Company: RWT-PA
Filing Date: 2025-03-03
Form Type: S-3ASR
Source: 0001104659-25-019828
Chunk: 52

Company: REDWOOD TRUST INC
Filing Date: 2025-03-03
Form: S-3ASR
Chunk 52
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 indirectly
at least 75% of our gross income (excluding gross income from prohibited transactions, certain hedging transactions, and certain foreign
currency gains) from investments relating to real property or mortgages on real property, including “rents from real property,”
dividends from other REITs and, in certain circumstances, interest, or certain types of temporary investments. Second, in each taxable
year we must derive at least 95% of our gross income (excluding gross income from prohibited transactions, certain hedging transactions,
and certain foreign currency gains) from the real property investments described above or dividends, interest and gain from the sale
or disposition of stock or securities, or from any combination of the foregoing.

Interest Income

Interest income constitutes
qualifying mortgage interest for purposes of the 75% gross income test to the extent that the obligation is secured by a mortgage on
real property or on interests in real property and, if an obligation is secured by a mortgage on both real property and personal property,
the fair market value of such personal property does not exceed 15% of the total fair market value of all such property. In the event
that we invest in a mortgage loan that is secured by both real property and personal property, we may be required to apportion our interest
on the loan between interest on an obligation that is secured by real property (or by an interest in real property) and interest on an
obligation that is not so secured. Even if a loan is not secured by real property or is undersecured, the income that it generates may
nonetheless qualify for purposes of the 95% gross income test.

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To the extent that we derive
interest income from a loan where all or a portion of the amount of interest payable is contingent, such income generally will qualify
for purposes of the gross income tests only if it is based upon the gross receipts or sales and not the net income or profits of any
person. This limitation does not apply, however, to a mortgage loan where the borrower derives substantially all of its income from the
property from the leasing of substantially all of its interest in the property to tenants, to the extent that the rental income derived
by the borrower would qualify as rents from real property had we earned it directly.

To the extent that the terms
of a loan provide for contingent interest that is based on the cash proceeds realized upon the sale of the property securing the loan
(or a shared appreciation provision), income attributable to