Company: RWT-PA
Filing Date: 2025-05-09
Form Type: 10-Q
Source: 0000930236-25-000020
Chunk: 92

Company: REDWOOD TRUST INC
Filing Date: 2025-05-09
Form: 10-Q
Item: Part I, Item 1
Chunk 92
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 using an allowance for credit losses, with the allowance limited to the amount by which the security's fair value is less than its amortized cost basis. We evaluate all securities in an unrealized loss position to determine if the impairment is credit-related (resulting in an allowance for credit losses recorded in earnings) or non-credit-related (resulting in an unrealized loss through other comprehensive income). The allowance for credit losses is calculated using a discounted cash flow approach and is measured as the difference between the beneficial interest’s amortized cost and the estimate of cash flows expected to be collected, discounted at the effective interest rate used to accrete the beneficial interest. No allowance is recorded for beneficial interests in an unrealized gain position. At March 31, 2025, our allowance for credit losses related to our AFS securities was $0.9 million.

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REDWOOD TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2025(Unaudited) Note 9. Real Estate Securities - (continued)

The following table details the activity related to the allowance for credit losses for AFS securities for the three months ended March 31, 2025 and 2024.Table 9.4 – Rollforward of Allowance for Credit LossesThree Months Ended March 31, 2025Three Months Ended March 31, 2024(In Thousands)Beginning balance allowance for credit losses$921 $2,482 Additional decreases to the allowance for credit losses on securities that had an allowance recorded in a previous period(67)(629)Ending balance of allowance for credit losses$854 $1,853 

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REDWOOD TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2025(Unaudited) 

Note 10. Home Equity Investments (HEI)

 We invest in HEI contracts from third party originators and in 2023, we began to originate HEI directly. 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.We co-sponsored two HEI secur