Strong operating income and rising portfolio valuations drove exceptional financial results for the second quarter, including GAAP earnings of $0.66 per diluted share, well in excess of our $0.18 per share dividend for the second quarter.
This contributed to a 6.5% increase in our GAAP book value to $11.46 per share at June 30th.
Many of forecasted residential non-agency origination volumes have significantly increased in 2021 from the $435 billion of originations in 2020.
Against this backdrop, in the second quarter, we still locked close to $4 billion of jumbo loans at margins in the high end of our historical target range.
Leveraging a well-earned reputation as a nimble and reliable lifecycle lender, CoreVest our BPL platform eclipse $500 million of fundings for the quarter and a balance of single family rental and bridge originations.
In the first half of 2021 approximately 70% of Redwood's adjusted revenue was driven by our mortgage banking operations with the remaining 30% from our investment portfolio.
As we note in our updated investor supplement, there are now 13 states in which we have a lot more loans year-to-date than in each of the two years prior to the pandemic.
Collectively, locks in these states represent 35% of our year-to-date volume, a trend we continue to track with great interest.
Overall market observers now forecast single family home price appreciation for 2021 to be 14% and 16% for existing and new homes respectively.
Furthermore, caps in place since earlier this year on GSE purchases of non owner-occupied loans could expand on non-agency market by an estimated $25 to $35 billion per year.
Reflecting these supply demand dynamics, single-family rental occupancy rates remain at record highs with a weighted average of 95% for all US single-family rental homes, and single-family rents have remain meaningfully more than multifamily rents since early last year.
As Brooke will elaborate on book value increased 6.5% driven by a mix of asset appreciation through fair value changes and retained earnings from mortgage banking income earned at our taxable REIT subsidiary.
Collectively, our platforms distributed $3.6 billion of loans through direct loan sales and 4 securitizations.
Following a historic first quarter, our residential business registered $3.9 billion of lock volume in Q2.
As anticipated, purchase money loans were a key driver and represented a 60% share of the quarter lock volume.
Despite the interest rate backdrop and competitive pressures impacting GSE eligible production, the business delivered margins at the high end of our historical target range of 75 to 100 basis points reflecting the diversity of our distribution channels and strength of our pipeline management amid broader market volatility.
During the second quarter, we sold $1.8 billion of loans and completed 3 Sequoia securitizations for $1.5 billion.
Choice represented 15% of our locks in the second quarter, up materially from 5% in Q1.
Choice represented as much as 40% of our locks pre-pandemic, a reminder of how meaningful this channel can be.
CoreVest originated $527 million overall in the second quarter, up 37% from Q1.
Our funding mix consisted of $312 million of single family rental loans and $215 million of bridge loans.
Bridge production was up over 60% from Q1, an increase for the fourth consecutive quarter driven by increased usage by borrowers on lines of credit and several build-for-rent and multifamily loans coming online for funding.
In all, 67% of total originations in the second quarter were from repeat customers and the pipeline remains strong with a consistent mix of new loans and refinance opportunities.
SFR production remains strong in the second quarter with fundings up 23% from Q1.
Last week's follow on transaction once again priced at all time tights including a spread of 57 basis points on the AAA-rated securities.
We have now completed optional calls on two CoreVest securitizations, refinancing many of the underlying loans with a platform made 5 or more years ago.
Since formally launching Horizons earlier this year, we have completed 5 investments in our assessing an exciting pipeline of new opportunities.
We reported GAAP book value per share of $11.46 at June 30th, a 6.5% increase relative to the prior quarter end.
The primary drivers of the $0.70 increase in book value per share or GAAP earnings of $90 million or $0.77 per basic share, partially offset by our quarterly dividend of $0.18 per share.
We are pleased to have maintained a strong momentum for the first quarter, generating a total economic return on book value of 19% for the first half of 2021.
Our economic return spotlights not only our growth in book value, but also to our growth in our dividend which we raised by another 13% in the second quarter.
These are particularly strong results this quarter from our business purpose mortgage banking operations, which delivered a 52% after-tax operating return on capital with the net operating contribution of $20 million, which is up 80% from Q1 on a 37% increase in origination volumes.
Income from residential mortgage banking operations decreased from historic first quarter level while still delivering an after-tax operating return of 17%.
Even as loan purchase commitments were down 22% Q2 still marks our second highest volume on record.
Turning to the investment portfolio, we had $49 million of positive investment fair value changes primarily from our RPL assets, even further spread tightening, and improved credit performance this quarter which I'll expand upon shortly.
Net interest income increased approximately 20% or nearly $5 million from the first quarter of 2021 due to higher average balance of loans and inventory at our operating businesses, higher yield maintenance income from SFR securities, growth in our bridge loan portfolio and a decline in interest expense from our investment portfolio.
Shifting to the tax side, we had retaxable income of $0.11 per share versus $0.09 in the first quarter, primarily on higher net interest income.
Our taxable REIT subsidiaries earned $0.27 per share in Q2, down from $0.47 in Q1.
The decrease was primarily driven by lower mortgage banking income, partially offset by lower operating expenses and resulted in a $5 million lower tax provision for the quarter.
On a combined basis, our operating businesses generated an annualized after-tax return of over 28% in Q2, utilizing $483 million of average capital.
Specifically, we deployed $45 million of capital to Brisbane during the quarter and $50 million to SFR securities in core loans.
Working capital for our mortgage banking businesses represented less than 30% of our allocated capital, but produced approximately 65% of our adjusted revenue for the second quarter.
We settled the call rights on three Sequoia securitizations and one capital securitization during the second quarter, acquiring $83 million of seasoned jumbo loans and $45 million of seasoned SFR loans all at par, which benefited book value by $0.05 per share.
We estimate about $250 million to $300 million of expected call activity across capital and Sequoia through the remainder of the year and we estimate at current market conditions the underlying loans can generally be sold or resecuritized well above their par value creating further potential upside to earnings and book value of approximately $0.68 per share for 2021.
Furthermore, we project another $2 billion of loans that could become callable by the end of 2024 with the majority of those currently expected to occur by the end of 2022, and that could potentially add another $0.63 to $0.65 per share on average to book value depending on execution.
Specifically Choice and RPL securities experience improved 90-day delinquencies during the quarter with select remaining flat from Q1 and absolute low levels of 80 basis points.
We added over $750 million of financing capacity to support growth of our operating platforms including the refinance of a $242 million bridge loan financing which contributed to a roughly 100 basis point cost of funds improvement for our overall investment portfolio.
Importantly, the second quarter marked another record for Redwood with combined $3.3 billion of residential whole loan sales and securitizations underscoring our ability to source and distribute in side.
Our recourse leverage was marginally higher at 2.2 times at the end of the second quarter as we incurred additional warehouse borrowings to finance higher loan inventory.
At June 30th our unrestricted cash was $421 million, which is over half the size of our outstanding marginable debt, and at quarter end, our investable capital was $175 million, not including $100 million of incremental capital generated from a secured term financing we closed in early July.
As we look ahead, we remain on track to keep pace with the robust volumes we've seen through the first half of the year anticipating another $6 to $8 billion of jumbo lock and approximately $1 billion of BPL originations for the second half of the year, which would have nearly doubled the volume of that business year-over-year.
For the remainder of the year, we anticipate generating an adjusted return on allocated capital between 20% to 25% from our mortgage banking operations, and 10% to 12% for the investment portfolio.
And finally, in terms of the potential sources and book value upside we began the year with $444 million of net accretable discount in our portfolio, and even after growing book value of $1.55 per share or roughly $175 million since that time we have approximately $2.60 per share or $300 million of remaining discount in the portfolio that we have the potential to recognize over time.

Summary:
Strong operating income and rising portfolio valuations drove exceptional financial results for the second quarter, including GAAP earnings of $0.66 per diluted share, well in excess of our $0.18 per share dividend for the second quarter.
This contributed to a 6.5% increase in our GAAP book value to $11.46 per share at June 30th.
We reported GAAP book value per share of $11.46 at June 30th, a 6.5% increase relative to the prior quarter end.