Company: RWT-PA
Filing Date: 2025-01-15
Form Type: 424B5
Source: 0001104659-25-003632
Chunk: 93

Company: REDWOOD TRUST INC
Filing Date: 2025-01-15
Form: 424B5
Chunk 93
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 other limitations described herein that
are applicable to us. If a Subsidiary REIT were to fail to qualify as a REIT, then (i) that Subsidiary REIT would become subject to U.S.
federal income tax and (ii) the Subsidiary REIT's failure to qualify could have an adverse effect on our ability to comply with the REIT
income and asset tests, and thus could impair our ability to qualify as a REIT unless we could avail ourselves of certain relief provisions.

Taxable Mortgage Pools

An entity, or a portion of
an entity, may be classified as a taxable mortgage pool, or a TMP, under the Code if:

| · | substantially                                                                   
 all of its assets consist of debt obligations or interests in debt obligations; |

| · | more than 50%                                                                                                            
 of those debt obligations are real estate mortgages or interests in real estate mortgages as of specified testing dates; |

| · | the entity                                                        
 has issued debt obligations that have two or more maturities; and |

| · | the payments                                                                                                          
 required to be made by the entity on its debt obligations “bear a relationship” to the payments to be received by the 
 entity on the debt obligations that it holds as assets.                                                               |

Under applicable Treasury
Regulations, if less than 80% of the assets of an entity (or a portion of an entity) consist of debt obligations, these debt obligations
are considered not to comprise “substantially all” of its assets, and therefore the entity would not be treated as a TMP.
We may enter into financing and securitization arrangements that give rise to TMPs.

A TMP generally is treated
as a corporation for U.S. federal income tax purposes. However, special rules apply to a REIT, a portion of a REIT, or a qualified
REIT subsidiary that is a TMP. If a REIT owns directly, or indirectly through one or more qualified REIT subsidiaries or other entities
that are disregarded entities for U.S. federal income tax purposes, 100% of the equity interests in the TMP, the TMP will be a qualified
REIT subsidiary and, therefore, disregarded as an entity separate from the REIT for U.S. federal income tax purposes and would not generally
affect the tax qualification of the REIT. Rather, the consequences of the TMP classification would generally be limited to the REIT’s
shareholders. See “Material U.S. Federal