Company: RWT-PA
Filing Date: 2025-03-03
Form Type: 10-K
Source: 0000930236-25-000007
Chunk: 109

Company: REDWOOD TRUST INC
Filing Date: 2025-03-03
Form: 10-K
Item: Item 16
Chunk 109
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 in a previous period(1,649)(50)Reduction to allowance for securities sold during the period— (308)Ending balance of allowance for credit losses$921 $2,482 

F- 47

REDWOOD TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2024

Note 10. Home Equity Investments (HEI)

We invest in HEI contracts from third party originators and in the third quarter of 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 securitization entities that we consolidated in accordance with GAAP, and have elected to account for them under the CFE election. As such, market valuation changes for the securitized HEI are based on the fair value of the associated ABS issued by the entity, including the interest we own, and are reported in HEI income, net on our Consolidated statements of income.The following table presents our HEI at December 31, 2024 and 2023.Table 10.1 – Home Equity Investments(In Thousands)December 31, 2024December 31, 2023HEI at Redwood$257,315 $244,719 HEI held at consolidated HEI securitization entities332,470 305,717 Total Home Equity Investments$589,785 $550,436 The following table details our HEI activity during the years ended December 31, 2024 and 2023.Table 10.2 – Activity of HEIYear Ended December 31, 2024Year Ended December 31, 2023(In Thousands)HEI at RedwoodSecuritized HEIHEI at RedwoodSecuritized HEIFair value of HEI purchased and originated$2,043 $— $136,445 $— Net market valuation gains (losses) recorded28,739 57,948 30,750 23,177 The following table provides the components of