REDWOOD TRUST INC

We report on our business using four segments: Sequoia Mortgage Banking, CoreVest Mortgage Banking, Redwood Investments and Legacy Investments. For additional information on our segments, refer to Note 4 of our Notes to Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

The following table presents the segment contribution from our four segments reconciled to our consolidated net income for the three and nine months ended September 30, 2025, the immediate preceding quarter June 30, 2025, and year-to-date period September 30, 2024.

Table 4 – Segment Results Summary

The sections that follow provide further detail on our business segments and their results of operations for the three and nine months ended September 30, 2025, the immediate preceding quarter ended June 30, 2025, and year-to-date period ended September 30, 2024.

Corporate/Other

Net expenses from Corporate/Other remained consistent quarter over quarter, with no material change between the three months ended September 30, 2025 and June 30, 2025. For the nine months ended September 30, 2025, compared to the same period in 2024, net expenses increased by $10 million. The increase in the nine month periods primarily reflect higher compensation and related costs associated with increased headcount supporting growth of new platforms such as Aspire and our expanded small balance loan focus within CoreVest, higher portfolio management expenses related to legacy loan resolutions, and higher corporate interest expense driven by higher corporate debt balances and interest rates on existing corporate debt during 2025.

Sequoia Mortgage Banking Segment

This segment consists of a mortgage loan conduit that acquires residential consumer loans from third-party originators for subsequent sale to whole loan buyers, securitization through our SEMT® (Sequoia) private-label securitization program, or transfer into our Redwood Investments portfolio. Subordinate securities that we retain from our Sequoia securitizations (many of which we consolidate for GAAP purposes) are transferred to and held in our Redwood Investments segment. We typically acquire prime jumbo mortgages and the related mortgage servicing rights on a flow or bulk basis from our extensive network of loan sellers. We utilize a combination of capital and our residential consumer loan warehouse facilities to finance our inventory of residential consumer loans held-for-sale. This segment also includes various derivative financial instruments that we utilize to manage certain risks associated with our inventory of residential consumer loans held-for-sale within this segment.

This segment’s main source of income is Mortgage banking income, which is comprised of net interest income from its inventory of loans held-for-sale, securities utilized for interest rate hedging purposes, as well as income from mortgage banking activities, which includes changes in fair value of loans we acquire and subsequently sell, securitize, or transfer into our Redwood investments portfolio, loan purchase commitments, interest rate lock commitments and the hedges used to manage risks associated with these activities. See Note 5 of our Notes to Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further detail on the composition of mortgage banking activities, net. Direct operating expenses and tax expenses associated with these activities are also included in this segment.

In the first quarter of 2025, we launched an additional mortgage loan conduit under our Aspire brand that acquires mortgage loans under expanded underwriting criteria, which we also refer to as "non-QM". These loan programs, primarily bank statement and DSCR loans, are designed for prime quality borrowers seeking alternative underwriting solutions, a segment that continues to grow within the U.S housing market. While we may report this activity as a separate standalone segment in the future, we are including its results within our Sequoia Mortgage Banking segment until this additional conduit activity reaches sufficient scale.

The following table presents key earnings and operating metrics for our Sequoia Mortgage Banking segment during the three and nine months ended September 30, 2025, the immediate preceding quarter June 30, 2025, and year-to-date period through September 30, 2024.

Table 5 – Sequoia Mortgage Banking Earnings Summary and Operating Metrics

Operating expenses presented in the table above include general and administrative expenses and loan acquisition costs for this segment.

Activity at this segment that is performed within our taxable REIT subsidiary is subject to federal and state income taxes. The provision for income taxes for the periods presented above resulted from GAAP income from these operations at our TRS during that period.

The following table provides the activity of residential consumer loans held in inventory for sale at our Sequoia Mortgage Banking business during the three and nine months ended September 30, 2025.

Table 6 – Loan Inventory for Sequoia Mortgage Banking Operations

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

The $12 million increase in segment contribution in the three months ended September 30, 2025, as compared to the three months ended June 30, 2025 was primarily due to higher lock volumes and distribution activity. Operating expenses remained consistent quarter-over-quarter, demonstrating continued cost discipline and scalability of the Sequoia platform as production reached record levels.

Sequoia locked $6.3 billion of loans during the third quarter, up 75% from $3.6 billion in the prior quarter. Of this amount $5.1 billion were prime jumbo loans, representing a 54% increase from $3.3 billion in the second quarter. Volume was elevated across both bank and independent mortgage bank (“IMB”) sellers, each of which recorded more than a 50% increase in lock volume contributions quarter over quarter. The platform continues to see opportunities across products, including the purchase of bulk pools of seasoned loan portfolios. Third quarter lock volume of $1.3 billion, or 25%, was considered seasoned. Over the last twelve months,

Sequoia has locked $2.4 billion of seasoned bank collateral capturing opportunities from institutions repositioning balance sheets as well as the increase in industry merger and acquisition activity. Approximately 10% of third quarter lock volume was considered Adjustable Rate Mortgages ("ARM") or Closed-End Seconds ("CES"). These market dynamics and product breadth continue to broaden Sequoia's sourcing abilities, contributing to the record lock volumes achieved in the third quarter.

Approximately $1.2 billion of locks were Aspire non-QM loans, a 277% increase relative to $330 million in the second quarter. The increase in third quarter lock volume was driven by ongoing growth of the Aspire platform, including a 46% increase in loan sellers during the quarter. Indicative of the ongoing scale of the platform, September lock volume of $550 million represented a record month for Aspire. Third quarter lock volume had a weighted average credit score of 749 and weighted average LTV of 71%.

Gain on sale margins for the segment averaged 93 basis points, towards the high end of the company’s long-term target range of 75 to 100 basis points, compared to 131 basis points in the prior quarter. The quarter-over-quarter decrease was primarily driven by a higher proportion of bulk executions and modest spread compression in August, partially offset by favorable hedge performance. Sequoia’s execution efficiency and stable investor participation supported consistent operating results during the quarter. Cost per loan (calculated as operating expenses divided by loan purchase commitments) improved to 18 basis points, from 33 basis points in the prior-year period, and 26 basis points in the prior quarter. The platform continues to utilize a combination of interest-rate futures, TBAs, and other hedging instruments to mitigate pipeline volatility and protect execution margins. Over time, we expect cost per loan to normalize within a range of approximately 25 to 35 basis points as market activity and production volumes stabilize.

Distribution activity remained robust, with approximately $2.7 billion of loans sold during the quarter, including $1.9 billion through Sequoia securitizations, $716 million through Sequoia whole loan sales and $146 million through Aspire whole loan sales. Sequoia also completed four jumbo securitizations during the period, reflecting elevated capital markets activity compared to recent quarters. Investor participation remained steady, allowing the platform to execute transactions efficiently and continue to recycle capital through its mortgage banking operations.

Capital allocated to this segment was approximately $550 million at September 30, 2025, compared to $475 million at June 30, 2025, reflecting higher working capital requirements associated with increased loan inventory and securitization activity. The Sequoia platform remains focused on capital-efficient growth through active loan sales and securitizations, supporting our ability to turn capital over quickly. Loan inventory is financed through a combination of corporate capital and consumer loan warehouse facilities.

Sequoia segment contribution increased by $43 million during the nine months ended September 30, 2025, compared to the same period in 2024. The increase was driven by factors consistent with those discussed in the quarterly comparison above, including higher mortgage banking income from increased loan lock and purchase volumes, strong distribution activity, tightening credit spreads, and sustained operating efficiency.

Total loan locks for the nine months ended September 30, 2025 were $13.9 billion, compared to $6.7 billion in the same period of 2024, a substantial increase of 109%. Growth was broadly based across both flow and bulk channels, supported by deeper engagement with bank sellers as well as increased activity from IMBs. Aspire, which is included within this segment, generated $1.7 billion of lock volume through September 30, 2025, reflecting the platform's January 2025 launch and strong growth driven by an expanding seller base and increasing investor demand for non-QM products.

Key performance trends such as gain-on-sale margins, cost per loan, and operating efficiency followed a similar trajectory in the year-to-date comparison as observed in the quarter-over-quarter period, with both timeframes reflecting normalized margins, stable efficiency metrics, and scaled distribution execution.

Gain-on-sale margins for the nine months ended September 30, 2025 were above the company’s long-term target range of 75 to 100 basis points, compared to elevated levels in 2024 driven by the rally in interest rates, hedge outperformance and spread tightening on securitization execution.

Distribution activity for the nine months ended September 30, 2025 totaled approximately $7.7 billion of loans sold through a combination of securitizations and whole-loan sales, compared to $4.4 billion in 2024, reflecting strong capital-markets execution and efficient balance-sheet turnover.

Operating expenses increased compared to the prior-year period, consistent with higher loan volumes and performance-based compensation.

Capital allocated to the Sequoia Mortgage Banking segment increased to $550 million at September 30, 2025, compared to $300 million at September 30, 2024, supporting elevated production and distribution levels.

CoreVest Mortgage Banking Segment

This segment consists of a platform that originates residential investor loans for subsequent securitization, sale, or transfer into our Redwood Investments portfolio or into joint ventures. Residential investor loans are loans to investors in single-family rental and multifamily properties, which we classify as either "term" loans (which include loans with maturities that generally range from three to thirty years) or "bridge" loans (which include loans with maturities that generally range between six and 36 months). Term loans are mortgage loans secured by stabilized residential real estate (primarily 1-4 unit detached or multifamily) that the borrower owns as an investment property and rents to residential tenants. Residential investor bridge loans are mortgage loans which are generally secured by unoccupied (or in the case of certain multifamily properties, partially occupied) single-family or multifamily real estate that the borrower owns as an investment and that is being renovated, rehabilitated or constructed. Our bridge loans are first-lien, interest-only loans. Our inventory of loans is managed with a combination of our capital and loan warehouse facilities. All of these facilities are non-marginable (i.e., not subject to margin calls based solely on the lender's determination, in its discretion, of the market value of the underlying collateral that is non-delinquent). This segment also includes various derivative financial instruments that we utilize to manage certain risks associated with our inventory of residential investor loans held-for-sale within this segment.

We typically distribute most of our term loans through our CAFL® private-label securitization program, through whole loan sales or transfers into our Redwood Investments portfolio or into one of our joint ventures.

Since mid-2023, we have established joint ventures with two separate institutional investment managers, one to invest in residential investor bridge loans originated by CoreVest and another to invest in residential investor bridge and term loans originated by CoreVest. We administer the joint ventures for ongoing fees and are entitled to earn additional performance fees upon realization of specified return hurdles.

This segment also includes various derivative financial instruments that we utilize to manage certain risks associated with our inventory of loans held-for-sale. This segment’s main sources of mortgage banking income are net interest income from its inventory of loans held-for-sale, securities utilized for interest hedging purposes, as well as mortgage banking activities, net which includes origination and other fees on loans, mark-to-market adjustments on loans from the time loans are originated or purchased to when they are sold, securitized or transferred into our Redwood Investments portfolio, and gains/losses from associated hedges. See Note 5 of our Notes to Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further detail on the composition of mortgage banking activities. Fee income associated with our administration of joint ventures and other loan-related administrative functions is also included in this segment. Direct operating expenses and tax expenses associated with these activities are also included in this segment.

The following table presents an earnings summary for our CoreVest Mortgage Banking segment for the three and nine months ended September 30, 2025, the immediate preceding quarter June 30, 2025, and year-to-date period September 30, 2024.

Table 7 – CoreVest Mortgage Banking Earnings Summary

Operating expenses presented in the table above includes general and administrative expenses, loan acquisition costs and other expenses (including amortization of purchased intangibles) for this segment.

Activity of this segment that is performed within/at our TRS is subject to federal and state income taxes. The benefit from income taxes was primarily due to GAAP losses generated by this segment’s operations at our TRS in those periods presented above.

The following table provides unsecuritized residential investor loan origination activity during the three and nine months ended September 30, 2025.

Table 8 – Residential Investor Loans - Funding Activity

(1)We originate Residential investor bridge loans at our TRS and transfer many of them to our REIT. Origination fees and any fair value changeson these loans prior to transfer or sale are recognized within Mortgage banking activities, net on our consolidated statements of income. Loans transferred to our REIT are classified as held-for-investment, with fair value changes subsequent to their transfer generally recorded through Investment fair value changes, net on our consolidated statements of income.

(2)Funding and sales for Residential investor bridge loans for the three and nine months ended September 30, 2025, includes $34 million and $94 million, respectively, of construction draws, of which $6 million and $38 million, respectively, were related to construction draws on loans sold to our joint ventures.

(3)For Residential investor term loans, amounts primarily represent loans transferred into consolidated securitizations reflected within our Redwood Investments Segment. Residential investor bridge loan amounts represent the transfer of loans originated or acquired by our CoreVest Mortgage Banking segment at our TRS and transferred to our Redwood Investments segment at our REIT.

The decrease in segment contribution in the three months ended September 30, 2025, as compared to the three months ended June 30, 2025 was due to normalized loan sale margins, partially offset by higher funding volumes. Operating expenses declined slightly quarter-over-quarter, demonstrating continued discipline in expense management as production scaled.

CoreVest funded $521 million of loans during the quarter, up 2% from $509 million in the prior quarter and 14% from the same period in 2024 — marking the highest quarterly funding volume since the third quarter of 2022. Average loan size declined 32% relative to this period, reflecting an intentional focus on small balance and cash flow based investor products.

Loan production remained well diversified, with 37% term, 32% small-balance residential transitional ("RTL"), 24% bridge and 7% DSCR loans. The composition reflects CoreVest’s ongoing expansion across multiple investor-focused lending strategies, positioning the platform to meet a broad range of borrower needs.

Distribution activity remained strong, with $425 million of loans sold through a combination of whole loan sales, securitizations, and sales to one of our joint ventures. Notably, $207 million of loans were transferred to one of our joint ventures, split evenly between bridge and term loans, and $179 million of term and bridge loans sold through whole loan sales. Year to date, we have distributed over $1.4 billion of loans across channels, demonstrating the ongoing strength of our distributions and demand for the assets we create, while also advancing the Company’s capital-light strategy and expanded recurring fee income opportunities.

Net cost to originate, calculated as operating expenses less upfront origination fees divided by total origination volume, improved to 0.60% in the third quarter, compared to 0.94% in the second quarter and 1.22% in the first quarter of 2025. The third quarter results also included a one-time recovery of previously recognized costs, which is not expected to recur in future periods. The stability in net cost to originate reflects CoreVest’s operating leverage and disciplined approach to expense management, even as volumes continue to scale.

CoreVest continues to expand its footprint and capture market share within the small-balance investor lending market. Fundings for DSCR and RTL loans are up 141% and 23%, respectively, compared to the same quarter in 2024. During the quarter, we also saw increased demand from borrowers for build-for-rent (BFR) strategies and we are pursuing strategic partnerships with homebuilders to drive opportunities across our term loan and DSCR products. We are also benefiting from a broader industry shift, as banks retreat from certain investor loan segments and homebuilders increasingly pursue forward sales to institutional buyers. CoreVest continues to operate in a large and expanding market, particularly for RTL and DSCR products. Management believes CoreVest remains well-positioned to capture increased share through platform depth, distribution relationships, and consistent borrower engagement.

Capital allocated to this segment was $147 million at September 30, 2025, up from $93 million at June 30, 2025. The platform remains focused on capital-efficient growth strategies, including ongoing engagement with JV partners and non-recourse financing structures to support its scaling loan inventory.

CoreVest segment contribution increased $12 million during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The increase is attributable to higher mortgage banking income, driven by an increase in total loan funding volumes and robust distribution via whole loan sales and joint ventures. Funded volume for the nine months ended September 30, 2025 was $1.5 billion compared to $1.2 billion for the nine months ended September 30, 2024, representing a 22% increase. Nearly all strategies saw growth over the period, with funded volumes increasingly concentrated in products of strategic focus such as RTL and DSCR loans.

Distribution activity for the nine months ended September 30, 2025 was also elevated compared to the nine months ended September 30, 2024. For the nine months ended September 30, 2025, CoreVest distribution increased by 51% to $1.4 billion of loans compared to $948 million of loans for the nine months ended September 30, 2024. Demand for our products from investors remains elevated and these sales were executed through a combination of whole-loan sales, securitizations, and joint-venture contributions as we focus on capital-efficient growth.

Redwood Investments Segment

This segment consists of retained operating investments sourced through our Sequoia securitizations and CoreVest term and bridge loan securitizations, some of which we consolidate for GAAP purposes, and other third-party securities. We directly finance our holdings of real estate securities with a combination of recourse, non-marginable term debt financing, non-recourse, non-marginable re-securitization debt, and recourse, marginable securities repurchase financing.

In the second quarter of 2025, as a part of the Company's accelerated shift towards a scalable and simplified operating model and wind-down of the legacy unsecuritized bridge and term loan portfolios, third-party securities portfolio, and other non-core legacy assets historically held in this segment were formally reclassified to the newly established Legacy Investments segment. This reclassification did not impact our consolidated financial results but served to streamline reporting and better align Redwood’s disclosure with its strategic focus. All relevant prior period amounts and disclosures have been conformed to reflect the current segment structure.

We primarily target investments with sensitivity to housing credit risk, sourced through our operating platforms where we control the underwriting and collateral review. Going forward, the portfolio will focus on retained interests from the Company’s own securitizations and collateralized assets, rather than third-party securities, consistent with Redwood’s strategic shift toward internally originated investments.

This segment’s main sources of income are net interest income and other income from investments, changes in fair value of investments and associated hedges, and realized gains and losses upon the sale of securities. Direct operating expenses and tax provisions associated with these activities are also included in this segment.

The following table presents an earnings summary for our Redwood Investments segment for the three and nine months ended September 30, 2025, the immediate preceding quarter ended June 30, 2025, and the year-to-date period ended September 30, 2024.

Table 9 – Redwood Investments Earnings Summary

Investment fair value changes, net is primarily comprised of the change in fair value (both realized and unrealized) of our portfolio investments accounted for under the fair value option and interest rate hedges associated with these investments. See Table 3 inthe Consolidated Results of Operations in Part I, Item 2 of this Quarterly Report on Form 10-Q for further detail on the composition of investment fair value changes (the difference in amounts in the table above and in Table 3 relates to fair value changes for investments held at corporate/other).

We hold certain of our investments, primarily our MSRs, at our TRS. Activity at this segment that is performed within our TRS is subject to federal and state income taxes. The benefit from income taxes was primarily due to GAAP losses generated by this segment’s operations at our TRS and our provision for income taxes at this segment is primarily driven by the amount of income earned from portfolio assets at our TRS.

The $2 million decrease in segment contribution during the three months ended September 30, 2025, as compared to the three months ended June 30, 2025, is due to a $5 million decline in Net interest income, offset by a $7 million improvement in Investment fair value losses, net. The modest net decline reflected paydowns of third-party securities, partially offset by gains on retained investments as rates declined and spreads tightened.

Fundamental performance of assets within this segment saw consistent trends in underlying credit and continue to be driven by relatively healthy employment data, embedded equity protection associated with loan seasoning and home price appreciation, and borrowers motivated to stay current on their low-coupon mortgages. Notably, 90 day+ delinquencies on our CAFL Bridge Securities improved to 2.9% in the third quarter of 2025, compared to 3.6% in the second quarter of 2025. Our 90 day + delinquency balances for Sequoia Securities and CAFL Term Securities were stable in the third quarter of 2025 at 0.3% and 7.7% of our total unpaid principal balances, respectively, compared to 0.3% and 7.1% in the second quarter of 2025.

As we continue to expand our focus on our operating platforms, we intend to allocate capital accordingly. In line with this strategy, during the third quarter we deployed approximately $30 million of capital into assets sourced from our operating businesses and completed our fourth non-recourse financing transaction of retained investments, reducing total security repo balances to $28 million.

The $54 million decrease in segment contribution in the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024 is primarily due to the decline in Investment fair value changes, net of $39 million driven by rate declines and spread tightening in the nine month period.

Redwood Investments Detail

The following table presents a balance sheet summary for our Redwood Investments segment as of September 30, 2025 and June 30, 2025.

Table 10 – Redwood Investments Balance Sheet Summary

(1) Represents our retained economic investment in securities issued by consolidated Sequoia securitization VIEs. For GAAP purposes, we consolidated $13.08 billion of loans and $12.43 billion of ABS issued associated with these investments at September 30, 2025. We consolidated $11.59 billion of loans and $10.98 billion of ABS issued associated with these investments at June 30, 2025. At September 30, 2025 and June 30, 2025, excludes $93 million and $97 million, respectively, of retained Sequoia securities that were used as hedges for our Sequoia Mortgage Banking segment.

(2) Represents our retained economic investments in securities issued by consolidated CAFL Term securitization VIEs. For GAAP purposes, we consolidated $2.14 billion of loans and $1.82 billion of ABS issued associated with these investments at September 30, 2025. We consolidated $2.27 billion of loans and $1.95 billion of ABS issued associated with these investments at June 30, 2025.

(3) At September 30, 2025 and June 30, 2025 represents HEI originated and owned by Redwood.

(4) Other investments at both September 30, 2025 and June 30, 2025 includes net risk share investments of $17 million, representing $19 million of restricted cash and other assets, net of other liabilities of $2 million. Also includes mortgage servicing rights of $31 million and $32 million at September 30, 2025 and June 30, 2025, respectively.

(5) Represented our economic investment in securities issued by a consolidated Freddie Mac K-Series securitization entity which were paid off in full during the three months ending September 30, 2025. For GAAP purposes, we consolidated $423 million of loans and $387 million of ABS issued associated with these investments at June 30, 2025.

(6) Represents our economic investment in consolidated Servicing Investment variable interest entities. At September 30, 2025, for GAAP purposes, we consolidated $248 million of servicing investments and $151 million of non-recourse short-term securitization debt, as well as other assets and liabilities for these entities. At June 30, 2025, for GAAP purposes, we consolidated $263 million of servicing investments and $161 million of non-recourse securitization debt, as well as other assets and liabilities for these entities.

The size of our Redwood Investments portfolio on an economic basis remained relatively flat for the three months ended September 30, 2025. The retention of residential consumer securities from our four Sequoia securitizations during the three months ended September 30, 2025, was offset by sales of third-party securities and the payoff of our multifamily securities upon the call of the underlying securitization.

The following table summarizes the credit characteristics of Sequoia securities and CAFL term securities at September 30, 2025. This table includes both our securities held on balance sheet and our economic interest in securities we own in securitizations we consolidate in accordance with GAAP.

Table 11 – Credit Statistics (1)

(1)The methodology for calculating weighted average values for securities investments presented in the tables above, including delinquency rates, is based on notional balances of loans collateralizing each of our securities investments.

(2)Sequoia Securities presented in this table include subordinate and interest only or certificated servicing securities.

(3)Delinquency percentages at underlying securitizations are calculated using unpaid principal balance ("UPB"). Aggregate delinquency amounts by security type are weighted using the UPB of the loans collateralizing each of our securities investments.

(4)Includes loans over 90 days delinquent and all loans in foreclosure (regardless of delinquency status).

Legacy Investments Segment

In the second quarter of 2025, we established Legacy Investments as a new reportable segment. This new segment primarily consists of assets no longer aligned with our core strategic objectives, including legacy unsecuritized bridge and term loans, third-party securities portfolios and other non-core Legacy assets, that are in the active process of sale, runoff, or other disposition as part of accelerated strategic repositioning of our business model. These assets were previously included within the Redwood Investments segment. We finance our Legacy assets with a combination of recourse and non-recourse, non-marginable warehouse facilities, non-recourse, non-marginable re-securitization debt, and a portion of a secured, revolving financing facility. All relevant prior period amounts and disclosures have been conformed to reflect the current segment structure.

During the third quarter of 2025, we executed on our plan to accelerate the wind down the Legacy Investments portfolio ahead of schedule by accelerating the repositioning of the Legacy Investments portfolio through approximately $1 billion of dispositions and structured transactions. See further detail in the Investments Detail and Activity section of this segment discussion.

This segment’s main sources of income are net interest income and other income from investments, changes in fair value of investments and associated hedges, and realized gains and losses upon the sale or disposition of assets. Direct operating expenses and tax provisions associated with these activities are also included in this segment.

The following table presents an earnings summary for our Legacy Investments segment for the three and nine months ended September 30, 2025, the immediate preceding quarter ended June 30, 2025, and the year-to-date period ended September 30, 2024.

Table 12 – Legacy Investments Earnings Summary

Investment fair value changes, net is primarily comprised of the change in fair value (both realized and unrealized) of our loans and portfolio investments accounted for under the fair value option and related interest rate hedges. See Table 3 inthe Consolidated Results of Operations in Part I, Item 2 of this Quarterly Report on Form 10-Q for further detail on the composition of investment fair value changes (the difference in amounts in the table above and in Table 3 relates to fair value changes for investments held at corporate/other).

We hold certain of our investments at our TRS. Activity of this segment that is performed within our TRS is subject to federal and state income taxes. The benefit from income taxes was primarily due to GAAP losses generated by this segment’s operations at our TRS and our provision for income taxes at this segment is primarily driven by the amount of income earned from portfolio assets at our TRS.

Legacy Investments reported a $22 million segment loss during the three months ended September 30, 2025, driven by Net interest loss of $9 million from continued net interest margin pressure and Investment fair value losses, net of $7 million. During the third quarter of 2025, we transferred a portfolio of unsecuritized bridge loans and REO totaling $484 million in fair value to newly formed partnership structure (the “Legacy Trust”). In connection with this transfer, we recognized a negative $6 million investment fair value change, reflecting adjustments associated with completing the transaction.

Capital allocated to Legacy Investments declined by $63 million or 12% at September 30, 2025 from June 30, 2025, largely due to dispositions and paydowns on our Legacy unsecuritized bridge and term loan portfolios and HEI portfolio. Through October 2025, we further reduced our capital allocated to our Legacy investments through the sale of our SLST re-performing loan securities. Looking ahead, we intend to continue reducing our capital allocation to Legacy Investments, targeting a decrease to approximately 20% by year-end 2025 from 28% at the end of the third quarter. While subject to market conditions and execution timing, we are targeting reducing the percentage of our capital allocated to Legacy Investments down to a range of 0% to 5%. As we execute on this reallocation strategy, we believe there is an opportunity for consolidated returns to improve.

Legacy Investments reported a $128 million segment loss in the nine months ended September 30, 2025, driven by Investment fair value losses, net of $91 million. The second quarter of 2025 included significant fair value adjustments on Legacy unsecuritized bridge and term loans, reflecting both realized and anticipated resolutions as well as credit deterioration in certain vintages. In the third quarter of 2025, we recognized an additional negative $6 million investment fair value change, reflecting adjustments associated with completing the transfer of a portfolio of unsecuritized bridge loans and REO totaling $484 million in fair value to the Legacy Trust.

Investments Detail and Activity

The following table presents a balance sheet summary for our Legacy Investments segment as of September 30, 2025 and June 30, 2025.

Table 13 – Legacy Investments Balance Sheet Summary

(1)At September 30, 2025 and June 30, 2025, represents third-party originated HEI at Redwood, as well as our net investment HEI securitization entities.

(2)On September 30, 2025, we transferred a portfolio totaling $484 million in fair value of legacy unsecuritized bridge loans and REO assets to the Legacy Trust and retained a $182 million subordinate beneficial interest in the Legacy Trust. The beneficial interest represents our right to residual cash flows from the Legacy Trust after payment of senior financing and preferred interests and is recorded as an AFS security, measured at fair value and classified as a Level 3 asset. See further information in Note 9 of the Notes to Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Footnotes to table 13 continued

(3)Residential re-performing loan securities (SLST) reflects the fair value of the securities we retained from our consolidated Freddie Mac SLST securitization entities. We sold these securities in October 2025. See further information on our VIEs in Note 16 of the Notes to Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

During the third quarter of 2025, we continued to execute on our plan to accelerate the wind down of the Legacy Investments portfolio through $746 million of dispositions and structured transactions. These included the sale of $262 million in fair value of our HEI, and the transfer of $484 million in fair value of Legacy unsecuritized bridge loans and REO assets to the Legacy Trust. These transactions reduced associated recourse debt by more than $300 million and unlocked approximately $115 million of capital.

Additionally, in October 2025, we further reduced this segment's capital base by selling the securities that we had retained from our consolidated Freddie Mac SLST securitization entities totaling $254 million. In conjunction with this agreement, we deconsolidated our securitized re-performing loans and related ABS issued. In addition, we exercised our call of the Freddie Mac SLST re-securitization entity and paid off the underlying ABS issued.

Legacy Unsecuritized Bridge and Term Loan Portfolios

The following table provides the activity of the legacy unsecuritized bridge and term loans during the three and nine months ended September 30, 2025.

Table 14 – Legacy Unsecuritized Bridge and Term Loan Portfolios - Activity

For the three and nine months ended September 30, 2025, gross interest income recognized on Legacy bridge and term loans totaled $8 million and $36 million, respectively. These amounts include a write-off of deferred interest of $0.4 million in the three months ended September 30, 2025 and recognition of $4 million of deferred income during the nine months ended September 30, 2025.

At September 30, 2025, legacy unsecuritized bridge and term loans in this portfolio with an aggregate fair value of $192 million and an unpaid principal balance of $241 million, were greater than 90+ days delinquent. Included in the 90+ days delinquent balance are legacy bridge loans in foreclosure with an aggregate fair value of $17 million and an aggregate unpaid principal balance of $23 million. Additionally, the fair value of REO associated with legacy unsecuritized bridge loans decreased to $24 million at September 30, 2025, from $58 million at June 30, 2025, resulting from the sale of one REO property to the Legacy Trust for $29 million and a decrease in fair value totaling $5 million, partially offset by transfers to REO of $29 million and payoffs of $29 million. Legacy REO properties are actively being marketed and are expected to be resolved over the next few quarters.

During the third quarter of 2025, as part of our plans to accelerate the wind-down of the Legacy Investments portfolio, we transferred a portfolio totaling $484 million in fair value of legacy unsecuritized bridge loans and REO assets to the Legacy Trust. These transfers met the criteria to be accounted for as sales for financial reporting purposes, in accordance with GAAP. As part of the transaction, we retained a $182 million subordinate beneficial interest in the Legacy Trust, which is recorded as an AFS real estate security on our Consolidated balance sheet. See Note 9 for further discussion on the beneficial interest. See Notes 4, 8, 9 and 19 of the Notes to Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Loan Composition

The following table provides the composition of legacy unsecuritized bridge and term loans by product type as of September 30, 2025.

Table 15 – Legacy Loans - By Strategy Type at Legacy Investments

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

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

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

At September 30, 2025, the fair value of our Legacy bridge and term loans and associated REO represented 88.4% of the combined unpaid principal balance of these loans and the unpaid principal balance of the loans associated with the REO at time of foreclosure. As part of our plans to accelerate the wind-down of the Legacy Investments portfolio, we have revised our underwriting practices to discontinue the active origination of large multifamily loans. Consequently, we expect our exposure to multifamily loans and REO to decline over time as we proactively reduce long-term exposure to the Legacy bridge loan portfolio.