REDWOOD TRUST INC

Business Update

Our third quarter results reflect continued execution of Redwood’s strategic transition toward a more scalable and simplified operating model designed to capitalize on the transformative opportunities emerging across housing finance. In particular, we delivered on the objectives we outlined during our second quarter 2025 earnings call, profitably growing our mortgage banking business, accelerating the wind-down of our Legacy Investment portfolio and repurchasing our common shares under our increased repurchase authorization announced in July.

During the quarter, we made substantial progress in repositioning our balance sheet by redeploying capital from Legacy assets into higher-return core operating platforms, while continuing to repurchase common shares under our expanded authorization. Through late October, we have reduced our Legacy investment exposure to approximately 25% of total capital, tracking towards our year-end target of 20%, through nearly $1 billion of asset dispositions, including outright sales, structured financings, and other transactions. These asset dispositions included the transfer of $484 million in fair value of Legacy unsecuritized bridge loans and REO assets, the sale of $262 million in fair value of our HEI and $254 million in fair value of re-performing loan securities that we had retained from our consolidated Freddie Mac SLST securitization entities. These actions, together with the execution of new long-term, non-recourse financings and portfolio sales at accretive levels, have improved our earnings profile, reduced leverage, and enhanced balance-sheet flexibility to support mortgage banking growth.

Redwood’s operating platforms delivered record production during the third quarter, reflecting continued market share gains despite a subdued broader housing environment. Across the enterprise, we locked or originated nearly $6.8 billion of loans, the highest quarterly volume in our Company’s history. Within our Sequoia platform, lock volume reached a record $5.1 billion, driven by strong contributions from both bank and IMB counterparties and ongoing distribution momentum through our Sequoia securitization platform. Aspire also achieved exceptional growth, locking approximately $1.2 billion of prime quality, expanded-credit loans during the quarter. Leveraging our established Sequoia seller network, Aspire has rapidly scaled since its launch in January 2025 to become a leading non-QM aggregator, further broadening Redwood’s reach across the residential mortgage market. CoreVest funded $521 million in business purpose loans, supported by robust demand for residential investor products and the continued focus on smaller balance products. These results underscore the benefits of our diversified platform and our ability to generate attractive returns across a wide spectrum of housing finance opportunities. On the heels of this elevated activity, Redwood's mortgage banking segments generated its highest revenue since 2021.

We also strengthened our funding profile and extended the duration of our liabilities. Early in the fourth quarter, we retired the remaining $124 million of our maturing 2025 convertible debt and upsized our secured financing facility with an institutional investment manager from $250 million to $400 million, extending its maturity to 2028 and enhancing flexibility to support additional growth in our Mortgage Banking platforms. Concurrently, we extended the commitment period of our joint venture with this institutional investment manager, reinforcing the success of its capital-light strategy. While overall recourse leverage increased on the quarter, most of the increase was driven by record mortgage banking activity in the quarter while corporate leverage declined. Approximately 60% of the Company’s recourse debt now supports our mortgage banking activities, where loans are typically financed for short durations until they are sold or securitized.

Looking ahead, Redwood remains well positioned to benefit from multiple emerging tailwinds across the housing finance ecosystem. The Federal Reserve’s signal that it will end the runoff of its balance sheet suggests a shift toward a more accommodative monetary stance, which could drive lower front-end interest rates, steepen the yield curve, and support tighter mortgage spreads—all of which would enhance the Company’s funding economics and capital markets execution.

At the same time, potential housing-related policy initiatives, including federal efforts to increase housing supply and improve affordability, could further stimulate purchase activity and construction-related lending. Broader banking sector consolidation and regulatory recalibration under the Basel III endgame capital framework are also expected to create additional partnership opportunities for Redwood, as banks increasingly seek capital-efficient outlets for mortgage production and balance-sheet optimization.

Finally, renewed momentum in private-label securitization—with issuance volumes already exceeding full-year 2024 levels—has drawn renewed regulatory attention to improving non-agency RMBS market efficiency. Redwood has been actively engaged in this dialogue, advocating for enhanced disclosure standards that could attract greater institutional participation and strengthen market depth for the assets we originate.

Entering the fourth quarter, Redwood’s operating momentum remains strong. With strong production levels, a simplified balance sheet, expanded funding capacity, and deep institutional partnerships, we are well positioned to capitalize on improving market conditions and drive long-term growth.