Company: RWT-PA
Filing Date: 2025-08-08
Form Type: 10-Q
Source: 0000930236-25-000029
Chunk: 11

Company: REDWOOD TRUST INC
Filing Date: 2025-08-08
Form: 10-Q
Item: Part I, Item 2
Chunk 11
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 sections that follows. 

Investment Fair Value Changes, Net

Investment fair value changes, net declined by $80 million, resulting in a loss of $85 million during the second quarter of 2025. The decline was primarily driven by negative fair value adjustments on our legacy unsecuritized bridge loans, and to a lesser extent, legacy unsecuritized term loans, reflecting both realized and anticipated near-term resolutions on these loans and other non-core legacy assets, as well as changes in the underlying performance of certain legacy unsecuritized bridge and term loan portfolios. In the second quarter of 2025, we began reporting these loans as part of our Legacy Investments segment.  

A more detailed analysis of the changes in this line item is included in the “Redwood Investments Segment” and "Legacy Investments Segment" section that follows. 

HEI Income, net

HEI income, net decreased by $23 million, resulting in a loss of $13 million during the second quarter of 2025. This was primarily driven by a $14 million fair value loss on our third-party originated HEI portfolio, which are legacy HEI options originated by third-parties and primarily acquired between 2019 and 2022. This fair value change reflected an anticipated near-term disposition, as we intend to a substantial portion of the portfolio during the third quarter of 2025. In the second quarter of 2025, we began reporting this HEI portfolio as part of our Legacy Investments segment. Furthermore, HEI income, net declined due to negative fair value adjustments due to a slowdown in home price appreciation and prepayment speeds during the quarter.

Additional detail on our HEI income is presented in Table 10.3 of our Notes to Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

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Operating Expenses 

Operating expenses increased by $4 million during the second quarter of 2025, primarily due to higher portfolio management costs related to specially-serviced residential investor bridge loans.

Additional detail on our General and administrative expenses is presented in Table 22.1 of our Notes to Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Provision for Income Taxes

Our provision for income taxes is almost entirely related to activity at our Taxable REIT Subsidiaries ("TRS"), which primarily includes our mortgage banking activities and MSR investments, as well as certain other investment and hedging activities