REDWOOD TRUST INC

Current report

Over the past year, our focus has been on advancing Redwood Trust’s strategic transition toward a more scalable, capital-efficient, and simplified operating model centered on our mortgage banking platforms. During 2025, we accelerated the repositioning of our balance sheet, reallocated capital away from legacy investment activities, and materially expanded the scale of our core operating businesses. These efforts resulted in record production volumes and improved capital efficiency, positioning us for a more durable and predictable earnings profile, which we saw begin to materialize in the fourth quarter of 2025.

Current report

The housing finance market in 2025 was characterized by continued affordability challenges, subdued overall transaction activity, and evolving dynamics across bank and non-bank mortgage lending. While mortgage rates remained elevated for much of the year, volatility in interest rates and capital markets persisted, alongside shifting regulatory and policy considerations affecting housing supply, bank balance sheet positions, and institutional participation in residential mortgage finance. Against this backdrop, retrenchment by banks from certain areas of mortgage lending continued to create opportunities for non-bank platforms capable of providing liquidity, distribution, and capital-efficient execution at scale.

Current report

In response to these market dynamics, we furthered our role as a leading provider of capital to the non-agency market, emphasizing growth across our Mortgage Banking platforms, which is comprised of Sequoia (inclusive of Aspire) and CoreVest, while actively reducing exposure to assets and strategies that no longer align with our long-term operating objectives. For the full year, our Mortgage Banking platforms generated a record level of production, comprised of $20.7 billion of Sequoia loan locks and $2.0 billion of CoreVest funded volume, more than double our 2024 production. During the second half of 2025, Sequoia loan lock and CoreVest loan funding volume was $14.1 billion, which on a standalone basis, would have represented our second-largest production year ever.

Current report

At December 31, 2025, 81% of our capital was allocated to our Mortgage Banking platforms and Redwood Investments, compared to approximately 62% at the end of 2024, reflecting our continued shift toward an originate-to-distribute business model. A central element of our strategy in 2025 was the accelerated wind-down of our Legacy Investments portfolio. These assets, which include legacy unsecuritized bridge loans, residential re-performing loan securities, and third-party originated investments, were largely accumulated during prior periods when market conditions and return opportunities differed materially from those prevailing today.

Current report

Throughout the year, we executed a series of asset dispositions, financings, and restructurings to reduce our exposure to Legacy Investments, improve balance sheet flexibility, and enhance our earnings profile. During 2025, we completed approximately $1.2 billion of legacy asset dispositions, including outright sales, structured financings, and partnership transactions. As a result, Legacy Investments declined from approximately 33% of total capital in mid-2025 to 19% by year-end, with continued progress expected as remaining assets are resolved.

Current report

Proceeds from these actions enabled the repayment of higher-cost secured debt, improved utilization of flexible funding sources, and redeployment of capital into higher-return operating activities. In parallel, we actively managed our corporate capital structure, including repayment of our convertible notes that matured in 2025, issuance of $190 million of senior unsecured debt, and repurchase of $53 million of common stock during the year, the latter of which contributed approximately $0.13 per share of book value accretion.

Current report

Our Sequoia platform, which includes Aspire, delivered record production in 2025, reflecting continued market share gains across both bank and independent mortgage bank (“IMB”) counterparties. Full-year Sequoia lock volume totaled approximately $20.7 billion, increasing substantially year over year, with record quarterly production achieved in both the third and fourth quarters. In the fourth quarter alone, Sequoia locked $6.8 billion of loans (inclusive of Aspire activity), representing a 193% increase compared to the fourth quarter of 2024. Overall 2025 volumes translated into 7.0% of jumbo market share, up from 4.3% in 2024 and compared to our 1-2% historical average.

Current report

Aspire, our expanded-credit and non-QM platform included within the Sequoia platform, completed its first full year of operations in 2025 and scaled rapidly throughout the year. Aspire locked $3.2 billion of loans in 2025, including record quarterly production of approximately $1.5 billion in the fourth quarter. Aspire’s seller network expanded to 123 originators, with 69% of volume sourced from originators that also transact with Sequoia, demonstrating the benefits of our integrated platform approach.

Current report

Bulk transactions represented a significant portion of Sequoia’s activity during the year, particularly with bank counterparties seeking capital-efficient alternatives to holding residential mortgage loans on balance sheet. Production was supported by continued strength in both flow and bulk executions, including the purchase of a large seasoned loan pools in each of the first and third quarters of 2025 and additional seasoned bank collateral acquired during 2025 as institutions repositioned balance sheets amid increased merger and acquisition activity. Product breadth also contributed to record lock volumes, including growth in Adjustable-Rate Mortgages (“ARMs”) and Closed-End Seconds (“CES”), reflecting borrower demand for alternative affordability structures in a higher-rate environment and broadening Sequoia’s sourcing capabilities. Refinancing volumes for our Sequoia prime jumbo products increased during the second half of 2025, representing approximately 35% of second-half lock volume, compared to approximately 26% in the first half of the year.

Current report

Distribution remained a core differentiator across the Sequoia platform, inclusive of Aspire. During the fourth quarter, Sequoia distributed approximately $3.0 billion of loans through securitizations and an additional $1.2 billion through whole loan sales, supporting rapid capital turnover and attractive returns. Loans were typically held on balance sheet for approximately 36 days prior to sale or securitization, limiting balance sheet risk and enhancing capital efficiency. As production volumes increased, cost per loan (calculated as operating expenses divided by loan purchase commitments) declined to 0.23% in 2025 from 0.29% in 2024, a 21% year-over-year improvement driven by operating leverage and disciplined cost management.

Current report

Distribution capabilities expanded alongside production within Aspire. During 2025, Aspire completed $914 million of loan sales to various institutional buyers, including its first whole loan sale to a bank in the fourth quarter, and prepared for the launch of its inaugural securitization platform in early 2026. These activities supported improved capital turnover and positioned Aspire for continued growth and enhanced returns as volumes scale.

Current report

CoreVest continued to expand its footprint in business purpose lending, delivering 13% year-over-year growth in funded volume during 2025. Production increasingly shifted toward smaller-balance products, including RTL and DSCR loans. In the fourth quarter, RTL represented 37% of funded volume, while DSCR production increased 43% from the prior quarter. Importantly, these two products represented 40% of CoreVest's full year 2025 volume, representing clear progress on our strategic focus for the platform.

Current report

Distribution activity supported improved liquidity and capital efficiency, while credit performance remained an area of focus. The second and fourth quarters of 2025 each represented record quarters for CoreVest distribution activity, reflecting continued momentum across securitizations, whole loan sales, and transfers to joint ventures. Since launching our joint venture strategy, cumulative loan transfers to these vehicles were $2.1 billion in early 2026, underscoring the scale and capital efficiency achieved through this distribution channel. We continued to apply targeted credit overlays, tightened leverage in vulnerable markets, and actively managed legacy exposures. As a result of these efforts, 90-day-plus delinquencies in the legacy unsecuritized bridge loans portfolio declined significantly during the year, and remaining exposure became increasingly concentrated in a smaller number of assets.

Current report

Net cost to originate, calculated as operating expenses less upfront origination fees divided by total origination volume, improved 22% year-over-year from 1.18% in 2024 to 0.92% in 2025. The improvement reflects higher production volumes, disciplined expense management and improved revenue margins achieved through joint venture and other distribution channels. These efficiency gains follow improvements realized in 2024 and demonstrate operating leverage as production volumes increase.

Current report

Capital efficiency was a defining feature of our operating model in 2025. Across our mortgage banking platforms, working capital usage averaged approximately 2.5% of total production volume, reflecting high levels of capital turnover driven by sales, securitizations, and joint venture activity.

Current report

As volumes scaled, revenue growth significantly outpaced operating expense growth. Combined mortgage banking fixed cost per loan declined by approximately 44% year over year, while revenue-to-expense efficiency improved by 35%. Total operating expenses declined to approximately 0.9% of production volume, compared to 1.6% in the prior year, reflecting disciplined cost management and operating leverage embedded in our model.

Current report

By the end of 2025, Redwood Trust operated with a simplified balance sheet, a greater concentration of capital in core operating activities, and an expanded network of institutional capital partners. Our operating platforms entered 2026 with strong production momentum, diversified funding and distribution channels, and infrastructure designed to support continued growth as housing market conditions evolve.

Current report

While housing affordability, interest rate trends, and policy developments remain key variables influencing market activity, we believe the structural changes implemented during 2025 have strengthened our ability to generate durable returns across a range of market environments. Our focus remains on scaling our operating platforms, efficiently deploying capital, and creating long-term value through disciplined execution and risk management.

Current report

Table 1 – Net (Loss) Income

Current report

Net loss for the year ended December 31, 2025 totaled $77 million, compared with net income of $47 million for the year ended December 31, 2024. The decline primarily reflects adverse fair value adjustments and reduced net interest income primarily associated with our Legacy bridge loan portfolio, lower HEI income, net and higher operating expenses tied to volume growth across the Mortgage Banking platforms. This decline was partially offset by stronger performance in our Mortgage Banking operations.

Current report

Net interest income decreased to $83 million from $103 million year over year. The decline was largely driven by an increase in the balance of Legacy unsecuritized bridge and term loan portfolios placed on non-accrual in 2025, which in certain cases resulted in reversals of previously accrued interest income. Lower net interest income in our Redwood Investments portfolio was primarily due to lower average balances of term loan securitizations and the higher average cost of debt on securitized bridge loans incurred in 2025. These decreases were partially offset by higher net interest income from our Mortgage Banking operations. Sequoia net interest income in particular increased by $39 million, driven by higher loan purchase volumes and lower base floating rates on financing facilities as SOFR declined in 2025, relative to the prior year. CoreVest net interest income also increased by $3 million, primarily driven by increased funding volumes and lower SOFR.

Current report

Mortgage banking activities, net increased to $167 million from $99 million in the prior-year period, reflecting stronger performance across volume, profitability and efficiency for our Mortgage Banking operations. Sequoia Mortgage banking activities, net increased by $58 million, as lock volumes rose to $20.7 billion from $9.0 billion in the prior year. This growth was supported by continued strength in both flow and bulk executions across our network of loan sellers, including the purchase of various seasoned loan pools during 2025, along with outperformance of interest rate hedges. Sequoia also benefited from substantial growth in our new Aspire platform in 2025, where lock volumes totaled $3.2 billion. CoreVest reported $51 million of Mortgage banking income during 2025, compared with $42 million in the prior year, driven by higher funding levels, improved execution economics across products, as well as elevated distribution across securitization, whole loan sales and sales to joint ventures.

Current report

Investment fair value changes increased to a $97 million net loss in 2025 from a $15 million net loss in the prior year. The decline was primarily driven by negative fair value adjustments on our legacy unsecuritized bridge loans, and to a lesser extent, legacy unsecuritized term loans, reflecting increased delinquencies and credit stress in certain 2021 and 2022 vintage loans. These loans were underwritten during a period of significantly lower interest rates, more favorable financing conditions and different market fundamentals. These negative fair value adjustments reflected both realized and anticipated near-term resolutions on these loans, REO assets and other non-core legacy assets associated with completing the resolution or transfer of these assets. This decline was partially offset by fair value gains, net of associated interest rate hedges, on our net investment in our consolidated SLST (re-performing loans) securitization entities which benefitted from lower rates and improved credit performance in 2025 compared to 2024. In the fourth quarter of 2025, we sold all of the securities that we had retained from our SLST securitization entities and deconsolidated our securitized re-performing loans and related ABS issued.

Current report

HEI income (loss), net recorded a $0.7 million net gain in 2025, compared with a $42 million net gain in the prior-year period. The change reflects fair value losses recognized on the sale of $262 million of third-party originated HEI in the second quarter of 2025, as well as lower housing price appreciation observed in 2025 compared to 2024.

Current report

Operating expenses increased to $222 million from $184 million year over year, primarily reflecting higher fixed and variable compensation tied to volume growth across the Mortgage Banking platforms, as well as higher portfolio-management costs linked to Legacy loan resolutions.

Current report

For additional detail on these results, see the “Segment Results” section that follows.

Current report

Expenses from Corporate/Other remained flat year-over-year, primarily attributable to offsetting changes in expense components. Higher compensation and related costs associated with increased headcount supporting Mortgage Banking platform growth were largely offset by lower corporate interest expense resulting from lower average corporate debt balances.

Current report

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 "Expanded". 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 finance 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.

Current report

Sequoia Mortgage Banking segment contribution increased to $126 million from $61 million for 2025, as compared to the prior year, driven by higher mortgage banking income from increased loan lock and purchase volumes, strong distribution activity, tightening credit spreads, and sustained operating efficiency. The Sequoia Mortgage Banking segment represents one of the Company’s primary capital-efficient operating platforms and a key driver of earnings growth. During 2025, the segment transitioned into a phase of scaled execution, reflecting sustained engagement with loan sellers, consistent access to capital markets, and continued operating leverage. Results for the year reflect both higher production volumes and disciplined execution across acquisition, hedging, and distribution activities.

Current report

Total loan locks for the year ended December 31, 2025 were $20.7 billion, compared to $9.0 billion in the prior year, representing a 130% increase. Growth was broad-based across both flow and bulk acquisition channels and was supported by deeper engagement with bank sellers as well as increased activity from independent mortgage bankers or IMBs. Our network now includes 210 originators across banks and IMBs and we estimate our full-year 2025 jumbo market share at 7%, up materially from prior years. Lock volume benefited from continued demand for prime jumbo products and increased availability of seasoned collateral as financial institutions evaluated balance sheet repositioning opportunities. In addition, we increased our lock volume in other products such as closed-end second liens ("CES") and adjustable rate-mortgages ("ARMs").

Current report

Aspire, which is included within the Sequoia Mortgage Banking segment, contributed $3.2 billion of lock volume during 2025 following its launch in the first quarter of the year. Aspire’s activity was supported with strong contributions from both flow and bulk channels, with close to 69% sourced through flow channels and approximately 70% from sellers in the Sequoia network. Although Aspire remains early in its development, performance to date highlights strengthening investor demand for "Expanded" products in a growing market segment, supporting overall segment results.

Current report

Distribution activity remained robust during 2025, with approximately $4.0 billion of loans sold through whole-loan sales and sixteen securitizations completed, backed by $8.5 billion of loans. Of the $4.0 billion of whole loan sales, nearly $1 billion related to Aspire-originated loans, with the remainder attributable to Sequoia prime jumbo production. The combination of whole loan sales and securitizations supported efficient balance sheet turnover and capital recycling throughout the year.

Current report

Gain on sale margins (calculated as net revenue divided by loan purchase commitments) for the segment averaged 116 basis points, exceeding the company’s long-term target range of 75 to 100 basis points, compared to 137 basis points in 2024. The year-over-year decrease was primarily driven by a higher proportion of bulk executions and modest spread compression, partially offset by favorable hedge performance and disciplined execution. Margins remained above the company's long-term target range of 75 to 100 basis points.

Current report

Operating expenses increased by $18 million year over year, reflecting higher loan acquisition costs, increased variable compensation associated with increased production levels and operating expenses related to the build out of Aspire. Cost per loan (calculated as operating expenses divided by loan purchase commitments) improved to 23 basis points in 2025 from 29 basis points in 2024, reflecting continued operating leverage as volumes scaled. The platform continues to utilize a combination of interest-rate futures, TBAs, and other hedging instruments to mitigate pipeline volatility and protect execution margins.

Current report

Capital allocated to the Sequoia Mortgage Banking segment increased to $650 million at December 31, 2025, compared to $350 million at December 31, 2024, reflecting higher working capital requirements associated with increased loan inventory and securitization activity, including approximately $200 million allocated to Aspire, which commenced operations in the first quarter of 2025. Despite higher average capital allocation during the year, the segment maintained loan holding periods of approximately 36 days. This was supported by consistent whole-loan sales and securitization execution, which enabled active capital recycling and limited balance sheet duration risk.

Current report

Residential investor term loans include both larger balance and smaller balance mortgage loans secured by stabilized residential real estate (primarily 1-4 units detached or multifamily) that the borrower owns as an investment property and rents to residential tenants. Our smaller balance term loans are referred to as DSCR loans, which are fixed or floating-rate loans underwritten primarily on the basis of the property's debt service coverage ratio, rather than the borrower's personal income, and designed for stabilized rental properties.

Current report

(3)Fundings include small-balance loans, consisting of DSCR loans reported within Residential investor term loans and RTL loans reported within Residential investor bridge loans.

Current report

(4)For the years ended December 31, 2025 and 2024, acquisitions include loans acquired from a residential construction loan originator, with whom we have a strategic equity method investment, and loan repurchases. See Note 12 in Part II, Item 8 of this Annual Report on Form 10-K for further information.

Current report

CoreVest segment contribution increased to $20 million from $2 million for 2025, as compared to the prior year, primarily driven by higher mortgage banking income resulting from increased funding volumes, improved distribution execution, a shift in product mix toward smaller-balance investor loans, and operating efficiencies across the platform.

Current report

CoreVest funded $2.0 billion of loans during 2025, representing a 13% increase compared to $1.7 billion in 2024, driven by continued borrower demand across bridge and term lending products and growth in small balance loans, RTL and DSCR loans, areas of strategic focus for the platform. Approximately 40% of 2025 funded volume consisted of small-balance loans: RTL production increased by 36% to $641 million from $471 million in 2024, while DSCR volumes grew 134% to $150 million from $64 million. The shift in mix reflects strong demand for transitional and cash-flow-based lending products and aligns production with institutional investor demand for these assets.

Previous report

• Recent Developments

Previous report

Over the past twelve months, our focus has been on strategically and efficiently driving the growth and scale of our operating platforms and investment strategy. The market generally spent much of 2024 focused on the onset of the Federal Reserve's short-term interest rate easing cycle. Despite the market anticipating lower short- and long-term interest rates, the initial stages of the Federal Reserve's short-term interest rate easing cycle coincided with a nearly 100 basis point rise in the 10-year Treasury yield from the Federal Reserve's first short-term interest rate cut in September 2024 through the end of 2024. Interest rate volatility was a theme for 2024, as the 10-year Treasury yield made three separate nearly 100 basis point swings across the year.

Previous report

The year was also characterized by muted housing transaction activity, as current and prospective homeowners were faced with another year of high mortgage rates and low housing affordability. The Mortgage Banker’s Association ("MBA") estimates that total mortgage origination volume in 2024 was $1.8 trillion, a 9% increase from 2023 levels. The increase was partially driven by a late summer drop in rates that triggered mortgage loan refinance activity to increase 56% year over year. Purchase money mortgage lending activity was down 3% year over year.

Previous report

Given this market backdrop, we were successful in profitably gaining market share for both of our operating platforms, while continuing to make accretive investments, sourced both organically and from third parties.

Previous report

Within our Sequoia platform, we emphasized deepening and continuing to build relationships with our loan seller network, including both banks and independent mortgage banks ("IMBs"). Our thesis remains that banks will need balance sheet solutions for their on-the-run and legacy residential jumbo mortgage loan portfolios. From 2020 to 2023, bank holdings of jumbo loans increased 33%, yet a number of factors make holding these loans on balance sheet less attractive for banks, including capital treatment, funding mismatches and reduced net interest margin due to higher funding costs. Consistent with our focus on bank relationships, we remain focused on positioning ourselves to transact in large pools of mortgage loans emerging from the banking sector, which we believe has accelerated in early 2025. For example, in January 2025, three large regional banks spurred nearly $10 billion of seasoned mortgage pools to change hands, a trend that we currently expect will continue throughout 2025 with the potential for our existing bank relationships to evolve into more sizable bulk flow purchase opportunities for jumbo mortgage loans.

Previous report

Given this dynamic, in 2024 we were actively engaged in both onboarding new loan sellers and strengthening relationships with existing ones. By the end of the year, more than half of our loan seller network consisted of banks. As these sellers transitioned to working with us, we had the opportunity to showcase our expertise, fast closing times, tailored product solutions, and seamless execution. This led to increased volume, a larger market share, and heightened distribution activity. We locked $8.95 billion of loans in 2024, supported by a combination of bulk (39%) and flow volume (61%). As evidence of our strengthening engagement with our bank and IMB relationships, quarterly flow volume in the fourth quarter of 2024 rose to its highest level since early 2022. Bulk activity also benefited from deepening relationships with our seller network, including the purchase of a $0.4 billion pool of seasoned hybrid adjustable-rate mortgage loans (“ARMs”) in the second half of 2024 from a large bank that we subsequently securitized later in the year. Consistent with this theme, in mid-February 2025, we executed a trade with a large money-center bank to acquire a pool of approximately $1 billion of jumbo and agency fixed and adjustable-rate loans, which we expect to settle early in the second quarter of 2025.

Previous report

Healthy investor demand for our products supported strong distribution execution for our Sequoia platform. The majority of our distribution activity within this business in 2024 was through securitizations, as we completed twelve transactions backed by $5.2 billion of loans – our highest level of Sequoia securitization activity since 2013. Into the end of the year, we engaged in a resurgence of whole loan sales activity, selling $1.4 billion of loans to a handful of buyers in the fourth quarter of 2024, the highest quarterly activity in this distribution channel since the first quarter of 2022.

Previous report

To support greater transaction volume and the needs of our loan seller network, we also expanded our set of product offerings in 2024, especially as our network of originators faced a housing market with muted activity. We launched new guidelines for both hybrid ARMs and closed-end second (“CES”) lien mortgage loans early in 2024. These efforts were coupled in early 2025 with the launch of expanded loan products under our Aspire brand. These new Aspire product offerings include loans to consumers who qualify for financing through alternative methods of calculating income, including bank statements, as well as debt service coverage ratio (“DSCR”) loans to housing investors that complement CoreVest’s direct lending capabilities. The expansion of Aspire comes at a time when demand for non-traditional financing solutions is growing, as persistently higher interest rates and constrained housing supply continue to impede refinancing activity and the path to homeownership for many American households. Aspire intends to source these new loan types through a growing base of origination partners that will enjoy access to both Redwood’s core prime jumbo and expanded product set.

Previous report

Our CoreVest platform was also focused in 2024 on further supporting its network of real estate investors with its broad product set. In 2024, CoreVest was able to gain market share, especially given the pullback by banks as they adjusted their allocation of resources and balance sheets to residential lending. As a result, borrowers who had historically procured funding from banks, actively sought out our platform for solutions. The result was $1.7 billion of fundings across our bridge loan products (59% of full year 2024 fundings) and term loan products (41% of full year 2024 fundings).

Previous report

Over the last two years, as long-term interest rates have remained elevated, real estate investors have favored short-duration, fully prepayable bridge loans over longer-term, fixed-rate term loans with lender prepayment protection. That trend generally continued across 2024, with bridge loan volumes remaining elevated across the year, driven by ongoing growth of our single-asset bridge (“SAB”) loan product. In the fourth quarter, borrower demand for term loans picked up considerably, rising 43% in the fourth quarter relative to the third quarter 2024, and to the highest quarterly level we have seen for term fundings since mid-2022.

Previous report

On a product specific basis, CoreVest also continued to see demand for our lines of credit, both within the traditional fix and flip sector, as well as the aggregation lines of credit, which are an attractive solution for real estate investors looking for a lower cost of capital as they stabilize or acquire newly-built homes.

Previous report

Volume growth was supported by our differentiated distribution platform which includes securitization, whole loan sales and sales to joint ventures. In March of 2024, we established a $500 million joint venture with a large institutional investor, with the capacity to purchase both bridge and term loans originated by CoreVest. The launch of this joint venture, which was created to support the growth ambitions of our CoreVest platform, was very impactful from the onset. Ultimately for the year, we distributed $1.56 billion of loans, 53% of which were transfers to joint ventures, 26% of which were whole loan sales and 21% of which were through securitization. In the fourth quarter of 2024, we completed our first securitization that included loans from one of our joint ventures.

Previous report

Optimizing and strengthening our capital position was an ongoing focus across the year, especially as we grew our volumes. We strategically reallocated capital, emphasizing growth in our operating platforms and continuing engagement with our partners (such as our joint ventures). As such, both our Sequoia and CoreVest platforms achieved improved operating and capital efficiency metrics across the year. Additionally, investment activity across 2024 was elevated, as we deployed $525 million of capital, including assets sourced from third parties and organically created investments. Looking ahead, we aim to further enhance the efficiency of our platforms, while also creating reliable distribution channels with the capacity to enhance our liquidity and pricing, supporting predictable revenues and profitability.

Previous report

Credit performance in 2024 in our residential consumer backed investments (largely jumbo and reperforming loans) remained strong, with generally declining delinquencies and LTVs. We continued to work through pockets of stress in our CoreVest portfolio, particularly related to parts of our multifamily bridge portfolio, successfully recasting loans, extending timelines and working with borrowers to bring in fresh capital. This work helps to position their projects, and our portfolio's performance, for greater success. Since the fourth quarter of 2022, multifamily fundings have been less than 20% of overall bridge fundings, as we have strategically increased focus on single-family renovate or build for rent ("BFR") and SAB production.

Previous report

As we focus on 2025, we continue to assess the impact of the Los Angeles wildfires on our business and we are currently monitoring mortgage loans in 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.

Previous report

Finally, as we move through 2025, we remind ourselves of our long-held view that most challenges and opportunities in the mortgage finance market we participate in relate back to policymaking in at the Federal level. With such a significant shift in governing philosophy from the new presidential administration, much is likely to change in the arenas of housing and mortgage lending policy and regulation – and we anticipate the vast majority of the changes we currently expect to see, will benefit Redwood. As a result, although mortgage interest rates remain elevated and may cause overall housing activity to remain flat in 2025, we see several strategic opportunities that could drive meaningful market share gains for our platforms and increased financial returns for Redwood and our shareholders.

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Table 1 – Net Income (Loss)

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Net Interest Income

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Net interest income increased by $10 million from $93 million in 2023 to $103 million in 2024. Net interest income from Sequoia Mortgage Banking operations increased by $43 million, primarily due to higher average residential consumer loan balances and the addition of certain hedges accretive to net interest income. This was partially offset by a decrease of $18 million from our Redwood Investments portfolio from $139 million in 2023 to $121 million in 2024, primarily related to lower net interest income from our bridge loan portfolio, an increase in borrowing costs on debt facilities and ABS issued to finance our investments within this segment.

Previous report

Corporate net interest expense increased by $18 million from $50 million in 2023 to $68 million in 2024. The increase was primarily related to the higher cost of corporate debt issued recently relative to repurchases and payoffs of older vintage, lower coupon convertible debt. During the year ended December 31, 2024, we issued $60 million of 9.125%, $85 million of 9.00% senior notes, $40 million of 7.75% convertible senior notes, and procured a secured revolving financing facility, which we drew on beginning in the second quarter of 2024. Additionally, we earned lower interest income at the corporate level in 2024 from lower average cash balances invested in money market funds and U.S. Treasury Securities relative to 2023.

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

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Mortgage Banking Activities, Net

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Mortgage Banking activities, net increased by $32 million from $67 million in 2023 to $99 million in 2024, primarily due to higher Sequoia Mortgage Banking revenues.

Previous report

Sequoia Mortgage Banking activities increased by $30 million, primarily attributable to a significant increase in loan purchase volumes from both banks and independent mortgage bankers ("IMBs") across bulk and flow transactions, as well as a combination of improved efficiency metrics, spread tightening on securitization execution and net hedge income, particularly in the third and fourth quarter of 2024.

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CoreVest Mortgage Banking activities increased by $2 million, primarily attributable to higher volumes experienced throughout 2024, combined with improved economics from whole loan sales and sales to joint ventures during the year.

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A more detailed analysis of the changes in this line item is included in the “Sequoia Mortgage Banking Segment” and “CoreVest Mortgage Banking Segment” sections that follow.

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Investment Fair Value Changes, Net

Previous report

Investment fair value changes, net improved by $30 million year over year, primarily due to ongoing strength in credit performance on our securities portfolio and spread tightening across our securities and performing whole loan portfolios, offset by negative fair value changes on our bridge and unsecuritized term loans and, to a lesser extent, paydowns on assets held at a premium.

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

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HEI Income, net

Previous report

HEI income, net increased by $7 million year over year. Home price appreciation, discount rates and prepayment speeds are the primary drivers of HEI Income, net. As such, gains in the value of our HEI portfolio over the first three quarters of 2024 were the result of home price appreciation and prepayment speeds exceeding modeled assumptions. In the fourth quarter of 2024, gains in the HEI portfolio were lower relative to prior quarters as realized home price appreciation slowed to levels more in line with modeled assumptions.

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Details on the composition of HEI income, net is included in Note 10 in Part II, Item 8 of this Annual Report on Form 10-K.

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Operating Expenses

Previous report

Operating expenses increased by $18 million year over year, primarily related to an increase in variable and equity compensation expense associated with improved operating results and overall 2024 earnings performance, as well as increased portfolio management costs incurred in 2024, which were related to specially serviced residential investor bridge loans and related workout arrangements.

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Details on the composition of General and Administrative expenses are included in Note 22 in Part II, Item 8 of this Annual Report on Form 10-K.

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Provision for Income Taxes

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Our provision for income taxes is almost entirely related to activity at our taxable REIT subsidiaries, which primarily includes our mortgage banking operations and MSR investments, as well as certain other investment and hedging activities. The tax provision for the year ended December 31, 2024 reflects GAAP income earned at our TRS, resulting primarily from improved mortgage banking results.

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

Previous report

The increase in net expenses from Corporate/Other for the year ended December 31, 2024 was related to an increase in variable and equity compensation expense associated with improved operating results and overall 2024 earnings performance relative to 2023. Additionally, an increase in net interest expense was driven by the higher cost of corporate debt issued relative to repurchases and payoffs of older vintage, lower cost convertible debt in 2024, coupled with a decrease in interest income earned from lower average cash balances invested in money market funds and U.S. Treasury Securities in 2024 relative to 2023.

Previous report

Footnote to Table 5

Current report — wording carried from elsewhere

Our aggregation, origination, and investment activities have evolved to incorporate a diverse mix of residential consumer and residential investor housing credit assets. We operate our business across four reportable segments: Sequoia Mortgage Banking, CoreVest Mortgage Banking, Redwood Investments, and Legacy Investments. Our two mortgage banking segments generate income from the origination or acquisition of loans and the subsequent sale or securitization of those loans. Our Redwood Investments portfolio is comprised of investments sourced through our mortgage banking operations as well as investments purchased from third-parties, and generates income primarily from net interest income and asset appreciation. Our Legacy Investments portfolio is comprised ofassets that were previously included within the Redwood Investments segment and generates income primarily from net interest income.

Current report — wording carried from elsewhere

Comparison of Consolidated Results of Operations for Years Ended December 31, 2024 and 2023

Current report — wording carried from elsewhere

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 in Part II, Item 8 of this Annual Report on Form 10-K 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.

Current report — wording carried from elsewhere

Residential investor bridge loans include both larger balance and smaller balance 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 smaller balance bridge loans are referred to as RTL loans, which are short-term, typically fixed-rate loans secured by 1-4 units residential properties that are commonly used by investors to acquire, renovate, or reposition properties prior to stabilization or exit.

Current report — wording carried from elsewhere

The following table provides unsecuritized residential investor loan origination activity for the years ended December 31, 2025 and 2024.

Current report — wording carried from elsewhere

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. Gains and losses from the sale of AFS securities are recorded as Realized gains, net, in our consolidated statements of (loss) income. See Table 3 in the Consolidated Results of Operations section of this MD&A for further detail on the composition of investment fair value changes (the difference in amounts in the table above and in Table 4 relates to fair value changes for investments held at Corporate/Other).

Current report — wording carried from elsewhere

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.

Current report — wording carried from elsewhere

This segment’s earnings are primarily driven by net interest income and other income from investments, changes in the 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.

Current report — wording carried from elsewhere

Our most significant uses of cash are to purchase and originate mortgage loans for our mortgage banking operations, including financing loans held for sale and managing hedges associated with those activities; to purchase investment securities and make other investments, to repay principal and interest on our debt, including warehouse and other recourse borrowings as loans are sold or securitized; to meet margin calls associated with our debt and other obligations, to make dividend payments on our capital stock, to fund draws on our bridge loan portfolio and other commitments when requested, and to fund our operations.

Current report — wording carried from elsewhere

•Maintenance of a minimum dollar amount of stockholders’ equity/tangible net worth at Redwood.

Current report — wording carried from elsewhere

•Maintenance of a minimum dollar amount of stockholders’ equity/tangible net worth at Redwood.

Current report — wording carried from elsewhere

Changes in Fair Values of Real Estate Securities

Current report — wording carried from elsewhere

Periodic fluctuations in the values of our securities can be caused by changes in the discount rate assumptions used to value the securities, as well as actual and anticipated prepayments, delinquencies, losses and other factors on the loans underlying the securitizations in which we own securities. Significant inputs used to estimate the fair value of these assets include certain unobservable inputs that require significant judgment to develop, and changes in these estimates have had and are reasonably likely to have a material effect on our reported earnings and financial condition.

Previous report — wording carried elsewhere

(1)We originate Residential investor bridge loans at our TRS and transfer many of them to our REIT. Origination fees and any fair value changes on 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. For the carrying value and activity of our Residential investor bridge loans held-for-investment, see the Redwood Investments section that follows.

Previous report — wording carried elsewhere

Residential Investor Bridge Loans Held-for-Investment

Previous report — wording carried elsewhere

TRS does not directly affect the tax characterization of our 2024 dividends; however, a $45 million dividend paid from our TRS to our REIT in 2024 allowed a portion of our REIT’s dividends to be classified as qualified dividends.

Previous report — wording carried elsewhere

These residential consumer and residential investor loan, MSR, and HEI warehouse facilities could also become unavailable and outstanding amounts borrowed thereunder could become immediately due and payable if there is a material adverse change in our business. If we breach or trigger the representations and warranties, covenants, events of default, or other terms of our warehouse facilities, we are exposed to liquidity and other risks, including of the type described in Part I, Item 1A of this Annual Report on Form 10-K under the heading “Risk Factors,” and in Part II, Item 7A of this Annual Report on Form 10-K under the heading “Market Risks.”

Previous report — wording carried elsewhere

•Securities Repurchase Facilities. As noted above, another source of our debt financing is through secured borrowings under securities repurchase facilities we have established with various financial institution counterparties. Financial covenants included in these securities repurchase facilities are as follows and at December 31, 2024, and through the date of this Annual Report on Form 10-K, we were in compliance with each of these financial covenants:

Previous report — wording carried elsewhere

•Maintenance of a maximum ratio of consolidated recourse indebtedness to consolidated adjusted tangible net worth at Redwood.