REDWOOD TRUST INC

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 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 consumer and residential investor housing credit 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 inthree segments: Sequoia Mortgage Banking, CoreVest Mortgage Banking, and Redwood Investments.

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. On October 15, 2019, Redwood acquired CoreVest American Finance Lender, LLC and certain affiliated entities ("CoreVest"), at which time CoreVest became wholly owned by Redwood. On July 1, 2022, Redwood acquired Riverbend Funding, LLC ("Riverbend"), at which time Riverbend became wholly owned by Redwood. The operations of Riverbend were combined with those of CoreVest under the CoreVest brand. References herein to “Redwood,” the “company,” “we,” “us,” and “our” include Redwood Trust, Inc. and its consolidated subsidiaries, unless the context otherwise requires. In statements regarding qualification as a REIT, such terms refer solely to Redwood Trust, Inc. Refer to Item 1 -Business in this Annual Report on Form 10-K for additional information on our business.

Note 2. Basis of Presentation

The consolidated financial statements presented herein are at December 31, 2024 and 2023, and for the years ended December 31, 2024, 2023 and 2022. These consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). In the opinion of management, all normal and recurring adjustments have been made to present fairly the financial condition of the Company at December 31, 2024 and 2023, and results of operations for all periods presented.

In the fourth quarter of 2024, we updated the names of our segments: Residential Consumer Mortgage Banking to Sequoia Mortgage Banking, Residential Investor Mortgage Banking to CoreVest Mortgage Banking and our Investment Portfolio to Redwood Investments. There were no changes to the classifications of account balances as a result of these updates. All prior period references in this document were conformed to this presentation. Additionally in 2024, we combined the presentation of Short-term and Long-term debt within Debt obligations, net, as applicable. There was no impact to the consolidated financial statements as a result of this change and all prior periods in this document were conformed to this presentation.

In 2023, we changed the presentation of our Consolidated Statements of Income (Loss) to include a new line item "HEI income, net" to include all amounts related to our HEI investments that were previously presented within "Investment fair value changes, net." All applicable prior period amounts presented in this document were conformed to this new presentation.

Principles of Consolidation

The consolidated financial statements include the accounts of the entities where the Company has a controlling financial interest. The method for determining whether a controlling financial interest exists varies depending on whether the entity is a VIE.

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Note 2. Basis of Presentation - (continued)

The Company has a controlling financial interest in and consolidates a VIE when the firm has a variable interest or interests that provide it with (i) the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits for the VIE that could potentially be significant to the VIE. See Note 15 for further information about VIEs. For entities that are not VIEs, we have a controlling financial interest in entities where we hold a majority of the voting rights. We use the equity method to account for our interest in entities in which we do not have a controlling financial interest, but over which we have significant influence.

For financial reporting purposes, we consolidate the assets and liabilities of certain entities formed in connection with the securitization of our loans and HEI, which we have determined to be VIEs and in which we have a controlling financial interest. The underlying loans owned at the consolidated securitization entities are shown under residential consumer loans and residential investor loans on our consolidated balance sheets. 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. The asset-backed securities (“ABS”) issued to third parties by these entities are shown under ABS issued. See Note 16 for further discussion on ABS issued. The underlying HEI at the consolidated HEI securitization entities are shown under Home equity investments on our consolidated balance sheets and the associated fair value changes and interest expense associated with ABS issued are shown under HEI income, net on our consolidated statements of income (loss). See Note 10 for further discussion on HEI.

We also consolidatetwo 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. We account for the co-investors' interests as non-controlling interests, see Note 14 for further discussion.

See Note 15 for further discussion on principles of consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates and assumptions.

Note 3. Summary of Significant Accounting Policies

Significant Accounting Policies

Fair Value Measurements

Our consolidated financial statements include assets and liabilities that are measured at their fair values in accordance with GAAP. A fair value measurement represents the price at which an orderly transaction would occur between willing market participants at the measurement date.

We develop fair values for financial assets or liabilities based on available inputs and pricing that is observed in the marketplace. After considering all available indications of the appropriate rate of return that market participants would require, we consider the reasonableness of the range indicated by the results to determine an estimate that is most representative of fair value.

See Note 6 for further discussion on fair value measurements.

Fair Value Option

Under GAAP, we have the option to measure eligible financial assets, financial liabilities, and commitments at fair value on an instrument-by-instrument basis. This option is available when we first recognize a financial asset or financial liability or enter into a firm commitment. Subsequent changes in the fair value of assets, liabilities, and commitments where we have elected the fair value option are recorded in our consolidated statements of income (loss).

We elect the fair value option for certain residential consumer and investor loans, interest-only (“IO”) and certain subordinate securities, MSRs, servicer advance investments, HEI, and certain of our other investments. We generally elect the fair value option for residential consumer and investor loans that are held-for-sale, due to our intent to sell or securitize the loans in the near-term and for residential investor bridge loans due to their shorter duration. We elect the fair value option for our IO and certain subordinate

F- 14 securities, and MSRs, for which we may hedge market interest rate risk. In addition, we elect the fair value option for the assets and liabilities of our consolidated securitization entities in accordance with GAAP accounting for collateralized financing entities ("CFEs").

See Note 6 for further discussion on the fair value option.

Real Estate Loans

Residential Consumer Loans

We acquire residential consumer loans from third-party originators for subsequent sale to whole loan buyers, securitization or transfer into our Redwood Investments portfolio.

Residential consumer loans held-for-sale include loans that we intend to sell to third parties, or including transfers to securitization entities that we plan to sponsor. We generally elect the fair value option for residential consumer loans that we purchase and the changes in fair value for these loans are recurring which are reported through our consolidated statements of income (loss) in Mortgage banking activities, net.

We record residential consumer loans held-for-investment at consolidated securitization entities at fair value. In accordance with accounting guidance for CFEs, we use the fair value of the ABS issued by these entities (which we determined to be more observable) to determine the fair value of the loans held at these entities. Changes in fair value for these loans and related ABS are recurring and are reported through our consolidated statements of income (loss) in Investment fair value changes, net.

See Note 7 for further discussion on residential consumer loans.

Residential Investor Loans

We originate and purchase residential investor loans, for subsequent securitization, sale, or transfer into our Redwood Investments portfolio. Residential investor loans are loans to investors in single-family and multifamily housing properties, which we classify as either "term" loans (which include loans with maturities that generally range from 3 to 30 years) or "bridge" loans (which include loans with maturities that generally range from 12 to 36 months). Single-family loans are mortgage loans secured by residential real estate (primarily 1-4 unit) that the borrower owns as an investment property. Residential investor bridge loans are mortgage loans which are generally secured by unoccupied residential investor or multifamily real estate that the borrower owns as an investment and that is being renovated, rehabilitated or constructed.

We classify residential investor loans as held-for-sale at fair value when we originate or purchase these loans with the intent to transfer the loans to securitization entities or sell the loans to third parties. Changes in fair value are recurring and reported through our consolidated statements of income (loss) in Mortgage banking activities, net.

We classify residential investor loans as held-for-investment at fair value if we intend to hold these loans to maturity. Changes in fair value for these loans are recurring and are reported through our consolidated statements of income (loss) in Investment fair value changes, net.

In addition, we record residential investor loans held-for-investment at consolidated securitization entities at fair value in accordance with accounting guidance for CFEs, as described in the section above for residential consumer loans.

See Note 8 for further discussion on residential investor loans.

Interest Income

Interest income is accrued on our unsecuritized loans in the period the coupon interest is contractually earned until such time a loan is placed on non-accrual status. A loan is generally placed on non-accrual status when it is probable that all principal and interest due under the contractual terms will not be collected and a loan is past due more than 90 days. Income from non-accrual loans is generally recognized on a cash basis when it is received. At the time a loan is placed on non-accrual status, all accrued but uncollected interest is reversed against interest income and interest subsequently collected is recognized on a cash basis to the extent the loan balance is deemed collectible or until such time the loan qualifies to be placed back on accrual status. Generally, a loan is placed back on accrual status when the loan becomes contractually current or the collection of past due and future payments is reasonably assured, either through reinstatement by the borrower or if there is sufficient estimated net equity in the underlying real estate property.

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Coupon interest for our securitized loans is recognized as revenue based on amounts expected to be paid to the securities issued by the securitization entities.

Real Estate Securities, at Fair Value

Our securities primarily consist of mortgage-backed securities (“MBS”) collateralized by residential consumer, re-performing ("RPL") and multifamily mortgage loans. We classify our real estate securities as trading or available-for-sale securities.

Trading Securities

We primarily denote trading securities as those securities where we have adopted the fair value option. Coupon interest is recognized as interest income when earned and deemed collectible. Changes in the fair value of securities designated as trading securities are generally reported in Investment fair value changes, net on our consolidated statements of income (loss).

Available-for-Sale Securities

AFS securities are carried at their fair value with unrealized gains and losses excluded from earnings (except when an allowance for credit losses is recognized, as discussed below) and reported in Accumulated other comprehensive income (loss) (“AOCI”), a component of stockholders’ equity.

Interest income on AFS securities is accrued based on their outstanding principal balance and contractual terms and interest income is recognized based on the security’s effective interest rate. In order to calculate the effective interest rate, we must project cash flows over the remaining life of each security and make assumptions with regards to interest rates, prepayment rates, the timing and amount of credit losses, estimated call dates and other factors. On at least a quarterly basis, we review and, if appropriate, make adjustments to our cash flow projections based on input and analysis received from external sources, internal models, and our own judgments about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. Changes in cash flows from those originally projected, or from those estimated at the last evaluation, may result in a prospective change in the yield and interest income recognized on these securities or in the recognition of an allowance for credit losses as discussed below.

Credit impairments on our available-for-sale securities are recorded in earnings using an allowance for credit losses, with the allowance limited to the amount by which the security's fair value is less than its amortized cost basis. 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). The allowance for credit losses is calculated using a discounted cash flow approach and is measured as the difference between the beneficial interest’s amortized cost and the estimate of cash flows expected to be collected, discounted at the effective interest rate used to accrete the beneficial interest. No allowance is recorded for beneficial interests in an unrealized gain position.

See Note 9 for further discussion on real estate securities.

HEI

We invest in HEI from third-party originators and securities collateralized by third-party HEI. We also originate HEI ourselves through our Aspire platform, some or all of which are retained in our Redwood Investments portfolio. Each HEI provides the investor an option to purchase a percentage ownership interest in the underlying residential property upon the occurrence of specified events. The homeowner's obligations under the HEI are secured by the recording of a lien (typically junior liens) against the property in the form of a deed of trustor a mortgage. Our investments in HEI allow us to share in home price appreciation (or depreciation) of the associated property. We have elected to record these investments at fair value and report changes in their fair value in HEI income, net on our consolidated statements of income (loss).

In addition, we record HEI held at our consolidated HEI securitization entities at fair value. In accordance with accounting guidance for CFEs, we use the fair value of the ABS issued by these entities (which we determined to be more observable) to determine the fair value of the HEI held at these entities. Changes in fair value of the HEI assets held by these entities and the ABS issued by these entities (including issuance costs and the interest expense component of the ABS issued) are recorded through HEI income, net on our consolidated statements of income (loss).

See Note 10 for further discussion on HEI.

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Other Investments

Servicer Advance Investments

Our servicer advance investments are comprised of outstanding servicer advances receivable, the requirement to purchase all future servicer advances made with respect to a specified pool of residential mortgage loans and a fee component of the related MSR. We have elected to record these investments at fair value. We recognize interest income from our servicer advance investments when earned and deemed collectible and record the income as a component of Other interest income in our consolidated statements of income (loss). Our servicer advance investments are marked-to-market on a recurring basis with changes in the fair value reported in Investment fair value changes, net on our consolidated statements of income (loss).

See Note 11 for further discussion on our servicer advance investments.

We have made and may make additional strategic investments in companies through our RWT Horizons venture investment strategy or at a corporate level. These investments can take the form of equity or debt and often have conversion features. Depending on the terms of the investments, we may account for these investments under the fair value option, as non-marketable equity securities under the equity method of accounting or the measurement alternative for equity securities without readily determinable fair values.

Investments accounted for under the fair value option are carried at fair value with periodic changes in value recorded through Investment fair value changes, net on our consolidated statements of income (loss). For non-marketable securities, we utilize the equity method of accounting when we are able to exert significant influence over but do not control the activities of the investee. Under the equity method of accounting, we record our share of earnings or losses from equity-method investments and we assess our investments for impairment whenever events or changes in circumstances indicate that the carrying amount of our investment might not be recoverable. Income from equity-method investments is recorded in Other income, net on our consolidated statements of income (loss). Under the measurement alternative, the carrying value of our investment is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Adjustments are determined primarily based on a market approach as of the transaction date and are recorded as a component of Other income, net on our consolidated statements of income (loss).

See Note 11 for further discussion on our strategic investments.

Excess MSRs

Our excess MSR investments represent the right to receive a portion of mortgage servicing cash flows in excess of amounts paid for the underlying mortgage loans to be serviced. As owners of excess MSRs, we are not required to be a licensed servicer, and we are not required to assume any servicing duties, advance obligations or liabilities associated with the loan pool underlying the MSR. We have elected to record these investments at fair value. We recognize income from excess MSRs when it is earned and deemed collectible and record the income as a component of Other interest income in our consolidated statements of income (loss). Changes in fair value are recurring and are reported through our consolidated statements of income (loss) in Investment fair value changes, net.

See Note 6 for further discussion on excess MSRs.

MSRs

We recognize MSRs through the retention of servicing rights associated with residential mortgage loans that we acquired and subsequently transferred to third parties when the transfer meets the GAAP criteria for sale accounting, or through the direct acquisition of MSRs sold by third parties.

We contract with licensed sub-servicers to perform servicing functions for loans associated with our MSRs. We have elected the fair value option for all of our MSRs, and they are initially recognized and subsequently carried at their fair values. Servicing fee income from MSRs is recorded on a cash basis when received. Net servicing income and changes in the fair value of MSRs are reported in Other income, net on our consolidated statements of income (loss).

See Note 6 for further discussion on MSRs.

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Cash and Cash Equivalents

Cash and cash equivalents include non-restricted cash and highly liquid investments with original maturities of three months or less and money market fund investments which are generally invested in U.S. government securities and are available to us on a daily basis. The Company maintains its cash and cash equivalents with major financial institutions. The Company monitors the financial stability of these financial institutions and believes it is not exposed to any significant credit risk in its cash and cash equivalents at these institutions.

Restricted Cash

Restricted cash primarily includes cash held at our consolidated Servicing Investment entities, and cash associated with our risk-sharing transactions with Fannie Mae and Freddie Mac ("the Agencies"), as well as cash collateral held at Servicing Investment entities, and cash held at consolidated Sequoia, HEI and CAFL Bridge and Term entities for the purpose of distribution to investors and reinvestment.

Derivative Financial Instruments

Derivative financial instruments we typically utilize include swaps, swaptions, financial futures contracts, and “To Be Announced” (“TBA”) contracts. These derivatives are primarily used to manage interest rate risk associated with our operations. In addition, we enter into certain residential loan purchase commitments (“LPCs”) and interest rate lock commitments ("IRLCs") that are treated as derivatives for financial reporting purposes. All derivative financial instruments are recorded at their fair value on our consolidated balance sheets. Derivatives with positive fair values to us are reported as assets, and derivatives with negative fair values to us are reported as liabilities. We classify each derivative as either (i) a trading instrument (no specific hedging designation for financial reporting purposes) or (ii) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge).

Changes in the fair values of derivatives accounted for as trading instruments, including any associated interest income or expense, are recorded in our consolidated statements of income (loss) through Other income, net if they are used to manage risks associated with our MSR investments, through Mortgage banking activities, net if they are used to manage risks associated with our mortgage banking activities, or through Investment fair value changes, net if they are used to manage risks associated with our investments. Valuation changes related to residential LPCs and IRLCs are included in Mortgage banking activities, net on our consolidated statements of income (loss).

Changes in the fair values of derivatives accounted for as cash flow hedges, to the extent they are effective, are recorded in Accumulated other comprehensive (loss) income, a component of equity on our consolidated balance sheets. Interest income or expense, and any ineffectiveness associated with these derivatives, are recorded as a component of net interest income in our consolidated statements of income (loss). We measure the effective portion of cash flow hedges by comparing the change in fair value of the expected future variable cash flows of the derivative hedging instruments with the change in fair value of the expected future variable cash flows of the hedged item.

We will discontinue a designated cash flow hedge relationship if (i) we determine that the hedging derivative is no longer expected to be effective in offsetting changes in the cash flows of the designated hedged item; (ii) the derivative expires or is sold, terminated, or exercised; (iii) the derivative is de-designated as a cash flow hedge; or (iv) it is probable that a forecasted transaction associated with the hedged item will not occur by the end of the originally specified time period. To the extent we de-designate or terminate a cash flow hedging relationship and the associated hedged item continues to exist, any unrealized gain or loss of the cash flow hedge at the time of de-designation remains in accumulated other comprehensive income and is amortized using the straight-line method through interest expense over the remaining life of the hedged item.

Cash flow activity related to the net settlements of derivatives are reflected within the operating activities section of the Company's consolidated statements of cash flows. Realized gains or losses on the Company's derivative financial instruments are included in the market valuation adjustment line item within the operating activities section of the consolidated statements of cash flows.

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Swaps and Swaptions

Interest rate swaps are agreements in which (i) one counterparty exchanges a stream of fixed interest payments for another counterparty’s stream of variable interest cash flows; or (ii) each counterparty exchanges variable interest cash flows that are referenced to different indices. Interest rate swaptions are agreements that provide the owner the right but not the obligation to enter into an underlying interest rate swap with a counterparty in the future. We enter into swaps and swaptions primarily to reduce significant changes in our income or equity caused by interest rate volatility. Certain of these interest rate agreements may be designated as cash flow hedges.

TBA Agreements

TBA agreements are forward contracts to purchase mortgage-backed securities that will be issued by a U.S. government sponsored enterprise in the future. We purchase or sell these derivatives to offset - to varying degrees - changes in the values of mortgage products for which we have exposure to interest rate volatility.

Loan Purchase Commitments

We use the term LPCs to refer to agreements with third-party residential loan originators to purchase residential loans at a future date that qualify as a derivative under GAAP. LPCs are recorded at their fair values on our consolidated balance sheets and changes in fair value are recurring and are reported through our consolidated statements of income (loss) in Mortgage banking activities, net.

Interest Rate Lock Commitments

IRLCs are agreements we have made with third-party borrowers for residential investor loans that will be originated and held for sale. IRLCs qualify as derivatives under GAAP and are recorded at their fair values on our consolidated balance sheets. Changes in fair value are recurring and are reported through our consolidated statements of income (loss) in Mortgage banking activities, net.

See Note 12 for further discussion on derivative financial instruments.

Deferred Tax Assets and Liabilities

Our deferred tax assets/liabilities are generated by temporary differences in GAAP income and taxable income at our taxable REIT subsidiaries. As a result of these differences, we may recognize taxable income in periods prior to when we recognize income for GAAP purposes. When this occurs, we pay the tax liability as required and establish a deferred tax asset. As the income is subsequently realized in future periods for GAAP purposes, the deferred tax asset is reduced. We may also recognize GAAP income in periods prior to when we recognize income for tax purposes. When this occurs, we establish a deferred tax liability. As the income is subsequently realized in future periods for tax purposes, the deferred tax liability is reduced.

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider historical and projected future taxable income and capital gains as well as tax planning strategies in making this assessment. We determine the extent to which realization of deferred assets is not assured and establish a valuation allowance accordingly. The estimate of net deferred tax assets could change in future periods to the extent that actual or revised estimates of future taxable income during the carryforward periods change from current expectations.

Other Assets and Liabilities

Goodwill and Intangible Assets

Significant judgment is required to estimate the fair value of intangible assets and in assigning their estimated useful lives. The fair value estimates are based on available historical information and on future expectations and assumptions we deem reasonable. We generally use an income-based valuation method to estimate the fair value of intangible assets, which discounts expected future cash flows to present value using estimates and assumptions we deem reasonable. Determining the estimated useful lives of intangible assets also requires judgment. Our assessment as to which intangible assets are deemed to have finite or indefinite lives is based on several factors including economic barriers of entry for the acquired business, retention trends, and our operating plans, among other factors. Finite-lived intangible assets are amortized over their estimated useful lives on a straight-line basis and reviewed for

F- 19 impairment if indicators are present. Additionally, useful lives are evaluated each reporting period to determine if revisions to the remaining periods of amortization are warranted. Goodwill is tested for impairment annually or more frequently if indicators of impairment exist. We have elected to make the first day of our fiscal fourth quarter the annual impairment assessment date for goodwill. We first assess qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If, based on that assessment, we believe it is more likely than not that the fair value of the reporting unit is less than its carrying value, we measure the fair value of the reporting unit and record a goodwill impairment charge for the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of the goodwill.

See Note 14 for further discussion on intangible assets.

Agency Risk-Sharing - Assets and Liabilities

We have entered into various risk-sharing arrangements with Fannie Mae and Freddie Mac. Under these arrangements, we committed to assume the first 1.00% or 2.25% (depending on the arrangement) of losses realized on reference pools of conforming residential mortgage loans that we acquired and then sold to the Agencies. As part of these risk-sharing arrangements, during the 10-year term of our first Fannie Mae arrangement, we receive monthly cash payments from Fannie Mae based on the monthly outstanding unpaid principal balance of the reference pool of loans, and for our Freddie Mac and our subsequent Fannie Mae arrangements, the Agencies charged us a reduced guarantee fee for the reference loans we delivered to them in exchange for mortgage-backed securities, which we then sold.

Under these arrangements we are required to pledge assets to the Agencies to collateralize our risk-sharing commitments to them throughout the terms of the arrangements. These pledged assets are held by a third-party custodian for the benefit of the Agencies. To the extent approved losses are incurred, the custodian will transfer collateral to the Agencies. As a result of these transactions, we recorded restricted cash, “pledged collateral” in the other assets line item, and “guarantee obligations” in the other liabilities line item, on our consolidated balance sheets. In addition, for the first Fannie Mae transaction, we recorded a “guarantee asset” in the other assets line item on our consolidated balance sheets.

The guarantee obligations represent our commitments to assume losses under these arrangements. We amortize the guarantee obligations over the 10-year terms of the arrangements based primarily on changes in the outstanding unpaid principal balance of loans in the reference pools, with a portion of the liabilities treated as a credit reserve that is not amortized into income. In addition, each period we assess the need for a separate loss allowance related to these arrangements, based on our estimate of credit losses inherent in the reference pools of loans.

Income from cash payments received under the first Fannie Mae risk-sharing arrangement and income related to the amortization of the guarantee obligations of all three arrangements are recorded in Other income, net and market valuation changes of the guarantee asset are recorded in Investment fair value changes, net on our consolidated statements of income (loss).

Our consolidated balance sheets include assets of the 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 and liabilities of these SPEs for which the creditors of these SPEs (the Agencies) do not have recourse to Redwood Trust, Inc. or its affiliates. At December 31, 2024 and 2023, assets of such SPEs totaled $29 million and $28 million, respectively, and liabilities of such SPEs totaled $3 million and $6 million, respectively.

Real Estate Owned ("REO")

REO property acquired through, or in lieu of, foreclosure is initially recorded at fair value, and subsequently reported at the lower of its carrying amount or fair value (less estimated cost to sell). Changes in the fair value of an REO property that has a fair value at or below its carrying amount are recorded in Investment fair value changes, net on our consolidated statements of income (loss).

See Note 14 for further discussion on REO.

Lease - Asset and Liabilities

We record operating lease liabilities and operating lease right-of-use assets on our consolidated balance sheets. Operating lease liabilities are equal to the present value of our remaining lease payments discounted at our incremental borrowing rate and the operating lease right-of-use assets are equal to the operating lease liabilities adjusted for our deferred rent liabilities. As lease payments are made, the operating lease liabilities are reduced to the present value of the remaining lease payments and the operating

F- 20 lease right-of-use assets are reduced by the difference between the lease expense (straight-lined over the lease term) and the theoretical interest expense amount (calculated using the incremental borrowing rate).

See Note 18 for further discussion on leases.

Payable to Non-Controlling Interests

Payable to non-controlling interests includes amounts payable to third parties, representing their interest in our consolidated Servicing Investment and HEI securitization entities.

See Note 10 and Note 11 for further discussion of HEI and Other investments, respectively, and Note 14 for further discussion on other assets and other liabilities.

Asset-Backed Securities Issued ("ABS")

ABS issued represents asset-backed securities issued through our consolidated securitization entities. Assets at these entities are held in the custody of securitization trustees and are not owned by Redwood. These trustees collect principal and interest payments (less servicing and related fees) from the assets in these entities and make corresponding principal and interest payments to the ABS investors. In accordance with accounting guidance for CFEs, we account for the ABS issued under certain of our consolidated entities at fair value, with periodic changes in fair value recorded in Investment fair value changes, net or HEI income, net (for HEI securitizations) on our consolidated statements of income (loss).

See Note 16 for further discussion on ABS issued.

Debt Obligations

Debt obligations under our financing facilities are secured by real estate securities and carried at unpaid principal balance ("UPB") net of any unamortized deferred issuance costs. Interest on these facilities is paid monthly. If the value of the collateral securing those borrowings decreases, we may be subject to margin calls during the period the borrowings are outstanding. In instances where we do not satisfy the margin calls within the required time frame, the counterparty may retain the collateral and pursue any outstanding debt amount from us

Convertible notes include unsecured convertible and exchangeable debt that are carried at their UPB net of any unamortized deferred issuance costs. Interest on the notes is payable semiannually until such time the notes mature or are converted or exchanged into shares. If converted or exchanged by a holder, the holder of the notes would receive shares of our common stock.

Senior notes and trust preferred securities and subordinated notes are carried at their UPB net of any unamortized deferred issuance costs. This debt is unsecured and interest is paid quarterly until it is redeemed in whole or matures at a future date.

See Note 17 for further discussion on our debt obligations.

Equity

Accumulated Other Comprehensive Income (Loss)

Net unrealized gains and losses on real estate securities available-for-sale and interest rate agreements designated as cash flow hedges are reported as components of Accumulated other comprehensive income on our consolidated statements of changes in stockholders' equity and our consolidated balance sheets. Net unrealized gains and losses on securities and interest rate agreements held by our taxable REIT subsidiaries that are reported in other comprehensive income are adjusted for the effects of taxation and may create deferred tax assets or liabilities.

See Note 19 for further discussion on equity.

Earnings per Common Share

Basic earnings per common share (“EPS”) is computed by dividing net income allocated to common shareholders by the weighted average common shares outstanding. Net income allocated to common shareholders represents net income less income allocated to participating securities (as described herein). Diluted EPS is computed by dividing income allocated to common shareholders by the weighted average common shares outstanding plus amounts representing the dilutive effect of share-based payment awards. If the

F- 21 assumed conversion or exchange of convertible or exchangeable debt into common shares is dilutive, diluted EPS is adjusted by adding back the periodic interest expense (net of any tax effects) associated with dilutive convertible or exchangeable debt to net income and adding the shares issued in an assumed conversion or exchange to the diluted weighted average share count. For our convertible debt issued in 2022, if the potential conversion of the debt is dilutive, then the number of shares needed to settle the conversion premium are added to the shares outstanding used to calculate dilutive EPS.

The two-class method is an earnings allocation formula under which EPS is calculated for common stock and participating securities according to dividends declared and participating rights in undistributed earnings. Under this method, all earnings (distributed and undistributed) are allocated between participating securities and common shares based on their respective rights to receive dividends or dividend equivalents. GAAP defines vested and unvested share-based payment awards containing non-forfeitable rights to dividends or dividend equivalents as participating securities that are included in computing EPS under the two-class method.

See Note 20 for further discussion on EPS.

Equity Compensation Plans

In 2023, our shareholders approved an amendment to the 2014 Redwood Trust, Inc. Incentive Plan (“Incentive Plan”) for executive officers, employees, and non-employee directors, which, among other things, increased the number of shares available under the Incentive Plan. The Incentive Plan provides for the grant of restricted stock, deferred stock, deferred stock units, performance-based awards (including performance stock units and cash-settled performance stock units), dividend equivalents, stock payments, restricted stock units, cash-settled restricted and deferred stock units, and other types of awards to eligible participants. Long-term incentive awards granted under the Incentive Plan generally vest over athree- orfour-year period. Deferred stock units, restricted stock units, and restricted stock awards (as well as cash-settled restricted and deferred stock units) have attached dividend equivalent rights, resulting in the payment of dividend equivalents each time we pay a common stock dividend. Non-employee directors are also provided annual awards under the Incentive Plan that generally vest immediately. The cost of the awards is generally amortized over the vesting period on a straight-line basis. We have elected to account for forfeitures on employee equity-based awards, including cash-settled awards, as they occur.

Executive Deferred Compensation Plan

In 2023, our Board of Directors approved an amendment to our 2002 Executive Deferred Compensation Plan (“EDCP”) to increase the number of shares available to non-employee directors to defer certain cash payments and dividends into DSUs. The EDCP allows eligible employees and directors to defer portions of current salary and certain other forms of compensation. The Company matches some deferrals. Compensation deferred under the EDCP is recorded as a liability on our consolidated balance sheets. The EDCP allows for the investment of deferrals in either an interest crediting account or DSUs.

See Note 21 for further discussion on equity compensation plans.

Taxes

We have elected to be taxed as a REIT under the Internal Revenue Code and the corresponding provisions of state law. To qualify as a REIT we must distribute at least 90% of our annual REIT taxable income to shareholders (not including taxable income retained in our taxable REIT subsidiaries) within the time frame set forth in the Internal Revenue Code and also meet certain other requirements related to assets, income, and stock ownership. We assess our tax positions for all open tax years and record tax benefits only if tax positions meet a more-likely-than-not threshold in accordance with GAAP guidance on accounting for uncertain tax positions. We classify interest and penalties on material uncertain tax positions as interest expense and general and administrative expenses, respectively, in our consolidated statements of income (loss).

See Note 23 for further discussion on taxes.

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures." This ASU requires enhanced disclosures primarily about significant segment expenses that are regularly provided to the chief operating decision maker. This new guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. We adopted this guidance, as required, in the year ended 2024, which resulted in additional disclosures and did not have a material effect on our consolidated financial statements.

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See Note 4 for further discussion on Segment Information.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." This ASU requires incremental disclosures primarily related to the reconciliation of the statutory income tax rate to the effective income tax rate, as well as income taxes paid. This new guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted and upon adoption, the guidance can be adopted on a prospective or retrospective basis. We anticipate that the new guidance will result in additional disclosures and plan to adopt this new guidance by the required date.

In November 2024, the FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses." This ASU requires additional disclosures on disaggregated information about certain income statement expense line items including employee compensation, depreciation, amortization and depletion. This new guidance is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. We expect that this new guidance will result in additional disclosures in our consolidated financial statements and plan to adopt this new guidance by the required date.

The Company reviewed other recently issued ASUs and determined that they were not expected to have a significant impact on the Company's consolidated financial statements when adopted or did not have a significant impact on the Company's consolidated financial statements upon adoption.

Note 4. Segment Information

Redwood operates inthree segments: Sequoia Mortgage Banking, CoreVest Mortgage Banking and Redwood Investments. For a full description of our segments and factors used to determine each reportable segments, see Item 1—Business in this Annual Report on Form 10-K.

This segmentation aligns with the results of operations presented to our chief operating decision maker ("CODM") in reviewing the Company for performance assessment and resource allocation. We identify our CODM to be a group consisting of the Company's Chief Executive Officer, President and Chief Financial Officer.

Our CODM evaluates performance and allocates resources on each respective segment primarily based on segment net income (loss), also referred to as segment contribution, which is also used to assess the annual budget and forecasting process and to consider budget-to-actual variances when allocating capital and personnel to the segments throughout the year.

The accounting policies applied to the segments are the same as those described in the summary of significant accounting policies in Note 3 of the Notes to Consolidated Financial Statements, with the exception of allocations of certain corporate expenses not directly assigned or allocated to one of ourthree segments. These unallocated corporate expenses are included in the Corporate/Other column as reconciling items to our consolidated financial statements and primarily include interest expense for our senior notes, convertible and exchangeable senior notes, and trust preferred securities, indirect general and administrative expenses and other expense. In the normal course of business, loans are originated and acquired at our mortgage banking segments and may subsequently be transferred to our Redwood Investments segment either as whole loans or through the retention of securities from securitizations we sponsor and consolidate under GAAP. All of our loans are accounted for under the fair value option and amounts transferred between segments are accounted for at fair value at the time of transfer.

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The following tables present financial information by segment for the years ended December 31, 2024, 2023, and 2022.

Table 4.1 – Business Segment Financial Information

(1)Represents market valuation changes of derivatives that were used to manage risks associated with our mortgage banking operations and Redwood Investments. For mortgage banking, also includes other derivative financial instruments such as loan purchase commitments and interest rate locks.

(2)Net Income (Loss) by segment is also referred to as Segment Contribution.

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(1)Represents market valuation changes of derivatives that were used to manage risks associated with our mortgage banking operations and Redwood Investments. For mortgage banking, also includes other derivative financial instruments such as loan purchase commitments and interest rate locks.

(2)Net Income (Loss) by segment is also referred to as Segment Contribution.

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(1)Represents market valuation changes of derivatives that were used to manage risks associated with our mortgage banking operations and Redwood Investments. For mortgage banking, also includes other derivative financial instruments such as loan purchase commitments and interest rate locks.

(2)Net (Loss) by segment is also referred to as Segment Contribution.

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Note 5. Mortgage Banking Activities, Net

The following table presents the components of Mortgage banking activities, net, recorded in our consolidated statements of income (loss) for the years ended December 31, 2024, 2023 and 2022.

Table 5.1 – Mortgage Banking Activities

(1)Includes changes in fair value for associated loan purchase commitments for residential consumer loans.

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

(3)Represents market valuation changes of derivatives that were used to manage risks associated with our mortgage banking operations and other derivative financial instruments such as loan purchase commitments and interest rate locks.

(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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Note 6. Fair Value of Financial Instruments

We estimate fair values for financial assets or liabilities based on available inputs observed in the marketplace as well as unobservable inputs. We primarily use two pricing valuation techniques: market comparable pricing and discounted cash flow analysis. Market comparable pricing is used to determine the fair value of certain instruments by incorporating known inputs and performance metrics, such as observed prepayment rates, delinquencies, severities, credit support, recent transaction prices, pending transactions, or prices of other similar instruments. Discounted cash flow analysis techniques generally consist of developing an estimate of future cash flows that are expected to occur over the life of an instrument and then discounting those cash flows at a rate of return that results in an estimate of fair value. After considering all available indications of the appropriate rate of return that market participants would require, we consider the reasonableness of the range indicated by the results to determine an estimate that is most representative of fair value. We also consider counterparty credit quality and risk as part of our fair value assessments.

We maintain policies that specify the methodologies we use to value different types of financial instruments. Significant changes to the valuation methodologies are reviewed by members of the Pricing Committee, which is comprised of several members of senior management, to confirm the changes are appropriate and reasonable. Valuations based on information from external sources are generally performed on an instrument-by-instrument basis with the resulting amounts analyzed individually against internal calculations as well as in the aggregate by product type classification. Our Pricing Committee then independently reviews all fair value estimates to ensure they are reasonable.

For financial reporting purposes, we follow a fair value hierarchy established under GAAP that is used to determine the fair value of financial instruments. 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 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 describes the valuation methodologies used for the financial instruments measured at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the Level 1, Level 2, and Level 3 valuation hierarchy. 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 the determination of relevant inputs and assumptions, some of which represent significant unobservable inputs as indicated in the preceding table.

Residential Consumer loans, Residential Investor loans, Multifamily loans and HEI at consolidated securitization entities

We have elected to account for most of our consolidated securitization entities as CFEs in accordance with GAAP. 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. Pursuant to this guidance, we use the fair value of the ABS issued by the CFEs (which we determined to be more observable) to determine the fair value of the loans or HEI held at these entities, whereby the net assets we consolidate in our financial statements related to these entities represent the fair value of our retained interests in the CFEs.

Residential Consumer Loans

Fair values for residential consumer loans are determined using models that incorporate various pricing inputs, including information derived from whole loan sales and securitizations that have occurred in the market. Certain significant inputs in these models are considered unobservable and are therefore Level 3 in nature. Significant pricing inputs obtained from market whole loan transaction activity include indicative spreads to indexed TBA prices and indexed swap rates. Significant pricing inputs obtained from market securitization activity include indicative spreads to indexed TBA prices and swap rates for senior and subordinate MBS, IO MBS discount rates, senior credit support levels, and assumed future prepayment rates.

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Residential Investor Loans

Fair values for residential investor loans are determined using models that incorporate various pricing inputs, including information derived from whole loan sales and securitizations that have occurred in the market. Certain significant inputs in these models are considered unobservable and are therefore Level 3 in nature. Significant pricing inputs obtained from market securitization activity include indicative spreads to indexed treasury rates for senior and subordinate MBS, IO MBS discount rates, senior credit support levels, and assumed future prepayment rates. Significant pricing inputs obtained from market whole loan transaction activity include indicative credit spreads to indexed treasury prices and swap rates or absolute yields. These assets would generally decrease in value based upon an increase in the credit spread or absolute yield, prepayment speed, or credit support assumptions. Prices for most of our residential investor bridge loans are determined using discounted cash flow modeling, which incorporates a primary significant unobservable input of market discount rates (incorporating indicative credit spreads where applicable). Cash flows for performing loans are generally based on contractual loan terms. Delinquent loans are generally valued at a dollar price that is informed by various market data inputs, including the fair value of the collateral securing the loan.

Real estate securities

Real estate securities include residential consumer, multifamily, and other mortgage-backed securities that are generally illiquid in nature and trade infrequently. Significant inputs in the valuation analysis for these assets are predominantly Level 3 in nature, due to the lack of readily available market quotes and related inputs. For real estate securities, we utilize both market comparable pricing and discounted cash flow analysis valuation techniques. Relevant market indicators that are factored into the analysis include bid/ask spreads, the amount and timing of credit losses, interest rates, and collateral prepayment rates. Securities priced using discounted cash flow models use significant unobservable inputs such as a discount rate, prepayment rate, default rate and loss severity.

Derivative assets and liabilities

Our derivative instruments include swaps, swaptions, TBAs, interest rate futures, loan purchase and interest rate lock commitments, and forward sale commitments. Fair values of derivative instruments are determined using quoted prices from active markets, when available, or from valuation models and are supported by valuations provided by dealers active in derivative markets. Fair values of TBAs and interest rate futures are generally obtained using quoted prices from active markets. Our derivative valuation models for swaps and swaptions require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, prepayment rates, and correlations of certain inputs. Model inputs can generally be verified and model selection does not involve significant management judgment. LPC, and IRLC fair values for residential consumer jumbo and residential investor term loans are estimated based on the fair values of the underlying loans (as described in "Residential consumer loans" and "Residential investor loans"above). In addition, fair values for LPCs and IRLCs are estimated based on the probability that the mortgage loan will be purchased or originated (the "Pull-through rate").

Servicer advance investments

Fair values for servicer advance investments are determined through internal pricing models that estimate future cash flows and utilize certain significant inputs that are considered unobservable and are therefore Level 3 in nature. Our estimations of cash flows include the combined cash flows of all of the components that comprise the servicer advance investments: existing advances, the requirement to purchase future advances, the recovery of advances, and the right to a portion of the associated mortgage servicing fee ("mortgage servicing income"). The valuation technique is based on discounted cash flows. Significant inputs used in the valuations include prepayment rate (of the loans underlying the investments), mortgage servicing income, the weighted-average expected remaining life of servicer advances ("expected remaining life"), and discount rate.

HEI

Fair values for home equity investment contracts are determined through internal pricing models that estimate future cash flows and utilize certain significant unobservable inputs such as forecasted home price appreciation, prepayment rates and discount rates, and are therefore Level 3 in nature. The valuation technique is based on discounted cash flows.

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MSRs

MSRs include the rights to service jumbo residential mortgage loans. Significant inputs in the valuation analysis are predominantly Level 3, due to the nature of these instruments and the lack of readily available market quotes. Changes in the fair value of MSRs occur primarily due to the collection/realization of expected cash flows, as well as changes in valuation inputs and assumptions. Fair values are based on applying the inputs to generate the net present value of estimated future MSR income. These discounted cash flow models utilize certain significant unobservable inputs including market discount rates, assumed future prepayment rates of serviced loans, and the market cost of servicing.

Excess MSRs

Fair values for excess MSRs are determined through internal pricing models that estimate future cash flows and utilize certain significant inputs that are considered unobservable and are therefore Level 3 in nature. The valuation technique is based on discounted cash flows. Significant unobservable inputs used in the valuations include prepayment rate (of the loans underlying the investments), the amount of excess servicing income expected to be received ("excess mortgage servicing income"), and discount rate.

Strategic investments are Level 3 financial instruments that we account for under the fair value option. These investments are in early-stage start-up companies and 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.

ABS issued

ABS issued includes asset-backed securities issued through the Legacy Sequoia, Sequoia, CAFL and HEI securitization entities, as well as securities issued by certain third-party Freddie Mac K-Series and SLST securitization entities that we consolidate. These instruments are generally illiquid in nature and trade infrequently. Significant inputs in the valuation analysis are predominantly Level 3, due to the nature of these instruments and the lack of readily available market quotes. For ABS issued, we utilize both market comparable pricing and discounted cash flow analysis valuation techniques. Relevant market indicators factored into the analysis include bid/ask spreads, the amount and timing of collateral credit losses, interest rates, and collateral prepayment rates. Fair values incorporate market indicators as well as other significant unobservable inputs to generate discounted cash flows. These cash flow models use significant unobservable inputs such as discount rate, prepayment rate, default rate, and loss severity.

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The following table presents the assets and liabilities that are reported at fair value on our consolidated balance sheets on a recurring basis at December 31, 2024 and 2023, as well as the fair value hierarchy of the valuation inputs used to measure fair value.

Table 6.1 – Assets and Liabilities Measured at Fair Value on a Recurring Basis

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The following table presents additional information about Level 3 assets and liabilities measured at fair value on a recurring basis for the years ended December 31, 2024.

Table 6.2 – Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis

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Footnotes to table 6.2

(1)Other settlements, net: for residential consumer and residential investor loans, represents the transfer of loans to REO; for HEI, represents the profit share fee we pay our third party originators for our purchased HEI portfolio; for derivatives, represents 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 consumer and investor loans; and for mortgage servicing rights ("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)All changes in unrealized gains or (losses) are included in earnings with the exception of Real Estate AFS Securities, which are included in comprehensive income.

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

(4)Includes $285 million of ABS and $12 million of non-controlling interests associated with the consolidation of securitized CAFL bridge loans.

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 for the years ended December 31, 2024.

Table 6.3 – Fair Value Methodology for Level 3 Financial Instruments

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(1)The predominant valuation technique used to determine our Level 3 fair value assets and liabilities is based on the discounted cash flow model.

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

(3)Values represent pricing inputs used in a securitization pricing model. Credit spreads represent spreads to applicable swap rates unless specified otherwise.

(4)The fair value of the loans and HEI held by consolidated entities is 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 December 31, 2024, the fair value of securities we owned at the consolidated Sequoia, CAFL Term, Freddie Mac SLST, and Freddie Mac K-Series was $419 million, $326 million, $242 million and $35 million, respectively. At December 31, 2024, the fair value of our securities in thetwo CAFL Bridge loan securitizations accounted for under the CFE election and our HEI securitization entities was $21 million and $47 million, respectively.

(5)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).

(6)Consolidated agency multifamily loans represent securitized financial assets and liabilities of the Company's CFEs.

(7)Of the total $123 million payable to non-controlling interests, $100 million is measured at fair value on a recurring basis.

(8)Represents less than 1% of the individual and aggregate amount of Level 3 assets and liabilities measured at fair value on a recurring basis.

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Assets and Liabilities Not Measured at Fair Value

The following table summarizes the fair values of assets and liabilities that are not measured at fair value at December 31, 2024 and December 31, 2023.

Table 6.4 – Carrying Values and Fair Values of Assets and Liabilities

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

During the year ended December 31, 2024, we elected the fair value option for $118 million of securities, $7.04 billion (principal balance) of residential consumer loans, and $1.72 billion (principal balance) of residential investor loans. Additionally, during the year ended December 31, 2024, we elected the fair value option for $2 million of HEI. For the year ended December 31, 2024, we elected the fair value option for $2 million, of MSRs/Strategic Investments/Other investments.

Nonrecurring Fair Values

We measure the fair value of certain assets and liabilities on a nonrecurring basis when events or changes in circumstances indicate that the carrying value may be impaired. Adjustments to fair value generally result from the write-down of asset values due to impairment. REO in Other Assets and Liabilities are classified as Level 3 in the fair value hierarchy based upon fair value determinations using appraisals, broker price opinions, comparable properties or other indications of value.

Refer to Note 14 for further information on our REO.

Note 7. Residential Consumer Loans

We acquire residential consumer 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 consumer loans owned at Redwood, consolidated Sequoia and Freddie Mac SLST entities at December 31, 2024 and 2023.

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Table 7.1 – Classifications and Carrying Values of Residential Consumer Loans

At December 31, 2024, we owned mortgage servicing rights associated with $1.0 billion (principal balance) of residential consumer 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 Consumer Loans Held-for-Sale

The following table summarizes the characteristics of residential consumer loans held-for-sale at December 31, 2024 and 2023.

Table 7.2 – Characteristics of Residential Consumer Loans Held-for-Sale

At both December 31, 2024 and December 31, 2023, there wereno residential consumer loans held-for-sale that were 90 days or more delinquent or in foreclosure.

The following table provides the activity of residential Consumer loans held-for-sale during the years ended December 31, 2024 and 2023.

Table 7.3 – Activity of Residential Consumer Loans Held-for-Sale

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

Residential Consumer Loans Held-for-Investment at Fair Value

We invest in residential subordinate securities issued by SEMT and Freddie Mac SLST securitization trusts and consolidate the underlying residential consumer loans owned by these entities for financial reporting purposes in accordance with GAAP. The

F- 37 following tables summarize the characteristics of the residential consumer loans owned at consolidated SEMT and Freddie Mac SLST entities at December 31, 2024 and 2023.

Table 7.4 – Characteristics of Residential Consumer Loans Held-for-Investment

(1)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 the accounting guidance for collateralized financing entities.

(2)For loans held at consolidated entities, the number and unpaid principal balance of loans 90+ days delinquent includes loans in foreclosure.

(3)For loans held at our consolidated SEMT and Freddie Mac SLST entities, market value changes are based on the fair value of the associated ABS issued, including securities we own, pursuant to the measurement alternative provided for collateralized financing entities, and are recorded in Investment fair value changes, net on our consolidated statements of income (loss).

The following table provides the activity of residential consumer loans held-for-investment at consolidated entities during the years ended December 31, 2024 and 2023.

Table 7.5 – Activity of Residential Consumer Loans Held-for-Investment at Consolidated Entities

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

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Residential Consumer Loan Characteristics

The following table presents the geographic concentration of residential consumer loans recorded on our consolidated balance sheets at December 31, 2024 and 2023.

Table 7.6 – Geographic Concentration of Residential Consumer Loans

Note 8. Residential Investor Loans

We originate and invest in residential investor loans, including term loans and bridge loans (see Note 3 for a full description of these loans). The following table summarizes the classifications and carrying values of the residential investor loans owned at Redwood and at consolidated CAFL entities at December 31, 2024 and 2023.

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Table 8.1 – Classifications and Carrying Values of Residential Investor Loans

Nearly all of the outstanding residential investor term loans at December 31, 2024 were first-lien, fixed-rate loans with original maturities ofthree, five, seven, orten years.

The outstanding residential investor bridge loans held-for-investment at December 31, 2024 were first-lien, interest-only loans with original maturities ofsix to 36 months and were comprised of 53% one-month SOFR-indexed adjustable-rate loans, and 47% fixed-rate loans.

At December 31, 2024, we had a $397 million in commitments to fund residential investor bridge loans. See Note 18 for additional information on these commitments.

During the year ended December 31, 2024, we sold $789 million, of residential investor bridge and term loans, net of $49 million of construction draws to our joint ventures. See Note 11 for additional information on these joint ventures.

The following table provides the activity of residential investor loans during the years ended December 31, 2024 and 2023.

Table 8.2 – Activity of Residential Investor Loans at Redwood

(1)For the year ended December 31, 2024 the principal balance of loans sold to third parties is net of $49 million related to construction draws on residential investor bridge loans sold to our joint ventures. See Note 11 for additional information on these joint ventures.

(2)Transfers of residential investor term loans between portfolios at Redwood represents the transfer of loans from held-for-sale to held-for-investment associated with consolidated CAFL term securitizations. Transfers of residential investor bridge loans at Redwood, represents the transfer of residential investor bridge loans from "Bridge at Redwood" to "Bridge at CAFL" resulting from their inclusion inone of our bridge loan securitizations, which generally have replenishment features for a set period of time from the closing date.

(3)In the fourth quarter of 2024, we completed our first CAFL securitization sponsored by our joint venture. This securitization involved loans contributed from our joint venture and by CoreVest. This securitization vehicle has been determined to be a VIE that we consolidate under GAAP as we are the primary beneficiary. See Note 15 for additional information on our principles of consolidation.

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(4)Represents net market valuation changes from the time a loan is originated to when it is sold, securitized or transferred to our Redwood Investments portfolio. See Table 5.1 for additional detail on Mortgage banking activities income.

Residential Investor Loans Held-for-Investment at CAFL

We invest in securities issued by CAFL securitizations sponsored by CoreVest and consolidate the underlying CoreVest term loans and bridge loans owned by these entities. For loans held at our consolidated CAFL Term entities andone CAFL Bridge entity, market value changes are based on the 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 the CAFL Term entities is presented in Table 15.2. We did not elect to account fortwo of our CAFL Bridge securitizations under the collateralized financing entity guidelines but have elected to account for the loans in these securitization at fair value, and changes in fair value for these loans are recorded through Investment fair value changes, net on our consolidated statements of income (loss). The following table provides the activity of residential investor loans held-for-investment at CAFL during the years ended December 31, 2024 and 2023.

Table 8.3 – Activity of Residential Investor Loans Held-for-Investment at CAFL

(1)Net market valuation gains (losses) on residential investor loans held-for-investment at CAFL are recorded through Investment fair value changes, net on our consolidated statements of income (loss). For loans held at our consolidated CAFL Term and Bridge entities, market value changes are based on the fair value of the associated ABS issued, including securities we own, pursuant to CFE guidelines. We did not elect to account fortwo of our CAFL Bridge securitizations under the CFE guidelines but have elected to account for the loans in these securitizations at fair value, and changes in fair value for these loans are recorded through Investment fair value changes, net on our consolidated statements of income (loss).

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Residential Investor Loan Characteristics

The following tables summarize the characteristics of the residential investor loans owned at Redwood and at consolidated CAFL entities at December 31, 2024 and 2023.

Table 8.4 – Characteristics of Residential Investor Loans

(1)The fair value of the loans held by consolidated CAFL Term and Bridge entities were 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 the accounting guidance for CFEs.

(2)The number of loans 90+ days delinquent includes loans in foreclosure.

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

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The following table presents the unpaid principal balance of residential investor loans recorded on our consolidated balance sheets at December 31, 2024 by collateral/strategy type.

Table 8.5 – Residential Investor Loans Collateral/Strategy Type

(1)The fair value of the loans held by consolidated CAFL Term and Bridge entities were 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.

(2)Includes loans to finance acquisition and/or stabilization of existing housing stock or to finance new construction of residential properties for rent.

(3)Includes loans for light to moderate renovation of residential investor and small multifamily properties (generally less than 20 units).

(4)Includes loans for predominantly light to moderate rehabilitation projects on multifamily properties.

Loan Modifications

We may amend or modify a loan depending on the loan's specific facts and circumstances. These loan modifications typically include amendments and restructuring and include terms such as additional time for the borrower to refinance or sell the collateral property, interest rate reductions and/or deferral of scheduled principal and/or interest payments. In some instances, a loan amendment or restructuring may bring the loan out of delinquent status. In other instances, including in the case of Build for Rent ("BFR") loans, a loan modification may amend the project's underlying budget (including allocation of hard/soft costs, interest reserves and other items) or construction or completion milestones, if warranted, based on progress versus the initial budget. Because they finance the construction of rental housing, many BFR projects do not generate net operating income until the later stages of the loan term. As such, BFR loans are sized to include allocations for interest expense as well as construction costs and other standard budget items. In exchange for a modification, we may receive a partial repayment of principal, a short-term accrual of capitalized interest for a portion of interest due, a capital infusion to replenish interest or capital improvement reserves and/or termination of all or a portion of the remaining unfunded loan commitment.

The fair value of residential investor bridge loans of $1.94 billion at December 31, 2024 declined from $2.10 billion at December 31, 2023. Changes in the value of these loans during the year ending December 31, 2024 primarily reflect principal repayments and reductions in the fair values for non-accrual bridge loans and certain modified bridge loans since the fourth quarter of 2023. For the year ending December 31, 2024, we modified or put into forbearance loans with a total aggregate unpaid principal balance of $848 million. Of this balance, loans with reductions in contractual interest rates (including, in certain cases, deferrals of interest) had an aggregate unpaid principal balance of $663 million, and an aggregate fair value of $645 million at December 31, 2024. The modification terms on these loans involved conversions of the contractual interest rates on the loans from floating to fixed and/or deferrals of a portion of the stated pay rate to an extended date or to maturity. In 2024, modifications on these loans maintained a weighted average contractual interest rate of approximately 9.09%, of which 4.46% represented deferred interest.

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In addition, for the year ending December 31, 2024, we modified four BFR loans with a total aggregate unpaid principal balance of $142 million and an aggregate fair value of $140 million at December 31, 2024. These loans were a subset of the $848 million of modified loans and had previously been modified in 2024. The previous modifications on these loans amended the interest rate to a combination of current pay and deferred interest. During the year ending December 31, 2024, the modifications on these loans amended the allocation of loan commitments between hard and soft costs, interest expense and other expenses, provided maturity extensions of 10 months on average (subject to mandatory partial repayments during the loan term), and established a hard lockbox and funding of interest reserves to cover debt service shortfalls.

Nonaccrual Loans

Interest income is accrued on loans in the period the coupon interest is contractually earned until such time a loan is placed on non-accrual status.

A loan is generally placed on non-accrual status when it is probable that all principal and interest due under the contractual terms will not be collected and a loan is past due more than 90 days. At the time a loan is placed on non-accrual status, all previously accrued but uncollected interest is reversed against interest income and interest subsequently collected is recognized on a cash basis when it is received. A loan remains on non-accrual status until the loan balance is deemed collectible or until such time the loan qualifies to be placed back on accrual status. Generally, a loan is placed back on accrual status when the loan becomes contractually current or the collection of past due and future payments is reasonably assured either through reinstatement by the borrower, estimated net equity in the underlying real estate property or both.

At December 31, 2024 and December 31, 2023, residential investor loans with an aggregate unpaid principal balance of $151 million and $340 million, respectively, and an aggregate fair value of $104 million and $312 million, respectively, were on non-accrual status. Of this balance, loans with an aggregate unpaid principal balance ofzero and $207 million were less than 90 days past due (including loans that were contractually current) as of December 31, 2024 and December 31, 2023, respectively.

The following table presents the geographic concentration of residential investor loans recorded on our consolidated balance sheets at December 31, 2024 and December 31, 2023.

Table 8.6 – Geographic Concentration of Residential Investor Loans

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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 December 31, 2024 and 2023.

Table 9.1 – Fair Values of Real Estate Securities by Type

Our real estate securities include mortgage-backed securities, which are classified 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 generally include both residential and multifamily mortgage-backed interest-only and subordinate securities. Refer to Note 6 for further information on the inputs into the fair valuation of our real estate trading securities.

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Note 9. Real Estate Securities - (continued)

AFS Securities

The following tables present the detail of our AFS securities, by position and collateral type, at December 31, 2024 and 2023.

Table 9.2 – Carrying Value and Fair Value of AFS Securities by Type

Gains and losses from the sale of AFS securities are recorded as Realized gains, net, in our consolidated statements of income. During the year ended December 31, 2024, we didnot sell any AFS securities. During the year ended December 31, 2023, we realized gains of $2 million on sales of AFS securities. During the year ended December 31, 2024, we had $12 million of net unrealized gains on AFS securities.

During the years ended December 31, 2024, 2023 and 2022 we had accretion income on AFS securities of $2 million, $1 million, and $11 million, respectively.

At December 31, 2024, we had $49 million of AFS securities with contractual maturities less than five years, $4 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.

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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 December 31, 2024 and 2023.

Table 9.3 – AFS Securities in Gross Unrealized Loss Position by Holding Periods

At December 31, 2024, after giving effect to purchases, sales, and extinguishment due to credit losses, our consolidated balance sheet included 90 AFS securities, of which 20 were in an unrealized loss position, including 11 in a continuous unrealized loss position for 12 consecutive months or longer. At December 31, 2023, our consolidated balance sheet included 66 AFS securities, of which 21 were in an unrealized loss position including 19 that was in a continuous unrealized loss position for 12 consecutive months or longer.

Allowance for Credit Losses

Credit impairments on our available-for-sale securities are recorded in earnings using an allowance for credit losses, with the allowance limited to the amount by which the security's fair value is less than its amortized cost basis. 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). The allowance for credit losses is calculated using a discounted cash flow approach and is measured as the difference between the beneficial interest’s amortized cost and the estimate of cash flows expected to be collected, discounted at the effective interest rate used to accrete the beneficial interest. No allowance is recorded for beneficial interests in an unrealized gain position. At December 31, 2024 and 2023, our allowance for credit losses related to our AFS securities was $0.9 million and $2 million, respectively.

The following table details the activity related to the allowance for credit losses for AFS securities for the years ended December 31, 2024 and 2023.

Table 9.4 – Rollforward of Allowance for Credit Losses

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Note 10. Home Equity Investments (HEI)

We invest in HEI contracts from third party originators and in the third quarter of 2023, we began to originate HEI directly. 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 recording a security instrument (e.g., deed of trust) with respect to the property. Our investments in HEI expose us to both home price appreciation and depreciation of the associated property.

We co-sponsoredtwo HEI securitization entities that we consolidated in accordance with GAAP, and have elected to account for them under the CFE election. As such, market valuation changes for the securitized HEI are based on the fair value of the associated ABS issued by the entity, including the interest we own, and are reported in HEI income, net on our Consolidated statements of income.

The following table presents our HEI at December 31, 2024 and 2023.

Table 10.1 – Home Equity Investments

The following table details our HEI activity during the years ended December 31, 2024 and 2023.

Table 10.2 – Activity of HEI

The following table provides the components of HEI income, net for the years ended December 31, 2024, 2023 and 2022.

Table 10.3 – Components of HEI Income, net

(1)Amount includes interest expense associated with ABS issued, which totaled$12 million, $6 million and $5 million for 2024, 2023 and 2022, respectively.

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Note 10. Home Equity Investments - (continued)

The following tables present the geographic concentration of HEI recorded on our consolidated balance sheets at December 31, 2024 and 2023.

Table 10.4 – Geographic Concentration of HEI

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Note 11. Other Investments

Other Investments at December 31, 2024 and 2023 are summarized in the following table.

Table 11.1 – Components of Other Investments

Income from Other Investments for years ended December 31, 2024, 2023 and 2022 is summarized in the following table.

Table 11.2 – Components of Income From Other Investments, net (1)

(1)Market valuation gains (losses) on Other investments accounted for under the fair value option are recorded in Investment fair value changes, net. All other market valuation gains (losses) on Other investments are recorded in Other income, net.

(2)Represents net equity method earnings (losses) from our Strategic investments that are accounted for under the equity method.

(3)Includes Investment fair value changes related to our Strategic investments that are accounted for under the measurement alternative for equity securities without readily determinable fair values. For the year ended December 31, 2024, includes Investment fair value gains of $4 million and investment fair value losses of $5 million under the measurement alternative. For the year ended December 31, 2023, includes Investment fair value gains of $1 million and investment fair value losses of $3 million under the measurement alternative. For the year ended December 31, 2022, includes Investment fair value gains of $14 million under the measurement alternative.

We account for our Servicer advance investments, Excess MSRs and MSRs at fair value. Depending on the terms of the Strategic investments, we may account for these investments under the fair value option, as non-marketable equity securities under the equity method of accounting or the measurement alternative for equity securities without readily determinable fair values. See Note 3 for additional information on the accounting policies on these investments. Refer to Note 6 for further information on the inputs into the fair valuation of these components.

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Note 11. Other Investments - (continued)

At December 31, 2024, we have investments in private companies, including investments through our RWT Horizons venture investment platform, with a total carrying value of $78 million.

In the second quarter of 2023, we established a joint venture with an institutional investment manager to invest in residential investor bridge loans originated by our CoreVest subsidiary. At December 31, 2024 and 2023, the carrying value of our investment in the joint venture was $3 million and $4 million, respectively. We account for our investment in the joint venture under the equity method of accounting as we have a 20% non-controlling interest, but are deemed to be able to exert significant influence over the affairs of the joint venture. We adjust the carrying value of our equity method investment for our share of earnings or losses, dividends or return of capital on a quarterly basis. For the years ended December 31, 2024 and 2023, we recognized net equity method earnings of $0.3 million and $0.2 million, respectively, through Other income, net in our Consolidated statements of income.

In the first quarter of 2024, we established a joint venture with another institutional investment manager to invest in residential investor bridge and term loans originated by us. At December 31, 2024, the carrying value of our investment in the joint venture was $26 million. We account for our investment in the joint venture under the equity method of accounting as we have a minority non-controlling interest approximating 20% across both Redwood's direct equity capital contribution to this joint venture structure and joint venture co-investments to be held in Redwood's investment portfolio, but we are deemed to be able to exert significant influence over the affairs of the joint venture. We adjust the carrying value of our equity method investment for our share of earnings or losses, dividends or return of capital on a quarterly basis. We recognized net equity method earnings of $1 million for the year ended December 31, 2024, through Other income, net in our Consolidated statements of income.

See Note 8 for further information on residential investor bridge loans sold to these joint ventures.

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Note 12. Derivative Financial Instruments

The following table presents the fair value and notional amount of our derivative financial instruments at December 31, 2024 and 2023.

Table 12.1 – Fair Value and Notional Amount of Derivative Financial Instruments

(1) For the purpose of this presentation, derivative assets and liabilities are presented on a gross and a net basis.

The following table presents the market valuation gains and losses on our derivatives for the years ended December 31, 2024 and 2023.

Table 12.2 – Market Valuation (Losses) Gains on Derivatives

(1)Market valuation gains (losses) on risk management derivatives used to manage the mark-to-market risks associated with our Mortgage Banking operations are recorded in Mortgage banking activities, net and market valuation gains (losses) on all other derivatives are recorded in Investment fair value changes, net on our consolidated statements of income.

(2)Market valuation gains (losses) on LPCs and IRLCs are recorded in Mortgage banking activities, net on our consolidated statements of income.

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 December 31, 2024, we were party to swaps and swaptions with an aggregate notional amount of $8.25 billion, TBA agreements with an aggregate notional amount of $1.35 billion, and interest rate futures contracts with an aggregate notional amount of $1.54 billion. At December 31, 2023, we were party to swaptions with an aggregate notional amount of

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Note 12. Derivative Financial Instruments - (continued)

$50 million, TBA agreements with an aggregate notional amount of $1.79 billion, and interest rate futures contracts with an aggregate notional amount of $142 million

For the years ended December 31, 2024, 2023, and 2022, risk management derivatives had net market valuation losses of $30 million, net market valuation losses of $20 million, and net market valuation gains of $184 million, respectively. These market valuation gains and losses are recorded in Mortgage banking activities, net and Investment fair value changes, net on our consolidated statements of income (loss).

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 fair values. For the years ended December 31, 2024, 2023, and 2022, LPCs and IRLCs had net market valuation gains of $10 million, net market valuation gains of $23 million, and net market valuation losses of $55 million, respectively, that were recorded in Mortgage banking activities, net on our consolidated statements of income (loss).

Derivatives Designated as Cash Flow Hedges

For interest rate agreements previously designated as cash flow hedges, our total unrealized loss reported in Accumulated other comprehe nsive income was $64 million and $68 million at December 31, 2024 and 2023, respectively. We are amortizing this loss into interest expense over the remaining term of our trust preferred securities and subordinated notes For both the years ended December 31, 2024 and 2023, we reclassified $4 million of realized net losses from Accumulated other comprehensive loss into Interest expense. As of December 31, 2024, we expect to amortize$4 million of realized losses related to terminated cash flow hedges into interest expense over the next twelve months.

Derivative Counterparty Credit Risk

We incur credit risk to the extent that counterparties to our derivative financial instruments do not perform their obligations under specified contractual agreements. If a derivative counterparty does not perform, we may not receive the proceeds to which we may be entitled under these agreements. Each of our derivative counterparties that is not a clearinghouse must maintain compliance with International Swaps and Derivatives Association (“ISDA”) agreements or other similar agreements (or receive a waiver of non-compliance after a specific assessment) in order to conduct derivative transactions with us. Additionally, we review non-clearinghouse derivative counterparty credit standings, and in the case of a deterioration of creditworthiness, appropriate remedial action is taken. To further mitigate counterparty risk, we exit derivatives contracts with counterparties that (i) do not maintain compliance with (or obtain a waiver from) the terms of their ISDA or other agreements with us; or (ii) do not meet internally established guidelines regarding creditworthiness. Our ISDA and similar agreements currently require full bilateral collateralization of unrealized loss exposures with our derivative counterparties. Through a margin posting process, our positions are revalued with counterparties each business day and cash margin is generally transferred to either us or our derivative counterparties as collateral based upon the directional changes in fair value of the positions. We also attempt to transact with several different counterparties in order to reduce our specific counterparty exposure. With respect to certain of our derivatives, clearing and settlement is through one or more clearinghouses, which may be substituted as a counterparty. Clearing and settlement of derivative transactions through a clearinghouse is also intended to reduce specific counterparty exposure. We consider counterparty risk as part of our fair value assessments of all derivative financial instruments at each quarter-end. At December 31, 2024, we assessed this risk as remote and did not record a specific valuation adjustment. At December 31, 2024, we were in compliance with our derivative counterparty ISDA agreements.

Note 13. Offsetting Assets and Liabilities

Certain of our derivatives and loan warehouse facilities 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 December 31, 2024 and 2023.

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Note 13. Offsetting Assets and Liabilities - (continued)

Table 13.1 - Offsetting of Financial Assets, Liabilities, and Collateral

(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, we have pledged excess cash collateral or financial assets to a counterparty (which, in certain circumstances, may 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, these excess amounts are excluded from the table; they are separately reported in our consolidated balance sheets as assets or liabilities, respectively.

(2)Interest rate agreements, TBAs and futures are components of derivative instruments on our consolidated balance sheets. Loan warehouse debt, which is secured by certain Residential consumer and Residential investor loans, is a component of Debt obligations on our consolidated balance sheets.

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Note 14. Other Assets and Liabilities

Other Assets

Other assets at December 31, 2024 and 2023 are summarized in the following table.

Table 14.1 – Components of Other Assets

(1)Fixed assets and leasehold improvements had a basis of $17 million and accumulated depreciation of $12 million and $10 million at December 31, 2024 and 2023, respectively.

Real Estate Owned ("REO")

The Company holds REO at the lower of the current carrying amount or fair value less estimated selling costs. The following table summarizes the activity and carrying values of REO assets held at Redwood and at consolidated Sequoia, Freddie Mac SLST, and CAFL entities during the years ended December 31, 2024 and 2023.

Table 14.2 – REO Activity

(1)Includes REO held at Redwood and within consolidated CAFL Bridge securitization entities.

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(2)For the years ended December 31, 2024 and 2023, REO market valuation adjustments and liquidations resulted in net valuation losses of $16 million and $2 million, respectively, which were recorded in Investment fair value changes, net on our consolidated statements of income.

Intangible Assets

The table below presents the amortization period and carrying value of our intangible assets, net of accumulated amortization at December 31, 2024 and 2023.

Table 14.3 – Intangible Assets – Activity

All of our intangible assets are amortized on a straight-line basis. For the years ended December 31, 2024 and 2023, we recorded intangible asset amortization expense of $9 million and $12 million, respectively. Estimated future amortization expense is summarized in the table below.

Table 14.4 – Intangible Asset Amortization Expense by Year

On at least an annual 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 December 31, 2024.

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Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities at December 31, 2024 and 2023 are summarized in the following table.

Table 14.5 – Components of Accrued Expenses and Other Liabilities

(1)Bridge loan holdbacks represent amounts withheld from the initial loan proceeds and are subsequently disbursed to the borrower to be used in the construction, rehabilitation or purchase of the mortgaged property or to fund interest on the bridge loan.

Investment Receivable

Investment receivable primarily consists of amounts receivable from third-party servicers related to principal and interest receivable from residential investor loans and fees receivable from servicer advance investments.

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 December 31, 2024, we had met all margin calls due.

Operating Lease Right-of-Use Assets and Operating Lease Liabilities

Operating lease liabilities are equal to the present value of our remaining lease payments discounted at our incremental borrowing rate and the operating lease right-of-use assets are equal to the operating lease liabilities adjusted for our deferred rent liabilities. These balances are reduced as lease payments are made. See Note 18 for additional information on leases.

Legal and Repurchase Reserves

See Note 18 for additional information on repurchase reserves and loss contingencies regarding litigation, claims and demands.

Payable to Non-Controlling Interests

Redwood and a third-party co-investor, throughtwo partnership entities consolidated by Redwood, purchased servicer advances and excess MSRs related to a portfolio of residential mortgage loans serviced by the co-investor (see Note 11 and Note 15 for additional information on the partnership entities and associated investments). We account for the co-investor’s interests in the entities as liabilities and at December 31, 2024, the carrying value of their interests was $24 million, representing their current economic interest in the entities. Earnings from the partnership entities are allocated to the co-investors on a proportional basis and during the years ended December 31, 2024, 2023, and 2022 we allocated $5 million of income, $6 million of income, and $2 million of income, respectively, to the co-investors, which were recorded in Other expenses on our consolidated statements of income (loss).

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Redwood and a third-party investor co-sponsored the transfer and securitization of HEI throughtwo HEI securitization entities. Other third-party investors contributed HEI into these securitizations through Redwood and retained subordinate beneficial interests issued by the securitization entities alongside Redwood. See Note 10 for a further discussion of the HEI securitizations. We account for the co-investors' interests in the HEI securitization entities as liabilities and at December 31, 2024, the carrying value of their interests was $83 million, representing the fair value of their economic interests in the beneficial interests issued by the HEI entities. During the years ended December 31, 2024, 2023 and 2022, the investors' share of earnings from their retained interests (for which positive earnings are reflected as an expense to Redwood in our consolidated statements of income) were positive $23 million, positive $8 million, and positive $5 million, respectively, and were recorded through HEI Income, net on our consolidated statements of income (loss).

In 2024, we completed a CAFL securitization of bridge loans sponsored by our joint venture. This transaction involved the transfer and securitization of bridge loans contributed from the joint venture and from Redwood throughone bridge securitization entity. Each of the joint venture and Redwood retained its proportionate share of subordinate beneficial interests issued by the securitization entity. We account for the joint venture's interest in the bridge loan securitization entity as a liability and at December 31, 2024, the carrying value of their interest was $17 million, representing the fair value of their economic interest in the beneficial interest issued. During the year ended December 31, 2024, the joint venture's share of earnings from their retained interest (for which positive earnings are reflected as an expense to Redwood in our consolidated statements of income) were positive $5 million and were recorded through Investment fair value changes, net on our consolidated statements of income (loss).

Accrued Compensation

Accrued compensation includes costs related to our cash-settled awards, bonuses, deferred compensation, vacation and commissions. Our cash-settled awards were granted to certain executive officers and non-executive employees. These awards will be payable in cash with a vested award value based on the closing market price of our common stock on their respective final vesting dates. These awards are classified as liabilities in Accrued expenses and other liabilities on our consolidated balance sheets, and are being amortized over their respective vesting periods on a straight-line basis, adjusted for changes in the value of our common stock at the end of each reporting period.

The following table presents our cash-settled awards by type of award at December 31, 2024.

Table 14.6 – Activities of Cash Settled Awards by Award Type

Cash-Settled Restricted Stock Units ("csRSUs")

During the year ended December 31, 2024, $5 million of csRSUs were granted to certain executive officers that will vest over the next four years through 2028. On each vesting date over thefour-year vesting period, cash in an amount equal to the value of the common stock underlying the csRSUs that vest on such vesting date will be distributed to the recipients. At December 31, 2024 the unamortized compensation cost of the csRSUs was $7 million.

Cash-Settled Deferred Stock Units ("csDSUs")

During the years ended December 31, 2022 and 2021, $3 million and $4 million of csDSUs, respectively, were granted to certain executive officers and non-executive employees that vest over four-year periods through 2026. At December 31, 2024 the unamortized compensation cost of the csDSUs was $2 million.

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Cash Settled Performance Stock Units ("csPSUs")

During the year ended December 31, 2023, $6 million of csPSUs were granted to certain executive and non-executive employees which vest over approximately three years through January 1, 2026. The target number of csPSUs that were granted totaled 663,499 units based on a per unit grant-date fair value of $9.75. The equivalent number of underlying shares of common stock that vest and that the recipient becomes entitled to receive at the time of vesting will generally range from 0% to 250% of the target number of csPSUs granted, with the target number of csPSUs granted being adjusted to reflect the value of any dividends declared on our common stock during the vesting period. At December 31, 2024 the unamortized compensation cost of the csPSUs was $1 million.

Note 15. Principles of Consolidation

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

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

Analysis of Consolidated VIEs

For certain of our consolidated VIEs, we have elected to account for the assets and liabilities of these entities pursuant to the measurement alternative available to CFEs. A CFE is a 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. GAAP allows companies to elect to measure both the financial assets and financial liabilities of a CFE using the more observable of the fair value of the financial assets or fair value of the financial liabilities. 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 fair value or amortized cost. These includetwo CAFL bridge loan securitizations and a Freddie Mac SLST re-securitization for which the ABS are accounted at amortized cost and a Sequoia re-securitization completed during the third quarter of 2024 for which the ABS are accounted at fair value. See Note 16 for additional information regarding the Sequoia re-securitization.

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Note 15. Principles of Consolidation - (continued)

The following table presents a summary of the assets and liabilities of our consolidated VIEs at December 31, 2024 and 2023.

Table 15.1 – Assets and Liabilities of Consolidated VIEs

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Note 15. Principles of Consolidation - (continued)

Footnotes to table 15.1

(1)The value of our investments in VIEs, as presented in this table, generally represents the fair value of the economic interests we own in VIEs (i.e., the securities or other interests we legally own in the consolidated securitizations or other VIEs). While most of our VIEs are accounted for under the CFE election (whereby the net equity in the VIE generally represents the fair value of our retained interests and associated accrued interest receivable), certain entities, includingtwo CAFL bridge loan securitizations (included within the CAFL column), our SLST re-securitization (included within the Freddie Mac SLST column), and our Servicing Investment VIEs are not accounted for under the CFE election and their associated ABS issued are accounted for at amortized historical cost. At December 31, 2024 and December 31, 2023, the fair value of our interests in the CAFL term loan securitizations accounted for under the CFE election was $326 million and $323 million, respectively, and the fair value of our interest in the CAFL bridge loan securitizations accounted for under the CFE election was $29 million and $22 million, respectively, with the difference from the tables above generally representing ABS issued and carried at amortized historical cost and accrued interest on our economic interests. At December 31, 2024 and December 31, 2023, the fair value of our interests in the Freddie Mac SLST securitizations accounted for under the CFE election were $242 million and $274 million, respectively, with the difference from the tables above representing ABS issued and carried at amortized historical cost.

(2)Additionally, the ABS from a Sequoia re-securitization completed during the third quarter of 2024 are not accounted for under the CFE election and are accounted for at fair value (included within the Sequoia column at December 31, 2024). At December 31, 2024, the fair value of our interests in consolidated Sequoia securitizations accounted for under the CFE election was $418 million, with the difference in value of our investments in these VIEs reflected in the table above representing $79 million of consolidated Sequoia securities in the Sequoia re-securitization and $184 million of ABS issued at fair value.

Unconsolidated VIEs with Continuing Involvement

We have transferred residential consumer loans to certain Sequoia securitization entities sponsored by us that are still outstanding as of December 31, 2024, and accounted for these transfers as sales for financial reporting purposes, in accordance with GAAP. 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-servicers to perform) and the receipt of interest income associated with the securities we retained.

The following table presents additional information at December 31, 2024 and 2023, related to unconsolidated VIEs sponsored by Redwood and accounted for as sales since 2012.

Table 15.2 – Unconsolidated VIEs Sponsored by Redwood

(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.

Note 16. 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 15 for additional detail), with the remainder carried at amortized cost. The carrying values of ABS issued by our consolidated securitization entities at December 31, 2024 and 2023 along with other selected information, are summarized in the following table.

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Note 16. Asset-Backed Securities Issued - (continued)

Table 16.1 – Asset-Backed Securities Issued

During the fourth quarter of 2024, we consolidated the assets and liabilities of an entity formed in connection with the financing of residential investor bridge loans (presented within CAFL in table 15.1 above) and sponsored by our joint venture. We determined the entity was a VIE for which we determined we are the primary beneficiary. At issuance, we recognized $300 million of loans and other assets and $297 million of ABS issued and other liabilities and acquired a $3 million 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 recorded through Investment fair value changes, net on our consolidated statements of income. At December 31, 2024, the principal balance of the ABS issued was $285 million, and the net carrying value was $286 million. The weighted average stated coupon of the ABS issued was 7.13% at issuance. The ABS issued by the CAFL bridge entity are subject to an optional redemption in May 2027 and beginning in June 2027, the interest rate on the ABS issued increases by 1.5% through final maturity in November 2031. The ABS issued by this securitization were collateralized by $293 million of residential investor bridge loans, $11 million of restricted cash and $6 million of other assets at December 31, 2024. The securitization is structured with $300 million of total funding capacity and a feature to allow reinvestment of loan payoffs for the first 24 months of the transaction (through November 2026), 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.

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Note 16. Asset-Backed Securities Issued - (continued)

During the third quarter of 2024, we transferred subordinate securities we owned in certain consolidated and unconsolidated Sequoia securitization trusts to a Sequoia re-securitization trust that we sponsored, which we determined was a VIE. At issuance, we sold $205 million (principal balance) of ABS issued to third parties at a discount and elected to account for the ABS issued under the fair value option, with changes in the fair value of the ABS reported through our consolidated statements of income (loss) in Investment fair value changes, net. The stated coupon of the ABS issued was approximately 8.5% at issuance, increasing by 3.0% after the payment date occurring in July 2026. The ABS issued are subject to an optional redemption beginning in July 2025 and have a final stated maturity in December 2054. At issuance, we retained 100% of the remaining beneficial ownership interest in the trust through ownership of a subordinate security issued by the trust. We maintained certain discretionary rights associated with the ownership of this investment that we determined reflected a controlling financial interest in the trust and as such, we consolidated the trust. At December 31, 2024, the collateral for the Sequoia re-securitization trust included $79 million of Sequoia securities we owned from unconsolidated Sequoia securitization trusts as well as $148 million of Sequoia securities that we have retained from certain consolidated Sequoia securitization entities. The Sequoia re-securitization ABS are included in "Sequoia" in Table 16.1 above at December 31, 2024. See Note 15 for further information regarding our Principles of consolidation on this trust.

During the fourth quarter of 2023, we consolidated the assets and liabilities of a securitization entity formed in connection with the securitization of CoreVest residential investor bridge loans (presented within CAFL in Table 15.1 above), which we determined was a VIE and for which we determined we are the primary beneficiary. At issuance, we sold $231 million (principal balance) of ABS issued to third parties and retained the remaining beneficial ownership interests 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 recorded through Investment fair value changes, net on our consolidated statements of income. At December 31, 2024, the principal balance of the ABS issued was $231 million, and the net carrying value was $234 million. The weighted average stated coupon of the ABS issued was 7.89% at issuance. The ABS issued by the CAFL bridge entity are subject to an optional redemption in December 2025, and beginning in July 2026, the interest rate on the ABS issued increases by 1.5% through final maturity in December 2030. The ABS issued by this securitization were collateralized by $229 million of residential investor bridge loans, $4 million of restricted cash and $25 million of other assets at December 31, 2024. 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 December 2025), 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 fourth quarter of 2023, we consolidated the assets and liabilities of a HEI securitization entity formed in connection with the securitization of HEI, which we determined was a VIE and for which we determined we are the primary beneficiary. At issuance, we sold $139 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 HEI income, net on our consolidated statements of income (loss). The ABS issued by the HEI securitization entity are subject to an optional redemption in October 2025, and beginning in October 2026, the interest rate on the ABS issued increases by 3% through final maturity in 2053.

During the fourth quarter of 2023, we transferred all of the subordinate securities we owned fromtwo 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 $184 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 December 31, 2024, the principal balance of the ABS issued was $148 million and the unamortized debt discount and deferred issuance costs totaled $2 million, for a net carrying value of $146 million. The stated coupon of the ABS issued was 7.50% at issuance and the final stated maturity occurs in July 2059. The ABS issued are subject to an optional redemption through November 2025, at which time, if the redemption right has not been exercised, the ABS interest rate steps up to 10.50%.

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 December 31, 2024, the majority of the ABS issued and outstanding had contractual maturities beyond five years. See Note 15 for detail on the carrying value components of the collateral for ABS issued and outstanding.

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Note 17. Debt Obligations, Net

We enter into loan warehouse facilities, repurchase agreements ("repo"), recourse subordinate securities financings, and other forms of collateralized (and generally uncommitted) borrowings with several banks and major investment banking firms. We use debt to finance the acquisition and/or origination of residential consumer and residential investor mortgage loans (including those we acquire or originate in anticipation of sale or securitization), and to finance investments in securities and other investments. Additionally, we use corporate debt obligations to fund other aspects of our business and operations, including the repurchase of shares of our capital stock.

At December 31, 2024, we had outstanding agreements on debt obligations with several counterparties and we were in compliance with all of the related covenants.

The following tables summarize our debt obligations at December 31, 2024 and 2023.

Table 17.1 – Debt Obligations, Net

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Note 17. Debt Obligations, net - (continued)

(1)Variable rate borrowings are primarily based on 1- or 3-month SOFR, plus an applicable spread.

(2)Promissory notes payable on demand to lender with 90-day notice.

(3)Borrowing has a fixed interest rate at period end.

(4)Carrying value presented net of total deferred issuance costs of $20 million and $11 million at December 31, 2024 and 2023, respectively.

In September 2024, we terminatedtwo recourse subordinate financing facilities entered into in 2020 and 2021, and entered into a new recourse subordinate financing facility providing non-marginable debt financing of certain securities retained from our consolidated CAFL securitizations. This financing is fully and unconditionally guaranteed by Redwood, with an interest rate of approximately 7.54% through September 2027, increasing to 10.54% from October 2027 through September 2028. This financing facility may be terminated at our option, beginning in September 2026, and has a final stated maturity in September 2028.

During the year ended December 31, 2024, we repaid our Sequoia recourse subordinate securities financing in full.

Corporate Debt

Corporate Secured Revolving Financing Facility

In March 2024, we entered into a corporate secured revolving financing facility to provide non-marginable recourse debt financing secured by previously unencumbered assets, such as retained Residential Consumer and Residential Investor subordinate securities and other investments, as well as equity in certain operating subsidiaries. This facility has a capacity of $250 million and a

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Note 17. Debt Obligations, net - (continued)

two-year term, with aone-year extension option.

Senior Notes

In January 2024, Redwood issued $60 million of 9.125% Senior Notes due in 2029. The Senior Notes are senior unsecured obligations of Redwood and bear interest at a rate equal to 9.125% per year, payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year, beginning on June 1, 2024. The Senior Notes mature on March 1, 2029. We may redeem the Senior Notes, in whole or in part, at any time on or after March 1, 2026 at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest.

In June 2024, Redwood issued $85 million of 9.0% Senior Notes due in 2029. The Senior Notes are senior unsecured obligations of Redwood and bear interest at a rate equal to 9.0% per year, payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year, beginning on September 1, 2024. The Senior Notes mature on September 1, 2029. We may redeem the Senior Notes, in whole or in part, at any time on or after September 1, 2026 at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest.

Convertible Notes

RWT Holdings, Inc., a wholly-owned subsidiary of Redwood Trust, Inc., issued $201 million principal amount of 5.75% exchangeable senior notes due 2025. During 2024, 2023 and 2022, we repurchased $33 million, $5 million, and $10 million par value of these notes, respectively. At December 31, 2024, these notes were exchangeable at the option of the holder at an exchange rate of 55.2644 common shares per $1,000 principal amount of exchangeable senior notes (equivalent to an exchange price of $18.09 per common share). Additionally, during the year ended December 31, 2024, we repurchased and repaid in full $143 million principal amount of 5.625% convertible senior 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. In October 2024, we issued an additional $40 million of these 7.75% senior notes due in 2027 in a private offering, resulting in net proceeds of approximately $39 million. 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. At December 31, 2024, the conversion rate of the notes was 95.6823 common shares per $1,000 principal amount of notes (equivalent to a conversion price of $10.45 per common share). During 2024 and 2023, we repurchased $4 million and $4 million par value of these notes, respectively.

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Note 18. Commitments and Contingencies

Lease Commitments

At December 31, 2024, we were obligated under 8 non-cancelable operating leases with expiration dates through 2031 for $12 million of cumulative lease payments. Our operating lease expense was $5 million for each of the years ended December 31, 2024, 2023 and 2022, respectively.

The following table presents our future lease commitments at December 31, 2024.

Table 18.1 – Future Lease Commitments by Year

Leasehold improvements for our offices are amortized into expense over the lease term. There were $2 million of unamortized leasehold improvements at December 31, 2024. For each of the years ended December 31, 2024, 2023, and 2022, we recognized $0.5 million of leasehold amortization expense.

During the year ended December 31, 2024, we extended an office lease with a term offour years and aggregate lease payments of $0.4 million. At December 31, 2024, our operating lease liabilities were $11 million, which were a component of Accrued expenses and other liabilities, and our operating lease right-of-use assets were $9 million, which were a component of Other assets. Additionally, during 2024, we entered into an office lease with a term five years which commenced in February 2025 with aggregate lease payments of $3 million.

We determined that none of our leases contained an implicit interest rate and used a discount rate equal to our incremental borrowing rate on a collateralized basis to determine the present value of our total lease payments. As such, we determined the applicable discount rate for each of our leases using a swap rate plus an applicable spread for borrowing arrangements secured by our real estate loans and securities for a length of time equal to the remaining lease term on the lease commencement date. At December 31, 2024, the weighted-average remaining lease term and weighted-average discount rate for our leases was 4 years and 5.3%, respectively.

Commitment to Fund Residential Investor Bridge Loans

As of December 31, 2024, we had commitments to fund up to $397 million of additional advances on existing residential investor bridge loans. These commitments are generally subject to loan agreements with covenants regarding the financial performance of the borrower and other terms regarding advances that must be met before we fund the commitment. At December 31, 2024, we carried a $1 million contingent liability related to these commitments to fund construction advances.

Commitment to Fund Joint Venture

In the first quarter of 2024, we entered into a joint venture with an institutional investment manager pursuant to which we will offer to sell certain residential investor bridge and term loans we originate into joint venture entities that meet specified criteria at contractually pre-established prices. We have committed approximately $100 million of equity capital to be allocated to the joint venture entities and joint venture co-investments to be held in Redwood's investment portfolio. At December 31, 2024, we had contributed $26 million of capital, net to the joint venture.

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Note 18. Commitments and Contingencies - (continued)

In the second quarter of 2023, we entered into a joint venture with another institutional investment manager to invest in residential investor bridge loans originated by CoreVest. We have a commitment to contribute up to approximately $19 million to the joint venture to fund the joint venture's purchase of residential investor bridge loans, under the updated terms of the joint venture. At December 31, 2024, we had contributed$5 million of capital to the joint venture.

Loss Contingencies — Repurchase Reserves

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

Loss Contingencies — Litigation, Claims and Demands

The Company may be involved in litigation, claims and demands in the ordinary course of the business. As of December 31, 2024, the Company was not involved in any legal proceedings that are expected to have a material adverse effect on the Company’s results of operations, financial position, or liquidity.

Note 19. Equity

The following table provides a summary of changes to accumulated other comprehensive income by component for the years ended December 31, 2024 and 2023.

Table 19.1 – Changes in Accumulated Other Comprehensive Income (Loss) by Component

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Note 19. Equity - (continued)

The following table provides a summary of reclassifications out of accumulated other comprehensive income (loss) for the years ended December 31, 2024 and 2023.

Table 19.2 – Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

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 year ended December 31, 2024, we didnot issue any common shares through ATM offerings. The capacity of this program is $175 million, of which approximately $50 million remained outstanding for future offerings at December 31, 2024. During the years ended December 31, 2023 and 2022, we issued 17 million and 5 million of common shares under this program for net proceeds of $124 million and $67 million, respectively.

Issuance of Preferred Stock

Redwood issued 2.8 million shares of 10.00% Series A Fixed-Rate Reset Cumulative Redeemable Preferred Stock ("Series A Preferred Stock") for gross proceeds of $70 million and net proceeds of approximately $67 million, after deducting the underwriting discount and other estimated expenses. The Series A Preferred Stock pays quarterly cumulative cash dividends through January 15, 2028 at a fixed annual rate of 10%, based on the stated liquidation preference of $25.00 per share, in arrears, when authorized by Redwood's Board of Directors and declared by the Company. Starting April 15, 2028, the annual dividend rate will reset to the five-year U.S. Treasury Rate plus a spread of 6.278%. The Series A Preferred Stock ranks senior to Redwood's common stock with respect to rights to the payment of dividends and the distribution of assets upon any liquidation, dissolution or winding up of the Company. During the year ended December 31, 2024, the Company declared preferred stock dividends of $2.50 per share. At December 31, 2024, preferred dividends payable totaling $1 million for the fourth quarter 2024 were included in Accrued expenses and other liabilities. These dividends are payable on January 15, 2025 to preferred stockholders of record on January 1, 2025.

Direct Stock Purchase and Dividend Reinvestment Plan

During the years ended December 31, 2024 and 2023, we didnot issue shares of common stock through our Direct Stock Purchase and Dividend Reinvestment Plan. At December 31, 2024, approximately 6 million shares remained outstanding for future offerings under this plan.

Common Stock Warrants

In conjunction with establishing the joint venture with an institutional investment manager in the first quarter of 2024, we issued warrants exercisable for 1,974,905 shares of our common stock (the “First Tranche Warrants”); and (ii) warrants exercisable for 4,608,112 shares of our common stock (the “Second Tranche Warrants” and together with the First Tranche Warrants, the “Warrants”). The First Tranche Warrants are exercisable from March 18, 2025 to March 18, 2029. The Second Tranche Warrants will vest upon achievement of specified deployment thresholds related to the joint venture and, if vested, will be exercisable from the date the Second Tranche Warrants vest to March 18, 2029. The initial strike price of the Warrants is $7.76. The Warrants also contain a

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Note 19. Equity - (continued)

mandatory exercise provision, exercisable at Redwood’s option upon satisfaction of specified conditions, including the trading price of Redwood’s common stock exceeding a specified premium to the exercise price. Exercises of any Warrants will be settled on a net basis.

The Warrants met the criteria for equity classification under GAAP and are recorded as a component of Additional paid-in-capital in Equity on our Consolidated Balance Sheets. The Warrants were valued at $0.8 million on the issuance date and are not subject to subsequent remeasurement. See Note 20 for discussion on the impact of the Warrants on earnings per common share.

Note 20. Earnings per Common Share

The following table provides the basic and diluted earnings per common share computations for the years ended December 31, 2024, 2023, and 2022.

Table 20.1 – Basic and Diluted Earnings per Common Share

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 years ended December 31, 2024, 2023 and 2022, none of our convertible or exchangeable senior notes were determined to be dilutive and were not included in the calculation of diluted EPS under the "if-converted" method. Under this method, for the exchangeable senior notes due in 2025, and previously for the repaid convertible senior notes due in 2024 and 2023, 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 convertible notes due in 2027, if the potential conversion of the debt is dilutive, then the number of shares needed to settle the conversion premium are added to the shares outstanding used to calculate dilutive EPS.

During the year ended December 31, 2024, none of our Warrants were determined to be dilutive to our calculation of dilutive earnings per common share. The Warrants would have a dilutive effect on earnings per common share to the extent that the Warrants are vested and exercisable, and the average market value per share of our common stock exceeds the strike price of the Warrants.

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Note 20. Earnings per Common Share - (continued)

For the years ended December 31, 2024, 2023 and 2022,32,422,712,42,229,598, and 40,081,997 of common shares, respectively, related to the assumed conversion of our convertible and exchangeable senior notes, were antidilutive and were excluded in the calculation of diluted earnings per share. For the years ended December 31, 2024, 2023 and 2022, the number of outstanding equity awards that were antidilutive totaled 81,779,105,592 and 226,975, respectively.

Stock Repurchases

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. In May 2023, our Board of Directors approved an additional authorization for the repurchase of up to $70 million of our preferred stock. During the year ended December 31, 2024 we didnot repurchase any shares of our common stock or preferred stock and repurchased $72 million of our convertible and exchangeable debt. During the year ended December 31, 2023, we didnot repurchase any shares of our common and preferred stock and repurchased $81 million of our convertible and exchangeable notes. At December 31, 2024, $101 million of the current authorization remained available for the repurchase of shares of our common stock, $70 million remained available for repurchases of shares of our preferred stock, and we also continued to be authorized to repurchase outstanding debt securities.

Note 21. Equity Compensation Plans

At December 31, 2024 and 2023,7,027,251 and 10,211,459 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 $40 million at December 31, 2024, as shown in the following table.

Table 21.1 – Activities of Equity Compensation Costs by Award Type

At December 31, 2024, the weighted average amortization period remaining for all of our equity awards was less thantwo years.

Restricted Stock Awards ("RSAs")

As of December 31, 2024, there wereno restricted stock awards outstanding or any remaining unrecognized compensation costs related to these awards. The expenses recorded for RSAs were zero, zero, and $0.1 million for the years ended December 31, 2024, 2023 and 2022, respectively.

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Restricted Stock Units ("RSUs")

The following table summarizes the activities related to RSUs for the years ended December 31, 2024, 2023, and 2022.

Table 21.2 – Restricted Stock Units Activities

We generally grant RSUs annually, as part of our compensation process. In addition, RSUs are granted from time to time in connection with hiring and promotions. RSUs generally vest over the course of afour-year vesting period, and are distributed annually, at the end of each vesting period.

The expenses recorded for RSUs were $2 million, $3 million, and $3 million for the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, there was $7 million of unrecognized compensation cost related to unvested RSUs. This cost will be recognized over a weighted average period of less than 2 years. Restrictions on shares underlying RSUs outstanding lapse through 2028.

Deferred Stock Units (“DSUs”)

The following table summarizes the activities related to DSUs for the years ended December 31, 2024, 2023, and 2022.

Table 21.3 – Deferred Stock Units Activities

We generally grant DSUs annually, as part of our compensation process. In addition, DSUs are granted from time to time in connection with hiring and promotions and in lieu of the payment in cash of a portion of annual bonuses earned. DSUs generally vest over the course of afour-year vesting period, and are distributed after the end of the final vesting period or after an employee is terminated. At December 31, 2024 and 2023, the number of outstanding DSUs that were unvested was 3,011,071 and 2,536,692, respectively, and the weighted average grant-date fair value of these unvested DSUs was $7.71 and $9.05 at December 31, 2024 and 2023, respectively. Unvested DSUs at December 31, 2024 will vest through 2028.

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Expenses related to DSUs were $11 million, $11 million, and $13 million for the years ended December 31, 2024, 2023, and 2022, respectively. At December 31, 2024, there was $18 million of unrecognized compensation cost related to unvested DSUs. This cost will be recognized over a weighted average period of less than 2 years.

Performance Stock Units (“PSUs”)

During the years ended December 31, 2024, 2023, and 2022, the Company granted PSUs to certain executive officers that had been approved by the Compensation Committee as part of the annual compensation process. PSUs generally have performance-based vesting over the course of athree-year vesting/performance period and, subject to meeting certain performance criteria, will vest and be distributed after the end of the vesting period.

The grant date fair value of the PSUs was determined through a Monte-Carlo simulation using the following assumptions: (i) the common stock closing price at the grant date for Redwood and each member of the comparator group, (ii) the average closing price of the common stock price for the 60 trading days at the beginning of each calendar year for Redwood and each member of the comparator group, (iii) the range of performance-based vesting based on absolute total shareholder return (“TSR”) over three years from the grant date, (iv) an implied volatility assumption based on historical volatility, (v) a risk-free rate for the period interpolated from the U.S. Treasury yield curve on grant date and (vi) a dividend yield equivalent to reinvesting the dividends over the three-year performance period.

With respect to the vesting of the 2024, 2023, and 2022 PSU awards:

•First, vesting would range from 0% -250% of two-thirds of the Target PSUs granted based on the level of book value total shareholder return ("bvTSR") attained over thethree-year vesting period, with 100% of this two-thirds of the Target PSUs vesting ifthree-year bvTSR is 25%.

•Second, vesting would range from 0% -250% of one-third of the Target PSUs granted based on Redwood’s relative total shareholder return (“rTSR”) against a comparator group of companies measured over thethree-year vesting period, with 100% of this one-third of the Target PSUs vesting ifthree-year rTSR corresponds to 55th percentile rTSR.

•Third, if the aggregate vesting level after steps one and two is greater than 100% of the Target PSUs, but the Company's absolute total shareholder return ("TSR") is negative over thethree-year performance period, vesting would be capped at 100% of Target PSUs.

The following table summarizes the activities related to PSUs for the years ended December 31, 2024, 2023, and 2022.

Table 21.4 – Performance Stock Unit Activities

Expenses related to PSUs were $6 million, $4 million, and $4 million for the years ended December 31, 2024, 2023, and 2022, respectively. As of December 31, 2024, there was $16 million of unrecognized compensation cost related to unvested PSUs. During 2024, for PSUs granted in 2022 and 2021, we adjusted the cumulative expected amortization expense down by $2 million to reflect our revised vesting estimates.

The end of the vesting period for 518,173 target PSU awards that were granted in 2021 was January 1, 2025, and based upon the performance-based vesting criteria of these awards, approximately 180,000 shares of our common stock underlying these PSUs

F- 73 qualified for vesting, subject to approval by our Board of Directors during the first quarter of 2025. For 473,845 target PSU awards that were granted in December 2020, the performance vesting period ended on January 1, 2024. Based upon the performance-based vesting criteria of these awards,564,975 shares of our common stock underlying these PSU vested and were distributed during the second quarter of 2024.

Executive Deferred Compensation Plan

The following table summarizes the outstanding liability and activities related to the EDCP for the years ended December 31, 2024, 2023, and 2022.

Table 21.5 – EDCP Payable and Activities

In 2023, our Board of Directors approved an amendment to the EDCP to increase by 100,000 shares the shares available to allow non-employee directors to defer certain cash payments and dividends into DSUs. At December 31, 2024, there were 82,395 shares available for grant under this plan.

Note 22. General and Administrative Expenses

Components of our general and administrative expenses for the years ended December 31, 2024, 2023 and 2022 are presented in the following table.

Table 22.1 – Components of General and Administrative Expenses

(1)Includes $2 million, $2 million and $7 million of severance and transition-related expenses for the years ended December 31, 2024, 2023 and 2022, respectively.

(2)For the years ended December 31, 2024, 2023, and 2022, long-term incentive award expense includes $19 million, $18 million and $20 million, respectively, of expense for awards settleable in shares of our common stock and $6 million, $6 million and $3 million, respectively, of expense for awards settleable in cash. For the year ended December 31, 2024, includes equity amortization expense of $1 million related to employee terminations.

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Note 23. Taxes

Components of our net deferred tax assets at December 31, 2024 and 2023 are presented in the following table.

Table 23.1 – Deferred Tax Assets and (Liabilities)

The deferred tax assets and liabilities reported above, with the exception of the state net operating loss ("NOL") and capital loss carryforwards, relate solely to our TRS. For state purposes, the REIT files a unitary combined return with its TRS. Because the REIT may have state taxable income apportioned to it from the activity of its TRS, we report the entire combined unitary state NOL and capital loss carryforwards as deferred tax assets, including the carryforwards allocated to the REIT.

Realization of our deferred tax assets ("DTAs") at December 31, 2024, is dependent on many factors, including generating sufficient taxable income prior to the expiration of NOL carryforwards (where applicable) and generating sufficient capital gains in future periods prior to the expiration of capital loss carryforwards. We determine the extent to which realization of the deferred assets is not assured and establish a valuation allowance accordingly. We closely analyzed our estimate of the realizability of our net deferred tax assets in whole and in part at December 31, 2024 and 2023. The Company evaluates its deferred tax assets each period to determine if a valuation allowance is required based on whether it is "more likely than not" that some portion of the deferred tax assets would not be realized. This evaluation requires significant judgment and changes to our assumptions could result in a material change in the valuation allowance. The ultimate realization of these deferred tax assets is dependent upon the generation of sufficient taxable income during future periods. The Company conducts its evaluation by considering, among other things, all available positive and negative evidence, historical operating results and cumulative earnings analysis, forecasts of future profitability, and the duration of statutory carryforward periods. Based on this analysis, we continue to believe it is more likely than not that we will realize our federal deferred tax assets in future periods as income is earned at our TRS; therefore, there continues to be no material valuation allowance recorded against our net federal DTAs. Consistent with prior periods, we continued to maintain a valuation allowance against the majority of our net state DTAs as we remained uncertain about our ability to generate sufficient income in future periods needed to utilize net state DTAs beyond the reversal of our state DTLs. The net increase in the total valuation allowance was $1 million in 2024.

Our estimate of net deferred tax assets could change in future periods to the extent that actual or revised estimates of future taxable income during the carryforward periods change from current expectations. We assessed our tax positions for all open tax years (i.e., Federal, 2021 to 2024, and State, 2020 to 2024) and, at December 31, 2024 and 2023, concluded that we had no uncertain tax positions that resulted in material unrecognized tax benefits.

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Note 23. Taxes (continued)

At December 31, 2024, our federal NOL carryforward at the REIT was $37 million, of which $29 million will expire in 2029 and $9 million will carry forward indefinitely. In order to utilize NOLs at the REIT, taxable income must exceed dividend distributions. At December 31, 2024, our taxable REIT subsidiaries had $65 million of federal NOLs which will carry forward indefinitely. Redwood and its taxable REIT subsidiaries accumulated estimated state NOLs of $1.1 billion at December 31, 2024. These NOLs expire beginning in 2031. If certain substantial changes in the Company’s ownership occur, there could be an annual limitation on the amount of the carryforwards that can be utilized.

The following table summarizes the provision for income taxes for the years ended December 31, 2024, 2023, and 2022.

Table 23.2 – Provision for Income Taxes

The following is a reconciliation of the statutory federal and state tax rates to our effective tax rate at December 31, 2024, 2023, and 2022.

Table 23.3 – Reconciliation of Statutory Tax Rate to Effective Tax Rate

The December 31, 2023 effective tax rate is negative and appears outsized due to a relatively small consolidated GAAP loss and a provision for income taxes recorded against TRS GAAP income well in excess of the consolidated loss.

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.

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Note 24. Subsequent Events

In January 2025, Redwood issued $90 million of 9.125% Senior Notes due in 2030. The Senior Notes are senior unsecured obligations of Redwood and bear interest at a rate equal to 9.125% per year, payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year, beginning on June 1, 2025. The Senior Notes mature on March 1, 2030. We may redeem the Senior Notes, in whole or in part, at any time on or after March 1, 2027 at a redemption price equal to 100% of the principal amount redeemed, plus accrued and unpaid interest.

In response to the Los Angeles wildfires that occurred in January 2025, we continue to assess the impact to our business and we are currently monitoring the affected areas. Based on our assessments to date, we have not identified circumstances that we believe would have a material adverse impact on our business.

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