Company: RWT-PA
Filing Date: 2025-11-07
Form Type: 10-Q
Source: 0000930236-25-000037
Chunk: 100

Company: REDWOOD TRUST INC
Filing Date: 2025-11-07
Form: 10-Q
Item: Part I, Item 1
Chunk 100
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867 Nine Months Ended September 30,(In Thousands)20252024Beginning balance allowance for credit losses$921 $2,482 Additions to allowance for credit losses on securities for which credit losses were not previously recorded— 25 Additional decreases to the allowance for credit losses on securities that had an allowance recorded in a previous period(126)(1,640)Ending balance of allowance for credit losses$795 $867 

34

REDWOOD TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2025(Unaudited) 

Note 10. Home Equity Investments (HEI)

 We have historically invested in HEI contracts acquired from third party originators, however, we ceased new investments in third-party originated HEI contracts and began originating HEI directly in 2023 through our own Aspire HEI platform. Each HEI provides the owner of such HEI the right to purchase a percentage ownership interest in an associated residential property, and the homeowner's obligations under the HEI are secured by a lien (primarily second liens) on the property created by recording a security instrument (e.g., deed of trust) with respect to the property. Our investments in HEI expose us to both home price appreciation and depreciation of the associated property. In the second quarter of 2025, we began reporting our third-party originated HEI portfolio within the Legacy Investments segment, consistent with how the CODM evaluates financial performance and allocates resources across our reportable segments.At September 30, 2025 and December 31, 2024, within our Legacy Investments segment, we co-sponsored one and two HEI securitization entities, respectively, that we consolidated in accordance with GAAP, and have elected to account for this securitization under the CFE election. As such, market valuation changes for the securitized HEI are based on the fair value of the associated ABS issued by the entity, including the interest we own, and are reported in HEI income, net on our Consolidated statements of income. During the three months ended September 30, 2025, we called one of our HEI securitization entities and paid off the related outstanding ABS issued. Subsequent to the call of this securitization, we sold previously securitized and unsecuritized third-party originated HEI from our Legacy Investments segment totaling $262 million to a third party. The following table presents our