REDWOOD TRUST INC

We operate our business across five reportable segments: Sequoia Mortgage Banking, Aspire 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.

We discuss our Mortgage Banking platforms ("Mortgage Banking") on a combined basis to reflect the manner in which management evaluates the performance of its mortgage origination and distribution activities. Our Mortgage Banking platforms consist of the Sequoia Mortgage Banking, Aspire Mortgage Banking and CoreVest Mortgage Banking segments. Revenue from these platforms is primarily driven by loan production volumes, gain-on-sale margins, and execution across distribution channels. While each segment is reported separately, a combined discussion provides useful context for understanding the key drivers of changes in results of operations, with additional segment-level detail provided in the sections following. Prior-period amounts have been conformed to the current presentation, as applicable.

Beginning in the first quarter of 2026, we also began allocating corporate financing costs, comprised of interest expense on our promissory notes, trust preferred securities, convertible debt, and senior unsecured notes, as well as our preferred stock dividend to our operating or reportable segments for informational purposes. Corporate and other activities that are not directly allocated to the Company’s operating segments are included in Corporate/Other. For comparability purposes, prior period segment information has been adjusted to reflect this allocation.

The following table presents the segment contribution from our operations, reconciled to our net loss related to common stockholders for the three and nine months ended September 30, 2026, the immediate preceding quarter June 30, 2026, and year-to-date period September 30, 2025. For comparability purposes, prior period segment information has been adjusted to reflect the changes discussed above.

Table 3 – Segment Results Summary

(1) Corporate/Other is not a reportable segment. It reflects items not allocated to the reportable segments, consisting primarily of general and administrative expenses and realized losses. Beginning in the first quarter of 2026, corporate financing costs and preferred dividends are allocated to the segments.

The sections that follow provide further detail on our segments and their results of operations for the three and nine months ended September 30, 2026, the immediate preceding quarter ended June 30, 2026, and year-to-date period ended September 30, 2025.

Mortgage Banking Platforms

Our Mortgage Banking platforms, consisting of the Sequoia Mortgage Banking, Aspire Mortgage Banking and CoreVest Mortgage Banking segments, generate income from the origination or acquisition of loans and the subsequent sale or securitization of those loans.

Sequoia Mortgage Banking 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 or into joint ventures. In the second quarter of 2026 we launched a strategic joint venture to acquire prime jumbo residential mortgage loans sourced through our Sequoia platform and provide additional capital to support loan acquisition and securitization activities. Subordinate securities and certain interest-only 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 residential consumer mortgages and the related mortgage servicing rights on a flow or bulk basis from our extensive network of loan sellers.

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" or "non-QM." These loan programs, primarily bank statement and DSCR loans, are designed for prime-quality borrowers seeking alternative underwriting solutions (including the use of bank statements and rental income to derive income), a segment that continues to grow within the U.S. housing market. In the first quarter of 2026, due to the continued scaling and distinct operating characteristics of this platform, we began reporting Aspire as a separate reportable segment, Aspire Mortgage Banking.

CoreVest Mortgage Banking consists of a platform that originates residential investor loans, including term and bridge loans, for subsequent securitization, whole loan sale, transfer into our Redwood Investments portfolio, or contribution to joint ventures. Term loans are secured by stabilized residential rental properties and include larger-balance loans and smaller-balance DSCR loans, which are underwritten primarily based on the property’s debt service coverage ratio. Bridge loans generally finance transitional properties or value-add strategies. CoreVest loans are typically distributed through our CAFL® private-label securitization program or through whole loan sales. CoreVest also administers two joint ventures that invest in residential investor loans originated by the platform, for which we earn ongoing administrative fees and may earn performance-based fees.

Our inventory of loans is managed with a combination of our capital and loan warehouse facilities. Nearly all of the financing facilities used for our Sequoia and Aspire mortgage banking segments are marginable (i.e., 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), while all of the financing facilities for our CoreVest mortgage banking segment are non-marginable.

The main sources of mortgage banking income across our segments are net interest income from our inventory of loans held-for-sale (including interest expense on secured financings and allocated corporate financing costs), securities utilized for interest rate 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, as well as 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. Fee income associated with our administration of joint ventures and other loan-related administrative functions is also included in the applicable mortgage banking segment within Fee income, net. Direct operating expenses and tax expenses associated with these activities are also included in each mortgage banking segment.

The following table presents key earnings for our Mortgage Banking platforms, in total and by segment, during the three and nine months ended September 30, 2026, the immediate preceding quarter June 30, 2026, and year-to-date period through September 30, 2025.

Table 4 – Mortgage Banking Earnings Summary

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

Activity for the Mortgage Banking platforms performed within our taxable REIT subsidiary is subject to federal and state income taxes. The provision for income taxes or income tax benefit for the periods presented above reflects GAAP income or loss from these operations at our TRS during the respective periods.

The following tables summarize certain operating metrics related to our portfolio of loans included in the Sequoia Mortgage Banking segment, Aspire Mortgage Banking segment and CoreVest Mortgage Banking segment, during the three and nine months ended September 30, 2026, the immediate preceding quarter ended June 30, 2026, and year-to-date period through September 30, 2025.

Table 5 – Sequoia Mortgage Banking Operating Metrics

(1)Number of loans presented in units.

(2)Includes securitizations of previously retained investments from Sequoia securitizations as well as securitizations that were issued and called within the reporting period.

(3)Excludes $639 million of loans securitized through our Castlelake joint venture.

(4)Cost per loan for the Sequoia Mortgage Banking segment is calculated as operating expenses of this segment divided by loan purchase commitments of this segment, reflected in basis points ("bps").

(5)Gain-on-sale margins reflect net revenue excluding the allocation of corporate unsecured financing costs, divided by loan purchase commitments.

Table 6 – Aspire Mortgage Banking Operating Metrics

(1)Number of loans presented in units.

(2)Cost per loan for the Aspire Mortgage Banking segment is calculated as operating expenses of this segment divided by loan purchase commitments of this segment.

(3)Gain-on-sale margins reflect net revenue excluding the allocation of corporate unsecured financing costs, divided by loan purchase commitments.

Table 7 – CoreVest Mortgage Banking Operating Metrics

(1) For the three months ended June 30, 2026 and nine months ended September 30, 2026 includes joint venture securitizations of $268 million of UPB.

(2)Net Cost to Originate is calculated as operating expenses, adjusted for organizational restructuring charges associated with employee severance and related transition expenses, less origination fees and other fees attributable to this segment, divided by this segment’s funding volume.

The $13 million decrease in Mortgage Banking contribution during the three months ended September 30, 2026, as compared to the three months ended June 30, 2026, was primarily driven by a $20 million decrease in mortgage banking income, partially offset by a $8 million favorable change in income taxes, reflecting a shift from an income tax provision in the prior quarter to an income tax benefit in the current quarter. The decrease in segment contribution was primarily attributable to Aspire Mortgage Banking, which reported a segment loss of $5 million compared to segment income of $7 million in the prior quarter, while Sequoia Mortgage Banking was relatively unchanged at $32 million and CoreVest Mortgage Banking decreased $1 million, to approximately breakeven.

Mortgage Banking production volumes decreased to $6.6 billion during the third quarter of 2026, compared to $8.0 billion in the second quarter of 2026. The decrease primarily reflected a deliberately more measured operating posture in response to a sharp increase in long-term interest rates and wider credit spreads. Sequoia lock volume decreased to $5.1 billion from $5.6 billion. While Aspire lock volume decreased 45% to $1.1 billion from a record $2.1 billion in the second quarter. Aspire's active seller network continued to expand, reaching over 165 loan sellers compared with over 150 in the second quarter. CoreVest funding volume remained relatively stable at $406 million. Bridge loan fundings increased 35% to $301 million, while term loan fundings decreased 44% to $104 million, as higher rates continued to weigh on demand for term loans.

Mortgage Banking income decreased to $46 million from $66 million, primarily reflecting a $15 million decrease in mortgage banking income within the Aspire Mortgage Banking segment, which reported a mortgage banking loss of $2 million. Aspire Mortgage Banking's gain-on-sale margin declined to negative 7 basis points from 101 basis points, reflecting lower hedge effectiveness on beginning-of-quarter loan inventory, extended distribution timelines and wider non-QM securitization spreads, which reduced the fair value of loan inventory and impacted execution on securitizations issued during the quarter. Loan purchase commitments decreased 47% to $763 million. At CoreVest, mortgage banking income decreased $5 million to $9 million, reflecting lower mortgage banking activities, net and lower fee income. Sequoia mortgage banking income was relatively unchanged at $40 million, as an increase in gain-on-sale margin to 113 basis points from 92 basis points offset a 13% decrease in loan purchase commitments to $4.4 billion. Sequoia's gain-on-sale margin was above the Company's historical targeted range of 75 to 100 basis points.

Distribution activity remained strong during the quarter, supported by continued execution across securitization, whole loan sale and joint venture channels. Mortgage Banking distributed $8.8 billion 1 of loans during the quarter, compared to $8.2 billion during the second quarter, including $6.2 billion 1 2 through securitizations, $1.5 billion through transfers to joint ventures and $1.2 billion through whole loan sales.

2 Excludes $639 million of loans securitized through our Castlelake joint venture, which are also included in transfers to joint ventures.

Sequoia accounted for $7.1 billion 1 of distributions, including $5.2 billion through securitizations, $1.2 billion through transfers to its Castlelake joint venture and $738 million through whole loan sales. Sequoia completed ten securitizations totaling $5.8 billion 1 2, including the joint venture’s first securitization.

Aspire’s distributions totaled $1.3 billion, comprising $904 million through securitizations—including its fourth and fifth SPIRE transactions—and $386 million through whole loan sales. Aspire also continued operational preparations for its previously announced joint venture, with utilization anticipated to begin in the fourth quarter of 2026.

CoreVest distributed $427 million of newly originated loans through $244 million of sales to joint ventures, $113 million of replenishments of bridge loan securitizations and $70 million of whole loan sales.

Operating expenses were relatively unchanged at $25 million during the third quarter of 2026 compared to the second quarter, as a $1 million increase at Sequoia, primarily reflecting higher loan acquisition costs on a 25% increase in the number of loans acquired, was partially offset by modest decreases at Aspire and CoreVest. Cost per loan increased at Sequoia to 20 basis points from 17 basis points and at Aspire to 50 basis points from 27 basis points, reflecting lower loan purchase commitments. CoreVest net cost to originate increased to 103 basis points from 96 basis points. The change from a tax provision to a tax benefit from the prior quarter was primarily the result of TRS GAAP losses during the three months ended September 30, 2026, as compared to TRS GAAP income during the three months ended June 30, 2026.

Capital allocated to the Mortgage Banking platforms decreased to $580 million at September 30, 2026, compared to $628 million at June 30, 2026, reflecting decreases of $25 million each at Sequoia and Aspire, to $275 million and $175 million, respectively, as loan sales and joint venture distribution reduced the working capital needs for loan inventory. Capital allocated to CoreVest remained relatively flat at $130 million, compared to $128 million at June 30, 2026.

Overall, Mortgage Banking results for the current quarter reflect the impact of a sharp increase in interest rates and wider credit spreads on production volumes and loan valuations, significantly lower gross margins at Aspire, partially offset by strong gain-on-sale margins at Sequoia.

The $27 million increase in Mortgage Banking contribution during the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025, was primarily driven by a $8 million increase in mortgage banking income and a $30 million change in income taxes, partially offset by a $10 million increase in operating expenses. Mortgage Banking contribution increased to $104 million during the current-year period from $77 million during the prior-year period. Sequoia’s contribution increased $36 million to $102 million, and Aspire’s contribution increased $3 million to $4 million. These increases were partially offset by a $12 million decrease in CoreVest’s contribution, which reported a segment loss of $2 million.

Mortgage Banking production volumes increased 50% to $23.2 billion during the nine months ended September 30, 2026, compared to approximately $15.4 billion during the prior-year period. The increase was primarily driven by continued growth at Sequoia, where loan locks increased 40% to $17.2 billion, and the continued scaling of Aspire, where loan locks increased to $4.8 billion from $1.7 billion during its initial ramp-up period in 2025. Growth across these platforms reflected expansion of the Company’s loan seller network, increased activity from bank and independent mortgage bank counterparties, broader product offerings, and increasing demand for expanded credit products. These increases were partially offset by lower CoreVest funding volume, reflecting a more cautious approach to loan production in response to market volatility, and evolving demand from real estate investors amid persistently higher interest rates.

Mortgage banking income increased to $179 million during the nine months ended September 30, 2026, compared to $171 million during the prior-year period. The increase was primarily attributable to higher production volumes and strong capital markets execution at Sequoia and Aspire, where mortgage banking income increased $17 million to $127 million and $11 million to $17 million, respectively, partially offset by lower funding volumes at CoreVest, where mortgage banking income decreased $19 million to $35 million as well as third-quarter valuation losses at Aspire and normalization in Sequoia gain-on-sale margins from elevated prior-year levels. Sequoia's gain-on-sale margin decreased to 100 basis points from 118 basis points in the prior-year period, remaining at the upper end of the Company's long-term targeted range of 75 to 100 basis points, while Aspire's gain-on-sale margin increased to 67 basis points from 55 basis points.

1 Includes securitizations of previously retained investments from Sequoia securitizations as well as securitizations that were issued and called within the reporting period.

2 Includes $639 million of loans securitized through our Castlelake joint venture, which are also included in transfers to joint ventures.

Distribution activity also increased significantly, with $25.7 billion 1 of loans distributed through securitizations, whole loan sales and joint ventures during the nine months ended September 30, 2026, compared to $11.6 billion during the prior-year period. The increase was primarily driven by higher Sequoia distributions, which increased to $20.5 billion from $9.5 billion, and the continued development of Aspire's distribution capabilities, which distributed $3.6 billion of loans compared to $189 million. Increased distribution activity supported capital recycling and enabled the platforms to accommodate higher production volumes while maintaining diversified access to capital markets.

Operating expenses increased to $81 million during the nine months ended September 30, 2026, compared to $71 million during the prior-year period, primarily reflecting higher variable and production-related expenses and continued investment in personnel, infrastructure and capital markets capabilities. Operating expenses at Sequoia and Aspire increased $5 million and $7 million, respectively, partially offset by a $2 million decrease at CoreVest. The nine-month period also included severance and organizational restructuring costs of approximately $5 million within the CoreVest segment. Operating efficiency was relatively stable across the platforms, with Sequoia cost per loan of 18 basis points compared to 19 basis points, Aspire cost per loan of 33 basis points compared to 34 basis points, and CoreVest net cost to originate of 92 basis points compared to 91 basis points. The change from a tax provision to a tax benefit for the nine-month periods ended September 30, 2025 and 2026, respectively, was primarily the result of GAAP income earned at our taxable REIT subsidiary ("TRS") in 2025 compared to TRS GAAP losses in 2026. The favorable change in income taxes reflected a $9 million benefit during the current-year period compared to a $21 million provision during the prior-year period, primarily attributable to changes in taxable income generated within the Company's taxable REIT subsidiaries.

Overall, the current-year results reflect substantially higher production and distribution activity, continued platform diversification and a favorable change in income taxes, partially offset by normalization in gain-on-sale margins, significantly lower third quarter gross margins at Aspire and lower CoreVest funding activity.

Redwood Investments Segment

This segment consists of investments comprising retained operating investments sourced through our Mortgage Banking securitizations and third-party securities, some of which we consolidate for GAAP purposes. 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, the 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 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. The Redwood Investments portfolio is increasingly focused on retained interests from the Company’s own securitizations and other internally sourced investment vehicles, as we continue to scale our mortgage banking platforms and allocate capital to investments generated through those activities. This shift has resulted in a portfolio increasingly concentrated in investments sourced through our Mortgage Banking platforms and is consistent with our strategy to enhance capital efficiency and align our investment portfolio with our core operating businesses.

This segment’s main sources of income are net interest income (including interest expense on secured financings and allocated corporate financing costs) 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, 2026, the immediate preceding quarter ended June 30, 2026, and the year-to-date period ended September 30, 2025.

Table 8 – Redwood Investments Earnings Summary

(1) Includes income from HEI that were originated through our Aspire HEI platform. Third-party originated HEI are included in our Legacy Investments segment.

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 2 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 2 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 performed within our TRS is subject to federal and state income taxes. The provision or benefit for income taxes at this segment is primarily driven by the amount of GAAP income or losses generated by portfolio assets at our TRS.

The $5 million decrease in segment contribution for the three months ended September 30 2026, compared to the three months ended June 30, 2026, was primarily driven by higher investment fair value losses, a decrease in Other income, net as a result of lower earnings from equity method investments, higher Operating expenses from increased Portfolio management costs and increased Other expenses, and a higher provision for income taxes. These decreases were partially offset by a $9 million increase in Net interest income and a $1 million increase in servicing income.

Investment fair value changes, net decreased $6 million, primarily due to fair value declines of risk management derivatives in excess of net increases in the value of our retained investment portfolio, driven by the sharp increase in benchmark interest rates and spread widening during the third quarter of 2026. These declines were partially offset by $5 million of positive fair value changes from our RWT Horizons portfolio, driven by positive investment fair value changes and monetizations across our Technology and AI investments, which contributed positively to segment earnings for the third consecutive quarter. Other income, net decreased $3 million, primarily due to lower earnings from equity method investments as compared to the second quarter. The provision for income taxes increased $3 million, primarily due to income earned from portfolio assets at our TRS. Net interest income increased $9 million, primarily due to growth in our portfolio of retained Sequoia securities, including Sequoia securities previously used as hedges that were transferred from our Sequoia Mortgage Banking segment during the second quarter.

Overall, results for the quarter were primarily impacted by market-driven valuation changes, portfolio seasoning, and an increase in delinquencies within our bridge loan portfolio, which were concentrated among a small number of borrowers. Delinquencies in CAFL Bridge Securities increased with 90 day+ delinquency rates of 13.2% at September 30, 2026, compared to 6.3% at June 30, 2026. Sequoia Securities and CAFL Term Securities 90+ day delinquency balances were 0.2% and 10.9% of total unpaid principal balances at September 30, 2026, compared to 0.2% and 8.7% at June 30, 2026.

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 $67 million of investment capital into retained investments created from our third quarter securitization activity, primarily related to securities retained from Sequoia securitizations. We continue to optimize financing through non-recourse structures to enhance capital efficiency and align our investment portfolio with our Mortgage Banking platforms.

The $42 million decrease in segment contribution for the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025 is primarily due to a $34 million decline in Investment fair value changes, net, driven by market-related valuation changes on portfolio investments and associated hedges resulting from interest rate volatility and spread movements during the nine-month period ending September 30, 2026. Additionally, Operating expenses for the nine-month period ending September 30, 2026 were $10 million higher compared to the same period in 2025 due to $2 million of severance and organizational realignment charges incurred during the first quarter of 2026 as well as $6 million of higher Other expenses related to income allocated to the co-investor in a seasoned servicing investment due to improved investment performance in 2026.

Redwood Investments Detail

The following table presents a balance sheet summary for our Redwood Investments segment as of September 30, 2026 and June 30, 2026.

Table 9 – Redwood Investments Balance Sheet Summary

(1) Represents our retained economic investment in securities issued by consolidated Sequoia securitization VIEs. For GAAP purposes, we consolidated $22.81 billion of loans and $21.32 billion of ABS issued associated with these investments at September 30, 2026. We consolidated $20.70 billion of loans and $19.48 billion of ABS issued associated with these investments at June 30, 2026. At September 30, 2026 and June 30, 2026, excludes $207 million and $173 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 $1.53 billion of loans and $1.25 billion of ABS issued associated with these investments at September 30, 2026. We consolidated $1.70 billion of loans and $1.42 billion of ABS issued associated with these investments at June 30, 2026.

(3) At September 30, 2026 and June 30, 2026 represents HEI originated and owned by Redwood.

(4) Other investments at both September 30, 2026 and June 30, 2026 includes net risk share investments of $0.6 million, representing $1.1 million of restricted cash and other assets, net of other liabilities of $0.6 million. Also includes mortgage servicing rights of $42 million at both September 30, 2026 and June 30, 2026.

(5) Represents our economic investment in consolidated Servicing Investment variable interest entities. At September 30, 2026, for GAAP purposes, we consolidated $246 million of servicing investments and $124 million of non-recourse short-term securitization debt, as well as other assets and liabilities for these entities. At June 30, 2026, for GAAP purposes, we consolidated $244 million of servicing investments and $128 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 increased during the three months ended September 30, 2026 primarily due to the retention of residential consumer securities from our Sequoia securitizations, as well as the transfer of Sequoia securities that had been used as hedges from our Sequoia Mortgage Banking segment to our Redwood Investments portfolio.

The following table summarizes the credit characteristics of Sequoia securities and CAFL term securities at September 30, 2026 and June 30, 2026. 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 10 – Credit Statistics (1)

(1)Underlying loan performance information provided in this table is generally reported on a one-month lag. Accordingly, data as of September 30, 2026 reflects September 2026 reports with a loan performance date of August 2026, and data as of June 30, 2026 reflects June 2026 reports with a loan performance date of May 2026. 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 and CAFL 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 notional value 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

The Legacy Investments segment primarily consists of assets no longer aligned with our core strategic objectives, including legacy unsecuritized bridge and term loans and other non-core legacy assets, that are in the active process of sale, runoff, or other disposition as part of our accelerated strategic repositioning. We finance our assets in this segment with a combination of recourse and non-recourse, non-marginable warehouse facilities, and a portion of a secured, revolving financing facility.

During the third quarter of 2026, we accelerated the resolution of Legacy Investment to recover capital and reduce portfolio exposure. At September 30, 2026, Legacy Investments represented 7% of total capital, down from 12% at June 30, 2026. Proceeds from further resolutions are expected to provide additional resources to reduce corporate debt and improve financial flexibility, supporting our objective of improving consolidated financial performance beginning in 2027. We remain focused on capital recovery through outright sales and in selected cases partnership structures that release capital while preserving potential upside where economically appropriate.

This segment’s earnings are primarily driven by net interest income (including interest expense on secured financings and allocated corporate financing costs) and other income from investments, portfolio management costs, 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.

The following table presents an earnings summary for our Legacy Investments segment for the three and nine months ended September 30, 2026, the immediate preceding quarter ended June 30, 2026, and the year-to-date period ended September 30, 2025.

Table 11 – 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 2 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 2 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 segment loss of $45 million for the third quarter of 2026, compared to a loss of $23 million in the second quarter of 2026. The increased loss primarily reflected higher investment fair value losses, including realized losses related to asset dispositions, lower HEI income, increased net interest expense and higher operating expenses, partially offset by a larger income tax benefit. Results also reflected the accelerated resolution of the Legacy portfolio, including disposition-related losses and valuation adjustments, including those taken in anticipation of resolutions completed during the fourth quarter.

Investment fair value losses increased by $10 million to $22 million in the third quarter of 2026, primarily reflecting realized losses on legacy bridge loans and impairments on the subordinate beneficial interest we retained from the Legacy Trust. Approximately 85% of the segment’s third-quarter investment fair value changes related to realized dispositions. HEI results shifted from income of $2 million in the prior quarter to a loss of $4 million, including fair value adjustments.

Net interest expense increased by $3 million to $13 million in the third quarter of 2026, reflecting higher allocated corporate interest expense and secured financing costs, together with lower interest income.

Resolution activity accelerated, with loan payoffs and REO sales totaling $125 million during the third quarter and October 2026, compared with $55 million during the first half of 2026. Capital allocated to Legacy Investments declined by $79 million or 40%, during the quarter, reflecting continued asset resolutions and financing optimization. While accelerated dispositions contributed to current-quarter losses, these actions reduced remaining exposure and released capital for debt reduction and reinvestment in our Mortgage Banking platforms. We continue to prioritize expedient capital recovery and expect further resolutions to reduce portfolio carrying costs over time.

Legacy Investments reported a segment loss of $81 million for the nine months ended September 30, 2026, compared to a loss of $148 million for the nine months ended September 30, 2025, primarily reflecting our progress in resolving legacy bridge exposures and other non-core legacy assets during the nine-month periods. Capital allocated to this segment has declined 75% from $459 million at September 30, 2025 to $116 million at September 30, 2026.

Legacy Investments Detail and Activity

The following table presents a balance sheet summary for our Legacy Investments segment as of September 30, 2026 and June 30, 2026.

Table 12 – Legacy Investments Balance Sheet Summary

(1)At September 30, 2026 and June 30, 2026, represents third-party originated HEI, as well as our net investment in a HEI securitization entity.

(2)During the year ended December 31, 2025 we sold 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. As of September 30, 2026, we had funded all of our $35 million capital support commitment ($10 million initially and $25 million through subsequent contributions) related to maintaining specified loan-to-value ratio thresholds of the Legacy Trust. At September 30, 2026, the beneficial interest had a fair value of $183 million. The investment balance includes the $24 million of subsequent capital contributions and reflects a credit loss allowance of$24 million.

(3)Other assets includes cash, restricted cash, accrued interest receivables, servicer receivables and other miscellaneous assets.

During the first quarter of 2026, we completed a $225 million CAFL securitization backed primarily by a mix of performing, re-performing and non-performing bridge loans and REO. The collateral included $223 million of loans and $38 million of REO, primarily sourced from our called CAFL securitizations issued between 2021 and 2023. The securitization also included $66 million of loans and $19 million of REO from our Legacy Investments portfolio. This transaction contributed to the financing efficiency of legacy assets, facilitated the redeployment of capital into our core operating platforms and, through its securitization structure, provides the flexibility to sell loans and further reduce legacy exposures over time. See further discussion of this securitization in Note 17 in Part 1, Item 1 — Financial Statements.

During the third quarter of 2026, we completed a secured financing transaction to finance our unsecuritized HEI contracts. In connection with the transaction, Redwood guaranteed approximately $90 million of obligations secured by this HEI portfolio and in the process retired $42 million of related recourse debt. With the completion of this transaction, capital previously held against the HEI portfolio became available for other investment and corporate purposes. See further discussion of this financing transaction in Note 18 in Part 1, Item 1 — Financial Statements.

Loan Composition

The following table provides the composition of legacy term and bridge loans by product type at September 30, 2026.

Table 13 – Legacy Loans By Product Type at Legacy Investments at Fair Value

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

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

(3)Includes $14 million of loans recorded at the lower of cost or market value for which the carrying value approximates the fair value.

At September 30, 2026, the fair value of our legacy bridge and term loans and associated REO represented 85% of the combined unpaid principal balance of these loans and the unpaid principal balance of the loans at the time the REO were foreclosed. As part of our plans to accelerate the wind-down of the Legacy Investments portfolio, we revised our underwriting practices to discontinue the active origination of large multifamily loans. For the three months ended September 30, 2026, we did not complete any complex loan modifications in the Legacy Investments portfolio. As we continue to prioritize dispositions and resolutions, we expect our exposure to multifamily loans and REO to decline over time as we proactively reduce exposure to the legacy bridge loan portfolio.