Company: RWT-PA
Filing Date: 2025-03-03
Form Type: 10-K
Source: 0000930236-25-000007
Chunk: 229

Company: REDWOOD TRUST INC
Filing Date: 2025-03-03
Form: 10-K
Item: Item 1A
Chunk 229
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 to third parties that invest in these securitization transactions, including liability for disclosures prepared by third parties or with respect to loans that we did not sell or contribute to the securitization. Additionally, we typically retain various third-party service providers when we engage in securitization transactions, including underwriters or initial purchasers, trustees, administrative and paying agents, and custodians, among others. We frequently contractually agree to indemnify these service providers against various claims and losses they may suffer in connection with the provision of services to us and/or the securitization issuer. To the extent any of these service providers are liable for damages to third parties that have invested in these securitization transactions, we may incur costs and expenses as a result of our indemnification obligations.

In addition, the securitization trusts or other securitization entities that own collateral underlying securitization transactions may be held liable for acts of third parties and may be required to obtain state mortgage lending licenses. For example, the CFPB has asserted the power to investigate and bring enforcement actions directly against securitization entities for the bad acts of the entities’ servicers or sub-servicers. On March 19, 2024, in an action brought by the CFPB, the U.S. Court of Appeals for the Third Circuit in CFPB v. Nat’l Collegiate Master Student Loan Trust, No. 22-1864 (3d Cir. 2024) (the “Student Loan ABS Litigation”), held that securitization trusts holding student loans are “covered persons” subject to the CFPB’s enforcement and investigative powers because they “engage” in offering or providing consumer financial products or services. The court focused on language in the relevant trust agreement, which provided that the trust’s purpose was to “engage in” certain activities relating to the ownership of the trust assets. Before a decision on the merits of the case, in January 2025, the parties settled. Regardless, the CFPB may rely on the Third Circuit’s decision as precedent in investigating and bringing future enforcement actions against other securitization entities, including entities we sponsor or invest in. As another example, in January 2025, the Maryland Office of Financial Regulation (“OFR”) issued emergency regulations and formal guidance relating to a ruling by the Appellate Court of Maryland, which held that the assignee of a home equity line of credit, a statutory trust, was required to obtain