Company: RWT-PA
Filing Date: 2025-08-08
Form Type: 10-Q
Source: 0000930236-25-000029
Chunk: 190

Company: REDWOOD TRUST INC
Filing Date: 2025-08-08
Form: 10-Q
Item: Part I, Item 1
Chunk 190
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 vary materially from our estimates and could have a material impact on our earnings in future periods.

Fair value changes also reflect the impact of loan modifications during the period, particularly extensions and interest deferrals, which may have resulted in downward adjustments to loan valuations. These modifications were predominantly related to bridge loans with underlying project delays, borrower financial stress, or market-driven refinancing challenges. The fair value impact of such modifications is incorporated into the Company’s valuation models and contributed to the overall movement in loan values during the period.  

Loan Modifications

For the three months ended June 30, 2025, we made modifications to certain Legacy bridge loans, including adjustments to the contractual interest rates. In certain cases, these adjustments involved deferrals of interest. Other modifications were limited to extensions of loan maturities and/or covenant terms.

We may also offer maturity extensions, subject to mandatory partial repayments during the loan term. In some cases, we will establish a hard cash management structure (to enable Redwood, as the lender, to control all cash flows at the property) and fund interest reserves to cover potential debt service shortfalls. Any shift in our intended exit strategy could have implications for the 

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valuation of these loans. Additionally, we may further modify loans that were previously modified. These subsequent modifications may include further changes to the contractual interest pay rate and deferred interest terms. 

In the three months ended June 30, 2025, consistent with our strategic transition from non-core legacy assets, we have adopted a more aggressive approach to resolving modified and legacy loans, accelerating the wind-down of underperforming or non-core legacy assets to proactively reduce long-term exposure. This includes advancing loan and REO sales, executing structured exits, and, where necessary, accelerating foreclosure or liquidation processes on assets with limited workout potential. 

For the three months ended June 30, 2025, we modified or put into forbearance loans with a total aggregate unpaid principal balance of $363 million. This balance included modifications to the contractual interest rates (including, in certain cases, deferrals of interest) on loans, modifications involving only extensions of loan maturities and/or covenant terms and further modifications on loans that had been previously modified in a prior period.

For the three months ended June 30, 2025, we modified loans primarily involving adjustments in contractual interest rates (including, in certain cases, deferrals of interest) with an aggregate unpaid principal balance of $60 million, of which $25 million had been previously modified