Company: RWT-PA
Filing Date: 2025-03-03
Form Type: 10-K
Source: 0000930236-25-000007
Chunk: 336

Company: REDWOOD TRUST INC
Filing Date: 2025-03-03
Form: 10-K
Item: Item 7
Chunk 336
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 to invest in servicer advance investments and excess MSRs, are the primary beneficiary. The servicer advance financing consists of non-recourse securitization debt, secured by servicer advances. This securitization entity is independent of Redwood and the assets and liabilities are not owned by and are not legal obligations of Redwood. In addition, our joint ventures have dedicated warehouse facilities. These warehouse facilities are obligations of the respective joint ventures, not of Redwood, and they are non-recourse to Redwood (except for customary expectations for fraud, acts of insolvency, or other "bad acts"). See Notes 11 and 18 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, for additional information regarding our residential investor bridge loan joint ventures.

The remainder of the debt we use to finance our investments is recourse debt, including our subordinate securities financing facility, residential investor financing facilities, MSR financing facility, securities repo borrowings and HEI warehouse facility. For securities we have financed, our subordinate securities financing facility is non-marginable and our repo debt facilities and MSR facility (which also finances certificated MSRs we classify as securities) are marginable. Our subordinate securities financing facility, residential investor financing facilities and HEI warehouse facility are non-marginable. Additionally, our subordinate securities financing facility is subject to optional redemptions and interest rate step-ups. If we choose not to redeem these borrowings, the interest rates will increase, reducing our net interest income. If we choose to redeem the securities, we will need to secure alternative sources of financing for these assets or utilize available cash.

Delinquencies on residential investor bridge loans that are financed through warehouse facilities increased during 2024, and have been and are expected to continue to be a required use of our liquidity to the extent the terms of the applicable warehouse facility apply reduced financing advance rates to these loans (“advance rate step-downs”) or these loans become ineligible for financing under the terms of the warehouse facility. Loans pledged on certain of our warehouse facilities while they are performing, that subsequently become delinquent, may become subject to advance rate step downs or repurchase requirements. In 2023 and 2024, we entered into two new warehouse facilities specifically for non-performing residential investor bridge loans and have added capacity for such loans on existing warehouse lines. While we may have the ability to finance delinquent loans on other facilities with capacity for these types of loans, the advance rates are generally lower