Company: RWT-PA
Filing Date: 2025-08-08
Form Type: 10-Q
Source: 0000930236-25-000029
Chunk: 268

Company: REDWOOD TRUST INC
Filing Date: 2025-08-08
Form: 10-Q
Item: Part I, Item 8
Chunk 268
---
 Each HEI provides the owner of such HEI the right to purchase a percentage ownership interest in an associated residential property, and the homeowner's obligations under the HEI are secured by a lien (primarily second liens) on the property created by recording a security instrument (e.g., deed of trust) with respect to the property. Our investments in HEI expose us to both home price appreciation and depreciation of the associated property.We co-sponsor two HEI securitization entities that we consolidated in accordance with GAAP, and have elected to account for them under the CFE election. As such, market valuation changes for the securitized HEI are based on the fair value of the associated ABS issued by the entity, including the interest we own, and are reported in HEI income, net on our Consolidated statements of income.In the second quarter of 2025, we began reporting our third-party originated HEI portfolio within the Legacy Investments segment, consistent with how the CODM evaluates financial performance and allocates resources across our reportable segments.The following table presents our HEI at June 30, 2025 and December 31, 2024.Table 10.1 – Home Equity Investments(In Thousands)June 30, 2025December 31, 2024Unsecuritized HEI$246,355 $257,315 HEI held at consolidated HEI securitization entities341,281 332,470 Total Home Equity Investments at fair value (1)$587,636 $589,785 (1)As of June 30, 2025, balance includes $579 million of third-party originated HEI included in our Legacy Investments segment.The following table details our HEI activity during the three and six months ended June 30, 2025 and 2024. Changes in the value of HEI during the three months ended June 30, 2025 are driven by incremental negative fair value adjustments, reflecting anticipated near-term resolutions on HEI held in our Legacy Investments segment. Table 10.2 – Activity of HEIThree Months Ended June 30,20252024(In Thousands)Unsecuritized HEISecuritized HEIUnsecuritized HEISecuritized HEIFair value of HEI purchased and originated$4,226 $— $299 $— Net market valuation (losses) gains recorded (14,306)8,621 11,663 17,029