Company: RWT-PA
Filing Date: 2025-08-08
Form Type: 10-Q
Source: 0000930236-25-000029
Chunk: 166

Company: REDWOOD TRUST INC
Filing Date: 2025-08-08
Form: 10-Q
Item: Part I, Item 1
Chunk 166
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 $10 million, primarily due to an increase in variable and fixed compensation expense associated with additional headcount, and higher interest expense related to higher corporate debt balances for the first half of 2025, which also carried a higher interest rate than that of the convertible debt which matured in 2024.

Sequoia Mortgage Banking Segment

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

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

In the first quarter of 2025, we launched an additional mortgage loan conduit under our Aspire brand that acquires mortgage loans under expanded underwriting criteria, which we also refer to as "non-QM", as well as DSCR mortgage loans. 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. 

70

The following table presents key earnings and operating metrics for our Sequoia Mortgage Banking segment during the three and six months ended June 30, 2025 to the immediate preceding quarter March 31, 2025 and year-to-date period through June