Company: RWT-PA
Filing Date: 2025-08-08
Form Type: 10-Q
Source: 0000930236-25-000029
Chunk: 261

Company: REDWOOD TRUST INC
Filing Date: 2025-08-08
Form: 10-Q
Item: Part I, Item 8
Chunk 261
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IDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2025(Unaudited) Note 8. Residential Investor Loans - (continued)

Loan ModificationsWe may amend or modify a loan depending on the loan's specific facts and circumstances. These loan modifications typically include amendments and restructuring and include terms such as additional time for the borrower to refinance or sell the collateral property, interest rate reductions, and/or deferral of scheduled principal and/or interest payments. In some instances, a loan amendment or restructuring may bring the loan out of delinquent status. In other instances, including in the case of Build for Rent ("BFR") loans, a loan modification may amend the project's underlying budget (including allocation of hard/soft costs, interest reserves, and other items) or construction or completion milestones, if warranted, based on progress versus the initial budget. Because they finance the construction of rental housing, many BFR projects do not generate net operating income until the later stages of the loan term. As such, BFR loans are sized to include allocations for interest expense as well as construction costs and other standard budget items. We utilize a rigorous and consistently implemented fair value process when evaluating these loans, which involves management’s review of updated appraisals, collateral performance, sales cost estimates, and independent market data when available. This approach, conducted in accordance with GAAP, is designed to ensure valuations reflect current conditions and project-specific risks. The actual amounts ultimately recovered—whether through foreclosure, collateral sale, or alternative resolutions, such as discounted payoffs or loan sales—may differ significantly from our estimates and could materially affect future earnings. In exchange for a modification, we may receive a partial repayment of principal, a short-term accrual of capitalized interest for a portion of interest due, a capital infusion to replenish interest or capital improvement reserves, and/or termination of all or a portion of the remaining unfunded loan commitment.For the three months ended June 30, 2025 and December 31, 2024, we made modifications to our legacy unsecuritized bridge and term loan portfolios. These modifications included adjustments to the contractual interest rates. In certain cases, these adjustments involve deferrals of interest. Some modifications are limited to extensions of loan maturities and/or covenant terms.We may also offer maturity extensions, subject to mandatory partial repayments during the loan term. In certain cases, we implement a hard cash management structure (enabling Redwood, as the lender, to control all cash flows at the property