Company: RWT-PA
Filing Date: 2025-11-07
Form Type: 10-Q
Source: 0000930236-25-000037
Chunk: 150

Company: REDWOOD TRUST INC
Filing Date: 2025-11-07
Form: 10-Q
Item: Part I, Item 1
Chunk 150
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 originated HEI that had been subject to negative fair value adjustments in the prior quarter, together with strong segment contribution from our Mortgage Banking operations in the current quarter.

Net interest income increased to $15 million from $14 million in the prior quarter, primarily driven by an increase in net interest income from our Sequoia Mortgage Banking operations of $6 million, which was offset by a decrease of $5 million in net interest income from our Redwood Investments portfolio. The increase in net interest income in our Sequoia Mortgage Banking operations was due to an increase in average loan balances and higher yields earned on residential consumer loans held-for-sale during the quarter. Lower net interest income in our Redwood Investments portfolio primarily reflected paydowns on our third-party securities during the third quarter, and to a lesser extent, continued third-party security sales of assets as part of our plans to wind-down the Legacy Investments portfolio.

Sequoia mortgage banking activities, net increased to $29 million from $24 million in the prior quarter. This increase was primarily due to a significant increase in lock volumes and distribution activity during the third quarter. Third-quarter lock volumes totaled $6.3 billion, up 75% from $3.6 billion in the second quarter. A significant portion of this lock volume increase was due to contribution from Aspire, which generated $1.2 billion of lock volume compared with $330 million in the prior quarter.

 CoreVest mortgage banking activities, net declined to $11 million from $16 million in the prior quarter, reflecting normalized loan sale margins relative to elevated margins in the second quarter of 2025, partially offset by higher funding volumes. CoreVest funded $521 million of loans during the third quarter, a 2% increase from $509 million in the second quarter of 2025.

Negative Investment fair value changes, net improved to $7 million, compared with $85 million in the prior quarter. The second quarter of 2025 included significant fair value adjustments on unsecuritized bridge and term loan portfolios within Legacy Investments, reflecting both realized and anticipated resolutions as well as credit deterioration in certain vintages. Negative fair value changes in the current quarter were primarily related to a negative $6 million investment fair value change, largely reflecting adjustments associated with completing the resolution or transfer of $484 million in fair value of Legacy unsecuritized bridge loans and REO assets.

HEI income, net was $0.