Company: RWT-PA
Filing Date: 2025-11-07
Form Type: 10-Q
Source: 0000930236-25-000037
Chunk: 36

Company: REDWOOD TRUST INC
Filing Date: 2025-11-07
Form: 10-Q
Item: Part I, Item 2
Chunk 36
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 and Investment fair value losses, net of $7 million. During the third quarter of 2025, we transferred a portfolio of unsecuritized bridge loans and REO totaling $484 million in fair value to newly formed partnership structure (the “Legacy Trust”). In connection with this transfer, we recognized a negative $6 million investment fair value change, reflecting adjustments associated with completing the transaction.

 Capital allocated to Legacy Investments declined by $63 million or 12% at September 30, 2025 from June 30, 2025, largely due to dispositions and paydowns on our Legacy unsecuritized bridge and term loan portfolios and HEI portfolio. Through October 2025, we further reduced our capital allocated to our Legacy investments through the sale of our SLST re-performing loan securities. Looking ahead, we intend to continue reducing our capital allocation to Legacy Investments, targeting a decrease to approximately 20% by year-end 2025 from 28% at the end of the third quarter. While subject to market conditions and execution timing, we are targeting reducing the percentage of our capital allocated to Legacy Investments down to a range of 0% to 5%. As we execute on this reallocation strategy, we believe there is an opportunity for consolidated returns to improve.

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

Legacy Investments reported a $128 million segment loss in the nine months ended September 30, 2025, driven by Investment fair value losses, net of $91 million. The second quarter of 2025 included significant fair value adjustments on Legacy unsecuritized bridge and term loans, reflecting both realized and anticipated resolutions as well as credit deterioration in certain vintages. In the third quarter of 2025, we recognized an additional negative $6 million investment fair value change, reflecting adjustments associated with completing the transfer of a portfolio of unsecuritized bridge loans and REO totaling $484 million in fair value to the Legacy Trust. 

Investments Detail and Activity

The following table presents a balance sheet summary for our Legacy Investments segment as of September 30, 2025 and June 30, 2025. 

Table 13 – Legacy Investments Balance Sheet Summary

(In Thousands)September 30, 2025June 30, 2025ChangeLegacy Unsecuritized Bridge Loans$441,359 $935,946 $(494,587)Home Equity Investments (