5,212		$ 5,212		$ 5,473
Number of loans in foreclosure | loan	4		4		7
Unpaid principal balance of loans in foreclosure	$ 4,086		$ 4,086		$ 4,305
Single-Family Rental Loans, Held-For-Sale | Redwood | Loans Pledged As Collateral, Short Term Debt
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Gain (loss) on investments			312,732		75,873
Single-Family Rental Loans, Held-For-Sale | Redwood | Loans Pledged As Collateral, Long Term debt
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Gain (loss) on investments			180,482		244,703
Single-Family Rental Loans, Held-For-Sale | Redwood | Financing Receivables, Equal to Greater than 90 Days Past Due
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans	$ 4,086		$ 4,086		$ 4,238
Number of loans with 90+ day delinquencies | loan	4		4		6
Fair value of loans with 90+ day delinquencies	$ 5,212		$ 5,212		$ 5,384
Business Purpose Bridge Loans
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of loans | loan			1,131		1,134
Unpaid principal balance	1,116,582		$ 1,116,582		$ 670,392
Fair value of loans	$ 1,109,337		$ 1,109,337		$ 666,364
Weighted average coupon rate (as a percent)	6.73%		6.73%		6.91%
Weighted average remaining loan term (years)			2 years		1 year
Fair value of loans with 90+ day delinquencies	$ 35,070		$ 35,070		$ 18,043
Number of loans in foreclosure | loan	53		53		28
Unpaid principal balance of loans in foreclosure	$ 32,338		$ 32,338		$ 14,257
Business Purpose Bridge Loans | Loans Pledged As Collateral, Short Term Debt
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Gain (loss) on investments			265,242		91,814
Business Purpose Bridge Loans | Loans Pledged As Collateral, Long Term debt
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Gain (loss) on investments			779,467		554,597
Business Purpose Bridge Loans | Financing Receivables, Equal to Greater than 90 Days Past Due
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans	$ 30,209		$ 30,209		$ 14,218
Number of loans with 90+ day delinquencies | loan	51		51		31
Fair value of loans with 90+ day delinquencies	$ 32,941		$ 32,941		$ 18,032
Business Purpose Bridge Loans | CAFL
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of loans | loan			2,268		1,640
Unpaid principal balance	541,677		$ 541,677		$ 274,617
Fair value of loans	$ 542,152		$ 542,152		$ 278,242
Weighted average coupon rate (as a percent)	6.89%		6.89%		7.05%
Weighted average remaining loan term (years)			1 year		1 year
Fair value of loans with 90+ day delinquencies	$ 4,472		$ 4,472		$ 0
Number of loans in foreclosure | loan	3		3		0
Unpaid principal balance of loans in foreclosure	$ 4,472		$ 4,472		$ 0
Business Purpose Bridge Loans | CAFL | Financing Receivables, Equal to Greater than 90 Days Past Due
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Fair value of loans	$ 7,847		$ 7,847		$ 0
Number of loans with 90+ day delinquencies | loan	48		48		0
Fair value of loans with 90+ day delinquencies	$ 7,847		$ 7,847		$ 0

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Consolidated Agency Multifamily Loans (Details) - Consolidated Agency multifamily loans, at fair value $ in Thousands	3 Months Ended			6 Months Ended		12 Months Ended
	Jun. 30, 2022 USD ($) loan	Mar. 31, 2022	Jun. 30, 2021 USD ($)	Jun. 30, 2022 USD ($) loan	Jun. 30, 2021 USD ($)	Dec. 31, 2021 USD ($) loan
Held-for-investment at fair value
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Net market valuation gain (loss) | $	$ (6,748)		$ (2,528)	$ (26,429)	$ (3,258)
Redwood
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of loans | loan				28		28
Unpaid principal balance | $	451,197			$ 451,197		$ 455,168
Fair value of loans | $	$ 443,114			$ 443,114		$ 473,514
Weighted average coupon rate (as a percent)	4.25%			4.25%		4.25%
Weighted average remaining loan term (years)		4 years		3 years
Number of loans in foreclosure | loan	0			0		0
Redwood | Financing Receivables, Equal to Greater than 90 Days Past Due
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Number of loans with 90+ day delinquencies | loan	0			0		0

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Real Estate Securities - Fair Values of Real Estate Securities (Details) - USD ($) $ in Thousands		Jun. 30, 2022	Dec. 31, 2021
Investments, Debt and Equity Securities [Abstract]
Trading		$ 133,780	$ 170,619
Available-for-sale		150,498	206,792
Total Real Estate Securities	[1]	$ 284,278	$ 377,411

[1] Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At June 30, 2022 and December 31, 2021, assets of consolidated VIEs totaled $9,951,520 and $10,661,081, respectively. At June 30, 2022 and December 31, 2021, liabilities of consolidated VIEs totaled $8,899,020 and $9,619,347, respectively. See Note 4 for further discussion.

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Real Estate Securities - Trading Securities by Collateral Type (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Investment Holdings [Line Items]
Real estate securities, at fair value	$ 133,780		$ 133,780		$ 170,619
Unpaid principal balance	221,473		221,473		235,306
Principal balance of securities acquired (1)	0	$ 1,750	0	$ 17,630
Principal balance of securities sold (1)	12,716	18,068	12,716	52,811
Net market valuation gains (losses) recorded	(16,042)	1,798	(17,498)	23,147
Securities bought and sold during the same quarter	0	$ 0	2,000	$ 2,000
Senior IO Securities
Investment Holdings [Line Items]
Real estate securities, at fair value	31,498		31,498		21,787
Unpaid principal balance	0		0		0
Subordinate
Investment Holdings [Line Items]
Real estate securities, at fair value	102,282		102,282		148,832
Unpaid principal balance	221,473		221,473		235,306
Interest Only Senior Trading Securities | Senior IO Securities
Investment Holdings [Line Items]
Real estate securities, at fair value	31,498		31,498		21,787
Interest Only Senior Trading Securities | Senior IO Securities | Sequoia
Investment Holdings [Line Items]
Real estate securities, at fair value	24,000		24,000		15,000
RPL securities | Subordinate
Investment Holdings [Line Items]
Real estate securities, at fair value	46,607		46,607		65,140
Consolidated Agency multifamily loans, at fair value | Subordinate
Investment Holdings [Line Items]
Real estate securities, at fair value	7,960		7,960		10,549
Other third-party residential securities | Subordinate
Investment Holdings [Line Items]
Real estate securities, at fair value	$ 47,715		$ 47,715		$ 73,143

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Real Estate Securities - Available for Sale Securities by Collateral Type (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Investment Holdings [Line Items]
Available-for-sale	$ 150,498		$ 150,498		$ 206,792
Fair value of securities acquired	0	$ 522	10,000	$ 1,600
Fair value of securities sold	0	2,585	0	4,785
Principal balance of securities called	0	1,307	14,486	1,507
Net unrealized (loss) gain on available-for-sale securities	(33,409)	$ 11,224	(51,282)	$ 22,210
Sequoia securities
Investment Holdings [Line Items]
Available-for-sale	85,269		85,269		127,542
Consolidated Agency multifamily loans, at fair value
Investment Holdings [Line Items]
Available-for-sale	13,169		13,169		22,166
Other third-party residential securities
Investment Holdings [Line Items]
Available-for-sale	52,060		52,060		57,084
Total Subordinate Investment Securities
Investment Holdings [Line Items]
Available-for-sale	$ 150,498		$ 150,498		$ 206,792

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Real Estate Securities - Additional Information (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2022 USD ($) investment entity	Mar. 31, 2022 USD ($)	Dec. 31, 2021 USD ($) investment
Investment Holdings [Line Items]
Number of AFS securities (in investments) | investment	82		85
Number of securities in unrealized loss position | investment	21		4
Number of securities in a continuous unrealized loss position for twelve consecutive months or longer (in investments) | investment			1
Gross unrealized losses	$ 9,650		$ 297
CECL credit allowance	1,771	$ 705	0
Realized gain on securities	$ 300
Variable Interest Entity, Not Primary Beneficiary
Investment Holdings [Line Items]
Number of entities called | entity	3
Unpaid principal balance of loans purchased	$ 102,000
Residential
Investment Holdings [Line Items]
AFS securities, contractual maturities, less than five years	10,000
Marketable securities, due from five to ten years	1,000
CECL credit allowance	$ 30,619	$ 29,901	$ 27,555

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Real Estate Securities - Components of Carrying Value (Which Equals Fair Value) of Residential Available for Sale Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021
Investments, Debt and Equity Securities [Abstract]
Principal balance	$ 227,911		$ 242,852
Credit reserve	(30,619)		(27,555)
Unamortized discount, net	(61,303)		(76,023)
Amortized cost	135,989		139,274
Gross unrealized gains	25,930		67,815
Gross unrealized losses	(9,650)		(297)
CECL allowance	(1,771)	$ (705)	0
Carrying Value	$ 150,498		$ 206,792

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Real Estate Securities - Changes of Unamortized Discount and Designated Credit Reserves on Residential Available for Sale Securities (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2022
Credit Reserve
Beginning balance	$ 705	$ 0
Sales, calls, other	0	0
Ending Balance	1,771	1,771
Unamortized Discount, Net
Beginning balance		76,023
Ending Balance	61,303	61,303
Residential
Credit Reserve
Beginning balance	29,901	27,555
Amortization of net discount	0	0
Realized credit recoveries (losses), net	162	74
Acquisitions	0	0
Sales, calls, other	0	(343)
Transfers to (release of) credit reserves, net	556	3,333
Ending Balance	30,619	30,619
Unamortized Discount, Net
Beginning balance	63,206	76,023
Amortization of net discount	(1,347)	(9,817)
Realized credit recoveries (losses), net	0	0
Acquisitions	0	0
Sales, calls, other	0	(1,570)
Transfers to (release of) credit reserves, net	(556)	(3,333)
Ending Balance	$ 61,303	$ 61,303

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Real Estate Securities - Components of Carrying Value of Residential Available for Sale Securities in Unrealized Loss Position (Details) - Residential - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Debt Securities, Available-for-sale [Line Items]
Less Than 12 Consecutive Months, Fair Value	$ 46,369	$ 6,827
Less Than 12 Consecutive Months, Unrealized Losses	(9,456)	(251)
12 Consecutive Months or Longer, Fair Value	1,406	1,554
12 Consecutive Months or Longer, Unrealized Losses	$ (194)	$ (46)

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Real Estate Securities - Summary of Significant Valuation Assumptions for Available for Sale Securities Credit Loss (Details) - Subordinate Securities	6 Months Ended
	Jun. 30, 2022
Debt Securities, Available-for-sale [Line Items]
Default rate	0.80%
Loss severity	20.00%

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Real Estate Securities - Activity of Allowance for Credit Losses for Available-for-sale Securities (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2022
Rollforward of Allowance for Credit Losses
Beginning balance	$ 705	$ 0
Additions to allowance for credit losses on securities for which credit losses were not previously recorded	785	1,490
Additional increases (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period	281	281
Allowance on purchased financial assets with credit deterioration	0	0
Reduction to allowance for securities sold during the period	0	0
Reduction to allowance for securities we intend to sell or more likely than not will be required to sell	0	0
Write-offs charged against allowance	0	0
Recoveries of amounts previously written off	0	0
Ending Balance	$ 1,771	$ 1,771

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Real Estate Securities - Gross Realized Gains and Losses on Sales and Calls of Available for Sale Securities (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Debt Securities, Available-for-sale [Line Items]
Total Realized Gains on Sales and Calls of AFS Securities, net	$ 0	$ 7,994	$ 1,914	$ 10,602
Sales
Debt Securities, Available-for-sale [Line Items]
Gross realized gains	0	1,307	0	1,507
Gross realized losses - sales	0	0	0	0
Calls
Debt Securities, Available-for-sale [Line Items]
Gross realized gains	$ 0	$ 6,687	$ 1,914	$ 9,095

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Other Investments - Summary of Other Investments (Details) - USD ($) $ in Thousands		Jun. 30, 2022	Dec. 31, 2021
Net Investment Income [Line Items]
Mortgage servicing rights		$ 239,552	$ 310,953
Other Investments	[1]	679,667	641,969
HEIs
Net Investment Income [Line Items]
Mortgage servicing rights		276,366	192,740
Servicer advance investments
Net Investment Income [Line Items]
Mortgage servicing rights		273,210	350,923
Strategic investments
Net Investment Income [Line Items]
Mortgage servicing rights		63,860	35,702
Excess MSRs
Net Investment Income [Line Items]
Mortgage servicing rights		40,803	44,231
Mortgage servicing rights
Net Investment Income [Line Items]
Mortgage servicing rights		23,560	12,438
Other
Net Investment Income [Line Items]
Loans held for investment		$ 1,868	$ 5,935

[1] Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At June 30, 2022 and December 31, 2021, assets of consolidated VIEs totaled $9,951,520 and $10,661,081, respectively. At June 30, 2022 and December 31, 2021, liabilities of consolidated VIEs totaled $8,899,020 and $9,619,347, respectively. See Note 4 for further discussion.

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Other Investments - Additional Information (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022 USD ($) investment	Jun. 30, 2021 USD ($)	Jun. 30, 2022 USD ($) partnership investment	Jun. 30, 2021 USD ($)	Dec. 31, 2021 USD ($)
Net Investment Income [Line Items]
Number of partnerships consolidated | partnership			2
Commitment to fund partnership			$ 148,000
Mortgage servicing rights	$ 239,552		239,552		$ 310,953
Collateral amounts	1,405,695		1,405,695		1,306,932
Investment fair value changes, net	(87,972)	$ 49,480	(94,092)	$ 94,567
Investments	9,000		9,000
Other income, net	7,006	2,126	12,989	5,969
Interest income	167,455	138,695	356,855	267,000
Servicer advance financing
Net Investment Income [Line Items]
Collateral amounts	240,000		240,000
Equity investment income	5,000		10,000
Investment fair value changes, net	(3,000)		(6,000)
Held-for-sale residential loans
Net Investment Income [Line Items]
Mortgage servicing rights	273,210		273,210		350,923
Servicing asset, unpaid principal balance on underlying loan	12,090,000		12,090,000
Point HEI
Net Investment Income [Line Items]
Investment fair value changes, net	5,000
Interest expense	1,000		2,000
Excess MSRs
Net Investment Income [Line Items]
Mortgage servicing rights	40,803		40,803		44,231
Investment fair value changes, net	(2,000)		(3,000)
Interest income	4,000		8,000
Fair value option elected aggregate carrying amount, asset	0		5,000
HEIs | Commitment To Acquire HEIs
Net Investment Income [Line Items]
Cumulative commitment	225,000		225,000
Shared home appreciation options | Redwood
Net Investment Income [Line Items]
Mortgage servicing rights	130,000		130,000
Shared home appreciation options | Point HEI
Net Investment Income [Line Items]
Mortgage servicing rights	146,000		146,000
Shared home appreciation options | Commitment To Fund Investment
Net Investment Income [Line Items]
Investment fair value changes, net	2,000		3,000
Strategic investments
Net Investment Income [Line Items]
Investment fair value changes, net	10,000		$ 10,000
Other income, net	$ 300
Strategic investments | RWT Horizons
Net Investment Income [Line Items]
Number of investments made | investment	24		24
Investments	$ 24,000		$ 24,000
Strategic investments | Churchill Finance
Net Investment Income [Line Items]
Number of investments made | investment	6		6
MSRs
Net Investment Income [Line Items]
Mortgage servicing rights	$ 23,560		$ 23,560		12,438
Aggregate principal balance	2,280,000		2,280,000		$ 2,120,000
MSR income (losses), net	5,000		10,000
Investment Fair Value Changes, Net
Net Investment Income [Line Items]
Market valuations gains (losses), net	(87,972)	49,480	(94,092)	94,567
Investment Fair Value Changes, Net | Point Entities
Net Investment Income [Line Items]
Market valuations gains (losses), net	$ 1,201	$ 0	$ 4,612	$ 0

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Other Investments - Servicing Advance Investments (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Schedule of Investments [Line Items]
Total Servicer Advance Receivables	$ 239,552	$ 310,953
Servicer advance financing
Schedule of Investments [Line Items]
Principal and interest advances	76,506	94,148
Escrow advances (taxes and insurance advances)	133,403	172,847
Corporate advances	$ 29,643	$ 43,958

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Derivative Financial Instruments - Aggregate Fair Value and Notional Amount of Derivative Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Derivative [Line Items]
Fair Value	$ 29,996	$ 23,150
Notional Amount	3,025,270	6,861,921
TBAs
Derivative [Line Items]
Notional Amount	860,000	3,310,000
Interest rate futures
Derivative [Line Items]
Notional Amount	389,000	72,000
Derivative Liabilities
Derivative [Line Items]
Fair Value	(6,591)	(3,317)
Notional Amount	796,947	1,619,790
Derivative Liabilities | Interest rate swaps
Derivative [Line Items]
Fair Value	(2,445)	(1,251)
Notional Amount	226,000	283,100
Derivative Liabilities | TBAs
Derivative [Line Items]
Fair Value	(2,004)	(658)
Notional Amount	405,000	870,000
Derivative Liabilities | Interest rate futures
Derivative [Line Items]
Fair Value	(1,615)	(905)
Notional Amount	115,000	62,500
Derivative Liabilities | Residential loan purchase commitments, net
Derivative [Line Items]
Fair Value	(527)	(503)
Notional Amount	50,947	404,190
Derivative Assets
Derivative [Line Items]
Fair Value	36,587	26,467
Notional Amount	2,228,323	5,242,131
Derivative Assets | Interest rate swaps
Derivative [Line Items]
Fair Value	19,113	611
Notional Amount	644,000	161,500
Derivative Assets | TBAs
Derivative [Line Items]
Fair Value	3,104	2,880
Notional Amount	455,000	2,440,000
Derivative Assets | Interest rate futures
Derivative [Line Items]
Fair Value	1,875	25
Notional Amount	273,600	9,000
Derivative Assets | Swaptions
Derivative [Line Items]
Fair Value	10,488	18,318
Notional Amount	620,000	1,660,000
Derivative Assets | Residential loan purchase commitments, net
Derivative [Line Items]
Fair Value	2,007	4,633
Notional Amount	$ 235,723	$ 971,631

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Derivative Financial Instruments - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Mar. 31, 2022	Dec. 31, 2021	Mar. 31, 2021	Dec. 31, 2020
Derivative [Line Items]
Notional amount	$ 3,025,270		$ 3,025,270			$ 6,861,921
Accumulated other comprehensive income (loss)	1,258,091	$ 1,295,142	1,258,091	$ 1,295,142	$ 1,445,266	1,386,087	$ 1,215,575	$ 1,110,899
Interest Rate Agreements Accounted for as Cash Flow Hedges
Derivative [Line Items]
Accumulated other comprehensive income (loss)	(74,383)	(78,511)	(74,383)	(78,511)	$ (75,412)	(76,430)	$ (79,539)	$ (80,557)
Cash Flow Hedging | Interest Rate Agreements Accounted for as Cash Flow Hedges
Derivative [Line Items]
Accumulated other comprehensive income (loss)	(74,000)		(74,000)			(76,000)
Interest Expense | Cash Flow Hedging
Derivative [Line Items]
Cash flow hedge loss to be reclassified over the next 12 months			4,000
Mortgage Banking Activities, Net
Derivative [Line Items]
Market valuations gains (losses), net	(46,590)	45,759	(45,297)	121,321
Loan purchase commitments and forward sales commitments | Mortgage Banking Activities, Net
Derivative [Line Items]
Market valuations gains (losses), net	(9,000)		(51,000)
Interest Rate Swap And Swaptions
Derivative [Line Items]
Notional amount	1,490,000		1,490,000
TBAs
Derivative [Line Items]
Notional amount	860,000		860,000			3,310,000
Interest rate futures
Derivative [Line Items]
Notional amount	389,000		389,000			72,000
Interest rate contract
Derivative [Line Items]
Notional amount	468,000		468,000			$ 2,100,000
Unsecuritized Residential and Commercial Loans
Derivative [Line Items]
Derivative gain (loss)	$ 30,000	$ (58,000)	$ 122,000	$ 35,000

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Derivative Financial Instruments - Impact on Interest Expense of Interest Rate Agreements Accounted for as Cash Flow Hedges (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Derivative [Line Items]
Total interest expense	$ (126,967)	$ (108,065)	$ (263,265)	$ (210,617)
Cash Flow Hedging | Interest rate contract
Derivative [Line Items]
Net interest expense on cash flows hedges	0	0	0	0
Realized net losses reclassified from other comprehensive income	(1,029)	(1,028)	(2,047)	(2,046)
Total interest expense	$ (1,029)	$ (1,028)	$ (2,047)	$ (2,046)

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Other Assets and Liabilities - Components of Other Assets (Details) - USD ($) $ in Thousands		Jun. 30, 2022	Dec. 31, 2021
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Accrued interest receivable		$ 51,006	$ 47,515
Investment receivable		25,688	82,781
Deferred tax asset		20,867	20,867
Operating lease right-of-use assets		17,074	18,772
Income tax receivables		15,573	22
Margin receivable		11,420	7,269
Fixed assets and leasehold improvements		11,189	9,019
REO		7,813	36,126
Other		11,150	8,746
Total Other Assets	[1]	171,780	$ 231,117
Fixed assets		20,000
Accumulated depreciation		$ 9,000

[1] Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At June 30, 2022 and December 31, 2021, assets of consolidated VIEs totaled $9,951,520 and $10,661,081, respectively. At June 30, 2022 and December 31, 2021, liabilities of consolidated VIEs totaled $8,899,020 and $9,619,347, respectively. See Note 4 for further discussion.

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Other Assets and Liabilities - Accrued Expenses and Other Liabilities (Details) - USD ($) $ in Thousands		Jun. 30, 2022	Dec. 31, 2021
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Payable to non-controlling interests		$ 49,544	$ 42,670
Accrued interest payable		42,548	39,297
Operating lease liabilities		19,448	20,960
Accrued compensation		17,765	74,636
Margin payable		15,023	24,368
Accrued operating expenses		8,743	4,377
Guarantee obligations		6,768	7,459
Residential loan and MSR repurchase reserve		5,678	9,306
Current accounts payable		5,518	8,273
Bridge loan holdbacks		3,983	3,109
Other		15,807	11,333
Accrued expenses and other liabilities	[1]	$ 190,825	$ 245,788

[1] Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At June 30, 2022 and December 31, 2021, assets of consolidated VIEs totaled $9,951,520 and $10,661,081, respectively. At June 30, 2022 and December 31, 2021, liabilities of consolidated VIEs totaled $8,899,020 and $9,619,347, respectively. See Note 4 for further discussion.

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Other Assets and Liabilities - REO Information (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2022 USD ($) asset	Dec. 31, 2021 asset
Other Real Estate [Roll Forward]
Balance at beginning of period	$ 36,126
Amount related to transfers into REO	3,133
Liquidations	(32,683)
Unrealized gain (loss) resulting from market valuation adjustments on REO	1,237
Balance at End of Period	7,813
Realized loss from liquidation	$ 1,000
Number of REO properties recorded on balance sheet | asset	25	34
Legacy Sequoia
Other Real Estate [Roll Forward]
Balance at beginning of period	$ 61
Amount related to transfers into REO	407
Liquidations	(504)
Unrealized gain (loss) resulting from market valuation adjustments on REO	443
Balance at End of Period	$ 407
Number of REO properties recorded on balance sheet | asset	1	2
Freddie Mac SLST
Other Real Estate [Roll Forward]
Balance at beginning of period	$ 2,028
Amount related to transfers into REO	1,763
Liquidations	(1,661)
Unrealized gain (loss) resulting from market valuation adjustments on REO	169
Balance at End of Period	$ 2,299
Number of REO properties recorded on balance sheet | asset	21	24
CAFL
Other Real Estate [Roll Forward]
Balance at beginning of period	$ 20,969
Amount related to transfers into REO	0
Liquidations	(20,969)
Unrealized gain (loss) resulting from market valuation adjustments on REO	0
Balance at End of Period	$ 0
Number of REO properties recorded on balance sheet | asset	0	3
Bridge Loan
Other Real Estate [Roll Forward]
Balance at beginning of period	$ 13,068
Amount related to transfers into REO	963
Liquidations	(9,549)
Unrealized gain (loss) resulting from market valuation adjustments on REO	625
Balance at End of Period	$ 5,107
Number of REO properties recorded on balance sheet | asset	3	5

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Short-Term Debt - Outstanding Balances of Short-Term Debt by Type of Collateral Securing Debt (Details)		6 Months Ended	12 Months Ended
		Jun. 30, 2022 USD ($) facility	Dec. 31, 2021 USD ($) facility
Short-term Debt [Line Items]
Outstanding Balance	[1]	$ 1,869,822,000	$ 2,177,362,000
Limit		$ 450,000,000
Facilities
Short-term Debt [Line Items]
Number of Facilities | facility		14	13
Outstanding Balance		$ 1,637,976,000	$ 1,882,915,000
Facilities | Residential loan warehouse
Short-term Debt [Line Items]
Number of Facilities | facility		7	7
Outstanding Balance		$ 1,085,802,000	$ 1,669,344,000
Limit		$ 2,750,000,000	$ 2,900,000,000
Weighted Average Interest Rate (as a percent)		3.28%	1.87%
Weighted Average Days Until Maturity		213 days	153 days
Facilities | Business purpose residential loan warehouse
Short-term Debt [Line Items]
Number of Facilities | facility		3	2
Outstanding Balance		$ 456,887,000	$ 138,746,000
Limit		$ 1,200,000,000	$ 350,000,000
Weighted Average Interest Rate (as a percent)		4.21%	3.34%
Weighted Average Days Until Maturity		258 days	105 days
Facilities | Real estate securities repo
Short-term Debt [Line Items]
Number of Facilities | facility		4	4
Outstanding Balance		$ 95,287,000	$ 74,825,000
Limit		$ 0	$ 0
Weighted Average Interest Rate (as a percent)		1.91%	1.13%
Weighted Average Days Until Maturity		32 days	33 days
Servicer advance financing
Short-term Debt [Line Items]
Number of Facilities | facility		1	1
Outstanding Balance		$ 231,846,000	$ 294,447,000
Limit		$ 300,000,000	$ 350,000,000
Weighted Average Interest Rate (as a percent)		3.40%	1.90%
Weighted Average Days Until Maturity		125 days	306 days

[1] Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At June 30, 2022 and December 31, 2021, assets of consolidated VIEs totaled $9,951,520 and $10,661,081, respectively. At June 30, 2022 and December 31, 2021, liabilities of consolidated VIEs totaled $8,899,020 and $9,619,347, respectively. See Note 4 for further discussion.

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Short-Term Debt - Collateral for Short-Term Debt Facilities (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Short-term Debt [Line Items]
Total collateral for financing	$ 2,225,880	$ 2,450,304
Facilities
Short-term Debt [Line Items]
Total real estate securities owned	124,382	99,005
Other assets	2,512	1,962
Total collateral for financing	1,912,053	2,107,451
Servicer advance financing
Short-term Debt [Line Items]
Total collateral for financing	313,827	342,853
Cash	14,381	6,480
Restricted cash	26,236	25,420
Servicer advances	273,210	310,953
Held-for-sale residential loans | Facilities
Short-term Debt [Line Items]
Market value of loans pledged as collateral under short-term borrowing agreements	1,207,185	1,838,797
Business purpose loans | Facilities
Short-term Debt [Line Items]
Market value of loans pledged as collateral under short-term borrowing agreements	577,974	167,687
On balance sheet | Facilities
Short-term Debt [Line Items]
Available-for-sale securities pledged as collateral	10,014	5,823
Sequoia | Sequoia securities | Short Term Borrowing Agreement | Facilities
Short-term Debt [Line Items]
Trading securities pledged as collateral	82,636	61,525
Freddie Mac K-Series | Sequoia securities | Short Term Borrowing Agreement | Facilities
Short-term Debt [Line Items]
Trading securities pledged as collateral	$ 31,732	$ 31,657

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Short-Term Debt - Additional Information (Details) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2022	Dec. 31, 2021
Short-term Debt [Line Items]
Average balance of short-term debt	$ 1,640,000,000	$ 1,660,000,000
Accrued interest payable on short-term debt	3,000,000	3,000,000	$ 2,000,000
Committed line of credit	10,000,000	10,000,000
Fair market value of committed line of credit	1,000,000	1,000,000
Amount outstanding under credit facilities	0	0	$ 0
Borrowing limit	450,000,000	450,000,000
Servicer advance financing
Short-term Debt [Line Items]
Accrued interest payable on short-term debt	200,000	200,000
Unamortized capitalized commitment costs	$ 300,000	$ 300,000

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Short-Term Debt - Remaining Maturities of Short Term Debt (Details) - USD ($) $ in Thousands		Jun. 30, 2022	Dec. 31, 2021
Short-term Debt [Line Items]
Short-term debt	[1]	$ 1,869,822	$ 2,177,362
Within 30 days
Short-term Debt [Line Items]
Short-term debt		57,323
31 to 90 days
Short-term Debt [Line Items]
Short-term debt		166,404
Over 90 days
Short-term Debt [Line Items]
Short-term debt		1,646,095
Facilities
Short-term Debt [Line Items]
Short-term debt		1,637,976	1,882,915
Facilities | Within 30 days
Short-term Debt [Line Items]
Short-term debt		57,323
Facilities | 31 to 90 days
Short-term Debt [Line Items]
Short-term debt		166,404
Facilities | Over 90 days
Short-term Debt [Line Items]
Short-term debt		1,414,249
Facilities | Held-for-sale residential loans
Short-term Debt [Line Items]
Short-term debt		1,085,802	1,669,344
Facilities | Held-for-sale residential loans | Within 30 days
Short-term Debt [Line Items]
Short-term debt		0
Facilities | Held-for-sale residential loans | 31 to 90 days
Short-term Debt [Line Items]
Short-term debt		128,440
Facilities | Held-for-sale residential loans | Over 90 days
Short-term Debt [Line Items]
Short-term debt		957,362
Facilities | Business purpose loans
Short-term Debt [Line Items]
Short-term debt		456,887
Facilities | Business purpose loans | Within 30 days
Short-term Debt [Line Items]
Short-term debt		0
Facilities | Business purpose loans | 31 to 90 days
Short-term Debt [Line Items]
Short-term debt		0
Facilities | Business purpose loans | Over 90 days
Short-term Debt [Line Items]
Short-term debt		456,887
Facilities | Real estate securities
Short-term Debt [Line Items]
Short-term debt		95,287
Facilities | Real estate securities | Within 30 days
Short-term Debt [Line Items]
Short-term debt		57,323
Facilities | Real estate securities | 31 to 90 days
Short-term Debt [Line Items]
Short-term debt		37,964
Facilities | Real estate securities | Over 90 days
Short-term Debt [Line Items]
Short-term debt		0
Servicer advance financing
Short-term Debt [Line Items]
Short-term debt		231,846	$ 294,447
Servicer advance financing | Within 30 days
Short-term Debt [Line Items]
Short-term debt		0
Servicer advance financing | 31 to 90 days
Short-term Debt [Line Items]
Short-term debt		0
Servicer advance financing | Over 90 days
Short-term Debt [Line Items]
Short-term debt		$ 231,846

[1] Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At June 30, 2022 and December 31, 2021, assets of consolidated VIEs totaled $9,951,520 and $10,661,081, respectively. At June 30, 2022 and December 31, 2021, liabilities of consolidated VIEs totaled $8,899,020 and $9,619,347, respectively. See Note 4 for further discussion.

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Asset-Backed Securities Issued - Components of Asset-Backed Securities Issued by Consolidated Securitization Entities Sponsored, Along With Other Selected Information (Details) - Asset-backed securities issued $ in Thousands	Jun. 30, 2022 USD ($) series	Dec. 31, 2021 USD ($) series
Debt Instrument [Line Items]
ABS Issued, Net	$ 8,584,146	$ 9,253,557
Revision of Prior Period, Accounting Standards Update, Adjustment
Debt Instrument [Line Items]
ABS Issued, Net	(840,698)	34,092
Certificates with principal balance
Debt Instrument [Line Items]
ABS Issued, Net	9,191,472	8,970,474
Interest-only certificates
Debt Instrument [Line Items]
ABS Issued, Net	233,372	248,991
Legacy Sequoia
Debt Instrument [Line Items]
ABS Issued, Net	$ 207,647	$ 227,881
Number of series | series	20	20
Legacy Sequoia | Revision of Prior Period, Accounting Standards Update, Adjustment
Debt Instrument [Line Items]
ABS Issued, Net	$ (22,262)	$ (32,243)
Legacy Sequoia | Minimum
Debt Instrument [Line Items]
Range of weighted average interest rates, by series	1.59%	0.23%
Legacy Sequoia | Maximum
Debt Instrument [Line Items]
Range of weighted average interest rates, by series	2.88%	1.44%
Legacy Sequoia | Certificates with principal balance
Debt Instrument [Line Items]
ABS Issued, Net	$ 229,651	$ 259,505
Legacy Sequoia | Interest-only certificates
Debt Instrument [Line Items]
ABS Issued, Net	258	619
Sequoia
Debt Instrument [Line Items]
ABS Issued, Net	$ 3,288,682	$ 3,383,048
Number of series | series	17	16
Sequoia | Revision of Prior Period, Accounting Standards Update, Adjustment
Debt Instrument [Line Items]
ABS Issued, Net	$ (505,456)	$ (2,774)
Sequoia | Minimum
Debt Instrument [Line Items]
Range of weighted average interest rates, by series	2.52%	2.40%
Sequoia | Maximum
Debt Instrument [Line Items]
Range of weighted average interest rates, by series	5.00%	5.03%
Sequoia | Certificates with principal balance
Debt Instrument [Line Items]
ABS Issued, Net	$ 3,733,955	$ 3,353,073
Sequoia | Interest-only certificates
Debt Instrument [Line Items]
ABS Issued, Net	60,183	32,749
CAFL
Debt Instrument [Line Items]
ABS Issued, Net	$ 3,207,867	$ 3,474,898
Number of series | series	18	16
CAFL | Revision of Prior Period, Accounting Standards Update, Adjustment
Debt Instrument [Line Items]
ABS Issued, Net	$ (244,629)	$ 16,407
CAFL | Minimum
Debt Instrument [Line Items]
Range of weighted average interest rates, by series	2.34%	2.64%
CAFL | Maximum
Debt Instrument [Line Items]
Range of weighted average interest rates, by series	5.34%	5.24%
CAFL | Certificates with principal balance
Debt Instrument [Line Items]
ABS Issued, Net	$ 3,303,312	$ 3,264,766
CAFL | Interest-only certificates
Debt Instrument [Line Items]
ABS Issued, Net	149,184	193,725
Freddie Mac SLST
Debt Instrument [Line Items]
ABS Issued, Net	$ 1,358,459	$ 1,588,463
Number of series | series	3	3
Debt instrument, face amount	$ 117,000	$ 145,000
Freddie Mac SLST | Revision of Prior Period, Accounting Standards Update, Adjustment
Debt Instrument [Line Items]
ABS Issued, Net	$ (48,723)	$ 41,111
Freddie Mac SLST | Minimum
Debt Instrument [Line Items]
Range of weighted average interest rates, by series	3.50%	3.50%
Freddie Mac SLST | Maximum
Debt Instrument [Line Items]
Range of weighted average interest rates, by series	4.75%	4.75%
Freddie Mac SLST | Certificates with principal balance
Debt Instrument [Line Items]
ABS Issued, Net	$ 1,392,244	$ 1,535,638
Freddie Mac SLST | Interest-only certificates
Debt Instrument [Line Items]
ABS Issued, Net	14,938	11,714
Freddie Mac K-Series
Debt Instrument [Line Items]
ABS Issued, Net	$ 411,380	$ 441,857
Range of weighted average interest rates, by series	3.41%	3.41%
Number of series | series	1	1
Freddie Mac K-Series | Revision of Prior Period, Accounting Standards Update, Adjustment
Debt Instrument [Line Items]
ABS Issued, Net	$ (12,158)	$ 12,973
Freddie Mac K-Series | Certificates with principal balance
Debt Instrument [Line Items]
ABS Issued, Net	414,729	418,700
Freddie Mac K-Series | Interest-only certificates
Debt Instrument [Line Items]
ABS Issued, Net	8,809	10,184
HEI
Debt Instrument [Line Items]
ABS Issued, Net	$ 110,111	$ 137,410
Range of weighted average interest rates, by series	3.74%	3.31%
Number of series | series	1	1
HEI | Revision of Prior Period, Accounting Standards Update, Adjustment
Debt Instrument [Line Items]
ABS Issued, Net	$ (7,470)	$ (1,382)
HEI | Certificates with principal balance
Debt Instrument [Line Items]
ABS Issued, Net	117,581	138,792
HEI | Interest-only certificates
Debt Instrument [Line Items]
ABS Issued, Net	0	0
CoreVest
Debt Instrument [Line Items]
Debt instrument, face amount	$ 485,000	$ 270,000

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Asset-Backed Securities Issued - Additional Information (Details) - USD ($) $ in Thousands		6 Months Ended
		Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2052	Mar. 31, 2029	Jul. 31, 2023	Dec. 31, 2021	Sep. 30, 2021
Debt Instrument [Line Items]
Other assets	[1]	$ 171,780					$ 231,117
VIE, ownership interest rate (as a percent)		80.00%
Variable Interest Entity, Primary Beneficiary | Point HEI
Debt Instrument [Line Items]
ABS issued, net, At amortized cost		$ 146,000
Variable Interest Entity, Primary Beneficiary | CoreVest
Debt Instrument [Line Items]
ABS issued, net, At amortized cost		215,000
Variable Interest Entity, Primary Beneficiary | Freddie Mac SLST
Debt Instrument [Line Items]
ABS issued, net, At amortized cost			$ 210,000
2022 Asset Backed Securities Sold | CoreVest
Debt Instrument [Line Items]
Debt instrument, face amount		215,000
Bridge loan		249,000
Restricted cash		1,000
2022 Asset Backed Securities Sold | Variable Interest Entity, Primary Beneficiary | CoreVest
Debt Instrument [Line Items]
Debt instrument, face amount		207,000
Unamortized debt discount		8,000
2021 Asset Backed Securities Sold | CoreVest
Debt Instrument [Line Items]
Debt instrument, face amount		270,000
Bridge loan		293,000
Restricted cash		8,000
Other assets		7,000
Total funding capacity		300,000
2021 Asset Backed Securities Sold | Variable Interest Entity, Primary Beneficiary | Forecast
Debt Instrument [Line Items]
Debt Instrument interest rate					2.00%
2021 Asset Backed Securities Sold | Variable Interest Entity, Primary Beneficiary | CoreVest
Debt Instrument [Line Items]
ABS issued, net, At amortized cost								$ 270,000
Debt instrument, face amount		268,000
Unamortized debt discount		$ 2,000
Debt Instrument interest rate		2.34%
Asset-backed securities issued | CoreVest
Debt Instrument [Line Items]
Debt instrument, face amount		$ 485,000					270,000
Total funding capacity		250,000
Asset-backed securities issued | Freddie Mac SLST
Debt Instrument [Line Items]
Debt instrument, face amount		117,000					$ 145,000
Asset-backed securities issued | Variable Interest Entity, Primary Beneficiary
Debt Instrument [Line Items]
Debt instrument, face amount		115,000
Unamortized debt discount		$ 1,000
Debt Instrument interest rate		4.75%
VIE, ownership interest rate (as a percent)			100.00%
Asset-backed securities issued | Variable Interest Entity, Primary Beneficiary | Forecast
Debt Instrument [Line Items]
Debt Instrument interest rate				2.00%		7.75%
Asset-backed securities issued | Variable Interest Entity, Primary Beneficiary | CoreVest
Debt Instrument [Line Items]
Debt Instrument interest rate		4.32%
Asset-backed securities issued | Contractual maturities of over five years
Debt Instrument [Line Items]
Contractual maturities of securities (in years)		5 years

[1] Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At June 30, 2022 and December 31, 2021, assets of consolidated VIEs totaled $9,951,520 and $10,661,081, respectively. At June 30, 2022 and December 31, 2021, liabilities of consolidated VIEs totaled $8,899,020 and $9,619,347, respectively. See Note 4 for further discussion.

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Asset-Backed Securities Issued - Accrued Interest Payable (Details) - Asset-backed securities issued - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2022	Dec. 31, 2021
Debt Instrument [Line Items]
Total Accrued Interest Payable on ABS Issued	$ 25,374	$ 25,401
Legacy Sequoia
Debt Instrument [Line Items]
Total Accrued Interest Payable on ABS Issued	171	99
Sequoia
Debt Instrument [Line Items]
Total Accrued Interest Payable on ABS Issued	9,232	8,452
CAFL
Debt Instrument [Line Items]
Total Accrued Interest Payable on ABS Issued	10,611	11,030
Freddie Mac SLST
Debt Instrument [Line Items]
Total Accrued Interest Payable on ABS Issued	4,182	4,630
Freddie Mac K-Series
Debt Instrument [Line Items]
Total Accrued Interest Payable on ABS Issued	$ 1,178	$ 1,190

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Long-Term Debt - Schedule of Components of Long-Term Debt (Details) - USD ($)	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2022	Jun. 30, 2022	Dec. 31, 2021
Debt Instrument [Line Items]
Borrowings	$ 1,981,156,000	$ 1,981,156,000	$ 1,650,576,000
Unamortized Deferred Issuance Costs / Discount	(15,095,000)	(15,095,000)	(9,743,000)
Net Carrying Value	1,966,061,000	1,966,061,000	1,640,833,000
Limit	450,000,000	450,000,000
Facilities
Debt Instrument [Line Items]
Borrowings	1,105,735,000	1,105,735,000	990,155,000
Unamortized Deferred Issuance Costs / Discount	(1,686,000)	(1,686,000)	(1,672,000)
Net Carrying Value	1,104,049,000	1,104,049,000	988,483,000
Trust preferred securities and subordinated notes
Debt Instrument [Line Items]
Borrowings	139,500,000	139,500,000	139,500,000
Unamortized Deferred Issuance Costs / Discount	(756,000)	(756,000)	(779,000)
Net Carrying Value	138,744,000	$ 138,744,000	$ 138,721,000
Trust preferred securities and subordinated notes | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate		2.25%	2.25%
Facility A | Recourse Subordinate Securities Financing | Affiliated Entity
Debt Instrument [Line Items]
Borrowings	132,212,000	$ 132,212,000	$ 144,385,000
Unamortized Deferred Issuance Costs / Discount	(104,000)	(104,000)	(313,000)
Net Carrying Value	$ 132,108,000	$ 132,108,000	$ 144,072,000
Weighted Average Interest Rate (as a percent)	4.21%	4.21%	4.21%
Facility B | Recourse Subordinate Securities Financing | Affiliated Entity
Debt Instrument [Line Items]
Borrowings	$ 102,018,000	$ 102,018,000	$ 102,351,000
Unamortized Deferred Issuance Costs / Discount	(202,000)	(202,000)	(353,000)
Net Carrying Value	$ 101,816,000	$ 101,816,000	$ 101,998,000
Weighted Average Interest Rate (as a percent)	4.21%	4.21%	4.21%
Facility C | Recourse Subordinate Securities Financing | Affiliated Entity
Debt Instrument [Line Items]
Borrowings	$ 76,195,000	$ 76,195,000	$ 91,707,000
Unamortized Deferred Issuance Costs / Discount	(251,000)	(251,000)	(376,000)
Net Carrying Value	$ 75,944,000	$ 75,944,000	$ 91,331,000
Weighted Average Interest Rate (as a percent)	4.75%	4.75%	4.75%
Non-Recourse BPL Financing, Facility D | Facilities
Debt Instrument [Line Items]
Borrowings	$ 500,608,000	$ 500,608,000	$ 307,215,000
Unamortized Deferred Issuance Costs / Discount	(1,026,000)	(1,026,000)	(507,000)
Net Carrying Value	499,582,000	499,582,000	306,708,000
Limit	$ 600,000,000	600,000,000	$ 400,000,000
Non-Recourse BPL Financing, Facility D | Facilities | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate	2.50%		2.75%
Recourse BPL Financing, Facility E | Facilities
Debt Instrument [Line Items]
Borrowings	$ 294,702,000	294,702,000	$ 234,349,000
Unamortized Deferred Issuance Costs / Discount	(103,000)	(103,000)	(123,000)
Net Carrying Value	294,599,000	294,599,000	234,226,000
Limit	450,000,000	$ 450,000,000	$ 450,000,000
Recourse BPL Financing, Facility E | Facilities | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate		2.25%	2.21%
Recourse BPL Financing, Facility I | Facilities
Debt Instrument [Line Items]
Borrowings			$ 110,148,000
Unamortized Deferred Issuance Costs / Discount			0
Net Carrying Value			110,148,000
Limit			$ 450,000,000
Recourse BPL Financing, Facility I | Facilities | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate			3.35%
4.75% convertible senior notes | Convertible notes
Debt Instrument [Line Items]
Borrowings	198,629,000	$ 198,629,000	$ 198,629,000
Unamortized Deferred Issuance Costs / Discount	(1,302,000)	(1,302,000)	(1,836,000)
Net Carrying Value	$ 197,327,000	$ 197,327,000	$ 196,793,000
Weighted Average Interest Rate (as a percent)	4.75%	4.75%	4.75%
5.625% convertible senior notes | Convertible notes
Debt Instrument [Line Items]
Borrowings	$ 150,200,000	$ 150,200,000	$ 150,200,000
Unamortized Deferred Issuance Costs / Discount	(1,683,000)	(1,683,000)	(2,072,000)
Net Carrying Value	$ 148,517,000	$ 148,517,000	$ 148,128,000
Weighted Average Interest Rate (as a percent)	5.625%	5.625%	5.625%
5.75% exchangeable senior notes | Convertible notes
Debt Instrument [Line Items]
Borrowings	$ 172,092,000	$ 172,092,000	$ 172,092,000
Unamortized Deferred Issuance Costs / Discount	(2,977,000)	(2,977,000)	(3,384,000)
Net Carrying Value	$ 169,115,000	$ 169,115,000	$ 168,708,000
Weighted Average Interest Rate (as a percent)	5.75%	5.75%	5.75%
7.75% convertible senior notes | Convertible notes
Debt Instrument [Line Items]
Borrowings	$ 215,000,000	$ 215,000,000
Unamortized Deferred Issuance Costs / Discount	(6,691,000)	(6,691,000)
Net Carrying Value	$ 208,309,000	$ 208,309,000
Weighted Average Interest Rate (as a percent)	7.75%	7.75%

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Long-Term Debt - Additional Information (Details)	1 Months Ended
	Jun. 30, 2022 USD ($) $ / shares	Dec. 31, 2021 USD ($)
Debt Instrument [Line Items]
Limit	$ 450,000,000
Borrowings	1,981,156,000	$ 1,650,576,000
Facilities
Debt Instrument [Line Items]
Borrowings	1,105,735,000	990,155,000
Non-Recourse BPL Financing, Facility D | Facilities
Debt Instrument [Line Items]
Limit	600,000,000	400,000,000
Borrowings	500,608,000	$ 307,215,000
7.75% convertible senior notes | Convertible notes
Debt Instrument [Line Items]
Borrowings	$ 215,000,000
Debt Instrument interest rate	7.75%
Net proceeds from issuance of convertible debt	$ 208,000,000
Range of weighted average interest rates, by series	8.50%
Convertible senior notes conversion rate	0.0956823
Convertible senior notes conversion per share (in dollars per share) | $ / shares	$ 10.45

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Long-Term Debt - Schedule of Collateral for Long-Term Debt (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Debt Instrument [Line Items]
Collateral amounts	$ 1,405,695	$ 1,306,932
Bridge Loan
Debt Instrument [Line Items]
Collateral amounts	779,467	554,597
Residential Real Estate
Debt Instrument [Line Items]
Collateral amounts	180,482	244,703
Commercial Real Estate | Facility A | Affiliated Entity
Debt Instrument [Line Items]
Collateral amounts	198,640	247,227
Commercial Real Estate | Facility B | Affiliated Entity
Debt Instrument [Line Items]
Collateral amounts	$ 247,106	$ 260,405

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Long-Term Debt - Schedule of Accrued Interest Payable on Long Term Debt (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Debt Instrument [Line Items]
Total Accrued Interest Payable on Long-Term Debt	$ 14,577	$ 11,330
Facilities
Debt Instrument [Line Items]
Total Accrued Interest Payable on Long-Term Debt	2,775	815
Convertible notes | 4.75% convertible senior notes
Debt Instrument [Line Items]
Total Accrued Interest Payable on Long-Term Debt	3,564	3,564
Convertible notes | 5.625% convertible senior notes
Debt Instrument [Line Items]
Total Accrued Interest Payable on Long-Term Debt	3,896	3,896
Convertible notes | 5.75% exchangeable senior notes
Debt Instrument [Line Items]
Total Accrued Interest Payable on Long-Term Debt	2,474	2,474
Convertible notes | 7.75% convertible senior notes
Debt Instrument [Line Items]
Total Accrued Interest Payable on Long-Term Debt	1,018	0
Trust preferred securities and subordinated notes
Debt Instrument [Line Items]
Total Accrued Interest Payable on Long-Term Debt	$ 850	$ 581

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Commitments and Contingencies - Additional Information (Details) $ in Thousands		3 Months Ended				6 Months Ended		12 Months Ended
		Jun. 30, 2022 USD ($) lease	Mar. 31, 2022 USD ($)	Jun. 30, 2021 USD ($)	Mar. 31, 2019 partnership	Jun. 30, 2022 USD ($) lease repurchase_request loan	Jun. 30, 2021 USD ($) repurchase_request	Dec. 31, 2021 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)
Loss Contingencies [Line Items]
Lessee, number of leases | lease		7				7
Present value of remaining lease payments		$ 22,417				$ 22,417
Operating lease expense						2,000	$ 2,000
Operating lease liabilities		$ 19,448				$ 19,448		$ 20,960
Operating lease liability, statement of financial position [Extensible List]		Accounts Payable and Accrued Liabilities				Accounts Payable and Accrued Liabilities
Operating lease right-of-use assets		$ 17,074				$ 17,074		18,772
Operating lease right-of-use asset, statement of financial position [Extensible List]		Other assets				Other assets
Weighted average remaining lease term		6 years				6 years
Discount rate (as a percent)		5.10%				5.10%
Derivative liabilities	[1]	$ 6,591				$ 6,591		3,317
Net market valuation gains (losses)		(3,000)		$ 1,000		(3,000)	2,000
Number of partnerships, committed to fund | partnership					2
Other income related to risk sharing agreement		323		861		783	$ 1,743
Guarantee obligations		6,768				6,768		7,459
Guarantee obligations, credit reserve		5,000				5,000
Special purpose entities assets		34,000				34,000
Special purpose entities liabilities		7,000				7,000
Residential repurchase reserve		5,678				$ 5,678		9,306
Number of residential repurchase requests (in repurchase requests) | repurchase_request						3	1
Number of loans repurchased | loan						0
Residential loans repurchase (reversal) provision		(4,000)		$ (200)		$ (4,000)	$ (300)
Aggregate amount of loss contingency reserves		2,000				2,000
HEIs
Loss Contingencies [Line Items]
Payments to acquire other investments						350,000
Maximum
Loss Contingencies [Line Items]
Loss from arrangements						100
Residential Loans
Loss Contingencies [Line Items]
Unpaid principal balance		1,238,469				1,238,469		1,813,865
Fair value of loans		1,213,067				1,213,067		1,845,282
Financing Receivables, Equal to Greater than 90 Days Past Due | Residential Loans
Loss Contingencies [Line Items]
Fair value of loans		211				211		2,923
Other income
Loss Contingencies [Line Items]
Other income related to risk sharing agreement		300				1,000
Guarantee Obligations
Loss Contingencies [Line Items]
Original unpaid balance of loans subject to risk sharing agreements									$ 3,190,000	$ 3,190,000
Potential future payments on loans		44,000				44,000
Unpaid principal balance		$ 476,000				$ 476,000
Weighted average original FICO score		756				756
Weighted average original loan-to-value (LTV)		74.00%				74.00%
Guarantee Obligations | Residential Loans
Loss Contingencies [Line Items]
Unpaid principal balance of loans in foreclosure		$ 1,000				$ 1,000
Guarantee Obligations | Financing Receivables, Equal to Greater than 90 Days Past Due
Loss Contingencies [Line Items]
Fair value of loans		12,000				12,000
Commitment To Fund Residential Bridge Loan
Loss Contingencies [Line Items]
Other commitments made		835,000				835,000
Derivative liabilities		(4,000)				(4,000)
Commitment To Acquire HEIs | HEIs
Loss Contingencies [Line Items]
Payments to acquire other investments		100,000
Cumulative commitment		225,000				225,000
Commitment To Fund Strategic Investment
Loss Contingencies [Line Items]
Other commitments made		9,400				9,400
Payments for other commitments			$ 25,000
Commitment To Fund RWT Horizons Investments
Loss Contingencies [Line Items]
Other commitments made		$ 1,000				$ 1,000
Payments for other commitments								$ 5,000

[1] Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At June 30, 2022 and December 31, 2021, assets of consolidated VIEs totaled $9,951,520 and $10,661,081, respectively. At June 30, 2022 and December 31, 2021, liabilities of consolidated VIEs totaled $8,899,020 and $9,619,347, respectively. See Note 4 for further discussion.

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Commitments and Contingencies - Future Lease Commitments (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Commitments and Contingencies Disclosure [Abstract]
2022 (6 months)	$ 2,203
2023	4,428
2024	4,338
2025	3,475
2026	3,420
2027 and thereafter	4,553
Total Lease Commitments	22,417
Less: Imputed interest	(2,969)
Operating lease liabilities	$ 19,448	$ 20,960

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Equity - Changes to Accumulated Other Comprehensive Income (Loss) by Component (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Balance at beginning of period	$ 1,445,266	$ 1,215,575	$ 1,386,087	$ 1,110,899
Total other comprehensive (loss) income	(31,314)	4,752	(48,861)	13,961
Balance at End of Period	1,258,091	1,295,142	1,258,091	1,295,142
Available-for-Sale Securities
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Balance at beginning of period	48,938	84,527	67,503	76,336
Other comprehensive (loss) income before reclassifications	(33,409)	11,224	(51,282)	22,210
Amounts reclassified from other accumulated comprehensive (income) loss	1,066	(7,500)	374	(10,295)
Total other comprehensive (loss) income	(32,343)	3,724	(50,908)	11,915
Balance at End of Period	16,595	88,251	16,595	88,251
Interest Rate Agreements Accounted for as Cash Flow Hedges
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Balance at beginning of period	(75,412)	(79,539)	(76,430)	(80,557)
Other comprehensive (loss) income before reclassifications	0	0	0	0
Amounts reclassified from other accumulated comprehensive (income) loss	1,029	1,028	2,047	2,046
Total other comprehensive (loss) income	1,029	1,028	2,047	2,046
Balance at End of Period	$ (74,383)	$ (78,511)	$ (74,383)	$ (78,511)

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Equity - Reclassifications out of Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Investment fair value changes, net	$ (87,972)	$ 49,480	$ (94,092)	$ 94,567
Realized gains, net	0	(8,384)	(2,581)	(11,100)
Interest expense	126,967	108,065	263,265	210,617
Net income before provision for income taxes	(109,409)	96,712	(80,952)	205,512
Reclassification out of Accumulated Other Comprehensive Income | Available-for-Sale Securities
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Investment fair value changes, net	1,066	(13)	1,771	(388)
Realized gains, net	0	(7,487)	(1,397)	(9,907)
Net income before provision for income taxes	1,066	(7,500)	374	(10,295)
Reclassification out of Accumulated Other Comprehensive Income | Interest Rate Agreements Accounted for as Cash Flow Hedges
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest expense	1,029	1,028	2,047	2,046
Net income before provision for income taxes	$ 1,029	$ 1,028	$ 2,047	$ 2,046

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Equity - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Feb. 28, 2018
Stockholders Equity Note [Line Items]
Net proceeds from issuance of common stock			$ 67,770,000	$ 255,000
Share repurchases	$ 32,802,000		32,802,000
Share Repurchase Plan, February 2018
Stockholders Equity Note [Line Items]
Common stock authorized to repurchase by Board					$ 100,000,000
Share repurchases (in shares)	3,700,000
Available authorization remaining for repurchase	$ 46,000,000		$ 46,000,000
Convertible Debt Securities
Stockholders Equity Note [Line Items]
Securities excluded in the calculation of diluted earnings per share (in shares)	33,992,377		31,294,614
Equity awards
Stockholders Equity Note [Line Items]
Securities excluded in the calculation of diluted earnings per share (in shares)	249,224	18,645	278,604	17,053
At The Market Offerings | Common Stock
Stockholders Equity Note [Line Items]
Issuance of common stock (in shares)			5,232,869
Net proceeds from issuance of common stock			$ 67,000,000
Remaining capacity	$ 175,000,000		$ 175,000,000
Direct Stock Purchases and Dividend Reinvestment Plan | Common Stock
Stockholders Equity Note [Line Items]
Shares remaining for future offerings	6,000,000		6,000,000
Common Stock
Stockholders Equity Note [Line Items]
Issuance of common stock (in shares)			5,232,869	806,068
Share repurchases (in shares)	3,680,033		3,680,033
Share repurchases	$ 36,000		$ 36,000

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Equity - Basic and Diluted Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Basic Earnings per Common Share:
Net (loss) income attributable to Redwood	$ (99,966)	$ 90,025	$ (69,051)	$ 187,282
Less: Dividends and undistributed earnings allocated to participating securities	(1,159)	(3,149)	(2,286)	(6,458)
Net (loss) income allocated to common shareholders	$ (101,125)	$ 86,876	$ (71,337)	$ 180,824
Basic weighted average common shares outstanding (in shares)	119,660,173	112,921,070	119,771,554	112,337,984
Basic Earnings per Common Share (in dollars per share)	$ (0.85)	$ 0.77	$ (0.60)	$ 1.61
Diluted Earnings per Common Share:
Net (loss) income attributable to Redwood	$ (99,966)	$ 90,025	$ (69,051)	$ 187,282
Less: Dividends and undistributed earnings allocated to participating securities	(1,159)	(2,869)	(2,286)	(5,829)
Add back: Interest expense on convertible notes for the period, net of tax	0	6,990	0	13,971
Net (loss) income allocated to common shareholders	$ (101,125)	$ 94,146	$ (71,337)	$ 195,424
Net effect of dilutive equity awards (in shares)	0	273,139	0	234,353
Net effect of assumed convertible notes conversion to common shares (in shares)	0	28,566,875	0	28,566,875
Diluted weighted average common shares outstanding (in shares)	119,660,173	141,761,084	119,771,554	141,139,212
Diluted Earnings (Loss) per Common Share (in dollars per share)	$ (0.85)	$ 0.66	$ (0.60)	$ 1.38

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Equity Compensation Plans - Additional Information (Details) - USD ($)	3 Months Ended	6 Months Ended	12 Months Ended
	Mar. 31, 2022	Jun. 30, 2022	Dec. 31, 2021	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost		$ 38,624,000	$ 42,383,000
Weighted average amortization period remaining for equity awards		2 years
Shares of common stock to be purchased in aggregate for all employees (in shares)		850,000	850,000
Number of shares purchased by employees (in shares)	569,728	607,877
Restricted Stock Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unvested outstanding stock awards (in shares)		1,551	28,141
Number of stock awards granted (in shares)		0
Number of stock awards vested (in shares)		26,249,000
Number of stock awards forfeited (in shares)		341
Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unvested outstanding stock awards (in shares)		486,546	431,072
Number of stock awards granted (in shares)		206,179,000
Number of stock awards vested (in shares)		120,154,000
Number of stock awards forfeited (in shares)		30,551,000
Deferred Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unvested outstanding stock awards (in shares)		4,551,475	4,022,088
Number of stock awards granted (in shares)		824,875,000
Number of stock awards vested (in shares)		2,089,958	1,469,903
Stock units distributed (in shares)		295,488,000
Performance Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unvested outstanding stock awards (in shares)		1,267,849	1,473,883
Number of stock awards granted (in shares)				206,034
Share-based compensation, vesting period (in years)		3 years
Equity compensation expense		$ 2,000,000
Redwood Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock available for grant (in shares)		5,551,039	5,958,390
Redwood Incentive Plan | Restricted Stock Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost		$ 7,000	$ 84,000
Redwood Incentive Plan | Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost		4,885,000	3,589,000
Redwood Incentive Plan | Deferred Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost		25,041,000	26,473,000
Redwood Incentive Plan | Performance Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost		$ 8,530,000	$ 12,237,000

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Equity Compensation Plans - Unrecognized Compensation Cost (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2022 USD ($)
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Roll Forward]
Unrecognized compensation cost at beginning of period	$ 42,383
Equity grants	7,357
Performance-based valuation adjustment	(1,719)
Equity grant forfeitures	(344)
Equity compensation expense	(9,053)
Unrecognized Compensation Cost at End of Period	38,624
Redwood Incentive Plan | Restricted Stock Awards
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Roll Forward]
Unrecognized compensation cost at beginning of period	84
Equity grants	0
Performance-based valuation adjustment	0
Equity grant forfeitures	(5)
Equity compensation expense	(72)
Unrecognized Compensation Cost at End of Period	7
Redwood Incentive Plan | Restricted Stock Units
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Roll Forward]
Unrecognized compensation cost at beginning of period	3,589
Equity grants	2,684
Performance-based valuation adjustment	0
Equity grant forfeitures	(339)
Equity compensation expense	(1,049)
Unrecognized Compensation Cost at End of Period	4,885
Redwood Incentive Plan | Deferred Stock Units
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Roll Forward]
Unrecognized compensation cost at beginning of period	26,473
Equity grants	4,350
Performance-based valuation adjustment	0
Equity grant forfeitures	0
Equity compensation expense	(5,782)
Unrecognized Compensation Cost at End of Period	25,041
Redwood Incentive Plan | Performance Stock Units
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Roll Forward]
Unrecognized compensation cost at beginning of period	12,237
Equity grants	0
Performance-based valuation adjustment	(1,719)
Equity grant forfeitures	0
Equity compensation expense	(1,988)
Unrecognized Compensation Cost at End of Period	8,530
Employee Stock Purchase Plan
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Roll Forward]
Unrecognized compensation cost at beginning of period	0
Equity grants	323
Performance-based valuation adjustment	0
Equity grant forfeitures	0
Equity compensation expense	(162)
Unrecognized Compensation Cost at End of Period	$ 161

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Mortgage Banking Activities, Net (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Other income, net	$ 7,006	$ 2,126	$ 12,989	$ 5,969
Mortgage banking activities, net	(30,017)	54,419	(13,702)	137,026
Residential Mortgage Banking Activities, Net
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Other income, net	4,412	1,193	5,029	2,216
Mortgage banking activities, net	(17,787)	21,265	(9,852)	82,700
Residential Mortgage Banking Activities, Net | Residential loans, held-for-sale, at fair value
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Changes in fair value of assets	(33,414)	76,907	(102,236)	47,634
Residential Mortgage Banking Activities, Net | Trading securities
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Changes in fair value of assets	1,315	(1,095)	4,101	(374)
Residential Mortgage Banking Activities, Net | Risk management derivatives
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Risk management derivatives	9,900	(55,740)	83,254	33,224
Business Purpose Mortgage Banking Activities, Net:
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Changes in fair value of assets	116	2,225	2,251	3,269
Other income, net	12,161	7,467	26,566	13,489
Mortgage banking activities, net	(12,230)	33,154	(3,850)	54,326
Business Purpose Mortgage Banking Activities, Net: | Risk management derivatives
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Risk management derivatives	15,487	(2,504)	32,520	1,354
Business Purpose Mortgage Banking Activities, Net: | Single-family rental loans, at fair value
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Changes in fair value of assets	$ (39,994)	$ 25,966	$ (65,187)	$ 36,214

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Other Income, Net (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Other Income and Expenses [Abstract]
MSR income, net	$ 5,376	$ (43)	$ 9,679	$ 654
Bridge loan fees	1,473	911	2,463	1,604
Risk share income	323	861	783	1,743
Other	(166)	397	64	1,968
Other income, net	$ 7,006	$ 2,126	$ 12,989	$ 5,969

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General and Administrative Expenses, Loan Acquisition Costs, and Other Expenses - Components of General and Administrative Expenses and Other Expenses (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
	Oct. 15, 2019	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Business Acquisition [Line Items]
Fixed compensation expense		$ 12,110	$ 11,269	$ 26,738	$ 23,074
Annual variable compensation expense		1,811	12,508	5,168	31,177
Long-term incentive award expense		5,532	5,682	11,192	9,851
Acquisition-related equity compensation expense		0	1,212	0	2,424
Systems and consulting		3,703	3,272	6,887	6,249
Office costs		2,083	2,024	4,108	3,832
Accounting and legal		1,576	1,221	3,251	1,935
Corporate costs		1,000	873	1,864	1,564
Other		4,151	2,533	7,612	4,039
Total General and Administrative Expenses		31,966	40,594	66,820	84,145
Commissions		2,116	1,661	4,730	2,924
Underwriting costs		1,096	1,836	2,468	3,521
Transfer and holding costs		268	251	747	862
Total Loan Acquisition Costs		3,480	3,748	7,945	7,307
Amortization of purchase-related intangible assets		3,306	3,873	6,840	7,746
Other		162	112	713	335
Total Other Expenses		3,468	3,985	7,553	8,081
Total General and Administrative Expenses, Loan Acquisition Costs, and Other Expenses		38,914	48,327	82,318	99,533
Settlement in Common Stock
Business Acquisition [Line Items]
Long-term incentive award expense		5,000	4,000	10,000	7,000
Settlement in Cash
Business Acquisition [Line Items]
Long-term incentive award expense		400	$ 1,000	$ 1,000	$ 3,000
Variable compensation expense, service period				4 years
Unamortized compensation cost		3,000		$ 3,000		$ 7,000
Cash Based Retention Award
Business Acquisition [Line Items]
Cash-based retention awards granted		2,000		$ 2,000
Variable compensation expense, term				3 years
Unamortized compensation cost		$ 4,000		$ 4,000		$ 4,000
CAFL
Business Acquisition [Line Items]
Restricted stock awards (in shares)	588,260
Restricted stock awards	$ 10,000
Contingent consideration performance term	2 years

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Taxes - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Income Tax Disclosure [Abstract]
Provision from (benefit for) income taxes	$ (9,443)	$ 6,687	$ (11,901)	$ 18,230

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Taxes - Reconciliation of Statutory Tax Rate to Effective Tax Rate (Details)	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Income Tax Disclosure [Abstract]
Federal statutory rate	21.00%	21.00%
State statutory rate, net of Federal tax effect	8.60%	8.60%
Differences in taxable (loss) income from GAAP income	(22.40%)	(14.10%)
Change in valuation allowance	(4.40%)	(3.30%)
Dividends paid deduction	11.90%	(3.30%)
Effective Tax Rate	14.70%	8.90%

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Segment Information - Additional Information (Details)	6 Months Ended
	Jun. 30, 2022 segment
Segment Reporting [Abstract]
Number of operating segments	3

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Segment Information - Financial Information by Segment (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Segment Reporting Information [Line Items]
Interest income	$ 167,455	$ 138,695	$ 356,855	$ 267,000
Interest expense	(126,967)	(108,065)	(263,265)	(210,617)
Net Interest Income	40,488	30,630	93,590	56,383
Non-interest (loss) income
Mortgage banking activities, net	(30,017)	54,419	(13,702)	137,026
Investment fair value changes, net	(87,972)	49,480	(94,092)	94,567
Other income, net	7,006	2,126	12,989	5,969
Realized gains, net	0	8,384	2,581	11,100
Total non-interest (loss) income, net	(110,983)	114,409	(92,224)	248,662
General and administrative expenses	(31,966)	(40,594)	(66,820)	(84,145)
Loan acquisition costs	(3,480)	(3,748)	(7,945)	(7,307)
Other expenses	(3,468)	(3,985)	(7,553)	(8,081)
Benefit from (provision for) income taxes	9,443	(6,687)	11,901	(18,230)
Net (Loss) Income	(99,966)	90,025	(69,051)	187,282
Non-cash amortization (expense) income, net	(7,827)	(6,015)	(21,482)	(12,245)
Operating Segments | Residential Mortgage Banking
Segment Reporting Information [Line Items]
Interest income	13,199	13,246	26,166	20,825
Interest expense	(8,297)	(7,618)	(15,233)	(12,365)
Net Interest Income	4,902	5,628	10,933	8,460
Non-interest (loss) income
Mortgage banking activities, net	(17,787)	21,265	(9,852)	82,700
Investment fair value changes, net	0	0	0	0
Other income, net	0	0	0	0
Realized gains, net	0	0	0	0
Total non-interest (loss) income, net	(17,787)	21,265	(9,852)	82,700
General and administrative expenses	(6,082)	(6,898)	(12,183)	(19,587)
Loan acquisition costs	(881)	(1,887)	(2,298)	(3,291)
Other expenses	74	0	74	(6)
Benefit from (provision for) income taxes	5,588	(3,725)	6,595	(13,211)
Net (Loss) Income	(14,186)	14,383	(6,731)	55,065
Non-cash amortization (expense) income, net	(760)	(13)	(298)	(16)
Operating Segments | Business Purpose Mortgage Banking
Segment Reporting Information [Line Items]
Interest income	8,586	3,026	13,427	5,881
Interest expense	(4,258)	(1,521)	(6,826)	(3,120)
Net Interest Income	4,328	1,505	6,601	2,761
Non-interest (loss) income
Mortgage banking activities, net	(12,230)	33,154	(3,850)	54,326
Investment fair value changes, net	0	0	0	0
Other income, net	1,054	156	1,629	278
Realized gains, net	0	0	0	0
Total non-interest (loss) income, net	(11,176)	33,310	(2,221)	54,604
General and administrative expenses	(11,069)	(12,356)	(21,541)	(22,550)
Loan acquisition costs	(2,599)	(1,861)	(5,647)	(3,353)
Other expenses	(3,306)	(3,873)	(6,840)	(7,650)
Benefit from (provision for) income taxes	3,169	(2,182)	6,450	(3,503)
Net (Loss) Income	(20,653)	14,543	(23,198)	20,309
Non-cash amortization (expense) income, net	(3,480)	(4,054)	(7,370)	(8,152)
Operating Segments | Investment Portfolio
Segment Reporting Information [Line Items]
Interest income	144,478	121,248	315,050	237,757
Interest expense	(102,589)	(88,693)	(219,171)	(174,638)
Net Interest Income	41,889	32,555	95,879	63,119
Non-interest (loss) income
Mortgage banking activities, net	0	0	0	0
Investment fair value changes, net	(98,111)	49,727	(103,517)	95,488
Other income, net	6,235	1,705	11,517	5,279
Realized gains, net	0	8,384	2,581	11,100
Total non-interest (loss) income, net	(91,876)	59,816	(89,419)	111,867
General and administrative expenses	(3,041)	(3,157)	(6,174)	(6,321)
Loan acquisition costs	0	0	0	(659)
Other expenses	(236)	(112)	(787)	(442)
Benefit from (provision for) income taxes	686	(780)	(1,144)	(1,516)
Net (Loss) Income	(52,578)	88,322	(1,645)	166,048
Non-cash amortization (expense) income, net	(1,450)	7	(9,644)	(227)
Corporate/ Other
Segment Reporting Information [Line Items]
Interest income	1,192	1,175	2,212	2,537
Interest expense	(11,823)	(10,233)	(22,035)	(20,494)
Net Interest Income	(10,631)	(9,058)	(19,823)	(17,957)
Non-interest (loss) income
Mortgage banking activities, net	0	0	0	0
Investment fair value changes, net	10,139	(247)	9,425	(921)
Other income, net	(283)	265	(157)	412
Realized gains, net	0	0	0	0
Total non-interest (loss) income, net	9,856	18	9,268	(509)
General and administrative expenses	(11,774)	(18,183)	(26,922)	(35,687)
Loan acquisition costs	0	0	0	(4)
Other expenses	0	0	0	17
Benefit from (provision for) income taxes	0	0	0	0
Net (Loss) Income	(12,549)	(27,223)	(37,477)	(54,140)
Non-cash amortization (expense) income, net	$ (2,137)	$ (1,955)	$ (4,170)	$ (3,850)

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Segment Information - Components of Corporate/Other (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Segment Reporting Information [Line Items]
Interest income	$ 167,455	$ 138,695	$ 356,855	$ 267,000
Interest expense	(126,967)	(108,065)	(263,265)	(210,617)
Net Interest Income	40,488	30,630	93,590	56,383
Investment fair value changes, net	(87,972)	49,480	(94,092)	94,567
Other	(166)	397	64	1,968
Realized gains, net	0	8,384	2,581	11,100
Total non-interest (loss) income, net	(110,983)	114,409	(92,224)	248,662
General and administrative expenses	(31,966)	(40,594)	(66,820)	(84,145)
Loan acquisition costs	(3,480)	(3,748)	(7,945)	(7,307)
Other expenses	(3,468)	(3,985)	(7,553)	(8,081)
Net (Loss) Income	(99,966)	90,025	(69,051)	187,282
Corporate/ Other
Segment Reporting Information [Line Items]
Interest income	1,192	1,175	2,212	2,537
Interest expense	(11,823)	(10,233)	(22,035)	(20,494)
Net Interest Income	(10,631)	(9,058)	(19,823)	(17,957)
Investment fair value changes, net	10,139	(247)	9,425	(921)
Other	(283)	265	(157)	412
Realized gains, net	0	0	0	0
Total non-interest (loss) income, net	9,856	18	9,268	(509)
General and administrative expenses	(11,774)	(18,183)	(26,922)	(35,687)
Loan acquisition costs	0	0	0	(4)
Other expenses	0	0	0	17
Net (Loss) Income	(12,549)	(27,223)	(37,477)	(54,140)
Corporate/ Other | Legacy Consolidated VIEs
Segment Reporting Information [Line Items]
Interest income	1,108	1,169	2,120	2,517
Interest expense	(967)	(755)	(1,668)	(1,630)
Net Interest Income	141	414	452	887
Investment fair value changes, net	(336)	(216)	(1,050)	(915)
Other	0	0	0	0
Realized gains, net			0	0
Total non-interest (loss) income, net	(336)	(216)	(1,050)	(915)
General and administrative expenses	0	0	0	0
Loan acquisition costs	0	0	0	0
Other expenses	0	0	0	0
Net (Loss) Income	(195)	198	(598)	(28)
Corporate/ Other | Other
Segment Reporting Information [Line Items]
Interest income	84	6	92	20
Interest expense	(10,856)	(9,478)	(20,367)	(18,864)
Net Interest Income	(10,772)	(9,472)	(20,275)	(18,844)
Investment fair value changes, net	10,475	(31)	10,475	(6)
Other	(283)	265	(157)	412
Realized gains, net			0	0
Total non-interest (loss) income, net	10,192	234	10,318	406
General and administrative expenses	(11,774)	(18,183)	(26,922)	(35,687)
Loan acquisition costs	0	0	0	(4)
Other expenses	0	0	0	17
Net (Loss) Income	$ (12,354)	$ (27,421)	$ (36,879)	$ (54,112)

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Segment Information - Supplemental Information by Segment (Details) - USD ($) $ in Thousands		Jun. 30, 2022	Dec. 31, 2021
Segment Reporting Information [Line Items]
Real estate securities	[1]	$ 284,278	$ 377,411
Other investments	[1]	679,667	641,969
Intangible assets	[1]	34,720	41,561
Total Assets	[1]	13,875,536	14,706,944
Residential loans
Segment Reporting Information [Line Items]
Fair value of loans		6,578,599	7,592,432
Business purpose loans
Segment Reporting Information [Line Items]
Fair value of loans		5,202,937	4,790,989
Consolidated Agency multifamily loans
Segment Reporting Information [Line Items]
Fair value of loans		443,114	473,514
Operating Segments | Residential Mortgage Banking
Segment Reporting Information [Line Items]
Real estate securities		3,994	4,927
Other investments		0	0
Intangible assets		0	0
Total Assets		1,032,281	1,716,285
Operating Segments | Residential Mortgage Banking | Residential loans
Segment Reporting Information [Line Items]
Fair value of loans		990,924	1,673,235
Operating Segments | Residential Mortgage Banking | Business purpose loans
Segment Reporting Information [Line Items]
Fair value of loans		0	0
Operating Segments | Residential Mortgage Banking | Consolidated Agency multifamily loans
Segment Reporting Information [Line Items]
Fair value of loans		0	0
Operating Segments | Business Purpose Mortgage Banking
Segment Reporting Information [Line Items]
Real estate securities		0	0
Other investments		0	0
Intangible assets		34,720	41,561
Total Assets		645,428	464,967
Operating Segments | Business Purpose Mortgage Banking | Residential loans
Segment Reporting Information [Line Items]
Fair value of loans		0	0
Operating Segments | Business Purpose Mortgage Banking | Business purpose loans
Segment Reporting Information [Line Items]
Fair value of loans		503,945	347,860
Operating Segments | Business Purpose Mortgage Banking | Consolidated Agency multifamily loans
Segment Reporting Information [Line Items]
Fair value of loans		0	0
Operating Segments | Investment Portfolio
Segment Reporting Information [Line Items]
Real estate securities		280,284	372,484
Other investments		615,807	606,267
Intangible assets		0	0
Total Assets		11,513,520	11,770,486
Operating Segments | Investment Portfolio | Residential loans
Segment Reporting Information [Line Items]
Fair value of loans		5,378,886	5,688,742
Operating Segments | Investment Portfolio | Business purpose loans
Segment Reporting Information [Line Items]
Fair value of loans		4,698,992	4,443,129
Operating Segments | Investment Portfolio | Consolidated Agency multifamily loans
Segment Reporting Information [Line Items]
Fair value of loans		443,114	473,514
Corporate/ Other
Segment Reporting Information [Line Items]
Real estate securities		0	0
Other investments		63,860	35,702
Intangible assets		0	0
Total Assets		684,307	755,206
Corporate/ Other | Residential loans
Segment Reporting Information [Line Items]
Fair value of loans		208,789	230,455
Corporate/ Other | Business purpose loans
Segment Reporting Information [Line Items]
Fair value of loans		0	0
Corporate/ Other | Consolidated Agency multifamily loans
Segment Reporting Information [Line Items]
Fair value of loans		$ 0	$ 0

[1] Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At June 30, 2022 and December 31, 2021, assets of consolidated VIEs totaled $9,951,520 and $10,661,081, respectively. At June 30, 2022 and December 31, 2021, liabilities of consolidated VIEs totaled $8,899,020 and $9,619,347, respectively. See Note 4 for further discussion.

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Subsequent Events (Details) - Subsequent Event	1 Months Ended
	Jul. 31, 2022 USD ($)
Riverbend Funding, LLC
Subsequent Event [Line Items]
Cash purchase price	$ 44,000,000
Share Repurchase Program 2022
Subsequent Event [Line Items]
Common stock authorized to repurchase by Board	125,000,000
Prior Share Repurchase Program
Subsequent Event [Line Items]
Common stock authorized to repurchase by Board	$ 100,000,000