Company: RWT-PA
Filing Date: 2025-01-15
Form Type: 424B5
Source: 0001104659-25-003632
Chunk: 108

Company: REDWOOD TRUST INC
Filing Date: 2025-01-15
Form: 424B5
Chunk 108
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 asset tests.

In addition, we intend to
enter into repurchase agreements under which we will nominally sell certain of our assets to a counterparty and simultaneously enter
into an agreement to repurchase the sold assets. We believe that we will be treated for U.S. federal income tax purposes as the owner
of the assets that are the subject of any repurchase agreement and that the repurchase agreement will be treated as a secured lending
transaction notwithstanding that we may transfer record ownership of the assets to the counterparty during the term of the agreement.
It is possible, however, that the IRS could successfully assert that we did not own the assets during the term of the repurchase agreement,
in which case we could fail to qualify as a REIT.

The asset tests must be satisfied
at the close of each calendar quarter of our taxable year in which we (directly or through any qualified REIT subsidiary or subsidiary
partnership) acquire securities in the applicable issuer, and also at the close of each calendar quarter in which we increase our ownership
of securities of such issuer (including as a result of an increase in our interest in any partnership that owns such securities). For
example, our indirect ownership of securities of each issuer may increase as a result of our capital contributions to, or the redemption
of other partners’ or members’ interests in, a partnership in which we have an ownership interest. However, after initially
meeting the asset tests at the close of any quarter, we will not lose our status as a REIT for failure to satisfy the asset tests at
the end of a later quarter solely by reason of changes in asset values. If we fail to satisfy an asset test because we acquire securities
or other property during a quarter (including as a result of an increase in our interest in any partnership), we may cure this failure
by disposing of sufficient nonqualifying assets within 30 days after the close of that quarter. We believe that we have maintained, and
we intend to maintain, adequate records of the value of our assets to ensure compliance with the asset tests. If we fail to cure any
noncompliance with the asset tests within the 30-day cure period, we would cease to qualify as a REIT unless we are eligible for certain
relief provisions discussed below.

<div align='center'>38</div>

Certain relief provisions
may be available to us if we discover a failure to satisfy the asset tests described above after the 30-day cure period. Under these
provisions, we will