Company: RWT-PA
Filing Date: 2025-01-16
Form Type: 424B5
Source: 0001104659-25-004099
Chunk: 98

Company: REDWOOD TRUST INC
Filing Date: 2025-01-16
Form: 424B5
Chunk 98
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 combination of the foregoing.

Interest Income

Interest income constitutes
qualifying mortgage interest for purposes of the 75% gross income test to the extent that the obligation is secured by a mortgage on
real property or on interests in real property and, if an obligation is secured by a mortgage on both real property and personal property,
the fair market value of such personal property does not exceed 15% of the total fair market value of all such property. In the event
that we invest in a mortgage loan that is secured by both real property and personal property, we may be required to apportion our interest
on the loan between interest on an obligation that is secured by real property (or by an interest in real property) and interest on an
obligation that is not so secured. Even if a loan is not secured by real property or is undersecured, the income that it generates may
nonetheless qualify for purposes of the 95% gross income test.

To the extent that we derive
interest income from a loan where all or a portion of the amount of interest payable is contingent, such income generally will qualify
for purposes of the gross income tests only if it is based upon the gross receipts or sales and not the net income or profits of any
person. This limitation does not apply, however, to a mortgage loan where the borrower derives substantially all of its income from the
property from the leasing of substantially all of its interest in the property to tenants, to the extent that the rental income derived
by the borrower would qualify as rents from real property had we earned it directly.

To the extent that the terms
of a loan provide for contingent interest that is based on the cash proceeds realized upon the sale of the property securing the loan
(or a shared appreciation provision), income attributable to the participation feature will be treated as gain from sale of the underlying
property, which generally will be qualifying income for purposes of both the 75% and 95% gross income tests, provided that the property
is not inventory or dealer property of the borrower or ours.

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Any amount includible in
our gross income with respect to a regular or residual interest in a REMIC generally is treated as interest on an obligation secured
by a mortgage on real property. If, however, less than 95% of the assets of a REMIC consists of real estate assets (determined as if
we held such assets), we will be treated as receiving directly our proportionate share of the income of