Company: RWT-PA
Filing Date: 2025-03-03
Form Type: 10-K
Source: 0000930236-25-000007
Chunk: 230

Company: REDWOOD TRUST INC
Filing Date: 2025-03-03
Form: 10-K
Item: Item 1A
Chunk 230
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 certain state lending licenses to have legal authority to foreclose on mortgage debt. The formal guidance published by OFR provides that, absent an otherwise applicable statutory exemption to licensure, "mortgage trusts, including, passive trusts, must comply with the OFR’s licensing requirements as clarified by the emergency regulations". While the emergency regulations became effective immediately, OFR has suspended the enforcement deadline until July 6, 2025. OFR and industry representatives recently proposed legislation that would provide a licensing exemption for entities that acquire mortgage loans by assignment but do not originate, service, or collect these loans on their own behalf (e.g., securitization trusts), but there is no assurance this proposed legislation will become law. Unless exempt or otherwise not so required, failure of an issuer of mortgage-backed securities to obtain the appropriate Maryland licenses could result in OFR administrative action against the issuer and/or other transaction parties, including potential assessment of civil monetary penalties and issuance of cease-and-desist orders. Further, there can be no assurance that any other state or local jurisdictions will not enact similar laws or regulations or otherwise assert that securitization trusts must obtain a particular license or permit. Any civil penalties imposed and the costs of compliance may be borne by the securitization issuer and, accordingly, could reduce amounts otherwise available for distribution to investors and/or the value of the underlying securities. Absent superseding action by OFR or the Maryland legislature, mortgage securitization trusts holding Maryland loans—including trusts that have issued Redwood- or CoreVest-sponsored securities—will be expected to obtain the appropriate licenses, which could be complicated, time consuming, costly, and/or lead to enforcement activity or litigation.

In addition, the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC) have published regulations relating to the issuance of ABS, including RMBS; and recently, the SEC finalized regulations prohibiting certain conflicts of interest in securitization transactions which will require us, as a sponsor of securitization transactions, to adopt policies and procedures for reviewing, approving and tracking transactions that could be considered “conflicted transactions” and these regulations could limit certain risk mitigating practices we might otherwise seek to engage in and/or increase the cost and operational burden of compliance. 

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There may be defects in the legal process and legal documents governing transactions in which securitization trusts and other secondary purchasers take legal ownership of residential mortgage loans or other assets and establish their rights as first-priority lienholders on underlying mortgaged property