Company: RWT-PA
Filing Date: 2025-03-03
Form Type: 10-K
Source: 0000930236-25-000007
Chunk: 324

Company: REDWOOD TRUST INC
Filing Date: 2025-03-03
Form: 10-K
Item: Item 7
Chunk 324
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 with reductions in contractual interest rates (including, in certain cases, deferrals of interest) had an aggregate unpaid principal balance of $663 million, and an aggregate fair value of $645 million at December 31, 2024. The modification terms on these loans involved conversions of the contractual interest rates on the loans from floating to fixed and/or 

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deferrals of a portion of the stated pay rate to an extended date or to maturity. In 2024, modifications on these loans maintained a weighted average contractual interest rate of approximately 9.09%, of which 4.46% represented deferred interest.

For the year ended December 31, 2024, we modified four BFR loans with a total aggregate unpaid principal balance of $142 million and an aggregate fair value of $140 million, respectively, at December 31, 2024. These loans were a subset of the $848 million of modified loans and had previously been modified in 2024. The previous modifications on these loans amended the interest rate to a combination of current pay and deferred interest. Because they finance the construction of rental housing, many BFR projects do not generate net operating income until the later stages of the loan term. As such, BFR loans are sized to include allocations for interest expense. During the year ended December 31, 2024, the modifications on these loans amended the allocation of loan commitments between hard and soft costs, interest expense and other expenses, provided maturity extensions of 10 months on average (subject to mandatory partial repayments during the loan term), and established a hard lockbox and funding of interest reserves to cover debt service shortfalls.

While we continue to work proactively with certain borrowers to address the impacts of rising interest rates, elongated project timelines, or other issues, further increases in delinquencies or modifications within our residential investor bridge loan portfolio could ultimately result in further decreases in net interest income and the fair value of our bridge loans held for investment, and further instances of borrower/sponsor stress could lead to realized credit losses. In addition to the loan modifications described above, during 2024, we extended the loan covenant terms and/or extended the maturities on $402 million of loans (representing cumulative unpaid principal balance as of December 31, 2024). An increase in maturity extensions in the residential investor bridge portfolio would increase the expected time to repayment with a potential impact on fair values and credit losses. However, given the overall short duration nature of our bridge loans, a certain level of maturity