Company: RWT-PA
Filing Date: 2025-11-07
Form Type: 10-Q
Source: 0000930236-25-000037
Chunk: 240

Company: REDWOOD TRUST INC
Filing Date: 2025-11-07
Form: 10-Q
Item: Part I, Item 8
Chunk 240
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 we do not have the power to direct the activities that most significantly affect the Legacy Trust’s economic performance. Accordingly, the Legacy Trust is not consolidated in our financial statements. In connection with this transfer, we recognized a negative $6 million investment fair value change within our Consolidated Statements of (Loss) Income, reflecting adjustments associated with completing the transaction. As part of the transaction, we retained a $182 million subordinate beneficial interest in the Legacy Trust, which is recorded as an AFS real estate security on our Consolidated balance sheet, as well as a funding commitment to provide capital support if the Legacy Trust’s portfolio loan-to-value ratios exceed specified thresholds. See Notes 9 and 19 for further discussion on the beneficial interest and the funding commitment, respectively. The change in fair value of residential investor loans from December 31, 2024 to September 30, 2025 reflects both realized and anticipated changes in portfolio performance and composition. The overall decline in fair value was primarily attributable to the unsecuritized residential investor bridge loan portfolio, which decreased to $626 million at September 30, 2025 from $1.1 billion at December 31, 2024. This decline was primarily driven by the sale transaction to the Legacy Trust and other resolutions in the third quarter of 2025. During the nine month period ended September 30, 2025, losses also reflected adverse market developments and the acceleration of resolution activity and further anticipated near-term resolutions on these loans, as well as changes in the underlying performance on certain of these loans, particularly those of the 2021 and 2022 vintage. 

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REDWOOD TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2025(Unaudited) Note 8. Residential Investor Loans - (continued)

Fair value changes also reflect the impact of loan modifications during the period, particularly rate changes 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.At September 30, 2025, we had $261 million in commitments to fund additional advances on existing residential investor bridge loans, of which $84 million related to loans currently in securitizations co-sponsored by one of