Cover Page
Cover Page - shares | 9 Months Ended | |
Sep. 30, 2019 | Nov. 05, 2019 | |
Cover page. | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2019 | |
Document Transition Report | false | |
Entity File Number | 1-13759 | |
Entity Registrant Name | REDWOOD TRUST INC | |
Entity Incorporation, State or Country Code | MD | |
Entity Tax Identification Number | 68-0329422 | |
Entity Address Address Line | One Belvedere Place, Suite 300 | |
Entity Address City Or Town | Mill Valley, | |
Entity Address, State or Province | CA | |
Entity Address Postal Zip Code | 94941 | |
City Area Code | 415 | |
Local Phone Number | 389-7373 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity small business | false | |
Emerging growth company | false | |
Entity Shell Company | false | |
Title of 12(b) Security | Common stock, par value $0.01 per share | |
Trading Symbol | RWT | |
Security Exchange Name | NYSE | |
Entity Common Stock, Shares Outstanding | 112,689,511 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q3 | |
Entity Central Index Key | 0000930236 | |
Current Fiscal Year End Date | --12-31 | |
Amendment Flag | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 | |
ASSETS | |||
Real estate securities, at fair value | [1] | $ 1,285,426 | $ 1,452,494 |
Other investments | [1] | 347,707 | 438,518 |
Cash and cash equivalents | [1] | 394,628 | 175,764 |
Restricted cash | [1] | 111,518 | 29,313 |
Goodwill and intangible assets | [1] | 49,121 | 0 |
Accrued interest receivable | [1] | 57,464 | 47,105 |
Derivative assets | [1] | 43,649 | 35,789 |
Other assets | [1] | 377,310 | 217,825 |
Total Assets | [1] | 15,476,283 | 11,937,406 |
Liabilities | |||
Short-term debt, net | [1],[2] | 1,980,817 | 2,400,279 |
Accrued interest payable | [1] | 46,881 | 42,528 |
Derivative liabilities | [1] | 234,011 | 84,855 |
Accrued expenses and other liabilities | [1] | 129,742 | 78,719 |
Asset-backed securities issued, at fair value | [1] | 8,346,051 | 5,410,073 |
Long-term debt, net | [1] | 2,953,722 | 2,572,158 |
Total liabilities | [1] | 13,691,224 | 10,588,612 |
Commitments and Contingencies (see Note 16) | [1] | ||
Equity | |||
Common stock, par value $0.01 per share, 270,000,000 and 180,000,000 shares authorized; 112,101,731 and 84,884,344 issued and outstanding | [1] | 1,121 | 849 |
Additional paid-in capital | [1] | 2,244,834 | 1,811,422 |
Accumulated other comprehensive income | [1] | 38,124 | 61,297 |
Cumulative earnings | [1] | 1,529,981 | 1,409,941 |
Cumulative distributions to stockholders | [1] | (2,029,001) | (1,934,715) |
Total equity | [1] | 1,785,059 | 1,348,794 |
Total Liabilities and Equity | [1] | 15,476,283 | 11,937,406 |
Residential loans, held-for-sale, at fair value | |||
ASSETS | |||
Loans, at fair value | [1] | 925,887 | 1,048,801 |
Residential loans, held-for-investment, at fair value | |||
ASSETS | |||
Loans, at fair value | [1] | 7,755,916 | 6,205,941 |
Business purpose residential loans, at fair value | |||
ASSETS | |||
Loans, at fair value | [1] | 336,035 | 141,258 |
Multifamily loans, held-for-investment, at fair value | |||
ASSETS | |||
Loans, at fair value | [1] | $ 3,791,622 | $ 2,144,598 |
[1] | Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At September 30, 2019 and December 31, 2018 , assets of consolidated VIEs totaled $9,596,537 and $6,331,191 , respectively. At September 30, 2019 and December 31, 2018 , liabilities of consolidated VIEs totaled $8,582,595 and $5,709,807 , respectively. See Note 4 for further discussion. | ||
[2] | Includes $201 million of convertible notes, which were reclassified from Long-term debt, net to Short-term debt as the maturity of the notes was less than one year as of November 15, 2018. See Note 13 for further discussion. |
CONSOLIDATED BALANCE SHEETS (PA
CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Common stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (shares) | 270,000,000 | 180,000,000 |
Common stock, issued (shares) | 112,101,731 | 84,884,344 |
Common stock, outstanding (shares) | 112,101,731 | 84,884,344 |
Variable interest held by entity, assets | $ 9,596,537 | $ 6,331,191 |
Variable interest held by entity, liabilities | $ 8,582,595 | $ 5,709,807 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Interest Income | ||||
Residential loans | $ 77,070 | $ 63,265 | $ 230,308 | $ 169,010 |
Business purpose residential loans | 5,446 | 1,445 | 12,231 | 1,445 |
Multifamily loans | 36,829 | 5,578 | 94,134 | 5,578 |
Real estate securities | 23,047 | 27,063 | 72,514 | 79,054 |
Other interest income | 7,725 | 2,046 | 20,513 | 3,905 |
Total interest income | 150,117 | 99,397 | 429,700 | 258,992 |
Interest Expense | ||||
Short-term debt | (24,239) | (14,146) | (70,732) | (40,756) |
Asset-backed securities issued | (71,065) | (27,421) | (196,473) | (55,171) |
Long-term debt | (21,300) | (22,784) | (64,895) | (58,151) |
Total interest expense | (116,604) | (64,351) | (332,100) | (154,078) |
Net Interest Income | 33,513 | 35,046 | 97,600 | 104,914 |
Non-interest Income | ||||
Mortgage banking activities, net | 9,515 | 11,224 | 40,984 | 48,396 |
Investment fair value changes, net | 11,444 | 10,332 | 34,741 | 12,830 |
Other income, net | 1,825 | 3,453 | 7,819 | 8,893 |
Realized gains, net | 4,714 | 7,275 | 18,227 | 21,352 |
Total non-interest income, net | 27,498 | 32,284 | 101,771 | 91,471 |
Operating expenses | (26,815) | (21,490) | (76,229) | (63,529) |
Net Income before Provision for Income Taxes | 34,196 | 45,840 | 123,142 | 132,856 |
Benefit from (provision for) income taxes | 114 | (4,919) | (3,102) | (12,343) |
Net Income | $ 34,310 | $ 40,921 | $ 120,040 | $ 120,513 |
Basic earnings per common share (in dollars per share) | $ 0.33 | $ 0.49 | $ 1.20 | $ 1.51 |
Diluted earnings per common share (in dollars per share) | $ 0.31 | $ 0.42 | $ 1.09 | $ 1.30 |
Basic weighted average shares outstanding (in shares) | 101,872,126 | 80,796,856 | 97,214,064 | 77,211,188 |
Diluted weighted average shares outstanding (in shares) | 136,522,709 | 114,682,688 | 131,202,689 | 107,792,029 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Statement of Comprehensive Income [Abstract] | ||||
Net Income | $ 34,310 | $ 40,921 | $ 120,040 | $ 120,513 |
Other comprehensive loss: | ||||
Net unrealized gain (loss) on available-for-sale securities | 4,484 | (2,408) | 19,764 | (9,749) |
Reclassification of unrealized gain on available-for-sale securities to net income | (3,492) | (5,686) | (15,807) | (19,821) |
Net unrealized (loss) gain on interest rate agreements | (11,791) | (27,130) | ||
Net unrealized (loss) gain on interest rate agreements | 4,801 | 16,649 | ||
Total other comprehensive loss | (10,799) | (3,293) | (23,173) | (12,921) |
Total Comprehensive Income | $ 23,511 | $ 37,628 | $ 96,867 | $ 107,592 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income | Cumulative Earnings | Cumulative Distributions to Stockholders |
Beginning balance (in shares) at Dec. 31, 2017 | 76,599,972 | |||||
Balance at beginning of period at Dec. 31, 2017 | $ 1,212,287 | $ 766 | $ 1,673,845 | $ 85,248 | $ 1,290,341 | $ (1,837,913) |
Increase (Decrease) in Stockholders' Equity | ||||||
Net Income | 120,513 | 120,513 | ||||
Other comprehensive loss | (12,921) | (12,921) | ||||
Issuance of common stock (in shares) | 7,187,500 | |||||
Issuance of common stock | 117,036 | $ 72 | 116,964 | |||
Employee stock purchase and incentive plans (in shares) | 183,638 | |||||
Employee stock purchase and incentive plans | (100) | $ 1 | (101) | |||
Non-cash equity award compensation | 10,783 | 10,783 | ||||
Share repurchases (in shares) | (1,040,829) | |||||
Share repurchases | (15,544) | $ (10) | (15,534) | |||
Common dividends declared | (70,727) | (70,727) | ||||
Ending balance (in shares) at Sep. 30, 2018 | 82,930,281 | |||||
Balance at End of Period at Sep. 30, 2018 | 1,361,327 | $ 829 | 1,785,957 | 72,327 | 1,410,854 | (1,908,640) |
Beginning balance (in shares) at Jun. 30, 2018 | 75,742,719 | |||||
Balance at beginning of period at Jun. 30, 2018 | 1,228,955 | $ 757 | 1,665,749 | 75,620 | 1,369,933 | (1,883,104) |
Increase (Decrease) in Stockholders' Equity | ||||||
Net Income | 40,921 | 40,921 | ||||
Other comprehensive loss | (3,293) | (3,293) | ||||
Issuance of common stock (in shares) | 7,187,500 | |||||
Issuance of common stock | 117,036 | $ 72 | 116,964 | |||
Employee stock purchase and incentive plans (in shares) | 62 | |||||
Employee stock purchase and incentive plans | 94 | 94 | ||||
Non-cash equity award compensation | 3,150 | 3,150 | ||||
Common dividends declared | (25,536) | (25,536) | ||||
Ending balance (in shares) at Sep. 30, 2018 | 82,930,281 | |||||
Balance at End of Period at Sep. 30, 2018 | 1,361,327 | $ 829 | 1,785,957 | 72,327 | 1,410,854 | (1,908,640) |
Beginning balance (in shares) at Dec. 31, 2018 | 84,884,344 | |||||
Balance at beginning of period at Dec. 31, 2018 | 1,348,794 | $ 849 | 1,811,422 | 61,297 | 1,409,941 | (1,934,715) |
Increase (Decrease) in Stockholders' Equity | ||||||
Net Income | 120,040 | 120,040 | ||||
Other comprehensive loss | (23,173) | (23,173) | ||||
Issuance of common stock (in shares) | 26,666,191 | |||||
Issuance of common stock | 418,591 | $ 267 | 418,324 | |||
Direct stock purchase and dividend reinvestment plan (in shares) | 399,838 | |||||
Direct stock purchase and dividend reinvestment plan | 6,307 | $ 4 | 6,303 | |||
Employee stock purchase and incentive plans (in shares) | 151,358 | |||||
Employee stock purchase and incentive plans | (1,766) | $ 1 | (1,767) | |||
Non-cash equity award compensation | 10,552 | 10,552 | ||||
Common dividends declared | (94,286) | (94,286) | ||||
Ending balance (in shares) at Sep. 30, 2019 | 112,101,731 | |||||
Balance at End of Period at Sep. 30, 2019 | 1,785,059 | $ 1,121 | 2,244,834 | 38,124 | 1,529,981 | (2,029,001) |
Beginning balance (in shares) at Jun. 30, 2019 | 97,715,021 | |||||
Balance at beginning of period at Jun. 30, 2019 | 1,564,032 | $ 977 | 2,013,044 | 48,923 | 1,495,671 | (1,994,583) |
Increase (Decrease) in Stockholders' Equity | ||||||
Net Income | 34,310 | 34,310 | ||||
Other comprehensive loss | (10,799) | (10,799) | ||||
Issuance of common stock (in shares) | 14,375,000 | |||||
Issuance of common stock | 228,483 | $ 144 | 228,339 | |||
Employee stock purchase and incentive plans (in shares) | 11,710 | |||||
Employee stock purchase and incentive plans | 154 | 154 | ||||
Non-cash equity award compensation | 3,297 | 3,297 | ||||
Common dividends declared | (34,418) | (34,418) | ||||
Ending balance (in shares) at Sep. 30, 2019 | 112,101,731 | |||||
Balance at End of Period at Sep. 30, 2019 | $ 1,785,059 | $ 1,121 | $ 2,244,834 | $ 38,124 | $ 1,529,981 | $ (2,029,001) |
CONSOLIDATED STATEMENTS OF CH_2
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Statement of Stockholders' Equity [Abstract] | ||||
Common dividends declared (in dollars per share) | $ 0.30 | $ 0.30 | $ 0.90 | $ 0.88 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | ||
Cash Flows From Operating Activities: | |||
Net Income | $ 120,040 | $ 120,513 | |
Adjustments to reconcile net income to net cash used in operating activities: | |||
Amortization of premiums, discounts, and securities issuance costs, net | (3,486) | (11,091) | |
Depreciation and amortization of non-financial assets | 5,673 | 922 | |
Originations of held-for-sale loans | (124,392) | 0 | |
Purchases of held-for-sale loans | (4,002,509) | (5,596,326) | |
Proceeds from sales of held-for-sale loans | 2,971,811 | 4,097,211 | |
Principal payments on held-for-sale loans | 77,100 | 51,853 | |
Net settlements of derivatives | (32,902) | 36,721 | |
Non-cash equity award compensation expense | 10,552 | 10,783 | |
Market valuation adjustments | (62,720) | (53,666) | |
Realized gains, net | (18,227) | (21,352) | |
Net change in: | |||
Accrued interest receivable and other assets | (141,197) | (32,722) | |
Accrued interest payable and accrued expenses and other liabilities | (1,049) | 34,137 | |
Net cash used in operating activities | (1,201,306) | (1,363,017) | |
Cash Flows From Investing Activities: | |||
Originations of loans held-for-investment | (171,915) | 0 | |
Purchases of loans held-for-investment | (49,489) | (111,231) | |
Proceeds from sales of loans held-for-investment | 9,422 | 0 | |
Principal payments on loans held-for-investment | 1,091,652 | 550,973 | |
Purchases of real estate securities | (309,839) | (482,150) | |
Proceeds from sales of real estate securities | 487,469 | 432,199 | |
Principal payments on real estate securities | 62,711 | 61,278 | |
Purchases of servicer advance investments | (69,610) | 0 | |
Principal repayments from servicer advance investments | 150,512 | 0 | |
Acquisition of 5 Arches, net of cash acquired | (3,714) | 0 | |
Net investment in participation in loan warehouse facility | 38,209 | (37,814) | |
Net investment in multifamily loan fund | (33,090) | 0 | |
Other investing activities, net | (24,989) | (3,731) | |
Net cash provided by investing activities | 915,516 | 354,567 | |
Cash Flows From Financing Activities: | |||
Proceeds from borrowings on short-term debt | 4,009,083 | 4,760,083 | |
Repayments on short-term debt | (4,435,823) | (5,274,664) | |
Proceeds from issuance of asset-backed securities | 1,020,136 | 1,658,848 | |
Repayments on asset-backed securities issued | (720,651) | (305,528) | |
Proceeds from issuance of long-term debt | 387,053 | 199,000 | |
Deferred long-term debt issuance costs paid | (7,023) | (4,977) | |
Net proceeds from issuance of common stock | 426,970 | 117,311 | |
Net payments on repurchase of common stock | 0 | (16,315) | |
Dividends paid | (94,286) | (70,727) | |
Other financing activities, net | 1,400 | (619) | |
Net cash provided by financing activities | 586,859 | 1,062,412 | |
Net increase in cash, cash equivalents and restricted cash | 301,069 | 53,962 | |
Cash, cash equivalents and restricted cash at beginning of period | [1] | 205,077 | 146,807 |
Cash, cash equivalents, and restricted cash at end of period | [1] | 506,146 | 200,769 |
Cash paid during the period for: | |||
Interest | 319,036 | 139,003 | |
Taxes | 6,977 | 6,372 | |
Supplemental Noncash Information: | |||
Real estate securities retained from loan securitizations | 7,759 | 46,872 | |
Retention of mortgage servicing rights from loan securitizations and sales | 868 | 0 | |
Transfers from loans held-for-sale to loans held-for-investment | 1,361,015 | 1,981,170 | |
Transfers from loans held-for-investment to loans held-for-sale | 22,808 | 15,717 | |
Transfers from residential loans to real estate owned | 5,280 | 2,139 | |
Right-of-use asset obtained in exchange for operating lease liability | 13,016 | 0 | |
Residential loans | |||
Cash Flows From Investing Activities: | |||
Purchases of securities held in consolidated securitization trusts | (193,212) | 0 | |
Supplemental Noncash Information: | |||
Consolidation of multifamily loans held in securitization trusts | 1,190,995 | 0 | |
Consolidation of multifamily ABS | 997,783 | 0 | |
Multifamily loans | |||
Cash Flows From Investing Activities: | |||
Purchases of securities held in consolidated securitization trusts | (68,601) | (54,957) | |
Supplemental Noncash Information: | |||
Consolidation of multifamily loans held in securitization trusts | 1,481,554 | 946,650 | |
Consolidation of multifamily ABS | $ 1,408,002 | $ 880,602 | |
[1] | Cash, cash equivalents, and restricted cash at September 30, 2019 includes cash and cash equivalents of $395 million and restricted cash of $112 million , and at December 31, 2018 includes cash and cash equivalents of $176 million and restricted cash of $29 million . |
CONSOLIDATED STATEMENTS OF CA_2
CONSOLIDATED STATEMENTS OF CASH FLOWS (PARENTHETICAL) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 | |
Statement of Cash Flows [Abstract] | |||
Cash and cash equivalents | [1] | $ 394,628 | $ 175,764 |
Restricted cash | [1] | $ 111,518 | $ 29,313 |
[1] | Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At September 30, 2019 and December 31, 2018 , assets of consolidated VIEs totaled $9,596,537 and $6,331,191 , respectively. At September 30, 2019 and December 31, 2018 , liabilities of consolidated VIEs totaled $8,582,595 and $5,709,807 , respectively. See Note 4 for further discussion. |
Organization
Organization | 9 Months Ended |
Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Organization Redwood Trust, Inc., together with its subsidiaries, is a specialty finance company focused on making credit-sensitive investments in single-family residential and multifamily mortgages and related assets and engaging in mortgage banking activities. Our goal is to provide attractive returns to shareholders through a stable and growing stream of earnings and dividends, as well as through capital appreciation. We operate our business in two segments: Investment Portfolio and Mortgage Banking. Our primary sources of income are net interest income from our investment portfolio and non-interest income from our mortgage banking activities. Net interest income consists of the interest income we earn on investments less the interest expense we incur on borrowed funds and other liabilities. Income from mortgage banking activities is generated through the acquisition of residential loans and their subsequent sale or securitization, as well as through the origination of business purpose residential loans. Redwood Trust, Inc. has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), beginning with its taxable year ended December 31, 1994. We generally refer, collectively, to Redwood Trust, Inc. and those of its subsidiaries that are not subject to subsidiary-level corporate income tax as “the REIT” or “our REIT.” We generally refer to subsidiaries of Redwood Trust, Inc. that are subject to subsidiary-level corporate income tax as “our operating subsidiaries” or “our taxable REIT subsidiaries” or “TRS.” |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The consolidated financial statements presented herein are at September 30, 2019 and December 31, 2018 , and for the three and nine months ended September 30, 2019 and 2018 . These interim unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and note disclosures normally included in our annual financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") — as prescribed by the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) — have been condensed or omitted in these interim financial statements according to these SEC rules and regulations. Management believes that the disclosures included in these interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the company's Annual Report on Form 10-K for the year ended December 31, 2018 . In the opinion of management, all normal and recurring adjustments to present fairly the financial condition of the company at September 30, 2019 and results of operations for all periods presented have been made. The results of operations for the three and nine months ended September 30, 2019 should not be construed as indicative of the results to be expected for the full year. Principles of Consolidation In accordance with GAAP, we determine whether we must consolidate transferred financial assets and variable interest entities (“VIEs”) for financial reporting purposes. We currently consolidate the assets and liabilities of certain Sequoia securitization entities issued prior to 2012 where we maintain an ongoing involvement ("Legacy Sequoia"), as well as entities formed in connection with the securitization of Redwood Choice expanded-prime loans beginning in the third quarter of 2017 ("Sequoia Choice"). In addition, we consolidated the assets and liabilities of certain Freddie Mac K-Series securitizations we invested in beginning in the third quarter of 2018, and the assets and liabilities of certain Freddie Mac SLST securitizations we invested in beginning in the fourth quarter of 2018. Each securitization entity is independent of Redwood and of each other and the assets and liabilities are not owned by and are not legal obligations of Redwood Trust, Inc. Our exposure to these entities is primarily through the financial interests we have purchased or retained, although for the consolidated Sequoia entities we are exposed to certain financial risks associated with our role as a sponsor, servicing administrator, or depositor of these entities or as a result of our having sold assets directly or indirectly to these entities. For financial reporting purposes, the underlying loans owned at the consolidated Sequoia and Freddie Mac SLST entities are shown under Residential loans, held-for-investment, at fair value, and the underlying loans at the consolidated Freddie Mac K-Series are shown under Multifamily loans, held-for-investment, at fair value, on our consolidated balance sheets. The asset-backed securities (“ABS”) issued to third parties by these entities are shown under ABS issued. In our consolidated statements of income, we recorded interest income on the loans owned at these entities and interest expense on the ABS issued by these entities as well as other income and expenses associated with these entities' activities. See Note 14 for further discussion on ABS issued. Beginning in the fourth quarter of 2018, we consolidated two partnerships ("Servicing Investment" entities) through which we have invested in servicing-related assets. We maintain an 80% ownership interest in each entity and have determined that we are the primary beneficiary of these partnerships. Beginning in the first quarter of 2019, we consolidated 5 Arches, LLC ("5 Arches"), an originator of business purpose residential loans, pursuant to the exercise of our purchase option and the acquisition of the remaining equity in the company. See Note 4 for further discussion on principles of consolidation. Use of Estimates The preparation of financial statements requires us to make a number of significant estimates. These include estimates of fair value of certain assets and liabilities, amounts and timing of credit losses, prepayment rates, and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the consolidated financial statements and the reported amounts of certain revenues and expenses during the reported periods. It is likely that changes in these estimates (e.g., valuation changes due to supply and demand, credit performance, prepayments, interest rates, or other reasons) will occur in the near term. Our estimates are inherently subjective in nature and actual results could differ from our estimates and the differences could be material. Acquisition of 5 Arches, LLC On March 1, 2019, we completed the acquisition of the remaining 80% interest in 5 Arches, an originator of business purpose residential loans. In May 2018, Redwood acquired a 20% minority interest in 5 Arches for $10 million in cash, with a one -year option to purchase all remaining equity in the company. At closing, we paid approximately $13 million of cash, and the remainder of the consideration, which could total up to an additional $27 million , will be paid in a mix of cash and Redwood common stock and is contingent on the achievement of certain specified loan origination thresholds over the next two years . We accounted for the acquisition of 5 Arches under the acquisition method of accounting pursuant to ASC 805. We performed the preliminary purchase price allocation and recorded underlying assets acquired and liabilities assumed based on their estimated fair values using the information available as of the acquisition date, with the excess of the purchase price allocated to goodwill. Through September 30, 2019 , there have been no significant changes to our preliminary purchase price allocation, which is summarized in the following table. Table 2.1 – 5 Arches Purchase Price Allocation (In Thousands) March 1, 2019 Purchase price: Cash $ 12,575 Contingent consideration, at fair value 24,621 Purchase option, at fair value 5,082 Equity method investment, at fair value 8,052 Total consideration $ 50,330 Allocated to: Tangible net assets acquired (1) $ 985 Goodwill 28,747 Intangible assets 24,800 Deferred tax liability (4,202 ) Total net assets acquired $ 50,330 (1) 5 Arches net assets acquired consisted of assets of $19 million and liabilities of $18 million as of March 1, 2019. Because we owned a 20% noncontrolling interest in 5 Arches immediately before obtaining full control, we remeasured our initial minority investment and purchase option at their acquisition-date fair values using the income approach, which resulted in a gain of $2 million that was recorded in Other income, net on our consolidated statements of income during the three months ended March 31, 2019. As part of this acquisition, we identified and recorded finite-lived intangible assets totaling $25 million . The amortization period for each of these assets and the activity for the period from March 1, 2019 to September 30, 2019 is summarized in the table below. Table 2.2 – Intangible Assets – Activity (Dollars in Thousands) Carrying Value at December 31, 2018 Additions Amortization Expense Carrying Value at September 30, 2019 Weighted Average Amortization Period (in years) Finite-lived intangible assets: Broker network $ — $ 18,100 $ (2,112 ) $ 15,988 5 Non-compete agreements — 2,900 (564 ) 2,336 3 Loan administration fees on existing loan assets — 2,600 (1,517 ) 1,083 1 Tradename — 1,200 (233 ) 967 3 Total $ — $ 24,800 $ (4,426 ) $ 20,374 4 All of our intangible assets are amortized on a straight-line basis. Estimated amortization expense for the remainder of 2019 and the following years is summarized in the table below. Table 2.3 – Intangible Asset Amortization Expense by Year (In Thousands) September 30, 2019 2019 (3 months) $ 1,897 2020 5,420 2021 4,987 2022 3,848 2023 and thereafter 4,222 Total Future Intangible Asset Amortization $ 20,374 We recorded goodwill of $29 million as a result of the total consideration exceeding the fair value of the net assets acquired. The goodwill was attributed to the expected business synergies and expansion into business purpose loan markets, as well as access to the knowledgeable and experienced workforce continuing to provide services to the business. We expect $3 million of our goodwill balance to be deductible for tax purposes. The following table presents the goodwill activity for the nine months ended September 30, 2019 . Table 2.4 – Goodwill – Activity (In Thousands) Nine Months Ended September 30, 2019 Beginning balance $ — Goodwill recognized from 5 Arches acquisition 28,728 Measurement period adjustment 19 Impairment — Ending Balance $ 28,747 The liability resulting from the contingent consideration arrangement was recorded at its acquisition-date fair value of $25 million as part of total consideration for the acquisition of 5 Arches. At September 30, 2019 , our estimated fair value of this contingent liability was $25 million and was recorded as a component of Accrued expenses and other liabilities on our consolidated balance sheets. See Note 16 for additional information on our contingent consideration liability. The following unaudited pro forma financial information presents Net interest income, Non-interest income, and Net income of Redwood and 5 Arches combined, as if the acquisition occurred as of January 1, 2018. These pro forma amounts have been adjusted to include the amortization of intangible assets for both periods, and to exclude the income statement impacts related to our equity method investment in 5 Arches. The unaudited pro forma financial information is not intended to represent or be indicative of the consolidated financial results of operations that would have been reported if the acquisition had been completed as of January 1, 2018 and should not be taken as indicative of our future consolidated results of operations. During the period from March 1, 2019 to September 30, 2019 , 5 Arches had mortgage banking income of $12 million and a net loss of $3 million . Included in the net loss for this period was intangible asset amortization expense of $4 million . Table 2.5 – Unaudited Pro Forma Financial Information Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Supplementary pro forma information: Net interest income $ 33,513 $ 35,231 $ 98,101 $ 105,660 Non-interest income 27,498 22,280 98,780 84,684 Net income 34,310 32,636 115,809 111,072 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Significant Accounting Policies Included in Note 3 to the Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2018 is a summary of our significant accounting policies. Provided below is a summary of additional accounting policies that are significant to the company’s consolidated financial position and results of operations for the three and nine months ended September 30, 2019 . Business Combinations We use the acquisition method of accounting for business combinations, under which the purchase price is allocated to the fair values of the assets acquired and liabilities assumed at the acquisition date. The excess of the purchase price over the amount allocated to the assets acquired and liabilities assumed is recorded as goodwill. Adjustments to the values of the assets acquired and liabilities assumed that could be made during the measurement period, which could be up to one year after the acquisition date, are recorded in the period in which the adjustment is identified, with a corresponding offset to goodwill. Any adjustments made after the measurement period are recorded in the consolidated statements of income. Acquisition-related costs are expensed as incurred. Goodwill and Intangible Assets Significant judgment is required to estimate the fair value of intangible assets and in assigning their estimated useful lives. Accordingly, we typically seek the assistance of independent third-party valuation specialists for significant intangible assets. The fair value estimates are based on available historical information and on future expectations and assumptions we deem reasonable. We generally use an income-based valuation method to estimate the fair value of intangible assets, which discounts expected future cash flows to present value using estimates and assumptions we deem reasonable. Determining the estimated useful lives of intangible assets also requires judgment. Our assessment as to which intangible assets are deemed to have finite or indefinite lives is based on several factors including economic barriers of entry for the acquired business, retention trends, and our operating plans, among other factors. Finite-lived intangible assets are amortized over their estimated useful lives on a straight-line basis and reviewed for impairment if indicators are present. Additionally, useful lives are evaluated each reporting period to determine if revisions to the remaining periods of amortization are warranted. Goodwill is tested for impairment annually or more frequently if indicators of impairment exist. We have elected to make the first day of our fiscal fourth quarter the annual impairment assessment date for goodwill. We first assess qualitative factors to determine whether it is more likely than not that the fair value is less than the carrying value. If, based on that assessment, we believe it is more likely than not that the fair value is less than the carrying value, then a two-step quantitative goodwill impairment test is performed. Loan Originations Our wholly-owned subsidiary, 5 Arches, originates business purpose residential loans, including single-family rental and residential bridge loans. Single-family rental loans are mortgage loans secured by 1-4 unit residential real estate with a mortgage loan borrower that owns the real estate as an investment property and rents the property to residential tenants. Residential bridge loans are mortgage loans generally secured by unoccupied residential real estate that the borrower owns as an investment and that is being renovated, rehabilitated or constructed. Generally, single-family rental loans are classified as held-for-sale at fair value, as we have originated these loans with the intent to sell to third parties or transfer to securitization entities. Certain single-family rental loans may be subsequently reclassified to held-for-investment when the loans are transferred to our Federal Home Loan Bank of Chicago ("FHLBC") member subsidiary and pledged as collateral for borrowings made from the FHLBC. Residential bridge loans are classified as held-for-investment at fair value, if we intend to hold these loans to maturity, or held-for-sale at fair value, if we intend to sell the loans to a third party. Contingent Consideration In relation to our acquisition of 5 Arches, we recorded contingent consideration liabilities that represent the estimated fair value (at the date of acquisition) of our obligation to make certain earn-out payments that are contingent on 5 Arches loan origination volumes exceeding certain specified thresholds. These liabilities are carried at fair value and periodic changes in their estimated fair value are recorded through Other income, net on our consolidated statements of income. The estimate of the fair value of contingent consideration requires significant judgment regarding assumptions about future operating results, discount rates, and probabilities of projected operating result scenarios. Leases Upon adoption of ASU 2016-02, "Leases," in the first quarter of 2019, we recorded a lease liability and right-of-use asset on our consolidated balance sheets. The lease liability is equal to the present value of our remaining lease payments discounted at our incremental borrowing rate and the right-of-use asset is equal to the lease liability adjusted for our deferred rent liability at the adoption of this accounting standard. As lease payments are made, the lease liability is reduced to the present value of the remaining lease payments and the right-of-use asset is reduced by the difference between the lease expense (straight-lined over the lease term) and the theoretical interest expense amount (calculated using the incremental borrowing rate). See Note 16 for further discussion on leases. Recent Accounting Pronouncements Newly Adopted Accounting Standards Updates ("ASUs") In July 2019, the FASB issued ASU 2019-07, "Codification Updates to SEC Sections - Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization, and Miscellaneous Updates (SEC Update)." This new guidance amends certain SEC paragraphs in the FASB Accounting Standards Codification pursuant to the issuance of various SEC Final Rule Releases, and is effective immediately. We adopted this guidance, as required, in the third quarter of 2019, which did not have a material impact on our consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." This new guidance allows a reclassification from accumulated other comprehensive income ("AOCI") to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (the "Tax Act"). This new guidance is effective for fiscal years beginning after December 15, 2018. However, we did not elect to reclassify any income tax effects of the Tax Act from AOCI to retained earnings as we did not have any tax effects related to the Tax Act remaining in AOCI at December 31, 2018. Our policy is to release any stranded income tax effects from AOCI to income tax expense on an investment-by-investment basis. In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities." This new guidance amends previous guidance to better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. This new guidance is effective for fiscal years beginning after December 15, 2018. Additionally, in October 2018, the FASB issued ASU 2018-16, "Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes," which permits the use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815. The amendments in this update are required to be adopted concurrently with the amendments in ASU 2017-12. We adopted this guidance, as required, in the first quarter of 2019, which did not have a material impact on our consolidated financial statements. In July 2017, the FASB issued ASU 2017-11, "Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception." This new guidance changes the classification analysis of certain equity-linked financial instruments (or embedded conversion options) with down round features. This new guidance is effective for fiscal years beginning after December 15, 2018. We adopted this guidance, as required, in the first quarter of 2019, which did not have a material impact on our consolidated financial statements. In March 2017, the FASB issued ASU 2017-08, "Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20)." This new guidance shortens the amortization period for certain callable debt securities purchased at a premium by requiring the premium to be amortized to the earliest call date. This new guidance is effective for fiscal years beginning after December 15, 2018. We adopted this guidance, as required, in the first quarter of 2019, which did not have a material impact on our consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, "Leases." This new guidance requires lessees to recognize most leases on their balance sheet as a right-of-use asset and a lease liability. This new guidance retains a dual lease accounting model, which requires leases to be classified as either operating or capital leases for lessees, for purposes of income statement recognition. This new guidance is effective for fiscal years beginning after December 15, 2018. In July 2018, the FASB issued ASU 2018-10, "Codification Improvements to Topic 842, Leases," which provides more specific guidance on certain aspects of Topic 842. Additionally, in July 2018, the FASB issued ASU 2018-11, "Leases (Topic 842): Targeted Improvements." This new ASU introduces an additional transition method which allows entities to apply the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In March 2019, the FASB issued ASU 2019-01, "Leases (Topic 842): Codification Improvements," which is intended to clarify Codification guidance. We adopted this guidance, as required, in the first quarter of 2019, which did not have a material impact on our consolidated financial statements. We elected the package of practical expedients under the transition guidance within this standard, which allowed us to carry forward the classifications of each of our existing leases as operating leases. In connection with the adoption of this guidance, at September 30, 2019 , our lease liability was $13 million , which represented the present value of our remaining lease payments discounted at our incremental borrowing rate and was recorded in Accrued expenses and other liabilities on our consolidated balance sheets. At September 30, 2019 , our right-of-use asset was $11 million , which was equal to the lease liability adjusted for our deferred rent liability at adoption and was recorded in Other assets on our consolidated balance sheets. We will continue to record lease expense on a straight-line basis and have included required lease disclosures within Note 16. Other Recent Accounting Pronouncements In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement." This new guidance amends previous guidance by removing and modifying certain existing fair value disclosure requirements, while adding other new disclosure requirements. This new guidance is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted and entities may elect to early adopt the removal or modification of disclosures immediately and delay adoption of the new disclosure requirements until their effective date. We plan to adopt this new guidance by the required date and do not anticipate that this update will have a material impact on our consolidated financial statements. In July 2018, the FASB issued ASU 2018-09, "Codification Improvements." This new guidance is intended to clarify, correct, and make minor improvements to the FASB Accounting Standards Codification. The transition and effective dates are based on the facts and circumstances of each amendment, with some amendments becoming effective upon issuance of this ASU and others becoming effective for annual periods beginning after December 15, 2018. We plan to adopt this new guidance by the required date and do not anticipate that this update will have a material impact on our consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." This new guidance simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. This new guidance is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for interim and annual goodwill impairment tests performed on testing dates after January 1, 2017. We plan to adopt this new guidance by the required date and do not anticipate that this update will have a material impact on our consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses." This new guidance provides a new impairment model that is based on expected losses rather than incurred losses to determine the allowance for credit losses. This new guidance is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for fiscal years beginning after December 15, 2018. In November 2018, the FASB issued ASU 2018-19, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses," which clarifies the scope of the amendments in ASU 2016-13. In April 2019, the FASB issued ASU 2019-04, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments," which is intended to clarify this guidance. Additionally, in May 2019, the FASB issued ASU 2019-05, "Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief," which provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost. We currently have only a small balance of loans receivable that are not carried at fair value and would be subject to this new guidance for allowance for credit losses. Separately, we account for our available-for-sale securities under the other-than-temporary impairment ("OTTI") model for debt securities. This new guidance requires that credit impairments on our available-for-sale securities be recorded in earnings using an allowance for credit losses, with the allowance limited to the amount by which the security's fair value is less than its amortized cost basis. Subsequent reversals in credit loss estimates are recognized in income. We plan to adopt this new guidance by the required date and do not anticipate that these updates will have a material impact on our consolidated financial statements as nearly all of our financial instruments are carried at fair value and changes in fair values of these instruments are recorded on our consolidated statements of income in the period in which the valuation change occurs. We will continue evaluating these new standards and caution that any changes in our business or additional amendments to these standards could change our initial assessment. Balance Sheet Netting Certain of our derivatives and short-term debt are subject to master netting arrangements or similar agreements. Under GAAP, in certain circumstances we may elect to present certain financial assets, liabilities and related collateral subject to master netting arrangements in a net position on our consolidated balance sheets. However, we do not report any of these financial assets or liabilities on a net basis, and instead present them on a gross basis on our consolidated balance sheets. The table below presents financial assets and liabilities that are subject to master netting arrangements or similar agreements categorized by financial instrument, together with corresponding financial instruments and corresponding collateral received or pledged at September 30, 2019 and December 31, 2018 . Table 3.1 – Offsetting of Financial Assets, Liabilities, and Collateral Gross Amounts of Recognized Assets (Liabilities) Gross Amounts Offset in Consolidated Balance Sheet Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet Gross Amounts Not Offset in Consolidated (1) Net Amount September 30, 2019 Financial Instruments Cash Collateral (Received) Pledged Assets (2) Interest rate agreements $ 33,642 $ — $ 33,642 $ (25,802 ) $ (4,379 ) $ 3,461 TBAs 5,250 — 5,250 (3,448 ) (1,040 ) 762 Total Assets $ 38,892 $ — $ 38,892 $ (29,250 ) $ (5,419 ) $ 4,223 Liabilities (2) Interest rate agreements $ (228,150 ) $ — $ (228,150 ) $ 25,802 $ 202,348 $ — TBAs (4,192 ) — (4,192 ) 3,448 483 (261 ) Loan warehouse debt (233,224 ) — (233,224 ) 233,224 — — Security repurchase agreements (1,157,646 ) — (1,157,646 ) 1,157,646 — — Total Liabilities $ (1,623,212 ) $ — $ (1,623,212 ) $ 1,420,120 $ 202,831 $ (261 ) Gross Amounts of Recognized Assets (Liabilities) Gross Amounts Offset in Consolidated Balance Sheet Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet Gross Amounts Not Offset in Consolidated (1) Net Amount December 31, 2018 Financial Instruments Cash Collateral (Received) Pledged Assets (2) Interest rate agreements $ 28,211 $ — $ 28,211 $ (28,211 ) $ — $ — TBAs 4,665 — 4,665 (3,391 ) (835 ) 439 Total Assets $ 32,876 $ — $ 32,876 $ (31,602 ) $ (835 ) $ 439 Liabilities (2) Interest rate agreements $ (70,908 ) $ — $ (70,908 ) $ 28,211 $ 42,697 $ — TBAs (13,215 ) — (13,215 ) 3,391 5,620 (4,204 ) Loan warehouse debt (860,650 ) — (860,650 ) 860,650 — — Security repurchase agreements (988,890 ) — (988,890 ) 988,890 — — Total Liabilities $ (1,933,663 ) $ — $ (1,933,663 ) $ 1,881,142 $ 48,317 $ (4,204 ) (1) Amounts presented in these columns are limited in total to the net amount of assets or liabilities presented in the prior column by instrument. In certain cases, there is excess cash collateral or financial assets we have pledged to a counterparty (which may, in certain circumstances, be a clearinghouse) that exceed the financial liabilities subject to a master netting arrangement or similar agreement. Additionally, in certain cases, counterparties may have pledged excess cash collateral to us that exceeds our corresponding financial assets. In each case, any of these excess amounts are excluded from the table although they are separately reported in our consolidated balance sheets as assets or liabilities, respectively. (2) Interest rate agreements and TBAs are components of derivatives instruments on our consolidated balance sheets. Loan warehouse debt, which is secured by residential mortgage loans, and security repurchase agreements are components of Short-term debt on our consolidated balance sheets. |
Principles of Consolidation
Principles of Consolidation | 9 Months Ended |
Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Principles of Consolidation | Principles of Consolidation GAAP requires us to consider whether securitizations we sponsor and other transfers of financial assets should be treated as sales or financings, as well as whether any VIEs that we hold variable interests in – for example, certain legal entities often used in securitization and other structured finance transactions – should be included in our consolidated financial statements. The GAAP principles we apply require us to reassess our requirement to consolidate VIEs each quarter and therefore our determination may change based upon new facts and circumstances pertaining to each VIE. This could result in a material impact to our consolidated financial statements during subsequent reporting periods. Analysis of Consolidated VIEs At September 30, 2019 , we consolidated our Legacy Sequoia and Sequoia Choice securitization entities that we determined were VIEs and for which we determined we were the primary beneficiary. Additionally, beginning in the second half of 2018, we consolidated certain Freddie Mac K-Series and SLST securitization entities that we determined were VIEs and for which we determined we were the primary beneficiary. Each of these entities is independent of Redwood and of each other and the assets and liabilities of these entities are not owned by and are not legal obligations of ours. Our exposure to these entities is primarily through the financial interests we have retained, although for the consolidated Sequoia entities we are exposed to certain financial risks associated with our role as a sponsor, servicing administrator, or depositor of these entities or as a result of our having sold assets directly or indirectly to these entities. At September 30, 2019 , the estimated fair value of our investments in the consolidated Legacy Sequoia, Sequoia Choice, Freddie Mac SLST and Freddie Mac K-Series entities was $10 million , $259 million , $456 million , and $215 million , respectively. Beginning in the fourth quarter of 2018, we consolidated two Servicing Investment entities formed to invest in servicing-related assets that we determined were VIEs and for which we determined we were the primary beneficiary. At September 30, 2019 , we held an 80% ownership interest in, and were responsible for the management of, each entity. See Note 10 for a further description of these entities and the investments they hold and Note 12 for additional information on the minority partner’s interest. Additionally, beginning in the fourth quarter of 2018, we consolidated an entity that was formed to finance servicer advances that we determined was a VIE and for which we, through our control of one of the aforementioned partnerships, were the primary beneficiary. The servicer advance financing consists of non-recourse short-term securitization debt, secured by servicer advances. We consolidate the securitization entity, but the securitization entity is independent of Redwood and the assets and liabilities are not owned by and are not legal obligations of Redwood. See Note 13 for additional information on the servicer advance financing. At September 30, 2019 , the estimated fair value of our investment in the Servicing Investment entities was $75 million . The following table presents a summary of the assets and liabilities of these VIEs. Table 4.1 – Assets and Liabilities of Consolidated VIEs September 30, 2019 Legacy Sequoia Sequoia Choice Freddie Mac SLST Freddie Mac K-Series Servicing Investment Total Consolidated VIEs (Dollars in Thousands) Residential loans, held-for-investment $ 429,159 $ 2,618,316 $ 2,441,223 $ — $ — $ 5,488,698 Multifamily loans, held-for-investment — — — 3,791,622 — 3,791,622 Other investments — — — — 238,316 238,316 Cash and cash equivalents — — — — 21,240 21,240 Restricted cash 143 15 — — 21,450 21,608 Accrued interest receivable 716 10,806 7,215 11,300 4,472 34,509 REO 460 — 84 — — 544 Total Assets $ 430,478 $ 2,629,137 $ 2,448,522 $ 3,802,922 $ 285,478 $ 9,596,537 Short-term debt $ — $ — $ — $ — $ 191,203 $ 191,203 Accrued interest payable 456 8,949 5,498 10,805 247 25,955 Accrued expenses and other liabilities — 15 — — 19,371 19,386 Asset-backed securities issued 419,890 2,361,111 1,987,473 3,577,577 — 8,346,051 Total Liabilities $ 420,346 $ 2,370,075 $ 1,992,971 $ 3,588,382 $ 210,821 $ 8,582,595 Number of VIEs 20 9 2 4 3 38 December 31, 2018 Legacy Sequoia Sequoia Freddie Mac SLST Freddie Mac K-Series Servicing Investment Total Consolidated VIEs (Dollars in Thousands) Residential loans, held-for-investment $ 519,958 $ 2,079,382 $ 1,222,669 $ — $ — $ 3,822,009 Multifamily loans, held-for-investment — — — 2,144,598 — 2,144,598 Other investments — — — — 312,688 312,688 Restricted cash 146 1,022 — — 25,363 26,531 Accrued interest receivable 822 8,988 3,926 6,595 1,091 21,422 REO 3,943 — — — — 3,943 Total Assets $ 524,869 $ 2,089,392 $ 1,226,595 $ 2,151,193 $ 339,142 $ 6,331,191 Short-term debt $ — $ — $ — $ — $ 262,740 $ 262,740 Accrued interest payable 571 7,180 2,907 6,239 483 17,380 Accrued expenses and other liabilities — 1,022 — — 18,592 19,614 Asset-backed securities issued 512,240 1,885,010 993,748 2,019,075 — 5,410,073 Total Liabilities $ 512,811 $ 1,893,212 $ 996,655 $ 2,025,314 $ 281,815 $ 5,709,807 Number of VIEs 20 6 1 3 3 33 We consolidate the assets and liabilities of certain Sequoia securitization entities, as we did not meet the GAAP sale criteria at the time we transferred financial assets to these entities. Our involvement in consolidated Sequoia entities continues in the following ways: (i) we continue to hold subordinate investments in each entity, and for certain entities, more senior investments; (ii) we maintain certain discretionary rights associated with our sponsorship of, or our subordinate investments in, each entity; and (iii) we continue to hold a right to call the assets of certain entities (once they have been paid down below a specified threshold) at a price equal to, or in excess of, the current outstanding principal amount of the entity’s asset-backed securities issued. These factors have resulted in our continuing to consolidate the assets and liabilities of these Sequoia entities in accordance with GAAP. We consolidate the assets and liabilities of certain Freddie Mac K-Series and SLST securitization trusts resulting from our investment in subordinate securities issued by these trusts. Additionally, we consolidate the assets and liabilities of Servicing Investment entities from our investment in servicer advance investments and excess MSRs. In each case, we maintain certain discretionary rights associated with the ownership of these investments that we determined reflected a controlling financial interest, as we have both the power to direct the activities that most significantly impact the economic performance of the VIEs and the right to receive benefits of and the obligation to absorb losses from the VIEs that could potentially be significant to the VIEs. Analysis of Unconsolidated VIEs with Continuing Involvement Since 2012, we have transferred residential loans to 46 Sequoia securitization entities sponsored by us that are still outstanding as of September 30, 2019 , and accounted for these transfers as sales for financial reporting purposes, in accordance with ASC 860. We also determined we were not the primary beneficiary of these VIEs as we lacked the power to direct the activities that will have the most significant economic impact on the entities. For certain of these transfers to securitization entities, for the transferred loans where we held the servicing rights prior to the transfer and continued to hold the servicing rights following the transfer, we recorded mortgage servicing rights ("MSRs") on our consolidated balance sheets, and classified those MSRs as Level 3 assets. We also retained senior and subordinate securities in these securitizations that we classified as Level 3 assets. Our continuing involvement in these securitizations is limited to customary servicing obligations associated with retaining servicing rights (which we retain a third-party sub-servicer to perform) and the receipt of interest income associated with the securities we retained. During the first quarter of 2019, the master servicer for one of our unconsolidated Sequoia entities exercised their right to call the securitization and paid off the underlying securities. We realized a $4 million gain related to the called securities, which was recognized through Realized gains, net on our consolidated statements of income. In connection with this called securitization, Redwood acquired $39 million of residential real estate loans that were subsequently sold or were held in our held-for-investment portfolio at Redwood at September 30, 2019 . The following table presents information related to securitization transactions that occurred during the three and nine months ended September 30, 2019 and 2018 . Table 4.2 – Securitization Activity Related to Unconsolidated VIEs Sponsored by Redwood Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Principal balance of loans transferred $ 366,999 $ 327,511 $ 1,116,092 $ 2,735,644 Trading securities retained, at fair value 1,228 2,583 4,736 48,831 AFS securities retained, at fair value 1,069 776 3,023 6,728 The following table summarizes the cash flows during the three and nine months ended September 30, 2019 and 2018 between us and the unconsolidated VIEs sponsored by us and accounted for as sales since 2012. Table 4.3 – Cash Flows Related to Unconsolidated VIEs Sponsored by Redwood Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Proceeds from new transfers $ 376,126 $ 329,231 $ 1,138,778 $ 2,723,012 MSR fees received 2,919 3,405 9,084 10,216 Funding of compensating interest, net (76 ) (46 ) (213 ) (102 ) Cash flows received on retained securities 6,603 7,267 20,892 21,720 The following table presents the key weighted-average assumptions used to measure MSRs and securities retained at the date of securitization for securitizations completed during the three and nine months ended September 30, 2019 and 2018 . Table 4.4 – Assumptions Related to Assets Retained from Unconsolidated VIEs Sponsored by Redwood Three Months Ended September 30, 2019 Three Months Ended September 30, 2018 At Date of Securitization Senior IO Securities Subordinate Securities Senior IO Securities Subordinate Securities Prepayment rates 37 % 15 % 9 % 9 % Discount rates 14 % 7 % 14 % 7 % Credit loss assumptions 0.20 % 0.20 % 0.20 % 0.20 % Nine Months Ended September 30, 2019 Nine Months Ended September 30, 2018 At Date of Securitization Senior IO Securities Subordinate Securities Senior IO Securities Subordinate Securities Prepayment rates 25 % 15 % 9 % 10 % Discount rates 14 % 7 % 14 % 5 % Credit loss assumptions 0.20 % 0.20 % 0.20 % 0.20 % The following table presents additional information at September 30, 2019 and December 31, 2018 , related to unconsolidated VIEs sponsored by Redwood and accounted for as sales since 2012. Table 4.5 – Unconsolidated VIEs Sponsored by Redwood (In Thousands) September 30, 2019 December 31, 2018 On-balance sheet assets, at fair value: Interest-only, senior and subordinate securities, classified as trading $ 106,691 $ 129,111 Subordinate securities, classified as AFS 141,568 162,314 Mortgage servicing rights 37,904 58,572 Maximum loss exposure (1) $ 286,163 $ 349,997 Assets transferred: Principal balance of loans outstanding $ 10,360,700 $ 10,580,216 Principal balance of loans 30+ days delinquent 28,782 21,805 (1) Maximum loss exposure from our involvement with unconsolidated VIEs pertains to the carrying value of our securities and MSRs retained from these VIEs and represents estimated losses that would be incurred under severe, hypothetical circumstances, such as if the value of our interests and any associated collateral declines to zero. This does not include, for example, any potential exposure to representation and warranty claims associated with our initial transfer of loans into a securitization. The following table presents key economic assumptions for assets retained from unconsolidated VIEs and the sensitivity of their fair values to immediate adverse changes in those assumptions at September 30, 2019 and December 31, 2018 . Table 4.6 – Key Assumptions and Sensitivity Analysis for Assets Retained from Unconsolidated VIEs Sponsored by Redwood September 30, 2019 MSRs Senior Securities (1) Subordinate Securities (Dollars in Thousands) Fair value at September 30, 2019 $ 37,904 $ 41,827 $ 206,433 Expected life (in years) (2) 6 5 13 Prepayment speed assumption (annual CPR) (2) 14 % 16 % 16 % Decrease in fair value from: 10% adverse change $ 1,893 $ 1,977 $ 454 25% adverse change 4,486 5,189 1,802 Discount rate assumption (2) 11 % 13 % 5 % Decrease in fair value from: 100 basis point increase $ 1,259 $ 848 $ 19,313 200 basis point increase 2,436 1,977 35,950 Credit loss assumption (2) N/A 0.21 % 0.21 % Decrease in fair value from: 10% higher losses N/A $ — $ 1,666 25% higher losses N/A — 4,153 December 31, 2018 MSRs Senior Securities (1) Subordinate Securities (Dollars in Thousands) Fair value at December 31, 2018 $ 58,572 $ 61,178 $ 230,247 Expected life (in years) (2) 8 7 15 Prepayment speed assumption (annual CPR) (2) 7 % 10 % 9 % Decrease in fair value from: 10% adverse change $ 1,668 $ 2,151 $ 201 25% adverse change 4,027 5,127 1,372 Discount rate assumption (2) 11 % 12 % 6 % Decrease in fair value from: 100 basis point increase $ 2,323 $ 2,190 $ 21,982 200 basis point increase 4,493 4,226 40,641 Credit loss assumption (2) N/A 0.20 % 0.20 % Decrease in fair value from: 10% higher losses N/A $ — $ 1,387 25% higher losses N/A — 3,471 (1) Senior securities included $42 million and $61 million of interest-only securities at September 30, 2019 and December 31, 2018 , respectively. (2) Expected life, prepayment speed assumption, discount rate assumption, and credit loss assumption presented in the tables above represent weighted averages. Analysis of Unconsolidated Third-Party VIEs Third-party VIEs are securitization entities in which we maintain an economic interest, but do not sponsor. Our economic interest may include several securities and other investments from the same third-party VIE, and in those cases, the analysis is performed in consideration of all of our interests. The following table presents a summary of our interests in third-party VIEs at September 30, 2019 and December 31, 2018, grouped by asset type. Table 4.7 – Third-Party Sponsored VIE Summary (In Thousands) September 30, 2019 December 31, 2018 Mortgage-Backed Securities Senior $ 141,264 $ 185,107 Mezzanine 589,189 547,249 Subordinate 306,713 428,713 Total Mortgage-Backed Securities 1,037,166 1,161,069 Excess MSR 17,212 15,092 Total Investments in Third-Party Sponsored VIEs $ 1,054,378 $ 1,176,161 We determined that we are not the primary beneficiary of these third-party VIEs, as we do not have the required power to direct the activities that most significantly impact the economic performance of these entities. Specifically, we do not service or manage these entities or otherwise solely hold decision making powers that are significant. As a result of this assessment, we do not consolidate any of the underlying assets and liabilities of these third-party VIEs – we only account for our specific interests in them. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 9 Months Ended |
Sep. 30, 2019 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Financial Instruments | Fair Value of Financial Instruments For financial reporting purposes, we follow a fair value hierarchy established under GAAP that is used to determine the fair value of financial instruments. This hierarchy prioritizes relevant market inputs in order to determine an “exit price” at the measurement date, or the price at which an asset could be sold or a liability could be transferred in an orderly process that is not a forced liquidation or distressed sale. Level 1 inputs are observable inputs that reflect quoted prices for identical assets or liabilities in active markets. Level 2 inputs are observable inputs other than quoted prices for an asset or liability that are obtained through corroboration with observable market data. Level 3 inputs are unobservable inputs (e.g., our own data or assumptions) that are used when there is little, if any, relevant market activity for the asset or liability required to be measured at fair value. In certain cases, inputs used to measure fair value fall into different levels of the fair value hierarchy. In such cases, the level at which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. Our assessment of the significance of a particular input requires judgment and considers factors specific to the asset or liability being measured. The following table presents the carrying values and estimated fair values of assets and liabilities that are required to be recorded or disclosed at fair value at September 30, 2019 and December 31, 2018 . Table 5.1 – Carrying Values and Fair Values of Assets and Liabilities September 30, 2019 December 31, 2018 Carrying Value Fair Value Carrying Value Fair Value (In Thousands) Assets Residential loans, held-for-sale At fair value $ 925,780 $ 925,780 $ 1,048,690 $ 1,048,690 At lower of cost or fair value 107 126 111 131 Residential loans, held-for-investment 7,755,916 7,755,916 6,205,941 6,205,941 Business purpose residential loans 336,035 336,035 141,258 141,258 Multifamily loans 3,791,622 3,791,622 2,144,598 2,144,598 Trading securities 1,013,785 1,013,785 1,118,612 1,118,612 Available-for-sale securities 271,641 271,641 333,882 333,882 Servicer advance investments (1) 222,591 222,591 300,468 300,468 MSRs (1) 39,837 39,837 60,281 60,281 Participation in loan warehouse facility (1) — — 39,703 39,703 Excess MSRs (1) 32,937 32,937 27,312 27,312 Shared home appreciation options (1) 11,372 11,372 — — Cash and cash equivalents 394,628 394,628 175,764 175,764 Restricted cash 111,518 111,518 29,313 29,313 Accrued interest receivable 57,464 57,464 47,105 47,105 Derivative assets 43,649 43,649 35,789 35,789 REO (2) 5,069 5,124 3,943 4,396 Margin receivable (2) 226,727 226,727 100,773 100,773 FHLBC stock (2) 43,393 43,393 43,393 43,393 Guarantee asset (2) 1,784 1,784 2,618 2,618 Pledged collateral (2) 57,832 57,832 42,433 42,433 Liabilities Short-term debt facilities $ 1,589,062 $ 1,589,062 $ 1,937,920 $ 1,937,920 Short-term debt - servicer advance financing 191,203 191,203 262,740 262,740 Accrued interest payable 46,881 46,881 42,528 42,528 Margin payable (3) 6,658 6,658 835 835 Guarantee obligation (3) 15,016 14,661 16,711 16,774 Contingent consideration (3) 25,167 25,167 — — Derivative liabilities 234,011 234,011 84,855 84,855 ABS issued at fair value 8,346,051 8,346,051 5,410,073 5,410,073 FHLBC long-term borrowings 1,999,999 1,999,999 1,999,999 1,999,999 Subordinate securities financing facility 184,664 185,803 — — Convertible notes, net 830,995 853,471 633,196 618,271 Trust preferred securities and subordinated notes, net 138,616 92,070 138,582 102,533 (1) These investments are included in Other investments on our consolidated balance sheets. (2) These assets are included in Other assets on our consolidated balance sheets. (3) These liabilities are included in Accrued expenses and other liabilities on our consolidated balance sheets. During the three and nine months ended September 30, 2019 , we elected the fair value option for $16 million and $50 million of residential senior securities, respectively, $40 million and $247 million of subordinate securities, respectively, $2.67 billion and $5.20 billion of residential loans (principal balance), respectively, $124 million and $301 million of business purpose residential loans (principal balance), respectively, zero and $1.43 billion of multifamily loans (principal balance), respectively, $1 million and $70 million of servicer advance investments, respectively, and $1 million and $8 million of excess MSRs, respectively. Additionally, during the three months ended September 30, 2019, we elected the fair value option for $11 million of shared home appreciation options. We anticipate electing the fair value option for all future purchases of residential and business purpose residential loans that we intend to sell to third parties or transfer to securitizations, as well as for certain securities we purchase, including IO securities and fixed-rate securities rated investment grade or higher. The following table presents the assets and liabilities that are reported at fair value on our consolidated balance sheets on a recurring basis at September 30, 2019 and December 31, 2018 , as well as the fair value hierarchy of the valuation inputs used to measure fair value. Table 5.2 – Assets and Liabilities Measured at Fair Value on a Recurring Basis September 30, 2019 Carrying Value Fair Value Measurements Using (In Thousands) Level 1 Level 2 Level 3 Assets Residential loans $ 8,681,696 $ — $ — $ 8,681,696 Business purpose residential loans 336,035 — — 336,035 Multifamily loans 3,791,622 — — 3,791,622 Trading securities 1,013,785 — — 1,013,785 Available-for-sale securities 271,641 — — 271,641 Servicer advance investments 222,591 — — 222,591 MSRs 39,837 — — 39,837 Excess MSRs 32,937 — — 32,937 Shared home appreciation options 11,372 — — 11,372 Derivative assets 43,649 5,250 33,642 4,757 Pledged collateral 57,832 57,832 — — FHLBC stock 43,393 — 43,393 — Guarantee asset 1,784 — — 1,784 Liabilities Contingent consideration $ 25,167 $ — $ — $ 25,167 Derivative liabilities 234,011 4,192 228,150 1,669 ABS issued 8,346,051 — — 8,346,051 December 31, 2018 Carrying Value Fair Value Measurements Using (In Thousands) Level 1 Level 2 Level 3 Assets Residential loans $ 7,254,631 $ — $ — $ 7,254,631 Business purpose residential loans 141,258 — — 141,258 Multifamily loans 2,144,598 — — 2,144,598 Trading securities 1,118,612 — — 1,118,612 Available-for-sale securities 333,882 — — 333,882 Servicer advance investments 300,468 — — 300,468 MSRs 60,281 — — 60,281 Excess MSRs 27,312 — — 27,312 Derivative assets 35,789 4,665 28,211 2,913 Pledged collateral 42,433 42,433 — — FHLBC stock 43,393 — 43,393 — Guarantee asset 2,618 — — 2,618 Liabilities Derivative liabilities $ 84,855 $ 13,215 $ 70,908 $ 732 ABS issued 5,410,073 — — 5,410,073 The following table presents additional information about Level 3 assets and liabilities measured at fair value on a recurring basis for the nine months ended September 30, 2019 . Table 5.3 – Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis Assets Residential Loans Business Purpose Residential Loans Multifamily Loans Trading Securities AFS Securities Servicer Advance Investments MSRs Excess MSRs Shared Home Appreciation Options (In Thousands) Beginning balance - December 31, 2018 $ 7,254,631 $ 141,258 $ 2,144,598 $ 1,118,612 $ 333,882 $ 300,468 $ 60,281 $ 27,312 $ — Acquisitions 5,257,800 29,093 1,481,554 296,484 21,115 69,610 868 7,762 11,343 Originations — 296,955 — — — — — — — Sales (2,941,592 ) (46,855 ) — (418,168 ) (82,384 ) — — — — Principal paydowns (1,068,878 ) (84,410 ) (12,904 ) (33,730 ) (28,981 ) (150,512 ) — — — Gains (losses) in net income, net 179,964 4,990 178,374 55,538 24,052 3,025 (21,312 ) (2,137 ) 29 Unrealized losses in OCI, net — — — — 3,957 — — — — Other settlements, net (1) (229 ) (4,996 ) — (4,951 ) — — — — — Ending Balance - September 30, 2019 $ 8,681,696 $ 336,035 $ 3,791,622 $ 1,013,785 $ 271,641 $ 222,591 $ 39,837 $ 32,937 $ 11,372 Table 5.3 – Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis (continued) Assets Liabilities Guarantee Asset Derivatives (2) Contingent Consideration ABS Issued (In Thousands) Beginning balance - December 31, 2018 $ 2,618 $ 2,181 $ — $ 5,410,073 Acquisitions — — 24,621 3,423,561 Principal paydowns — — — (718,293 ) Gains (losses) in net income, net (834 ) 42,415 546 230,710 Other settlements, net (1) — (41,508 ) — — Ending Balance - September 30, 2019 $ 1,784 $ 3,088 $ 25,167 $ 8,346,051 (1) Other settlements, net for residential and business purpose residential loans represents the transfer of loans to REO, and for derivatives, the settlement of forward sale commitments and the transfer of the fair value of loan purchase commitments at the time loans are acquired to the basis of residential loans. Other settlements, net for trading securities relates to the consolidation of a Freddie Mac K-Series entity during the second quarter of 2019. (2) For the purpose of this presentation, derivative assets and liabilities, which consist of loan purchase and forward sale commitments, are presented on a net basis. The following table presents the portion of gains or losses included in our consolidated statements of income that were attributable to Level 3 assets and liabilities recorded at fair value on a recurring basis and held at September 30, 2019 and 2018 . Gains or losses incurred on assets or liabilities sold, matured, called, or fully written down during the three and nine months ended September 30, 2019 and 2018 are not included in this presentation. Table 5.4 – Portion of Net Gains (Losses) Attributable to Level 3 Assets and Liabilities Still Held at September 30, 2019 and 2018 Included in Net Income Included in Net Income Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Assets Residential loans at Redwood $ 17,771 $ (18,100 ) $ 82,408 $ (70,316 ) Residential loans at consolidated Sequoia entities (11,132 ) (8,978 ) 10,111 11,936 Residential loans at consolidated Freddie Mac SLST entities 39,783 — 94,788 — Business purpose residential loans 584 (20 ) 4,069 (20 ) Multifamily loans at consolidated Freddie Mac K-Series entities 47,353 (4,199 ) 178,374 (4,199 ) Trading securities 11,206 3,821 33,196 (1,956 ) Available-for-sale securities — (33 ) — (90 ) Servicer advance investments 1,585 — 3,025 — MSRs (5,892 ) 337 (16,971 ) 4,861 Excess MSRs (1,634 ) — (2,137 ) — Shared home appreciation options 29 — 29 — Loan purchase commitments 4,678 2,168 4,757 2,157 Other assets - Guarantee asset (216 ) (51 ) (834 ) 15 Liabilities Loan purchase commitments $ (1,668 ) $ (2,314 ) $ (1,669 ) $ (2,388 ) Contingent consideration (235 ) — (546 ) — ABS issued (49,399 ) 12,536 (230,709 ) (8,478 ) The following table presents information on assets recorded at fair value on a non-recurring basis at September 30, 2019 . This table does not include the carrying value and gains or losses associated with the asset types below that were not recorded at fair value on our consolidated balance sheets at September 30, 2019 . Table 5.5 – Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis at September 30, 2019 Gain (Loss) for September 30, 2019 Carrying Value Fair Value Measurements Using Three Months Ended Nine Months Ended (In Thousands) Level 1 Level 2 Level 3 September 30, 2019 September 30, 2019 Assets REO $ 4,525 $ — $ — $ 4,525 $ (332 ) $ (470 ) The following table presents the net market valuation gains and losses recorded in each line item of our consolidated statements of income for the three and nine months ended September 30, 2019 and 2018 . Table 5.6 – Market Valuation Gains and Losses, Net Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Mortgage Banking Activities, Net Residential loans held-for-sale, at fair value $ (6,623 ) $ 5,626 $ 289 $ 16,522 Residential loan purchase and forward sale commitments 12,943 1,610 41,142 (8,116 ) Single-family rental loans held-for-sale, at fair value 1,283 (99 ) 4,200 (99 ) Single-family rental loan purchase commitments 564 (22 ) 1,273 (22 ) Residential bridge loans 1,010 — 2,108 — Risk management derivatives, net (2,972 ) 3,796 (15,387 ) 38,378 Total mortgage banking activities, net (1) $ 6,205 $ 10,911 $ 33,625 $ 46,663 Investment Fair Value Changes, Net Residential loans held-for-investment, at Redwood $ 7,667 $ (17,063 ) $ 71,323 $ (71,058 ) Single-family rental loans held-for-investment 22 — 22 — Residential bridge loans held-for-investment (742 ) 53 (1,363 ) 53 Trading securities 15,275 6,314 55,577 2,429 Servicer advance investments 1,585 — 3,025 — Excess MSRs (1,635 ) — (2,137 ) — Shared home appreciation options 29 — 29 — REO (331 ) — (470 ) — Net investments in Legacy Sequoia entities (2) (407 ) (248 ) (904 ) (976 ) Net investments in Sequoia Choice entities (2) 2,722 (943 ) 8,866 43 Net investments in Freddie Mac SLST entities (2) 17,300 — 31,702 — Net investments in Freddie Mac K-Series entities (2) 7,445 511 13,810 511 Risk-sharing investments (53 ) (126 ) (191 ) (474 ) Risk management derivatives, net (37,433 ) 21,867 (144,548 ) 82,391 Impairments on AFS securities — (33 ) — (89 ) Total investment fair value changes, net $ 11,444 $ 10,332 $ 34,741 $ 12,830 Other Income (Expense), Net MSRs $ (7,489 ) $ (823 ) $ (21,243 ) $ 1,324 Risk management derivatives, net 4,389 (890 ) 13,157 (7,151 ) Gain on re-measurement of 5 Arches investment — — 2,440 — Total other expense, net (3) $ (3,100 ) $ (1,713 ) $ (5,646 ) $ (5,827 ) Total Market Valuation Gains, Net $ 14,549 $ 19,530 $ 62,720 $ 53,666 (1) Mortgage banking activities, net presented above does not include fee income or provisions for repurchases that are components of Mortgage banking activities, net presented on our consolidated statements of income, as these amounts do not represent market valuation changes. (2) Includes changes in fair value of the residential loans held-for-investment, REO and the ABS issued at the entities, which netted together represent the change in value of our investments at the consolidated VIEs. (3) Other income (expense), net presented above does not include net MSR fee income or provisions for repurchases for MSRs, as these amounts do not represent market valuation adjustments. At September 30, 2019 , our valuation policy and processes had not changed from those described in our Annual Report on Form 10-K for the year ended December 31, 2018 . The following table provides quantitative information about the significant unobservable inputs used in the valuation of our Level 3 assets and liabilities measured at fair value. Table 5.7 – Fair Value Methodology for Level 3 Financial Instruments September 30, 2019 Fair Value Input Values (Dollars in Thousands, except Input Values) Unobservable Input Range Weighted Average Assets Residential loans, at fair value: Jumbo fixed-rate loans $ 2,452,300 Prepayment rate (annual CPR) 20 - 20 % 20 % Whole loan spread to TBA price $ 0.56 - $ 1.56 $ 1.55 Whole loan spread to swap rate 94 - 375 bps 184 bps Jumbo hybrid loans 321,793 Prepayment rate (annual CPR) 15 - 15 % 15 % Whole loan spread to swap rate 90 - 345 bps 146 bps Jumbo loans committed to sell 418,905 Whole loan committed sales price $ 101.88 - $ 102.91 $ 102.27 Loans held by Legacy Sequoia (1) 429,159 Liability price N/A N/A Loans held by Sequoia Choice (1) 2,618,316 Liability price N/A N/A Loans held by Freddie Mac SLST (1) 2,441,223 Liability price N/A N/A Business purpose residential loans: Single-family rental loans 129,145 Senior credit spread 110 - 110 bps 110 bps Subordinate credit spread 143 - 1,250 bps 308 bps Senior credit support 35 - 36 % 36 % IO discount rate 5 - 8 % 8 % Prepayment rate (annual CPR) 1 - 10 % 5 % Residential bridge loans 206,890 Discount rate 6 - 10 % 7 % Multifamily loans held by Freddie Mac K-Series (1) 3,791,622 Liability price N/A N/A Trading and AFS securities 1,285,426 Discount rate 2 - 15 % 5 % Prepayment rate (annual CPR) — - 60 % 13 % Default rate — - 20 % 1 % Loss severity — - 40 % 21 % Servicer advance investments 222,591 Discount rate 5 - 5 % 5 % Prepayment rate (annual CPR) 8 - 15 % 14 % Expected remaining life (2) 2 - 2 years 2 years Mortgage servicing income 8 - 14 bps 10 bps MSRs 39,837 Discount rate 11 - 13 % 11 % Prepayment rate (annual CPR) 6 - 53 % 14 % Per loan annual cost to service $ 82 - $ 82 $ 82 Excess MSRs 32,937 Discount rate 11 - 16 % 14 % Prepayment rate (annual CPR) 9 - 14 % 11 % Excess mortgage servicing income 8 - 17 bps 13 bps Shared home appreciation options 11,372 Discount rate 11 - 11 % 11 % Prepayment rate (annual CPR) 10 - 30 % 23 % Home price appreciation 3 - 3 % 3 % Guarantee asset 1,784 Discount rate 11 - 11 % 11 % Prepayment rate (annual CPR) 16 - 16 % 16 % Table 5.7 – Fair Value Methodology for Level 3 Financial Instruments (continued) September 30, 2019 Fair Value Input Values (Dollars in Thousands, except Input Values) Unobservable Input Range Weighted Average Assets (continued) REO $ 4,525 Loss severity 16 - 16 % 16 % Residential loan purchase commitments, net 3,042 MSR multiple 0.6 - 4.6 x 2.5 x Pull-through rate 9 - 100 % 71 % Whole loan spread to TBA price $ 0.56 - $ 1.56 $ 1.55 Whole loan spread to swap rate - fixed rate 115 - 375 bps 257 bps Prepayment rate (annual CPR) 15 - 20 % 20 % Whole loan spread to swap rate - hybrid 90 - 330 bps 128 bps Liabilities ABS issued (1) : At consolidated Sequoia entities 2,781,001 Discount rate 3 - 15 % 4 % Prepayment rate (annual CPR) 8 - 40 % 20 % Default rate — - 7 % 2 % Loss severity 20 - 29 % 21 % At consolidated Freddie Mac SLST entities 1,987,473 Discount rate 2 - 13 % 3 % Prepayment rate (annual CPR) 6 - 6 % 6 % Default rate 22 - 22 % 22 % Loss severity 30 - 30 % 30 % At consolidated Freddie Mac K-Series entities 3,577,577 Discount rate 2 - 9 % 2 % Prepayment rate (annual CPR) — - — % — % Default rate 1 - 1 % 1 % Loss severity 20 - 20 % 20 % Contingent consideration 25,167 Discount rate 23 - 23 % 23 % Probability of outcomes (3) — - 100 % 90 % (1) The fair value of the loans held by consolidated entities was based on the fair value of the ABS issued by these entities, including securities we own, which we determined were more readily observable, in accordance with accounting guidance for collateralized financing entities. At September 30, 2019, the fair value of securities we owned at the consolidated Sequoia, Freddie Mac SLST and Freddie Mac K-Series entities was $266 million , $454 million , and $214 million , respectively. (2) Represents the estimated average duration of outstanding servicer advances at a given point in time (not taking into account new advances made with respect to the pool). (3) Represents the probability of a full payout of contingent purchase consideration. Determination of Fair Value A description of the instruments measured at fair value as well as the general classification of such instruments pursuant to the Level 1, Level 2, and Level 3 valuation hierarchy is listed herein. We generally use both market comparable information and discounted cash flow modeling techniques to determine the fair value of our Level 3 assets and liabilities. Use of these techniques requires determination of relevant inputs and assumptions, some of which represent significant unobservable inputs as indicated in the preceding table. Accordingly, a significant increase or decrease in any of these inputs – such as anticipated credit losses, prepayment rates, interest rates, or other valuation assumptions – in isolation would likely result in a significantly lower or higher fair value measurement. Residential loans at Redwood Estimated fair values for residential loans are determined using models that incorporate various observable inputs, including pricing information from whole loan sales and securitizations. Certain significant inputs in these models are considered unobservable and are therefore Level 3 in nature. Pricing inputs obtained from market whole loan transaction activity include indicative spreads to indexed to be announced ("TBA") prices and indexed swap rates for fixed-rate loans and indexed swap rates for hybrid loans (Level 3). Pricing inputs obtained from market securitization activity include indicative spreads to indexed TBA prices for senior residential mortgage-backed securities ("RMBS") and indexed swap rates for subordinate RMBS, and credit support levels (Level 3). Other unobservable inputs also include assumed future prepayment rates. Observable inputs include benchmark interest rates, swap rates, and TBA prices. These assets would generally decrease in value based upon an increase in the credit spread, prepayment speed, or credit support assumptions. Residential and multifamily loans at consolidated entities We have elected to account for our consolidated securitization entities as CFEs in accordance with GAAP. A CFE is a variable interest entity that holds financial assets and issues beneficial interests in those assets, and these beneficial interests have contractual recourse only to the related assets of the CFE. Accounting guidance for CFEs allow companies to elect to measure both the financial assets and financial liabilities of a CFE using the more observable of the fair value of the financial assets or fair value of the financial liabilities. Pursuant to this guidance, we use the fair value of the ABS issued by the CFEs (which we determined to be more observable) to determine the fair value of the loans held at these entities, whereby the net assets we consolidate in our financial statements related to these entities represent the estimated fair value of our retained interests in the CFEs. Business purpose residential loans Business purpose residential loans include single-family rental loans and residential bridge loans that are generally illiquid in nature and trade infrequently. Significant inputs in the valuation analysis are predominantly Level 3 in nature, due to the lack of readily available market quotes and related inputs. Prices for our single-family rental loans are determined using market comparable information. Significant inputs obtained from market activity include indicative spreads to indexed swap rates for senior and subordinate mortgage-backed securities ("MBS"), IO MBS discount rates, senior credit support levels, and assumed future prepayment rates (Level 3). These assets would generally decrease in value based upon an increase in the credit spread or prepayment speed assumptions. Prices for our residential bridge loans are determined using discounted cash flow modeling, which incorporates a primary significant unobservable input of discount rate. These assets would generally decrease in value based upon an increase in the discount rate. Real estate securities Real estate securities include residential, multifamily, and other mortgage-backed securities that are generally illiquid in nature and trade infrequently. Significant inputs in the valuation analysis are predominantly Level 3 in nature, due to the lack of readily available market quotes and related inputs. For real estate securities, we utilize both market comparable pricing and discounted cash flow analysis valuation techniques. Relevant market indicators that are factored into the analysis include bid/ask spreads, the amount and timing of credit losses, interest rates, and collateral prepayment rates. Estimated fair values are based on applying the market indicators to generate discounted cash flows (Level 3). These cash flow models use significant unobservable inputs such as a discount rate, prepayment rate, default rate and loss severity. The estimated fair value of our securities would generally decrease based upon an increase in discount rate, default rates, loss severities, or a decrease in prepayment rates. As part of our securities valuation process, we request and consider indications of value from third-party securities dealers. For purposes of pricing our securities at September 30, 2019 , we received dealer price indications on 83% of our securities, representing 95% of our carrying value. In the aggregate, our internal valuations of the securities for which we received dealer price indications were within 1% of the aggregate average dealer valuations. Once we receive the price indications from dealers, they are compared to other relevant market inputs, such as actual or comparable trades, and the results of our discounted cash flow analysis. In circumstances where relevant market inputs cannot be obtained, increased reliance on discounted cash flow analysis and management judgment are required to estimate fair value. Derivative assets and liabilities Our derivative instruments include swaps, swaptions, TBAs, loan purchase commitments ("LPCs"), and forward sale commitments ("FSCs"). Fair values of derivative instruments are determined using quoted prices from active markets, when available, or from valuation models and are supported by valuations provided by dealers active in derivative markets. Fair values of TBAs and financial futures are generally obtained using quoted prices from active markets (Level 1). Our derivative valuation models for swaps and swaptions require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, prepayment rates, and correlations of certain inputs. Model inputs can generally be verified and model selection does not involve significant management judgment (Level 2). LPC and FSC fair values for residential jumbo and single-family rental loans are estimated based on the estimated fair values of the underlying loans (as described in " Residential loans at Redwood " and " Business purpose residential loans " above). In addition, fair values for LPCs are estimated based on the probability that the mortgage loan will be purchased (the "Pull-through rate") (Level 3). For other derivatives, valuations are based on various factors such as liquidity, bid/ask spreads, and credit considerations for which we rely on available market inputs. In the absence of such inputs, management’s best estimate is used (Level 3). Servicer advance investments Estimated fair values for servicer advance investments are determined through internal pricing models that estimate future cash flows and utilize certain significant inputs that are considered unobservable and are therefore Level 3 in nature. Our estimations of cash flows include the combined cash flows of all of the components that comprise the servicer advance investments: existing advances, the requirement to purchase future advances, the recovery of advances, and the right to a portion of the associated mortgage servicing fee ("mortgage servicing income"). The valuation technique is based on discounted cash flows. Significant inputs used in the valuations included prepayment rate (of the loans underlying the investments), mortgage servicing income, servicer advance WAL (the weighted-average expected remaining life of servicer advances), and discount rate. These assets would generally decrease in value based upon an increase in prepayment rates, an increase in servicer advance WAL, or an increase in discount rate, or a decrease in mortgage servicing income. MSRs MSRs include the rights to service jumbo residential mortgage loans. Significant inputs in the valuation analysis are predominantly Level 3, due to the nature of these instruments and the lack of readily available market quotes. Changes in the fair value of MSRs occur primarily due to the collection/realization of expected cash flows, as well as changes in valuation inputs and assumptions. Estimated fair values are based on applying the inputs to generate the net present value of estimated future MSR income (Level 3). These discounted cash flow models utilize certain significant unobservable inputs including market discount rates, assumed future prepayment rates of serviced loans, and the market cost of servicing. An increase in these unobservable inputs would generally reduce the estimated fair value of the MSRs. As part of our MSR valuation process, we received a valuation estimate from a third-party valuations firm. In the aggregate, our internal valuation of the MSRs were within 5% of the third-party valuation. Excess MSRs Estimated fair values for excess MSRs are determined through internal pricing models that estimate future cash flows and utilize certain significant inputs that are considered unobservable and are therefore Level 3 in nature. The valuation technique is based on discounted cash flows. Significant inputs used in the valuations included prepayment rate (of the loans underlying the investments), the amount of excess servicing income expected to be received ("excess mortgage servicing income"), and discount rate. These assets would generally decrease in value based upon an increase in prepayment rates or discount rate, or a decrease in excess mortgage servicing income. Shared Home Appreciation Options Estimated fair values for shared home appreciation options are determined through internal pricing models that estimate future cash flows and utilize certain significant inputs such as forecasted home price appreciation, prepayment rates, and discount rate. The valuation technique is based on discounted cash flows. An increase in discount rate, or a decrease in expected future home values combined with a decrease in prepayment rates, would generally reduce the estimated fair value of the shared home appreciation options (Level 3). FHLBC stock Our Federal Home Loan Bank ("FHLB") member subsidiary is required to purchase FHLBC stock under a borrowing agreement between our FHLB-member subsidiary and the FHLBC. Under this agreement, the stock is redeemable at face value, which represents the carrying value and fair value of the stock (Level 2). Guarantee asset The guarantee asset represents the estimated fair value of cash flows we are contractually entitled to receive related to a risk-sharing arrangement with Fannie Mae. Significant inputs in the valuation analysis are Level 3, due to the nature of this asset and the lack of market quotes. The fair value of the guarantee asset is determined using a discounted cash flow model, for which significant unobservable inputs include assumed future prepayment rates and market discount rate (Level 3). An increase in prepayment rates or discount rate would generally reduce the estimated fair value of the guarantee asset. Pledged collateral Pledged collateral consists of cash and U.S. Treasury securities held by a custodian in association with certain agreements we have entered into. Treasury securities are carried at their fair value, which is determined using quoted prices in active markets (Level 1). Cash and cash equivalents Cash and cash equivalents include cash on hand and highly liquid investments with original maturities of three months or less. Fair values equal carrying values (Level 1). Restricted cash Restricted cash primarily includes interest-earning cash balances related to risk-sharing transactions with the Agencies, cash held in association with borrowings from the FHLBC, cash held at Servicing Investment entities, and cash held at consolidated Sequoia entities for the purpose of distribution to investors and reinvestment. Due to the short-term nature of the restrictions, fair values approximate carrying values (Level 1). Accrued interest receivable and payable Accrued interest receivable and payable includes interest due on our assets and payable on our liabilities. Due to the short-term nature of when these interest payments will be received or paid, fair values approximate carrying values (Level 1). Real estate owned Real estate owned ("REO") includes properties owned in satisfaction of foreclosed loans. Fair values are determined using available market quotes, appraisals, broker price opinions, comparable properties, or other indications of value (Level 3). Margin receivable Margin receivable reflects cash collateral we have posted with our various derivative and debt counterparties as required to satisfy margin requirements. Fair values approximate carrying values (Level 2). Contingent consideration Contingent consideration is related to our acquisition of 5 Arches and is estimated and recorded at fair value as part of purchase consideration. Each reporting period we estimate the change in fair value of the contingent consideration, and such change is recognized in our consolidated statements of income |
Residential Loans
Residential Loans | 9 Months Ended |
Sep. 30, 2019 | |
Receivables [Abstract] | |
Residential Loans | Residential Loans We acquire residential loans from third-party originators and may sell or securitize these loans or hold them for investment. The following table summarizes the classifications and carrying values of the residential loans owned at Redwood and at consolidated Sequoia entities at September 30, 2019 and December 31, 2018 . Table 6.1 – Classifications and Carrying Values of Residential Loans September 30, 2019 Legacy Sequoia Freddie Mac (In Thousands) Redwood Sequoia Choice SLST Total Held-for-sale At fair value $ 925,780 $ — $ — $ — $ 925,780 At lower of cost or fair value 107 — — — 107 Total held-for-sale 925,887 — — — 925,887 Held-for-investment at fair value 2,267,218 429,159 2,618,316 2,441,223 7,755,916 Total Residential Loans $ 3,193,105 $ 429,159 $ 2,618,316 $ 2,441,223 $ 8,681,803 December 31, 2018 Legacy Sequoia Freddie Mac (In Thousands) Redwood Sequoia Choice SLST Total Held-for-sale At fair value $ 1,048,690 $ — $ — $ — $ 1,048,690 At lower of cost or fair value 111 — — — 111 Total held-for-sale 1,048,801 — — — 1,048,801 Held-for-investment at fair value 2,383,932 519,958 2,079,382 1,222,669 6,205,941 Total Residential Loans $ 3,432,733 $ 519,958 $ 2,079,382 $ 1,222,669 $ 7,254,742 At September 30, 2019 , we owned mortgage servicing rights associated with $2.51 billion (principal balance) of consolidated residential loans purchased from third-party originators. The value of these MSRs is included in the carrying value of the associated loans on our consolidated balance sheets. We contract with licensed sub-servicers that perform servicing functions for these loans. Residential Loans Held-for-Sale At Fair Value At September 30, 2019 , we owned 1,206 loans held-for-sale at fair value with an aggregate unpaid principal balance of $904 million and a fair value of $926 million , compared to 1,484 loans with an aggregate unpaid principal balance of $1.03 billion and a fair value of $1.05 billion at December 31, 2018 . At both September 30, 2019 and December 31, 2018, one of these loans with a fair value of $0.6 million and an unpaid principal balance of $0.7 million was greater than 90 days delinquent and none of these loans were in foreclosure. During the three and nine months ended September 30, 2019 , we purchased $1.45 billion and $3.94 billion (principal balance) of loans, respectively, for which we elected the fair value option, and we sold $1.53 billion and $3.92 billion (principal balance) of loans, respectively, for which we recorded a net market valuation loss of $7 million and a net market valuation gain of $0.3 million , respectively, through Mortgage banking activities, net on our consolidated statements of income. At September 30, 2019 , loans held-for-sale with a market value of $253 million were pledged as collateral under short-term borrowing agreements. During the three and nine months ended September 30, 2018 , we purchased $1.79 billion and $5.52 billion (principal balance) of loans, respectively, for which we elected the fair value option, and we sold $1.90 billion and $5.83 billion (principal balance) of loans, respectively, for which we recorded net market valuation gain s of $6 million and $16 million , respectively, through Mortgage banking activities, net on our consolidated statements of income. At Lower of Cost or Fair Value At both September 30, 2019 and December 31, 2018 , we held two residential loans at the lower of cost or fair value with $0.1 million in outstanding principal balance and carrying values of $0.1 million . At both September 30, 2019 and December 31, 2018, none of these loans were greater than 90 days delinquent or in foreclosure. Residential Loans Held-for-Investment at Fair Value At Redwood At September 30, 2019 , we owned 3,118 held-for-investment loans at Redwood with an aggregate unpaid principal balance of $2.20 billion and a fair value of $2.27 billion , compared to 3,296 loans with an aggregate unpaid principal balance of $2.39 billion and a fair value of $2.38 billion at December 31, 2018 . At September 30, 2019 , one of these loans with an aggregate fair value of $0.5 million and an unpaid principal balance of $0.6 million was greater than 90 days delinquent and in foreclosure. At December 31, 2018, two of these loans with an aggregate fair value and unpaid principal balance of $1 million were greater than 90 days delinquent and none of these loans were in foreclosure. During the three and nine months ended September 30, 2019 , we purchased zero and $39 million (principal balance) of loans, respectively, for which we elected the fair value option, and did no t sell any loans. During the three and nine months ended September 30, 2019 , we transferred loans with a fair value of zero and $69 million , respectively, from held-for-sale to held-for-investment. During the three and nine months ended September 30, 2019 , we transferred loans with a fair value of zero and $23 million , respectively, from held-for-investment to held-for-sale. During the three and nine months ended September 30, 2019 , we recorded net market valuation gain s of $8 million and $71 million , respectively, on residential loans held-for-investment at fair value through Investment fair value changes, net on our consolidated statements of income. At September 30, 2019 , loans with a fair value of $2.27 billion were pledged as collateral under a borrowing agreement with the FHLBC. During the three and nine months ended September 30, 2018 , we transferred loans with a fair value of $116 million and $204 million , respectively, from held-for-sale to held-for-investment. During both the three and nine months ended September 30, 2018 , we transferred loans with a fair value of $16 million from held-for-investment to held-for-sale. During the three and nine months ended September 30, 2018 , we recorded net market valuation loss es of $17 million and $71 million , respectively, on residential loans held-for-investment at fair value through Investment fair value changes, net on our consolidated statements of income. The outstanding loans held-for-investment at Redwood at September 30, 2019 were prime-quality, first lien loans, of which 96% were originated between 2013 and 2019, and 4% were originated in 2012 and prior years. The weighted average Fair Isaac Corporation ("FICO") score of borrowers backing these loans was 768 (at origination) and the weighted average loan-to-value ("LTV") ratio of these loans was 66% (at origination). At September 30, 2019 , these loans were comprised of 88% fixed-rate loans with a weighted average coupon of 4.15% , and the remainder were hybrid or ARM loans with a weighted average coupon of 4.19% . At Consolidated Legacy Sequoia Entities At September 30, 2019 , we consolidated 2,277 held-for-investment loans at consolidated Legacy Sequoia entities, with an aggregate unpaid principal balance of $446 million and a fair value of $429 million , as compared to 2,641 loans at December 31, 2018 , with an aggregate unpaid principal balance of $545 million and a fair value of $520 million . At origination, the weighted average FICO score of borrowers backing these loans was 727 , the weighted average LTV ratio of these loans was 66% , and the loans were nearly all first lien and prime-quality. At September 30, 2019 and December 31, 2018 , the aggregate unpaid principal balance of loans at consolidated Legacy Sequoia entities delinquent greater than 90 days was $13 million and $14 million , respectively, of which the aggregate unpaid principal balance of loans in foreclosure was $3 million and $5 million , respectively. During the three and nine months ended September 30, 2019 , we recorded a net market valuation loss of $0.1 million and a net market valuation gain of $5 million , respectively, on these loans through Investment fair value changes, net on our consolidated statements of income. During the three and nine months ended September 30, 2018 , we recorded net market valuation gain s of $4 million and $37 million , respectively, on these loans through Investment fair value changes, net on our consolidated statements of income. Pursuant to the collateralized financing entity guidelines, the market valuation changes of these loans are based on the estimated fair value of the associated ABS issued. The net impact to our income statement associated with our retained economic investment in the Legacy Sequoia securitization entities is presented in Note 5. At Consolidated Sequoia Choice Entities At September 30, 2019 , we consolidated 3,543 held-for-investment loans at the consolidated Sequoia Choice entities, with an aggregate unpaid principal balance of $2.55 billion and a fair value of $2.62 billion , as compared to 2,800 loans at December 31, 2018 with an aggregate unpaid principal balance of $2.04 billion and a fair value of $2.08 billion . At origination, the weighted average FICO score of borrowers backing these loans was 745 , the weighted average LTV ratio of these loans was 75% , and the loans were all first lien and prime-quality. At September 30, 2019 , six of these loans with an aggregate unpaid principal balance of $4 million were greater than 90 days delinquent and one of these loans with an unpaid principal balance of $1 million was in foreclosure. At December 31, 2018 , three of these loans with an aggregate unpaid principal balance of $2 million were greater than 90 days delinquent and none of these loans were in foreclosure. During the three and nine months ended September 30, 2019 , we transferred loans with a fair value of $727 million and $1.08 billion , respectively, from held-for-sale to held-for-investment associated with Choice securitizations. During the three and nine months ended September 30, 2019 , we recorded a net market valuation loss of $11 million and a net market valuation gain of $5 million , respectively, on these loans through Investment fair value changes, net on our consolidated statements of income. During the three and nine months ended September 30, 2018 , we recorded net market valuation loss es of $13 million and $25 million , respectively, on these loans through Investment fair value changes, net on our consolidated statements of income. Pursuant to the collateralized financing entity guidelines, the market valuation changes of these loans are based on the estimated fair value of the ABS issued associated with Choice securitizations . The net impact to our income statement associated with our retained economic investment in the Sequoia Choice securitization entities is presented in Note 5. At Consolidated Freddie Mac SLST Entities Beginning in the fourth quarter of 2018, we invested in subordinate securities issued by certain Freddie Mac SLST securitization trusts and were required to consolidate the underlying seasoned re-performing and non-performing residential loans owned at these entities for financial reporting purposes in accordance with GAAP. At securitization, each of these mortgage loans was a fully amortizing, fixed- or step-rate, first-lien loan that had been modified. At September 30, 2019 , we consolidated 14,706 held-for-investment loans at the consolidated Freddie Mac SLST entities, with an aggregate unpaid principal balance of $2.47 billion and a fair value of $2.44 billion , compared to 7,900 loans at December 31, 2018 with an aggregate unpaid principal balance of $1.31 billion and a fair value of $1.22 billion . At securitization, the weighted average FICO score of borrowers backing these loans was 599 and the weighted average LTV ratio of these loans was 68% . At September 30, 2019 , 288 of these loans with an aggregate unpaid principal balance of $75 million were greater than 90 days delinquent, and 150 of these loans with an aggregate unpaid principal balance of $24 million were in foreclosure. At December 31, 2018 , 306 of these loans with an aggregate unpaid principal balance of $51 million were greater than 90 days delinquent and none of these loans were in foreclosure. During the three and nine months ended September 30, 2019 , we recorded net market valuation gain s of $40 million and $95 million , respectively, on these loans through Investment fair value changes, net on our consolidated statements of income. Pursuant to the collateralized financing entity guidelines, the market valuation changes of these loans are based on the estimated fair value of the ABS issued associated with the Freddie Mac SLST securitizations . The net impact to our income statement associated with our economic investment in the Freddie Mac SLST securitization entities is presented in We originate business purpose residential loans, including single-family rental loans and residential bridge loans. This origination activity commenced in connection with our acquisition of 5 Arches in March 2019. Business Purpose Residential Loan Originations During the three months ended September 30, 2019 , we funded $127 million of business purpose residential loans, of which $3 million of residential bridge loans were sold to a third party. During the period from March 1, 2019 to September 30, 2019 , we funded $297 million of business purpose residential loans, of which $47 million of residential bridge loans were sold to a third party. The remaining business purpose residential loans were transferred to our investment portfolio (residential bridge loans), or retained in our mortgage banking business (single-family rental loans). Prior to the transfer of residential bridge loans to our investment portfolio, we recorded net market valuation gains of $1 million and $2 million on these loans through Mortgage banking activities, net on our consolidated statements of income for the three months ended September 30, 2019 and for the period from March 1, 2019 to September 30, 2019 , respectively. Market valuation adjustments on our single-family rental loans are also recorded in Mortgage banking activities, net on our consolidated statements of income. Additionally, during the three months ended September 30, 2019 and during the period from March 1, 2019 to September 30, 2019 , we recorded loan origination fee income associated with business purpose loans of $3 million and $6 million , respectively, through Mortgage banking activities, net on our consolidated statements of income. The following table summarizes the classifications and carrying values of the business purpose residential loans owned at Redwood at September 30, 2019 and December 31, 2018 . Table 7.1 – Classifications and Carrying Values of Business Purpose Residential Loans September 30, 2019 Single-Family Residential (In Thousands) Rental Bridge Total Held-for-sale at fair value $ 110,434 $ — $ 110,434 Held-for-investment at fair value 18,711 206,890 225,601 Total Business Purpose Residential Loans $ 129,145 $ 206,890 $ 336,035 December 31, 2018 Single-Family Residential (In Thousands) Rental Bridge Total Held-for-sale at fair value $ 28,460 $ — $ 28,460 Held-for-investment at fair value — 112,798 112,798 Total Business Purpose Residential Loans $ 28,460 $ 112,798 $ 141,258 Single-Family Rental Loans Held-for-Sale at Fair Value At September 30, 2019 , we owned 77 single-family rental loans held-for-sale with an aggregate unpaid principal balance of $106 million and a fair value of $110 million , compared to 11 loans at December 31, 2018 with an aggregate unpaid principal balance of $28 million and a fair value of $28 million . At both September 30, 2019 and December 31, 2018 , none of these loans were greater than 90 days delinquent or in foreclosure. During the three months ended September 30, 2019 and for the period from March 1, 2019 to September 30, 2019 , we originated $36 million and $78 million of single-family rental loans, respectively. During both the three months ended September 30, 2019 and for the period from March 1, 2019 to September 30, 2019 , $19 million of single-family rental loans were transferred to our investment portfolio and financed with FHLB borrowings, and the remaining loans were retained in our mortgage banking business. We did no t sell any loans during either of these periods. During the first two months of 2019, prior to our acquisition of 5 Arches on March 1, 2019, we purchased $19 million of single-family rental loans from 5 Arches. During the three and nine months ended September 30, 2019 , we recorded net market valuation gain s of $1 million and $3 million , respectively, on single-family rental loans held-for-sale at fair value through Mortgage banking activities, net on our consolidated statements of income. At September 30, 2019 , loans held-for-sale with a market value of $78 million were pledged as collateral under short-term borrowing agreements. The outstanding single-family rental loans held-for-sale at September 30, 2019 were first lien, fixed-rate loans with original maturities of five, seven, or ten years. At September 30, 2019 , the weighted average coupon of our single-family rental loans was 5.35% and the weighted average remaining loan term was six years . At origination, the weighted average LTV ratio of these loans was 68% and the weighted average debt service coverage ratio ("DSCR") was 1.36 times. Single-Family Rental Loans Held-for-Investment at Fair Value At September 30, 2019 , we owned one single-family rental loan held-for-investment with an aggregate unpaid principal balance of $17 million and a fair value of $19 million . At September 30, 2019 , this loan was no t greater than 90 days delinquent or in foreclosure. During the three months ended September 30, 2019 , we transferred one loan with a fair value of $19 million from held-for-sale to held-for-investment. During both the three and nine months ended September 30, 2019 , we recorded net market valuation gain s of less than $0.1 million on single-family rental loans held-for-investment at fair value through Investment fair value changes, net on our consolidated statements of income. Residential Bridge Loans Held-for-Investment at Fair Value At September 30, 2019 , we owned 392 residential bridge loans held-for-investment with an aggregate unpaid principal balance of $205 million and a fair value of $207 million , compared to 157 loans at December 31, 2018 with an aggregate unpaid principal balance of $112 million and a fair value of $113 million . As part of our credit risk management practices, our residential bridge loans are subject to individual risk assessment using an internal borrower and collateral quality evaluation framework. At September 30, 2019 , nine loans with an aggregate fair value and unpaid principal balance of $6 million were greater than 90 days delinquent, and eight of these loans with an aggregate fair value and unpaid principal balance of $5 million were in foreclosure. At December 31, 2018 , seven loans with an aggregate fair value of $12 million were greater than 90 days delinquent and four of these loans with an aggregate fair value of $11 million were in foreclosure. During the nine months ended September 30, 2019 , we transferred one loan with a fair value of $5 million to REO, which is included in Other assets on our consolidated balance sheets. During the three months ended September 30, 2019 and for the period from March 1, 2019 to September 30, 2019 , $88 million and $174 million of newly originated residential bridge loans, respectively, were transferred to our investment portfolio. During the first two months of 2019, prior to our acquisition of 5 Arches on March 1, 2019, we purchased $10 million of residential bridge loans from 5 Arches. During both the three and nine months ended September 30, 2019 , we recorded net market valuation loss es of $1 million on residential bridge loans held-for-investment at fair value through Investment fair value changes, net on our consolidated statements of income. At September 30, 2019 , loans with a market value of $176 million were pledged as collateral under short-term borrowing agreements. The outstanding residential bridge loans held-for-investment at September 30, 2019 were first lien, fixed-rate, interest-only loans with a weighted average coupon of 8.90% and original maturities of six to 24 months. At origination, the weighted average FICO score of borrowers backing these loans was 693 and the weighted average LTV ratio of these loans was 70% . At September 30, 2019 , we had a $67 million commitment to fund residential bridge loans. See Note 16 for additional information on this commitment. Beginning in the second half of 2018, we invested in multifamily subordinate securities issued by certain Freddie Mac K-Series securitization trusts and were required to consolidate the underlying multifamily loans owned at these entities for financial reporting purposes in accordance with GAAP. At September 30, 2019 , we consolidated 250 held-for-investment multifamily loans, with an aggregate unpaid principal balance of $3.54 billion and a fair value of $3.79 billion , compared to 162 loans at December 31, 2018 with an aggregate unpaid principal balance of $2.13 billion and a fair value of $2.14 billion . The outstanding multifamily loans held-for-investment at the Freddie Mac K-Series entities at September 30, 2019 were first lien, fixed-rate loans that were originated between 2015 and 2017 and had original loan terms of seven to ten years and an original weighted average LTV ratio of 69% . At September 30, 2019 , the weighted average coupon of these multifamily loans was 4.19% and the weighted average remaining loan term was six years . At both September 30, 2019 and December 31, 2018, none of these loans were greater than 90 days delinquent or in foreclosure. During the three and nine months ended September 30, 2019 , we recorded net market valuation gain s of $47 million and $178 million , respectively, on these loans through Investment fair value changes, net on our consolidated statements of income. Pursuant to the collateralized financing entity guidelines, the market valuation changes of these loans are based on the estimated fair value of the ABS issued associated with the securitizations . The net impact to our income statement associated with our economic investment in the securities of the Freddie Mac K-Series securitization entities is presented in |
Business Purpose Residential Lo
Business Purpose Residential Loans | 9 Months Ended |
Sep. 30, 2019 | |
Receivables [Abstract] | |
Business Purpose Residential Loans | Residential Loans We acquire residential loans from third-party originators and may sell or securitize these loans or hold them for investment. The following table summarizes the classifications and carrying values of the residential loans owned at Redwood and at consolidated Sequoia entities at September 30, 2019 and December 31, 2018 . Table 6.1 – Classifications and Carrying Values of Residential Loans September 30, 2019 Legacy Sequoia Freddie Mac (In Thousands) Redwood Sequoia Choice SLST Total Held-for-sale At fair value $ 925,780 $ — $ — $ — $ 925,780 At lower of cost or fair value 107 — — — 107 Total held-for-sale 925,887 — — — 925,887 Held-for-investment at fair value 2,267,218 429,159 2,618,316 2,441,223 7,755,916 Total Residential Loans $ 3,193,105 $ 429,159 $ 2,618,316 $ 2,441,223 $ 8,681,803 December 31, 2018 Legacy Sequoia Freddie Mac (In Thousands) Redwood Sequoia Choice SLST Total Held-for-sale At fair value $ 1,048,690 $ — $ — $ — $ 1,048,690 At lower of cost or fair value 111 — — — 111 Total held-for-sale 1,048,801 — — — 1,048,801 Held-for-investment at fair value 2,383,932 519,958 2,079,382 1,222,669 6,205,941 Total Residential Loans $ 3,432,733 $ 519,958 $ 2,079,382 $ 1,222,669 $ 7,254,742 At September 30, 2019 , we owned mortgage servicing rights associated with $2.51 billion (principal balance) of consolidated residential loans purchased from third-party originators. The value of these MSRs is included in the carrying value of the associated loans on our consolidated balance sheets. We contract with licensed sub-servicers that perform servicing functions for these loans. Residential Loans Held-for-Sale At Fair Value At September 30, 2019 , we owned 1,206 loans held-for-sale at fair value with an aggregate unpaid principal balance of $904 million and a fair value of $926 million , compared to 1,484 loans with an aggregate unpaid principal balance of $1.03 billion and a fair value of $1.05 billion at December 31, 2018 . At both September 30, 2019 and December 31, 2018, one of these loans with a fair value of $0.6 million and an unpaid principal balance of $0.7 million was greater than 90 days delinquent and none of these loans were in foreclosure. During the three and nine months ended September 30, 2019 , we purchased $1.45 billion and $3.94 billion (principal balance) of loans, respectively, for which we elected the fair value option, and we sold $1.53 billion and $3.92 billion (principal balance) of loans, respectively, for which we recorded a net market valuation loss of $7 million and a net market valuation gain of $0.3 million , respectively, through Mortgage banking activities, net on our consolidated statements of income. At September 30, 2019 , loans held-for-sale with a market value of $253 million were pledged as collateral under short-term borrowing agreements. During the three and nine months ended September 30, 2018 , we purchased $1.79 billion and $5.52 billion (principal balance) of loans, respectively, for which we elected the fair value option, and we sold $1.90 billion and $5.83 billion (principal balance) of loans, respectively, for which we recorded net market valuation gain s of $6 million and $16 million , respectively, through Mortgage banking activities, net on our consolidated statements of income. At Lower of Cost or Fair Value At both September 30, 2019 and December 31, 2018 , we held two residential loans at the lower of cost or fair value with $0.1 million in outstanding principal balance and carrying values of $0.1 million . At both September 30, 2019 and December 31, 2018, none of these loans were greater than 90 days delinquent or in foreclosure. Residential Loans Held-for-Investment at Fair Value At Redwood At September 30, 2019 , we owned 3,118 held-for-investment loans at Redwood with an aggregate unpaid principal balance of $2.20 billion and a fair value of $2.27 billion , compared to 3,296 loans with an aggregate unpaid principal balance of $2.39 billion and a fair value of $2.38 billion at December 31, 2018 . At September 30, 2019 , one of these loans with an aggregate fair value of $0.5 million and an unpaid principal balance of $0.6 million was greater than 90 days delinquent and in foreclosure. At December 31, 2018, two of these loans with an aggregate fair value and unpaid principal balance of $1 million were greater than 90 days delinquent and none of these loans were in foreclosure. During the three and nine months ended September 30, 2019 , we purchased zero and $39 million (principal balance) of loans, respectively, for which we elected the fair value option, and did no t sell any loans. During the three and nine months ended September 30, 2019 , we transferred loans with a fair value of zero and $69 million , respectively, from held-for-sale to held-for-investment. During the three and nine months ended September 30, 2019 , we transferred loans with a fair value of zero and $23 million , respectively, from held-for-investment to held-for-sale. During the three and nine months ended September 30, 2019 , we recorded net market valuation gain s of $8 million and $71 million , respectively, on residential loans held-for-investment at fair value through Investment fair value changes, net on our consolidated statements of income. At September 30, 2019 , loans with a fair value of $2.27 billion were pledged as collateral under a borrowing agreement with the FHLBC. During the three and nine months ended September 30, 2018 , we transferred loans with a fair value of $116 million and $204 million , respectively, from held-for-sale to held-for-investment. During both the three and nine months ended September 30, 2018 , we transferred loans with a fair value of $16 million from held-for-investment to held-for-sale. During the three and nine months ended September 30, 2018 , we recorded net market valuation loss es of $17 million and $71 million , respectively, on residential loans held-for-investment at fair value through Investment fair value changes, net on our consolidated statements of income. The outstanding loans held-for-investment at Redwood at September 30, 2019 were prime-quality, first lien loans, of which 96% were originated between 2013 and 2019, and 4% were originated in 2012 and prior years. The weighted average Fair Isaac Corporation ("FICO") score of borrowers backing these loans was 768 (at origination) and the weighted average loan-to-value ("LTV") ratio of these loans was 66% (at origination). At September 30, 2019 , these loans were comprised of 88% fixed-rate loans with a weighted average coupon of 4.15% , and the remainder were hybrid or ARM loans with a weighted average coupon of 4.19% . At Consolidated Legacy Sequoia Entities At September 30, 2019 , we consolidated 2,277 held-for-investment loans at consolidated Legacy Sequoia entities, with an aggregate unpaid principal balance of $446 million and a fair value of $429 million , as compared to 2,641 loans at December 31, 2018 , with an aggregate unpaid principal balance of $545 million and a fair value of $520 million . At origination, the weighted average FICO score of borrowers backing these loans was 727 , the weighted average LTV ratio of these loans was 66% , and the loans were nearly all first lien and prime-quality. At September 30, 2019 and December 31, 2018 , the aggregate unpaid principal balance of loans at consolidated Legacy Sequoia entities delinquent greater than 90 days was $13 million and $14 million , respectively, of which the aggregate unpaid principal balance of loans in foreclosure was $3 million and $5 million , respectively. During the three and nine months ended September 30, 2019 , we recorded a net market valuation loss of $0.1 million and a net market valuation gain of $5 million , respectively, on these loans through Investment fair value changes, net on our consolidated statements of income. During the three and nine months ended September 30, 2018 , we recorded net market valuation gain s of $4 million and $37 million , respectively, on these loans through Investment fair value changes, net on our consolidated statements of income. Pursuant to the collateralized financing entity guidelines, the market valuation changes of these loans are based on the estimated fair value of the associated ABS issued. The net impact to our income statement associated with our retained economic investment in the Legacy Sequoia securitization entities is presented in Note 5. At Consolidated Sequoia Choice Entities At September 30, 2019 , we consolidated 3,543 held-for-investment loans at the consolidated Sequoia Choice entities, with an aggregate unpaid principal balance of $2.55 billion and a fair value of $2.62 billion , as compared to 2,800 loans at December 31, 2018 with an aggregate unpaid principal balance of $2.04 billion and a fair value of $2.08 billion . At origination, the weighted average FICO score of borrowers backing these loans was 745 , the weighted average LTV ratio of these loans was 75% , and the loans were all first lien and prime-quality. At September 30, 2019 , six of these loans with an aggregate unpaid principal balance of $4 million were greater than 90 days delinquent and one of these loans with an unpaid principal balance of $1 million was in foreclosure. At December 31, 2018 , three of these loans with an aggregate unpaid principal balance of $2 million were greater than 90 days delinquent and none of these loans were in foreclosure. During the three and nine months ended September 30, 2019 , we transferred loans with a fair value of $727 million and $1.08 billion , respectively, from held-for-sale to held-for-investment associated with Choice securitizations. During the three and nine months ended September 30, 2019 , we recorded a net market valuation loss of $11 million and a net market valuation gain of $5 million , respectively, on these loans through Investment fair value changes, net on our consolidated statements of income. During the three and nine months ended September 30, 2018 , we recorded net market valuation loss es of $13 million and $25 million , respectively, on these loans through Investment fair value changes, net on our consolidated statements of income. Pursuant to the collateralized financing entity guidelines, the market valuation changes of these loans are based on the estimated fair value of the ABS issued associated with Choice securitizations . The net impact to our income statement associated with our retained economic investment in the Sequoia Choice securitization entities is presented in Note 5. At Consolidated Freddie Mac SLST Entities Beginning in the fourth quarter of 2018, we invested in subordinate securities issued by certain Freddie Mac SLST securitization trusts and were required to consolidate the underlying seasoned re-performing and non-performing residential loans owned at these entities for financial reporting purposes in accordance with GAAP. At securitization, each of these mortgage loans was a fully amortizing, fixed- or step-rate, first-lien loan that had been modified. At September 30, 2019 , we consolidated 14,706 held-for-investment loans at the consolidated Freddie Mac SLST entities, with an aggregate unpaid principal balance of $2.47 billion and a fair value of $2.44 billion , compared to 7,900 loans at December 31, 2018 with an aggregate unpaid principal balance of $1.31 billion and a fair value of $1.22 billion . At securitization, the weighted average FICO score of borrowers backing these loans was 599 and the weighted average LTV ratio of these loans was 68% . At September 30, 2019 , 288 of these loans with an aggregate unpaid principal balance of $75 million were greater than 90 days delinquent, and 150 of these loans with an aggregate unpaid principal balance of $24 million were in foreclosure. At December 31, 2018 , 306 of these loans with an aggregate unpaid principal balance of $51 million were greater than 90 days delinquent and none of these loans were in foreclosure. During the three and nine months ended September 30, 2019 , we recorded net market valuation gain s of $40 million and $95 million , respectively, on these loans through Investment fair value changes, net on our consolidated statements of income. Pursuant to the collateralized financing entity guidelines, the market valuation changes of these loans are based on the estimated fair value of the ABS issued associated with the Freddie Mac SLST securitizations . The net impact to our income statement associated with our economic investment in the Freddie Mac SLST securitization entities is presented in We originate business purpose residential loans, including single-family rental loans and residential bridge loans. This origination activity commenced in connection with our acquisition of 5 Arches in March 2019. Business Purpose Residential Loan Originations During the three months ended September 30, 2019 , we funded $127 million of business purpose residential loans, of which $3 million of residential bridge loans were sold to a third party. During the period from March 1, 2019 to September 30, 2019 , we funded $297 million of business purpose residential loans, of which $47 million of residential bridge loans were sold to a third party. The remaining business purpose residential loans were transferred to our investment portfolio (residential bridge loans), or retained in our mortgage banking business (single-family rental loans). Prior to the transfer of residential bridge loans to our investment portfolio, we recorded net market valuation gains of $1 million and $2 million on these loans through Mortgage banking activities, net on our consolidated statements of income for the three months ended September 30, 2019 and for the period from March 1, 2019 to September 30, 2019 , respectively. Market valuation adjustments on our single-family rental loans are also recorded in Mortgage banking activities, net on our consolidated statements of income. Additionally, during the three months ended September 30, 2019 and during the period from March 1, 2019 to September 30, 2019 , we recorded loan origination fee income associated with business purpose loans of $3 million and $6 million , respectively, through Mortgage banking activities, net on our consolidated statements of income. The following table summarizes the classifications and carrying values of the business purpose residential loans owned at Redwood at September 30, 2019 and December 31, 2018 . Table 7.1 – Classifications and Carrying Values of Business Purpose Residential Loans September 30, 2019 Single-Family Residential (In Thousands) Rental Bridge Total Held-for-sale at fair value $ 110,434 $ — $ 110,434 Held-for-investment at fair value 18,711 206,890 225,601 Total Business Purpose Residential Loans $ 129,145 $ 206,890 $ 336,035 December 31, 2018 Single-Family Residential (In Thousands) Rental Bridge Total Held-for-sale at fair value $ 28,460 $ — $ 28,460 Held-for-investment at fair value — 112,798 112,798 Total Business Purpose Residential Loans $ 28,460 $ 112,798 $ 141,258 Single-Family Rental Loans Held-for-Sale at Fair Value At September 30, 2019 , we owned 77 single-family rental loans held-for-sale with an aggregate unpaid principal balance of $106 million and a fair value of $110 million , compared to 11 loans at December 31, 2018 with an aggregate unpaid principal balance of $28 million and a fair value of $28 million . At both September 30, 2019 and December 31, 2018 , none of these loans were greater than 90 days delinquent or in foreclosure. During the three months ended September 30, 2019 and for the period from March 1, 2019 to September 30, 2019 , we originated $36 million and $78 million of single-family rental loans, respectively. During both the three months ended September 30, 2019 and for the period from March 1, 2019 to September 30, 2019 , $19 million of single-family rental loans were transferred to our investment portfolio and financed with FHLB borrowings, and the remaining loans were retained in our mortgage banking business. We did no t sell any loans during either of these periods. During the first two months of 2019, prior to our acquisition of 5 Arches on March 1, 2019, we purchased $19 million of single-family rental loans from 5 Arches. During the three and nine months ended September 30, 2019 , we recorded net market valuation gain s of $1 million and $3 million , respectively, on single-family rental loans held-for-sale at fair value through Mortgage banking activities, net on our consolidated statements of income. At September 30, 2019 , loans held-for-sale with a market value of $78 million were pledged as collateral under short-term borrowing agreements. The outstanding single-family rental loans held-for-sale at September 30, 2019 were first lien, fixed-rate loans with original maturities of five, seven, or ten years. At September 30, 2019 , the weighted average coupon of our single-family rental loans was 5.35% and the weighted average remaining loan term was six years . At origination, the weighted average LTV ratio of these loans was 68% and the weighted average debt service coverage ratio ("DSCR") was 1.36 times. Single-Family Rental Loans Held-for-Investment at Fair Value At September 30, 2019 , we owned one single-family rental loan held-for-investment with an aggregate unpaid principal balance of $17 million and a fair value of $19 million . At September 30, 2019 , this loan was no t greater than 90 days delinquent or in foreclosure. During the three months ended September 30, 2019 , we transferred one loan with a fair value of $19 million from held-for-sale to held-for-investment. During both the three and nine months ended September 30, 2019 , we recorded net market valuation gain s of less than $0.1 million on single-family rental loans held-for-investment at fair value through Investment fair value changes, net on our consolidated statements of income. Residential Bridge Loans Held-for-Investment at Fair Value At September 30, 2019 , we owned 392 residential bridge loans held-for-investment with an aggregate unpaid principal balance of $205 million and a fair value of $207 million , compared to 157 loans at December 31, 2018 with an aggregate unpaid principal balance of $112 million and a fair value of $113 million . As part of our credit risk management practices, our residential bridge loans are subject to individual risk assessment using an internal borrower and collateral quality evaluation framework. At September 30, 2019 , nine loans with an aggregate fair value and unpaid principal balance of $6 million were greater than 90 days delinquent, and eight of these loans with an aggregate fair value and unpaid principal balance of $5 million were in foreclosure. At December 31, 2018 , seven loans with an aggregate fair value of $12 million were greater than 90 days delinquent and four of these loans with an aggregate fair value of $11 million were in foreclosure. During the nine months ended September 30, 2019 , we transferred one loan with a fair value of $5 million to REO, which is included in Other assets on our consolidated balance sheets. During the three months ended September 30, 2019 and for the period from March 1, 2019 to September 30, 2019 , $88 million and $174 million of newly originated residential bridge loans, respectively, were transferred to our investment portfolio. During the first two months of 2019, prior to our acquisition of 5 Arches on March 1, 2019, we purchased $10 million of residential bridge loans from 5 Arches. During both the three and nine months ended September 30, 2019 , we recorded net market valuation loss es of $1 million on residential bridge loans held-for-investment at fair value through Investment fair value changes, net on our consolidated statements of income. At September 30, 2019 , loans with a market value of $176 million were pledged as collateral under short-term borrowing agreements. The outstanding residential bridge loans held-for-investment at September 30, 2019 were first lien, fixed-rate, interest-only loans with a weighted average coupon of 8.90% and original maturities of six to 24 months. At origination, the weighted average FICO score of borrowers backing these loans was 693 and the weighted average LTV ratio of these loans was 70% . At September 30, 2019 , we had a $67 million commitment to fund residential bridge loans. See Note 16 for additional information on this commitment. Beginning in the second half of 2018, we invested in multifamily subordinate securities issued by certain Freddie Mac K-Series securitization trusts and were required to consolidate the underlying multifamily loans owned at these entities for financial reporting purposes in accordance with GAAP. At September 30, 2019 , we consolidated 250 held-for-investment multifamily loans, with an aggregate unpaid principal balance of $3.54 billion and a fair value of $3.79 billion , compared to 162 loans at December 31, 2018 with an aggregate unpaid principal balance of $2.13 billion and a fair value of $2.14 billion . The outstanding multifamily loans held-for-investment at the Freddie Mac K-Series entities at September 30, 2019 were first lien, fixed-rate loans that were originated between 2015 and 2017 and had original loan terms of seven to ten years and an original weighted average LTV ratio of 69% . At September 30, 2019 , the weighted average coupon of these multifamily loans was 4.19% and the weighted average remaining loan term was six years . At both September 30, 2019 and December 31, 2018, none of these loans were greater than 90 days delinquent or in foreclosure. During the three and nine months ended September 30, 2019 , we recorded net market valuation gain s of $47 million and $178 million , respectively, on these loans through Investment fair value changes, net on our consolidated statements of income. Pursuant to the collateralized financing entity guidelines, the market valuation changes of these loans are based on the estimated fair value of the ABS issued associated with the securitizations . The net impact to our income statement associated with our economic investment in the securities of the Freddie Mac K-Series securitization entities is presented in |
Multifamily Loans
Multifamily Loans | 9 Months Ended |
Sep. 30, 2019 | |
Receivables [Abstract] | |
Multifamily Loans | Residential Loans We acquire residential loans from third-party originators and may sell or securitize these loans or hold them for investment. The following table summarizes the classifications and carrying values of the residential loans owned at Redwood and at consolidated Sequoia entities at September 30, 2019 and December 31, 2018 . Table 6.1 – Classifications and Carrying Values of Residential Loans September 30, 2019 Legacy Sequoia Freddie Mac (In Thousands) Redwood Sequoia Choice SLST Total Held-for-sale At fair value $ 925,780 $ — $ — $ — $ 925,780 At lower of cost or fair value 107 — — — 107 Total held-for-sale 925,887 — — — 925,887 Held-for-investment at fair value 2,267,218 429,159 2,618,316 2,441,223 7,755,916 Total Residential Loans $ 3,193,105 $ 429,159 $ 2,618,316 $ 2,441,223 $ 8,681,803 December 31, 2018 Legacy Sequoia Freddie Mac (In Thousands) Redwood Sequoia Choice SLST Total Held-for-sale At fair value $ 1,048,690 $ — $ — $ — $ 1,048,690 At lower of cost or fair value 111 — — — 111 Total held-for-sale 1,048,801 — — — 1,048,801 Held-for-investment at fair value 2,383,932 519,958 2,079,382 1,222,669 6,205,941 Total Residential Loans $ 3,432,733 $ 519,958 $ 2,079,382 $ 1,222,669 $ 7,254,742 At September 30, 2019 , we owned mortgage servicing rights associated with $2.51 billion (principal balance) of consolidated residential loans purchased from third-party originators. The value of these MSRs is included in the carrying value of the associated loans on our consolidated balance sheets. We contract with licensed sub-servicers that perform servicing functions for these loans. Residential Loans Held-for-Sale At Fair Value At September 30, 2019 , we owned 1,206 loans held-for-sale at fair value with an aggregate unpaid principal balance of $904 million and a fair value of $926 million , compared to 1,484 loans with an aggregate unpaid principal balance of $1.03 billion and a fair value of $1.05 billion at December 31, 2018 . At both September 30, 2019 and December 31, 2018, one of these loans with a fair value of $0.6 million and an unpaid principal balance of $0.7 million was greater than 90 days delinquent and none of these loans were in foreclosure. During the three and nine months ended September 30, 2019 , we purchased $1.45 billion and $3.94 billion (principal balance) of loans, respectively, for which we elected the fair value option, and we sold $1.53 billion and $3.92 billion (principal balance) of loans, respectively, for which we recorded a net market valuation loss of $7 million and a net market valuation gain of $0.3 million , respectively, through Mortgage banking activities, net on our consolidated statements of income. At September 30, 2019 , loans held-for-sale with a market value of $253 million were pledged as collateral under short-term borrowing agreements. During the three and nine months ended September 30, 2018 , we purchased $1.79 billion and $5.52 billion (principal balance) of loans, respectively, for which we elected the fair value option, and we sold $1.90 billion and $5.83 billion (principal balance) of loans, respectively, for which we recorded net market valuation gain s of $6 million and $16 million , respectively, through Mortgage banking activities, net on our consolidated statements of income. At Lower of Cost or Fair Value At both September 30, 2019 and December 31, 2018 , we held two residential loans at the lower of cost or fair value with $0.1 million in outstanding principal balance and carrying values of $0.1 million . At both September 30, 2019 and December 31, 2018, none of these loans were greater than 90 days delinquent or in foreclosure. Residential Loans Held-for-Investment at Fair Value At Redwood At September 30, 2019 , we owned 3,118 held-for-investment loans at Redwood with an aggregate unpaid principal balance of $2.20 billion and a fair value of $2.27 billion , compared to 3,296 loans with an aggregate unpaid principal balance of $2.39 billion and a fair value of $2.38 billion at December 31, 2018 . At September 30, 2019 , one of these loans with an aggregate fair value of $0.5 million and an unpaid principal balance of $0.6 million was greater than 90 days delinquent and in foreclosure. At December 31, 2018, two of these loans with an aggregate fair value and unpaid principal balance of $1 million were greater than 90 days delinquent and none of these loans were in foreclosure. During the three and nine months ended September 30, 2019 , we purchased zero and $39 million (principal balance) of loans, respectively, for which we elected the fair value option, and did no t sell any loans. During the three and nine months ended September 30, 2019 , we transferred loans with a fair value of zero and $69 million , respectively, from held-for-sale to held-for-investment. During the three and nine months ended September 30, 2019 , we transferred loans with a fair value of zero and $23 million , respectively, from held-for-investment to held-for-sale. During the three and nine months ended September 30, 2019 , we recorded net market valuation gain s of $8 million and $71 million , respectively, on residential loans held-for-investment at fair value through Investment fair value changes, net on our consolidated statements of income. At September 30, 2019 , loans with a fair value of $2.27 billion were pledged as collateral under a borrowing agreement with the FHLBC. During the three and nine months ended September 30, 2018 , we transferred loans with a fair value of $116 million and $204 million , respectively, from held-for-sale to held-for-investment. During both the three and nine months ended September 30, 2018 , we transferred loans with a fair value of $16 million from held-for-investment to held-for-sale. During the three and nine months ended September 30, 2018 , we recorded net market valuation loss es of $17 million and $71 million , respectively, on residential loans held-for-investment at fair value through Investment fair value changes, net on our consolidated statements of income. The outstanding loans held-for-investment at Redwood at September 30, 2019 were prime-quality, first lien loans, of which 96% were originated between 2013 and 2019, and 4% were originated in 2012 and prior years. The weighted average Fair Isaac Corporation ("FICO") score of borrowers backing these loans was 768 (at origination) and the weighted average loan-to-value ("LTV") ratio of these loans was 66% (at origination). At September 30, 2019 , these loans were comprised of 88% fixed-rate loans with a weighted average coupon of 4.15% , and the remainder were hybrid or ARM loans with a weighted average coupon of 4.19% . At Consolidated Legacy Sequoia Entities At September 30, 2019 , we consolidated 2,277 held-for-investment loans at consolidated Legacy Sequoia entities, with an aggregate unpaid principal balance of $446 million and a fair value of $429 million , as compared to 2,641 loans at December 31, 2018 , with an aggregate unpaid principal balance of $545 million and a fair value of $520 million . At origination, the weighted average FICO score of borrowers backing these loans was 727 , the weighted average LTV ratio of these loans was 66% , and the loans were nearly all first lien and prime-quality. At September 30, 2019 and December 31, 2018 , the aggregate unpaid principal balance of loans at consolidated Legacy Sequoia entities delinquent greater than 90 days was $13 million and $14 million , respectively, of which the aggregate unpaid principal balance of loans in foreclosure was $3 million and $5 million , respectively. During the three and nine months ended September 30, 2019 , we recorded a net market valuation loss of $0.1 million and a net market valuation gain of $5 million , respectively, on these loans through Investment fair value changes, net on our consolidated statements of income. During the three and nine months ended September 30, 2018 , we recorded net market valuation gain s of $4 million and $37 million , respectively, on these loans through Investment fair value changes, net on our consolidated statements of income. Pursuant to the collateralized financing entity guidelines, the market valuation changes of these loans are based on the estimated fair value of the associated ABS issued. The net impact to our income statement associated with our retained economic investment in the Legacy Sequoia securitization entities is presented in Note 5. At Consolidated Sequoia Choice Entities At September 30, 2019 , we consolidated 3,543 held-for-investment loans at the consolidated Sequoia Choice entities, with an aggregate unpaid principal balance of $2.55 billion and a fair value of $2.62 billion , as compared to 2,800 loans at December 31, 2018 with an aggregate unpaid principal balance of $2.04 billion and a fair value of $2.08 billion . At origination, the weighted average FICO score of borrowers backing these loans was 745 , the weighted average LTV ratio of these loans was 75% , and the loans were all first lien and prime-quality. At September 30, 2019 , six of these loans with an aggregate unpaid principal balance of $4 million were greater than 90 days delinquent and one of these loans with an unpaid principal balance of $1 million was in foreclosure. At December 31, 2018 , three of these loans with an aggregate unpaid principal balance of $2 million were greater than 90 days delinquent and none of these loans were in foreclosure. During the three and nine months ended September 30, 2019 , we transferred loans with a fair value of $727 million and $1.08 billion , respectively, from held-for-sale to held-for-investment associated with Choice securitizations. During the three and nine months ended September 30, 2019 , we recorded a net market valuation loss of $11 million and a net market valuation gain of $5 million , respectively, on these loans through Investment fair value changes, net on our consolidated statements of income. During the three and nine months ended September 30, 2018 , we recorded net market valuation loss es of $13 million and $25 million , respectively, on these loans through Investment fair value changes, net on our consolidated statements of income. Pursuant to the collateralized financing entity guidelines, the market valuation changes of these loans are based on the estimated fair value of the ABS issued associated with Choice securitizations . The net impact to our income statement associated with our retained economic investment in the Sequoia Choice securitization entities is presented in Note 5. At Consolidated Freddie Mac SLST Entities Beginning in the fourth quarter of 2018, we invested in subordinate securities issued by certain Freddie Mac SLST securitization trusts and were required to consolidate the underlying seasoned re-performing and non-performing residential loans owned at these entities for financial reporting purposes in accordance with GAAP. At securitization, each of these mortgage loans was a fully amortizing, fixed- or step-rate, first-lien loan that had been modified. At September 30, 2019 , we consolidated 14,706 held-for-investment loans at the consolidated Freddie Mac SLST entities, with an aggregate unpaid principal balance of $2.47 billion and a fair value of $2.44 billion , compared to 7,900 loans at December 31, 2018 with an aggregate unpaid principal balance of $1.31 billion and a fair value of $1.22 billion . At securitization, the weighted average FICO score of borrowers backing these loans was 599 and the weighted average LTV ratio of these loans was 68% . At September 30, 2019 , 288 of these loans with an aggregate unpaid principal balance of $75 million were greater than 90 days delinquent, and 150 of these loans with an aggregate unpaid principal balance of $24 million were in foreclosure. At December 31, 2018 , 306 of these loans with an aggregate unpaid principal balance of $51 million were greater than 90 days delinquent and none of these loans were in foreclosure. During the three and nine months ended September 30, 2019 , we recorded net market valuation gain s of $40 million and $95 million , respectively, on these loans through Investment fair value changes, net on our consolidated statements of income. Pursuant to the collateralized financing entity guidelines, the market valuation changes of these loans are based on the estimated fair value of the ABS issued associated with the Freddie Mac SLST securitizations . The net impact to our income statement associated with our economic investment in the Freddie Mac SLST securitization entities is presented in We originate business purpose residential loans, including single-family rental loans and residential bridge loans. This origination activity commenced in connection with our acquisition of 5 Arches in March 2019. Business Purpose Residential Loan Originations During the three months ended September 30, 2019 , we funded $127 million of business purpose residential loans, of which $3 million of residential bridge loans were sold to a third party. During the period from March 1, 2019 to September 30, 2019 , we funded $297 million of business purpose residential loans, of which $47 million of residential bridge loans were sold to a third party. The remaining business purpose residential loans were transferred to our investment portfolio (residential bridge loans), or retained in our mortgage banking business (single-family rental loans). Prior to the transfer of residential bridge loans to our investment portfolio, we recorded net market valuation gains of $1 million and $2 million on these loans through Mortgage banking activities, net on our consolidated statements of income for the three months ended September 30, 2019 and for the period from March 1, 2019 to September 30, 2019 , respectively. Market valuation adjustments on our single-family rental loans are also recorded in Mortgage banking activities, net on our consolidated statements of income. Additionally, during the three months ended September 30, 2019 and during the period from March 1, 2019 to September 30, 2019 , we recorded loan origination fee income associated with business purpose loans of $3 million and $6 million , respectively, through Mortgage banking activities, net on our consolidated statements of income. The following table summarizes the classifications and carrying values of the business purpose residential loans owned at Redwood at September 30, 2019 and December 31, 2018 . Table 7.1 – Classifications and Carrying Values of Business Purpose Residential Loans September 30, 2019 Single-Family Residential (In Thousands) Rental Bridge Total Held-for-sale at fair value $ 110,434 $ — $ 110,434 Held-for-investment at fair value 18,711 206,890 225,601 Total Business Purpose Residential Loans $ 129,145 $ 206,890 $ 336,035 December 31, 2018 Single-Family Residential (In Thousands) Rental Bridge Total Held-for-sale at fair value $ 28,460 $ — $ 28,460 Held-for-investment at fair value — 112,798 112,798 Total Business Purpose Residential Loans $ 28,460 $ 112,798 $ 141,258 Single-Family Rental Loans Held-for-Sale at Fair Value At September 30, 2019 , we owned 77 single-family rental loans held-for-sale with an aggregate unpaid principal balance of $106 million and a fair value of $110 million , compared to 11 loans at December 31, 2018 with an aggregate unpaid principal balance of $28 million and a fair value of $28 million . At both September 30, 2019 and December 31, 2018 , none of these loans were greater than 90 days delinquent or in foreclosure. During the three months ended September 30, 2019 and for the period from March 1, 2019 to September 30, 2019 , we originated $36 million and $78 million of single-family rental loans, respectively. During both the three months ended September 30, 2019 and for the period from March 1, 2019 to September 30, 2019 , $19 million of single-family rental loans were transferred to our investment portfolio and financed with FHLB borrowings, and the remaining loans were retained in our mortgage banking business. We did no t sell any loans during either of these periods. During the first two months of 2019, prior to our acquisition of 5 Arches on March 1, 2019, we purchased $19 million of single-family rental loans from 5 Arches. During the three and nine months ended September 30, 2019 , we recorded net market valuation gain s of $1 million and $3 million , respectively, on single-family rental loans held-for-sale at fair value through Mortgage banking activities, net on our consolidated statements of income. At September 30, 2019 , loans held-for-sale with a market value of $78 million were pledged as collateral under short-term borrowing agreements. The outstanding single-family rental loans held-for-sale at September 30, 2019 were first lien, fixed-rate loans with original maturities of five, seven, or ten years. At September 30, 2019 , the weighted average coupon of our single-family rental loans was 5.35% and the weighted average remaining loan term was six years . At origination, the weighted average LTV ratio of these loans was 68% and the weighted average debt service coverage ratio ("DSCR") was 1.36 times. Single-Family Rental Loans Held-for-Investment at Fair Value At September 30, 2019 , we owned one single-family rental loan held-for-investment with an aggregate unpaid principal balance of $17 million and a fair value of $19 million . At September 30, 2019 , this loan was no t greater than 90 days delinquent or in foreclosure. During the three months ended September 30, 2019 , we transferred one loan with a fair value of $19 million from held-for-sale to held-for-investment. During both the three and nine months ended September 30, 2019 , we recorded net market valuation gain s of less than $0.1 million on single-family rental loans held-for-investment at fair value through Investment fair value changes, net on our consolidated statements of income. Residential Bridge Loans Held-for-Investment at Fair Value At September 30, 2019 , we owned 392 residential bridge loans held-for-investment with an aggregate unpaid principal balance of $205 million and a fair value of $207 million , compared to 157 loans at December 31, 2018 with an aggregate unpaid principal balance of $112 million and a fair value of $113 million . As part of our credit risk management practices, our residential bridge loans are subject to individual risk assessment using an internal borrower and collateral quality evaluation framework. At September 30, 2019 , nine loans with an aggregate fair value and unpaid principal balance of $6 million were greater than 90 days delinquent, and eight of these loans with an aggregate fair value and unpaid principal balance of $5 million were in foreclosure. At December 31, 2018 , seven loans with an aggregate fair value of $12 million were greater than 90 days delinquent and four of these loans with an aggregate fair value of $11 million were in foreclosure. During the nine months ended September 30, 2019 , we transferred one loan with a fair value of $5 million to REO, which is included in Other assets on our consolidated balance sheets. During the three months ended September 30, 2019 and for the period from March 1, 2019 to September 30, 2019 , $88 million and $174 million of newly originated residential bridge loans, respectively, were transferred to our investment portfolio. During the first two months of 2019, prior to our acquisition of 5 Arches on March 1, 2019, we purchased $10 million of residential bridge loans from 5 Arches. During both the three and nine months ended September 30, 2019 , we recorded net market valuation loss es of $1 million on residential bridge loans held-for-investment at fair value through Investment fair value changes, net on our consolidated statements of income. At September 30, 2019 , loans with a market value of $176 million were pledged as collateral under short-term borrowing agreements. The outstanding residential bridge loans held-for-investment at September 30, 2019 were first lien, fixed-rate, interest-only loans with a weighted average coupon of 8.90% and original maturities of six to 24 months. At origination, the weighted average FICO score of borrowers backing these loans was 693 and the weighted average LTV ratio of these loans was 70% . At September 30, 2019 , we had a $67 million commitment to fund residential bridge loans. See Note 16 for additional information on this commitment. Beginning in the second half of 2018, we invested in multifamily subordinate securities issued by certain Freddie Mac K-Series securitization trusts and were required to consolidate the underlying multifamily loans owned at these entities for financial reporting purposes in accordance with GAAP. At September 30, 2019 , we consolidated 250 held-for-investment multifamily loans, with an aggregate unpaid principal balance of $3.54 billion and a fair value of $3.79 billion , compared to 162 loans at December 31, 2018 with an aggregate unpaid principal balance of $2.13 billion and a fair value of $2.14 billion . The outstanding multifamily loans held-for-investment at the Freddie Mac K-Series entities at September 30, 2019 were first lien, fixed-rate loans that were originated between 2015 and 2017 and had original loan terms of seven to ten years and an original weighted average LTV ratio of 69% . At September 30, 2019 , the weighted average coupon of these multifamily loans was 4.19% and the weighted average remaining loan term was six years . At both September 30, 2019 and December 31, 2018, none of these loans were greater than 90 days delinquent or in foreclosure. During the three and nine months ended September 30, 2019 , we recorded net market valuation gain s of $47 million and $178 million , respectively, on these loans through Investment fair value changes, net on our consolidated statements of income. Pursuant to the collateralized financing entity guidelines, the market valuation changes of these loans are based on the estimated fair value of the ABS issued associated with the securitizations . The net impact to our income statement associated with our economic investment in the securities of the Freddie Mac K-Series securitization entities is presented in |
Real Estate Securities
Real Estate Securities | 9 Months Ended |
Sep. 30, 2019 | |
Investments, Debt and Equity Securities [Abstract] | |
Real Estate Securities | Real Estate Securities We invest in real estate securities that we acquire from third parties or create and retain from our Sequoia securitizations. The following table presents the fair values of our real estate securities by type at September 30, 2019 and December 31, 2018 . Table 9.1 – Fair Values of Real Estate Securities by Type (In Thousands) September 30, 2019 December 31, 2018 Trading $ 1,013,785 $ 1,118,612 Available-for-sale 271,641 333,882 Total Real Estate Securities $ 1,285,426 $ 1,452,494 Our real estate securities include mortgage-backed securities, which are presented in accordance with their general position within a securitization structure based on their rights to cash flows. Senior securities are those interests in a securitization that generally have the first right to cash flows and are last in line to absorb losses. Mezzanine securities are interests that are generally subordinate to senior securities in their rights to receive cash flows, and have subordinate securities below them that are first to absorb losses. Most of our mezzanine classified securities were initially rated AA through BBB- and issued in 2012 or later. Subordinate securities are all interests below mezzanine. Nearly all of our residential securities are supported by collateral that was designated as prime at the time of issuance. Trading Securities The following table presents the fair value of trading securities by position and collateral type at September 30, 2019 and December 31, 2018 . Table 9.2 – Trading Securities by Position (In Thousands) September 30, 2019 December 31, 2018 Senior $ 149,634 $ 158,670 Mezzanine 644,571 610,819 Subordinate 219,580 349,123 Total Trading Securities $ 1,013,785 $ 1,118,612 We elected the fair value option for certain securities and classify them as trading securities. Our trading securities include both residential and multifamily mortgage-backed securities. At September 30, 2019 , trading securities with a carrying value of $677 million as well as $113 million , $385 million , and $209 million of securities we owned that were issued by consolidated Sequoia Choice, Freddie Mac SLST, and Freddie Mac K-Series securitizations, respectively, were pledged as collateral under short-term borrowing agreements. See Note 13 for additional information on short-term debt. At September 30, 2019 , trading securities with a carrying value of $4 million , as well as $126 million of securities we owned that were issued by consolidated Sequoia Choice securitizations, were pledged as collateral under our subordinate securities financing facility. In addition, at September 30, 2019, trading securities with a fair value of $41 million were pledged as collateral under a borrowing agreement with the FHLBC. See Note 15 for additional information on long-term debt. At September 30, 2019 and December 31, 2018 , our senior trading securities included $58 million and $82 million of interest-only securities, respectively, for which there is no principal balance, and the remaining unpaid principal balance of our senior trading securities was $88 million and $78 million , respectively. Our interest-only securities included $29 million and $43 million of A-IO-S securities at September 30, 2019 and December 31, 2018 , respectively, which are securities we retained from certain of our Sequoia securitizations that represent certificated servicing strips. At September 30, 2019 and December 31, 2018 , our mezzanine and subordinate trading securities had an unpaid principal balance of $1.01 billion and $1.12 billion , respectively. At September 30, 2019 and December 31, 2018 , the fair value of our mezzanine and subordinate securities was $864 million and $960 million , respectively, and included $128 million and $277 million , respectively, of Agency residential mortgage credit risk transfer (or "CRT") securities, $65 million and $68 million , respectively, of Sequoia securities, $207 million and $186 million , respectively, of other third-party residential securities, and $464 million and $429 million , respectively, of third-party commercial/multifamily securities. During the three and nine months ended September 30, 2019 , we acquired $66 million and $335 million (principal balance), respectively, of securities for which we elected the fair value option and classified as trading, and sold $236 million and $397 million , respectively, of such securities. During the three and nine months ended September 30, 2018 , we acquired $189 million and $567 million (principal balance), respectively, of securities for which we elected the fair value option and classified as trading, and sold $79 million and $323 million , respectively, of such securities. During the three and nine months ended September 30, 2019 , we recorded net market valuation gain s of $15 million and $56 million , respectively, on trading securities, included in Investment fair value changes, net on our consolidated statements of income. During the three and nine months ended September 30, 2018 , we recorded net market valuation gain s of $6 million and $2 million , respectively, on trading securities, included in Investment fair value changes, net on our consolidated statements of income. AFS Securities The following table presents the fair value of our available-for-sale securities by position and collateral type at September 30, 2019 and December 31, 2018 . Table 9.3 – Available-for-Sale Securities by Position (In Thousands) September 30, 2019 December 31, 2018 Senior $ 33,457 $ 87,615 Mezzanine 13,967 36,407 Subordinate 224,217 209,860 Total AFS Securities $ 271,641 $ 333,882 At September 30, 2019 and December 31, 2018 , all of our available-for-sale securities were primarily comprised of residential mortgage-backed securities. At September 30, 2019 , AFS securities with a carrying value of $59 million were pledged as collateral under short-term borrowing agreements. See Note 13 for additional information on short-term debt. At September 30, 2019 , AFS securities with a carrying value of $123 million were pledged as collateral under our subordinate securities financing facility. See Note 15 for additional information on long-term debt. During the three and nine months ended September 30, 2019 , we purchased $12 million and $21 million of AFS securities, respectively, and sold $15 million and $82 million of AFS securities, respectively, which resulted in net realized gains of $4 million and $13 million , respectively. During the three and nine months ended September 30, 2018 , we purchased $1 million and $7 million of AFS securities, respectively, and sold $26 million and $118 million of AFS securities, respectively, which resulted in net realized gains of $7 million and $21 million , respectively. We often purchase AFS securities at a discount to their outstanding principal balances. To the extent we purchase an AFS security that has a likelihood of incurring a loss, we do not amortize into income the portion of the purchase discount that we do not expect to collect due to the inherent credit risk of the security. We may also expense a portion of our investment in the security to the extent we believe that principal losses will exceed the purchase discount. We designate any amount of unpaid principal balance that we do not expect to receive and thus do not expect to earn or recover as a credit reserve on the security. Any remaining net unamortized discounts or premiums on the security are amortized into income over time using the effective yield method. At September 30, 2019 , there were no AFS securities with contractual maturities less than five years , $8 million with contractual maturities greater than five years but less than 10 years , and the remainder of our AFS securities had contractual maturities greater than 10 years . The following table presents the components of carrying value (which equals fair value) of AFS securities at September 30, 2019 and December 31, 2018 . Table 9.4 – Carrying Value of AFS Securities September 30, 2019 (In Thousands) Senior Mezzanine Subordinate Total Principal balance $ 34,272 $ 13,729 $ 291,207 $ 339,208 Credit reserve (588 ) — (33,623 ) (34,211 ) Unamortized discount, net (12,346 ) (552 ) (119,756 ) (132,654 ) Amortized cost 21,338 13,177 137,828 172,343 Gross unrealized gains 12,131 790 86,389 99,310 Gross unrealized losses (12 ) — — (12 ) Carrying Value $ 33,457 $ 13,967 $ 224,217 $ 271,641 December 31, 2018 (In Thousands) Senior Mezzanine Subordinate Total Principal balance $ 91,736 $ 36,852 $ 302,524 $ 431,112 Credit reserve (7,790 ) — (33,580 ) (41,370 ) Unamortized discount, net (18,460 ) (3,697 ) (129,043 ) (151,200 ) Amortized cost 65,486 33,155 139,901 238,542 Gross unrealized gains 22,178 3,252 70,458 95,888 Gross unrealized losses (49 ) — (499 ) (548 ) Carrying Value $ 87,615 $ 36,407 $ 209,860 $ 333,882 The following table presents the changes for the three and nine months ended September 30, 2019 , in unamortized discount and designated credit reserves on AFS securities. Table 9.5 – Changes in Unamortized Discount and Designated Credit Reserves on AFS Securities Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019 Credit Reserve Unamortized Discount, Net Credit Unamortized (In Thousands) Beginning balance $ 34,849 $ 137,282 $ 41,370 $ 151,200 Amortization of net discount — (1,834 ) — (5,823 ) Realized credit losses (694 ) — (1,874 ) — Acquisitions 734 399 2,198 1,103 Sales, calls, other (800 ) (3,071 ) (7,197 ) (14,112 ) (Release of) transfers to credit reserves, net 122 (122 ) (286 ) 286 Ending Balance $ 34,211 $ 132,654 $ 34,211 $ 132,654 AFS Securities with Unrealized Losses The following table presents the components comprising the total carrying value of AFS securities that were in a gross unrealized loss position at September 30, 2019 and December 31, 2018 . Table 9.6 – Components of Fair Value of AFS Securities by Holding Periods Less Than 12 Consecutive Months 12 Consecutive Months or Longer Amortized Cost Unrealized Losses Fair Value Amortized Cost Unrealized Losses Fair (In Thousands) September 30, 2019 $ — $ — $ — $ 6,254 $ (12 ) $ 6,242 December 31, 2018 12,923 (499 ) 12,424 7,464 (49 ) 7,415 At September 30, 2019 , after giving effect to purchases, sales, and extinguishment due to credit losses, our consolidated balance sheet included 113 AFS securities, of which one was in an unrealized loss position and one was in a continuous unrealized loss position for 12 consecutive months or longer. At December 31, 2018 , our consolidated balance sheet included 128 AFS securities, of which seven were in an unrealized loss position and three were in a continuous unrealized loss position for 12 consecutive months or longer. Evaluating AFS Securities for Other-than-Temporary Impairments Gross unrealized losses on our AFS securities were less than $0.1 million at September 30, 2019 . We evaluate all securities in an unrealized loss position to determine if the impairment is temporary or other-than-temporary (resulting in an OTTI). At September 30, 2019 , we did not intend to sell any of our AFS securities that were in an unrealized loss position, and it is more likely than not that we will not be required to sell these securities before recovery of their amortized cost basis, which may be at their maturity. We review our AFS securities that are in an unrealized loss position to identify those securities with losses that are other-than-temporary based on an assessment of changes in expected cash flows for such securities, which considers recent security performance and expected future performance of the underlying collateral. For both the three and nine months ended September 30, 2019 , there were no other-than-temporary impairments related to our AFS securities. AFS securities for which OTTI is recognized have experienced, or are expected to experience, credit-related adverse cash flow changes. In determining our estimate of cash flows for AFS securities we may consider factors such as structural credit enhancement, past and expected future performance of underlying mortgage loans, including timing of expected future cash flows, which are informed by prepayment rates, default rates, loss severities, delinquency rates, percentage of non-performing loans, FICO scores at loan origination, year of origination, loan-to-value ratios, and geographic concentrations, as well as general market assessments. Changes in our evaluation of these factors impacted the cash flows expected to be collected at the OTTI assessment date and were used to determine if there were credit-related adverse cash flows and if so, the amount of credit related losses. Significant judgment is used in both our analysis of the expected cash flows for our AFS securities and any determination of the credit loss component of OTTI. The table below summarizes the significant valuation assumptions we used for our AFS securities in unrealized loss positions at September 30, 2019 . Table 9.7 – Significant Valuation Assumptions September 30, 2019 Range for Securities Prepayment rates 15% - 15% Projected losses 1% - 1% The following table details the activity related to the credit loss component of OTTI (i.e., OTTI recognized through earnings) for AFS securities held at September 30, 2019 and 2018 , for which a portion of an OTTI was recognized in other comprehensive income. Table 9.8 – Activity of the Credit Component of Other-than-Temporary Impairments Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Balance at beginning of period $ 18,580 $ 20,967 $ 18,652 $ 21,037 Additions Initial credit impairments — 33 — 76 Reductions Securities sold, or expected to sell (6 ) (927 ) (20 ) (1,026 ) Securities with no outstanding principal at period end — (1,229 ) (58 ) (1,243 ) Balance at End of Period $ 18,574 $ 18,844 $ 18,574 $ 18,844 Gains and losses from the sale of AFS securities are recorded as Realized gains, net, in our consolidated statements of income. The following table presents the gross realized gains and losses on sales and calls of AFS securities for the three and nine months ended September 30, 2019 and 2018 . Table 9.9 – Gross Realized Gains and Losses on AFS Securities Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Gross realized gains - sales $ 3,656 $ 7,275 $ 13,143 $ 21,312 Gross realized gains - calls 1,058 — 5,084 43 Gross realized losses - sales — — — (3 ) Total Realized Gains on Sales and Calls of AFS Securities, net $ 4,714 $ 7,275 $ 18,227 $ 21,352 |
Other Investments
Other Investments | 9 Months Ended |
Sep. 30, 2019 | |
Investments, All Other Investments [Abstract] | |
Other Investments | Other Investments Other investments at September 30, 2019 and December 31, 2018 are summarized in the following table. Table 10.1 – Components of Other Investments (In Thousands) September 30, 2019 December 31, 2018 Servicer advance investments $ 222,591 $ 300,468 Mortgage servicing rights 39,837 60,281 Excess MSRs 32,937 27,312 Investment in multifamily loan fund 32,158 — Shared home appreciation options 11,372 — Other 8,812 — Participation in loan warehouse facility — 39,703 Investment in 5 Arches — 10,754 Total Other Investments $ 347,707 $ 438,518 Servicer advance investments In 2018, we and a third-party co-investor, through two partnerships (“SA Buyers”) consolidated by us, purchased the outstanding servicer advances and excess MSRs related to a portfolio of legacy residential mortgage-backed securitizations serviced by the co-investor (See Note 4 for additional information regarding the transaction). At September 30, 2019 , we had funded $71 million of total capital to the SA Buyers (see Note 16 for additional detail). Our servicer advance investments (owned by the consolidated SA Buyers) are comprised of outstanding servicer advance receivables, the requirement to purchase all future servicer advances made with respect to a specified pool of residential mortgage loans, and a portion of the mortgage servicing fees from the underlying loan pool. A portion of the remaining mortgage servicing fees from the underlying loan pool are paid directly to the third-party servicer for the performance of servicing duties and a portion is paid to excess MSRs that we own as a separate investment. We hold our servicer advance investments at our taxable REIT subsidiary. Servicer advances are non-interest bearing and are a customary feature of residential mortgage securitization transactions. Servicer advances are generally reimbursable cash payments made by a servicer when the borrower fails to make scheduled payments due on a residential mortgage loan or to support the value of the collateral property. Servicer advances typically fall into three categories: • Principal and Interest Advances: cash payments made by the servicer to cover scheduled principal and interest payments on a residential mortgage loan that have not been paid on a timely basis by the borrower. • Escrow Advances (Taxes and Insurance Advances): Cash payments made by the servicer to third parties on behalf of the borrower for real estate taxes and insurance premiums on the property that have not been paid on a timely basis by the borrower. • Corporate Advances: Cash payments made by the servicer to third parties for the reimbursable costs and expenses incurred in connection with the foreclosure, preservation and sale of the mortgaged property, including attorneys’ and other professional fees. Servicer advances are generally permitted to be repaid from amounts received with respect to the related residential mortgage loan, including payments from the borrower or amounts received from the liquidation of the property securing the loan. Residential mortgage servicing agreements generally require a servicer to make advances in respect of serviced residential mortgage loans unless the servicer determines in good faith that the advance would not be ultimately recoverable from the proceeds of the related residential mortgage loan or the mortgaged property. At September 30, 2019 , our servicer advance investments had a carrying value of $223 million and were associated with a portfolio of residential mortgage loans with an unpaid principal balance of $8.38 billion . The outstanding servicer advance receivables associated with this investment were $205 million at September 30, 2019 , which were financed with short-term non-recourse securitization debt (see Note 13 for additional detail on this debt). The servicer advance receivables were comprised of the following types of advances at September 30, 2019 and December 31, 2018 : Table 10.2 – Components of Servicer Advance Receivables (In Thousands) September 30, 2019 December 31, 2018 Principal and interest advances $ 54,670 $ 144,336 Escrow advances (taxes and insurance advances) 99,227 94,828 Corporate advances 51,049 47,614 Total Servicer Advance Receivables $ 204,946 $ 286,778 We account for our servicer advance investments at fair value and during the three and nine months ended September 30, 2019 , we recorded $3 million and $9 million of interest income associated with these investments, respectively, and recorded net market valuation gain s of $2 million and $3 million , respectively, through Investment fair value changes, net in our consolidated statements of income. Mortgage Servicing Rights We invest in mortgage servicing rights associated with residential mortgage loans and contract with licensed sub-servicers to perform all servicing functions for these loans. The majority of our investments in MSRs were made through the retention of servicing rights associated with the residential jumbo mortgage loans that we acquired and subsequently transferred to third parties. We hold our MSR investments at our taxable REIT subsidiary. At September 30, 2019 and December 31, 2018 , our MSRs had a fair value of $40 million and $60 million , respectively, and were associated with loans with an aggregate principal balance of $4.61 billion and $4.93 billion , respectively. The following table presents activity for MSRs for the three and nine months ended September 30, 2019 and 2018 . Table 10.3 – Activity for MSRs Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Balance at beginning of period $ 47,396 $ 64,674 $ 60,281 $ 63,598 Additions — — 868 — Sales — — — (1,077 ) Changes in fair value due to: Changes in assumptions (1) (5,150 ) 1,099 (15,291 ) 6,388 Other changes (2) (2,409 ) (1,988 ) (6,021 ) (5,124 ) Balance at End of Period $ 39,837 $ 63,785 $ 39,837 $ 63,785 (1) Primarily reflects changes in prepayment assumptions due to changes in market interest rates. (2) Represents changes due to the realization of expected cash flows. The following table presents the components of our MSR income for the three and nine months ended September 30, 2019 and 2018 . Table 10.4 – Components of MSR Income, net Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Servicing income $ 3,850 $ 4,004 $ 11,310 $ 11,601 Cost of sub-servicer (319 ) (324 ) (1,090 ) (1,254 ) Net servicing fee income 3,531 3,680 10,220 10,347 Market valuation changes of MSRs (7,489 ) (823 ) (21,243 ) 1,324 Market valuation changes of associated derivatives 4,389 (890 ) 13,157 (7,151 ) MSR reversal of provision for repurchases — — 208 277 MSR Income, Net (1) $ 431 $ 1,967 $ 2,342 $ 4,797 (1) MSR income, net is included in Other income, net on our consolidated statements of income. Excess MSRs In association with our servicer advance investments described above, in the fourth quarter of 2018, we (through our consolidated SA Buyers) also invested in excess MSRs associated with the same portfolio of legacy residential mortgage-backed securitizations. Additionally, beginning in 2018, we invested in excess MSRs associated with specified pools of multifamily loans. We account for our excess MSRs at fair value and during the three and nine months ended September 30, 2019 , we recognized $2 million and $6 million of interest income, respectively, through Other interest income, and recorded net market valuation loss es of $2 million and $2 million , respectively, through Investment fair value changes, net on our consolidated statements of income. Investment in Multifamily Loan Fund In January 2019, we invested in a limited partnership created to acquire floating rate, light-renovation multifamily loans from Freddie Mac. We committed to fund an aggregate of $78 million to the partnership, and have funded approximately $33 million at September 30, 2019 . Freddie Mac is providing a debt facility to finance loans purchased by the partnership. After the partnership's acquisitions have reached a specific threshold, the partnership and Freddie Mac may agree to include the related loans in a Freddie Mac-sponsored securitization and the limited partners may acquire the subordinate securities issued in any such securitization. We account for our ownership interest in this partnership using the equity method of accounting as we are able to exert significant influence over but do not control the activities of the investee. At September 30, 2019 , the carrying amount of our investment in the partnership was $32 million . We have elected to record our share of earnings or losses from this investment on a one-quarter lag. During the three and nine months ended September 30, 2019 , we recorded $1 million and $0.5 million of income, respectively, associated with this investment in Other income, net on our consolidated statements of income. Shared Home Appreciation Options In the third quarter of 2019, we entered into a flow purchase agreement to acquire shared home appreciation options. The counterparty purchases an option to buy a fractional interest in a homeowner's ownership interest in his or her real property, and subsequently the counterparty sells the option contract to us. Pursuant to the terms of the option contract, we are able to share in both home price appreciation and depreciation. At September 30, 2019, we had acquired $11 million of shared home appreciation options under this flow purchase agreement and had an outstanding commitment to fund up to an additional $39 million under this agreement. Participation in Loan Warehouse Facility In the second quarter of 2018, we invested in a subordinated participation in a revolving mortgage loan warehouse credit facility of one of our loan sellers. We accounted for this subordinated participation interest as a loan receivable at amortized cost, and all associated interest income was recorded as a component of Other interest income in our consolidated statements of income. During the first quarter of 2019, our agreement associated with this investment was terminated and the balance outstanding under this agreement was repaid. Investment in 5 Arches In May 2018, we acquired a 20% minority interest in 5 Arches for $10 million , which included a one -year option to purchase all remaining equity in the company for a combination of cash and stock totaling $40 million . In March 2019, we closed on our option to acquire the remaining 80% interest in 5 Arches. See Note 2 for discussion of this acquisition. During 2018 and through February 28, 2019, we accounted for our minority ownership interest in 5 Arches using the equity method of accounting as we were able to exert significant influence over but did not control the activities of the investee. During the period from January 1, 2019 to February 28, 2019, we recorded $0.3 million of gross income associated with this investment and, including amortization of certain intangible assets, recorded $0.1 million of net earnings in Other income, net on our consolidated statements of income. |
Derivative Financial Instrument
Derivative Financial Instruments | 9 Months Ended |
Sep. 30, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Financial Instruments | Derivative Financial Instruments The following table presents the fair value and notional amount of our derivative financial instruments at September 30, 2019 and December 31, 2018 . Table 11.1 – Fair Value and Notional Amount of Derivative Financial Instruments September 30, 2019 December 31, 2018 Fair Value Notional Amount Fair Value Notional Amount (In Thousands) Assets - Risk Management Derivatives Interest rate swaps $ 28,987 $ 1,190,500 $ 28,211 $ 2,106,500 TBAs 5,250 1,960,000 4,665 520,000 Swaptions 4,655 625,000 — — Assets - Other Derivatives Loan purchase commitments 4,757 875,707 2,913 331,161 Total Assets $ 43,649 $ 4,651,207 $ 35,789 $ 2,957,661 Liabilities - Cash Flow Hedges Interest rate swaps $ (61,685 ) $ 139,500 $ (34,492 ) $ 139,500 Liabilities - Risk Management Derivatives Interest rate swaps (166,465 ) 3,896,300 (36,416 ) 1,742,000 TBAs (4,192 ) 1,655,000 (13,215 ) 935,000 Liabilities - Other Derivatives Loan purchase commitments (1,669 ) 457,272 (732 ) 137,224 Total Liabilities $ (234,011 ) $ 6,148,072 $ (84,855 ) $ 2,953,724 Total Derivative Financial Instruments, Net $ (190,362 ) $ 10,799,279 $ (49,066 ) $ 5,911,385 Risk Management Derivatives To manage, to varying degrees, risks associated with certain assets and liabilities on our consolidated balance sheets, we may enter into derivative contracts. At September 30, 2019 , we were party to swaps and swaptions with an aggregate notional amount of $5.71 billion and TBA agreements sold with an aggregate notional amount of $3.62 billion . At December 31, 2018 , we were party to swaps with an aggregate notional amount of $3.85 billion and TBA agreements sold with an aggregate notional amount of $1.46 billion . During the three and nine months ended September 30, 2019 , risk management derivatives had net market valuation loss es of $36 million and $147 million , respectively. During the three and nine months ended September 30, 2018 , risk management derivatives had net market valuation gain s of $25 million and $114 million , respectively. These market valuation gains and losses are recorded in Mortgage banking activities, net, Investment fair value changes, net, and Other income, net on our consolidated statements of income. Loan Purchase and Forward Sale Commitments LPCs and FSCs that qualify as derivatives are recorded at their estimated fair values. For the three and nine months ended September 30, 2019 , LPCs and FSCs had net market valuation gain s of $14 million and $42 million , respectively, that were recorded in Mortgage banking activities, net on our consolidated statements of income. For the three and nine months ended September 30, 2018 , LPCs and FSCs had a net market valuation gain of $2 million and a net market valuation loss of $8 million , respectively, that were recorded in Mortgage banking activities, net on our consolidated statements of income. Derivatives Designated as Cash Flow Hedges To manage the variability in interest expense related to portions of our long-term debt and certain adjustable-rate securitization entity liabilities that are included in our consolidated balance sheets for financial reporting purposes, we designated certain interest rate swaps as cash flow hedges with an aggregate notional balance of $140 million . For the three and nine months ended September 30, 2019 , changes in the values of designated cash flow hedges were negative $12 million and negative $27 million , respectively, and were recorded in Accumulated other comprehensive income, a component of equity. For the three and nine months ended September 30, 2018 , changes in the values of designated cash flow hedges were positive $5 million and positive $17 million , respectively, and were recorded in Accumulated other comprehensive income, a component of equity. For interest rate agreements currently or previously designated as cash flow hedges, our total unrealized loss reported in Accumulated other comprehensive income was $61 million and $34 million at September 30, 2019 and December 31, 2018 , respectively. The following table illustrates the impact on interest expense of our interest rate agreements accounted for as cash flow hedges for the three and nine months ended September 30, 2019 and 2018 . Table 11.2 – Impact on Interest Expense of Interest Rate Agreements Accounted for as Cash Flow Hedges Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Net interest expense on cash flows hedges $ (727 ) $ (734 ) $ (2,004 ) $ (2,536 ) Total Interest Expense $ (727 ) $ (734 ) $ (2,004 ) $ (2,536 ) Derivative Counterparty Credit Risk As discussed in our Annual Report on Form 10-K for the year ended December 31, 2018 , we consider counterparty risk as part of our fair value assessments of all derivative financial instruments at each quarter-end. At September 30, 2019 , we assessed this risk as remote and did not record a specific valuation adjustment. At September 30, 2019 , we had outstanding derivative agreements with six counterparties (other than clearinghouses) and were in compliance with ISDA agreements governing our open derivative positions. |
Other Assets and Liabilities
Other Assets and Liabilities | 9 Months Ended |
Sep. 30, 2019 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Other Assets and Liabilities | Other Assets and Liabilities Other assets at September 30, 2019 and December 31, 2018 are summarized in the following table. Table 12.1 – Components of Other Assets (In Thousands) September 30, 2019 December 31, 2018 Margin receivable $ 226,727 $ 100,773 Pledged collateral 57,832 42,433 FHLBC stock 43,393 43,393 Investment receivable 14,375 6,959 Right-of-use asset 11,076 — REO 5,069 3,943 Fixed assets and leasehold improvements (1) 4,794 5,106 Other 14,044 15,218 Total Other Assets $ 377,310 $ 217,825 (1) Fixed assets and leasehold improvements had a basis of $11 million and accumulated depreciation of $6 million at September 30, 2019 . Accrued expenses and other liabilities at September 30, 2019 and December 31, 2018 are summarized in the following table. Table 12.2 – Components of Accrued Expenses and Other Liabilities (In Thousands) September 30, 2019 December 31, 2018 Contingent consideration $ 25,167 $ — Payable to minority partner 18,664 14,331 Accrued compensation 17,219 19,769 Guarantee obligations 15,016 16,711 Lease liability 12,570 — Deferred tax liabilities 11,986 9,022 Margin payable 6,658 835 Accrued operating expenses 6,036 3,122 Residential bridge loan holdbacks 4,465 — Residential loan and MSR repurchase reserve 3,947 4,189 Legal reserve 2,000 2,000 Other 6,014 8,740 Total Accrued Expenses and Other Liabilities $ 129,742 $ 78,719 Margin Receivable and Payable Margin receivable and payable resulted from margin calls between us and our counterparties under derivatives, master repurchase agreements, and warehouse facilities, whereby we or the counterparty posted collateral. FHLBC Stock In accordance with our FHLB-member subsidiary's borrowing agreement with the FHLBC, our subsidiary is required to purchase and hold stock in the FHLBC. See Note 3 and Note 15 for additional information on this borrowing agreement. Pledged Collateral and Guarantee Obligations The pledged collateral and guarantee obligations presented in the tables above are related to our risk-sharing arrangements with Fannie Mae and Freddie Mac, as well as collateral pledged to a clearinghouse related to our interest rate agreements. In accordance with these arrangements, we are required to pledge collateral to secure our guarantee obligations and to meet margin requirements for our interest rate agreements. See Note 3 and Note 16 for additional information on our risk-sharing arrangements. Contingent Consideration The contingent consideration presented in the table above is related to our acquisition of 5 Arches in the first quarter of 2019. See Note 16 for additional information on our contingent consideration liabilities. Lease Liability and Right-of-Use Asset The lease liability and right-of-use asset presented in the tables above resulted from our adoption of ASU 2016-02, "Leases," in the first quarter of 2019. The lease liability is equal to the present value of our remaining lease payments discounted at our incremental borrowing rate and the right-of-use asset is equal to the lease liability adjusted for our deferred rent liability. These balances are reduced as lease payments are made. See Note 16 for additional information on leases. Residential Bridge Loan Holdbacks Residential bridge loan holdbacks represent loan amounts payable to residential bridge loan borrowers subject to the completion of various phases of property rehabilitation. Investment Receivable At September 30, 2019 , investment receivable primarily consisted of unsettled trade receivables related to real estate securities sales. In accordance with our policy to record purchases and sales of securities on the trade date, if the trade and settlement of a purchase or sale crosses over a quarterly reporting period, we will record an investment receivable for sales and an unsettled trades liability for purchases. REO The carrying value of REO at September 30, 2019 was $5 million , which included $0.5 million of REO from our Legacy Sequoia entities, $5 million from our residential bridge loan portfolio, and $0.1 million from our consolidated Freddie Mac SLST entities. During the nine months ended September 30, 2019 , transfers into REO included $0.2 million from Legacy Sequoia entities, a $5 million residential bridge loan, and $0.1 million from Freddie Mac SLST entities. During the nine months ended September 30, 2019 , there were Legacy Sequoia REO liquidations of $5 million , resulting in $1 million of unrealized gains which were recorded in Investment fair value changes, net, on our consolidated statements of income. At September 30, 2019 , there were three REO properties at our Legacy Sequoia entities, one residential bridge loan REO property, and one REO property at our Freddie Mac SLST entities recorded on our consolidated balance sheets. At December 31, 2018 , there were 13 REO properties recorded, all of which were owned at consolidated Legacy Sequoia entities. Legal and Repurchase Reserves See Note 16 for additional information on the legal and residential repurchase reserves. Payable to Minority Partner In 2018, Redwood and a third-party co-investor, through two partnership entities consolidated by Redwood, purchased servicer advances and excess MSRs related to a portfolio of residential mortgage loans serviced by the co-investor (see Note 4 and Note 10 for additional information on the partnership entities and associated investments). We account for the co-investor’s interests in the entities as liabilities and at September 30, 2019 , the carrying value of their interests was $19 million , representing their current economic interest in the entities. Earnings from the partnership entities are allocated to the co-investors on a proportional basis and during the three and nine months ended September 30, 2019 , we allocated $0.4 million and $0.9 million of gains to the co-investors, respectively, which were recorded in Other income, net on our consolidated statements of income. |
Short-Term Debt
Short-Term Debt | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Short-Term Debt | Short-Term Debt We enter into repurchase agreements, bank warehouse agreements, and other forms of collateralized (and generally uncommitted) short-term borrowings with several banks and major investment banking firms. At September 30, 2019 , we had outstanding agreements with several counterparties and we were in compliance with all of the related covenants. For additional information about these financial covenants and our short-term debt, see Part I, Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report on Form 10-Q and Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2018 . The table below summarizes our short-term debt, including the facilities that are available to us, the outstanding balances, the weighted average interest rate, and the maturity information at September 30, 2019 and December 31, 2018 . Table 13.1 – Short-Term Debt September 30, 2019 (Dollars in Thousands) Number of Facilities Outstanding Balance Limit Weighted Average Interest Rate Maturity Weighted Average Days Until Maturity Facilities Residential loan warehouse (1) 4 $ 233,224 $ 1,425,000 3.51 % 10/2019-3/2020 96 Real estate securities repo (1) 9 1,157,646 — 3.11 % 10/2019-1/2020 28 Single-family rental loan warehouse (2) 2 59,204 400,000 4.30 % 6/2020-6/2021 358 Residential bridge loan warehouse (2) 4 138,988 330,000 4.54 % 10/2019-5/2022 707 Business purpose loan working capital (2) 1 — 15,000 5.00 % 12/2020 N/A Total Short-Term Debt Facilities 20 1,589,062 Servicer advance financing 1 191,203 350,000 3.89 % 11/2019 46 Convertible notes, net N/A 200,552 — 5.63 % 11/2019 60 Total Short-Term Debt $ 1,980,817 December 31, 2018 (Dollars in Thousands) Number of Facilities Outstanding Balance Limit Weighted Average Interest Rate Maturity Weighted Average Days Until Maturity Facilities Residential loan warehouse (1) 4 $ 860,650 $ 1,425,000 4.10 % 2/2019-12/2019 178 Real estate securities repo (1) 9 988,890 — 3.47 % 1/2019-3/2019 26 Single-family rental loan warehouse (2) 2 22,053 400,000 4.77 % 6/2020-6/2021 560 Residential bridge loan warehouse (2) 2 66,327 80,000 5.20 % 11/2019-4/2021 629 Total Short-Term Debt Facilities 17 1,937,920 Servicer advance financing 1 262,740 350,000 4.32 % 11/2019 333 Convertible notes, net N/A 199,619 5.63 % 11/2019 319 Total Short-Term Debt $ 2,400,279 (1) Borrowings under our facilities are generally charged interest based on a specified margin over the one-month LIBOR interest rate. At September 30, 2019 , all of these borrowings were under uncommitted facilities and were due within 364 days (or less) of the borrowing date. (2) Due to the revolving nature of the borrowings under these facilities, we have classified these facilities as short-term debt at September 30, 2019 . Borrowings under these facilities will be repaid as the underlying loans mature or are sold to third parties or transferred to securitizations. At September 30, 2019 and December 31, 2018 , the fair value of held-for-sale residential loans pledged as collateral under our short-term debt facilities was $253 million and $935 million , respectively. At September 30, 2019 , the fair value of real estate securities pledged as collateral under our short-term debt facilities was $736 million , and also included $113 million of securities retained from our consolidated Sequoia Choice securitizations as well as $385 million and $209 million of securities we owned that were issued by consolidated Freddie Mac SLST and Freddie Mac K-series securitizations, respectively. At December 31, 2018 , the fair value of real estate securities pledged as collateral under our short-term debt facilities was $844 million , and also included $130 million of securities retained from our consolidated Sequoia Choice securitizations as well as $229 million and $18 million of securities we owned that were issued by consolidated Freddie Mac SLST and Freddie Mac K-series securitizations, respectively. The fair value of single-family rental and residential bridge loans pledged as collateral under our warehouse facilities was $78 million and $176 million , respectively, at September 30, 2019 and $28 million and $98 million , respectively, at December 31, 2018 . For the three and nine months ended September 30, 2019 , the average balances of our short-term debt facilities were $1.97 billion and $1.81 billion , respectively. At September 30, 2019 and December 31, 2018 , accrued interest payable on our short-term debt facilities was $3 million and $4 million , respectively. Servicer advance financing consists of non-recourse short-term securitization debt used to finance servicer advance investments. We consolidate the securitization entity that issued the debt, but the entity is independent of Redwood and the assets and liabilities are not owned by and are not legal obligations of Redwood. At September 30, 2019 , the fair value of servicer advances, cash and restricted cash collateralizing the securitization financing was $243 million . At September 30, 2019 , the accrued interest payable balance on this financing was $0.2 million and the unamortized capitalized commitment costs were $0.4 million . During the fourth quarter of 2018, $201 million principal amount of 5.625% exchangeable senior notes and $1 million of unamortized deferred issuance costs were reclassified from long-term debt to short-term debt as the maturity of the notes was less than one year as of November 2018. At September 30, 2019 , the accrued interest payable balance on this debt was $4 million . See Note 15 for additional information on our convertible notes. We also maintain a $10 million committed line of credit with a financial institution that is secured by certain mortgage-backed securities with a fair market value of $3 million at September 30, 2019 . At both September 30, 2019 and December 31, 2018 , we had no outstanding borrowings on this facility. Remaining Maturities of Short-Term Debt The following table presents the remaining maturities of our secured short-term debt by the type of collateral securing the debt as well as our convertible notes at September 30, 2019 . Table 13.2 – Short-Term Debt by Collateral Type and Remaining Maturities September 30, 2019 (In Thousands) Within 30 days 31 to 90 days Over 90 days Total Collateral Type Held-for-sale residential loans $ 31,031 $ 108,316 $ 93,877 $ 233,224 Real estate securities 834,748 293,108 29,790 1,157,646 Single-family rental loans — — 59,204 59,204 Residential bridge loans — — 138,988 138,988 Total Secured Short-Term Debt 865,779 401,424 321,859 1,589,062 Servicer advance financing — 191,203 — 191,203 Convertible notes, net — 200,552 — 200,552 Total Short-Term Debt $ 865,779 $ 793,179 $ 321,859 $ 1,980,817 |
Asset-Backed Securities Issued
Asset-Backed Securities Issued | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Asset-Backed Securities Issued | Asset-Backed Securities Issued Through our Sequoia securitization program, we sponsor securitization transactions in which securities backed by residential mortgage loans (ABS) are issued by Sequoia entities. We consolidated the Legacy Sequoia and Sequoia Choice securitization entities, and beginning in 2018, certain third-party Freddie Mac K-Series and SLST securitization entities, that we determined were VIEs and for which we determined we were the primary beneficiary. Each consolidated securitization entity is independent of Redwood and of each other and the assets and liabilities are not owned by and are not legal obligations of Redwood. Our exposure to these entities is primarily through the financial interests we have retained, although we are exposed to certain financial risks associated with our role as a sponsor, servicing administrator, or depositor of these entities or as a result of our having sold assets directly or indirectly to these entities. We account for the ABS issued under our consolidated entities at fair value, with periodic changes in fair value recorded in Investment fair value changes, net on our consolidated statements of income. Pursuant to the CFE guidelines, the market valuation changes on our loans are based on the estimated fair value of the associated ABS issued. The net impact to our income statement associated with our retained economic investment in each of these securitization entities is presented in Note 5. The ABS issued by these entities consist of various classes of securities that pay interest on a monthly basis. All ABS issued by the Sequoia Choice and Freddie Mac K-Series, and Freddie Mac SLST entities pay fixed rates of interest and substantially all ABS issued by the Legacy Sequoia entities pay variable rates of interest, which are indexed to one-, three-, or six-month LIBOR. ABS issued also includes some interest-only classes with coupons set at a fixed spread to a benchmark rate, or set at a spread to the interest rates earned on the assets less the interest rates paid on the liabilities of a securitization entity. The carrying values of ABS issued by Sequoia securitization entities we sponsored at September 30, 2019 and December 31, 2018 , along with other selected information, are summarized in the following table. Table 14.1 – Asset-Backed Securities Issued September 30, 2019 Legacy Sequoia Sequoia Freddie Mac SLST Freddie Mac K-Series Total (Dollars in Thousands) Certificates with principal balance $ 437,793 $ 2,285,479 $ 1,885,106 $ 3,239,009 $ 7,847,387 Interest-only certificates 1,486 16,619 28,758 202,730 249,593 Market valuation adjustments (19,389 ) 59,013 73,609 135,838 249,071 ABS Issued, Net $ 419,890 $ 2,361,111 $ 1,987,473 $ 3,577,577 $ 8,346,051 Range of weighted average interest rates, by series 2.22% to 3.49% 4.41% to 5.06% 3.50 % 3.39% to 4.20% Stated maturities 2024 - 2036 2047 - 2049 2028 - 2029 2025 - 2049 Number of series 20 9 2 4 December 31, 2018 Legacy Sequoia Sequoia Freddie Mac SLST Freddie Mac K-Series Total (Dollars in Thousands) Certificates with principal balance $ 540,456 $ 1,838,758 $ 993,659 $ 1,936,691 $ 5,309,564 Interest-only certificates 1,537 25,662 — 131,600 158,799 Market valuation adjustments (29,753 ) 20,590 89 (49,216 ) (58,290 ) ABS Issued, Net $ 512,240 $ 1,885,010 $ 993,748 $ 2,019,075 $ 5,410,073 Range of weighted average interest rates, by series 1.36% to 3.60% 4.46% to 4.97% 3.51 % 3.39% to 4.08% Stated maturities 2024 - 2036 2047 - 2048 2028 2025 - 2049 Number of series 20 6 1 3 The actual maturity of each class of ABS issued is primarily determined by the rate of principal prepayments on the assets of the issuing entity. Each series is also subject to redemption prior to the stated maturity according to the terms of the respective governing documents of each ABS issuing entity. As a result, the actual maturity of ABS issued may occur earlier than its stated maturity. At September 30, 2019 , all of the ABS issued and outstanding had contractual maturities beyond five years . The following table summarizes the accrued interest payable on ABS issued at September 30, 2019 and December 31, 2018 . Interest due on consolidated ABS issued is payable monthly. Table 14.2 – Accrued Interest Payable on Asset-Backed Securities Issued (In Thousands) September 30, 2019 December 31, 2018 Legacy Sequoia $ 456 $ 571 Sequoia Choice 8,949 7,180 Freddie Mac SLST 5,498 2,907 Freddie Mac K-Series 10,805 6,239 Total Accrued Interest Payable on ABS Issued $ 25,708 $ 16,897 The following table summarizes the carrying value components of the collateral for ABS issued and outstanding at September 30, 2019 and December 31, 2018 . Table 14.3 – Collateral for Asset-Backed Securities Issued September 30, 2019 Legacy Sequoia Sequoia Choice Freddie Mac SLST Freddie Mac K-Series Total (In Thousands) Residential loans $ 429,159 $ 2,618,316 $ 2,441,223 $ — $ 5,488,698 Multifamily loans — — — 3,791,622 3,791,622 Restricted cash 143 15 — — 158 Accrued interest receivable 716 10,806 7,215 11,300 30,037 REO 460 — 84 — 544 Total Collateral for ABS Issued $ 430,478 $ 2,629,137 $ 2,448,522 $ 3,802,922 $ 9,311,059 December 31, 2018 Legacy Sequoia Sequoia Freddie Mac SLST Freddie Mac K-Series Total (In Thousands) Residential loans $ 519,958 $ 2,079,382 $ 1,222,669 $ — $ 3,822,009 Multifamily loans — — — 2,144,598 2,144,598 Restricted cash 146 1,022 — — 1,168 Accrued interest receivable 822 8,988 3,926 6,595 20,331 REO 3,943 — — — 3,943 Total Collateral for ABS Issued $ 524,869 $ 2,089,392 $ 1,226,595 $ 2,151,193 $ 5,992,049 |
Long-Term Debt
Long-Term Debt | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Long-Term Debt FHLBC Borrowings In July 2014, our FHLB-member subsidiary entered into a borrowing agreement with the Federal Home Loan Bank of Chicago. At September 30, 2019 , under this agreement, our subsidiary could incur borrowings up to $2.00 billion , also referred to as “advances,” from the FHLBC secured by eligible collateral, including residential mortgage loans. During the three and nine months ended September 30, 2019 , our FHLB-member subsidiary made no additional borrowings under this agreement. Under a final rule published by the Federal Housing Finance Agency in January 2016, our FHLB-member subsidiary will remain an FHLB member through the five -year transition period for captive insurance companies. Our FHLB-member subsidiary's existing $2.00 billion of FHLB debt, which matures beyond this transition period, is permitted to remain outstanding until its stated maturity. As residential loans pledged as collateral for this debt pay down, we are permitted to pledge additional loans or other eligible assets to collateralize this debt; however, we do not expect to be able to increase our subsidiary's FHLB debt above the existing $2.00 billion maximum. At September 30, 2019 , $2.00 billion of advances were outstanding under this agreement, which were classified as long-term debt, with a weighted average interest rate of 2.31% and a weighted average maturity of approximately six years . At December 31, 2018 , $2.00 billion of advances were outstanding under this agreement, which were classified as long-term debt, with a weighted average interest rate of 2.52% and a weighted average maturity of seven years . Advances under this agreement incur interest charges based on a specified margin over the FHLBC’s 13 -week discount note rate, which resets every 13 weeks. At September 30, 2019 , total advances under this agreement were secured by residential mortgage loans with a fair value of $2.27 billion , securities with a fair value of $41 million , and $77 million of restricted cash. This agreement also requires our subsidiary to purchase and hold stock in the FHLBC in an amount equal to a specified percentage of outstanding advances. At September 30, 2019 , our subsidiary held $43 million of FHLBC stock that is included in Other assets in our consolidated balance sheets. The following table presents maturities of our FHLBC borrowings by year at September 30, 2019 . Table 15.1 – Maturities of FHLBC Borrowings by Year (In Thousands) September 30, 2019 2024 $ 470,171 2025 887,639 2026 642,189 Total FHLBC Borrowings $ 1,999,999 For additional information about our FHLBC borrowings, see Part I, Item 2 of Quarterly Report on Form 10-Q under the heading “ Risks Relating to Debt Incurred under Short- and Long-Term Borrowing Facilities. ” Subordinate Securities Financing Facility In September 2019, a subsidiary of Redwood entered into a repurchase agreement providing non-mark-to-market recourse debt financing. The financing is fully and unconditionally guaranteed by Redwood, with an interest rate of approximately 4.21% through September 2022. The financing facility may be terminated, at our option, in September 2022, and has a final maturity in September 2024, provided that the interest rate on amounts outstanding under the facility increases between October 2022 and September 2024. At September 30, 2019, we had borrowings under this facility totaling $186 million , net of $1 million of deferred issuance costs, for a carrying value of $185 million . At September 30, 2019, the fair value of real estate securities pledged as collateral under this long-term debt facility was $253 million , which included $126 million of securities retained from our consolidated Sequoia Choice securitizations. This facility is included in Long-term debt, net on our consolidated balance sheets at September 30, 2019. Convertible Notes In September 2019, RWT Holdings, Inc., a wholly-owned subsidiary of Redwood Trust, Inc., issued $201 million principal amount of 5.75% exchangeable senior notes due 2025 . These exchangeable notes require semi-annual interest payments at a fixed coupon rate of 5.75% until maturity or exchange, which will be no later than October 1, 2025 . After deducting the underwriting discount and offering costs, we received $195 million of net proceeds. Including amortization of deferred debt issuance costs, the weighted average interest expense yield on these exchangeable notes is approximately 6.3% per annum. At September 30, 2019 , these notes were exchangeable at the option of the holder at an exchange rate of 55.1967 common shares per $1,000 principal amount of exchangeable senior notes (equivalent to an exchange price of $18.12 per common share). Upon exchange of these notes by a holder, the holder will receive shares of our common stock. At September 30, 2019 , the outstanding principal amount of these notes was $201 million . At September 30, 2019 , the accrued interest payable balance on this debt was $0.2 million and the unamortized deferred issuance costs were $6 million . In June 2018, we issued $200 million principal amount of 5.625% convertible senior notes due 2024 at an issuance price of 99.5% . These convertible notes require semi-annual interest payments at a fixed coupon rate of 5.625% until maturity or conversion, which will be no later than July 15, 2024 . After deducting the issuance discount, the underwriting discount and offering costs, we received $194 million of net proceeds. Including amortization of deferred debt issuance costs and the debt discount, the weighted average interest expense yield on these convertible notes is approximately 6.2% per annum. These notes are convertible at the option of the holder at a conversion rate of 54.7645 common shares per $1,000 principal amount of convertible senior notes (equivalent to a conversion price of $18.26 per common share). Upon conversion of these notes by a holder, the holder will receive shares of our common stock. At September 30, 2019 , the outstanding principal amount of these notes was $200 million and the accrued interest payable on this debt was $2 million . At September 30, 2019 , the unamortized deferred issuance costs and debt discount were $4 million and $1 million , respectively. In August 2017, we issued $245 million principal amount of 4.75% convertible senior notes due 2023 . These convertible notes require semi-annual interest payments at a fixed coupon rate of 4.75% until maturity or conversion, which will be no later than August 15, 2023 . After deducting the underwriting discount and offering costs, we received $238 million of net proceeds. Including amortization of deferred debt issuance costs, the weighted average interest expense yield on these convertible notes is approximately 5.3% per annum. At September 30, 2019 , these notes were convertible at the option of the holder at a conversion rate of 53.9060 common shares per $1,000 principal amount of convertible senior notes (equivalent to a conversion price of $18.55 per common share). Upon conversion of these notes by a holder, the holder will receive shares of our common stock. At September 30, 2019 , the outstanding principal amount of these notes was $245 million . At September 30, 2019 , the accrued interest payable balance on this debt was $1 million and the unamortized deferred issuance costs were $5 million . In November 2014, RWT Holdings, Inc., a wholly-owned subsidiary of Redwood Trust, Inc., issued $205 million principal amount of 5.625% exchangeable senior notes due 2019 . These exchangeable notes require semi-annual interest payments at a fixed coupon rate of 5.625% until maturity or exchange, which will be no later than November 15, 2019 . After deducting the underwriting discount and offering costs, we received $198 million of net proceeds. Including amortization of deferred debt issuance costs, the weighted average interest expense yield on these exchangeable notes is approximately 6.3% per annum. At September 30, 2019 , these notes were exchangeable at the option of the holder at an exchange rate of 46.2370 common shares per $1,000 principal amount of exchangeable senior notes (equivalent to an exchange price of $21.63 per common share). Upon exchange of these notes by a holder, the holder will receive shares of our common stock. During 2016, we repurchased $4 million par value of these notes at a discount and recorded a gain on extinguishment of debt of $0.3 million in Realized gains, net on our consolidated statements of income. Additionally, during the fourth quarter of 2018, $201 million principal amount of these notes and $1 million of unamortized deferred issuance costs were reclassified from long-term debt to short-term debt as the maturity of the notes was less than one year as of November 2018. At September 30, 2019 , the outstanding principal amount of these notes was $201 million . At September 30, 2019 , the accrued interest payable balance on this debt was $4 million and the unamortized deferred issuance costs were $0.2 million . Trust Preferred Securities and Subordinated Notes At September 30, 2019 , we had trust preferred securities and subordinated notes outstanding of $100 million and $40 million , respectively. This debt requires quarterly interest payments at a floating rate equal to three-month LIBOR plus 2.25% until the notes are redeemed. The $100 million trust preferred securities will be redeemed no later than January 30, 2037, and the $40 million subordinated notes will be redeemed no later than July 30, 2037. Prior to 2014, we entered into interest rate swaps with aggregate notional values totaling $140 million to hedge the variability in this long-term debt interest expense. Including hedging costs and amortization of deferred debt issuance costs, the weighted average interest expense yield on our trust preferred securities and subordinated notes is approximately 6.9% per annum. At both September 30, 2019 and December 31, 2018 , the accrued interest payable balance on our trust preferred securities and subordinated notes was $1 million . |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Lease Commitments At September 30, 2019 , we were obligated under five non-cancelable operating leases with expiration dates through 2028 for $15 million of cumulative lease payments. Our principal executive and administrative office is located in Mill Valley, California and we have several additional offices, as disclosed in Part I, Item 2 of our Annual Report on Form 10-K for the year ended December 31, 2018. Additionally, with our acquisition of 5 Arches in the first quarter of 2019, we added an office located in Irvine, California. Our operating lease expense was $2 million for both nine -month periods ended September 30, 2019 and 2018. The following table presents our future lease commitments and a reconciliation to our lease liability at September 30, 2019 . Table 16.1 – Future Lease Commitments by Year (In Thousands) September 30, 2019 2019 (3 months) $ 688 2020 2,721 2021 1,864 2022 1,468 2023 and thereafter 8,749 Total Lease Commitments 15,490 Less: Imputed interest (2,920 ) Lease Liability $ 12,570 During the first quarter of 2019, we adopted ASU 2016-02, "Leases," which required us to recognize a lease liability that was equal to the present value of our remaining lease payments of $15 million discounted at various incremental borrowing rates, and a right-of-use asset, which was equal to our lease liability adjusted for our deferred rent liability. We elected to apply the new guidance using the optional transition method, which permits lessees to measure the lease liability and right-of-use asset at January 1, 2019, without adjusting the comparative periods presented. We elected the package of practical expedients under the transition guidance within this standard, which allowed us to carry forward the classifications of each of our four existing leases as operating leases and to continue to expense lease payments on a straight-line basis. As one of our operating leases qualifies for the short-term lease exception under this guidance, we will continue to account for this lease under legacy GAAP and did not include this lease in our calculation of the lease liability and right-of-use asset. At September 30, 2019 , our lease liability was $13 million , which was a component of Accrued expenses and other liabilities, and our right-of-use asset was $11 million , which was a component of Other assets. We determined that the four remaining leases did not contain an implicit interest rate and used a discount rate equal to our incremental borrowing rate on a collateralized basis to determine the present value of our total lease payments. As such, we determined the applicable discount rate for each of our leases using a swap rate plus an applicable spread for borrowing arrangements secured by our real estate loans and securities for a length of time equal to the remaining lease term on the date of adoption. At September 30, 2019 , the weighted-average remaining lease term and weighted-average discount rate for our leases was 8 years and 5.3% , respectively. Commitment to Fund Residential Bridge Loans As of September 30, 2019 , we had commitments to fund $67 million of residential bridge loans. These commitments are generally subject to loan agreements with covenants regarding the financial performance of the customer and other terms regarding advances that must be met before we fund the commitment. We may also advance funds related to loans sold under a separate loan sale agreement that are generally repaid immediately by the loan purchaser and do not generally expose us to loss (outstanding commitments related to these loans that we may temporarily fund totaled approximately $65 million at September 30, 2019 ). Commitment to Fund Partnerships In the fourth quarter of 2018, we invested in two partnerships created to acquire and manage certain mortgage servicing related assets (see Note 10 for additional detail). In connection with this investment, we are required to fund future net servicer advances related to the underlying mortgage loans. The actual amount of net servicer advances we may fund in the future is subject to significant uncertainty and will be based on the credit and prepayment performance of the underlying loans. In the first quarter of 2019, we invested in a partnership created to acquire floating rate, light-renovation multifamily loans from Freddie Mac (see Note 10 for additional detail). At September 30, 2019 , we had an outstanding commitment to fund an additional $49 million to the partnership. Additionally, in connection with this transaction, we have made a guarantee to Freddie Mac in the event of losses incurred on the loans that exceed the equity available in the partnership to absorb such losses. At September 30, 2019 , the carrying value of this guarantee was $0.1 million . We believe the likelihood of performance under the guarantee is remote. Our maximum loss exposure from this guarantee arrangement is $135 million . 5 Arches Contingent Consideration As part of the consideration for our acquisition of 5 Arches, we are committed to make earn-out payments up to $27 million , payable in a mix of cash and Redwood common stock, which will be calculated following each of the first two anniversaries of the option closing date based on loan origination volumes exceeding certain specified thresholds. These contingent earn-out payments are classified as a contingent consideration liability and carried at fair value. At September 30, 2019 , our estimated fair value of this contingent liability was $25 million . For the three and nine months ended September 30, 2019 , we recorded contingent consideration expense of $0.2 million and $0.5 million , respectively, related to our valuation of this liability through Other income, net, on our consolidated statements of income. Commitment to Fund Shared Home Appreciation Options In the third quarter of 2019, we entered into a flow purchase agreement to acquire shared home appreciation options. The counterparty purchases an option to buy a fractional interest in a homeowner's ownership interest in his or her real property, and subsequently the counterparty sells the option contract to us. Pursuant to the terms of the option contract, we are able to share in both home price appreciation and depreciation. At September 30, 2019, we had acquired $11 million of shared home appreciation options under this agreement, which are included in Other Investments on our consolidated balance sheets. At September 30, 2019, we had an outstanding commitment to fund up to an additional $39 million under this agreement. Commitment to Participate in Loan Warehouse Facility In the second quarter of 2018, we invested in a participation in the mortgage loan warehouse credit facility of one of our loan sellers. This investment included a commitment to participate in (and an obligation to fund) a designated amount of the loan seller's borrowings under this warehouse credit facility. Our commitment to participate in this facility was terminated in the first quarter of 2019. See Note 10 for additional detail on our participation in a loan warehouse facility. Loss Contingencies — Risk-Sharing During 2015 and 2016, we sold conforming loans to the Agencies with an original unpaid principal balance of $3.19 billion , subject to our risk-sharing arrangements with the Agencies. At September 30, 2019 , the maximum potential amount of future payments we could be required to make under these arrangements was $44 million and this amount was fully collateralized by assets we transferred to pledged accounts and is presented as pledged collateral in Other assets on our consolidated balance sheets. We have no recourse to any third parties that would allow us to recover any amounts related to our obligations under the arrangements. At September 30, 2019 , we had not incurred any losses under these arrangements. For the three and nine months ended September 30, 2019 , other income related to these arrangements was $1 million and $2 million , respectively, and net market valuation losses related to these investments were $0.1 million and $0.2 million , respectively. For the three and nine months ended September 30, 2018 , other income related to these arrangements was $1 million and $3 million , respectively, and net market valuation losses related to these investments were $0.1 million and $0.5 million , respectively. All of the loans in the reference pools subject to these risk-sharing arrangements were originated in 2014 and 2015, and at September 30, 2019 , the loans had an unpaid principal balance of $1.66 billion and a weighted average FICO score of 759 (at origination) and LTV ratio of 76% (at origination). At September 30, 2019 , $7 million of the loans were 90 days or more delinquent, of which $2 million were in foreclosure. At September 30, 2019 , the carrying value of our guarantee obligation was $15 million and included $5 million designated as a non-amortizing credit reserve, which we believe is sufficient to cover current expected losses under these obligations. Our consolidated balance sheets include assets of special purpose entities ("SPEs") associated with these risk-sharing arrangements (i.e., the "pledged collateral" referred to above) that can only be used to settle obligations of these SPEs for which the creditors of these SPEs (the Agencies) do not have recourse to Redwood Trust, Inc. or its affiliates. At September 30, 2019 and December 31, 2018 , assets of such SPEs totaled $48 million and $47 million , respectively, and liabilities of such SPEs totaled $15 million and $17 million , respectively. Loss Contingencies — Residential Repurchase Reserve We maintain a repurchase reserve for potential obligations arising from representation and warranty violations related to residential loans we have sold to securitization trusts or third parties and for conforming residential loans associated with MSRs that we have purchased from third parties. We do not originate residential loans and we believe the initial risk of loss due to loan repurchases (i.e., due to a breach of representations and warranties) would generally be a contingency to the companies from whom we acquired the loans. However, in some cases, for example, where loans were acquired from companies that have since become insolvent, repurchase claims may result in our being liable for a repurchase obligation. At both September 30, 2019 and December 31, 2018 , our repurchase reserve associated with our residential loans and MSRs was $4 million and was recorded in Accrued expenses and other liabilities on our consolidated balance sheets. We received 10 repurchase requests during the nine months ended September 30, 2019 , and did no t repurchase any loans during this period. During both the nine months ended September 30, 2019 and 2018, we recorded reversals of repurchase provisions of $0.2 million that were recorded in Mortgage banking activities, net and Other income, net on our consolidated statements of income. Loss Contingencies — Litigation On or about December 23, 2009, the Federal Home Loan Bank of Seattle (the “FHLB-Seattle”) filed a complaint in the Superior Court for the State of Washington (case number 09-2-46348-4 SEA) against Redwood Trust, Inc., our subsidiary, Sequoia Residential Funding, Inc. (“SRF”), Morgan Stanley & Co., and Morgan Stanley Capital I, Inc. (collectively, the “FHLB-Seattle Defendants”), which alleged that the FHLB-Seattle Defendants made false or misleading statements in offering materials for a mortgage pass-through certificate (the “Seattle Certificate”) issued in the Sequoia Mortgage Trust 2005-4 securitization transaction (the “2005-4 RMBS”) and purchased by the FHLB-Seattle. The Seattle Certificate was issued with an original principal amount of approximately $133 million , and, at September 30, 2019 , approximately $128 million of principal and $12 million of interest payments had been made in respect of the Seattle Certificate. The matter was subsequently resolved and the claims were dismissed by the FHLB Seattle as to all the FHLB Seattle Defendants. At the time the Seattle Certificate was issued, Redwood agreed to indemnify the underwriters of the 2005-4 RMBS, which underwriters were named as defendants in the action, for certain losses and expenses they might incur as a result of claims made against them relating to this RMBS, including, without limitation, certain legal expenses. Regardless of the resolution of this litigation, we could incur a loss as a result of these indemnities. On or about July 15, 2010, The Charles Schwab Corporation (“Schwab”) filed a complaint in the Superior Court for the State of California in San Francisco (case number CGC-10-501610) against SRF and 26 other defendants (collectively, the “Schwab Defendants”), which alleged that the Schwab Defendants made false or misleading statements in offering materials for various residential mortgage-backed securities sold or issued by the Schwab Defendants. Schwab alleged only a claim for negligent misrepresentation under California state law against SRF and sought unspecified damages and attorneys’ fees and costs from SRF. Schwab claimed that SRF made false or misleading statements in offering materials for a mortgage pass-through certificate (the “Schwab Certificate”) issued in the 2005-4 RMBS and purchased by Schwab. The Schwab Certificate was issued with an original principal amount of approximately $15 million , and, at September 30, 2019 , approximately $14 million of principal and $1 million of interest payments had been made in respect of the Schwab Certificate. On November 14, 2014, Schwab voluntarily dismissed with prejudice its negligent misrepresentation claim, which resulted in the dismissal with prejudice of SRF from the action. Subsequently, the matter was resolved and Schwab dismissed its claims against the lead underwriter of the 2005-4 RMBS. At the time the Schwab Certificate was issued, Redwood agreed to indemnify the underwriters of the 2005-4 RMBS, which underwriters were also named as defendants in the action, for certain losses and expenses they might incur as a result of claims made against them relating to this RMBS, including, without limitation, certain legal expenses. Regardless of the resolution of this litigation, Redwood could incur a loss as a result of these indemnities. Through certain of our wholly-owned subsidiaries, we have in the past engaged in, and expect to continue to engage in, activities relating to the acquisition and securitization of residential mortgage loans. In addition, certain of our wholly-owned subsidiaries have in the past engaged in activities relating to the acquisition and securitization of debt obligations and other assets through the issuance of collateralized debt obligations (commonly referred to as CDO transactions). Because of this involvement in the securitization and CDO businesses, we could become the subject of litigation relating to these businesses, including additional litigation of the type described above, and we could also become the subject of governmental investigations, enforcement actions, or lawsuits, and governmental authorities could allege that we violated applicable law or regulation in the conduct of our business. As an example, in July 2016 we became aware of a complaint filed by the State of California on April 1, 2016 against Morgan Stanley & Co. and certain of its affiliates alleging, among other things, that there were misleading statements contained in offering materials for 28 different mortgage pass-through certificates purchased by various California investors, including various California public pension systems, from Morgan Stanley and alleging that Morgan Stanley made false or fraudulent claims in connection with the sale of those certificates. Of the 28 mortgage pass-through certificates that were the subject of the complaint, two were Sequoia mortgage pass-through certificates issued in 2004 and two were Sequoia mortgage pass-through certificates issued in 2007. With respect to each of those certificates, our wholly-owned subsidiary, RWT Holdings, Inc., was the sponsor and our wholly-owned subsidiary, Sequoia Residential Funding, Inc., was the depositor. The plaintiffs subsequently withdrew from the litigation their claims based on eight of the 28 mortgage pass-through certificates, including one of the Sequoia mortgage pass-through certificates issued in 2004. We believe this matter was subsequently resolved and the plaintiffs withdrew their remaining claims. At the time these Sequoia mortgage pass-through certificates were issued, Sequoia Residential Funding, Inc. and Redwood Trust agreed to indemnify the underwriters of these certificates for certain losses and expenses they might incur as a result of claims made against them relating to these certificates, including, without limitation, certain legal expenses. Regardless of the resolution of this litigation, we could incur a loss as a result of these indemnities. In accordance with GAAP, we review the need for any loss contingency reserves and establish reserves when, in the opinion of management, it is probable that a matter would result in a liability and the amount of loss, if any, can be reasonably estimated. Additionally, we record receivables for insurance recoveries relating to litigation-related losses and expenses if and when such amounts are covered by insurance and recovery of such losses or expenses are due. At September 30, 2019 , the aggregate amount of loss contingency reserves established in respect of the FHLB-Seattle and Schwab litigation matters described above was $2 million . We review our litigation matters each quarter to assess these loss contingency reserves and make adjustments in these reserves, upwards or downwards, as appropriate, in accordance with GAAP based on our review. In the ordinary course of any litigation matter, including certain of the above-referenced matters, we have engaged and may continue to engage in formal or informal settlement communications with the plaintiffs or co-defendants. Settlement communications we have engaged in relating to certain of the above-referenced litigation matters are one of the factors that have resulted in our determination to establish the loss contingency reserves described above. We cannot be certain that any of these matters will be resolved through a settlement prior to trial and we cannot be certain that the resolution of these matters, whether through trial or settlement, will not have a material adverse effect on our financial condition or results of operations in any future period. Future developments (including resolution of substantive pre-trial motions relating to these matters, receipt of additional information and documents relating to these matters (such as through pre-trial discovery), new or additional settlement communications with plaintiffs relating to these matters, or resolutions of similar claims against other defendants in these matters) could result in our concluding in the future to establish additional loss contingency reserves or to disclose an estimate of reasonably possible losses in excess of our established reserves with respect to these matters. Our actual losses with respect to the above-referenced litigation matters may be materially higher than the aggregate amount of loss contingency reserves we have established in respect of these litigation matters, including in the event that any of these matters proceeds to trial and the plaintiff prevails. Other factors that could result in our concluding to establish additional loss contingency reserves or estimate additional reasonably possible losses, or could result in our actual losses with respect to the above-referenced litigation matters being materially higher than the aggregate amount of loss contingency reserves we have established in respect of these litigation matters include that: there are significant factual and legal issues to be resolved; information obtained or rulings made during the lawsuits could affect the methodology for calculation of the available remedies; and we may have additional obligations pursuant to indemnity agreements, representations and warranties, and other contractual provisions with other parties relating to these litigation matters that could increase our potential losses. |
Equity
Equity | 9 Months Ended |
Sep. 30, 2019 | |
Equity [Abstract] | |
Equity | Equity The following table provides a summary of changes to accumulated other comprehensive income by component for the three and nine months ended September 30, 2019 and 2018 . Table 17.1 – Changes in Accumulated Other Comprehensive Income by Component Three Months Ended September 30, 2019 Three Months Ended September 30, 2018 (In Thousands) Net Unrealized Gains on Available-for-Sale Securities Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges Net Unrealized Gains on Available-for-Sale Securities Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges Balance at beginning of period $ 98,307 $ (49,384 ) $ 106,725 $ (31,105 ) Other comprehensive income (loss) before reclassifications (1) 4,484 (11,791 ) (2,408 ) 4,801 Amounts reclassified from other accumulated comprehensive income (3,492 ) — (5,686 ) — Net current-period other comprehensive income (loss) 992 (11,791 ) (8,094 ) 4,801 Balance at End of Period $ 99,299 $ (61,175 ) $ 98,631 $ (26,304 ) Nine Months Ended September 30, 2019 Nine Months Ended September 30, 2018 (In Thousands) Net Unrealized Gains on Available-for-Sale Securities Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges Net Unrealized Gains on Available-for-Sale Securities Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges Balance at beginning of period $ 95,342 $ (34,045 ) $ 128,201 $ (42,953 ) Other comprehensive income (loss) (1) 19,764 (27,130 ) (9,749 ) 16,649 Amounts reclassified from other (15,807 ) — (19,821 ) — Net current-period other comprehensive income (loss) 3,957 (27,130 ) (29,570 ) 16,649 Balance at End of Period $ 99,299 $ (61,175 ) $ 98,631 $ (26,304 ) (1) Amounts presented for net unrealized gains on available-for-sale securities are net of tax benefit (provision) of zero and $0.1 million for the three and nine months ended September 30, 2018, respectively. The following table provides a summary of reclassifications out of accumulated other comprehensive income for the three and nine months ended September 30, 2019 and 2018 . Table 17.2 – Reclassifications Out of Accumulated Other Comprehensive Income Amount Reclassified From Accumulated Other Comprehensive Income Affected Line Item in the Three Months Ended September 30, (In Thousands) Income Statement 2019 2018 Net Realized (Gain) Loss on AFS Securities Other than temporary impairment (1) Investment fair value changes, net $ — $ 33 Gain on sale of AFS securities Realized gains, net (3,492 ) (7,247 ) Gain on sale of AFS securities Provision for income taxes — 1,528 $ (3,492 ) $ (5,686 ) Amount Reclassified From Accumulated Other Comprehensive Income Affected Line Item in the Nine Months Ended September 30, (In Thousands) Income Statement 2019 2018 Net Realized (Gain) Loss on AFS Securities Other than temporary impairment (1) Investment fair value changes, net $ — $ 89 Gain on sale of AFS securities Realized gains, net (15,807 ) (21,438 ) Gain on sale of AFS securities Provision for income taxes — 1,528 $ (15,807 ) $ (19,821 ) (1) For both the three and nine months ended September 30, 2019 , there were no other-than-temporary impairments. For the three months ended September 30, 2018, other-than-temporary impairments were $0.4 million , of which less than $0.1 million were recognized through our consolidated statements of income and $0.3 million were recognized in Accumulated other comprehensive income, a component of our consolidated balance sheet. For the nine months ended September 30, 2018, other-than-temporary impairments were $0.6 million , of which $0.1 million were recognized through our consolidated statements of income and $0.5 million were recognized in Accumulated other comprehensive income, a component of our consolidated balance sheet. Issuance of Common Stock In 2018, we established a program to sell up to an aggregate of $150 million of common stock from time to time in at-the-market ("ATM") offerings. During the nine months ended September 30, 2019 , we issued 791,191 common shares for net proceeds of approximately $13 million through ATM offerings. At September 30, 2019 , approximately $112 million remained outstanding for future offerings under this program. On January 29, 2019, we sold 11,500,000 shares of common stock in an underwritten public offering, resulting in net proceeds of approximately $177 million . On September 3, 2019, we sold 14,375,000 shares of common stock in an underwritten public offering, resulting in net proceeds of approximately $228 million . Direct Stock Purchase and Dividend Reinvestment Plan During the nine months ended September 30, 2019 , we issued 399,838 shares of common stock through our Direct Stock Purchase and Dividend Reinvestment Plan, resulting in net proceeds of approximately $6 million . Earnings per Common Share The following table provides the basic and diluted earnings per common share computations for the three and nine months ended September 30, 2019 and 2018 . Table 17.3 – Basic and Diluted Earnings per Common Share Three Months Ended September 30, Nine Months Ended September 30, (In Thousands, except Share Data) 2019 2018 2019 2018 Basic Earnings per Common Share: Net income attributable to Redwood $ 34,310 $ 40,921 $ 120,040 $ 120,513 Less: Dividends and undistributed earnings allocated to participating securities (856 ) (1,231 ) (3,260 ) (3,766 ) Net income allocated to common shareholders $ 33,454 $ 39,690 $ 116,780 $ 116,747 Basic weighted average common shares outstanding 101,872,126 80,796,856 97,214,064 77,211,188 Basic Earnings per Common Share $ 0.33 $ 0.49 $ 1.20 $ 1.51 Diluted Earnings per Common Share: Net income attributable to Redwood $ 34,310 $ 40,921 $ 120,040 $ 120,513 Less: Dividends and undistributed earnings allocated to participating securities (1,036 ) (1,284 ) (3,625 ) (3,867 ) Add back: Interest expense on convertible notes for the period, net of tax 8,887 8,666 26,271 23,642 Net income allocated to common shareholders $ 42,161 $ 48,303 $ 142,686 $ 140,288 Weighted average common shares outstanding 101,872,126 80,796,856 97,214,064 77,211,188 Net effect of dilutive equity awards 362,743 443,191 261,155 251,935 Net effect of assumed convertible notes conversion to common shares 34,287,840 33,442,641 33,727,470 30,328,906 Diluted weighted average common shares outstanding 136,522,709 114,682,688 131,202,689 107,792,029 Diluted Earnings per Common Share $ 0.31 $ 0.42 $ 1.09 $ 1.30 We included participating securities, which are certain equity awards that have non-forfeitable dividend participation rights, in the calculations of basic and diluted earnings per common share as we determined that the two-class method was more dilutive than the alternative treasury stock method for these shares. Dividends and undistributed earnings allocated to participating securities under the basic and diluted earnings per share calculations require specific shares to be included that may differ in certain circumstances. During the three and nine months ended September 30, 2019 and 2018 , certain of our convertible notes were determined to be dilutive and were included in the calculation of diluted EPS under the "if-converted" method. Under this method, the periodic interest expense (net of applicable taxes) for dilutive notes is added back to the numerator and the weighted average number of shares that the notes are entitled to (if converted, regardless of whether they are in or out of the money) are included in the denominator. For the three and nine months ended September 30, 2019 , the number of outstanding equity awards that were antidilutive totaled 11,710 and 9,361 , respectively. For the three and nine months ended September 30, 2018 , the number of outstanding equity awards that were antidilutive totaled 7,761 and 7,230 , respectively. Stock Repurchases In February 2018, our Board of Directors approved an authorization for the repurchase of our common stock, increasing the total amount authorized for repurchases of common stock to $100 million , and also authorized the repurchase of outstanding debt securities, including convertible and exchangeable debt. T his authorization increased the previous share repurchase authorization approved in February 2016 and has no expiration date. This repurchase authorization does not obligate us to acquire any specific number of shares or securities. Under this authorization, shares or securities may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. At September 30, 2019 , $100 million of the current authorization remained available for the repurchase of shares of our common stock. |
Equity Compensation Plans
Equity Compensation Plans | 9 Months Ended |
Sep. 30, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Equity Compensation Plans | Equity Compensation Plans At September 30, 2019 and December 31, 2018 , 4,187,924 and 4,616,776 shares of common stock, respectively, were available for grant under our Incentive Plan. The unamortized compensation cost of awards issued under the Incentive Plan and purchases under the Employee Stock Purchase Plan totaled $23 million at September 30, 2019 , as shown in the following table. Table 18.1 – Activities of Equity Compensation Costs by Award Type Nine Months Ended September 30, 2019 (In Thousands) Restricted Stock Awards Restricted Stock Units Deferred Stock Units Performance Stock Units Employee Stock Purchase Plan Total Unrecognized compensation cost at beginning of period $ 3,498 $ 74 $ 14,489 $ 7,061 $ — $ 25,122 Equity grants — 3,483 4,831 — 160 8,474 Equity grant forfeitures — — — — — — Equity compensation expense (1,137 ) (499 ) (5,871 ) (2,505 ) (120 ) (10,132 ) Unrecognized Compensation Cost at End of Period $ 2,361 $ 3,058 $ 13,449 $ 4,556 $ 40 $ 23,464 At September 30, 2019 , the weighted average amortization period remaining for all of our equity awards was two years . Restricted Stock Awards ("RSAs") At September 30, 2019 and December 31, 2018 , there were 218,022 and 334,606 shares, respectively, of RSAs outstanding. Restrictions on these shares lapse through 2022 . During the nine months ended September 30, 2019 , there were no RSAs granted, restrictions on 116,584 RSAs lapsed and those shares were distributed, and no RSAs forfeited. Restricted Stock Units ("RSUs") At September 30, 2019 and December 31, 2018 , there were 229,943 and 4,876 shares, respectively, of RSUs outstanding. Restrictions on these shares lapse through 2023 . During the nine months ended September 30, 2019 , there were 225,067 RSUs granted, no RSUs distributed, and no RSUs forfeited. Deferred Stock Units (“DSUs”) At September 30, 2019 and December 31, 2018 , there were 2,414,056 and 2,336,720 DSUs, respectively, outstanding of which 1,345,005 and 1,181,622 , respectively, had vested. During the nine months ended September 30, 2019 , there were 337,787 DSUs granted, 260,451 DSUs distributed, and no DSUs forfeited. Unvested DSUs at September 30, 2019 vest through 2023 . Performance Stock Units (“PSUs”) At both September 30, 2019 and December 31, 2018 , the target number of PSUs that were unvested was 725,616 . Vesting for all PSUs will generally occur at the end of three years from their grant date based on various TSR performance calculations, as discussed in our Annual Report on Form 10-K for the year ended December 31, 2018 . Employee Stock Purchase Plan ("ESPP") The ESPP allows a maximum of 600,000 shares of common stock to be purchased in aggregate for all employees. As of September 30, 2019 and December 31, 2018 , 418,651 and 390,569 shares had been purchased, respectively, and there remained a negligible amount of uninvested employee contributions in the ESPP at September 30, 2019 . |
Mortgage Banking Activities, Ne
Mortgage Banking Activities, Net | 9 Months Ended |
Sep. 30, 2019 | |
Mortgage Banking [Abstract] | |
Mortgage Banking Activities, Net | Mortgage Banking Activities, Net The following table presents the components of Mortgage banking activities, net, recorded in our consolidated statements of income for the three and nine months ended September 30, 2019 and 2018 . Table 19.1 – Mortgage Banking Activities Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Residential Mortgage Banking Activities, Net Changes in fair value of: Residential loans, at fair value (1) $ 6,320 $ 7,236 $ 41,431 $ 8,406 Risk management derivatives (2) (1,710 ) 3,796 (11,608 ) 38,378 Other income, net (3) 407 313 1,380 1,733 Total residential mortgage banking activities, net 5,017 11,345 31,203 48,517 Business Purpose Mortgage Banking Activities, Net: Changes in fair value of: Single-family rental loans, at fair value (1) 1,847 (121 ) 5,473 (121 ) Risk management derivatives (2) (1,262 ) — (3,779 ) — Residential bridge loans, at fair value 1,010 — 2,108 — Other income, net (4) 2,903 — 5,979 — Total business purpose mortgage banking activities, net 4,498 (121 ) 9,781 (121 ) Mortgage Banking Activities, Net $ 9,515 $ 11,224 $ 40,984 $ 48,396 (1) Includes changes in fair value for associated loan purchase and forward sale commitments. (2) Represents market valuation changes of derivatives that were used to manage risks associated with our accumulation of loans. (3) Amounts in this line item include other fee income from loan acquisitions and the provision for repurchases expense, presented net. (4) Amounts in this line item include other fee income from loan originations. |
Investment Fair Value Changes,
Investment Fair Value Changes, Net | 9 Months Ended |
Sep. 30, 2019 | |
Investments, Debt and Equity Securities [Abstract] | |
Investment Fair Value Changes, Net | Investment Fair Value Changes, Net The following table presents the components of Investment fair value changes, net, recorded in our consolidated statements of income for the three and nine months ended September 30, 2019 and 2018 . Table 20.1 – Investment Fair Value Changes Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Investment Fair Value Changes, Net Changes in fair value of: Residential loans held-for-investment at Redwood $ 7,667 $ (17,063 ) $ 71,323 $ (71,058 ) Single-family rental loans held-for-investment 22 — 22 — Residential bridge loans held-for-investment (742 ) 53 (1,363 ) 53 Trading securities 15,275 6,314 55,577 2,429 Servicer advance investments 1,585 — 3,025 — Excess MSRs (1,635 ) — (2,137 ) — Shared home appreciation options 29 — 29 — REO (331 ) — (470 ) — Net investments in Legacy Sequoia entities (1) (407 ) (248 ) (904 ) (976 ) Net investments in Sequoia Choice entities (1) 2,722 (943 ) 8,866 43 Net investments in Freddie Mac SLST entities (1) 17,300 — 31,702 — Net investments in Freddie Mac K-Series entities (1) 7,445 511 13,810 511 Risk-sharing investments (53 ) (126 ) (191 ) (474 ) Risk management derivatives, net (37,433 ) 21,867 (144,548 ) 82,391 Impairments on AFS securities — (33 ) — (89 ) Investment Fair Value Changes, Net $ 11,444 $ 10,332 $ 34,741 $ 12,830 (1) Includes changes in fair value of the loans held-for-investment, REO and the ABS issued at the entities, which netted together represent the change in value of our investments at the consolidated VIEs. |
Other Income, Net
Other Income, Net | 9 Months Ended |
Sep. 30, 2019 | |
Other Income and Expenses [Abstract] | |
Other Income, Net | Other Income, Net The following table presents the components of Other income, net, recorded in our consolidated statements of income for the three and nine months ended September 30, 2019 and 2018 . Table 21.1 – Other Income, Net Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 MSR income, net $ 431 $ 1,967 $ 2,342 $ 4,797 Risk share income 905 907 2,351 2,706 FHLBC capital stock dividend 541 460 1,623 1,271 Equity investment income 557 119 552 119 5 Arches loan administration fee income 1,344 — 3,298 — Amortization of intangible assets (1,897 ) — (4,429 ) — Gain on re-measurement of investment in 5 Arches — — 2,441 — Other (56 ) — (359 ) — Other Income, Net $ 1,825 $ 3,453 $ 7,819 $ 8,893 |
Operating Expenses
Operating Expenses | 9 Months Ended |
Sep. 30, 2019 | |
Other Income and Expenses [Abstract] | |
Operating Expenses | Operating Expenses Components of our operating expenses for the three and nine months ended September 30, 2019 and 2018 are presented in the following table. Table 22.1 – Components of Operating Expenses Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Fixed compensation expense $ 9,391 $ 5,922 $ 26,848 $ 18,136 Variable compensation expense 4,090 4,923 12,513 13,655 Equity compensation expense 3,155 3,033 10,132 9,565 Total compensation expense 16,636 13,878 49,493 41,356 Systems and consulting 3,230 1,794 7,594 5,434 Loan acquisition costs (1) 1,392 1,887 4,385 5,860 Office costs 1,517 1,173 4,406 3,397 Accounting and legal 1,767 1,170 3,852 3,078 Corporate costs 482 462 1,701 1,462 Other operating expenses 1,791 1,126 4,798 2,942 Total Operating Expenses $ 26,815 $ 21,490 $ 76,229 $ 63,529 (1) Loan acquisition costs primarily includes underwriting and due diligence costs related to the acquisition of residential loans held-for-sale at fair value. |
Taxes
Taxes | 9 Months Ended |
Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Taxes | Taxes For the nine months ended September 30, 2019 and 2018 , we recognized a provision for income taxes of $3 million and $12 million , respectively. The following is a reconciliation of the statutory federal and state tax rates to our effective tax rate at September 30, 2019 and 2018 . Table 23.1 – Reconciliation of Statutory Tax Rate to Effective Tax Rate September 30, 2019 September 30, 2018 Federal statutory rate 21.0 % 21.0 % State statutory rate, net of Federal tax effect 8.6 % 8.6 % Differences in taxable (loss) income from GAAP income (2.5 )% (1.8 )% Change in valuation allowance (2.5 )% (3.2 )% Dividends paid deduction (22.1 )% (15.3 )% Effective Tax Rate 2.5 % 9.3 % We assessed our tax positions for all open tax years (i.e., Federal, 2016 to 2019, and State, 2014 to 2019) at September 30, 2019 and December 31, 2018 , and concluded that we had no uncertain tax positions that resulted in material unrecognized tax benefits. |
Segment Information
Segment Information | 9 Months Ended |
Sep. 30, 2019 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information Redwood operates in two segments: Investment Portfolio and Mortgage Banking. Our segments are based on our organizational and management structure, which aligns with how our results are monitored and performance is assessed. For a full description of our segments, see Part I, Item 1—Business in our Annual Report on Form 10-K for the year ended December 31, 2018 . Our Mortgage Banking segment includes activity from both our residential and business purpose mortgage banking operations. Our business purpose mortgage banking operations includes activity from our wholly-owned subsidiary 5 Arches and our single-family rental loans that we are aggregating for subsequent sale or securitization. In connection with our acquisition of 5 Arches on March 1, 2019, the goodwill, intangible assets, and contingent consideration we recorded on our consolidated balance sheets were included in our Mortgage Banking segment. The gain on re-measurement of our initial minority investment and purchase option in 5 Arches during the three months ended March 31, 2019 was included in Corporate/Other. Segment contribution represents the measure of profit that management uses to assess the performance of our business segments and make resource allocation and operating decisions. Certain corporate expenses not directly assigned or allocated to one of our two segments, as well as activity from certain consolidated Sequoia entities, are included in the Corporate/Other column as reconciling items to our consolidated financial statements. These unallocated corporate expenses primarily include interest expense associated with certain long-term debt, indirect operating expenses, and other expense. The following tables present financial information by segment for the three and nine months ended September 30, 2019 and 2018 . Table 24.1 – Business Segment Financial Information Three Months Ended September 30, 2019 (In Thousands) Investment Portfolio Mortgage Banking Corporate/ Other Total Interest income $ 132,894 $ 12,491 $ 4,732 $ 150,117 Interest expense (94,519 ) (6,657 ) (15,428 ) (116,604 ) Net interest income (loss) 38,375 5,834 (10,696 ) 33,513 Non-interest income Mortgage banking activities, net — 9,515 — 9,515 Investment fair value changes, net 11,896 — (452 ) 11,444 Other income (expense), net 2,313 (252 ) (236 ) 1,825 Realized gains, net 4,714 — — 4,714 Total non-interest income, net 18,923 9,263 (688 ) 27,498 Direct operating expenses (2,191 ) (11,907 ) (12,717 ) (26,815 ) (Provision for) benefit from income taxes (89 ) 203 — 114 Segment Contribution $ 55,018 $ 3,393 $ (24,101 ) Net Income $ 34,310 Non-cash amortization income (expense), net $ 2,456 $ (2,028 ) $ (1,148 ) $ (720 ) Three Months Ended September 30, 2018 (In Thousands) Investment Portfolio Mortgage Banking Corporate/ Total Interest income $ 79,556 $ 14,427 $ 5,414 $ 99,397 Interest expense (40,852 ) (7,537 ) (15,962 ) (64,351 ) Net interest income (loss) 38,704 6,890 (10,548 ) 35,046 Non-interest income Mortgage banking activities, net — 11,224 — 11,224 Investment fair value changes, net 10,566 — (234 ) 10,332 Other income, net 3,334 — 119 3,453 Realized gains, net 7,275 — — 7,275 Total non-interest income, net 21,175 11,224 (115 ) 32,284 Direct operating expenses (2,659 ) (6,570 ) (12,261 ) (21,490 ) Provision for income taxes (2,840 ) (2,079 ) — (4,919 ) Segment Contribution $ 54,380 $ 9,465 $ (22,924 ) Net Income $ 40,921 Non-cash amortization income (expense), net $ 4,019 $ (54 ) $ (1,176 ) $ 2,789 Nine Months Ended September 30, 2019 (In Thousands) Investment Portfolio Mortgage Banking Corporate/ Total Interest income $ 380,394 $ 34,220 $ 15,086 $ 429,700 Interest expense (266,318 ) (18,816 ) (46,966 ) (332,100 ) Net interest income (loss) 114,076 15,404 (31,880 ) 97,600 Non-interest income Mortgage banking activities, net — 40,984 — 40,984 Investment fair value changes, net 35,749 — (1,008 ) 34,741 Other income, net 6,408 (575 ) 1,986 7,819 Realized gains, net 18,227 — — 18,227 Total non-interest income, net 60,384 40,409 978 101,771 Direct operating expenses (7,110 ) (31,582 ) (37,537 ) (76,229 ) Provision for income taxes (1,327 ) (1,775 ) — (3,102 ) Segment Contribution $ 166,023 $ 22,456 $ (68,439 ) Net Income $ 120,040 Non-cash amortization income (expense), net $ 7,446 $ (4,765 ) $ (3,573 ) $ (892 ) Nine Months Ended September 30, 2018 (In Thousands) Investment Portfolio Mortgage Banking Corporate/ Total Interest income $ 202,882 $ 40,408 $ 15,702 $ 258,992 Interest expense (87,719 ) (21,303 ) (45,056 ) (154,078 ) Net interest income (loss) 115,163 19,105 (29,354 ) 104,914 Non-interest income Mortgage banking activities, net — 48,396 — 48,396 Investment fair value changes, net 13,756 — (926 ) 12,830 Other income, net 8,774 — 119 8,893 Realized gains, net 21,352 — — 21,352 Total non-interest income, net 43,882 48,396 (807 ) 91,471 Direct operating expenses (6,524 ) (20,941 ) (36,064 ) (63,529 ) Provision for income taxes (4,858 ) (7,485 ) — (12,343 ) Segment Contribution $ 147,663 $ 39,075 $ (66,225 ) Net Income $ 120,513 Non-cash amortization income (expense), net $ 13,290 $ (99 ) $ (3,021 ) $ 10,170 The following table presents the components of Corporate/Other for the three and nine months ended September 30, 2019 and 2018 . Table 24.2 – Components of Corporate/Other Three Months Ended September 30, 2019 2018 (In Thousands) Legacy Consolidated VIEs (1) Other Total Legacy Consolidated VIEs (1) Other Total Interest income $ 4,295 $ 437 $ 4,732 $ 5,174 $ 240 $ 5,414 Interest expense (3,452 ) (11,976 ) (15,428 ) (4,257 ) (11,705 ) (15,962 ) Net interest income (loss) 843 (11,539 ) (10,696 ) 917 (11,465 ) (10,548 ) Non-interest income Investment fair value changes, net (407 ) (45 ) (452 ) (248 ) 14 (234 ) Other income — (236 ) (236 ) — 119 119 Total non-interest income, net (407 ) (281 ) (688 ) (248 ) 133 (115 ) Direct operating expenses — (12,717 ) (12,717 ) — (12,261 ) (12,261 ) Total $ 436 $ (24,537 ) $ (24,101 ) $ 669 $ (23,593 ) $ (22,924 ) Nine Months Ended September 30, 2019 2018 (In Thousands) Legacy Consolidated VIEs (1) Other Total Legacy Consolidated VIEs (1) Other Total Interest income $ 13,924 $ 1,162 $ 15,086 $ 15,003 $ 699 $ 15,702 Interest expense (11,548 ) (35,418 ) (46,966 ) (12,324 ) (32,732 ) (45,056 ) Net interest income (loss) 2,376 (34,256 ) (31,880 ) 2,679 (32,033 ) (29,354 ) Non-interest income Investment fair value changes, net (904 ) (104 ) (1,008 ) (976 ) 50 (926 ) Other income — 1,986 1,986 — 119 119 Total non-interest income, net (904 ) 1,882 978 (976 ) 169 (807 ) Direct operating expenses — (37,537 ) (37,537 ) — (36,064 ) (36,064 ) Total $ 1,472 $ (69,911 ) $ (68,439 ) $ 1,703 $ (67,928 ) $ (66,225 ) (1) Legacy consolidated VIEs represent Legacy Sequoia entities that are consolidated for GAAP financial reporting purposes. See Note 4 for further discussion on VIEs. The following table presents supplemental information by segment at September 30, 2019 and December 31, 2018 . Table 24.3 – Supplemental Segment Information (In Thousands) Investment Portfolio Mortgage Banking Corporate/ Other Total September 30, 2019 Residential loans $ 7,326,757 $ 925,887 $ 429,159 $ 8,681,803 Business purpose residential loans 225,601 110,434 — 336,035 Multifamily loans 3,791,622 — — 3,791,622 Real estate securities 1,285,426 — — 1,285,426 Other investments 346,136 1,571 — 347,707 Goodwill and intangible assets — 49,121 — 49,121 Total assets 13,347,460 1,166,639 962,184 15,476,283 December 31, 2018 Residential loans $ 5,685,983 $ 1,048,801 $ 519,958 $ 7,254,742 Business purpose residential loans 112,798 28,460 — 141,258 Multifamily loans 2,144,598 — — 2,144,598 Real estate securities 1,452,494 — — 1,452,494 Other investments 427,764 — 10,754 438,518 Total assets 10,093,993 1,103,090 740,323 11,937,406 |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On October 14, 2019, Redwood and RWT Holdings, Inc., our wholly-owned subsidiary, entered into an equity interests purchase agreement with CF CoreVest Parent I LLC, CF CoreVest Parent II LLC and CoreVest Management Partners LLC (collectively, the “Sellers”), and members of the CoreVest management team, pursuant to which we acquired a 100% equity interest in CoreVest American Finance Lender LLC and several of its affiliates (“CoreVest”), an originator of business purpose residential loans. The acquisition included CoreVest’s operating platform and approximately $900 million of business purpose loans and securities, a significant portion of which we will hold for investment in our investment portfolio. The estimated aggregate purchase consideration for CoreVest is approximately $492 million |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The consolidated financial statements presented herein are at September 30, 2019 and December 31, 2018 , and for the three and nine months ended September 30, 2019 and 2018 . These interim unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and note disclosures normally included in our annual financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") — as prescribed by the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) — have been condensed or omitted in these interim financial statements according to these SEC rules and regulations. Management believes that the disclosures included in these interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the company's Annual Report on Form 10-K for the year ended December 31, 2018 . In the opinion of management, all normal and recurring adjustments to present fairly the financial condition of the company at September 30, 2019 and results of operations for all periods presented have been made. The results of operations for the three and nine months ended September 30, 2019 should not be construed as indicative of the results to be expected for the full year. |
Principles of Consolidation | Principles of Consolidation In accordance with GAAP, we determine whether we must consolidate transferred financial assets and variable interest entities (“VIEs”) for financial reporting purposes. We currently consolidate the assets and liabilities of certain Sequoia securitization entities issued prior to 2012 where we maintain an ongoing involvement ("Legacy Sequoia"), as well as entities formed in connection with the securitization of Redwood Choice expanded-prime loans beginning in the third quarter of 2017 ("Sequoia Choice"). In addition, we consolidated the assets and liabilities of certain Freddie Mac K-Series securitizations we invested in beginning in the third quarter of 2018, and the assets and liabilities of certain Freddie Mac SLST securitizations we invested in beginning in the fourth quarter of 2018. Each securitization entity is independent of Redwood and of each other and the assets and liabilities are not owned by and are not legal obligations of Redwood Trust, Inc. Our exposure to these entities is primarily through the financial interests we have purchased or retained, although for the consolidated Sequoia entities we are exposed to certain financial risks associated with our role as a sponsor, servicing administrator, or depositor of these entities or as a result of our having sold assets directly or indirectly to these entities. |
Use of Estimates | Use of Estimates The preparation of financial statements requires us to make a number of significant estimates. These include estimates of fair value of certain assets and liabilities, amounts and timing of credit losses, prepayment rates, and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the consolidated financial statements and the reported amounts of certain revenues and expenses during the reported periods. It is likely that changes in these estimates (e.g., valuation changes due to supply and demand, credit performance, prepayments, interest rates, or other reasons) will occur in the near term. Our estimates are inherently subjective in nature and actual results could differ from our estimates and the differences could be material. |
Business Combinations and Contingent Consideration | Business Combinations We use the acquisition method of accounting for business combinations, under which the purchase price is allocated to the fair values of the assets acquired and liabilities assumed at the acquisition date. The excess of the purchase price over the amount allocated to the assets acquired and liabilities assumed is recorded as goodwill. Adjustments to the values of the assets acquired and liabilities assumed that could be made during the measurement period, which could be up to one year after the acquisition date, are recorded in the period in which the adjustment is identified, with a corresponding offset to goodwill. Any adjustments made after the measurement period are recorded in the consolidated statements of income. Acquisition-related costs are expensed as incurred. Contingent Consideration In relation to our acquisition of 5 Arches, we recorded contingent consideration liabilities that represent the estimated fair value (at the date of acquisition) of our obligation to make certain earn-out payments that are contingent on 5 Arches loan origination volumes exceeding certain specified thresholds. These liabilities are carried at fair value and periodic changes in their estimated fair value are recorded through Other income, net on our consolidated statements of income. The estimate of the fair value of contingent consideration requires significant judgment regarding assumptions about future operating results, discount rates, and probabilities of projected operating result scenarios. |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Significant judgment is required to estimate the fair value of intangible assets and in assigning their estimated useful lives. Accordingly, we typically seek the assistance of independent third-party valuation specialists for significant intangible assets. The fair value estimates are based on available historical information and on future expectations and assumptions we deem reasonable. We generally use an income-based valuation method to estimate the fair value of intangible assets, which discounts expected future cash flows to present value using estimates and assumptions we deem reasonable. Determining the estimated useful lives of intangible assets also requires judgment. Our assessment as to which intangible assets are deemed to have finite or indefinite lives is based on several factors including economic barriers of entry for the acquired business, retention trends, and our operating plans, among other factors. Finite-lived intangible assets are amortized over their estimated useful lives on a straight-line basis and reviewed for impairment if indicators are present. Additionally, useful lives are evaluated each reporting period to determine if revisions to the remaining periods of amortization are warranted. Goodwill is tested for impairment annually or more frequently if indicators of impairment exist. We have elected to make the first day of our fiscal fourth quarter the annual impairment assessment date for goodwill. We first assess qualitative factors to determine whether it is more likely than not that the fair value is less than the carrying value. If, based on that assessment, we believe it is more likely than not that the fair value is less than the carrying value, then a two-step quantitative goodwill impairment test is performed. |
Loan Originations | Loan Originations Our wholly-owned subsidiary, 5 Arches, originates business purpose residential loans, including single-family rental and residential bridge loans. Single-family rental loans are mortgage loans secured by 1-4 unit residential real estate with a mortgage loan borrower that owns the real estate as an investment property and rents the property to residential tenants. Residential bridge loans are mortgage loans generally secured by unoccupied residential real estate that the borrower owns as an investment and that is being renovated, rehabilitated or constructed. Generally, single-family rental loans are classified as held-for-sale at fair value, as we have originated these loans with the intent to sell to third parties or transfer to securitization entities. Certain single-family rental loans may be subsequently reclassified to held-for-investment when the loans are transferred to our Federal Home Loan Bank of Chicago ("FHLBC") member subsidiary and pledged as collateral for borrowings made from the FHLBC. Residential bridge loans are classified as held-for-investment at fair value, if we intend to hold these loans to maturity, or held-for-sale at fair value, if we intend to sell the loans to a third party. |
Leases | Leases Upon adoption of ASU 2016-02, "Leases," in the first quarter of 2019, we recorded a lease liability and right-of-use asset on our consolidated balance sheets. The lease liability is equal to the present value of our remaining lease payments discounted at our incremental borrowing rate and the right-of-use asset is equal to the lease liability adjusted for our deferred rent liability at the adoption of this accounting standard. As lease payments are made, the lease liability is reduced to the present value of the remaining lease payments and the right-of-use asset is reduced by the difference between the lease expense (straight-lined over the lease term) and the theoretical interest expense amount (calculated using the incremental borrowing rate). See Note 16 for further discussion on leases. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Newly Adopted Accounting Standards Updates ("ASUs") In July 2019, the FASB issued ASU 2019-07, "Codification Updates to SEC Sections - Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization, and Miscellaneous Updates (SEC Update)." This new guidance amends certain SEC paragraphs in the FASB Accounting Standards Codification pursuant to the issuance of various SEC Final Rule Releases, and is effective immediately. We adopted this guidance, as required, in the third quarter of 2019, which did not have a material impact on our consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." This new guidance allows a reclassification from accumulated other comprehensive income ("AOCI") to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (the "Tax Act"). This new guidance is effective for fiscal years beginning after December 15, 2018. However, we did not elect to reclassify any income tax effects of the Tax Act from AOCI to retained earnings as we did not have any tax effects related to the Tax Act remaining in AOCI at December 31, 2018. Our policy is to release any stranded income tax effects from AOCI to income tax expense on an investment-by-investment basis. In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities." This new guidance amends previous guidance to better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. This new guidance is effective for fiscal years beginning after December 15, 2018. Additionally, in October 2018, the FASB issued ASU 2018-16, "Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes," which permits the use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815. The amendments in this update are required to be adopted concurrently with the amendments in ASU 2017-12. We adopted this guidance, as required, in the first quarter of 2019, which did not have a material impact on our consolidated financial statements. In July 2017, the FASB issued ASU 2017-11, "Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception." This new guidance changes the classification analysis of certain equity-linked financial instruments (or embedded conversion options) with down round features. This new guidance is effective for fiscal years beginning after December 15, 2018. We adopted this guidance, as required, in the first quarter of 2019, which did not have a material impact on our consolidated financial statements. In March 2017, the FASB issued ASU 2017-08, "Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20)." This new guidance shortens the amortization period for certain callable debt securities purchased at a premium by requiring the premium to be amortized to the earliest call date. This new guidance is effective for fiscal years beginning after December 15, 2018. We adopted this guidance, as required, in the first quarter of 2019, which did not have a material impact on our consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, "Leases." This new guidance requires lessees to recognize most leases on their balance sheet as a right-of-use asset and a lease liability. This new guidance retains a dual lease accounting model, which requires leases to be classified as either operating or capital leases for lessees, for purposes of income statement recognition. This new guidance is effective for fiscal years beginning after December 15, 2018. In July 2018, the FASB issued ASU 2018-10, "Codification Improvements to Topic 842, Leases," which provides more specific guidance on certain aspects of Topic 842. Additionally, in July 2018, the FASB issued ASU 2018-11, "Leases (Topic 842): Targeted Improvements." This new ASU introduces an additional transition method which allows entities to apply the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In March 2019, the FASB issued ASU 2019-01, "Leases (Topic 842): Codification Improvements," which is intended to clarify Codification guidance. We adopted this guidance, as required, in the first quarter of 2019, which did not have a material impact on our consolidated financial statements. We elected the package of practical expedients under the transition guidance within this standard, which allowed us to carry forward the classifications of each of our existing leases as operating leases. In connection with the adoption of this guidance, at September 30, 2019 , our lease liability was $13 million , which represented the present value of our remaining lease payments discounted at our incremental borrowing rate and was recorded in Accrued expenses and other liabilities on our consolidated balance sheets. At September 30, 2019 , our right-of-use asset was $11 million , which was equal to the lease liability adjusted for our deferred rent liability at adoption and was recorded in Other assets on our consolidated balance sheets. We will continue to record lease expense on a straight-line basis and have included required lease disclosures within Note 16. Other Recent Accounting Pronouncements In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement." This new guidance amends previous guidance by removing and modifying certain existing fair value disclosure requirements, while adding other new disclosure requirements. This new guidance is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted and entities may elect to early adopt the removal or modification of disclosures immediately and delay adoption of the new disclosure requirements until their effective date. We plan to adopt this new guidance by the required date and do not anticipate that this update will have a material impact on our consolidated financial statements. In July 2018, the FASB issued ASU 2018-09, "Codification Improvements." This new guidance is intended to clarify, correct, and make minor improvements to the FASB Accounting Standards Codification. The transition and effective dates are based on the facts and circumstances of each amendment, with some amendments becoming effective upon issuance of this ASU and others becoming effective for annual periods beginning after December 15, 2018. We plan to adopt this new guidance by the required date and do not anticipate that this update will have a material impact on our consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." This new guidance simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. This new guidance is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for interim and annual goodwill impairment tests performed on testing dates after January 1, 2017. We plan to adopt this new guidance by the required date and do not anticipate that this update will have a material impact on our consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses." This new guidance provides a new impairment model that is based on expected losses rather than incurred losses to determine the allowance for credit losses. This new guidance is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for fiscal years beginning after December 15, 2018. In November 2018, the FASB issued ASU 2018-19, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses," which clarifies the scope of the amendments in ASU 2016-13. In April 2019, the FASB issued ASU 2019-04, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments," which is intended to clarify this guidance. Additionally, in May 2019, the FASB issued ASU 2019-05, "Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief," which provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost. We currently have only a small balance of loans receivable that are not carried at fair value and would be subject to this new guidance for allowance for credit losses. Separately, we account for our available-for-sale securities under the other-than-temporary impairment ("OTTI") model for debt securities. This new guidance requires that credit impairments on our available-for-sale securities be recorded in earnings using an allowance for credit losses, with the allowance limited to the amount by which the security's fair value is less than its amortized cost basis. Subsequent reversals in credit loss estimates are recognized in income. We plan to adopt this new guidance by the required date and do not anticipate that these updates will have a material impact on our consolidated financial statements as nearly all of our financial instruments are carried at fair value and changes in fair values of these instruments are recorded on our consolidated statements of income in the period in which the valuation change occurs. We will continue evaluating these new standards and caution that any changes in our business or additional amendments to these standards could change our initial assessment. |
Balance Sheet Netting | For each category of financial instrument set forth in the table above, the assets and liabilities resulting from individual transactions within that category between us and a counterparty are subject to a master netting arrangement or similar agreement with that counterparty that provides for individual transactions to be aggregated and treated as a single transaction. For certain categories of these instruments, some of our transactions are cleared and settled through one or more clearinghouses that are substituted as our counterparty. References herein to master netting arrangements or similar agreements include the arrangements and agreements governing the clearing and settlement of these transactions through the clearinghouses. In the event of the termination and close-out of any of those transactions, the corresponding master netting agreement or similar agreement provides for settlement on a net basis. Any such settlement would include the proceeds of the liquidation of any corresponding collateral, subject to certain limitations on termination, settlement, and liquidation of collateral that may apply in the event of the bankruptcy or insolvency of a party. Such limitations should not inhibit the eventual practical realization of the principal benefits of those transactions or the corresponding master netting arrangement or similar agreement and any corresponding collateral. Certain of our derivatives and short-term debt are subject to master netting arrangements or similar agreements. Under GAAP, in certain circumstances we may elect to present certain financial assets, liabilities and related collateral subject to master netting arrangements in a net position on our consolidated balance sheets. However, we do not report any of these financial assets or liabilities on a net basis, and instead present them on a gross basis on our consolidated balance sheets. |
Basis of Presentation (Tables)
Basis of Presentation (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Schedule of Assets Acquired and Liabilities Assumed | Through September 30, 2019 , there have been no significant changes to our preliminary purchase price allocation, which is summarized in the following table. Table 2.1 – 5 Arches Purchase Price Allocation (In Thousands) March 1, 2019 Purchase price: Cash $ 12,575 Contingent consideration, at fair value 24,621 Purchase option, at fair value 5,082 Equity method investment, at fair value 8,052 Total consideration $ 50,330 Allocated to: Tangible net assets acquired (1) $ 985 Goodwill 28,747 Intangible assets 24,800 Deferred tax liability (4,202 ) Total net assets acquired $ 50,330 (1) 5 Arches net assets acquired consisted of assets of $19 million and liabilities of $18 million as of March 1, 2019. |
Schedule of Finite-Lived Intangible Assets | The amortization period for each of these assets and the activity for the period from March 1, 2019 to September 30, 2019 is summarized in the table below. Table 2.2 – Intangible Assets – Activity (Dollars in Thousands) Carrying Value at December 31, 2018 Additions Amortization Expense Carrying Value at September 30, 2019 Weighted Average Amortization Period (in years) Finite-lived intangible assets: Broker network $ — $ 18,100 $ (2,112 ) $ 15,988 5 Non-compete agreements — 2,900 (564 ) 2,336 3 Loan administration fees on existing loan assets — 2,600 (1,517 ) 1,083 1 Tradename — 1,200 (233 ) 967 3 Total $ — $ 24,800 $ (4,426 ) $ 20,374 4 |
Finite-lived Intangible Assets Amortization Expense | All of our intangible assets are amortized on a straight-line basis. Estimated amortization expense for the remainder of 2019 and the following years is summarized in the table below. Table 2.3 – Intangible Asset Amortization Expense by Year (In Thousands) September 30, 2019 2019 (3 months) $ 1,897 2020 5,420 2021 4,987 2022 3,848 2023 and thereafter 4,222 Total Future Intangible Asset Amortization $ 20,374 |
Schedule of Goodwill | The following table presents the goodwill activity for the nine months ended September 30, 2019 . Table 2.4 – Goodwill – Activity (In Thousands) Nine Months Ended September 30, 2019 Beginning balance $ — Goodwill recognized from 5 Arches acquisition 28,728 Measurement period adjustment 19 Impairment — Ending Balance $ 28,747 |
Pro Forma Information | The following unaudited pro forma financial information presents Net interest income, Non-interest income, and Net income of Redwood and 5 Arches combined, as if the acquisition occurred as of January 1, 2018. These pro forma amounts have been adjusted to include the amortization of intangible assets for both periods, and to exclude the income statement impacts related to our equity method investment in 5 Arches. The unaudited pro forma financial information is not intended to represent or be indicative of the consolidated financial results of operations that would have been reported if the acquisition had been completed as of January 1, 2018 and should not be taken as indicative of our future consolidated results of operations. During the period from March 1, 2019 to September 30, 2019 , 5 Arches had mortgage banking income of $12 million and a net loss of $3 million . Included in the net loss for this period was intangible asset amortization expense of $4 million . Table 2.5 – Unaudited Pro Forma Financial Information Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Supplementary pro forma information: Net interest income $ 33,513 $ 35,231 $ 98,101 $ 105,660 Non-interest income 27,498 22,280 98,780 84,684 Net income 34,310 32,636 115,809 111,072 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Offsetting of Financial Assets, Liabilities, and Collateral | The table below presents financial assets and liabilities that are subject to master netting arrangements or similar agreements categorized by financial instrument, together with corresponding financial instruments and corresponding collateral received or pledged at September 30, 2019 and December 31, 2018 . Table 3.1 – Offsetting of Financial Assets, Liabilities, and Collateral Gross Amounts of Recognized Assets (Liabilities) Gross Amounts Offset in Consolidated Balance Sheet Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet Gross Amounts Not Offset in Consolidated (1) Net Amount September 30, 2019 Financial Instruments Cash Collateral (Received) Pledged Assets (2) Interest rate agreements $ 33,642 $ — $ 33,642 $ (25,802 ) $ (4,379 ) $ 3,461 TBAs 5,250 — 5,250 (3,448 ) (1,040 ) 762 Total Assets $ 38,892 $ — $ 38,892 $ (29,250 ) $ (5,419 ) $ 4,223 Liabilities (2) Interest rate agreements $ (228,150 ) $ — $ (228,150 ) $ 25,802 $ 202,348 $ — TBAs (4,192 ) — (4,192 ) 3,448 483 (261 ) Loan warehouse debt (233,224 ) — (233,224 ) 233,224 — — Security repurchase agreements (1,157,646 ) — (1,157,646 ) 1,157,646 — — Total Liabilities $ (1,623,212 ) $ — $ (1,623,212 ) $ 1,420,120 $ 202,831 $ (261 ) Gross Amounts of Recognized Assets (Liabilities) Gross Amounts Offset in Consolidated Balance Sheet Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet Gross Amounts Not Offset in Consolidated (1) Net Amount December 31, 2018 Financial Instruments Cash Collateral (Received) Pledged Assets (2) Interest rate agreements $ 28,211 $ — $ 28,211 $ (28,211 ) $ — $ — TBAs 4,665 — 4,665 (3,391 ) (835 ) 439 Total Assets $ 32,876 $ — $ 32,876 $ (31,602 ) $ (835 ) $ 439 Liabilities (2) Interest rate agreements $ (70,908 ) $ — $ (70,908 ) $ 28,211 $ 42,697 $ — TBAs (13,215 ) — (13,215 ) 3,391 5,620 (4,204 ) Loan warehouse debt (860,650 ) — (860,650 ) 860,650 — — Security repurchase agreements (988,890 ) — (988,890 ) 988,890 — — Total Liabilities $ (1,933,663 ) $ — $ (1,933,663 ) $ 1,881,142 $ 48,317 $ (4,204 ) (1) Amounts presented in these columns are limited in total to the net amount of assets or liabilities presented in the prior column by instrument. In certain cases, there is excess cash collateral or financial assets we have pledged to a counterparty (which may, in certain circumstances, be a clearinghouse) that exceed the financial liabilities subject to a master netting arrangement or similar agreement. Additionally, in certain cases, counterparties may have pledged excess cash collateral to us that exceeds our corresponding financial assets. In each case, any of these excess amounts are excluded from the table although they are separately reported in our consolidated balance sheets as assets or liabilities, respectively. (2) Interest rate agreements and TBAs are components of derivatives instruments on our consolidated balance sheets. Loan warehouse debt, which is secured by residential mortgage loans, and security repurchase agreements are components of Short-term debt on our consolidated balance sheets. |
Principles of Consolidation (Ta
Principles of Consolidation (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Assets and Liabilities of Consolidated VIEs | The following table presents a summary of the assets and liabilities of these VIEs. Table 4.1 – Assets and Liabilities of Consolidated VIEs September 30, 2019 Legacy Sequoia Sequoia Choice Freddie Mac SLST Freddie Mac K-Series Servicing Investment Total Consolidated VIEs (Dollars in Thousands) Residential loans, held-for-investment $ 429,159 $ 2,618,316 $ 2,441,223 $ — $ — $ 5,488,698 Multifamily loans, held-for-investment — — — 3,791,622 — 3,791,622 Other investments — — — — 238,316 238,316 Cash and cash equivalents — — — — 21,240 21,240 Restricted cash 143 15 — — 21,450 21,608 Accrued interest receivable 716 10,806 7,215 11,300 4,472 34,509 REO 460 — 84 — — 544 Total Assets $ 430,478 $ 2,629,137 $ 2,448,522 $ 3,802,922 $ 285,478 $ 9,596,537 Short-term debt $ — $ — $ — $ — $ 191,203 $ 191,203 Accrued interest payable 456 8,949 5,498 10,805 247 25,955 Accrued expenses and other liabilities — 15 — — 19,371 19,386 Asset-backed securities issued 419,890 2,361,111 1,987,473 3,577,577 — 8,346,051 Total Liabilities $ 420,346 $ 2,370,075 $ 1,992,971 $ 3,588,382 $ 210,821 $ 8,582,595 Number of VIEs 20 9 2 4 3 38 December 31, 2018 Legacy Sequoia Sequoia Freddie Mac SLST Freddie Mac K-Series Servicing Investment Total Consolidated VIEs (Dollars in Thousands) Residential loans, held-for-investment $ 519,958 $ 2,079,382 $ 1,222,669 $ — $ — $ 3,822,009 Multifamily loans, held-for-investment — — — 2,144,598 — 2,144,598 Other investments — — — — 312,688 312,688 Restricted cash 146 1,022 — — 25,363 26,531 Accrued interest receivable 822 8,988 3,926 6,595 1,091 21,422 REO 3,943 — — — — 3,943 Total Assets $ 524,869 $ 2,089,392 $ 1,226,595 $ 2,151,193 $ 339,142 $ 6,331,191 Short-term debt $ — $ — $ — $ — $ 262,740 $ 262,740 Accrued interest payable 571 7,180 2,907 6,239 483 17,380 Accrued expenses and other liabilities — 1,022 — — 18,592 19,614 Asset-backed securities issued 512,240 1,885,010 993,748 2,019,075 — 5,410,073 Total Liabilities $ 512,811 $ 1,893,212 $ 996,655 $ 2,025,314 $ 281,815 $ 5,709,807 Number of VIEs 20 6 1 3 3 33 |
Securitization Activity Related to Unconsolidated Variable Interest Entity's Sponsored by Redwood | The following table presents information related to securitization transactions that occurred during the three and nine months ended September 30, 2019 and 2018 . Table 4.2 – Securitization Activity Related to Unconsolidated VIEs Sponsored by Redwood Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Principal balance of loans transferred $ 366,999 $ 327,511 $ 1,116,092 $ 2,735,644 Trading securities retained, at fair value 1,228 2,583 4,736 48,831 AFS securities retained, at fair value 1,069 776 3,023 6,728 |
Cash Flows Related to Unconsolidated Variable Interest Entity's Sponsored by Redwood | The following table summarizes the cash flows during the three and nine months ended September 30, 2019 and 2018 between us and the unconsolidated VIEs sponsored by us and accounted for as sales since 2012. Table 4.3 – Cash Flows Related to Unconsolidated VIEs Sponsored by Redwood Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Proceeds from new transfers $ 376,126 $ 329,231 $ 1,138,778 $ 2,723,012 MSR fees received 2,919 3,405 9,084 10,216 Funding of compensating interest, net (76 ) (46 ) (213 ) (102 ) Cash flows received on retained securities 6,603 7,267 20,892 21,720 |
Assumptions Related to Assets Retained from Unconsolidated Variable Interest Entity's Sponsored by Redwood | The following table presents the key weighted-average assumptions used to measure MSRs and securities retained at the date of securitization for securitizations completed during the three and nine months ended September 30, 2019 and 2018 . Table 4.4 – Assumptions Related to Assets Retained from Unconsolidated VIEs Sponsored by Redwood Three Months Ended September 30, 2019 Three Months Ended September 30, 2018 At Date of Securitization Senior IO Securities Subordinate Securities Senior IO Securities Subordinate Securities Prepayment rates 37 % 15 % 9 % 9 % Discount rates 14 % 7 % 14 % 7 % Credit loss assumptions 0.20 % 0.20 % 0.20 % 0.20 % Nine Months Ended September 30, 2019 Nine Months Ended September 30, 2018 At Date of Securitization Senior IO Securities Subordinate Securities Senior IO Securities Subordinate Securities Prepayment rates 25 % 15 % 9 % 10 % Discount rates 14 % 7 % 14 % 5 % Credit loss assumptions 0.20 % 0.20 % 0.20 % 0.20 % |
Unconsolidated Variable Interest Entity's Sponsored by Redwood | The following table presents additional information at September 30, 2019 and December 31, 2018 , related to unconsolidated VIEs sponsored by Redwood and accounted for as sales since 2012. Table 4.5 – Unconsolidated VIEs Sponsored by Redwood (In Thousands) September 30, 2019 December 31, 2018 On-balance sheet assets, at fair value: Interest-only, senior and subordinate securities, classified as trading $ 106,691 $ 129,111 Subordinate securities, classified as AFS 141,568 162,314 Mortgage servicing rights 37,904 58,572 Maximum loss exposure (1) $ 286,163 $ 349,997 Assets transferred: Principal balance of loans outstanding $ 10,360,700 $ 10,580,216 Principal balance of loans 30+ days delinquent 28,782 21,805 (1) Maximum loss exposure from our involvement with unconsolidated VIEs pertains to the carrying value of our securities and MSRs retained from these VIEs and represents estimated losses that would be incurred under severe, hypothetical circumstances, such as if the value of our interests and any associated collateral declines to zero. This does not include, for example, any potential exposure to representation and warranty claims associated with our initial transfer of loans into a securitization. |
Key Assumptions and Sensitivity Analysis for Assets Retained from Unconsolidated Variable Interest Entity's Sponsored by Redwood | The following table presents key economic assumptions for assets retained from unconsolidated VIEs and the sensitivity of their fair values to immediate adverse changes in those assumptions at September 30, 2019 and December 31, 2018 . Table 4.6 – Key Assumptions and Sensitivity Analysis for Assets Retained from Unconsolidated VIEs Sponsored by Redwood September 30, 2019 MSRs Senior Securities (1) Subordinate Securities (Dollars in Thousands) Fair value at September 30, 2019 $ 37,904 $ 41,827 $ 206,433 Expected life (in years) (2) 6 5 13 Prepayment speed assumption (annual CPR) (2) 14 % 16 % 16 % Decrease in fair value from: 10% adverse change $ 1,893 $ 1,977 $ 454 25% adverse change 4,486 5,189 1,802 Discount rate assumption (2) 11 % 13 % 5 % Decrease in fair value from: 100 basis point increase $ 1,259 $ 848 $ 19,313 200 basis point increase 2,436 1,977 35,950 Credit loss assumption (2) N/A 0.21 % 0.21 % Decrease in fair value from: 10% higher losses N/A $ — $ 1,666 25% higher losses N/A — 4,153 December 31, 2018 MSRs Senior Securities (1) Subordinate Securities (Dollars in Thousands) Fair value at December 31, 2018 $ 58,572 $ 61,178 $ 230,247 Expected life (in years) (2) 8 7 15 Prepayment speed assumption (annual CPR) (2) 7 % 10 % 9 % Decrease in fair value from: 10% adverse change $ 1,668 $ 2,151 $ 201 25% adverse change 4,027 5,127 1,372 Discount rate assumption (2) 11 % 12 % 6 % Decrease in fair value from: 100 basis point increase $ 2,323 $ 2,190 $ 21,982 200 basis point increase 4,493 4,226 40,641 Credit loss assumption (2) N/A 0.20 % 0.20 % Decrease in fair value from: 10% higher losses N/A $ — $ 1,387 25% higher losses N/A — 3,471 (1) Senior securities included $42 million and $61 million of interest-only securities at September 30, 2019 and December 31, 2018 , respectively. (2) Expected life, prepayment speed assumption, discount rate assumption, and credit loss assumption presented in the tables above represent weighted averages. |
Schedule of Third-Party Sponsored VIE Summary | The following table presents a summary of our interests in third-party VIEs at September 30, 2019 and December 31, 2018, grouped by asset type. Table 4.7 – Third-Party Sponsored VIE Summary (In Thousands) September 30, 2019 December 31, 2018 Mortgage-Backed Securities Senior $ 141,264 $ 185,107 Mezzanine 589,189 547,249 Subordinate 306,713 428,713 Total Mortgage-Backed Securities 1,037,166 1,161,069 Excess MSR 17,212 15,092 Total Investments in Third-Party Sponsored VIEs $ 1,054,378 $ 1,176,161 |
Fair Value of Financial Instr_2
Fair Value of Financial Instruments (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Fair Value Disclosures [Abstract] | |
Carrying Values and Fair Values of Assets and Liabilities | The following table presents the carrying values and estimated fair values of assets and liabilities that are required to be recorded or disclosed at fair value at September 30, 2019 and December 31, 2018 . Table 5.1 – Carrying Values and Fair Values of Assets and Liabilities September 30, 2019 December 31, 2018 Carrying Value Fair Value Carrying Value Fair Value (In Thousands) Assets Residential loans, held-for-sale At fair value $ 925,780 $ 925,780 $ 1,048,690 $ 1,048,690 At lower of cost or fair value 107 126 111 131 Residential loans, held-for-investment 7,755,916 7,755,916 6,205,941 6,205,941 Business purpose residential loans 336,035 336,035 141,258 141,258 Multifamily loans 3,791,622 3,791,622 2,144,598 2,144,598 Trading securities 1,013,785 1,013,785 1,118,612 1,118,612 Available-for-sale securities 271,641 271,641 333,882 333,882 Servicer advance investments (1) 222,591 222,591 300,468 300,468 MSRs (1) 39,837 39,837 60,281 60,281 Participation in loan warehouse facility (1) — — 39,703 39,703 Excess MSRs (1) 32,937 32,937 27,312 27,312 Shared home appreciation options (1) 11,372 11,372 — — Cash and cash equivalents 394,628 394,628 175,764 175,764 Restricted cash 111,518 111,518 29,313 29,313 Accrued interest receivable 57,464 57,464 47,105 47,105 Derivative assets 43,649 43,649 35,789 35,789 REO (2) 5,069 5,124 3,943 4,396 Margin receivable (2) 226,727 226,727 100,773 100,773 FHLBC stock (2) 43,393 43,393 43,393 43,393 Guarantee asset (2) 1,784 1,784 2,618 2,618 Pledged collateral (2) 57,832 57,832 42,433 42,433 Liabilities Short-term debt facilities $ 1,589,062 $ 1,589,062 $ 1,937,920 $ 1,937,920 Short-term debt - servicer advance financing 191,203 191,203 262,740 262,740 Accrued interest payable 46,881 46,881 42,528 42,528 Margin payable (3) 6,658 6,658 835 835 Guarantee obligation (3) 15,016 14,661 16,711 16,774 Contingent consideration (3) 25,167 25,167 — — Derivative liabilities 234,011 234,011 84,855 84,855 ABS issued at fair value 8,346,051 8,346,051 5,410,073 5,410,073 FHLBC long-term borrowings 1,999,999 1,999,999 1,999,999 1,999,999 Subordinate securities financing facility 184,664 185,803 — — Convertible notes, net 830,995 853,471 633,196 618,271 Trust preferred securities and subordinated notes, net 138,616 92,070 138,582 102,533 (1) These investments are included in Other investments on our consolidated balance sheets. (2) These assets are included in Other assets on our consolidated balance sheets. (3) These liabilities are included in Accrued expenses and other liabilities on our consolidated balance sheets. |
Assets and Liabilities Measured at Fair Value on Recurring Basis | The following table presents the assets and liabilities that are reported at fair value on our consolidated balance sheets on a recurring basis at September 30, 2019 and December 31, 2018 , as well as the fair value hierarchy of the valuation inputs used to measure fair value. Table 5.2 – Assets and Liabilities Measured at Fair Value on a Recurring Basis September 30, 2019 Carrying Value Fair Value Measurements Using (In Thousands) Level 1 Level 2 Level 3 Assets Residential loans $ 8,681,696 $ — $ — $ 8,681,696 Business purpose residential loans 336,035 — — 336,035 Multifamily loans 3,791,622 — — 3,791,622 Trading securities 1,013,785 — — 1,013,785 Available-for-sale securities 271,641 — — 271,641 Servicer advance investments 222,591 — — 222,591 MSRs 39,837 — — 39,837 Excess MSRs 32,937 — — 32,937 Shared home appreciation options 11,372 — — 11,372 Derivative assets 43,649 5,250 33,642 4,757 Pledged collateral 57,832 57,832 — — FHLBC stock 43,393 — 43,393 — Guarantee asset 1,784 — — 1,784 Liabilities Contingent consideration $ 25,167 $ — $ — $ 25,167 Derivative liabilities 234,011 4,192 228,150 1,669 ABS issued 8,346,051 — — 8,346,051 December 31, 2018 Carrying Value Fair Value Measurements Using (In Thousands) Level 1 Level 2 Level 3 Assets Residential loans $ 7,254,631 $ — $ — $ 7,254,631 Business purpose residential loans 141,258 — — 141,258 Multifamily loans 2,144,598 — — 2,144,598 Trading securities 1,118,612 — — 1,118,612 Available-for-sale securities 333,882 — — 333,882 Servicer advance investments 300,468 — — 300,468 MSRs 60,281 — — 60,281 Excess MSRs 27,312 — — 27,312 Derivative assets 35,789 4,665 28,211 2,913 Pledged collateral 42,433 42,433 — — FHLBC stock 43,393 — 43,393 — Guarantee asset 2,618 — — 2,618 Liabilities Derivative liabilities $ 84,855 $ 13,215 $ 70,908 $ 732 ABS issued 5,410,073 — — 5,410,073 |
Changes in Level 3 Assets and Liabilities Measured at Fair Value on Recurring Basis | The following table presents additional information about Level 3 assets and liabilities measured at fair value on a recurring basis for the nine months ended September 30, 2019 . Table 5.3 – Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis Assets Residential Loans Business Purpose Residential Loans Multifamily Loans Trading Securities AFS Securities Servicer Advance Investments MSRs Excess MSRs Shared Home Appreciation Options (In Thousands) Beginning balance - December 31, 2018 $ 7,254,631 $ 141,258 $ 2,144,598 $ 1,118,612 $ 333,882 $ 300,468 $ 60,281 $ 27,312 $ — Acquisitions 5,257,800 29,093 1,481,554 296,484 21,115 69,610 868 7,762 11,343 Originations — 296,955 — — — — — — — Sales (2,941,592 ) (46,855 ) — (418,168 ) (82,384 ) — — — — Principal paydowns (1,068,878 ) (84,410 ) (12,904 ) (33,730 ) (28,981 ) (150,512 ) — — — Gains (losses) in net income, net 179,964 4,990 178,374 55,538 24,052 3,025 (21,312 ) (2,137 ) 29 Unrealized losses in OCI, net — — — — 3,957 — — — — Other settlements, net (1) (229 ) (4,996 ) — (4,951 ) — — — — — Ending Balance - September 30, 2019 $ 8,681,696 $ 336,035 $ 3,791,622 $ 1,013,785 $ 271,641 $ 222,591 $ 39,837 $ 32,937 $ 11,372 Table 5.3 – Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis (continued) Assets Liabilities Guarantee Asset Derivatives (2) Contingent Consideration ABS Issued (In Thousands) Beginning balance - December 31, 2018 $ 2,618 $ 2,181 $ — $ 5,410,073 Acquisitions — — 24,621 3,423,561 Principal paydowns — — — (718,293 ) Gains (losses) in net income, net (834 ) 42,415 546 230,710 Other settlements, net (1) — (41,508 ) — — Ending Balance - September 30, 2019 $ 1,784 $ 3,088 $ 25,167 $ 8,346,051 (1) Other settlements, net for residential and business purpose residential loans represents the transfer of loans to REO, and for derivatives, the settlement of forward sale commitments and the transfer of the fair value of loan purchase commitments at the time loans are acquired to the basis of residential loans. Other settlements, net for trading securities relates to the consolidation of a Freddie Mac K-Series entity during the second quarter of 2019. (2) For the purpose of this presentation, derivative assets and liabilities, which consist of loan purchase and forward sale commitments, are presented on a net basis. |
Portion of Net Gains (Losses) Attributable to Level 3 Assets and Liabilities Still Held and Included in Net Income | The following table presents the portion of gains or losses included in our consolidated statements of income that were attributable to Level 3 assets and liabilities recorded at fair value on a recurring basis and held at September 30, 2019 and 2018 . Gains or losses incurred on assets or liabilities sold, matured, called, or fully written down during the three and nine months ended September 30, 2019 and 2018 are not included in this presentation. Table 5.4 – Portion of Net Gains (Losses) Attributable to Level 3 Assets and Liabilities Still Held at September 30, 2019 and 2018 Included in Net Income Included in Net Income Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Assets Residential loans at Redwood $ 17,771 $ (18,100 ) $ 82,408 $ (70,316 ) Residential loans at consolidated Sequoia entities (11,132 ) (8,978 ) 10,111 11,936 Residential loans at consolidated Freddie Mac SLST entities 39,783 — 94,788 — Business purpose residential loans 584 (20 ) 4,069 (20 ) Multifamily loans at consolidated Freddie Mac K-Series entities 47,353 (4,199 ) 178,374 (4,199 ) Trading securities 11,206 3,821 33,196 (1,956 ) Available-for-sale securities — (33 ) — (90 ) Servicer advance investments 1,585 — 3,025 — MSRs (5,892 ) 337 (16,971 ) 4,861 Excess MSRs (1,634 ) — (2,137 ) — Shared home appreciation options 29 — 29 — Loan purchase commitments 4,678 2,168 4,757 2,157 Other assets - Guarantee asset (216 ) (51 ) (834 ) 15 Liabilities Loan purchase commitments $ (1,668 ) $ (2,314 ) $ (1,669 ) $ (2,388 ) Contingent consideration (235 ) — (546 ) — ABS issued (49,399 ) 12,536 (230,709 ) (8,478 ) |
Assets and Liabilities Measured at Fair Value on Non-Recurring Basis | The following table presents information on assets recorded at fair value on a non-recurring basis at September 30, 2019 . This table does not include the carrying value and gains or losses associated with the asset types below that were not recorded at fair value on our consolidated balance sheets at September 30, 2019 . Table 5.5 – Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis at September 30, 2019 Gain (Loss) for September 30, 2019 Carrying Value Fair Value Measurements Using Three Months Ended Nine Months Ended (In Thousands) Level 1 Level 2 Level 3 September 30, 2019 September 30, 2019 Assets REO $ 4,525 $ — $ — $ 4,525 $ (332 ) $ (470 ) |
Market Valuation Gains and Losses, Net | The following table presents the net market valuation gains and losses recorded in each line item of our consolidated statements of income for the three and nine months ended September 30, 2019 and 2018 . Table 5.6 – Market Valuation Gains and Losses, Net Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Mortgage Banking Activities, Net Residential loans held-for-sale, at fair value $ (6,623 ) $ 5,626 $ 289 $ 16,522 Residential loan purchase and forward sale commitments 12,943 1,610 41,142 (8,116 ) Single-family rental loans held-for-sale, at fair value 1,283 (99 ) 4,200 (99 ) Single-family rental loan purchase commitments 564 (22 ) 1,273 (22 ) Residential bridge loans 1,010 — 2,108 — Risk management derivatives, net (2,972 ) 3,796 (15,387 ) 38,378 Total mortgage banking activities, net (1) $ 6,205 $ 10,911 $ 33,625 $ 46,663 Investment Fair Value Changes, Net Residential loans held-for-investment, at Redwood $ 7,667 $ (17,063 ) $ 71,323 $ (71,058 ) Single-family rental loans held-for-investment 22 — 22 — Residential bridge loans held-for-investment (742 ) 53 (1,363 ) 53 Trading securities 15,275 6,314 55,577 2,429 Servicer advance investments 1,585 — 3,025 — Excess MSRs (1,635 ) — (2,137 ) — Shared home appreciation options 29 — 29 — REO (331 ) — (470 ) — Net investments in Legacy Sequoia entities (2) (407 ) (248 ) (904 ) (976 ) Net investments in Sequoia Choice entities (2) 2,722 (943 ) 8,866 43 Net investments in Freddie Mac SLST entities (2) 17,300 — 31,702 — Net investments in Freddie Mac K-Series entities (2) 7,445 511 13,810 511 Risk-sharing investments (53 ) (126 ) (191 ) (474 ) Risk management derivatives, net (37,433 ) 21,867 (144,548 ) 82,391 Impairments on AFS securities — (33 ) — (89 ) Total investment fair value changes, net $ 11,444 $ 10,332 $ 34,741 $ 12,830 Other Income (Expense), Net MSRs $ (7,489 ) $ (823 ) $ (21,243 ) $ 1,324 Risk management derivatives, net 4,389 (890 ) 13,157 (7,151 ) Gain on re-measurement of 5 Arches investment — — 2,440 — Total other expense, net (3) $ (3,100 ) $ (1,713 ) $ (5,646 ) $ (5,827 ) Total Market Valuation Gains, Net $ 14,549 $ 19,530 $ 62,720 $ 53,666 (1) Mortgage banking activities, net presented above does not include fee income or provisions for repurchases that are components of Mortgage banking activities, net presented on our consolidated statements of income, as these amounts do not represent market valuation changes. (2) Includes changes in fair value of the residential loans held-for-investment, REO and the ABS issued at the entities, which netted together represent the change in value of our investments at the consolidated VIEs. (3) Other income (expense), net presented above does not include net MSR fee income or provisions for repurchases for MSRs, as these amounts do not represent market valuation adjustments. |
Quantitative Information about Significant Unobservable Inputs Used in Valuation of Level 3 Assets and Liabilities Measured at Fair Value | The following table provides quantitative information about the significant unobservable inputs used in the valuation of our Level 3 assets and liabilities measured at fair value. Table 5.7 – Fair Value Methodology for Level 3 Financial Instruments September 30, 2019 Fair Value Input Values (Dollars in Thousands, except Input Values) Unobservable Input Range Weighted Average Assets Residential loans, at fair value: Jumbo fixed-rate loans $ 2,452,300 Prepayment rate (annual CPR) 20 - 20 % 20 % Whole loan spread to TBA price $ 0.56 - $ 1.56 $ 1.55 Whole loan spread to swap rate 94 - 375 bps 184 bps Jumbo hybrid loans 321,793 Prepayment rate (annual CPR) 15 - 15 % 15 % Whole loan spread to swap rate 90 - 345 bps 146 bps Jumbo loans committed to sell 418,905 Whole loan committed sales price $ 101.88 - $ 102.91 $ 102.27 Loans held by Legacy Sequoia (1) 429,159 Liability price N/A N/A Loans held by Sequoia Choice (1) 2,618,316 Liability price N/A N/A Loans held by Freddie Mac SLST (1) 2,441,223 Liability price N/A N/A Business purpose residential loans: Single-family rental loans 129,145 Senior credit spread 110 - 110 bps 110 bps Subordinate credit spread 143 - 1,250 bps 308 bps Senior credit support 35 - 36 % 36 % IO discount rate 5 - 8 % 8 % Prepayment rate (annual CPR) 1 - 10 % 5 % Residential bridge loans 206,890 Discount rate 6 - 10 % 7 % Multifamily loans held by Freddie Mac K-Series (1) 3,791,622 Liability price N/A N/A Trading and AFS securities 1,285,426 Discount rate 2 - 15 % 5 % Prepayment rate (annual CPR) — - 60 % 13 % Default rate — - 20 % 1 % Loss severity — - 40 % 21 % Servicer advance investments 222,591 Discount rate 5 - 5 % 5 % Prepayment rate (annual CPR) 8 - 15 % 14 % Expected remaining life (2) 2 - 2 years 2 years Mortgage servicing income 8 - 14 bps 10 bps MSRs 39,837 Discount rate 11 - 13 % 11 % Prepayment rate (annual CPR) 6 - 53 % 14 % Per loan annual cost to service $ 82 - $ 82 $ 82 Excess MSRs 32,937 Discount rate 11 - 16 % 14 % Prepayment rate (annual CPR) 9 - 14 % 11 % Excess mortgage servicing income 8 - 17 bps 13 bps Shared home appreciation options 11,372 Discount rate 11 - 11 % 11 % Prepayment rate (annual CPR) 10 - 30 % 23 % Home price appreciation 3 - 3 % 3 % Guarantee asset 1,784 Discount rate 11 - 11 % 11 % Prepayment rate (annual CPR) 16 - 16 % 16 % Table 5.7 – Fair Value Methodology for Level 3 Financial Instruments (continued) September 30, 2019 Fair Value Input Values (Dollars in Thousands, except Input Values) Unobservable Input Range Weighted Average Assets (continued) REO $ 4,525 Loss severity 16 - 16 % 16 % Residential loan purchase commitments, net 3,042 MSR multiple 0.6 - 4.6 x 2.5 x Pull-through rate 9 - 100 % 71 % Whole loan spread to TBA price $ 0.56 - $ 1.56 $ 1.55 Whole loan spread to swap rate - fixed rate 115 - 375 bps 257 bps Prepayment rate (annual CPR) 15 - 20 % 20 % Whole loan spread to swap rate - hybrid 90 - 330 bps 128 bps Liabilities ABS issued (1) : At consolidated Sequoia entities 2,781,001 Discount rate 3 - 15 % 4 % Prepayment rate (annual CPR) 8 - 40 % 20 % Default rate — - 7 % 2 % Loss severity 20 - 29 % 21 % At consolidated Freddie Mac SLST entities 1,987,473 Discount rate 2 - 13 % 3 % Prepayment rate (annual CPR) 6 - 6 % 6 % Default rate 22 - 22 % 22 % Loss severity 30 - 30 % 30 % At consolidated Freddie Mac K-Series entities 3,577,577 Discount rate 2 - 9 % 2 % Prepayment rate (annual CPR) — - — % — % Default rate 1 - 1 % 1 % Loss severity 20 - 20 % 20 % Contingent consideration 25,167 Discount rate 23 - 23 % 23 % Probability of outcomes (3) — - 100 % 90 % (1) The fair value of the loans held by consolidated entities was based on the fair value of the ABS issued by these entities, including securities we own, which we determined were more readily observable, in accordance with accounting guidance for collateralized financing entities. At September 30, 2019, the fair value of securities we owned at the consolidated Sequoia, Freddie Mac SLST and Freddie Mac K-Series entities was $266 million , $454 million , and $214 million , respectively. (2) Represents the estimated average duration of outstanding servicer advances at a given point in time (not taking into account new advances made with respect to the pool). (3) Represents the probability of a full payout of contingent purchase consideration. |
Residential Loans (Tables)
Residential Loans (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Receivables [Abstract] | |
Classifications and Carrying Value of Loans | The following table summarizes the classifications and carrying values of the residential loans owned at Redwood and at consolidated Sequoia entities at September 30, 2019 and December 31, 2018 . Table 6.1 – Classifications and Carrying Values of Residential Loans September 30, 2019 Legacy Sequoia Freddie Mac (In Thousands) Redwood Sequoia Choice SLST Total Held-for-sale At fair value $ 925,780 $ — $ — $ — $ 925,780 At lower of cost or fair value 107 — — — 107 Total held-for-sale 925,887 — — — 925,887 Held-for-investment at fair value 2,267,218 429,159 2,618,316 2,441,223 7,755,916 Total Residential Loans $ 3,193,105 $ 429,159 $ 2,618,316 $ 2,441,223 $ 8,681,803 December 31, 2018 Legacy Sequoia Freddie Mac (In Thousands) Redwood Sequoia Choice SLST Total Held-for-sale At fair value $ 1,048,690 $ — $ — $ — $ 1,048,690 At lower of cost or fair value 111 — — — 111 Total held-for-sale 1,048,801 — — — 1,048,801 Held-for-investment at fair value 2,383,932 519,958 2,079,382 1,222,669 6,205,941 Total Residential Loans $ 3,432,733 $ 519,958 $ 2,079,382 $ 1,222,669 $ 7,254,742 The following table summarizes the classifications and carrying values of the business purpose residential loans owned at Redwood at September 30, 2019 and December 31, 2018 . Table 7.1 – Classifications and Carrying Values of Business Purpose Residential Loans September 30, 2019 Single-Family Residential (In Thousands) Rental Bridge Total Held-for-sale at fair value $ 110,434 $ — $ 110,434 Held-for-investment at fair value 18,711 206,890 225,601 Total Business Purpose Residential Loans $ 129,145 $ 206,890 $ 336,035 December 31, 2018 Single-Family Residential (In Thousands) Rental Bridge Total Held-for-sale at fair value $ 28,460 $ — $ 28,460 Held-for-investment at fair value — 112,798 112,798 Total Business Purpose Residential Loans $ 28,460 $ 112,798 $ 141,258 |
Business Purpose Residential _2
Business Purpose Residential Loans (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Receivables [Abstract] | |
Classifications and Carrying Value of Loans | The following table summarizes the classifications and carrying values of the residential loans owned at Redwood and at consolidated Sequoia entities at September 30, 2019 and December 31, 2018 . Table 6.1 – Classifications and Carrying Values of Residential Loans September 30, 2019 Legacy Sequoia Freddie Mac (In Thousands) Redwood Sequoia Choice SLST Total Held-for-sale At fair value $ 925,780 $ — $ — $ — $ 925,780 At lower of cost or fair value 107 — — — 107 Total held-for-sale 925,887 — — — 925,887 Held-for-investment at fair value 2,267,218 429,159 2,618,316 2,441,223 7,755,916 Total Residential Loans $ 3,193,105 $ 429,159 $ 2,618,316 $ 2,441,223 $ 8,681,803 December 31, 2018 Legacy Sequoia Freddie Mac (In Thousands) Redwood Sequoia Choice SLST Total Held-for-sale At fair value $ 1,048,690 $ — $ — $ — $ 1,048,690 At lower of cost or fair value 111 — — — 111 Total held-for-sale 1,048,801 — — — 1,048,801 Held-for-investment at fair value 2,383,932 519,958 2,079,382 1,222,669 6,205,941 Total Residential Loans $ 3,432,733 $ 519,958 $ 2,079,382 $ 1,222,669 $ 7,254,742 The following table summarizes the classifications and carrying values of the business purpose residential loans owned at Redwood at September 30, 2019 and December 31, 2018 . Table 7.1 – Classifications and Carrying Values of Business Purpose Residential Loans September 30, 2019 Single-Family Residential (In Thousands) Rental Bridge Total Held-for-sale at fair value $ 110,434 $ — $ 110,434 Held-for-investment at fair value 18,711 206,890 225,601 Total Business Purpose Residential Loans $ 129,145 $ 206,890 $ 336,035 December 31, 2018 Single-Family Residential (In Thousands) Rental Bridge Total Held-for-sale at fair value $ 28,460 $ — $ 28,460 Held-for-investment at fair value — 112,798 112,798 Total Business Purpose Residential Loans $ 28,460 $ 112,798 $ 141,258 |
Real Estate Securities (Tables)
Real Estate Securities (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Investments, Debt and Equity Securities [Abstract] | |
Fair Values of Real Estate Securities by Type | The following table presents the fair values of our real estate securities by type at September 30, 2019 and December 31, 2018 . Table 9.1 – Fair Values of Real Estate Securities by Type (In Thousands) September 30, 2019 December 31, 2018 Trading $ 1,013,785 $ 1,118,612 Available-for-sale 271,641 333,882 Total Real Estate Securities $ 1,285,426 $ 1,452,494 |
Trading Securities by Collateral Type | The following table presents the fair value of trading securities by position and collateral type at September 30, 2019 and December 31, 2018 . Table 9.2 – Trading Securities by Position (In Thousands) September 30, 2019 December 31, 2018 Senior $ 149,634 $ 158,670 Mezzanine 644,571 610,819 Subordinate 219,580 349,123 Total Trading Securities $ 1,013,785 $ 1,118,612 |
Available-for-Sale Securities by Collateral Type | The following table presents the fair value of our available-for-sale securities by position and collateral type at September 30, 2019 and December 31, 2018 . Table 9.3 – Available-for-Sale Securities by Position (In Thousands) September 30, 2019 December 31, 2018 Senior $ 33,457 $ 87,615 Mezzanine 13,967 36,407 Subordinate 224,217 209,860 Total AFS Securities $ 271,641 $ 333,882 |
Carrying Value of Residential Available for Sale Securities | The following table presents the components of carrying value (which equals fair value) of AFS securities at September 30, 2019 and December 31, 2018 . Table 9.4 – Carrying Value of AFS Securities September 30, 2019 (In Thousands) Senior Mezzanine Subordinate Total Principal balance $ 34,272 $ 13,729 $ 291,207 $ 339,208 Credit reserve (588 ) — (33,623 ) (34,211 ) Unamortized discount, net (12,346 ) (552 ) (119,756 ) (132,654 ) Amortized cost 21,338 13,177 137,828 172,343 Gross unrealized gains 12,131 790 86,389 99,310 Gross unrealized losses (12 ) — — (12 ) Carrying Value $ 33,457 $ 13,967 $ 224,217 $ 271,641 December 31, 2018 (In Thousands) Senior Mezzanine Subordinate Total Principal balance $ 91,736 $ 36,852 $ 302,524 $ 431,112 Credit reserve (7,790 ) — (33,580 ) (41,370 ) Unamortized discount, net (18,460 ) (3,697 ) (129,043 ) (151,200 ) Amortized cost 65,486 33,155 139,901 238,542 Gross unrealized gains 22,178 3,252 70,458 95,888 Gross unrealized losses (49 ) — (499 ) (548 ) Carrying Value $ 87,615 $ 36,407 $ 209,860 $ 333,882 |
Changes of Unamortized Discount and Designated Credit Reserves on Residential Available for Sale Securities | The following table presents the changes for the three and nine months ended September 30, 2019 , in unamortized discount and designated credit reserves on AFS securities. Table 9.5 – Changes in Unamortized Discount and Designated Credit Reserves on AFS Securities Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019 Credit Reserve Unamortized Discount, Net Credit Unamortized (In Thousands) Beginning balance $ 34,849 $ 137,282 $ 41,370 $ 151,200 Amortization of net discount — (1,834 ) — (5,823 ) Realized credit losses (694 ) — (1,874 ) — Acquisitions 734 399 2,198 1,103 Sales, calls, other (800 ) (3,071 ) (7,197 ) (14,112 ) (Release of) transfers to credit reserves, net 122 (122 ) (286 ) 286 Ending Balance $ 34,211 $ 132,654 $ 34,211 $ 132,654 |
Components of Fair Value of Available for Sale Securities by Holding Periods | The following table presents the components comprising the total carrying value of AFS securities that were in a gross unrealized loss position at September 30, 2019 and December 31, 2018 . Table 9.6 – Components of Fair Value of AFS Securities by Holding Periods Less Than 12 Consecutive Months 12 Consecutive Months or Longer Amortized Cost Unrealized Losses Fair Value Amortized Cost Unrealized Losses Fair (In Thousands) September 30, 2019 $ — $ — $ — $ 6,254 $ (12 ) $ 6,242 December 31, 2018 12,923 (499 ) 12,424 7,464 (49 ) 7,415 |
Summary of Significant Valuation Assumptions for Available for Sale Securities | The table below summarizes the significant valuation assumptions we used for our AFS securities in unrealized loss positions at September 30, 2019 . Table 9.7 – Significant Valuation Assumptions September 30, 2019 Range for Securities Prepayment rates 15% - 15% Projected losses 1% - 1% |
Activity of Credit Component of Other-than-Temporary Impairments | The following table details the activity related to the credit loss component of OTTI (i.e., OTTI recognized through earnings) for AFS securities held at September 30, 2019 and 2018 , for which a portion of an OTTI was recognized in other comprehensive income. Table 9.8 – Activity of the Credit Component of Other-than-Temporary Impairments Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Balance at beginning of period $ 18,580 $ 20,967 $ 18,652 $ 21,037 Additions Initial credit impairments — 33 — 76 Reductions Securities sold, or expected to sell (6 ) (927 ) (20 ) (1,026 ) Securities with no outstanding principal at period end — (1,229 ) (58 ) (1,243 ) Balance at End of Period $ 18,574 $ 18,844 $ 18,574 $ 18,844 |
Gross Realized Gains and Losses on Available for Sale Securities | The following table presents the gross realized gains and losses on sales and calls of AFS securities for the three and nine months ended September 30, 2019 and 2018 . Table 9.9 – Gross Realized Gains and Losses on AFS Securities Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Gross realized gains - sales $ 3,656 $ 7,275 $ 13,143 $ 21,312 Gross realized gains - calls 1,058 — 5,084 43 Gross realized losses - sales — — — (3 ) Total Realized Gains on Sales and Calls of AFS Securities, net $ 4,714 $ 7,275 $ 18,227 $ 21,352 |
Other Investments (Tables)
Other Investments (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Investments, All Other Investments [Abstract] | |
Summary of Other Investments | Other investments at September 30, 2019 and December 31, 2018 are summarized in the following table. Table 10.1 – Components of Other Investments (In Thousands) September 30, 2019 December 31, 2018 Servicer advance investments $ 222,591 $ 300,468 Mortgage servicing rights 39,837 60,281 Excess MSRs 32,937 27,312 Investment in multifamily loan fund 32,158 — Shared home appreciation options 11,372 — Other 8,812 — Participation in loan warehouse facility — 39,703 Investment in 5 Arches — 10,754 Total Other Investments $ 347,707 $ 438,518 |
Components of Servicer Advance Investments | The servicer advance receivables were comprised of the following types of advances at September 30, 2019 and December 31, 2018 : Table 10.2 – Components of Servicer Advance Receivables (In Thousands) September 30, 2019 December 31, 2018 Principal and interest advances $ 54,670 $ 144,336 Escrow advances (taxes and insurance advances) 99,227 94,828 Corporate advances 51,049 47,614 Total Servicer Advance Receivables $ 204,946 $ 286,778 |
Income from Mortgage Servicing Rights, Net | The following table presents activity for MSRs for the three and nine months ended September 30, 2019 and 2018 . Table 10.3 – Activity for MSRs Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Balance at beginning of period $ 47,396 $ 64,674 $ 60,281 $ 63,598 Additions — — 868 — Sales — — — (1,077 ) Changes in fair value due to: Changes in assumptions (1) (5,150 ) 1,099 (15,291 ) 6,388 Other changes (2) (2,409 ) (1,988 ) (6,021 ) (5,124 ) Balance at End of Period $ 39,837 $ 63,785 $ 39,837 $ 63,785 (1) Primarily reflects changes in prepayment assumptions due to changes in market interest rates. (2) Represents changes due to the realization of expected cash flows. The following table presents the components of our MSR income for the three and nine months ended September 30, 2019 and 2018 . Table 10.4 – Components of MSR Income, net Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Servicing income $ 3,850 $ 4,004 $ 11,310 $ 11,601 Cost of sub-servicer (319 ) (324 ) (1,090 ) (1,254 ) Net servicing fee income 3,531 3,680 10,220 10,347 Market valuation changes of MSRs (7,489 ) (823 ) (21,243 ) 1,324 Market valuation changes of associated derivatives 4,389 (890 ) 13,157 (7,151 ) MSR reversal of provision for repurchases — — 208 277 MSR Income, Net (1) $ 431 $ 1,967 $ 2,342 $ 4,797 (1) MSR income, net is included in Other income, net on our consolidated statements of income. |
Derivative Financial Instrume_2
Derivative Financial Instruments (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Fair Value and Notional Amount of Derivative Financial Instruments | The following table presents the fair value and notional amount of our derivative financial instruments at September 30, 2019 and December 31, 2018 . Table 11.1 – Fair Value and Notional Amount of Derivative Financial Instruments September 30, 2019 December 31, 2018 Fair Value Notional Amount Fair Value Notional Amount (In Thousands) Assets - Risk Management Derivatives Interest rate swaps $ 28,987 $ 1,190,500 $ 28,211 $ 2,106,500 TBAs 5,250 1,960,000 4,665 520,000 Swaptions 4,655 625,000 — — Assets - Other Derivatives Loan purchase commitments 4,757 875,707 2,913 331,161 Total Assets $ 43,649 $ 4,651,207 $ 35,789 $ 2,957,661 Liabilities - Cash Flow Hedges Interest rate swaps $ (61,685 ) $ 139,500 $ (34,492 ) $ 139,500 Liabilities - Risk Management Derivatives Interest rate swaps (166,465 ) 3,896,300 (36,416 ) 1,742,000 TBAs (4,192 ) 1,655,000 (13,215 ) 935,000 Liabilities - Other Derivatives Loan purchase commitments (1,669 ) 457,272 (732 ) 137,224 Total Liabilities $ (234,011 ) $ 6,148,072 $ (84,855 ) $ 2,953,724 Total Derivative Financial Instruments, Net $ (190,362 ) $ 10,799,279 $ (49,066 ) $ 5,911,385 |
Impact on Interest Expense of Interest Rate Agreements Accounted for as Cash Flow Hedges | The following table illustrates the impact on interest expense of our interest rate agreements accounted for as cash flow hedges for the three and nine months ended September 30, 2019 and 2018 . Table 11.2 – Impact on Interest Expense of Interest Rate Agreements Accounted for as Cash Flow Hedges Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Net interest expense on cash flows hedges $ (727 ) $ (734 ) $ (2,004 ) $ (2,536 ) Total Interest Expense $ (727 ) $ (734 ) $ (2,004 ) $ (2,536 ) |
Other Assets and Liabilities (T
Other Assets and Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Components of Other Assets | Other assets at September 30, 2019 and December 31, 2018 are summarized in the following table. Table 12.1 – Components of Other Assets (In Thousands) September 30, 2019 December 31, 2018 Margin receivable $ 226,727 $ 100,773 Pledged collateral 57,832 42,433 FHLBC stock 43,393 43,393 Investment receivable 14,375 6,959 Right-of-use asset 11,076 — REO 5,069 3,943 Fixed assets and leasehold improvements (1) 4,794 5,106 Other 14,044 15,218 Total Other Assets $ 377,310 $ 217,825 (1) Fixed assets and leasehold improvements had a basis of $11 million and accumulated depreciation of $6 million at September 30, 2019 . |
Components of Accrued Expenses and Other Liabilities | Accrued expenses and other liabilities at September 30, 2019 and December 31, 2018 are summarized in the following table. Table 12.2 – Components of Accrued Expenses and Other Liabilities (In Thousands) September 30, 2019 December 31, 2018 Contingent consideration $ 25,167 $ — Payable to minority partner 18,664 14,331 Accrued compensation 17,219 19,769 Guarantee obligations 15,016 16,711 Lease liability 12,570 — Deferred tax liabilities 11,986 9,022 Margin payable 6,658 835 Accrued operating expenses 6,036 3,122 Residential bridge loan holdbacks 4,465 — Residential loan and MSR repurchase reserve 3,947 4,189 Legal reserve 2,000 2,000 Other 6,014 8,740 Total Accrued Expenses and Other Liabilities $ 129,742 $ 78,719 |
Short-Term Debt (Tables)
Short-Term Debt (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Short-Term Debt Facilities | The table below summarizes our short-term debt, including the facilities that are available to us, the outstanding balances, the weighted average interest rate, and the maturity information at September 30, 2019 and December 31, 2018 . Table 13.1 – Short-Term Debt September 30, 2019 (Dollars in Thousands) Number of Facilities Outstanding Balance Limit Weighted Average Interest Rate Maturity Weighted Average Days Until Maturity Facilities Residential loan warehouse (1) 4 $ 233,224 $ 1,425,000 3.51 % 10/2019-3/2020 96 Real estate securities repo (1) 9 1,157,646 — 3.11 % 10/2019-1/2020 28 Single-family rental loan warehouse (2) 2 59,204 400,000 4.30 % 6/2020-6/2021 358 Residential bridge loan warehouse (2) 4 138,988 330,000 4.54 % 10/2019-5/2022 707 Business purpose loan working capital (2) 1 — 15,000 5.00 % 12/2020 N/A Total Short-Term Debt Facilities 20 1,589,062 Servicer advance financing 1 191,203 350,000 3.89 % 11/2019 46 Convertible notes, net N/A 200,552 — 5.63 % 11/2019 60 Total Short-Term Debt $ 1,980,817 December 31, 2018 (Dollars in Thousands) Number of Facilities Outstanding Balance Limit Weighted Average Interest Rate Maturity Weighted Average Days Until Maturity Facilities Residential loan warehouse (1) 4 $ 860,650 $ 1,425,000 4.10 % 2/2019-12/2019 178 Real estate securities repo (1) 9 988,890 — 3.47 % 1/2019-3/2019 26 Single-family rental loan warehouse (2) 2 22,053 400,000 4.77 % 6/2020-6/2021 560 Residential bridge loan warehouse (2) 2 66,327 80,000 5.20 % 11/2019-4/2021 629 Total Short-Term Debt Facilities 17 1,937,920 Servicer advance financing 1 262,740 350,000 4.32 % 11/2019 333 Convertible notes, net N/A 199,619 5.63 % 11/2019 319 Total Short-Term Debt $ 2,400,279 (1) Borrowings under our facilities are generally charged interest based on a specified margin over the one-month LIBOR interest rate. At September 30, 2019 , all of these borrowings were under uncommitted facilities and were due within 364 days (or less) of the borrowing date. (2) Due to the revolving nature of the borrowings under these facilities, we have classified these facilities as short-term debt at September 30, 2019 . Borrowings under these facilities will be repaid as the underlying loans mature or are sold to third parties or transferred to securitizations. |
Short-Term Debt by Collateral Type and Remaining Maturities | The following table presents the remaining maturities of our secured short-term debt by the type of collateral securing the debt as well as our convertible notes at September 30, 2019 . Table 13.2 – Short-Term Debt by Collateral Type and Remaining Maturities September 30, 2019 (In Thousands) Within 30 days 31 to 90 days Over 90 days Total Collateral Type Held-for-sale residential loans $ 31,031 $ 108,316 $ 93,877 $ 233,224 Real estate securities 834,748 293,108 29,790 1,157,646 Single-family rental loans — — 59,204 59,204 Residential bridge loans — — 138,988 138,988 Total Secured Short-Term Debt 865,779 401,424 321,859 1,589,062 Servicer advance financing — 191,203 — 191,203 Convertible notes, net — 200,552 — 200,552 Total Short-Term Debt $ 865,779 $ 793,179 $ 321,859 $ 1,980,817 |
Asset-Backed Securities Issued
Asset-Backed Securities Issued (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Asset-Backed Securities Issued | The carrying values of ABS issued by Sequoia securitization entities we sponsored at September 30, 2019 and December 31, 2018 , along with other selected information, are summarized in the following table. Table 14.1 – Asset-Backed Securities Issued September 30, 2019 Legacy Sequoia Sequoia Freddie Mac SLST Freddie Mac K-Series Total (Dollars in Thousands) Certificates with principal balance $ 437,793 $ 2,285,479 $ 1,885,106 $ 3,239,009 $ 7,847,387 Interest-only certificates 1,486 16,619 28,758 202,730 249,593 Market valuation adjustments (19,389 ) 59,013 73,609 135,838 249,071 ABS Issued, Net $ 419,890 $ 2,361,111 $ 1,987,473 $ 3,577,577 $ 8,346,051 Range of weighted average interest rates, by series 2.22% to 3.49% 4.41% to 5.06% 3.50 % 3.39% to 4.20% Stated maturities 2024 - 2036 2047 - 2049 2028 - 2029 2025 - 2049 Number of series 20 9 2 4 December 31, 2018 Legacy Sequoia Sequoia Freddie Mac SLST Freddie Mac K-Series Total (Dollars in Thousands) Certificates with principal balance $ 540,456 $ 1,838,758 $ 993,659 $ 1,936,691 $ 5,309,564 Interest-only certificates 1,537 25,662 — 131,600 158,799 Market valuation adjustments (29,753 ) 20,590 89 (49,216 ) (58,290 ) ABS Issued, Net $ 512,240 $ 1,885,010 $ 993,748 $ 2,019,075 $ 5,410,073 Range of weighted average interest rates, by series 1.36% to 3.60% 4.46% to 4.97% 3.51 % 3.39% to 4.08% Stated maturities 2024 - 2036 2047 - 2048 2028 2025 - 2049 Number of series 20 6 1 3 |
Accrued Interest Payable on Asset-Backed Securities Issued | The following table summarizes the accrued interest payable on ABS issued at September 30, 2019 and December 31, 2018 . Interest due on consolidated ABS issued is payable monthly. Table 14.2 – Accrued Interest Payable on Asset-Backed Securities Issued (In Thousands) September 30, 2019 December 31, 2018 Legacy Sequoia $ 456 $ 571 Sequoia Choice 8,949 7,180 Freddie Mac SLST 5,498 2,907 Freddie Mac K-Series 10,805 6,239 Total Accrued Interest Payable on ABS Issued $ 25,708 $ 16,897 |
Collateral for ABS Issued | The following table summarizes the carrying value components of the collateral for ABS issued and outstanding at September 30, 2019 and December 31, 2018 . Table 14.3 – Collateral for Asset-Backed Securities Issued September 30, 2019 Legacy Sequoia Sequoia Choice Freddie Mac SLST Freddie Mac K-Series Total (In Thousands) Residential loans $ 429,159 $ 2,618,316 $ 2,441,223 $ — $ 5,488,698 Multifamily loans — — — 3,791,622 3,791,622 Restricted cash 143 15 — — 158 Accrued interest receivable 716 10,806 7,215 11,300 30,037 REO 460 — 84 — 544 Total Collateral for ABS Issued $ 430,478 $ 2,629,137 $ 2,448,522 $ 3,802,922 $ 9,311,059 December 31, 2018 Legacy Sequoia Sequoia Freddie Mac SLST Freddie Mac K-Series Total (In Thousands) Residential loans $ 519,958 $ 2,079,382 $ 1,222,669 $ — $ 3,822,009 Multifamily loans — — — 2,144,598 2,144,598 Restricted cash 146 1,022 — — 1,168 Accrued interest receivable 822 8,988 3,926 6,595 20,331 REO 3,943 — — — 3,943 Total Collateral for ABS Issued $ 524,869 $ 2,089,392 $ 1,226,595 $ 2,151,193 $ 5,992,049 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Maturities of FHLBC Borrowings by Year | The following table presents maturities of our FHLBC borrowings by year at September 30, 2019 . Table 15.1 – Maturities of FHLBC Borrowings by Year (In Thousands) September 30, 2019 2024 $ 470,171 2025 887,639 2026 642,189 Total FHLBC Borrowings $ 1,999,999 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Future Lease Commitments by Year | The following table presents our future lease commitments and a reconciliation to our lease liability at September 30, 2019 . Table 16.1 – Future Lease Commitments by Year (In Thousands) September 30, 2019 2019 (3 months) $ 688 2020 2,721 2021 1,864 2022 1,468 2023 and thereafter 8,749 Total Lease Commitments 15,490 Less: Imputed interest (2,920 ) Lease Liability $ 12,570 |
Equity (Tables)
Equity (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Equity [Abstract] | |
Changes to Accumulated Other Comprehensive Income by Component | The following table provides a summary of changes to accumulated other comprehensive income by component for the three and nine months ended September 30, 2019 and 2018 . Table 17.1 – Changes in Accumulated Other Comprehensive Income by Component Three Months Ended September 30, 2019 Three Months Ended September 30, 2018 (In Thousands) Net Unrealized Gains on Available-for-Sale Securities Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges Net Unrealized Gains on Available-for-Sale Securities Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges Balance at beginning of period $ 98,307 $ (49,384 ) $ 106,725 $ (31,105 ) Other comprehensive income (loss) before reclassifications (1) 4,484 (11,791 ) (2,408 ) 4,801 Amounts reclassified from other accumulated comprehensive income (3,492 ) — (5,686 ) — Net current-period other comprehensive income (loss) 992 (11,791 ) (8,094 ) 4,801 Balance at End of Period $ 99,299 $ (61,175 ) $ 98,631 $ (26,304 ) Nine Months Ended September 30, 2019 Nine Months Ended September 30, 2018 (In Thousands) Net Unrealized Gains on Available-for-Sale Securities Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges Net Unrealized Gains on Available-for-Sale Securities Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges Balance at beginning of period $ 95,342 $ (34,045 ) $ 128,201 $ (42,953 ) Other comprehensive income (loss) (1) 19,764 (27,130 ) (9,749 ) 16,649 Amounts reclassified from other (15,807 ) — (19,821 ) — Net current-period other comprehensive income (loss) 3,957 (27,130 ) (29,570 ) 16,649 Balance at End of Period $ 99,299 $ (61,175 ) $ 98,631 $ (26,304 ) (1) Amounts presented for net unrealized gains on available-for-sale securities are net of tax benefit (provision) of zero and $0.1 million for the three and nine months ended September 30, 2018, respectively. |
Reclassifications out of Accumulated Other Comprehensive Income | The following table provides a summary of reclassifications out of accumulated other comprehensive income for the three and nine months ended September 30, 2019 and 2018 . Table 17.2 – Reclassifications Out of Accumulated Other Comprehensive Income Amount Reclassified From Accumulated Other Comprehensive Income Affected Line Item in the Three Months Ended September 30, (In Thousands) Income Statement 2019 2018 Net Realized (Gain) Loss on AFS Securities Other than temporary impairment (1) Investment fair value changes, net $ — $ 33 Gain on sale of AFS securities Realized gains, net (3,492 ) (7,247 ) Gain on sale of AFS securities Provision for income taxes — 1,528 $ (3,492 ) $ (5,686 ) Amount Reclassified From Accumulated Other Comprehensive Income Affected Line Item in the Nine Months Ended September 30, (In Thousands) Income Statement 2019 2018 Net Realized (Gain) Loss on AFS Securities Other than temporary impairment (1) Investment fair value changes, net $ — $ 89 Gain on sale of AFS securities Realized gains, net (15,807 ) (21,438 ) Gain on sale of AFS securities Provision for income taxes — 1,528 $ (15,807 ) $ (19,821 ) (1) For both the three and nine months ended September 30, 2019 , there were no other-than-temporary impairments. For the three months ended September 30, 2018, other-than-temporary impairments were $0.4 million , of which less than $0.1 million were recognized through our consolidated statements of income and $0.3 million were recognized in Accumulated other comprehensive income, a component of our consolidated balance sheet. For the nine months ended September 30, 2018, other-than-temporary impairments were $0.6 million , of which $0.1 million were recognized through our consolidated statements of income and $0.5 million were recognized in Accumulated other comprehensive income, a component of our consolidated balance sheet. |
Basic and Diluted Earnings Per Common Share | The following table provides the basic and diluted earnings per common share computations for the three and nine months ended September 30, 2019 and 2018 . Table 17.3 – Basic and Diluted Earnings per Common Share Three Months Ended September 30, Nine Months Ended September 30, (In Thousands, except Share Data) 2019 2018 2019 2018 Basic Earnings per Common Share: Net income attributable to Redwood $ 34,310 $ 40,921 $ 120,040 $ 120,513 Less: Dividends and undistributed earnings allocated to participating securities (856 ) (1,231 ) (3,260 ) (3,766 ) Net income allocated to common shareholders $ 33,454 $ 39,690 $ 116,780 $ 116,747 Basic weighted average common shares outstanding 101,872,126 80,796,856 97,214,064 77,211,188 Basic Earnings per Common Share $ 0.33 $ 0.49 $ 1.20 $ 1.51 Diluted Earnings per Common Share: Net income attributable to Redwood $ 34,310 $ 40,921 $ 120,040 $ 120,513 Less: Dividends and undistributed earnings allocated to participating securities (1,036 ) (1,284 ) (3,625 ) (3,867 ) Add back: Interest expense on convertible notes for the period, net of tax 8,887 8,666 26,271 23,642 Net income allocated to common shareholders $ 42,161 $ 48,303 $ 142,686 $ 140,288 Weighted average common shares outstanding 101,872,126 80,796,856 97,214,064 77,211,188 Net effect of dilutive equity awards 362,743 443,191 261,155 251,935 Net effect of assumed convertible notes conversion to common shares 34,287,840 33,442,641 33,727,470 30,328,906 Diluted weighted average common shares outstanding 136,522,709 114,682,688 131,202,689 107,792,029 Diluted Earnings per Common Share $ 0.31 $ 0.42 $ 1.09 $ 1.30 |
Equity Compensation Plans (Tabl
Equity Compensation Plans (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Equity Compensation Costs by Award Type | The unamortized compensation cost of awards issued under the Incentive Plan and purchases under the Employee Stock Purchase Plan totaled $23 million at September 30, 2019 , as shown in the following table. Table 18.1 – Activities of Equity Compensation Costs by Award Type Nine Months Ended September 30, 2019 (In Thousands) Restricted Stock Awards Restricted Stock Units Deferred Stock Units Performance Stock Units Employee Stock Purchase Plan Total Unrecognized compensation cost at beginning of period $ 3,498 $ 74 $ 14,489 $ 7,061 $ — $ 25,122 Equity grants — 3,483 4,831 — 160 8,474 Equity grant forfeitures — — — — — — Equity compensation expense (1,137 ) (499 ) (5,871 ) (2,505 ) (120 ) (10,132 ) Unrecognized Compensation Cost at End of Period $ 2,361 $ 3,058 $ 13,449 $ 4,556 $ 40 $ 23,464 |
Mortgage Banking Activities, _2
Mortgage Banking Activities, Net (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Mortgage Banking [Abstract] | |
Mortgage Banking Activities | The following table presents the components of Mortgage banking activities, net, recorded in our consolidated statements of income for the three and nine months ended September 30, 2019 and 2018 . Table 19.1 – Mortgage Banking Activities Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Residential Mortgage Banking Activities, Net Changes in fair value of: Residential loans, at fair value (1) $ 6,320 $ 7,236 $ 41,431 $ 8,406 Risk management derivatives (2) (1,710 ) 3,796 (11,608 ) 38,378 Other income, net (3) 407 313 1,380 1,733 Total residential mortgage banking activities, net 5,017 11,345 31,203 48,517 Business Purpose Mortgage Banking Activities, Net: Changes in fair value of: Single-family rental loans, at fair value (1) 1,847 (121 ) 5,473 (121 ) Risk management derivatives (2) (1,262 ) — (3,779 ) — Residential bridge loans, at fair value 1,010 — 2,108 — Other income, net (4) 2,903 — 5,979 — Total business purpose mortgage banking activities, net 4,498 (121 ) 9,781 (121 ) Mortgage Banking Activities, Net $ 9,515 $ 11,224 $ 40,984 $ 48,396 (1) Includes changes in fair value for associated loan purchase and forward sale commitments. (2) Represents market valuation changes of derivatives that were used to manage risks associated with our accumulation of loans. (3) Amounts in this line item include other fee income from loan acquisitions and the provision for repurchases expense, presented net. (4) Amounts in this line item include other fee income from loan originations. |
Investment Fair Value Changes_2
Investment Fair Value Changes, Net (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Investments, Debt and Equity Securities [Abstract] | |
Investment Fair Value Changes | The following table presents the components of Investment fair value changes, net, recorded in our consolidated statements of income for the three and nine months ended September 30, 2019 and 2018 . Table 20.1 – Investment Fair Value Changes Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Investment Fair Value Changes, Net Changes in fair value of: Residential loans held-for-investment at Redwood $ 7,667 $ (17,063 ) $ 71,323 $ (71,058 ) Single-family rental loans held-for-investment 22 — 22 — Residential bridge loans held-for-investment (742 ) 53 (1,363 ) 53 Trading securities 15,275 6,314 55,577 2,429 Servicer advance investments 1,585 — 3,025 — Excess MSRs (1,635 ) — (2,137 ) — Shared home appreciation options 29 — 29 — REO (331 ) — (470 ) — Net investments in Legacy Sequoia entities (1) (407 ) (248 ) (904 ) (976 ) Net investments in Sequoia Choice entities (1) 2,722 (943 ) 8,866 43 Net investments in Freddie Mac SLST entities (1) 17,300 — 31,702 — Net investments in Freddie Mac K-Series entities (1) 7,445 511 13,810 511 Risk-sharing investments (53 ) (126 ) (191 ) (474 ) Risk management derivatives, net (37,433 ) 21,867 (144,548 ) 82,391 Impairments on AFS securities — (33 ) — (89 ) Investment Fair Value Changes, Net $ 11,444 $ 10,332 $ 34,741 $ 12,830 (1) Includes changes in fair value of the loans held-for-investment, REO and the ABS issued at the entities, which netted together represent the change in value of our investments at the consolidated VIEs. |
Other Income, Net (Tables)
Other Income, Net (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Other Income and Expenses [Abstract] | |
Schedule of other income | The following table presents the components of Other income, net, recorded in our consolidated statements of income for the three and nine months ended September 30, 2019 and 2018 . Table 21.1 – Other Income, Net Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 MSR income, net $ 431 $ 1,967 $ 2,342 $ 4,797 Risk share income 905 907 2,351 2,706 FHLBC capital stock dividend 541 460 1,623 1,271 Equity investment income 557 119 552 119 5 Arches loan administration fee income 1,344 — 3,298 — Amortization of intangible assets (1,897 ) — (4,429 ) — Gain on re-measurement of investment in 5 Arches — — 2,441 — Other (56 ) — (359 ) — Other Income, Net $ 1,825 $ 3,453 $ 7,819 $ 8,893 |
Operating Expenses (Tables)
Operating Expenses (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Other Income and Expenses [Abstract] | |
Components of Operating Expenses | Components of our operating expenses for the three and nine months ended September 30, 2019 and 2018 are presented in the following table. Table 22.1 – Components of Operating Expenses Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2019 2018 2019 2018 Fixed compensation expense $ 9,391 $ 5,922 $ 26,848 $ 18,136 Variable compensation expense 4,090 4,923 12,513 13,655 Equity compensation expense 3,155 3,033 10,132 9,565 Total compensation expense 16,636 13,878 49,493 41,356 Systems and consulting 3,230 1,794 7,594 5,434 Loan acquisition costs (1) 1,392 1,887 4,385 5,860 Office costs 1,517 1,173 4,406 3,397 Accounting and legal 1,767 1,170 3,852 3,078 Corporate costs 482 462 1,701 1,462 Other operating expenses 1,791 1,126 4,798 2,942 Total Operating Expenses $ 26,815 $ 21,490 $ 76,229 $ 63,529 (1) Loan acquisition costs primarily includes underwriting and due diligence costs related to the acquisition of residential loans held-for-sale at fair value. |
Taxes (Tables)
Taxes (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Reconciliation of Statutory Tax Rate to Effective Tax Rate | The following is a reconciliation of the statutory federal and state tax rates to our effective tax rate at September 30, 2019 and 2018 . Table 23.1 – Reconciliation of Statutory Tax Rate to Effective Tax Rate September 30, 2019 September 30, 2018 Federal statutory rate 21.0 % 21.0 % State statutory rate, net of Federal tax effect 8.6 % 8.6 % Differences in taxable (loss) income from GAAP income (2.5 )% (1.8 )% Change in valuation allowance (2.5 )% (3.2 )% Dividends paid deduction (22.1 )% (15.3 )% Effective Tax Rate 2.5 % 9.3 % |
Segment Information (Tables)
Segment Information (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Segment Reporting [Abstract] | |
Business Segment Financial Information | The following tables present financial information by segment for the three and nine months ended September 30, 2019 and 2018 . Table 24.1 – Business Segment Financial Information Three Months Ended September 30, 2019 (In Thousands) Investment Portfolio Mortgage Banking Corporate/ Other Total Interest income $ 132,894 $ 12,491 $ 4,732 $ 150,117 Interest expense (94,519 ) (6,657 ) (15,428 ) (116,604 ) Net interest income (loss) 38,375 5,834 (10,696 ) 33,513 Non-interest income Mortgage banking activities, net — 9,515 — 9,515 Investment fair value changes, net 11,896 — (452 ) 11,444 Other income (expense), net 2,313 (252 ) (236 ) 1,825 Realized gains, net 4,714 — — 4,714 Total non-interest income, net 18,923 9,263 (688 ) 27,498 Direct operating expenses (2,191 ) (11,907 ) (12,717 ) (26,815 ) (Provision for) benefit from income taxes (89 ) 203 — 114 Segment Contribution $ 55,018 $ 3,393 $ (24,101 ) Net Income $ 34,310 Non-cash amortization income (expense), net $ 2,456 $ (2,028 ) $ (1,148 ) $ (720 ) Three Months Ended September 30, 2018 (In Thousands) Investment Portfolio Mortgage Banking Corporate/ Total Interest income $ 79,556 $ 14,427 $ 5,414 $ 99,397 Interest expense (40,852 ) (7,537 ) (15,962 ) (64,351 ) Net interest income (loss) 38,704 6,890 (10,548 ) 35,046 Non-interest income Mortgage banking activities, net — 11,224 — 11,224 Investment fair value changes, net 10,566 — (234 ) 10,332 Other income, net 3,334 — 119 3,453 Realized gains, net 7,275 — — 7,275 Total non-interest income, net 21,175 11,224 (115 ) 32,284 Direct operating expenses (2,659 ) (6,570 ) (12,261 ) (21,490 ) Provision for income taxes (2,840 ) (2,079 ) — (4,919 ) Segment Contribution $ 54,380 $ 9,465 $ (22,924 ) Net Income $ 40,921 Non-cash amortization income (expense), net $ 4,019 $ (54 ) $ (1,176 ) $ 2,789 Nine Months Ended September 30, 2019 (In Thousands) Investment Portfolio Mortgage Banking Corporate/ Total Interest income $ 380,394 $ 34,220 $ 15,086 $ 429,700 Interest expense (266,318 ) (18,816 ) (46,966 ) (332,100 ) Net interest income (loss) 114,076 15,404 (31,880 ) 97,600 Non-interest income Mortgage banking activities, net — 40,984 — 40,984 Investment fair value changes, net 35,749 — (1,008 ) 34,741 Other income, net 6,408 (575 ) 1,986 7,819 Realized gains, net 18,227 — — 18,227 Total non-interest income, net 60,384 40,409 978 101,771 Direct operating expenses (7,110 ) (31,582 ) (37,537 ) (76,229 ) Provision for income taxes (1,327 ) (1,775 ) — (3,102 ) Segment Contribution $ 166,023 $ 22,456 $ (68,439 ) Net Income $ 120,040 Non-cash amortization income (expense), net $ 7,446 $ (4,765 ) $ (3,573 ) $ (892 ) Nine Months Ended September 30, 2018 (In Thousands) Investment Portfolio Mortgage Banking Corporate/ Total Interest income $ 202,882 $ 40,408 $ 15,702 $ 258,992 Interest expense (87,719 ) (21,303 ) (45,056 ) (154,078 ) Net interest income (loss) 115,163 19,105 (29,354 ) 104,914 Non-interest income Mortgage banking activities, net — 48,396 — 48,396 Investment fair value changes, net 13,756 — (926 ) 12,830 Other income, net 8,774 — 119 8,893 Realized gains, net 21,352 — — 21,352 Total non-interest income, net 43,882 48,396 (807 ) 91,471 Direct operating expenses (6,524 ) (20,941 ) (36,064 ) (63,529 ) Provision for income taxes (4,858 ) (7,485 ) — (12,343 ) Segment Contribution $ 147,663 $ 39,075 $ (66,225 ) Net Income $ 120,513 Non-cash amortization income (expense), net $ 13,290 $ (99 ) $ (3,021 ) $ 10,170 |
Components of Corporate and Other | The following table presents the components of Corporate/Other for the three and nine months ended September 30, 2019 and 2018 . Table 24.2 – Components of Corporate/Other Three Months Ended September 30, 2019 2018 (In Thousands) Legacy Consolidated VIEs (1) Other Total Legacy Consolidated VIEs (1) Other Total Interest income $ 4,295 $ 437 $ 4,732 $ 5,174 $ 240 $ 5,414 Interest expense (3,452 ) (11,976 ) (15,428 ) (4,257 ) (11,705 ) (15,962 ) Net interest income (loss) 843 (11,539 ) (10,696 ) 917 (11,465 ) (10,548 ) Non-interest income Investment fair value changes, net (407 ) (45 ) (452 ) (248 ) 14 (234 ) Other income — (236 ) (236 ) — 119 119 Total non-interest income, net (407 ) (281 ) (688 ) (248 ) 133 (115 ) Direct operating expenses — (12,717 ) (12,717 ) — (12,261 ) (12,261 ) Total $ 436 $ (24,537 ) $ (24,101 ) $ 669 $ (23,593 ) $ (22,924 ) Nine Months Ended September 30, 2019 2018 (In Thousands) Legacy Consolidated VIEs (1) Other Total Legacy Consolidated VIEs (1) Other Total Interest income $ 13,924 $ 1,162 $ 15,086 $ 15,003 $ 699 $ 15,702 Interest expense (11,548 ) (35,418 ) (46,966 ) (12,324 ) (32,732 ) (45,056 ) Net interest income (loss) 2,376 (34,256 ) (31,880 ) 2,679 (32,033 ) (29,354 ) Non-interest income Investment fair value changes, net (904 ) (104 ) (1,008 ) (976 ) 50 (926 ) Other income — 1,986 1,986 — 119 119 Total non-interest income, net (904 ) 1,882 978 (976 ) 169 (807 ) Direct operating expenses — (37,537 ) (37,537 ) — (36,064 ) (36,064 ) Total $ 1,472 $ (69,911 ) $ (68,439 ) $ 1,703 $ (67,928 ) $ (66,225 ) (1) Legacy consolidated VIEs represent Legacy Sequoia entities that are consolidated for GAAP financial reporting purposes. See Note 4 for further discussion on VIEs. |
Supplemental Information by Segment | The following table presents supplemental information by segment at September 30, 2019 and December 31, 2018 . Table 24.3 – Supplemental Segment Information (In Thousands) Investment Portfolio Mortgage Banking Corporate/ Other Total September 30, 2019 Residential loans $ 7,326,757 $ 925,887 $ 429,159 $ 8,681,803 Business purpose residential loans 225,601 110,434 — 336,035 Multifamily loans 3,791,622 — — 3,791,622 Real estate securities 1,285,426 — — 1,285,426 Other investments 346,136 1,571 — 347,707 Goodwill and intangible assets — 49,121 — 49,121 Total assets 13,347,460 1,166,639 962,184 15,476,283 December 31, 2018 Residential loans $ 5,685,983 $ 1,048,801 $ 519,958 $ 7,254,742 Business purpose residential loans 112,798 28,460 — 141,258 Multifamily loans 2,144,598 — — 2,144,598 Real estate securities 1,452,494 — — 1,452,494 Other investments 427,764 — 10,754 438,518 Total assets 10,093,993 1,103,090 740,323 11,937,406 |
Organization (Details)
Organization (Details) | 9 Months Ended |
Sep. 30, 2019segment | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of operating segments | 2 |
Basis of Presentation (Details)
Basis of Presentation (Details) - partnership | 3 Months Ended | 12 Months Ended |
Dec. 31, 2018 | Dec. 31, 2018 | |
Variable Interest Entity [Line Items] | ||
Number of partnerships consolidated | 2 | 2 |
Variable Interest Entity, Primary Beneficiary | ||
Variable Interest Entity [Line Items] | ||
VIE, ownership interest rate | 80.00% |
Basis of Presentation - Acquisi
Basis of Presentation - Acquisition of 5 Arches (Details) - USD ($) $ in Thousands | Mar. 01, 2019 | May 31, 2018 | Sep. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 |
Business Acquisition [Line Items] | ||||||||
Remeasurement gain | $ 0 | $ 0 | $ 2,441 | $ 0 | ||||
Contingent consideration | 25,167 | 25,167 | $ 0 | |||||
5 Arches, LLC | ||||||||
Business Acquisition [Line Items] | ||||||||
Percent acquired | 80.00% | |||||||
Minority interest, percentage | 20.00% | |||||||
Payment of cash to acquire business | $ 13,000 | |||||||
Contingent consideration maximum amount | 27,000 | |||||||
Contingent consideration performance term | 2 years | |||||||
Remeasurement gain | $ 2,000 | |||||||
Intangible assets | 24,800 | |||||||
Goodwill | 28,747 | 28,747 | 28,747 | $ 0 | ||||
Goodwill deductible for tax purposes | 3,000 | |||||||
Contingent consideration | $ 24,621 | $ 25,000 | 25,000 | |||||
Revenue | 12,000 | |||||||
Net loss | 3,000 | |||||||
Intangible assets amortization expense | $ 4,000 | |||||||
5 Arches, LLC | ||||||||
Business Acquisition [Line Items] | ||||||||
Payments to acquire equity method investment | $ 10,000 | |||||||
Option to purchase additional equity, term | 1 year |
Basis of Presentation - Assets
Basis of Presentation - Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands | Mar. 01, 2019 | Sep. 30, 2019 | Dec. 31, 2018 |
Purchase price: | |||
Contingent consideration, at fair value | $ 25,167 | $ 0 | |
5 Arches, LLC | |||
Purchase price: | |||
Cash | $ 12,575 | ||
Contingent consideration, at fair value | 24,621 | 25,000 | |
Purchase option, at fair value | 5,082 | ||
Equity method investment, at fair value | 8,052 | ||
Total consideration | 50,330 | ||
Allocated to: | |||
Tangible net assets acquired | 985 | ||
Goodwill | 28,747 | $ 28,747 | $ 0 |
Intangible assets | 24,800 | ||
Deferred tax liability | (4,202) | ||
Total net assets acquired | 50,330 | ||
Assets | 19,000 | ||
Liabilities | $ 18,000 |
Basis of Presentation - Intangi
Basis of Presentation - Intangible Assets – Activity (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Finite-lived Intangible Assets [Roll Forward] | ||||
Amortization Expense | $ (1,897) | $ 0 | $ (4,429) | $ 0 |
5 Arches, LLC | ||||
Finite-lived Intangible Assets [Roll Forward] | ||||
Carrying Value at December 31, 2018 | 0 | |||
Additions | 24,800 | |||
Amortization Expense | (4,426) | |||
Carrying Value at September 30, 2019 | 20,374 | $ 20,374 | ||
Weighted Average Amortization Period (in years) | 4 years | |||
5 Arches, LLC | Broker network | ||||
Finite-lived Intangible Assets [Roll Forward] | ||||
Carrying Value at December 31, 2018 | $ 0 | |||
Additions | 18,100 | |||
Amortization Expense | (2,112) | |||
Carrying Value at September 30, 2019 | 15,988 | $ 15,988 | ||
Weighted Average Amortization Period (in years) | 5 years | |||
5 Arches, LLC | Non-compete agreements | ||||
Finite-lived Intangible Assets [Roll Forward] | ||||
Carrying Value at December 31, 2018 | $ 0 | |||
Additions | 2,900 | |||
Amortization Expense | (564) | |||
Carrying Value at September 30, 2019 | 2,336 | $ 2,336 | ||
Weighted Average Amortization Period (in years) | 3 years | |||
5 Arches, LLC | Loan administration fees on existing loan assets | ||||
Finite-lived Intangible Assets [Roll Forward] | ||||
Carrying Value at December 31, 2018 | $ 0 | |||
Additions | 2,600 | |||
Amortization Expense | (1,517) | |||
Carrying Value at September 30, 2019 | 1,083 | $ 1,083 | ||
Weighted Average Amortization Period (in years) | 1 year | |||
5 Arches, LLC | Tradename | ||||
Finite-lived Intangible Assets [Roll Forward] | ||||
Carrying Value at December 31, 2018 | $ 0 | |||
Additions | 1,200 | |||
Amortization Expense | (233) | |||
Carrying Value at September 30, 2019 | $ 967 | $ 967 | ||
Weighted Average Amortization Period (in years) | 3 years |
Basis of Presentation - Intan_2
Basis of Presentation - Intangible Asset Amortization Expense by Year (Details) - 5 Arches, LLC - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Finite-Lived Intangible Assets [Line Items] | ||
2019 (3 months) | $ 1,897 | |
2020 | 5,420 | |
2021 | 4,987 | |
2022 | 3,848 | |
2023 and thereafter | 4,222 | |
Total Future Intangible Asset Amortization | $ 20,374 | $ 0 |
Basis of Presentation - Goodwil
Basis of Presentation - Goodwill – Activity (Details) - 5 Arches, LLC $ in Thousands | 9 Months Ended |
Sep. 30, 2019USD ($) | |
Goodwill [Roll Forward] | |
Beginning balance | $ 0 |
Goodwill recognized from 5 Arches acquisition | 28,728 |
Measurement period adjustment | 19 |
Impairment | 0 |
Ending Balance | $ 28,747 |
Basis of Presentation - Pro For
Basis of Presentation - Pro Forma Information (Details) - 5 Arches, LLC - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Business Acquisition [Line Items] | ||||
Net interest income | $ 33,513 | $ 35,231 | $ 98,101 | $ 105,660 |
Non-interest income | 27,498 | 22,280 | 98,780 | 84,684 |
Net income | $ 34,310 | $ 32,636 | $ 115,809 | $ 111,072 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Narrative (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Lease liability | $ 12,570 | $ 0 |
Right-of-use asset | 11,076 | $ 0 |
ASU 2016-02 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Lease liability | 13,000 | |
Right-of-use asset | $ 11,000 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Offsetting of Financial Assets, Liabilities, and Collateral (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 | |
Assets | |||
Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet | [1] | $ 43,649 | $ 35,789 |
Liabilities | |||
Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet | [1] | (234,011) | (84,855) |
Total Liabilities | |||
Gross Amounts of Recognized Assets (Liabilities) | (1,623,212) | (1,933,663) | |
Gross Amounts Offset in Consolidated Balance Sheet | 0 | 0 | |
Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet | (1,623,212) | (1,933,663) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments | 1,420,120 | 1,881,142 | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral (Received) Pledged | 202,831 | 48,317 | |
Net Amount | (261) | (4,204) | |
Interest rate agreements | |||
Assets | |||
Gross Amounts of Recognized Assets (Liabilities) | 33,642 | 28,211 | |
Gross Amounts Offset in Consolidated Balance Sheet | 0 | 0 | |
Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet | 33,642 | 28,211 | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments | (25,802) | (28,211) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral (Received) Pledged | (4,379) | 0 | |
Net Amount | 3,461 | 0 | |
Liabilities | |||
Gross Amounts of Recognized Assets (Liabilities) | (228,150) | (70,908) | |
Gross Amounts Offset in Consolidated Balance Sheet | 0 | 0 | |
Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet | (228,150) | (70,908) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments | 25,802 | 28,211 | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral (Received) Pledged | 202,348 | 42,697 | |
Net Amount | 0 | 0 | |
TBAs | |||
Assets | |||
Gross Amounts of Recognized Assets (Liabilities) | 5,250 | 4,665 | |
Gross Amounts Offset in Consolidated Balance Sheet | 0 | 0 | |
Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet | 5,250 | 4,665 | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments | (3,448) | (3,391) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral (Received) Pledged | (1,040) | (835) | |
Net Amount | 762 | 439 | |
Liabilities | |||
Gross Amounts of Recognized Assets (Liabilities) | (4,192) | (13,215) | |
Gross Amounts Offset in Consolidated Balance Sheet | 0 | 0 | |
Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet | (4,192) | (13,215) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments | 3,448 | 3,391 | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral (Received) Pledged | 483 | 5,620 | |
Net Amount | (261) | (4,204) | |
Interest Rate Agreement, TBAs, And Futures | |||
Assets | |||
Gross Amounts of Recognized Assets (Liabilities) | 38,892 | 32,876 | |
Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet | 38,892 | 32,876 | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments | (29,250) | (31,602) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral (Received) Pledged | (5,419) | (835) | |
Net Amount | 4,223 | 439 | |
Loan warehouse debt | |||
Loan warehouse debt and Security repurchase agreement | |||
Gross Amounts of Recognized Assets (Liabilities) | (233,224) | (860,650) | |
Gross Amounts Offset in Consolidated Balance Sheet | 0 | 0 | |
Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet | (233,224) | (860,650) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments | 233,224 | 860,650 | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral (Received) Pledged | 0 | 0 | |
Security repurchase agreements | |||
Loan warehouse debt and Security repurchase agreement | |||
Gross Amounts of Recognized Assets (Liabilities) | (1,157,646) | (988,890) | |
Gross Amounts Offset in Consolidated Balance Sheet | 0 | 0 | |
Net Amounts of Assets (Liabilities) Presented in Consolidated Balance Sheet | (1,157,646) | (988,890) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments | 1,157,646 | 988,890 | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral (Received) Pledged | 0 | 0 | |
Net Amount | $ 0 | $ 0 | |
[1] | Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At September 30, 2019 and December 31, 2018 , assets of consolidated VIEs totaled $9,596,537 and $6,331,191 , respectively. At September 30, 2019 and December 31, 2018 , liabilities of consolidated VIEs totaled $8,582,595 and $5,709,807 , respectively. See Note 4 for further discussion. |
Principles of Consolidation - A
Principles of Consolidation - Additional Information (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | 93 Months Ended | |
Sep. 30, 2019USD ($) | Dec. 31, 2018USD ($)partnership | Dec. 31, 2018USD ($)partnership | Sep. 30, 2019USD ($)entity | |
Variable Interest Entity [Line Items] | ||||
Number of partnerships consolidated | partnership | 2 | 2 | ||
MSRs | $ 204,946 | $ 286,778 | $ 286,778 | $ 204,946 |
Variable Interest Entity, Primary Beneficiary | ||||
Variable Interest Entity [Line Items] | ||||
VIE, ownership interest rate | 80.00% | |||
Variable Interest Entity, Not Primary Beneficiary | ||||
Variable Interest Entity [Line Items] | ||||
Number of securitization entities to which asset transferred (in entities) | entity | 46 | |||
Gain (loss) on securitization of financial assets | 4,000 | |||
Loan acquisition, aggregate amount acquired | 39,000 | |||
Legacy Sequoia | Variable Interest Entity, Primary Beneficiary | ||||
Variable Interest Entity [Line Items] | ||||
Estimated fair value of investments | 10,000 | $ 10,000 | ||
Sequoia Choice | Variable Interest Entity, Primary Beneficiary | ||||
Variable Interest Entity [Line Items] | ||||
Estimated fair value of investments | 259,000 | 259,000 | ||
Freddie Mac SLST | Variable Interest Entity, Primary Beneficiary | ||||
Variable Interest Entity [Line Items] | ||||
Estimated fair value of investments | 456,000 | 456,000 | ||
Freddie Mac K-Series | Variable Interest Entity, Primary Beneficiary | ||||
Variable Interest Entity [Line Items] | ||||
Estimated fair value of investments | 215,000 | 215,000 | ||
Servicing Investment | Variable Interest Entity, Primary Beneficiary | ||||
Variable Interest Entity [Line Items] | ||||
MSRs | $ 75,000 | $ 75,000 |
Principles of Consolidation -_2
Principles of Consolidation - Assets and Liabilities of Consolidated Variable Interest Entity's (Details) $ in Thousands | Sep. 30, 2019USD ($)investment | Dec. 31, 2018USD ($)investment |
Variable Interest Entity [Line Items] | ||
Assets | $ 9,596,537 | $ 6,331,191 |
Liabilities | $ 8,582,595 | $ 5,709,807 |
Number of VIEs | investment | 38 | 33 |
Residential loans, held-for-investment | ||
Variable Interest Entity [Line Items] | ||
Assets | $ 5,488,698 | $ 3,822,009 |
Multifamily loans, held-for-investment | ||
Variable Interest Entity [Line Items] | ||
Assets | 3,791,622 | 2,144,598 |
Other investments | ||
Variable Interest Entity [Line Items] | ||
Assets | 238,316 | 312,688 |
Cash and cash equivalents | ||
Variable Interest Entity [Line Items] | ||
Assets | 21,240 | |
Restricted cash | ||
Variable Interest Entity [Line Items] | ||
Assets | 21,608 | 26,531 |
Accrued interest receivable | ||
Variable Interest Entity [Line Items] | ||
Assets | 34,509 | 21,422 |
REO | ||
Variable Interest Entity [Line Items] | ||
Assets | 544 | 3,943 |
Short-term debt | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 191,203 | 262,740 |
Accrued interest payable | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 25,955 | 17,380 |
Accrued expenses and other liabilities | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 19,386 | 19,614 |
Asset-backed securities issued | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 8,346,051 | 5,410,073 |
Legacy Sequoia | ||
Variable Interest Entity [Line Items] | ||
Assets | 430,478 | 524,869 |
Liabilities | $ 420,346 | $ 512,811 |
Number of VIEs | investment | 20 | 20 |
Legacy Sequoia | Residential loans, held-for-investment | ||
Variable Interest Entity [Line Items] | ||
Assets | $ 429,159 | $ 519,958 |
Legacy Sequoia | Multifamily loans, held-for-investment | ||
Variable Interest Entity [Line Items] | ||
Assets | 0 | 0 |
Legacy Sequoia | Other investments | ||
Variable Interest Entity [Line Items] | ||
Assets | 0 | 0 |
Legacy Sequoia | Cash and cash equivalents | ||
Variable Interest Entity [Line Items] | ||
Assets | 0 | |
Legacy Sequoia | Restricted cash | ||
Variable Interest Entity [Line Items] | ||
Assets | 143 | 146 |
Legacy Sequoia | Accrued interest receivable | ||
Variable Interest Entity [Line Items] | ||
Assets | 716 | 822 |
Legacy Sequoia | REO | ||
Variable Interest Entity [Line Items] | ||
Assets | 460 | 3,943 |
Legacy Sequoia | Short-term debt | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 0 | 0 |
Legacy Sequoia | Accrued interest payable | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 456 | 571 |
Legacy Sequoia | Accrued expenses and other liabilities | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 0 | 0 |
Legacy Sequoia | Asset-backed securities issued | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 419,890 | 512,240 |
Sequoia Choice | ||
Variable Interest Entity [Line Items] | ||
Assets | 2,629,137 | 2,089,392 |
Liabilities | $ 2,370,075 | $ 1,893,212 |
Number of VIEs | investment | 9 | 6 |
Sequoia Choice | Residential loans, held-for-investment | ||
Variable Interest Entity [Line Items] | ||
Assets | $ 2,618,316 | $ 2,079,382 |
Sequoia Choice | Multifamily loans, held-for-investment | ||
Variable Interest Entity [Line Items] | ||
Assets | 0 | 0 |
Sequoia Choice | Other investments | ||
Variable Interest Entity [Line Items] | ||
Assets | 0 | 0 |
Sequoia Choice | Cash and cash equivalents | ||
Variable Interest Entity [Line Items] | ||
Assets | 0 | |
Sequoia Choice | Restricted cash | ||
Variable Interest Entity [Line Items] | ||
Assets | 15 | 1,022 |
Sequoia Choice | Accrued interest receivable | ||
Variable Interest Entity [Line Items] | ||
Assets | 10,806 | 8,988 |
Sequoia Choice | REO | ||
Variable Interest Entity [Line Items] | ||
Assets | 0 | 0 |
Sequoia Choice | Short-term debt | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 0 | 0 |
Sequoia Choice | Accrued interest payable | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 8,949 | 7,180 |
Sequoia Choice | Accrued expenses and other liabilities | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 15 | 1,022 |
Sequoia Choice | Asset-backed securities issued | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 2,361,111 | 1,885,010 |
Freddie Mac SLST | ||
Variable Interest Entity [Line Items] | ||
Assets | 2,448,522 | 1,226,595 |
Liabilities | $ 1,992,971 | $ 996,655 |
Number of VIEs | investment | 2 | 1 |
Freddie Mac SLST | Residential loans, held-for-investment | ||
Variable Interest Entity [Line Items] | ||
Assets | $ 2,441,223 | $ 1,222,669 |
Freddie Mac SLST | Multifamily loans, held-for-investment | ||
Variable Interest Entity [Line Items] | ||
Assets | 0 | 0 |
Freddie Mac SLST | Other investments | ||
Variable Interest Entity [Line Items] | ||
Assets | 0 | 0 |
Freddie Mac SLST | Cash and cash equivalents | ||
Variable Interest Entity [Line Items] | ||
Assets | 0 | |
Freddie Mac SLST | Restricted cash | ||
Variable Interest Entity [Line Items] | ||
Assets | 0 | 0 |
Freddie Mac SLST | Accrued interest receivable | ||
Variable Interest Entity [Line Items] | ||
Assets | 7,215 | 3,926 |
Freddie Mac SLST | REO | ||
Variable Interest Entity [Line Items] | ||
Assets | 84 | 0 |
Freddie Mac SLST | Short-term debt | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 0 | 0 |
Freddie Mac SLST | Accrued interest payable | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 5,498 | 2,907 |
Freddie Mac SLST | Accrued expenses and other liabilities | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 0 | 0 |
Freddie Mac SLST | Asset-backed securities issued | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 1,987,473 | 993,748 |
Freddie Mac K-Series | ||
Variable Interest Entity [Line Items] | ||
Assets | 3,802,922 | 2,151,193 |
Liabilities | $ 3,588,382 | $ 2,025,314 |
Number of VIEs | investment | 4 | 3 |
Freddie Mac K-Series | Residential loans, held-for-investment | ||
Variable Interest Entity [Line Items] | ||
Assets | $ 0 | $ 0 |
Freddie Mac K-Series | Multifamily loans, held-for-investment | ||
Variable Interest Entity [Line Items] | ||
Assets | 3,791,622 | 2,144,598 |
Freddie Mac K-Series | Other investments | ||
Variable Interest Entity [Line Items] | ||
Assets | 0 | 0 |
Freddie Mac K-Series | Cash and cash equivalents | ||
Variable Interest Entity [Line Items] | ||
Assets | 0 | |
Freddie Mac K-Series | Restricted cash | ||
Variable Interest Entity [Line Items] | ||
Assets | 0 | 0 |
Freddie Mac K-Series | Accrued interest receivable | ||
Variable Interest Entity [Line Items] | ||
Assets | 11,300 | 6,595 |
Freddie Mac K-Series | REO | ||
Variable Interest Entity [Line Items] | ||
Assets | 0 | 0 |
Freddie Mac K-Series | Short-term debt | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 0 | 0 |
Freddie Mac K-Series | Accrued interest payable | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 10,805 | 6,239 |
Freddie Mac K-Series | Accrued expenses and other liabilities | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 0 | 0 |
Freddie Mac K-Series | Asset-backed securities issued | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 3,577,577 | 2,019,075 |
Servicing Investment | ||
Variable Interest Entity [Line Items] | ||
Assets | 285,478 | 339,142 |
Liabilities | $ 210,821 | $ 281,815 |
Number of VIEs | investment | 3 | 3 |
Servicing Investment | Residential loans, held-for-investment | ||
Variable Interest Entity [Line Items] | ||
Assets | $ 0 | $ 0 |
Servicing Investment | Multifamily loans, held-for-investment | ||
Variable Interest Entity [Line Items] | ||
Assets | 0 | 0 |
Servicing Investment | Other investments | ||
Variable Interest Entity [Line Items] | ||
Assets | 238,316 | 312,688 |
Servicing Investment | Cash and cash equivalents | ||
Variable Interest Entity [Line Items] | ||
Assets | 21,240 | |
Servicing Investment | Restricted cash | ||
Variable Interest Entity [Line Items] | ||
Assets | 21,450 | 25,363 |
Servicing Investment | Accrued interest receivable | ||
Variable Interest Entity [Line Items] | ||
Assets | 4,472 | 1,091 |
Servicing Investment | REO | ||
Variable Interest Entity [Line Items] | ||
Assets | 0 | 0 |
Servicing Investment | Short-term debt | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 191,203 | 262,740 |
Servicing Investment | Accrued interest payable | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 247 | 483 |
Servicing Investment | Accrued expenses and other liabilities | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 19,371 | 18,592 |
Servicing Investment | Asset-backed securities issued | ||
Variable Interest Entity [Line Items] | ||
Liabilities | $ 0 | $ 0 |
Principles of Consolidation - S
Principles of Consolidation - Securitization Activity Related to Unconsolidated Variable Interest Entity's Sponsored by Redwood (Details) - Variable Interest Entity, Not Primary Beneficiary - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Variable Interest Entity [Line Items] | ||||
Principal balance of loans transferred | $ 366,999 | $ 327,511 | $ 1,116,092 | $ 2,735,644 |
Trading securities retained, at fair value | ||||
Variable Interest Entity [Line Items] | ||||
Securities retained, at fair value | 1,228 | 2,583 | 4,736 | 48,831 |
AFS securities retained, at fair value | ||||
Variable Interest Entity [Line Items] | ||||
Securities retained, at fair value | $ 1,069 | $ 776 | $ 3,023 | $ 6,728 |
Principles of Consolidation - C
Principles of Consolidation - Cash Flows Related to Unconsolidated Variable Interest Entity's Sponsored by Redwood (Details) - Variable Interest Entity, Not Primary Beneficiary - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Variable Interest Entity [Line Items] | ||||
Proceeds from new transfers | $ 376,126 | $ 329,231 | $ 1,138,778 | $ 2,723,012 |
MSR fees received | 2,919 | 3,405 | 9,084 | 10,216 |
Funding of compensating interest, net | (76) | (46) | (213) | (102) |
Cash flows received on retained securities | $ 6,603 | $ 7,267 | $ 20,892 | $ 21,720 |
Principles of Consolidation -_3
Principles of Consolidation - Assumptions Related to Unconsolidated Variable Interest Entity's Sponsored by Redwood (Details) - Variable Interest Entity, Not Primary Beneficiary | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Senior IO Securities | ||||
Fair Value Assumption, Date of Securitization or Asset-backed Financing Arrangement, Transferor's Continuing Involvement, Servicing Assets or Liabilities [Line Items] | ||||
Prepayment rates | 37.00% | 9.00% | 25.00% | 9.00% |
Discount rates | 14.00% | 14.00% | 14.00% | 14.00% |
Credit loss assumptions | 0.20% | 0.20% | 0.20% | 0.20% |
Subordinate Securities | ||||
Fair Value Assumption, Date of Securitization or Asset-backed Financing Arrangement, Transferor's Continuing Involvement, Servicing Assets or Liabilities [Line Items] | ||||
Prepayment rates | 15.00% | 9.00% | 15.00% | 10.00% |
Discount rates | 7.00% | 7.00% | 7.00% | 5.00% |
Credit loss assumptions | 0.20% | 0.20% | 0.20% | 0.20% |
Principles of Consolidation -_4
Principles of Consolidation - Summary of Unconsolidated Variable Interest Entity's Sponsored by Redwood (Details) - Variable Interest Entity, Not Primary Beneficiary - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
On-balance sheet assets, at fair value: | ||
Maximum loss exposure | $ 286,163 | $ 349,997 |
Assets transferred: | ||
Principal balance of loans outstanding | 10,360,700 | 10,580,216 |
Principal balance of loans 30 days delinquent | 28,782 | 21,805 |
Interest-only, senior and subordinate securities, classified as trading | ||
On-balance sheet assets, at fair value: | ||
Securities | 106,691 | 129,111 |
Subordinate securities, classified as AFS | ||
On-balance sheet assets, at fair value: | ||
Securities | 141,568 | 162,314 |
Mortgage servicing rights | ||
On-balance sheet assets, at fair value: | ||
Securities | $ 37,904 | $ 58,572 |
Principles of Consolidation - K
Principles of Consolidation - Key Assumptions and Sensitivity Analysis for Assets Retained from Unconsolidated Variable Interest Entity's Sponsored by Redwood (Details) - Variable Interest Entity, Not Primary Beneficiary - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 | Sep. 30, 2019 |
MSRs | |||
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items] | |||
Fair value | $ 37,904 | $ 58,572 | $ 37,904 |
Expected life (in years) | 6 years | 8 years | |
Prepayment speed assumption (annual CPR) | 14.00% | 7.00% | |
Decrease in fair value from: | |||
10% adverse change | $ 1,893 | $ 1,668 | 1,893 |
25% adverse change | $ 4,486 | $ 4,027 | 4,486 |
Discount rate assumption | 11.00% | 11.00% | |
Decrease in fair value from: | |||
100 basis point increase | $ 1,259 | $ 2,323 | 1,259 |
200 basis point increase | 2,436 | 4,493 | $ 2,436 |
Decrease in fair value from: | |||
Impact of adverse change in prepayment speed | 25.00% | ||
Impact of increase in discount rate assumption | 1.00% | ||
Impact of adverse change in expected credit losses | 25.00% | ||
Senior Securities | |||
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items] | |||
Fair value | $ 41,827 | $ 61,178 | $ 41,827 |
Expected life (in years) | 5 years | 7 years | |
Prepayment speed assumption (annual CPR) | 16.00% | 10.00% | |
Decrease in fair value from: | |||
10% adverse change | $ 1,977 | $ 2,151 | 1,977 |
25% adverse change | $ 5,189 | $ 5,127 | 5,189 |
Discount rate assumption | 13.00% | 12.00% | |
Decrease in fair value from: | |||
100 basis point increase | $ 848 | $ 2,190 | 848 |
200 basis point increase | $ 1,977 | $ 4,226 | 1,977 |
Credit loss assumption | 0.21% | 0.20% | |
Decrease in fair value from: | |||
10% higher losses | $ 0 | $ 0 | 0 |
25% higher losses | 0 | 0 | $ 0 |
Impact of adverse change in prepayment speed | 25.00% | ||
Impact of increase in discount rate assumption | 1.00% | ||
Impact of adverse change in expected credit losses | 25.00% | ||
Subordinate Securities | |||
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items] | |||
Fair value | $ 206,433 | $ 230,247 | $ 206,433 |
Expected life (in years) | 13 years | 15 years | |
Prepayment speed assumption (annual CPR) | 16.00% | 9.00% | |
Decrease in fair value from: | |||
10% adverse change | $ 454 | $ 201 | 454 |
25% adverse change | $ 1,802 | $ 1,372 | 1,802 |
Discount rate assumption | 5.00% | 6.00% | |
Decrease in fair value from: | |||
100 basis point increase | $ 19,313 | $ 21,982 | 19,313 |
200 basis point increase | $ 35,950 | $ 40,641 | 35,950 |
Credit loss assumption | 0.21% | 0.20% | |
Decrease in fair value from: | |||
10% higher losses | $ 1,666 | $ 1,387 | 1,666 |
25% higher losses | $ 4,153 | $ 3,471 | $ 4,153 |
Impact of adverse change in prepayment speed | 25.00% | ||
Impact of increase in discount rate assumption | 1.00% | ||
Impact of adverse change in expected credit losses | 25.00% |
Principles of Consolidation -_5
Principles of Consolidation - Summary of Redwood's Interest in Third-Party Variable Interest Entity's (Details) - REO - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Variable Interest Entity [Line Items] | ||
Assets | $ 1,054,378 | $ 1,176,161 |
Senior | ||
Variable Interest Entity [Line Items] | ||
Assets | 141,264 | 185,107 |
Mezzanine | ||
Variable Interest Entity [Line Items] | ||
Assets | 589,189 | 547,249 |
Subordinate | ||
Variable Interest Entity [Line Items] | ||
Assets | 306,713 | 428,713 |
Total Mortgage-Backed Securities | ||
Variable Interest Entity [Line Items] | ||
Assets | 1,037,166 | 1,161,069 |
Excess MSR | ||
Variable Interest Entity [Line Items] | ||
Assets | $ 17,212 | $ 15,092 |
Fair Value of Financial Instr_3
Fair Value of Financial Instruments - Carrying Values and Estimated Fair Values of Assets and Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 | |
Assets | |||
Trading securities | $ 1,013,785 | $ 1,118,612 | |
Available-for-sale securities | 271,641 | 333,882 | |
MSRs | 204,946 | 286,778 | |
Loan Held-for-investment, Amount | 0 | 39,703 | |
Derivative assets | [1] | 43,649 | 35,789 |
Pledged collateral | 57,832 | 42,433 | |
Liabilities | |||
Contingent consideration | 25,167 | 0 | |
Derivative liabilities | [1] | 234,011 | 84,855 |
Subordinate securities financing facility | 0 | ||
Residential Loans | |||
Assets | |||
MSRs | 222,591 | 300,468 | |
Carrying Value | |||
Assets | |||
Trading securities | 1,013,785 | 1,118,612 | |
Available-for-sale securities | 271,641 | 333,882 | |
Loan Held-for-investment, Amount | 11,372 | 0 | |
Cash and cash equivalents | 394,628 | 175,764 | |
Restricted cash | 111,518 | 29,313 | |
Accrued interest receivable | 57,464 | 47,105 | |
Derivative assets | 43,649 | 35,789 | |
Margin receivable | 226,727 | 100,773 | |
FHLBC stock | 43,393 | 43,393 | |
Guarantee asset | 1,784 | 2,618 | |
Pledged collateral | 57,832 | 42,433 | |
Liabilities | |||
Accrued interest payable | 46,881 | 42,528 | |
Margin payable | 6,658 | 835 | |
Guarantee obligation | 15,016 | 16,711 | |
Contingent consideration | 25,167 | 0 | |
Derivative liabilities | 234,011 | 84,855 | |
ABS issued at fair value | 8,346,051 | 5,410,073 | |
FHLBC long-term borrowings | 1,999,999 | 1,999,999 | |
Subordinate securities financing facility | 184,664 | ||
Convertible notes, net | 830,995 | 633,196 | |
Trust preferred securities and subordinated notes, net | 138,616 | 138,582 | |
Carrying Value | Servicer advance investments | |||
Assets | |||
MSRs | 222,591 | 300,468 | |
Carrying Value | MSRs | |||
Assets | |||
MSRs | 39,837 | 60,281 | |
Carrying Value | Participation in loan warehouse facility | |||
Assets | |||
Loans receivable, fair value | 0 | 39,703 | |
Carrying Value | Excess MSRs | |||
Assets | |||
REO | 32,937 | 27,312 | |
Carrying Value | REO | |||
Assets | |||
REO | 5,069 | 3,943 | |
Carrying Value | Short-term debt facilities | |||
Liabilities | |||
Short-term debt facilities | 1,589,062 | 1,937,920 | |
Carrying Value | Short-term debt - servicer advance financing | |||
Liabilities | |||
Short-term debt facilities | 191,203 | 262,740 | |
Carrying Value | Residential Loans | Residential loans, at fair value | |||
Assets | |||
Loans, held-for-sale | 925,780 | 1,048,690 | |
Carrying Value | Residential Loans | Residential loans, held-for-sale, At lower of cost or fair value | |||
Assets | |||
Loans, held-for-sale | 107 | 111 | |
Carrying Value | Residential Loans | Residential loans, held-for-investment | |||
Assets | |||
Loans receivable, fair value | 7,755,916 | 6,205,941 | |
Carrying Value | Residential Loans | Business purpose residential loans | |||
Assets | |||
Loans receivable, fair value | 336,035 | 141,258 | |
Carrying Value | Residential Loans | Multifamily loans | |||
Assets | |||
Loans receivable, fair value | 3,791,622 | 2,144,598 | |
Fair Value | |||
Assets | |||
Trading securities | 1,013,785 | 1,118,612 | |
Available-for-sale securities | 271,641 | 333,882 | |
Loan Held-for-investment, Amount | 11,372 | 0 | |
Cash and cash equivalents | 394,628 | 175,764 | |
Restricted cash | 111,518 | 29,313 | |
Accrued interest receivable | 57,464 | 47,105 | |
Derivative assets | 43,649 | 35,789 | |
Margin receivable | 226,727 | 100,773 | |
FHLBC stock | 43,393 | 43,393 | |
Guarantee asset | 1,784 | 2,618 | |
Pledged collateral | 57,832 | 42,433 | |
Liabilities | |||
Accrued interest payable | 46,881 | 42,528 | |
Margin payable | 6,658 | 835 | |
Guarantee obligation | 14,661 | 16,774 | |
Contingent consideration | 25,167 | 0 | |
Derivative liabilities | 234,011 | 84,855 | |
ABS issued at fair value | 8,346,051 | 5,410,073 | |
FHLBC long-term borrowings | 1,999,999 | 1,999,999 | |
Subordinate securities financing facility | 185,803 | ||
Convertible notes, net | 853,471 | 618,271 | |
Trust preferred securities and subordinated notes, net | 92,070 | 102,533 | |
Fair Value | Servicer advance investments | |||
Assets | |||
MSRs | 222,591 | 300,468 | |
Fair Value | MSRs | |||
Assets | |||
MSRs | 39,837 | 60,281 | |
Fair Value | Participation in loan warehouse facility | |||
Assets | |||
Loans receivable, fair value | 0 | 39,703 | |
Fair Value | Excess MSRs | |||
Assets | |||
REO | 32,937 | 27,312 | |
Fair Value | REO | |||
Assets | |||
REO | 5,124 | 4,396 | |
Fair Value | Short-term debt facilities | |||
Liabilities | |||
Short-term debt facilities | 1,589,062 | 1,937,920 | |
Fair Value | Short-term debt - servicer advance financing | |||
Liabilities | |||
Short-term debt facilities | 191,203 | 262,740 | |
Fair Value | Residential Loans | Residential loans, at fair value | |||
Assets | |||
Loans, held-for-sale | 925,780 | 1,048,690 | |
Fair Value | Residential Loans | Residential loans, held-for-sale, At lower of cost or fair value | |||
Assets | |||
Loans, held-for-sale | 126 | 131 | |
Fair Value | Residential Loans | Residential loans, held-for-investment | |||
Assets | |||
Loans receivable, fair value | 7,755,916 | 6,205,941 | |
Fair Value | Residential Loans | Business purpose residential loans | |||
Assets | |||
Loans receivable, fair value | 336,035 | 141,258 | |
Fair Value | Residential Loans | Multifamily loans | |||
Assets | |||
Loans receivable, fair value | 3,791,622 | 2,144,598 | |
Home appreciation options | |||
Assets | |||
Loan Held-for-investment, Amount | $ 11,372 | $ 0 | |
[1] | Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At September 30, 2019 and December 31, 2018 , assets of consolidated VIEs totaled $9,596,537 and $6,331,191 , respectively. At September 30, 2019 and December 31, 2018 , liabilities of consolidated VIEs totaled $8,582,595 and $5,709,807 , respectively. See Note 4 for further discussion. |
Fair Value of Financial Instr_4
Fair Value of Financial Instruments - Additional Information (Details) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2019USD ($) | Sep. 30, 2019USD ($) | |
Residential loans | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Fair value option elected aggregate carrying amount, asset | $ 2,670,000,000 | $ 5,200,000,000 |
Business purpose residential loans, at fair value | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Fair value option elected aggregate carrying amount, asset | 124,000,000 | 301,000,000 |
Multifamily loans | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Fair value option elected aggregate carrying amount, asset | $ 0 | $ 1,430,000,000 |
Real estate securities | Maximum | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Dealer marks of securities (as a percent) | 83.00% | 83.00% |
Carrying value for which dealer quotes have been received (as a percent) | 95.00% | 95.00% |
Difference of internal valuation than dealer marks (as a percent) | 1.00% | 1.00% |
Home appreciation options | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Fair value option elected aggregate carrying amount, asset | $ 11,000,000 | |
Excess MSR | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Fair value option elected aggregate carrying amount, asset | 1,000,000 | $ 8,000,000 |
Servicer advance investments | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Fair value option elected aggregate carrying amount, asset | 1,000,000 | 70,000,000 |
Residential Subordinate Securities | Subordinate Securities | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Fair value option elected aggregate carrying amount, asset | 40,000,000 | 247,000,000 |
Residential Senior Securities | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Fair value option elected aggregate carrying amount, asset | $ 16,000,000 | $ 50,000,000 |
Mortgage servicing rights | Maximum | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Difference of internal valuation than dealer marks (as a percent) | 5.00% | 5.00% |
Fair Value of Financial Instr_5
Fair Value of Financial Instruments - Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 | |
Assets | |||
Trading securities | $ 1,013,785 | $ 1,118,612 | |
Available-for-sale securities | 271,641 | 333,882 | |
MSRs | 204,946 | 286,778 | |
Derivative assets | [1] | 43,649 | 35,789 |
Pledged collateral | 57,832 | 42,433 | |
Liabilities | |||
Contingent consideration | 25,167 | 0 | |
Derivative liabilities | [1] | 234,011 | 84,855 |
Fair Value, Measurements, Recurring | |||
Assets | |||
Business purpose residential loans | 336,035 | 141,258 | |
Multifamily loans | 3,791,622 | 2,144,598 | |
Trading securities | 1,013,785 | 1,118,612 | |
Available-for-sale securities | 271,641 | 333,882 | |
Servicer advance investments | 222,591 | 300,468 | |
MSRs | 39,837 | 60,281 | |
Excess MSRs | 32,937 | 27,312 | |
Shared home appreciation options | 11,372 | ||
Derivative assets | 43,649 | 35,789 | |
Pledged collateral | 57,832 | 42,433 | |
FHLBC stock | 43,393 | 43,393 | |
Guarantee asset | 1,784 | 2,618 | |
Liabilities | |||
Contingent consideration | 25,167 | ||
Derivative liabilities | 234,011 | 84,855 | |
ABS issued | 8,346,051 | 5,410,073 | |
Fair Value, Measurements, Recurring | Residential Loans | |||
Assets | |||
Residential loans | 8,681,696 | 7,254,631 | |
Fair Value, Measurements, Recurring | Level 1 | |||
Assets | |||
Business purpose residential loans | 0 | 0 | |
Multifamily loans | 0 | 0 | |
Trading securities | 0 | 0 | |
Available-for-sale securities | 0 | 0 | |
Servicer advance investments | 0 | 0 | |
MSRs | 0 | 0 | |
Excess MSRs | 0 | 0 | |
Shared home appreciation options | 0 | ||
Derivative assets | 5,250 | 4,665 | |
Pledged collateral | 57,832 | 42,433 | |
FHLBC stock | 0 | 0 | |
Guarantee asset | 0 | 0 | |
Liabilities | |||
Contingent consideration | 0 | ||
Derivative liabilities | 4,192 | 13,215 | |
ABS issued | 0 | 0 | |
Fair Value, Measurements, Recurring | Level 1 | Residential Loans | |||
Assets | |||
Residential loans | 0 | 0 | |
Fair Value, Measurements, Recurring | Level 2 | |||
Assets | |||
Business purpose residential loans | 0 | 0 | |
Multifamily loans | 0 | 0 | |
Trading securities | 0 | 0 | |
Available-for-sale securities | 0 | 0 | |
Servicer advance investments | 0 | 0 | |
MSRs | 0 | 0 | |
Excess MSRs | 0 | 0 | |
Shared home appreciation options | 0 | ||
Derivative assets | 33,642 | 28,211 | |
Pledged collateral | 0 | 0 | |
FHLBC stock | 43,393 | 43,393 | |
Guarantee asset | 0 | 0 | |
Liabilities | |||
Contingent consideration | 0 | ||
Derivative liabilities | 228,150 | 70,908 | |
ABS issued | 0 | 0 | |
Fair Value, Measurements, Recurring | Level 2 | Residential Loans | |||
Assets | |||
Residential loans | 0 | 0 | |
Fair Value, Measurements, Recurring | Level 3 | |||
Assets | |||
Business purpose residential loans | 336,035 | 141,258 | |
Multifamily loans | 3,791,622 | 2,144,598 | |
Trading securities | 1,013,785 | 1,118,612 | |
Available-for-sale securities | 271,641 | 333,882 | |
Servicer advance investments | 222,591 | 300,468 | |
MSRs | 39,837 | 60,281 | |
Excess MSRs | 32,937 | 27,312 | |
Shared home appreciation options | 11,372 | ||
Derivative assets | 4,757 | 2,913 | |
Pledged collateral | 0 | 0 | |
FHLBC stock | 0 | 0 | |
Guarantee asset | 1,784 | 2,618 | |
Liabilities | |||
Contingent consideration | 25,167 | ||
Derivative liabilities | 1,669 | 732 | |
ABS issued | 8,346,051 | 5,410,073 | |
Fair Value, Measurements, Recurring | Level 3 | Residential Loans | |||
Assets | |||
Residential loans | $ 8,681,696 | $ 7,254,631 | |
[1] | Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At September 30, 2019 and December 31, 2018 , assets of consolidated VIEs totaled $9,596,537 and $6,331,191 , respectively. At September 30, 2019 and December 31, 2018 , liabilities of consolidated VIEs totaled $8,582,595 and $5,709,807 , respectively. See Note 4 for further discussion. |
Fair Value of Financial Instr_6
Fair Value of Financial Instruments - Changes in Level 3 Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2019USD ($) | |
Contingent Consideration | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Beginning balance - December 31, 2018 | $ 0 |
Acquisitions | 24,621 |
Principal paydowns | 0 |
Gains (losses) in net income, net | 546 |
Other settlements, net | 0 |
Ending Balance - September 30, 2019 | 25,167 |
ABS Issued | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Beginning balance - December 31, 2018 | 5,410,073 |
Acquisitions | 3,423,561 |
Principal paydowns | (718,293) |
Gains (losses) in net income, net | 230,710 |
Other settlements, net | 0 |
Ending Balance - September 30, 2019 | 8,346,051 |
Residential Loans | |
Assets | |
Beginning balance | 7,254,631 |
Acquisitions | 5,257,800 |
Originations | 0 |
Sales | (2,941,592) |
Principal paydowns | (1,068,878) |
Gains (losses) in net income, net | 179,964 |
Unrealized losses in OCI, net | 0 |
Other settlements, net | (229) |
Ending balance | 8,681,696 |
Business purpose residential loans | |
Assets | |
Beginning balance | 141,258 |
Acquisitions | 29,093 |
Originations | 296,955 |
Sales | (46,855) |
Principal paydowns | (84,410) |
Gains (losses) in net income, net | 4,990 |
Unrealized losses in OCI, net | 0 |
Other settlements, net | (4,996) |
Ending balance | 336,035 |
Multifamily loans | |
Assets | |
Beginning balance | 2,144,598 |
Acquisitions | 1,481,554 |
Originations | 0 |
Sales | 0 |
Principal paydowns | (12,904) |
Gains (losses) in net income, net | 178,374 |
Unrealized losses in OCI, net | 0 |
Other settlements, net | 0 |
Ending balance | 3,791,622 |
Trading securities | |
Assets | |
Beginning balance | 1,118,612 |
Acquisitions | 296,484 |
Originations | 0 |
Sales | (418,168) |
Principal paydowns | (33,730) |
Gains (losses) in net income, net | 55,538 |
Unrealized losses in OCI, net | 0 |
Other settlements, net | (4,951) |
Ending balance | 1,013,785 |
AFS Securities | |
Assets | |
Beginning balance | 333,882 |
Acquisitions | 21,115 |
Originations | 0 |
Sales | (82,384) |
Principal paydowns | (28,981) |
Gains (losses) in net income, net | 24,052 |
Unrealized losses in OCI, net | 3,957 |
Other settlements, net | 0 |
Ending balance | 271,641 |
Servicer Advance Investments | |
Assets | |
Beginning balance | 300,468 |
Acquisitions | 69,610 |
Originations | 0 |
Sales | 0 |
Principal paydowns | (150,512) |
Gains (losses) in net income, net | 3,025 |
Unrealized losses in OCI, net | 0 |
Other settlements, net | 0 |
Ending balance | 222,591 |
MSRs | |
Assets | |
Beginning balance | 60,281 |
Acquisitions | 868 |
Originations | 0 |
Sales | 0 |
Principal paydowns | 0 |
Gains (losses) in net income, net | (21,312) |
Unrealized losses in OCI, net | 0 |
Other settlements, net | 0 |
Ending balance | 39,837 |
Excess MSRs | |
Assets | |
Beginning balance | 27,312 |
Acquisitions | 7,762 |
Originations | 0 |
Sales | 0 |
Principal paydowns | 0 |
Gains (losses) in net income, net | (2,137) |
Unrealized losses in OCI, net | 0 |
Other settlements, net | 0 |
Ending balance | 32,937 |
Shared Home Appreciation Options | |
Assets | |
Beginning balance | 0 |
Acquisitions | 11,343 |
Originations | 0 |
Sales | 0 |
Principal paydowns | 0 |
Gains (losses) in net income, net | 29 |
Unrealized losses in OCI, net | 0 |
Other settlements, net | 0 |
Ending balance | 11,372 |
Shared Home Appreciation Options | |
Assets | |
Beginning balance | 2,618 |
Acquisitions | 0 |
Principal paydowns | 0 |
Gains (losses) in net income, net | (834) |
Other settlements, net | 0 |
Ending balance | 1,784 |
Derivatives | |
Assets | |
Beginning balance | 2,181 |
Acquisitions | 0 |
Principal paydowns | 0 |
Gains (losses) in net income, net | 42,415 |
Other settlements, net | (41,508) |
Ending balance | $ 3,088 |
Fair Value of Financial Instr_7
Fair Value of Financial Instruments - Portion of Net Gains (Losses) Attributable to Level 3 Assets and Liabilities Still Held Included in Net Income (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Loan purchase commitments | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Net gains (losses) attributable to level 3 liabilities still held included in net income | $ (1,668) | $ (2,314) | $ (1,669) | $ (2,388) |
Contingent Consideration | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Net gains (losses) attributable to level 3 liabilities still held included in net income | (235) | 0 | (546) | 0 |
ABS Issued | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Net gains (losses) attributable to level 3 liabilities still held included in net income | (49,399) | 12,536 | (230,709) | (8,478) |
Held-for-investment at fair value | Residential loans at Redwood | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Net gains (losses) attributable to level 3 assets still held included in net income | 17,771 | (18,100) | 82,408 | (70,316) |
Held-for-investment at fair value | Residential loans at consolidated Sequoia entities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Net gains (losses) attributable to level 3 assets still held included in net income | (11,132) | (8,978) | 10,111 | 11,936 |
Held-for-investment at fair value | Freddie Mac K-Series | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Net gains (losses) attributable to level 3 assets still held included in net income | 39,783 | 0 | 94,788 | 0 |
Business purpose residential loans | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Net gains (losses) attributable to level 3 assets still held included in net income | 584 | (20) | 4,069 | (20) |
Multifamily loans | Freddie Mac K-Series | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Net gains (losses) attributable to level 3 assets still held included in net income | 47,353 | (4,199) | 178,374 | (4,199) |
Trading securities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Net gains (losses) attributable to level 3 assets still held included in net income | 11,206 | 3,821 | 33,196 | (1,956) |
Available-for-sale securities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Net gains (losses) attributable to level 3 assets still held included in net income | 0 | (33) | 0 | (90) |
Servicer advance investments | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Net gains (losses) attributable to level 3 assets still held included in net income | 1,585 | 0 | 3,025 | 0 |
MSRs | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Net gains (losses) attributable to level 3 assets still held included in net income | (5,892) | 337 | (16,971) | 4,861 |
Excess MSRs | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Net gains (losses) attributable to level 3 assets still held included in net income | (1,634) | 0 | (2,137) | 0 |
Loan purchase commitments | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Net gains (losses) attributable to level 3 assets still held included in net income | 4,678 | 2,168 | 4,757 | 2,157 |
Other assets - Guarantee asset | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Net gains (losses) attributable to level 3 assets still held included in net income | (216) | (51) | (834) | 15 |
Home appreciation options | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Net gains (losses) attributable to level 3 assets still held included in net income | $ 29 | $ 0 | $ 29 | $ 0 |
Fair Value of Financial Instr_8
Fair Value of Financial Instruments - Assets and Liabilities Measured at Fair Value on Non-Recurring Basis (Details) - Fair Value, Measurements, Nonrecurring - REO $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2019USD ($) | Sep. 30, 2019USD ($) | |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
REO | $ 4,525 | $ 4,525 |
Gain (Loss) on assets measured at fair value on a non-recurring basis | (332) | (470) |
Level 1 | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
REO | 0 | 0 |
Level 2 | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
REO | 0 | 0 |
Level 3 | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
REO | $ 4,525 | $ 4,525 |
Fair Value of Financial Instr_9
Fair Value of Financial Instruments - Market Valuation Adjustments, Net (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Other Income (Expense), Net | $ 431 | $ 1,967 | $ 2,342 | $ 4,797 |
Gain on re-measurement of 5 Arches investment | 0 | 0 | 2,441 | 0 |
Total Market Valuation Gains, Net | 14,549 | 19,530 | 62,720 | 53,666 |
Mortgage Banking Activities, Net | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | 6,205 | 10,911 | 33,625 | 46,663 |
Mortgage Banking Activities, Net | Residential loans, at fair value | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | (6,623) | 5,626 | 289 | 16,522 |
Mortgage Banking Activities, Net | Residential loan purchase and forward sale commitments | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | 12,943 | 1,610 | 41,142 | (8,116) |
Mortgage Banking Activities, Net | Single-family rental loans held-for-sale, at fair value | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | 1,283 | (99) | 4,200 | (99) |
Mortgage Banking Activities, Net | Single-family rental loan purchase commitments | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | 564 | (22) | 1,273 | (22) |
Mortgage Banking Activities, Net | Residential bridge loans | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | 1,010 | 0 | 2,108 | 0 |
Mortgage Banking Activities, Net | Risk management derivatives, net | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | (2,972) | 3,796 | (15,387) | 38,378 |
Investment Fair Value Changes, Net | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | 11,444 | 10,332 | 34,741 | 12,830 |
Investment Fair Value Changes, Net | Risk management derivatives, net | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | (37,433) | 21,867 | (144,548) | 82,391 |
Investment Fair Value Changes, Net | Residential loans held-for-investment, at Redwood | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | 7,667 | (17,063) | 71,323 | (71,058) |
Investment Fair Value Changes, Net | Single-family rental loans held-for-investment | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | 22 | 0 | 22 | 0 |
Investment Fair Value Changes, Net | Residential bridge loans held-for-investment | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | (742) | 53 | (1,363) | 53 |
Investment Fair Value Changes, Net | Trading securities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | 15,275 | 6,314 | 55,577 | 2,429 |
Investment Fair Value Changes, Net | Servicer advance investments | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | 1,585 | 0 | 3,025 | 0 |
Investment Fair Value Changes, Net | Excess MSRs | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | (1,635) | 0 | (2,137) | 0 |
Investment Fair Value Changes, Net | Shared home appreciation options | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | 29 | 0 | 29 | 0 |
Investment Fair Value Changes, Net | REO | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | (331) | 0 | (470) | 0 |
Investment Fair Value Changes, Net | Legacy Sequoia | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | (407) | (248) | (904) | (976) |
Investment Fair Value Changes, Net | Sequoia Choice | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | 2,722 | (943) | 8,866 | 43 |
Investment Fair Value Changes, Net | Freddie Mac SLST | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | 17,300 | 0 | 31,702 | 0 |
Investment Fair Value Changes, Net | Freddie Mac K-Series | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | 7,445 | 511 | 13,810 | 511 |
Investment Fair Value Changes, Net | Risk-sharing investments | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | (53) | (126) | (191) | (474) |
Investment Fair Value Changes, Net | Impairments on AFS securities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | 0 | (33) | 0 | (89) |
Other Income (Expense), Net | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Other Income (Expense), Net | (3,100) | (1,713) | (5,646) | (5,827) |
Gain on re-measurement of 5 Arches investment | 0 | 0 | 2,440 | 0 |
Other Income (Expense), Net | Risk management derivatives, net | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Other Income (Expense), Net | 4,389 | (890) | 13,157 | (7,151) |
Other Income (Expense), Net | MSRs | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Other Income (Expense), Net | $ (7,489) | $ (823) | $ (21,243) | $ 1,324 |
Fair Value of Financial Inst_10
Fair Value of Financial Instruments - Quantitative Information about Significant Unobservable Inputs Used in Valuation of Level 3 Assets and Liabilities Measured at Fair Value (Details) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019USD ($)$ / loan | Dec. 31, 2018USD ($) | |
Liabilities | ||
Contingent consideration | $ | $ 25,167 | $ 0 |
ABS Issued | ||
Liabilities | ||
ABS issued | $ | $ 2,781,001 | |
ABS Issued | Prepayment rate (annual CPR) | Minimum | ||
Liabilities | ||
ABS issued, measurement input | 0.08 | |
ABS Issued | Prepayment rate (annual CPR) | Maximum | ||
Liabilities | ||
ABS issued, measurement input | 0.40 | |
ABS Issued | Prepayment rate (annual CPR) | Weighted Average | ||
Liabilities | ||
ABS issued, measurement input | 0.20 | |
ABS Issued | Discount rate | Minimum | ||
Liabilities | ||
ABS issued, measurement input | 0.03 | |
ABS Issued | Discount rate | Maximum | ||
Liabilities | ||
ABS issued, measurement input | 0.15 | |
ABS Issued | Discount rate | Weighted Average | ||
Liabilities | ||
ABS issued, measurement input | 0.04 | |
ABS Issued | Default rate | Minimum | ||
Liabilities | ||
ABS issued, measurement input | 0 | |
ABS Issued | Default rate | Maximum | ||
Liabilities | ||
ABS issued, measurement input | 0.07 | |
ABS Issued | Default rate | Weighted Average | ||
Liabilities | ||
ABS issued, measurement input | 0.02 | |
ABS Issued | Loss severity | Minimum | ||
Liabilities | ||
ABS issued, measurement input | 0.20 | |
ABS Issued | Loss severity | Maximum | ||
Liabilities | ||
ABS issued, measurement input | 0.29 | |
ABS Issued | Loss severity | Weighted Average | ||
Liabilities | ||
ABS issued, measurement input | 0.21 | |
Freddie Mac SLST | ||
Liabilities | ||
ABS issued | $ | $ 1,987,473 | |
Freddie Mac SLST | Prepayment rate (annual CPR) | Minimum | ||
Liabilities | ||
ABS issued, measurement input | 0.06 | |
Freddie Mac SLST | Prepayment rate (annual CPR) | Maximum | ||
Liabilities | ||
ABS issued, measurement input | 0.06 | |
Freddie Mac SLST | Prepayment rate (annual CPR) | Weighted Average | ||
Liabilities | ||
ABS issued, measurement input | 0.06 | |
Freddie Mac SLST | Discount rate | Minimum | ||
Liabilities | ||
ABS issued, measurement input | 0.02 | |
Freddie Mac SLST | Discount rate | Maximum | ||
Liabilities | ||
ABS issued, measurement input | 0.13 | |
Freddie Mac SLST | Discount rate | Weighted Average | ||
Liabilities | ||
ABS issued, measurement input | 0.03 | |
Freddie Mac SLST | Default rate | Minimum | ||
Liabilities | ||
ABS issued, measurement input | 0.22 | |
Freddie Mac SLST | Default rate | Maximum | ||
Liabilities | ||
ABS issued, measurement input | 0.22 | |
Freddie Mac SLST | Default rate | Weighted Average | ||
Liabilities | ||
ABS issued, measurement input | 0.22 | |
Freddie Mac SLST | Loss severity | Minimum | ||
Liabilities | ||
ABS issued, measurement input | 0.30 | |
Freddie Mac SLST | Loss severity | Maximum | ||
Liabilities | ||
ABS issued, measurement input | 0.30 | |
Freddie Mac SLST | Loss severity | Weighted Average | ||
Liabilities | ||
ABS issued, measurement input | 0.30 | |
Freddie Mac K-Series | ||
Liabilities | ||
ABS issued | $ | $ 3,577,577 | |
Freddie Mac K-Series | Prepayment rate (annual CPR) | Minimum | ||
Liabilities | ||
ABS issued, measurement input | 0 | |
Freddie Mac K-Series | Prepayment rate (annual CPR) | Maximum | ||
Liabilities | ||
ABS issued, measurement input | 0 | |
Freddie Mac K-Series | Prepayment rate (annual CPR) | Weighted Average | ||
Liabilities | ||
ABS issued, measurement input | 0 | |
Freddie Mac K-Series | Discount rate | Minimum | ||
Liabilities | ||
ABS issued, measurement input | 0.02 | |
Freddie Mac K-Series | Discount rate | Maximum | ||
Liabilities | ||
ABS issued, measurement input | 0.09 | |
Freddie Mac K-Series | Discount rate | Weighted Average | ||
Liabilities | ||
ABS issued, measurement input | 0.02 | |
Freddie Mac K-Series | Default rate | Minimum | ||
Liabilities | ||
ABS issued, measurement input | 0.01 | |
Freddie Mac K-Series | Default rate | Maximum | ||
Liabilities | ||
ABS issued, measurement input | 0.01 | |
Freddie Mac K-Series | Default rate | Weighted Average | ||
Liabilities | ||
ABS issued, measurement input | 0.01 | |
Freddie Mac K-Series | Loss severity | Minimum | ||
Liabilities | ||
ABS issued, measurement input | 0.20 | |
Freddie Mac K-Series | Loss severity | Maximum | ||
Liabilities | ||
ABS issued, measurement input | 0.20 | |
Freddie Mac K-Series | Loss severity | Weighted Average | ||
Liabilities | ||
ABS issued, measurement input | 0.20 | |
Loan purchase commitments | ||
Assets | ||
Loan purchase commitments, net | $ | $ 3,042 | |
Loan purchase commitments | Prepayment rate (annual CPR) | Minimum | ||
Assets | ||
Residential loan purchase commitments, net | 0.15 | |
Loan purchase commitments | Prepayment rate (annual CPR) | Maximum | ||
Assets | ||
Residential loan purchase commitments, net | 0.20 | |
Loan purchase commitments | Prepayment rate (annual CPR) | Weighted Average | ||
Assets | ||
Residential loan purchase commitments, net | 0.20 | |
Loan purchase commitments | Whole loan spread to TBA price | Minimum | ||
Assets | ||
Residential loan purchase commitments, net | 0.56 | |
Loan purchase commitments | Whole loan spread to TBA price | Maximum | ||
Assets | ||
Residential loan purchase commitments, net | 1.56 | |
Loan purchase commitments | Whole loan spread to TBA price | Weighted Average | ||
Assets | ||
Residential loan purchase commitments, net | 1.55 | |
Loan purchase commitments | Mortgage servicing income | Minimum | ||
Assets | ||
Residential loan purchase commitments, net | 0.0006 | |
Loan purchase commitments | Mortgage servicing income | Maximum | ||
Assets | ||
Residential loan purchase commitments, net | 0.0014 | |
Loan purchase commitments | Mortgage servicing income | Weighted Average | ||
Assets | ||
Residential loan purchase commitments, net | 0.001 | |
Loan purchase commitments | MSR multiple | Minimum | ||
Assets | ||
Residential loan purchase commitments, net | 0.6 | |
Loan purchase commitments | MSR multiple | Maximum | ||
Assets | ||
Residential loan purchase commitments, net | 4.6 | |
Loan purchase commitments | MSR multiple | Weighted Average | ||
Assets | ||
Residential loan purchase commitments, net | 2.5 | |
Loan purchase commitments | Pull-through rate | Minimum | ||
Assets | ||
Residential loan purchase commitments, net | 0.09 | |
Loan purchase commitments | Pull-through rate | Maximum | ||
Assets | ||
Residential loan purchase commitments, net | 1 | |
Loan purchase commitments | Pull-through rate | Weighted Average | ||
Assets | ||
Residential loan purchase commitments, net | 0.71 | |
Loan purchase commitments | Whole loan spread to swap rate - fixed rate | Minimum | ||
Assets | ||
Residential loan purchase commitments, net | 0.0115 | |
Loan purchase commitments | Whole loan spread to swap rate - fixed rate | Maximum | ||
Assets | ||
Residential loan purchase commitments, net | 0.0375 | |
Loan purchase commitments | Whole loan spread to swap rate - fixed rate | Weighted Average | ||
Assets | ||
Residential loan purchase commitments, net | 0.0257 | |
Loan purchase commitments | Whole loan spread to swap rate - hybrid | Minimum | ||
Assets | ||
Residential loan purchase commitments, net | 0.0090 | |
Loan purchase commitments | Whole loan spread to swap rate - hybrid | Maximum | ||
Assets | ||
Residential loan purchase commitments, net | 0.0330 | |
Loan purchase commitments | Whole loan spread to swap rate - hybrid | Weighted Average | ||
Assets | ||
Residential loan purchase commitments, net | 0.0128 | |
Contingent consideration | ||
Liabilities | ||
Contingent consideration | $ | $ 25,167 | |
Contingent consideration | Discount rate | Minimum | ||
Liabilities | ||
Contingent consideration, measurement input | 0.23 | |
Contingent consideration | Discount rate | Maximum | ||
Liabilities | ||
Contingent consideration, measurement input | 0.23 | |
Contingent consideration | Discount rate | Weighted Average | ||
Liabilities | ||
Contingent consideration, measurement input | 0.23 | |
Contingent consideration | Probability of outcomes | Minimum | ||
Liabilities | ||
Contingent consideration, measurement input | 0 | |
Contingent consideration | Probability of outcomes | Maximum | ||
Liabilities | ||
Contingent consideration, measurement input | 1 | |
Contingent consideration | Probability of outcomes | Weighted Average | ||
Liabilities | ||
Contingent consideration, measurement input | 0.90 | |
Jumbo fixed-rate loans | ||
Assets | ||
Residential loans, at fair value | $ | $ 2,452,300 | |
Jumbo fixed-rate loans | Prepayment rate (annual CPR) | Minimum | ||
Assets | ||
Residential loans, measurement input | 0.20 | |
Jumbo fixed-rate loans | Prepayment rate (annual CPR) | Maximum | ||
Assets | ||
Residential loans, measurement input | 0.20 | |
Jumbo fixed-rate loans | Prepayment rate (annual CPR) | Weighted Average | ||
Assets | ||
Residential loans, measurement input | 0.20 | |
Jumbo fixed-rate loans | Whole loan spread to TBA price | Minimum | ||
Assets | ||
Residential loans, measurement input | 0.56 | |
Jumbo fixed-rate loans | Whole loan spread to TBA price | Maximum | ||
Assets | ||
Residential loans, measurement input | 1.56 | |
Jumbo fixed-rate loans | Whole loan spread to TBA price | Weighted Average | ||
Assets | ||
Residential loans, measurement input | 1.55 | |
Jumbo fixed-rate loans | Whole loan spread to swap rate | Minimum | ||
Assets | ||
Residential loans, measurement input | 0.0094 | |
Jumbo fixed-rate loans | Whole loan spread to swap rate | Maximum | ||
Assets | ||
Residential loans, measurement input | 0.0375 | |
Jumbo fixed-rate loans | Whole loan spread to swap rate | Weighted Average | ||
Assets | ||
Residential loans, measurement input | 0.0184 | |
Jumbo hybrid loans | ||
Assets | ||
Residential loans, at fair value | $ | $ 321,793 | |
Jumbo hybrid loans | Prepayment rate (annual CPR) | Minimum | ||
Assets | ||
Residential loans, measurement input | 0.15 | |
Jumbo hybrid loans | Prepayment rate (annual CPR) | Maximum | ||
Assets | ||
Residential loans, measurement input | 0.15 | |
Jumbo hybrid loans | Prepayment rate (annual CPR) | Weighted Average | ||
Assets | ||
Residential loans, measurement input | 0.15 | |
Jumbo hybrid loans | Whole loan spread to swap rate | Minimum | ||
Assets | ||
Residential loans, measurement input | 0.0090 | |
Jumbo hybrid loans | Whole loan spread to swap rate | Maximum | ||
Assets | ||
Residential loans, measurement input | 0.0345 | |
Jumbo hybrid loans | Whole loan spread to swap rate | Weighted Average | ||
Assets | ||
Residential loans, measurement input | 0.0146 | |
Jumbo loans committed to sell | ||
Assets | ||
Residential loans, at fair value | $ | $ 418,905 | |
Jumbo loans committed to sell | Whole loan committed sales price | Minimum | ||
Assets | ||
Residential loans, measurement input | 101.88 | |
Jumbo loans committed to sell | Whole loan committed sales price | Maximum | ||
Assets | ||
Residential loans, measurement input | 102.91 | |
Jumbo loans committed to sell | Whole loan committed sales price | Weighted Average | ||
Assets | ||
Residential loans, measurement input | 102.27 | |
Legacy Sequoia | ||
Assets | ||
Residential loans, at fair value | $ | $ 429,159 | |
Liabilities | ||
Fair value of securities owned | $ | 266,000 | |
Sequoia Choice | ||
Assets | ||
Residential loans, at fair value | $ | 2,618,316 | |
Liabilities | ||
Fair value of securities owned | $ | 454,000 | |
Freddie Mac SLST | ||
Assets | ||
Residential loans, at fair value | $ | 2,441,223 | |
Liabilities | ||
Fair value of securities owned | $ | 214,000 | |
Business purpose residential loans, at fair value | ||
Assets | ||
Residential loans, at fair value | $ | $ 129,145 | |
Business purpose residential loans, at fair value | Prepayment rate (annual CPR) | Minimum | ||
Assets | ||
Residential loans, measurement input | 0.01 | |
Business purpose residential loans, at fair value | Prepayment rate (annual CPR) | Maximum | ||
Assets | ||
Residential loans, measurement input | 0.10 | |
Business purpose residential loans, at fair value | Prepayment rate (annual CPR) | Weighted Average | ||
Assets | ||
Residential loans, measurement input | 0.05 | |
Business purpose residential loans, at fair value | Discount rate | Minimum | ||
Assets | ||
Residential loans, measurement input | 0.05 | |
Business purpose residential loans, at fair value | Discount rate | Maximum | ||
Assets | ||
Residential loans, measurement input | 0.08 | |
Business purpose residential loans, at fair value | Discount rate | Weighted Average | ||
Assets | ||
Residential loans, measurement input | 0.08 | |
Business purpose residential loans, at fair value | Senior credit spread | Minimum | ||
Assets | ||
Residential loans, measurement input | 0.0110 | |
Business purpose residential loans, at fair value | Senior credit spread | Maximum | ||
Assets | ||
Residential loans, measurement input | 0.0110 | |
Business purpose residential loans, at fair value | Senior credit spread | Weighted Average | ||
Assets | ||
Residential loans, measurement input | 0.0110 | |
Business purpose residential loans, at fair value | Subordinate credit spread | Minimum | ||
Assets | ||
Residential loans, measurement input | 0.0143 | |
Business purpose residential loans, at fair value | Subordinate credit spread | Maximum | ||
Assets | ||
Residential loans, measurement input | 0.1250 | |
Business purpose residential loans, at fair value | Subordinate credit spread | Weighted Average | ||
Assets | ||
Residential loans, measurement input | 0.0308 | |
Business purpose residential loans, at fair value | Senior credit support | Minimum | ||
Assets | ||
MSR, measurement input | 0.35 | |
Business purpose residential loans, at fair value | Senior credit support | Maximum | ||
Assets | ||
MSR, measurement input | 0.36 | |
Business purpose residential loans, at fair value | Senior credit support | Weighted Average | ||
Assets | ||
MSR, measurement input | 0.36 | |
Residential bridge loans | ||
Assets | ||
Residential loans, at fair value | $ | $ 206,890 | |
Residential bridge loans | Discount rate | Minimum | ||
Assets | ||
Residential loans, measurement input | 0.06 | |
Residential bridge loans | Discount rate | Maximum | ||
Assets | ||
Residential loans, measurement input | 0.10 | |
Residential bridge loans | Discount rate | Weighted Average | ||
Assets | ||
Residential loans, measurement input | 0.07 | |
Freddie Mac K-Series | ||
Assets | ||
Residential loans, at fair value | $ | $ 3,791,622 | |
Trading and AFS securities | ||
Assets | ||
Trading and AFS securities | $ | $ 1,285,426 | |
Trading and AFS securities | Prepayment rate (annual CPR) | Minimum | ||
Assets | ||
Trading and AFS securities | 0 | |
Trading and AFS securities | Prepayment rate (annual CPR) | Maximum | ||
Assets | ||
Trading and AFS securities | 0.60 | |
Trading and AFS securities | Prepayment rate (annual CPR) | Weighted Average | ||
Assets | ||
Trading and AFS securities | 0.13 | |
Trading and AFS securities | Discount rate | Minimum | ||
Assets | ||
Trading and AFS securities | 0.02 | |
Trading and AFS securities | Discount rate | Maximum | ||
Assets | ||
Trading and AFS securities | 0.15 | |
Trading and AFS securities | Discount rate | Weighted Average | ||
Assets | ||
Trading and AFS securities | 0.05 | |
Trading and AFS securities | Default rate | Minimum | ||
Assets | ||
Trading and AFS securities | 0 | |
Trading and AFS securities | Default rate | Maximum | ||
Assets | ||
Trading and AFS securities | 0.20 | |
Trading and AFS securities | Default rate | Weighted Average | ||
Assets | ||
Trading and AFS securities | 0.01 | |
Trading and AFS securities | Loss severity | Minimum | ||
Assets | ||
Trading and AFS securities | 0 | |
Trading and AFS securities | Loss severity | Maximum | ||
Assets | ||
Trading and AFS securities | 0.40 | |
Trading and AFS securities | Loss severity | Weighted Average | ||
Assets | ||
Trading and AFS securities | 0.21 | |
Servicer advance investments | ||
Assets | ||
Mortgage servicing rights | $ | $ 222,591 | |
Servicer advance investments | Minimum | ||
Assets | ||
Expected remaining life | 2 years | |
Servicer advance investments | Maximum | ||
Assets | ||
Expected remaining life | 2 years | |
Servicer advance investments | Weighted Average | ||
Assets | ||
Expected remaining life | 2 years | |
Servicer advance investments | Prepayment rate (annual CPR) | Minimum | ||
Assets | ||
MSR, measurement input | 0.08 | |
Servicer advance investments | Prepayment rate (annual CPR) | Maximum | ||
Assets | ||
MSR, measurement input | 0.15 | |
Servicer advance investments | Prepayment rate (annual CPR) | Weighted Average | ||
Assets | ||
MSR, measurement input | 0.14 | |
Servicer advance investments | Discount rate | Minimum | ||
Assets | ||
MSR, measurement input | 0.05 | |
Servicer advance investments | Discount rate | Maximum | ||
Assets | ||
MSR, measurement input | 0.05 | |
Servicer advance investments | Discount rate | Weighted Average | ||
Assets | ||
MSR, measurement input | 0.05 | |
MSRs | ||
Assets | ||
Mortgage servicing rights | $ | $ 39,837 | |
MSRs | Prepayment rate (annual CPR) | Minimum | ||
Assets | ||
MSR, measurement input | 0.06 | |
MSRs | Prepayment rate (annual CPR) | Maximum | ||
Assets | ||
MSR, measurement input | 0.53 | |
MSRs | Prepayment rate (annual CPR) | Weighted Average | ||
Assets | ||
MSR, measurement input | 0.14 | |
MSRs | Discount rate | Minimum | ||
Assets | ||
MSR, measurement input | 0.11 | |
MSRs | Discount rate | Maximum | ||
Assets | ||
MSR, measurement input | 0.13 | |
MSRs | Discount rate | Weighted Average | ||
Assets | ||
MSR, measurement input | 0.11 | |
MSRs | Per loan annual cost to service | Minimum | ||
Assets | ||
MSR, measurement input | 82 | |
MSRs | Per loan annual cost to service | Maximum | ||
Assets | ||
MSR, measurement input | 82 | |
MSRs | Per loan annual cost to service | Weighted Average | ||
Assets | ||
MSR, measurement input | 82 | |
Excess MSRs | ||
Assets | ||
Mortgage servicing rights | $ | $ 32,937 | |
Excess MSRs | Prepayment rate (annual CPR) | Minimum | ||
Assets | ||
MSR, measurement input | 0.09 | |
Excess MSRs | Prepayment rate (annual CPR) | Maximum | ||
Assets | ||
MSR, measurement input | 0.14 | |
Excess MSRs | Prepayment rate (annual CPR) | Weighted Average | ||
Assets | ||
MSR, measurement input | 0.11 | |
Excess MSRs | Discount rate | Minimum | ||
Assets | ||
MSR, measurement input | 0.11 | |
Excess MSRs | Discount rate | Maximum | ||
Assets | ||
MSR, measurement input | 0.16 | |
Excess MSRs | Discount rate | Weighted Average | ||
Assets | ||
MSR, measurement input | 0.14 | |
Excess MSRs | Excess mortgage servicing income | Minimum | ||
Assets | ||
MSR, measurement input | 0.0008 | |
Excess MSRs | Excess mortgage servicing income | Maximum | ||
Assets | ||
MSR, measurement input | 0.0017 | |
Excess MSRs | Excess mortgage servicing income | Weighted Average | ||
Assets | ||
MSR, measurement input | 0.0013 | |
Home appreciation options | ||
Assets | ||
Shared home appreciation options | $ | $ 11,372 | |
Guarantee asset | ||
Assets | ||
Guarantee asset | $ | $ 1,784 | |
Guarantee asset | Prepayment rate (annual CPR) | Minimum | ||
Assets | ||
Guarantee asset | 0.16 | |
Shared home appreciation options | 0.10 | |
Guarantee asset | Prepayment rate (annual CPR) | Maximum | ||
Assets | ||
Guarantee asset | 0.16 | |
Shared home appreciation options | 0.30 | |
Guarantee asset | Prepayment rate (annual CPR) | Weighted Average | ||
Assets | ||
Guarantee asset | 0.16 | |
Shared home appreciation options | 0.23 | |
Guarantee asset | Discount rate | Minimum | ||
Assets | ||
Guarantee asset | 0.11 | |
Shared home appreciation options | 0.11 | |
Guarantee asset | Discount rate | Maximum | ||
Assets | ||
Guarantee asset | 0.11 | |
Shared home appreciation options | 0.11 | |
Guarantee asset | Discount rate | Weighted Average | ||
Assets | ||
Guarantee asset | 0.11 | |
Shared home appreciation options | 0.11 | |
Guarantee asset | Home price appreciation | Minimum | ||
Assets | ||
Shared home appreciation options | 0.03 | |
Guarantee asset | Home price appreciation | Maximum | ||
Assets | ||
Shared home appreciation options | 0.03 | |
Guarantee asset | Home price appreciation | Weighted Average | ||
Assets | ||
Shared home appreciation options | 0.03 | |
REO | ||
Assets | ||
REO | $ | $ 4,525 | |
REO | Loss severity | Minimum | ||
Assets | ||
REO, measurement input | 0.16 | |
REO | Loss severity | Maximum | ||
Assets | ||
REO, measurement input | 0.16 | |
REO | Loss severity | Weighted Average | ||
Assets | ||
REO, measurement input | 0.16 |
Residential Loans - Summary of
Residential Loans - Summary of Classifications and Carrying Value of Residential Loans (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 | |
At fair value | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | $ 926,000 | $ 1,050,000 | |
At lower of cost or fair value | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 100 | 100 | |
Total held-for-sale | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | [1] | 925,887 | 1,048,801 |
Legacy Sequoia | Held-for-investment at fair value | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 429,000 | 520,000 | |
Sequoia Choice | Held-for-investment at fair value | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 2,620,000 | 2,080,000 | |
Freddie Mac SLST | Held-for-investment at fair value | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 2,440,000 | 1,220,000 | |
Redwood | Held-for-investment at fair value | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 2,380,000 | ||
Residential Loans | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 8,681,803 | 7,254,742 | |
Residential Loans | At fair value | Jumbo Loans | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 925,780 | 1,048,690 | |
Residential Loans | At lower of cost or fair value | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 107 | 111 | |
Residential Loans | Total held-for-sale | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 925,887 | 1,048,801 | |
Residential Loans | Held-for-investment at fair value | Jumbo Loans | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 7,755,916 | 6,205,941 | |
Residential Loans | Legacy Sequoia | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 429,159 | 519,958 | |
Residential Loans | Legacy Sequoia | At fair value | Jumbo Loans | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 0 | 0 | |
Residential Loans | Legacy Sequoia | At lower of cost or fair value | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 0 | 0 | |
Residential Loans | Legacy Sequoia | Total held-for-sale | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 0 | 0 | |
Residential Loans | Legacy Sequoia | Held-for-investment at fair value | Jumbo Loans | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 429,159 | 519,958 | |
Residential Loans | Sequoia Choice | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 2,618,316 | 2,079,382 | |
Residential Loans | Sequoia Choice | At fair value | Jumbo Loans | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 0 | 0 | |
Residential Loans | Sequoia Choice | At lower of cost or fair value | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 0 | 0 | |
Residential Loans | Sequoia Choice | Total held-for-sale | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 0 | 0 | |
Residential Loans | Sequoia Choice | Held-for-investment at fair value | Jumbo Loans | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 2,618,316 | 2,079,382 | |
Residential Loans | Freddie Mac SLST | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 2,441,223 | 1,222,669 | |
Residential Loans | Freddie Mac SLST | At fair value | Jumbo Loans | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 0 | 0 | |
Residential Loans | Freddie Mac SLST | At lower of cost or fair value | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 0 | 0 | |
Residential Loans | Freddie Mac SLST | Total held-for-sale | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 0 | 0 | |
Residential Loans | Freddie Mac SLST | Held-for-investment at fair value | Jumbo Loans | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 2,441,223 | 1,222,669 | |
Residential Loans | Redwood | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 3,193,105 | 3,432,733 | |
Residential Loans | Redwood | At fair value | Jumbo Loans | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 925,780 | 1,048,690 | |
Residential Loans | Redwood | At lower of cost or fair value | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 107 | 111 | |
Residential Loans | Redwood | Total held-for-sale | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | 925,887 | 1,048,801 | |
Residential Loans | Redwood | Held-for-investment at fair value | Jumbo Loans | |||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | |||
Residential loans | $ 2,267,218 | $ 2,383,932 | |
[1] | Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At September 30, 2019 and December 31, 2018 , assets of consolidated VIEs totaled $9,596,537 and $6,331,191 , respectively. At September 30, 2019 and December 31, 2018 , liabilities of consolidated VIEs totaled $8,582,595 and $5,709,807 , respectively. See Note 4 for further discussion. |
Residential Loans - Additional
Residential Loans - Additional Information (Details) | Sep. 30, 2019USD ($)loan | Dec. 31, 2018USD ($)loan | Sep. 30, 2019USD ($)loan | Sep. 30, 2018USD ($) | Sep. 30, 2019USD ($)loan | Sep. 30, 2018USD ($) |
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Transfers from loans held-for-sale to loans held-for-investment | $ 1,361,015,000 | $ 1,981,170,000 | ||||
Transfers from loans held-for-investment to loans held-for-sale | 22,808,000 | 15,717,000 | ||||
Held-for-sale residential loans | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Residential loans | $ 8,681,803,000 | $ 7,254,742,000 | $ 8,681,803,000 | 8,681,803,000 | ||
Held-for-sale residential loans | Legacy Sequoia | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Residential loans | 429,159,000 | 519,958,000 | 429,159,000 | 429,159,000 | ||
Held-for-sale residential loans | Sequoia Choice | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Residential loans | 2,618,316,000 | 2,079,382,000 | 2,618,316,000 | 2,618,316,000 | ||
Held-for-sale residential loans | Freddie Mac SLST | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Residential loans | $ 2,441,223,000 | 1,222,669,000 | $ 2,441,223,000 | $ 2,441,223,000 | ||
Redwood | Fixed rate residential mortgage | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Weighted average coupon rate | 4.15% | 4.15% | 4.15% | |||
Redwood | Held-for-sale residential loans | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Residential loans | $ 3,193,105,000 | $ 3,432,733,000 | $ 3,193,105,000 | $ 3,193,105,000 | ||
Residential Loans | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Number of loans | loan | 1,206 | 1,484 | ||||
Loan principal | $ 904,000,000 | $ 1,030,000,000 | 904,000,000 | 904,000,000 | ||
Residential loans | $ 926,000,000 | $ 1,050,000,000 | $ 926,000,000 | $ 926,000,000 | ||
Number of loans in foreclosure | loan | 0 | 0 | 0 | 0 | ||
Principal value of loans purchased | $ 1,450,000,000 | $ 1,790,000,000 | $ 3,940,000,000 | 5,520,000,000 | ||
Principal balance of loans sold during period | 1,530,000,000 | 1,900,000,000 | 3,920,000,000 | 5,830,000,000 | ||
Gain (loss) on assets measured at fair value on a non-recurring basis | (7,000,000) | 6,000,000 | 300,000 | 16,000,000 | ||
Loan pledged as collateral | $ 253,000,000 | $ 935,000,000 | 253,000,000 | 253,000,000 | ||
Loans held-for-investment, in foreclosure | 2,000,000 | 2,000,000 | 2,000,000 | |||
Residential Loans | Jumbo Loans | Held-for-sale residential loans | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Residential loans | 925,780,000 | 1,048,690,000 | 925,780,000 | 925,780,000 | ||
Residential Loans | Jumbo Loans | Held-for-sale residential loans | Legacy Sequoia | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Residential loans | 0 | 0 | 0 | 0 | ||
Residential Loans | Jumbo Loans | Held-for-sale residential loans | Sequoia Choice | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Residential loans | 0 | 0 | 0 | 0 | ||
Residential Loans | Jumbo Loans | Held-for-sale residential loans | Freddie Mac SLST | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Residential loans | 0 | 0 | 0 | 0 | ||
Residential Loans | Jumbo Loans | Redwood | Held-for-sale residential loans | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Residential loans | 925,780,000 | 1,048,690,000 | 925,780,000 | 925,780,000 | ||
Residential Loans | Financing Receivables, Equal to Greater than 90 Days Past Due | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Loan principal | $ 700,000 | $ 700,000 | $ 700,000 | $ 700,000 | ||
Number of loans past due | loan | 1 | 1 | 1 | 1 | ||
Loans held-for-investment, delinquent greater than 90 days | $ 600,000 | $ 600,000 | $ 600,000 | $ 600,000 | ||
At lower of cost or fair value | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Number of loans | loan | 2 | 2 | ||||
Loan principal | $ 100,000 | $ 100,000 | 100,000 | 100,000 | ||
Residential loans | 100,000 | 100,000 | 100,000 | 100,000 | ||
At lower of cost or fair value | Held-for-sale residential loans | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Residential loans | 107,000 | 111,000 | 107,000 | 107,000 | ||
At lower of cost or fair value | Held-for-sale residential loans | Legacy Sequoia | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Residential loans | 0 | 0 | 0 | 0 | ||
At lower of cost or fair value | Held-for-sale residential loans | Sequoia Choice | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Residential loans | 0 | 0 | 0 | 0 | ||
At lower of cost or fair value | Held-for-sale residential loans | Freddie Mac SLST | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Residential loans | 0 | 0 | 0 | 0 | ||
At lower of cost or fair value | Redwood | Held-for-sale residential loans | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Residential loans | $ 107,000 | $ 111,000 | $ 107,000 | $ 107,000 | ||
At lower of cost or fair value | Financing Receivables, Equal to Greater than 90 Days Past Due | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Number of loans past due | loan | 0 | 0 | 0 | 0 | ||
Held-for-investment at fair value | Legacy Sequoia | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Valuation adjustment gain (loss) | $ (100,000) | 4,000,000 | $ 5,000,000 | 37,000,000 | ||
Held-for-investment at fair value | Sequoia Choice | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Transfers from loans held-for-sale to loans held-for-investment | 727,000,000 | 1,080,000,000 | ||||
Held-for-investment at fair value | Legacy Sequoia | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Number of loans | loan | 2,277 | 2,641 | ||||
Loan principal | $ 446,000,000 | $ 545,000,000 | 446,000,000 | 446,000,000 | ||
Residential loans | 429,000,000 | 520,000,000 | 429,000,000 | 429,000,000 | ||
Loans held-for-investment, delinquent greater than 90 days | $ 13,000,000 | 14,000,000 | $ 13,000,000 | $ 13,000,000 | ||
Weighted average original Fair Isaac Corporation (FICO) score | 727 | 727 | 727 | |||
Weighted average original loan-to-value (LTV) | 66.00% | 66.00% | 66.00% | |||
Loans held-for-investment, in foreclosure | $ 3,000,000 | $ 5,000,000 | $ 3,000,000 | $ 3,000,000 | ||
Held-for-investment at fair value | Sequoia Choice | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Number of loans | loan | 3,543 | 2,800 | ||||
Loan principal | $ 2,550,000,000 | $ 2,040,000,000 | 2,550,000,000 | 2,550,000,000 | ||
Residential loans | $ 2,620,000,000 | $ 2,080,000,000 | $ 2,620,000,000 | $ 2,620,000,000 | ||
Number of loans past due | loan | 6 | 3 | 6 | 6 | ||
Loans held-for-investment, delinquent greater than 90 days | $ 4,000,000 | $ 2,000,000 | $ 4,000,000 | $ 4,000,000 | ||
Number of loans in foreclosure | loan | 1 | 0 | 1 | 1 | ||
Weighted average original Fair Isaac Corporation (FICO) score | 745 | 745 | 745 | |||
Weighted average original loan-to-value (LTV) | 75.00% | 75.00% | 75.00% | |||
Valuation adjustment gain (loss) | $ (11,000,000) | (13,000,000) | $ 5,000,000 | (25,000,000) | ||
Loans in foreclosure amount | $ 1,000,000 | 1,000,000 | 1,000,000 | |||
Held-for-investment at fair value | Freddie Mac SLST | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Number of loans | loan | 14,706 | 7,900 | ||||
Loan principal | $ 2,470,000,000 | $ 1,310,000,000 | 2,470,000,000 | 2,470,000,000 | ||
Residential loans | $ 2,440,000,000 | $ 1,220,000,000 | $ 2,440,000,000 | $ 2,440,000,000 | ||
Number of loans past due | loan | 288 | 306 | 288 | 288 | ||
Loans held-for-investment, delinquent greater than 90 days | $ 75,000,000 | $ 51,000,000 | $ 75,000,000 | $ 75,000,000 | ||
Number of loans in foreclosure | loan | 150 | 0 | 150 | 150 | ||
Weighted average original Fair Isaac Corporation (FICO) score | 599 | 599 | 599 | |||
Weighted average original loan-to-value (LTV) | 68.00% | 68.00% | 68.00% | |||
Valuation adjustment gain (loss) | $ 40,000,000 | $ 95,000,000 | ||||
Loans in foreclosure amount | $ 24,000,000 | 24,000,000 | 24,000,000 | |||
Held-for-investment at fair value | Redwood | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Number of loans | loan | 3,118 | 3,296 | ||||
Loan principal | $ 2,200,000,000 | $ 2,390,000,000 | 2,200,000,000 | 2,200,000,000 | ||
Residential loans | $ 2,380,000,000 | |||||
Number of loans in foreclosure | loan | 0 | |||||
Principal value of loans purchased | 0 | 39,000,000 | ||||
Gain (loss) on assets measured at fair value on a non-recurring basis | 8,000,000 | (17,000,000) | 71,000,000 | (71,000,000) | ||
Transfers from loans held-for-sale to loans held-for-investment | 0 | 116,000,000 | 69,000,000 | 204,000,000 | ||
Transfers from loans held-for-investment to loans held-for-sale | $ 0 | $ 16,000,000 | $ 23,000,000 | $ 16,000,000 | ||
Weighted average original Fair Isaac Corporation (FICO) score | 768 | 768 | 768 | |||
Weighted average original loan-to-value (LTV) | 66.00% | 66.00% | 66.00% | |||
Percentage of fixed-rate loans | 88.00% | 88.00% | 88.00% | |||
Held-for-investment at fair value | Redwood | Originated Between 2013 and 2019 | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Percentage of loan portfolio originated in year | 96.00% | 96.00% | 96.00% | |||
Held-for-investment at fair value | Redwood | Originated 2012 and prior years | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Percentage of loan portfolio originated in year | 4.00% | 4.00% | 4.00% | |||
Held-for-investment at fair value | Redwood | Hybrid or ARM Loans | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Weighted average coupon rate | 4.19% | 4.19% | 4.19% | |||
Held-for-investment at fair value | Jumbo Loans | Held-for-sale residential loans | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Residential loans | $ 7,755,916,000 | $ 6,205,941,000 | $ 7,755,916,000 | $ 7,755,916,000 | ||
Held-for-investment at fair value | Jumbo Loans | Held-for-sale residential loans | Legacy Sequoia | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Residential loans | 429,159,000 | 519,958,000 | 429,159,000 | 429,159,000 | ||
Held-for-investment at fair value | Jumbo Loans | Held-for-sale residential loans | Sequoia Choice | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Residential loans | 2,618,316,000 | 2,079,382,000 | 2,618,316,000 | 2,618,316,000 | ||
Held-for-investment at fair value | Jumbo Loans | Held-for-sale residential loans | Freddie Mac SLST | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Residential loans | 2,441,223,000 | 1,222,669,000 | 2,441,223,000 | 2,441,223,000 | ||
Held-for-investment at fair value | Jumbo Loans | Redwood | Held-for-sale residential loans | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Residential loans | 2,267,218,000 | 2,383,932,000 | 2,267,218,000 | 2,267,218,000 | ||
Held-for-investment at fair value | Financing Receivables, Equal to Greater than 90 Days Past Due | Redwood | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Loan principal | $ 500,000 | $ 1,000,000 | $ 500,000 | $ 500,000 | ||
Number of loans past due | loan | 1 | 2 | 1 | 1 | ||
MSRs | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Mortgage servicing rights, at amortized cost | $ 2,510,000,000 | $ 2,510,000,000 | $ 2,510,000,000 | |||
Residential Real Estate | Redwood | Held-for-sale residential loans | FHLB Chicago | ||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||
Loans pledged as collateral under borrowing agreement with FHLBC | $ 2,270,000,000 | $ 2,270,000,000 | $ 2,270,000,000 |
Business Purpose Residential _3
Business Purpose Residential Loans (Details) | Sep. 30, 2019USD ($)loan | Dec. 31, 2018USD ($)loan | Feb. 28, 2019USD ($) | Sep. 30, 2019USD ($)loan | Sep. 30, 2018USD ($) | Sep. 30, 2019USD ($)loan | Sep. 30, 2019USD ($)loan | Sep. 30, 2018USD ($) |
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||||
Purchases of held-for-sale loans | $ 4,002,509,000 | $ 5,596,326,000 | ||||||
Proceeds from sales of held-for-sale loans | $ 2,971,811,000 | 4,097,211,000 | ||||||
Number of loans transferred | loan | 1 | |||||||
Transfer to REO | $ 5,280,000 | 2,139,000 | ||||||
Commitment To Fund Residential Bridge Loan | ||||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||||
Commitment to fund loan | $ 67,000,000 | $ 67,000,000 | $ 67,000,000 | 67,000,000 | ||||
Total Business Purpose Residential Loans | ||||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||||
Proceeds from loan originations | 127,000,000 | |||||||
Proceeds from loan originations to third parties | 3,000,000 | |||||||
Market valuations gains and losses, net | 1,000,000 | |||||||
Fee income | 3,000,000 | 6,000,000 | ||||||
Loans, at fair value | $ 336,035,000 | $ 141,258,000 | 336,035,000 | 336,035,000 | 336,035,000 | |||
Single-Family Rental, Held-for-sale at fair value | ||||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||||
Number of loans | loan | 77 | 11 | ||||||
Loan principal | $ 106,000,000 | $ 28,000,000 | 106,000,000 | 106,000,000 | 106,000,000 | |||
Loans, at fair value | $ 110,434,000 | $ 28,460,000 | $ 110,434,000 | $ 110,434,000 | $ 110,434,000 | |||
Number of loans past due | loan | 0 | 0 | 0 | 0 | 0 | |||
Purchases of held-for-sale loans | $ 19,000,000 | $ 36,000,000 | $ 78,000,000 | |||||
Proceeds from sales of held-for-sale loans | 0 | 0 | ||||||
Gain (loss) on investments | 1,000,000 | $ 3,000,000 | ||||||
Collateral amounts | $ 78,000,000 | $ 28,000,000 | $ 78,000,000 | $ 78,000,000 | $ 78,000,000 | |||
Weighted average coupon rate | 5.35% | 5.35% | 5.35% | 5.35% | ||||
Contract maturities | 6 years | |||||||
Weighted average original loan-to-value (LTV) | 68.00% | 68.00% | 68.00% | 68.00% | ||||
Weighted-average debt service coverage ratio | 1.36 | |||||||
Number of loans in foreclosure | loan | 0 | |||||||
Residential Bridge, Held-for-sale at fair value | ||||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||||
Loans, at fair value | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | |||
Held-for-sale at fair value, Total | ||||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||||
Loans, at fair value | $ 110,434,000 | 28,460,000 | 110,434,000 | 110,434,000 | 110,434,000 | |||
Single-Family Rental, Held-for-investment at fair value | ||||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||||
Number of loans | loan | 1 | |||||||
Loan principal | $ 17,000,000 | 17,000,000 | 17,000,000 | 17,000,000 | ||||
Loans, at fair value | $ 18,711,000 | $ 0 | 18,711,000 | 18,711,000 | 18,711,000 | |||
Transfer from Investments | 19,000,000 | |||||||
Residential Bridge, Held-for-investment at fair value | ||||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||||
Number of loans | loan | 392 | 157 | ||||||
Loan principal | $ 205,000,000 | $ 112,000,000 | 205,000,000 | 205,000,000 | 205,000,000 | |||
Loans, at fair value | 206,890,000 | $ 112,798,000 | 206,890,000 | 206,890,000 | 206,890,000 | |||
Number of loans past due | loan | 7 | |||||||
Purchases of held-for-sale loans | $ 10,000,000 | 88,000,000 | 174,000,000 | |||||
Gain (loss) on investments | (1,000,000) | |||||||
Collateral amounts | $ 176,000,000 | $ 98,000,000 | $ 176,000,000 | $ 176,000,000 | $ 176,000,000 | |||
Weighted average coupon rate | 8.90% | 8.90% | 8.90% | 8.90% | ||||
Weighted average original loan-to-value (LTV) | 70.00% | 70.00% | 70.00% | 70.00% | ||||
Unpaid principal balance on delinquent or foreclosure loans | $ 12,000,000 | |||||||
Number of loans in foreclosure | loan | 8 | 4 | 8 | 8 | 8 | |||
Loans in foreclosure amount | $ 5,000,000 | $ 11,000,000 | $ 5,000,000 | $ 5,000,000 | $ 5,000,000 | |||
Transfer to REO | $ 5,000,000 | |||||||
Weighted average original Fair Isaac Corporation (FICO) score | 693 | 693 | 693 | 693 | ||||
Amount of loans in foreclosure | $ 5,000,000 | $ 5,000,000 | $ 5,000,000 | $ 5,000,000 | ||||
Residential Bridge, Held-for-investment at fair value | Minimum | ||||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||||
Contract maturities | 6 months | |||||||
Residential Bridge, Held-for-investment at fair value | Maximum | ||||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||||
Contract maturities | 24 months | |||||||
Held-for-investment at fair value, Total | ||||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||||
Loans, at fair value | 225,601,000 | 112,798,000 | 225,601,000 | 225,601,000 | $ 225,601,000 | |||
Total of single family rental | ||||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||||
Loans, at fair value | 129,145,000 | 28,460,000 | 129,145,000 | 129,145,000 | 129,145,000 | |||
Total residential bridge loans | ||||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||||
Loans, at fair value | 206,890,000 | $ 112,798,000 | 206,890,000 | 206,890,000 | 206,890,000 | |||
Business Purpose Mortgage Banking Activities, Net | ||||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||||
Market valuations gains and losses, net | 1,010,000 | $ 0 | 2,108,000 | $ 0 | ||||
Total Business Purpose Residential Loans | ||||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||||
Proceeds from loan originations | 297,000,000 | |||||||
Proceeds from loan originations to third parties | 47,000,000 | |||||||
Financing Receivables, Equal to Greater than 90 Days Past Due | Residential Bridge, Held-for-investment at fair value | ||||||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||||||
Loan principal | $ 6,000,000 | $ 6,000,000 | $ 6,000,000 | $ 6,000,000 | ||||
Number of loans past due | loan | 9 | 9 | 9 | 9 | ||||
Unpaid principal balance on delinquent or foreclosure loans | $ 6,000,000 | $ 6,000,000 | $ 6,000,000 | $ 6,000,000 |
Multifamily Loans (Details)
Multifamily Loans (Details) $ in Millions | Sep. 30, 2019USD ($)loan | Dec. 31, 2018USD ($)loan | Sep. 30, 2019USD ($)loan | Sep. 30, 2019USD ($)loan |
Multifamily loans, held-for-investment, at fair value | ||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||
Number of loans | loan | 250 | 162 | ||
Loan principal | $ 3,540 | $ 2,130 | $ 3,540 | $ 3,540 |
Loans, at fair value | $ 3,790 | $ 2,140 | $ 3,790 | $ 3,790 |
Weighted average original loan-to-value (LTV) | 69.00% | 69.00% | 69.00% | |
Weighted average coupon rate | 4.19% | 4.19% | 4.19% | |
Contract maturities | 6 years | |||
Number of loans past due | loan | 0 | 0 | 0 | 0 |
Number of loans in foreclosure | loan | 0 | 0 | 0 | 0 |
Valuation adjustment gain (loss) | $ 47 | $ 178 | ||
Multifamily loans, held-for-investment, at fair value | Minimum | ||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||
Weighted average maturity (in years) | 7 years | |||
Multifamily loans, held-for-investment, at fair value | Maximum | ||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||
Weighted average maturity (in years) | 10 years | |||
Held-for-investment at fair value | Redwood | ||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||
Number of loans | loan | 3,118 | 3,296 | ||
Loan principal | $ 2,200 | $ 2,390 | $ 2,200 | $ 2,200 |
Loans, at fair value | $ 2,380 | |||
Weighted average original loan-to-value (LTV) | 66.00% | 66.00% | 66.00% | |
Number of loans in foreclosure | loan | 0 | |||
Held-for-investment at fair value | Redwood | Financing Receivables, Equal to Greater than 90 Days Past Due | ||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||
Loan principal | $ 0.5 | $ 1 | $ 0.5 | $ 0.5 |
Amount of loans in foreclosure | $ 0.6 | $ 0.6 | $ 0.6 | |
Number of loans past due | loan | 1 | 2 | 1 | 1 |
Real Estate Securities - Fair V
Real Estate Securities - Fair Values of Real Estate Securities (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 | |
Investments, Debt and Equity Securities [Abstract] | |||
Trading | $ 1,013,785 | $ 1,118,612 | |
Available-for-sale | 271,641 | 333,882 | |
Total Real Estate Securities | [1] | $ 1,285,426 | $ 1,452,494 |
[1] | Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At September 30, 2019 and December 31, 2018 , assets of consolidated VIEs totaled $9,596,537 and $6,331,191 , respectively. At September 30, 2019 and December 31, 2018 , liabilities of consolidated VIEs totaled $8,582,595 and $5,709,807 , respectively. See Note 4 for further discussion. |
Real Estate Securities - Tradin
Real Estate Securities - Trading Securities by Collateral Type (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Investment Holdings [Line Items] | ||
Trading securities | $ 1,013,785 | $ 1,118,612 |
Senior IO Securities | ||
Investment Holdings [Line Items] | ||
Trading securities | 149,634 | 158,670 |
Subordinate Securities | ||
Investment Holdings [Line Items] | ||
Trading securities | 864,000 | 960,000 |
Subordinate Securities | Mezzanine | ||
Investment Holdings [Line Items] | ||
Trading securities | 644,571 | 610,819 |
Subordinate Securities | Subordinate | ||
Investment Holdings [Line Items] | ||
Trading securities | $ 219,580 | $ 349,123 |
Real Estate Securities - Additi
Real Estate Securities - Additional Information (Details) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019USD ($)investment | Sep. 30, 2018USD ($) | Sep. 30, 2019USD ($)investment | Sep. 30, 2018USD ($) | Dec. 31, 2018USD ($)investment | |
Investment Holdings [Line Items] | |||||
Trading securities | $ 1,013,785,000 | $ 1,013,785,000 | $ 1,118,612,000 | ||
Trading securities acquired | 66,000,000 | $ 189,000,000 | 335,000,000 | $ 567,000,000 | |
Trading securities sold | 236,000,000 | 79,000,000 | 397,000,000 | 323,000,000 | |
Increase (decrease) in valuation of trading securities | 15,000,000 | 6,000,000 | 56,000,000 | 2,000,000 | |
Available-for-sale securities purchased | 12,000,000 | 1,000,000 | 21,000,000 | 7,000,000 | |
Available-for-sale securities sold | 15,000,000 | 26,000,000 | 82,000,000 | 118,000,000 | |
Net realized gains on AFS securities | $ 4,000,000 | $ 7,000,000 | $ 13,000,000 | $ 21,000,000 | |
Number of AFS securities (in investments) | investment | 113 | 113 | 128 | ||
Number of securities in unrealized loss position | investment | 1 | 1 | 7 | ||
Number of securities in a continuous unrealized loss position for twelve consecutive months or longer (in investments) | investment | 1 | 1 | 3 | ||
Reclassification out of Accumulated Other Comprehensive Income | Net Unrealized Gains on Available-for-Sale Securities | |||||
Investment Holdings [Line Items] | |||||
Other than temporary impairment | $ 0 | $ 0 | |||
Subordinate | |||||
Investment Holdings [Line Items] | |||||
Trading securities | 864,000,000 | 864,000,000 | $ 960,000,000 | ||
Interest Only Senior Trading Securities | |||||
Investment Holdings [Line Items] | |||||
Debt securities, trading | 58,000,000 | 58,000,000 | 82,000,000 | ||
Unpaid principal balance | 88,000,000 | 88,000,000 | 78,000,000 | ||
Certificated Servicing Strips | |||||
Investment Holdings [Line Items] | |||||
Debt securities, trading | 29,000,000 | 29,000,000 | 43,000,000 | ||
Residential | |||||
Investment Holdings [Line Items] | |||||
Securities pledged as collateral | 736,000,000 | 736,000,000 | 844,000,000 | ||
Marketable securities, due from five to ten years | 8,000,000 | 8,000,000 | |||
Residential Subordinate Securities | Trading securities | |||||
Investment Holdings [Line Items] | |||||
Unpaid principal balance | 1,010,000,000 | 1,010,000,000 | 1,120,000,000 | ||
Subordinate | Credit Risk Transfer (CRT) Securities | |||||
Investment Holdings [Line Items] | |||||
Trading securities | 128,000,000 | 128,000,000 | 277,000,000 | ||
Subordinate | Sequoia securities | |||||
Investment Holdings [Line Items] | |||||
Trading securities | 65,000,000 | 65,000,000 | 68,000,000 | ||
Subordinate | Other Third Party Securities | |||||
Investment Holdings [Line Items] | |||||
Trading securities | 207,000,000 | 207,000,000 | 186,000,000 | ||
Subordinate | Third Party Multifamily Mortgage-backed Securities | |||||
Investment Holdings [Line Items] | |||||
Trading securities | 464,000,000 | 464,000,000 | 429,000,000 | ||
Sequoia Choice | |||||
Investment Holdings [Line Items] | |||||
Trading securities pledged as collateral | 130,000,000 | ||||
Freddie Mac SLST | |||||
Investment Holdings [Line Items] | |||||
Trading securities pledged as collateral | 229,000,000 | ||||
Freddie Mac K-Series | |||||
Investment Holdings [Line Items] | |||||
Trading securities pledged as collateral | $ 18,000,000 | ||||
Short Term Borrowing Agreement | |||||
Investment Holdings [Line Items] | |||||
Trading securities pledged as collateral | 677,000,000 | 677,000,000 | |||
Short Term Borrowing Agreement | AFS securities retained, at fair value | Residential | |||||
Investment Holdings [Line Items] | |||||
Securities pledged as collateral | 59,000,000 | 59,000,000 | |||
Short Term Borrowing Agreement | Sequoia Choice | Sequoia securities | |||||
Investment Holdings [Line Items] | |||||
Trading securities pledged as collateral | 113,000,000 | 113,000,000 | |||
Short Term Borrowing Agreement | Freddie Mac SLST | Sequoia securities | |||||
Investment Holdings [Line Items] | |||||
Trading securities pledged as collateral | 385,000,000 | 385,000,000 | |||
Short Term Borrowing Agreement | Freddie Mac K-Series | Sequoia securities | |||||
Investment Holdings [Line Items] | |||||
Trading securities pledged as collateral | 209,000,000 | 209,000,000 | |||
Subordinate Securities Financing Facility | |||||
Investment Holdings [Line Items] | |||||
Trading securities pledged as collateral | 4,000,000 | 4,000,000 | |||
Subordinate Securities Financing Facility | AFS securities retained, at fair value | Residential | |||||
Investment Holdings [Line Items] | |||||
Securities pledged as collateral | 123,000,000 | 123,000,000 | |||
Subordinate Securities Financing Facility | Sequoia Choice | Sequoia securities | |||||
Investment Holdings [Line Items] | |||||
Trading securities pledged as collateral | 126,000,000 | 126,000,000 | |||
Borrowing Agreement With FHLBC | |||||
Investment Holdings [Line Items] | |||||
Trading securities pledged as collateral | $ 41,000,000 | $ 41,000,000 |
Real Estate Securities - Availa
Real Estate Securities - Available for Sale Securities by Collateral Type (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Investment Holdings [Line Items] | ||
Available-for-sale | $ 271,641 | $ 333,882 |
Subordinate Securities | Subordinate | ||
Investment Holdings [Line Items] | ||
Available-for-sale | 224,217 | 209,860 |
Subordinate Securities | Mezzanine | ||
Investment Holdings [Line Items] | ||
Available-for-sale | 13,967 | 36,407 |
Senior IO Securities | ||
Investment Holdings [Line Items] | ||
Available-for-sale | $ 33,457 | $ 87,615 |
Real Estate Securities - Compon
Real Estate Securities - Components of Carrying Value (Which Equals Fair Value) of Residential Available for Sale Securities (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Jun. 30, 2019 | Dec. 31, 2018 |
Debt Securities, Available-for-sale [Line Items] | |||
Carrying Value | $ 271,641 | $ 333,882 | |
Residential | |||
Debt Securities, Available-for-sale [Line Items] | |||
Principal balance | 339,208 | 431,112 | |
Credit reserve | (34,211) | $ (34,849) | (41,370) |
Unamortized discount, net | (132,654) | $ (137,282) | (151,200) |
Amortized cost | 172,343 | 238,542 | |
Gross unrealized gains | 99,310 | 95,888 | |
Gross unrealized losses | (12) | (548) | |
Carrying Value | 271,641 | 333,882 | |
Residential | Senior | |||
Debt Securities, Available-for-sale [Line Items] | |||
Principal balance | 34,272 | 91,736 | |
Credit reserve | (588) | (7,790) | |
Unamortized discount, net | (12,346) | (18,460) | |
Amortized cost | 21,338 | 65,486 | |
Gross unrealized gains | 12,131 | 22,178 | |
Gross unrealized losses | (12) | (49) | |
Carrying Value | 33,457 | 87,615 | |
Residential | Mezzanine | |||
Debt Securities, Available-for-sale [Line Items] | |||
Principal balance | 13,729 | 36,852 | |
Credit reserve | 0 | 0 | |
Unamortized discount, net | (552) | (3,697) | |
Amortized cost | 13,177 | 33,155 | |
Gross unrealized gains | 790 | 3,252 | |
Gross unrealized losses | 0 | 0 | |
Carrying Value | 13,967 | 36,407 | |
Residential | Subordinate | |||
Debt Securities, Available-for-sale [Line Items] | |||
Principal balance | 291,207 | 302,524 | |
Credit reserve | (33,623) | (33,580) | |
Unamortized discount, net | (119,756) | (129,043) | |
Amortized cost | 137,828 | 139,901 | |
Gross unrealized gains | 86,389 | 70,458 | |
Gross unrealized losses | 0 | (499) | |
Carrying Value | $ 224,217 | $ 209,860 |
Real Estate Securities - Change
Real Estate Securities - Changes of Unamortized Discount and Designated Credit Reserves on Residential Available for Sale Securities (Details) - Residential - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2019 | Sep. 30, 2019 | |
Credit Reserve | ||
Beginning balance | $ 34,849 | $ 41,370 |
Amortization of net discount | 0 | 0 |
Realized credit losses | (694) | (1,874) |
Acquisitions | 734 | 2,198 |
Sales, calls, other | (800) | (7,197) |
(Release of) transfers to credit reserves, net | 122 | (286) |
Ending Balance | 34,211 | 34,211 |
Unamortized Discount, Net | ||
Beginning balance | 137,282 | 151,200 |
Amortization of net discount | (1,834) | (5,823) |
Realized credit losses | 0 | 0 |
Acquisitions | 399 | 1,103 |
Sales, calls, other | (3,071) | (14,112) |
(Release of) transfers to credit reserves, net | (122) | 286 |
Ending Balance | $ 132,654 | $ 132,654 |
Real Estate Securities - Comp_2
Real Estate Securities - Components of Carrying Value of Residential Available for Sale Securities in Unrealized Loss Position (Details) - Residential - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Debt Securities, Available-for-sale [Line Items] | ||
Less Than 12 Consecutive Months, Amortized Cost | $ 0 | $ 12,923 |
Less Than 12 Consecutive Months, Unrealized Losses | 0 | (499) |
Less Than 12 Consecutive Months, Fair Value | 0 | 12,424 |
12 Consecutive Months or Longer, Amortized Cost | 6,254 | 7,464 |
12 Consecutive Months or Longer, Unrealized Losses | (12) | (49) |
12 Consecutive Months or Longer, Fair Value | $ 6,242 | $ 7,415 |
Real Estate Securities - Summar
Real Estate Securities - Summary of Significant Valuation Assumptions for Available for Sale Securities (Details) - Prime | 9 Months Ended |
Sep. 30, 2019 | |
Minimum | |
Debt Securities, Available-for-sale [Line Items] | |
Prepayment rates | 15.00% |
Projected losses | 1.00% |
Maximum | |
Debt Securities, Available-for-sale [Line Items] | |
Prepayment rates | 15.00% |
Projected losses | 1.00% |
Real Estate Securities - Activi
Real Estate Securities - Activity of Credit Component of Other-than-Temporary Impairments (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Activity of the Credit Component of Other-than-Temporary Impairments | ||||
Balance at beginning of period | $ 18,580 | $ 20,967 | $ 18,652 | $ 21,037 |
Additions | ||||
Initial credit impairments | 0 | 33 | 0 | 76 |
Reductions | ||||
Securities sold, or expected to sell | (6) | (927) | (20) | (1,026) |
Securities with no outstanding principal at period end | 0 | (1,229) | (58) | (1,243) |
Balance at End of Period | $ 18,574 | $ 18,844 | $ 18,574 | $ 18,844 |
Real Estate Securities - Gross
Real Estate Securities - Gross Realized Gains and Losses on Sales and Calls of Available for Sale Securities (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Debt Securities, Available-for-sale [Line Items] | ||||
Gross realized gains | $ 4,000 | $ 7,000 | $ 13,000 | $ 21,000 |
Total Realized Gains on Sales and Calls of AFS Securities, net | 4,714 | 7,275 | 18,227 | 21,352 |
Sales | ||||
Debt Securities, Available-for-sale [Line Items] | ||||
Gross realized gains | 3,656 | 7,275 | 13,143 | 21,312 |
Gross realized losses - sales | 0 | 0 | 0 | (3) |
Calls | ||||
Debt Securities, Available-for-sale [Line Items] | ||||
Gross realized gains | $ 1,058 | $ 0 | $ 5,084 | $ 43 |
Other Investments - Summary of
Other Investments - Summary of Other Investments (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Jun. 30, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Dec. 31, 2017 | |
Investment [Line Items] | |||||||
Servicing asset, fair value | $ 204,946 | $ 286,778 | |||||
Loan Held-for-investment, Amount | 0 | 39,703 | |||||
Other Investments | [1] | 347,707 | 438,518 | ||||
5 Arches, LLC | |||||||
Investment [Line Items] | |||||||
Investment in 5 Arches | 0 | 10,754 | |||||
Mortgage servicing rights | |||||||
Investment [Line Items] | |||||||
Servicing asset, fair value | 39,837 | $ 47,396 | 60,281 | $ 63,785 | $ 64,674 | $ 63,598 | |
Investment in multifamily loan fund | |||||||
Investment [Line Items] | |||||||
Loan Held-for-investment, Amount | 32,158 | 0 | |||||
Home appreciation options | |||||||
Investment [Line Items] | |||||||
Loan Held-for-investment, Amount | 11,372 | 0 | |||||
Other | |||||||
Investment [Line Items] | |||||||
Loan Held-for-investment, Amount | 8,812 | 0 | |||||
Residential Loans | |||||||
Investment [Line Items] | |||||||
Servicing asset, fair value | 222,591 | 300,468 | |||||
Excess MSRs | |||||||
Investment [Line Items] | |||||||
Servicing asset, fair value | $ 32,937 | $ 27,312 | |||||
[1] | Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At September 30, 2019 and December 31, 2018 , assets of consolidated VIEs totaled $9,596,537 and $6,331,191 , respectively. At September 30, 2019 and December 31, 2018 , liabilities of consolidated VIEs totaled $8,582,595 and $5,709,807 , respectively. See Note 4 for further discussion. |
Other Investments - Additional
Other Investments - Additional Information (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Mar. 31, 2019 | Jan. 31, 2019 | May 31, 2018 | Feb. 28, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Jun. 30, 2019 | Dec. 31, 2018 | Jun. 30, 2018 | Dec. 31, 2017 |
Investment [Line Items] | |||||||||||||
Commitment to fund partnership | $ 71,000 | ||||||||||||
Servicing asset, fair value | 204,946 | $ 204,946 | $ 204,946 | $ 286,778 | |||||||||
Equity method investment earnings | 3,000 | 9,000 | |||||||||||
Investment fair value changes, net | 11,444 | $ 10,332 | 34,741 | $ 12,830 | |||||||||
Interest income | 150,117 | 99,397 | 429,700 | 258,992 | |||||||||
Equity investment income | 557 | 119 | 552 | 119 | |||||||||
Light-Renovation Multifamily Loans | |||||||||||||
Investment [Line Items] | |||||||||||||
Commitment to fund partnership | $ 78,000 | ||||||||||||
Commitment to fund partnership, funded amount | 33,000 | 33,000 | 33,000 | ||||||||||
Equity method investments, carrying value | 32,000 | 32,000 | 32,000 | ||||||||||
Equity investment income | 1,000 | (500) | |||||||||||
5 Arches, LLC | |||||||||||||
Investment [Line Items] | |||||||||||||
Equity method investment earnings | $ 300 | ||||||||||||
Payments to acquire equity method investment | $ 10,000 | ||||||||||||
Option to purchase additional equity, term | 1 year | ||||||||||||
Option to purchase additional equity, amount | $ 40,000 | ||||||||||||
Option to purchase additional equity, percent | 80.00% | ||||||||||||
Amortization of certain intangibles | $ 100 | ||||||||||||
MSRs | |||||||||||||
Investment [Line Items] | |||||||||||||
Servicing asset, fair value | 39,837 | 39,837 | $ 63,785 | 39,837 | $ 63,785 | $ 47,396 | 60,281 | $ 64,674 | $ 63,598 | ||||
Servicing asset | 4,610,000 | 4,610,000 | 4,610,000 | 4,930,000 | |||||||||
Home appreciation options | |||||||||||||
Investment [Line Items] | |||||||||||||
Payments to acquire investments | 11,000 | ||||||||||||
Servicer advance financing | |||||||||||||
Investment [Line Items] | |||||||||||||
Collateral amounts | 205,000 | 205,000 | 205,000 | ||||||||||
Investment fair value changes, net | 2,000 | 3,000 | |||||||||||
Residential Loans | |||||||||||||
Investment [Line Items] | |||||||||||||
Servicing asset, fair value | 222,591 | 222,591 | 222,591 | 300,468 | |||||||||
Servicing asset, unpaid principal balance on underlying loan | 8,380,000 | 8,380,000 | 8,380,000 | ||||||||||
Excess MSRs | |||||||||||||
Investment [Line Items] | |||||||||||||
Servicing asset, fair value | $ 32,937 | 32,937 | 32,937 | $ 27,312 | |||||||||
Investment fair value changes, net | (2,000) | (2,000) | |||||||||||
Interest income | $ 2,000 | $ 6,000 | |||||||||||
5 Arches, LLC | |||||||||||||
Investment [Line Items] | |||||||||||||
Minority interest, percentage | 20.00% |
Other Investments - Servicing A
Other Investments - Servicing Advance Investments (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Investment [Line Items] | ||
Total Servicer Advance Receivables | $ 204,946 | $ 286,778 |
Residential Loans | ||
Investment [Line Items] | ||
Principal and interest advances | 54,670 | 144,336 |
Escrow advances (taxes and insurance advances) | 99,227 | 94,828 |
Corporate advances | $ 51,049 | $ 47,614 |
Other Investments - Mortgage Se
Other Investments - Mortgage Servicing Rights (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Servicing Asset at Fair Value, Amount [Roll Forward] | ||||
Balance at beginning of period | $ 286,778 | |||
Additions | 868 | $ 0 | ||
Changes in fair value due to: | ||||
Balance at End of Period | $ 204,946 | 204,946 | ||
Mortgage servicing rights | ||||
Servicing Asset at Fair Value, Amount [Roll Forward] | ||||
Balance at beginning of period | 47,396 | $ 64,674 | 60,281 | 63,598 |
Additions | 0 | 0 | 868 | 0 |
Sales | 0 | 0 | 0 | (1,077) |
Changes in fair value due to: | ||||
Changes in assumptions | (5,150) | 1,099 | (15,291) | 6,388 |
Other changes | (2,409) | (1,988) | (6,021) | (5,124) |
Balance at End of Period | 39,837 | 63,785 | 39,837 | 63,785 |
Servicing income | 3,850 | 4,004 | 11,310 | 11,601 |
Cost of sub-servicer | (319) | (324) | (1,090) | (1,254) |
Net servicing fee income | 3,531 | 3,680 | 10,220 | 10,347 |
Market valuation changes of MSRs | (7,489) | (823) | (21,243) | 1,324 |
Market valuation changes of associated derivatives | 4,389 | (890) | 13,157 | (7,151) |
MSR reversal of provision for repurchases | 0 | 0 | 208 | 277 |
MSR Income, Net | $ 431 | $ 1,967 | $ 2,342 | $ 4,797 |
Derivative Financial Instrume_3
Derivative Financial Instruments - Aggregate Fair Value and Notional Amount of Derivative Financial Instruments (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Derivative [Line Items] | ||
Fair Value | $ (190,362) | $ (49,066) |
Notional Amount | 10,799,279 | 5,911,385 |
TBAs | ||
Derivative [Line Items] | ||
Notional Amount | 3,620,000 | 1,460,000 |
Derivative Liabilities | ||
Derivative [Line Items] | ||
Fair Value | (234,011) | (84,855) |
Notional Amount | 6,148,072 | 2,953,724 |
Derivative Liabilities | Interest rate swaps | ||
Derivative [Line Items] | ||
Fair Value | (166,465) | (36,416) |
Notional Amount | 3,896,300 | 1,742,000 |
Derivative Liabilities | Interest rate swaps | Cash Flow Hedging | ||
Derivative [Line Items] | ||
Fair Value | (61,685) | (34,492) |
Notional Amount | 139,500 | 139,500 |
Derivative Liabilities | TBAs | ||
Derivative [Line Items] | ||
Fair Value | (4,192) | (13,215) |
Notional Amount | 1,655,000 | 935,000 |
Derivative Liabilities | Loan purchase commitments | ||
Derivative [Line Items] | ||
Fair Value | (1,669) | (732) |
Notional Amount | 457,272 | 137,224 |
Derivative Assets | ||
Derivative [Line Items] | ||
Fair Value | 43,649 | 35,789 |
Notional Amount | 4,651,207 | 2,957,661 |
Derivative Assets | Interest rate swaps | ||
Derivative [Line Items] | ||
Fair Value | 28,987 | 28,211 |
Notional Amount | 1,190,500 | 2,106,500 |
Derivative Assets | TBAs | ||
Derivative [Line Items] | ||
Fair Value | 5,250 | 4,665 |
Notional Amount | 1,960,000 | 520,000 |
Derivative Assets | Swaptions | ||
Derivative [Line Items] | ||
Fair Value | 4,655 | 0 |
Notional Amount | 625,000 | 0 |
Derivative Assets | Loan purchase commitments | ||
Derivative [Line Items] | ||
Fair Value | 4,757 | 2,913 |
Notional Amount | $ 875,707 | $ 331,161 |
Derivative Financial Instrume_4
Derivative Financial Instruments - Additional Information (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2019USD ($)counterparty | Sep. 30, 2018USD ($) | Sep. 30, 2019USD ($)counterparty | Sep. 30, 2018USD ($) | Jun. 30, 2019USD ($) | Dec. 31, 2018USD ($) | Jun. 30, 2018USD ($) | Dec. 31, 2017USD ($) | |
Derivative [Line Items] | ||||||||
Notional amount | $ 10,799,279 | $ 10,799,279 | $ 5,911,385 | |||||
Accumulated other comprehensive income (loss) | $ 1,785,059 | $ 1,361,327 | $ 1,785,059 | $ 1,361,327 | $ 1,564,032 | 1,348,794 | $ 1,228,955 | $ 1,212,287 |
Number of counterparties | counterparty | 6 | 6 | ||||||
Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges | ||||||||
Derivative [Line Items] | ||||||||
Accumulated other comprehensive income (loss) | $ (61,175) | $ (61,175) | $ (49,384) | (34,045) | ||||
Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges | ||||||||
Derivative [Line Items] | ||||||||
Accumulated other comprehensive income (loss) | (26,304) | (26,304) | (34,000) | $ (31,105) | $ (42,953) | |||
Derivative Liabilities | ||||||||
Derivative [Line Items] | ||||||||
Notional amount | 6,148,072 | 6,148,072 | 2,953,724 | |||||
Mortgage Banking Activities, Net | ||||||||
Derivative [Line Items] | ||||||||
Market valuations gains (losses), net | 6,205 | 10,911 | 33,625 | 46,663 | ||||
Loan purchase commitments and forward sales commitments | Mortgage Banking Activities, Net | ||||||||
Derivative [Line Items] | ||||||||
Market valuations gains (losses), net | 14,000 | 2,000 | 42,000 | (8,000) | ||||
Interest rate contract | ||||||||
Derivative [Line Items] | ||||||||
Notional amount | 5,710,000 | 5,710,000 | 3,850,000 | |||||
TBAs | ||||||||
Derivative [Line Items] | ||||||||
Notional amount | 3,620,000 | 3,620,000 | 1,460,000 | |||||
TBAs | Derivative Liabilities | ||||||||
Derivative [Line Items] | ||||||||
Notional amount | 1,655,000 | 1,655,000 | 935,000 | |||||
Unsecuritized Residential and Commercial Loans | ||||||||
Derivative [Line Items] | ||||||||
Derivative gain (loss) | (36,000) | 25,000 | (147,000) | 114,000 | ||||
Interest rate swaps | Cash Flow Hedging | ||||||||
Derivative [Line Items] | ||||||||
Derivative gain (loss) | (12,000) | $ 5,000 | (27,000) | $ 17,000 | ||||
Interest rate swaps | Derivative Liabilities | ||||||||
Derivative [Line Items] | ||||||||
Notional amount | 3,896,300 | 3,896,300 | 1,742,000 | |||||
Interest rate swaps | Derivative Liabilities | Cash Flow Hedging | ||||||||
Derivative [Line Items] | ||||||||
Notional amount | $ 139,500 | $ 139,500 | $ 139,500 |
Derivative Financial Instrume_5
Derivative Financial Instruments - Impact on Interest Expense of Interest Rate Agreements Accounted for as Cash Flow Hedges (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Derivative [Line Items] | ||||
Interest expense | $ (116,604) | $ (64,351) | $ (332,100) | $ (154,078) |
Cash Flow Hedging | Interest rate contract | ||||
Derivative [Line Items] | ||||
Net interest expense on cash flows hedges | (727) | (734) | (2,004) | (2,536) |
Interest expense | $ (727) | $ (734) | $ (2,004) | $ (2,536) |
Other Assets and Liabilities -
Other Assets and Liabilities - Components of Other Assets (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||
Margin receivable | $ 226,727 | $ 100,773 | |
Pledged collateral | 57,832 | 42,433 | |
FHLBC stock | 43,393 | 43,393 | |
Investment receivable | 14,375 | 6,959 | |
Right-of-use asset | 11,076 | 0 | |
REO | 5,069 | 3,943 | |
Fixed assets and leasehold improvements | 4,794 | 5,106 | |
Other | 14,044 | 15,218 | |
Total Other Assets | [1] | 377,310 | $ 217,825 |
Fixed assets | 11,000 | ||
Accumulated depreciation | $ 6,000 | ||
[1] | Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At September 30, 2019 and December 31, 2018 , assets of consolidated VIEs totaled $9,596,537 and $6,331,191 , respectively. At September 30, 2019 and December 31, 2018 , liabilities of consolidated VIEs totaled $8,582,595 and $5,709,807 , respectively. See Note 4 for further discussion. |
Other Assets and Liabilities _2
Other Assets and Liabilities - Accrued Expenses and Other Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||
Contingent consideration | $ 25,167 | $ 0 | |
Payable to minority partner | 18,664 | 14,331 | |
Accrued compensation | 17,219 | 19,769 | |
Guarantee obligations | 15,016 | 16,711 | |
Lease liability | 12,570 | 0 | |
Deferred tax liabilities | 11,986 | 9,022 | |
Margin payable | 6,658 | 835 | |
Accrued operating expenses | 6,036 | 3,122 | |
Residential bridge loan holdbacks | 4,465 | 0 | |
Residential loan and MSR repurchase reserve | 3,947 | 4,189 | |
Legal reserve | 2,000 | 2,000 | |
Other | 6,014 | 8,740 | |
Total Accrued Expenses and Other Liabilities | [1] | $ 129,742 | $ 78,719 |
[1] | Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At September 30, 2019 and December 31, 2018 , assets of consolidated VIEs totaled $9,596,537 and $6,331,191 , respectively. At September 30, 2019 and December 31, 2018 , liabilities of consolidated VIEs totaled $8,582,595 and $5,709,807 , respectively. See Note 4 for further discussion. |
Other Assets and Liabilities _3
Other Assets and Liabilities - Additional Information (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2019USD ($)property | Dec. 31, 2018USD ($)partnershipproperty | Sep. 30, 2019USD ($)property | Dec. 31, 2018USD ($)partnershipproperty | |
Other Assets and Other Liabilities [Line Items] | ||||
Real estate owned (REO) | $ 5,069 | $ 3,943 | $ 5,069 | $ 3,943 |
REO liquidations | 5,000 | |||
Unrealized gain resulting from market valuation adjustments on REO | 1,000 | |||
Number of partnerships consolidated | partnership | 2 | 2 | ||
Payable to minority partner | 18,664 | $ 14,331 | 18,664 | $ 14,331 |
Net gain allocated to Limited Partners | 400 | 900 | ||
Legacy Sequoia | ||||
Other Assets and Other Liabilities [Line Items] | ||||
Real estate owned (REO) | $ 500 | 500 | ||
Amount related to transfers into REO | $ 200 | |||
Number of REO properties recorded on balance sheet | property | 3 | 13 | 3 | 13 |
Freddie Mac SLST | ||||
Other Assets and Other Liabilities [Line Items] | ||||
Real estate owned (REO) | $ 100 | $ 100 | ||
Amount related to transfers into REO | 100 | |||
Bridge Loan | Debt Securities | ||||
Other Assets and Other Liabilities [Line Items] | ||||
Real estate owned (REO) | $ 5,000 | 5,000 | ||
Amount related to transfers into REO | $ 5,000 | |||
Number of REO properties recorded on balance sheet | property | 1 | 1 |
Short-Term Debt - Outstanding B
Short-Term Debt - Outstanding Balances of Short-Term Debt by Type of Collateral Securing Debt (Details) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2019USD ($)facility | Dec. 31, 2018USD ($)facility | ||
Short-term Debt [Line Items] | |||
Outstanding Balance | [1],[2] | $ 1,980,817,000 | $ 2,400,279,000 |
Facilities | |||
Short-term Debt [Line Items] | |||
Number of Facilities | facility | 20 | 17 | |
Outstanding Balance | $ 1,589,062,000 | $ 1,937,920,000 | |
Facilities | Residential loan warehouse | |||
Short-term Debt [Line Items] | |||
Number of Facilities | facility | 4 | 4 | |
Outstanding Balance | $ 233,224,000 | $ 860,650,000 | |
Limit | $ 1,425,000,000 | $ 1,425,000,000 | |
Weighted Average Interest Rate | 3.51% | 4.10% | |
Weighted Average Days Until Maturity | 96 days | 178 days | |
Facilities | Real estate securities repo | |||
Short-term Debt [Line Items] | |||
Number of Facilities | facility | 9 | 9 | |
Outstanding Balance | $ 1,157,646,000 | $ 988,890,000 | |
Limit | $ 0 | $ 0 | |
Weighted Average Interest Rate | 3.11% | 3.47% | |
Weighted Average Days Until Maturity | 28 days | 26 days | |
Facilities | Single-family rental loan warehouse | |||
Short-term Debt [Line Items] | |||
Number of Facilities | facility | 2 | 2 | |
Outstanding Balance | $ 59,204,000 | $ 22,053,000 | |
Limit | $ 400,000,000 | $ 400,000,000 | |
Weighted Average Interest Rate | 4.30% | 4.77% | |
Weighted Average Days Until Maturity | 358 days | 560 days | |
Facilities | Residential bridge loan warehouse | |||
Short-term Debt [Line Items] | |||
Number of Facilities | facility | 4 | 2 | |
Outstanding Balance | $ 138,988,000 | $ 66,327,000 | |
Limit | $ 330,000,000 | $ 80,000,000 | |
Weighted Average Interest Rate | 4.54% | 5.20% | |
Weighted Average Days Until Maturity | 707 days | 629 days | |
Facilities | Business purpose loan working capital | |||
Short-term Debt [Line Items] | |||
Number of Facilities | facility | 1 | ||
Outstanding Balance | $ 0 | ||
Limit | $ 15,000,000 | ||
Weighted Average Interest Rate | 5.00% | ||
Servicer advance financing | |||
Short-term Debt [Line Items] | |||
Number of Facilities | facility | 1 | 1 | |
Outstanding Balance | $ 191,203,000 | $ 262,740,000 | |
Limit | $ 350,000,000 | $ 350,000,000 | |
Weighted Average Interest Rate | 3.89% | 4.32% | |
Weighted Average Days Until Maturity | 46 days | 333 days | |
Convertible notes, net | |||
Short-term Debt [Line Items] | |||
Outstanding Balance | $ 200,552,000 | $ 199,619,000 | |
Weighted Average Interest Rate | 5.63% | 5.63% | |
Weighted Average Days Until Maturity | 60 days | 319 days | |
Servicer advance financing | |||
Short-term Debt [Line Items] | |||
Outstanding Balance | $ 191,203,000 | ||
[1] | Includes $201 million of convertible notes, which were reclassified from Long-term debt, net to Short-term debt as the maturity of the notes was less than one year as of November 15, 2018. See Note 13 for further discussion. | ||
[2] | Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At September 30, 2019 and December 31, 2018 , assets of consolidated VIEs totaled $9,596,537 and $6,331,191 , respectively. At September 30, 2019 and December 31, 2018 , liabilities of consolidated VIEs totaled $8,582,595 and $5,709,807 , respectively. See Note 4 for further discussion. |
Short-Term Debt - Additional In
Short-Term Debt - Additional Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2019 | Dec. 31, 2018 | Nov. 15, 2018 | Nov. 30, 2014 | |
Short-term Debt [Line Items] | |||||
Average balance of short-term debt | $ 1,970,000,000 | $ 1,810,000,000 | |||
Accrued interest payable on short-term debt | 3,000,000 | 3,000,000 | $ 4,000,000 | ||
Convertible notes | $ 201,000,000 | ||||
Committed line of credit | 10,000,000 | 10,000,000 | |||
Fair value of mortgage backed securities securing loan (in excess) | 3,000,000 | 3,000,000 | |||
Committed line of credit with financial institutions, outstanding | 0 | 0 | $ 0 | ||
Short Term Borrowing Agreement | |||||
Short-term Debt [Line Items] | |||||
Trading securities pledged as collateral | 677,000,000 | 677,000,000 | |||
Convertible Debt | Exchangeable Senior Notes Due 2019 | |||||
Short-term Debt [Line Items] | |||||
Accrued interest payable on short-term debt | 4,000,000 | 4,000,000 | |||
Debt Instrument interest rate | 5.625% | 5.625% | |||
Unamortized deferred issuance costs | $ 1,000,000 | ||||
Sequoia Choice | |||||
Short-term Debt [Line Items] | |||||
Trading securities pledged as collateral | 130,000,000 | ||||
Freddie Mac SLST | |||||
Short-term Debt [Line Items] | |||||
Trading securities pledged as collateral | 229,000,000 | ||||
Freddie Mac K-Series | |||||
Short-term Debt [Line Items] | |||||
Trading securities pledged as collateral | 18,000,000 | ||||
Residential | |||||
Short-term Debt [Line Items] | |||||
Securities pledged as collateral | 736,000,000 | 736,000,000 | 844,000,000 | ||
Sequoia securities | Sequoia Choice | Short Term Borrowing Agreement | |||||
Short-term Debt [Line Items] | |||||
Trading securities pledged as collateral | 113,000,000 | 113,000,000 | |||
Sequoia securities | Freddie Mac SLST | Short Term Borrowing Agreement | |||||
Short-term Debt [Line Items] | |||||
Trading securities pledged as collateral | 385,000,000 | 385,000,000 | |||
Sequoia securities | Freddie Mac K-Series | Short Term Borrowing Agreement | |||||
Short-term Debt [Line Items] | |||||
Trading securities pledged as collateral | 209,000,000 | 209,000,000 | |||
Single-family rental loans, held-for-sale at fair value | |||||
Short-term Debt [Line Items] | |||||
Collateral amounts | 78,000,000 | 78,000,000 | 28,000,000 | ||
Residential bridge loans | |||||
Short-term Debt [Line Items] | |||||
Collateral amounts | 176,000,000 | 176,000,000 | 98,000,000 | ||
Residential Loans | |||||
Short-term Debt [Line Items] | |||||
Servicing asset at fair value, amount | 243,000,000 | 243,000,000 | |||
Residential Loans | |||||
Short-term Debt [Line Items] | |||||
Loan pledged as collateral | 253,000,000 | 253,000,000 | $ 935,000,000 | ||
Servicer advance financing | |||||
Short-term Debt [Line Items] | |||||
Collateral amounts | 205,000,000 | 205,000,000 | |||
Accrued interest payable on short-term debt | 200,000 | 200,000 | |||
Unamortized capitalized commitment costs | $ 400,000 | $ 400,000 |
Short-Term Debt - Remaining Mat
Short-Term Debt - Remaining Maturities of Short Term Debt (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 | |
Short-term Debt [Line Items] | |||
Short-term debt | [1],[2] | $ 1,980,817 | $ 2,400,279 |
Within 30 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 865,779 | ||
31 to 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 793,179 | ||
Over 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 321,859 | ||
Facilities | |||
Short-term Debt [Line Items] | |||
Short-term debt | 1,589,062 | 1,937,920 | |
Facilities | Within 30 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 865,779 | ||
Facilities | 31 to 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 401,424 | ||
Facilities | Over 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 321,859 | ||
Facilities | Held-for-sale residential loans | |||
Short-term Debt [Line Items] | |||
Short-term debt | 233,224 | 860,650 | |
Facilities | Held-for-sale residential loans | Within 30 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 31,031 | ||
Facilities | Held-for-sale residential loans | 31 to 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 108,316 | ||
Facilities | Held-for-sale residential loans | Over 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 93,877 | ||
Facilities | Real estate securities | |||
Short-term Debt [Line Items] | |||
Short-term debt | 1,157,646 | ||
Facilities | Real estate securities | Within 30 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 834,748 | ||
Facilities | Real estate securities | 31 to 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 293,108 | ||
Facilities | Real estate securities | Over 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 29,790 | ||
Facilities | Single-family rental loans | |||
Short-term Debt [Line Items] | |||
Short-term debt | 59,204 | 22,053 | |
Facilities | Single-family rental loans | Within 30 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 0 | ||
Facilities | Single-family rental loans | 31 to 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 0 | ||
Facilities | Single-family rental loans | Over 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 59,204 | ||
Facilities | Residential bridge loans | |||
Short-term Debt [Line Items] | |||
Short-term debt | 138,988 | 66,327 | |
Facilities | Residential bridge loans | Within 30 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 0 | ||
Facilities | Residential bridge loans | 31 to 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 0 | ||
Facilities | Residential bridge loans | Over 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 138,988 | ||
Servicer advance financing | |||
Short-term Debt [Line Items] | |||
Short-term debt | 191,203 | 262,740 | |
Servicer advance financing | Within 30 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 0 | ||
Servicer advance financing | 31 to 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 191,203 | ||
Servicer advance financing | Over 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 0 | ||
Convertible notes, net | |||
Short-term Debt [Line Items] | |||
Short-term debt | 200,552 | $ 199,619 | |
Convertible notes, net | Within 30 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 0 | ||
Convertible notes, net | 31 to 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 200,552 | ||
Convertible notes, net | Over 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | $ 0 | ||
[1] | Includes $201 million of convertible notes, which were reclassified from Long-term debt, net to Short-term debt as the maturity of the notes was less than one year as of November 15, 2018. See Note 13 for further discussion. | ||
[2] | Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At September 30, 2019 and December 31, 2018 , assets of consolidated VIEs totaled $9,596,537 and $6,331,191 , respectively. At September 30, 2019 and December 31, 2018 , liabilities of consolidated VIEs totaled $8,582,595 and $5,709,807 , respectively. See Note 4 for further discussion. |
Asset-Backed Securities Issue_2
Asset-Backed Securities Issued - Components of Asset-Backed Securities Issued by Consolidated Securitization Entities Sponsored, Along With Other Selected Information (Details) $ in Thousands | Sep. 30, 2019USD ($)series | Dec. 31, 2018USD ($)series | |
Debt Instrument [Line Items] | |||
Total FHLBC Borrowings | [1] | $ 2,953,722 | $ 2,572,158 |
Asset-backed securities issued | |||
Debt Instrument [Line Items] | |||
Market valuation adjustments | 249,071 | (58,290) | |
Total FHLBC Borrowings | 8,346,051 | 5,410,073 | |
Asset-backed securities issued | Certificates with principal balance | |||
Debt Instrument [Line Items] | |||
Certificates | 7,847,387 | 5,309,564 | |
Asset-backed securities issued | Interest-only certificates | |||
Debt Instrument [Line Items] | |||
Certificates | 249,593 | 158,799 | |
Asset-backed securities issued | Legacy Sequoia | |||
Debt Instrument [Line Items] | |||
Market valuation adjustments | (19,389) | (29,753) | |
Total FHLBC Borrowings | $ 419,890 | $ 512,240 | |
Number of series | series | 20 | 20 | |
Asset-backed securities issued | Legacy Sequoia | Minimum | |||
Debt Instrument [Line Items] | |||
Range of weighted average interest rates, by series | 2.22% | 1.36% | |
Asset-backed securities issued | Legacy Sequoia | Maximum | |||
Debt Instrument [Line Items] | |||
Range of weighted average interest rates, by series | 3.49% | 3.60% | |
Asset-backed securities issued | Legacy Sequoia | Certificates with principal balance | |||
Debt Instrument [Line Items] | |||
Certificates | $ 437,793 | $ 540,456 | |
Asset-backed securities issued | Legacy Sequoia | Interest-only certificates | |||
Debt Instrument [Line Items] | |||
Certificates | 1,486 | 1,537 | |
Asset-backed securities issued | Sequoia Choice | |||
Debt Instrument [Line Items] | |||
Market valuation adjustments | 59,013 | 20,590 | |
Total FHLBC Borrowings | $ 2,361,111 | $ 1,885,010 | |
Number of series | series | 9 | 6 | |
Asset-backed securities issued | Sequoia Choice | Minimum | |||
Debt Instrument [Line Items] | |||
Range of weighted average interest rates, by series | 4.41% | 4.46% | |
Asset-backed securities issued | Sequoia Choice | Maximum | |||
Debt Instrument [Line Items] | |||
Range of weighted average interest rates, by series | 5.06% | 4.97% | |
Asset-backed securities issued | Sequoia Choice | Certificates with principal balance | |||
Debt Instrument [Line Items] | |||
Certificates | $ 2,285,479 | $ 1,838,758 | |
Asset-backed securities issued | Sequoia Choice | Interest-only certificates | |||
Debt Instrument [Line Items] | |||
Certificates | 16,619 | 25,662 | |
Asset-backed securities issued | Freddie Mac SLST | |||
Debt Instrument [Line Items] | |||
Market valuation adjustments | 73,609 | 89 | |
Total FHLBC Borrowings | $ 1,987,473 | $ 993,748 | |
Range of weighted average interest rates, by series | 3.50% | 3.51% | |
Number of series | series | 2 | 1 | |
Asset-backed securities issued | Freddie Mac SLST | Certificates with principal balance | |||
Debt Instrument [Line Items] | |||
Certificates | $ 1,885,106 | $ 993,659 | |
Asset-backed securities issued | Freddie Mac SLST | Interest-only certificates | |||
Debt Instrument [Line Items] | |||
Certificates | 28,758 | 0 | |
Asset-backed securities issued | Freddie Mac K-Series | |||
Debt Instrument [Line Items] | |||
Market valuation adjustments | 135,838 | (49,216) | |
Total FHLBC Borrowings | $ 3,577,577 | $ 2,019,075 | |
Number of series | series | 4 | 3 | |
Asset-backed securities issued | Freddie Mac K-Series | Minimum | |||
Debt Instrument [Line Items] | |||
Range of weighted average interest rates, by series | 3.39% | 3.39% | |
Asset-backed securities issued | Freddie Mac K-Series | Maximum | |||
Debt Instrument [Line Items] | |||
Range of weighted average interest rates, by series | 4.20% | 4.08% | |
Asset-backed securities issued | Freddie Mac K-Series | Certificates with principal balance | |||
Debt Instrument [Line Items] | |||
Certificates | $ 3,239,009 | $ 1,936,691 | |
Asset-backed securities issued | Freddie Mac K-Series | Interest-only certificates | |||
Debt Instrument [Line Items] | |||
Certificates | $ 202,730 | $ 131,600 | |
[1] | Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At September 30, 2019 and December 31, 2018 , assets of consolidated VIEs totaled $9,596,537 and $6,331,191 , respectively. At September 30, 2019 and December 31, 2018 , liabilities of consolidated VIEs totaled $8,582,595 and $5,709,807 , respectively. See Note 4 for further discussion. |
Asset-Backed Securities Issue_3
Asset-Backed Securities Issued - Additional Information (Details) | 9 Months Ended |
Sep. 30, 2019 | |
Asset-backed securities issued | Contractual maturities of over five years | |
Debt Instrument [Line Items] | |
Contractual maturities of securities (in years) | 5 years |
Asset-Backed Securities Issue_4
Asset-Backed Securities Issued - Accrued Interest Payable (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Debt Instrument [Line Items] | ||
Amortization of debt issuance costs | $ 25,708 | $ 16,897 |
Freddie Mac SLST | ||
Debt Instrument [Line Items] | ||
Amortization of debt issuance costs | 5,498 | 2,907 |
Freddie Mac K-Series | ||
Debt Instrument [Line Items] | ||
Amortization of debt issuance costs | 10,805 | 6,239 |
Asset-backed securities issued | Legacy Sequoia | ||
Debt Instrument [Line Items] | ||
Amortization of debt issuance costs | 456 | 571 |
Asset-backed securities issued | Sequoia Choice | ||
Debt Instrument [Line Items] | ||
Amortization of debt issuance costs | $ 8,949 | $ 7,180 |
Asset-Backed Securities Issue_5
Asset-Backed Securities Issued - Summary of Carrying Value Components of Collateral for Asset-Backed Securities Issued and Outstanding (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | $ 9,311,059 | $ 5,992,049 |
Residential loans | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 5,488,698 | 3,822,009 |
Multifamily loans | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 3,791,622 | 2,144,598 |
Restricted cash | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 158 | 1,168 |
Accrued interest receivable | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 30,037 | 20,331 |
REO | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 544 | 3,943 |
Legacy Sequoia | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 430,478 | 524,869 |
Legacy Sequoia | Residential loans | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 429,159 | 519,958 |
Legacy Sequoia | Multifamily loans | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 0 | 0 |
Legacy Sequoia | Restricted cash | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 143 | 146 |
Legacy Sequoia | Accrued interest receivable | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 716 | 822 |
Legacy Sequoia | REO | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 460 | 3,943 |
Sequoia Choice | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 2,629,137 | 2,089,392 |
Sequoia Choice | Residential loans | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 2,618,316 | 2,079,382 |
Sequoia Choice | Multifamily loans | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 0 | 0 |
Sequoia Choice | Restricted cash | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 15 | 1,022 |
Sequoia Choice | Accrued interest receivable | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 10,806 | 8,988 |
Sequoia Choice | REO | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 0 | 0 |
Freddie Mac SLST | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 2,448,522 | 1,226,595 |
Freddie Mac SLST | Residential loans | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 2,441,223 | 1,222,669 |
Freddie Mac SLST | Multifamily loans | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 0 | 0 |
Freddie Mac SLST | Restricted cash | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 0 | 0 |
Freddie Mac SLST | Accrued interest receivable | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 7,215 | 3,926 |
Freddie Mac SLST | REO | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 84 | 0 |
Freddie Mac K-Series | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 3,802,922 | 2,151,193 |
Freddie Mac K-Series | Residential loans | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 0 | 0 |
Freddie Mac K-Series | Multifamily loans | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 3,791,622 | 2,144,598 |
Freddie Mac K-Series | Restricted cash | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 0 | 0 |
Freddie Mac K-Series | Accrued interest receivable | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 11,300 | 6,595 |
Freddie Mac K-Series | REO | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | $ 0 | $ 0 |
Long-Term Debt - Additional Inf
Long-Term Debt - Additional Information (Details) | Sep. 30, 2019USD ($)$ / shares | Dec. 31, 2018USD ($) | Sep. 30, 2019USD ($)$ / shares | Jun. 30, 2018USD ($)$ / shares | Aug. 31, 2017USD ($)$ / shares | Jan. 31, 2016 | Nov. 30, 2014USD ($)$ / shares | Sep. 30, 2019USD ($)$ / shares | Sep. 30, 2019USD ($)$ / shares | Dec. 31, 2016USD ($) | Nov. 15, 2018USD ($) | Dec. 31, 2013USD ($) | |
Debt Instrument [Line Items] | |||||||||||||
Transition period for subsidiary to be a FHLB-member (in years) | 5 years | ||||||||||||
Existing debt | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | ||||||||
Federal home loan bank stock | 43,393,000 | 43,393,000 | 43,393,000 | 43,393,000 | 43,393,000 | ||||||||
Debt instrument face amount | [1] | 2,953,722,000 | 2,572,158,000 | 2,953,722,000 | 2,953,722,000 | 2,953,722,000 | |||||||
Accrued interest payable | 3,000,000 | 4,000,000 | 3,000,000 | 3,000,000 | 3,000,000 | ||||||||
Convertible notes | $ 201,000,000 | ||||||||||||
Notional amount | 10,799,279,000 | 5,911,385,000 | 10,799,279,000 | 10,799,279,000 | 10,799,279,000 | ||||||||
Accrued interest payable | [1] | $ 46,881,000 | $ 42,528,000 | $ 46,881,000 | $ 46,881,000 | $ 46,881,000 | |||||||
Convertible Debt | Exchangeable Senior Notes Due 2025 | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Debt Instrument interest rate | 5.75% | 5.75% | 5.75% | 5.75% | |||||||||
Unamortized debt issuance costs | $ 6,000,000 | $ 6,000,000 | $ 6,000,000 | $ 6,000,000 | |||||||||
Convertible notes | $ 201,000,000 | 201,000,000 | $ 201,000,000 | $ 201,000,000 | |||||||||
Net proceeds from issuance of convertible debt | $ 195,000,000 | ||||||||||||
Interest expense yield | 6.30% | ||||||||||||
Convertible senior notes conversion per share (in dollars per share) | $ / shares | $ 18.12 | $ 18.12 | $ 18.12 | $ 18.12 | |||||||||
Accrued interest payable | $ 200,000 | $ 200,000 | $ 200,000 | $ 200,000 | |||||||||
Convertible Debt | Senior Notes Due 2024 | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Debt Instrument interest rate | 5.625% | ||||||||||||
Unamortized debt issuance costs | 4,000,000 | 4,000,000 | 4,000,000 | 4,000,000 | |||||||||
Convertible notes | 200,000,000 | 200,000,000 | $ 200,000,000 | 200,000,000 | $ 200,000,000 | ||||||||
Net proceeds from issuance of convertible debt | $ 194,000,000 | ||||||||||||
Interest expense yield | 6.20% | ||||||||||||
Convertible senior notes conversion rate | 0.0547645 | ||||||||||||
Convertible senior notes conversion per share (in dollars per share) | $ / shares | $ 18.26 | ||||||||||||
Accrued interest payable | 2,000,000 | 2,000,000 | 2,000,000 | $ 2,000,000 | |||||||||
Debt instrument, percent of par | 99.50% | ||||||||||||
Unamortized discount | 1,000,000 | 1,000,000 | 1,000,000 | 1,000,000 | |||||||||
Convertible Debt | Senior Notes Due 2023 | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Debt Instrument interest rate | 4.75% | ||||||||||||
Unamortized debt issuance costs | 5,000,000 | 5,000,000 | 5,000,000 | 5,000,000 | |||||||||
Convertible notes | 245,000,000 | 245,000,000 | $ 245,000,000 | 245,000,000 | $ 245,000,000 | ||||||||
Net proceeds from issuance of convertible debt | $ 238,000,000 | ||||||||||||
Interest expense yield | 5.30% | ||||||||||||
Convertible senior notes conversion rate | 0.0539060 | ||||||||||||
Convertible senior notes conversion per share (in dollars per share) | $ / shares | $ 18.55 | ||||||||||||
Accrued interest payable | 1,000,000 | 1,000,000 | 1,000,000 | $ 1,000,000 | |||||||||
Convertible Debt | Exchangeable Senior Notes Due 2019 | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Debt Instrument interest rate | 5.625% | 5.625% | |||||||||||
Unamortized debt issuance costs | 200,000 | 200,000 | 200,000 | 200,000 | |||||||||
Convertible notes | 201,000,000 | 201,000,000 | $ 205,000,000 | 201,000,000 | $ 201,000,000 | ||||||||
Net proceeds from issuance of convertible debt | $ 198,000,000 | ||||||||||||
Interest expense yield | 6.30% | ||||||||||||
Convertible senior notes conversion rate | 0.0462370 | ||||||||||||
Convertible senior notes conversion per share (in dollars per share) | $ / shares | $ 21.63 | ||||||||||||
Accrued interest payable | 4,000,000 | 4,000,000 | 4,000,000 | $ 4,000,000 | |||||||||
Amount of debt repurchased | $ 4,000,000 | ||||||||||||
Unamortized deferred issuance costs | $ 1,000,000 | ||||||||||||
Convertible Debt | Exchangeable Senior Notes Due 2019 | Gain (loss) on investments | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Gain on extinguishment of debt | $ 300,000 | ||||||||||||
Trust Preferred Securities | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Debt instrument face amount | 100,000,000 | 100,000,000 | 100,000,000 | 100,000,000 | |||||||||
Subordinated Notes | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Debt instrument face amount | $ 40,000,000 | $ 40,000,000 | $ 40,000,000 | $ 40,000,000 | |||||||||
Trust Preferred Securities And Subordinated Notes | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Weighted average interest rates, by series | 6.90% | 6.90% | 6.90% | 6.90% | |||||||||
Accrued interest payable | $ 1,000,000 | 1,000,000 | $ 1,000,000 | $ 1,000,000 | $ 1,000,000 | ||||||||
Trust Preferred Securities And Subordinated Notes | Interest rate swaps | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Notional amount | $ 140,000,000 | ||||||||||||
Trust Preferred Securities And Subordinated Notes | LIBOR | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Basis spread on variable rate | 2.25% | ||||||||||||
Affiliated Entity | Long Term Non Market To market Recourse Debt Financing | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Debt Instrument interest rate | 4.21% | ||||||||||||
Amount outstanding | 186,000,000 | 186,000,000 | 186,000,000 | $ 186,000,000 | |||||||||
Unamortized debt issuance costs | 1,000,000 | 1,000,000 | 1,000,000 | 1,000,000 | |||||||||
Debt instrument face amount | 185,000,000 | 185,000,000 | 185,000,000 | 185,000,000 | |||||||||
Pledged assets real estate pledged as collateral, at fair value | 253,000,000 | 253,000,000 | 253,000,000 | 253,000,000 | |||||||||
Affiliated Entity | Sequoia Choice | Long Term Non Market To market Recourse Debt Financing | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Pledged assets real estate pledged as collateral, at fair value | 126,000,000 | 126,000,000 | 126,000,000 | $ 126,000,000 | |||||||||
FHLB Chicago | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Interest rate margin reset period | 91 days | ||||||||||||
FHLB Chicago | FHLB Member Subsidiary | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Maximum borrowing limit | 2,000,000,000 | 2,000,000,000 | 2,000,000,000 | $ 2,000,000,000 | |||||||||
Additional borrowings from FHLBC | 0 | 0 | |||||||||||
Existing debt | 2,000,000,000 | 2,000,000,000 | 2,000,000,000 | 2,000,000,000 | |||||||||
Federal home loan bank advances outstanding | $ 2,000,000,000 | $ 2,000,000,000 | $ 2,000,000,000 | $ 2,000,000,000 | $ 2,000,000,000 | ||||||||
Weighted average interest rate | 2.31% | 2.52% | 2.31% | 2.31% | 2.31% | ||||||||
Weighted average maturity (in years) | 6 years | 7 years | |||||||||||
Debt instrument face amount | $ 1,999,999,000 | $ 1,999,999,000 | $ 1,999,999,000 | $ 1,999,999,000 | |||||||||
FHLB Chicago | Redwood | Held-for-sale residential loans | Residential Real Estate | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Loans pledged as collateral under borrowing agreement with FHLBC | 2,270,000,000 | 2,270,000,000 | 2,270,000,000 | 2,270,000,000 | |||||||||
FHLB Chicago | Redwood | Held-for-sale residential loans | Securities | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Loans pledged as collateral under borrowing agreement with FHLBC | 41,000,000 | 41,000,000 | 41,000,000 | 41,000,000 | |||||||||
FHLB Chicago | Redwood | Held-for-sale residential loans | Restricted cash | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Loans pledged as collateral under borrowing agreement with FHLBC | $ 77,000,000 | $ 77,000,000 | $ 77,000,000 | $ 77,000,000 | |||||||||
[1] | Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At September 30, 2019 and December 31, 2018 , assets of consolidated VIEs totaled $9,596,537 and $6,331,191 , respectively. At September 30, 2019 and December 31, 2018 , liabilities of consolidated VIEs totaled $8,582,595 and $5,709,807 , respectively. See Note 4 for further discussion. |
Long-Term Debt - FHLBC Borrowin
Long-Term Debt - FHLBC Borrowings (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 | |
Debt Instrument [Line Items] | |||
Total FHLBC Borrowings | [1] | $ 2,953,722 | $ 2,572,158 |
FHLB Chicago | FHLB Member Subsidiary | |||
Debt Instrument [Line Items] | |||
2024 | 470,171 | ||
2025 | 887,639 | ||
2026 | 642,189 | ||
Total FHLBC Borrowings | $ 1,999,999 | ||
[1] | Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At September 30, 2019 and December 31, 2018 , assets of consolidated VIEs totaled $9,596,537 and $6,331,191 , respectively. At September 30, 2019 and December 31, 2018 , liabilities of consolidated VIEs totaled $8,582,595 and $5,709,807 , respectively. See Note 4 for further discussion. |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Details) $ in Thousands | Sep. 30, 2019USD ($)lease | Jul. 15, 2010plaintiff | Sep. 30, 2019USD ($)lease | Dec. 31, 2018USD ($)partnership | Sep. 30, 2018USD ($) | Sep. 30, 2019USD ($)loanleasecertificaterepurchase_request | Sep. 30, 2018USD ($) | Dec. 31, 2007certificate | Dec. 31, 2004certificate | Dec. 31, 2007certificate | Mar. 01, 2019USD ($) | Jan. 01, 2019USD ($)lease | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) |
Loss Contingencies [Line Items] | ||||||||||||||
Lessee, number of leases | lease | 5 | 5 | 5 | |||||||||||
Present value of remaining lease payments | $ 15,490 | $ 15,490 | $ 15,490 | $ 15,000 | ||||||||||
Operating lease expense | $ 2,000 | $ 2,000 | ||||||||||||
Number of noncancelable leases | lease | 4 | |||||||||||||
Number of leases qualified as short-term lease | lease | 1 | |||||||||||||
Lease liability | 12,570 | 12,570 | $ 0 | $ 12,570 | ||||||||||
Right-of-use asset | $ 11,076 | $ 11,076 | $ 0 | $ 11,076 | ||||||||||
Number of leases without implicit interest rate | lease | 4 | |||||||||||||
Weighted average remaining lease term | 8 years | 8 years | 8 years | |||||||||||
Discount rate | 5.30% | 5.30% | 5.30% | |||||||||||
Number of partnerships, committed to fund | partnership | 2 | |||||||||||||
Commitment to fund partnership | $ 71,000 | |||||||||||||
Contingent consideration | 25,167 | $ 25,167 | $ 0 | $ 25,167 | ||||||||||
Other income related to risk sharing agreement | 905 | $ 907 | 2,351 | 2,706 | ||||||||||
Guarantee obligations | 15,016 | 15,016 | 16,711 | 15,016 | ||||||||||
Guarantee obligations, credit reserve | 5,000 | 5,000 | 5,000 | |||||||||||
Special Purpose Entities (SPEs) assets | 48,000 | 48,000 | 47,000 | 48,000 | ||||||||||
Special Purpose Entities (SPEs) liabilities | 15,000 | 15,000 | 17,000 | 15,000 | ||||||||||
Residential repurchase reserve | 3,947 | 3,947 | 4,189 | $ 3,947 | ||||||||||
Number of residential repurchase requests (in repurchase requests) | repurchase_request | 10 | |||||||||||||
Number of loans repurchased | loan | 0 | |||||||||||||
Residential repurchase provisions recorded | $ (200) | (200) | ||||||||||||
Aggregate amount of loss contingency reserves | 2,000 | 2,000 | 2,000 | $ 2,000 | ||||||||||
Morgan Stanley And Company | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Number of mortgage pass-through certificates issued (in certificates) | certificate | 28 | |||||||||||||
Sequoia Residential Funding | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Number of mortgage pass-through certificates issued (in certificates) | certificate | 2 | 2 | 4 | |||||||||||
Number of certificated withdrawn | certificate | 1 | 8 | ||||||||||||
Schwab | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Number of other named defendants along with SRF (in plaintiffs) | plaintiff | 26 | |||||||||||||
Residential Loans | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Loan principal | 904,000 | 904,000 | 1,030,000 | $ 904,000 | ||||||||||
Loans held-for-investment, in foreclosure | 2,000 | 2,000 | 2,000 | |||||||||||
Financing Receivables, Equal to Greater than 90 Days Past Due | Residential Loans | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Loan principal | 700 | 700 | $ 700 | 700 | ||||||||||
Other income | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Other income related to risk sharing agreement | 1,000 | 1,000 | 2,000 | 3,000 | ||||||||||
Mortgage banking and investment activities | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Market valuation losses related to these investments | (100) | $ (100) | (200) | $ (500) | ||||||||||
Guarantee Obligations | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Original unpaid balance of loans subject to risk sharing agreements | $ 3,190,000 | $ 3,190,000 | ||||||||||||
Potential future payments on loans | 44,000 | 44,000 | 44,000 | |||||||||||
Loan principal | $ 1,660,000 | $ 1,660,000 | $ 1,660,000 | |||||||||||
Weighted average original Fair Isaac Corporation (FICO) score | 759 | 759 | 759 | |||||||||||
Weighted average original loan-to-value (LTV) | 76.00% | 76.00% | 76.00% | |||||||||||
Guarantee Obligations | Financing Receivables, Equal to Greater than 90 Days Past Due | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Balance of loans 90 days or more delinquent | $ 7,000 | $ 7,000 | $ 7,000 | |||||||||||
Residential | Sequoia | FHLB Seattle | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Principal value | 133,000 | 133,000 | 133,000 | |||||||||||
Debt instrument principal payment amount | 128,000 | |||||||||||||
Debt instrument interest payment amount | 12,000 | |||||||||||||
Residential | Sequoia | Schwab | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Principal value | 15,000 | 15,000 | 15,000 | |||||||||||
Principal balance of securities | 14,000 | 14,000 | 14,000 | |||||||||||
Debt instrument interest amount | 1,000 | 1,000 | 1,000 | |||||||||||
Financial Guarantee | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Commitment to fund partnership | 49,000 | |||||||||||||
Guarantor obligations, current carrying value | 100 | 100 | 100 | |||||||||||
Guarantor obligations, maximum exposure, undiscounted | 135,000 | 135,000 | 135,000 | |||||||||||
ASU 2016-02 | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Lease liability | 13,000 | 13,000 | 13,000 | |||||||||||
Right-of-use asset | 11,000 | 11,000 | 11,000 | |||||||||||
Commitment To Fund Residential Bridge Loan | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Commitments to fund temporary advances | 67,000 | 67,000 | 67,000 | |||||||||||
Commitment To Fund Temporary Advances On Residential Bridge Loans | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Commitments to fund temporary advances | 65,000 | 65,000 | 65,000 | |||||||||||
5 Arches, LLC | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Contingent consideration maximum amount | $ 27,000 | |||||||||||||
Contingent consideration | 25,000 | 25,000 | 25,000 | $ 24,621 | ||||||||||
Contingent consideration expense | 200 | 500 | ||||||||||||
Home appreciation options | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Payments to acquire investments | 11,000 | |||||||||||||
Home appreciation options | Commitment To Fund Investment | ||||||||||||||
Loss Contingencies [Line Items] | ||||||||||||||
Commitments to fund temporary advances | $ 39,000 | $ 39,000 | $ 39,000 |
Commitments and Contingencies_2
Commitments and Contingencies - Future Lease Commitments (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Jan. 01, 2019 | Dec. 31, 2018 |
Commitments and Contingencies Disclosure [Abstract] | |||
2019 (3 months) | $ 688 | ||
2020 | 2,721 | ||
2021 | 1,864 | ||
2022 | 1,468 | ||
2023 and thereafter | 8,749 | ||
Total Lease Commitments | 15,490 | $ 15,000 | |
Less: Imputed interest | (2,920) | ||
Lease liability | $ 12,570 | $ 0 |
Equity - Changes to Accumulated
Equity - Changes to Accumulated Other Comprehensive Income (Loss) by Component (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||||
Balance at beginning of period | $ 1,564,032,000 | $ 1,228,955,000 | $ 1,348,794,000 | $ 1,212,287,000 |
Total other comprehensive loss | (10,799,000) | (3,293,000) | (23,173,000) | (12,921,000) |
Balance at End of Period | 1,785,059,000 | 1,361,327,000 | 1,785,059,000 | 1,361,327,000 |
Net Unrealized Gains on Available-for-Sale Securities | ||||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||||
Balance at beginning of period | 98,307,000 | 106,725,000 | 95,342,000 | 128,201,000 |
Other comprehensive income (loss) before reclassifications | 4,484,000 | (2,408,000) | 19,764,000 | (9,749,000) |
Amounts reclassified from other accumulated comprehensive income | (3,492,000) | (5,686,000) | (15,807,000) | (19,821,000) |
Total other comprehensive loss | 992,000 | (8,094,000) | 3,957,000 | (29,570,000) |
Balance at End of Period | 99,299,000 | 98,631,000 | 99,299,000 | 98,631,000 |
Other comprehensive income (loss) before reclassifications, tax | 0 | 100,000 | ||
Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges | ||||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||||
Balance at beginning of period | (49,384,000) | (34,045,000) | ||
Other comprehensive income (loss) before reclassifications | (11,791,000) | (27,130,000) | ||
Amounts reclassified from other accumulated comprehensive income | 0 | 0 | ||
Total other comprehensive loss | (11,791,000) | (27,130,000) | ||
Balance at End of Period | $ (61,175,000) | (61,175,000) | ||
Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges | ||||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||||
Balance at beginning of period | (31,105,000) | $ (34,000,000) | (42,953,000) | |
Other comprehensive income (loss) before reclassifications | 4,801,000 | 16,649,000 | ||
Amounts reclassified from other accumulated comprehensive income | 0 | 0 | ||
Total other comprehensive loss | 4,801,000 | 16,649,000 | ||
Balance at End of Period | $ (26,304,000) | $ (26,304,000) |
Equity - Reclassifications out
Equity - Reclassifications out of Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Investment fair value changes, net | $ (11,444,000) | $ (10,332,000) | $ (34,741,000) | $ (12,830,000) |
Realized gains, net | (4,714,000) | (7,275,000) | (18,227,000) | (21,352,000) |
Provision for income taxes | (114,000) | 4,919,000 | 3,102,000 | 12,343,000 |
Net Income before Provision for Income Taxes | (34,196,000) | (45,840,000) | (123,142,000) | (132,856,000) |
Other than temporary impairments | 0 | 400,000 | 0 | 600,000 |
Other than temporary impairments recognized in income | 300,000 | 500,000 | ||
Reclassification out of Accumulated Other Comprehensive Income | Net Unrealized Gains on Available-for-Sale Securities | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Investment fair value changes, net | 0 | 33,000 | 0 | 89,000 |
Realized gains, net | (3,492,000) | (7,247,000) | (15,807,000) | (21,438,000) |
Provision for income taxes | 0 | 1,528,000 | 0 | 1,528,000 |
Net Income before Provision for Income Taxes | $ (3,492,000) | (5,686,000) | $ (15,807,000) | (19,821,000) |
Other-than-temporary impairment loss portion recognized in earnings | $ (100,000) | $ (100,000) |
Equity - Additional Information
Equity - Additional Information (Details) - USD ($) | Sep. 03, 2019 | Jan. 29, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Feb. 28, 2018 |
Stockholders Equity Note [Line Items] | ||||||||
Issuance of common stock (in shares) | 14,375,000 | 11,500,000 | ||||||
Net proceeds from issuance of common stock | $ 426,970,000 | $ 117,311,000 | ||||||
Issuance of common stock | $ 228,000,000 | $ 177,000,000 | $ 228,483,000 | $ 117,036,000 | 418,591,000 | $ 117,036,000 | ||
Direct stock purchase and dividend reinvestment plan | 6,307,000 | |||||||
Share Repurchase Plan, February 2018 | ||||||||
Stockholders Equity Note [Line Items] | ||||||||
Common stock authorized to repurchase by Board | $ 100,000,000 | |||||||
Available authorization remaining for repurchase | $ 100,000,000 | $ 100,000,000 | ||||||
Equity awards | ||||||||
Stockholders Equity Note [Line Items] | ||||||||
Securities excluded in the calculation of diluted earnings per share (in shares) | 11,710 | 7,761 | 9,361 | 7,230 | ||||
At The Market Offerings | Common Stock | ||||||||
Stockholders Equity Note [Line Items] | ||||||||
Stock issuance program, authorized amount | $ 150,000,000 | |||||||
Issuance of common stock (in shares) | 791,191 | |||||||
Net proceeds from issuance of common stock | $ 13,000,000 | |||||||
Remaining outstanding | $ 112,000,000 | $ 112,000,000 | ||||||
Common Stock | ||||||||
Stockholders Equity Note [Line Items] | ||||||||
Issuance of common stock (in shares) | 14,375,000 | 7,187,500 | 26,666,191 | 7,187,500 | ||||
Issuance of common stock | $ 144,000 | $ 72,000 | $ 267,000 | $ 72,000 | ||||
Direct stock purchase and dividend reinvestment plan (in shares) | 399,838 | |||||||
Direct stock purchase and dividend reinvestment plan | $ 4,000 |
Equity - Basic and Diluted Earn
Equity - Basic and Diluted Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Basic Earnings per Common Share: | ||||
Net income attributable to Redwood | $ 34,310 | $ 40,921 | $ 120,040 | $ 120,513 |
Less: Dividends and undistributed earnings allocated to participating securities | (856) | (1,231) | (3,260) | (3,766) |
Net income allocated to common shareholders | $ 33,454 | $ 39,690 | $ 116,780 | $ 116,747 |
Basic weighted average common shares outstanding (in shares) | 101,872,126 | 80,796,856 | 97,214,064 | 77,211,188 |
Basic Earnings per Common Share (in dollars per share) | $ 0.33 | $ 0.49 | $ 1.20 | $ 1.51 |
Diluted Earnings per Common Share: | ||||
Net income attributable to Redwood | $ 34,310 | $ 40,921 | $ 120,040 | $ 120,513 |
Less: Dividends and undistributed earnings allocated to participating securities | (1,036) | (1,284) | (3,625) | (3,867) |
Add back: Interest expense on convertible notes for the period, net of tax | 8,887 | 8,666 | 26,271 | 23,642 |
Net income allocated to common shareholders | $ 42,161 | $ 48,303 | $ 142,686 | $ 140,288 |
Weighted average common shares outstanding (in shares) | 101,872,126 | 80,796,856 | 97,214,064 | 77,211,188 |
Net effect of dilutive equity awards (in shares) | 362,743 | 443,191 | 261,155 | 251,935 |
Net effect of assumed convertible notes conversion to common shares (in shares) | 34,287,840 | 33,442,641 | 33,727,470 | 30,328,906 |
Diluted weighted average common shares outstanding (in shares) | 136,522,709 | 114,682,688 | 131,202,689 | 107,792,029 |
Diluted Earnings per Common Share (in dollars per share) | $ 0.31 | $ 0.42 | $ 1.09 | $ 1.30 |
Equity Compensation Plans - Add
Equity Compensation Plans - Additional Information (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares of common stock available for grant under Redwood's Incentive Plan (in shares) | 4,187,924 | 4,616,776 |
Unrecognized compensation cost | $ 23,464 | $ 25,122 |
Weighted average amortization period remaining for equity awards | 2 years | |
Shares of common stock to be purchased in aggregate for all employees (in shares) | 600,000 | |
Number of shares purchased by employees (in shares) | 418,651 | 390,569 |
Restricted Stock Awards | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Unvested outstanding stock awards (in shares) | 218,022 | 334,606 |
Number of stock awards granted (in shares) | 0 | |
Number of stock awards vested (in shares) | 116,584 | |
Number of stock awards forfeited (in shares) | 0 | |
Restricted Stock Units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Unvested outstanding stock awards (in shares) | 229,943 | 4,876 |
Number of stock awards granted (in shares) | 225,067 | |
Number of stock awards vested (in shares) | 0 | |
Number of stock awards forfeited (in shares) | 0 | |
Deferred Stock Units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Unvested outstanding stock awards (in shares) | 2,414,056 | 2,336,720 |
Number of stock awards granted (in shares) | 337,787 | |
Number of stock awards vested (in shares) | 1,345,005 | 1,181,622 |
Number of stock awards forfeited (in shares) | 0 | |
Stock units distributed (in shares) | 260,451 | |
Performance Stock Units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Unvested outstanding stock awards (in shares) | 725,616 | 725,616 |
Share-based compensation, vesting period (in years) | 3 years |
Equity Compensation Plans - Unr
Equity Compensation Plans - Unrecognized Compensation Cost (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2019USD ($) | |
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Roll Forward] | |
Unrecognized compensation cost at beginning of period | $ 25,122 |
Equity grants | 8,474 |
Equity grant forfeitures | 0 |
Equity compensation expense | (10,132) |
Unrecognized Compensation Cost at End of Period | 23,464 |
Incentive Plans | Restricted Stock Awards | |
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Roll Forward] | |
Unrecognized compensation cost at beginning of period | 3,498 |
Equity grants | 0 |
Equity grant forfeitures | 0 |
Equity compensation expense | (1,137) |
Unrecognized Compensation Cost at End of Period | 2,361 |
Incentive Plans | Restricted Stock Units | |
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Roll Forward] | |
Unrecognized compensation cost at beginning of period | 74 |
Equity grants | 3,483 |
Equity grant forfeitures | 0 |
Equity compensation expense | (499) |
Unrecognized Compensation Cost at End of Period | 3,058 |
Incentive Plans | Deferred Stock Units | |
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Roll Forward] | |
Unrecognized compensation cost at beginning of period | 14,489 |
Equity grants | 4,831 |
Equity grant forfeitures | 0 |
Equity compensation expense | (5,871) |
Unrecognized Compensation Cost at End of Period | 13,449 |
Incentive Plans | Performance Stock Units | |
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Roll Forward] | |
Unrecognized compensation cost at beginning of period | 7,061 |
Equity grants | 0 |
Equity grant forfeitures | 0 |
Equity compensation expense | (2,505) |
Unrecognized Compensation Cost at End of Period | 4,556 |
Employee Stock Purchase Plan | |
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Roll Forward] | |
Unrecognized compensation cost at beginning of period | 0 |
Equity grants | 160 |
Equity grant forfeitures | 0 |
Equity compensation expense | (120) |
Unrecognized Compensation Cost at End of Period | $ 40 |
Mortgage Banking Activities, _3
Mortgage Banking Activities, Net - Components of Mortgage Banking Activities (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||
Other income, net | $ 1,825 | $ 3,453 | $ 7,819 | $ 8,893 |
Mortgage banking activities, net | 9,515 | 11,224 | 40,984 | 48,396 |
Residential Mortgage Banking Activities, Net | ||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||
Other income, net | 407 | 313 | 1,380 | 1,733 |
Mortgage banking activities, net | 5,017 | 11,345 | 31,203 | 48,517 |
Residential Mortgage Banking Activities, Net | Residential loans, at fair value | ||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||
Changes in fair value of assets | 6,320 | 7,236 | 41,431 | 8,406 |
Residential Mortgage Banking Activities, Net | Risk management derivatives | ||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||
Risk management derivatives | (1,710) | 3,796 | (11,608) | 38,378 |
Business Purpose Mortgage Banking Activities, Net | ||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||
Changes in fair value of assets | 1,010 | 0 | 2,108 | 0 |
Other income, net | 2,903 | 0 | 5,979 | 0 |
Mortgage banking activities, net | 4,498 | (121) | 9,781 | (121) |
Business Purpose Mortgage Banking Activities, Net | Risk management derivatives | ||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||
Risk management derivatives | (1,262) | 0 | (3,779) | 0 |
Business Purpose Mortgage Banking Activities, Net | Single-family rental loans, at fair value | ||||
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items] | ||||
Changes in fair value of assets | $ 1,847 | $ (121) | $ 5,473 | $ (121) |
Investment Fair Value Changes_3
Investment Fair Value Changes, Net - Components of Investment Activities (Details) - Investment Fair Value Changes, Net - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | $ 11,444 | $ 10,332 | $ 34,741 | $ 12,830 |
Residential loans held-for-investment, at Redwood | ||||
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | 7,667 | (17,063) | 71,323 | (71,058) |
Single-family rental loans held-for-investment | ||||
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | 22 | 0 | 22 | 0 |
Residential bridge loans | ||||
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | (742) | 53 | (1,363) | 53 |
Trading securities | ||||
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | 15,275 | 6,314 | 55,577 | 2,429 |
Servicer advance investments | ||||
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | 1,585 | 0 | 3,025 | 0 |
Excess MSRs | ||||
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | (1,635) | 0 | (2,137) | 0 |
Home appreciation options | ||||
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | 29 | 0 | 29 | 0 |
REO | ||||
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | (331) | 0 | (470) | 0 |
Net investments in Legacy Sequoia entities | ||||
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | (407) | (248) | (904) | (976) |
Net investments in Sequoia Choice entities | ||||
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | 2,722 | (943) | 8,866 | 43 |
Net investments in Freddie Mac SLST entities | ||||
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | 17,300 | 0 | 31,702 | 0 |
Net investments in Freddie Mac K-Series entities | ||||
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | 7,445 | 511 | 13,810 | 511 |
Risk-sharing investments | ||||
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | (53) | (126) | (191) | (474) |
Risk management derivatives, net | ||||
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | (37,433) | 21,867 | (144,548) | 82,391 |
Impairments on AFS securities | ||||
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | $ 0 | $ (33) | $ 0 | $ (89) |
Other Income, Net (Details)
Other Income, Net (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Other Income and Expenses [Abstract] | ||||
MSR income, net | $ 431 | $ 1,967 | $ 2,342 | $ 4,797 |
Risk share income | 905 | 907 | 2,351 | 2,706 |
FHLBC capital stock dividend | 541 | 460 | 1,623 | 1,271 |
Equity investment income | 557 | 119 | 552 | 119 |
5 Arches loan administration fee income | 1,344 | 0 | 3,298 | 0 |
Amortization of intangible assets | (1,897) | 0 | (4,429) | 0 |
Gain on re-measurement of investment in 5 Arches | 0 | 0 | 2,441 | 0 |
Other | (56) | 0 | (359) | 0 |
Other Income, Net | $ 1,825 | $ 3,453 | $ 7,819 | $ 8,893 |
Operating Expenses - Components
Operating Expenses - Components of Operating Expenses (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Other Income and Expenses [Abstract] | ||||
Fixed compensation expense | $ 9,391 | $ 5,922 | $ 26,848 | $ 18,136 |
Variable compensation expense | 4,090 | 4,923 | 12,513 | 13,655 |
Equity compensation expense | 3,155 | 3,033 | 10,132 | 9,565 |
Total compensation expense | 16,636 | 13,878 | 49,493 | 41,356 |
Systems and consulting | 3,230 | 1,794 | 7,594 | 5,434 |
Loan acquisition costs | 1,392 | 1,887 | 4,385 | 5,860 |
Office costs | 1,517 | 1,173 | 4,406 | 3,397 |
Accounting and legal | 1,767 | 1,170 | 3,852 | 3,078 |
Corporate costs | 482 | 462 | 1,701 | 1,462 |
Other operating expenses | 1,791 | 1,126 | 4,798 | 2,942 |
Total Operating Expenses | $ 26,815 | $ 21,490 | $ 76,229 | $ 63,529 |
Taxes - Additional Information
Taxes - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | ||||
Provision for income taxes | $ (114) | $ 4,919 | $ 3,102 | $ 12,343 |
Taxes - Reconciliation of Statu
Taxes - Reconciliation of Statutory Tax Rate to Effective Tax Rate (Details) | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | ||
Federal statutory rate | 21.00% | 21.00% |
State statutory rate, net of Federal tax effect | 8.60% | 8.60% |
Differences in taxable (loss) income from GAAP income | (2.50%) | (1.80%) |
Change in valuation allowance | (2.50%) | (3.20%) |
Dividends paid deduction | (22.10%) | (15.30%) |
Effective Tax Rate | 2.50% | 9.30% |
Segment Information - Additiona
Segment Information - Additional Information (Details) | 9 Months Ended |
Sep. 30, 2019segment | |
Segment Reporting [Abstract] | |
Number of operating segments | 2 |
Segment Information - Financial
Segment Information - Financial Information by Segment (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Segment Reporting Information [Line Items] | ||||
Interest income | $ 150,117 | $ 99,397 | $ 429,700 | $ 258,992 |
Interest expense | (116,604) | (64,351) | (332,100) | (154,078) |
Net Interest Income | 33,513 | 35,046 | 97,600 | 104,914 |
Non-interest Income | ||||
Mortgage banking activities, net | 9,515 | 11,224 | 40,984 | 48,396 |
Investment fair value changes, net | 11,444 | 10,332 | 34,741 | 12,830 |
Other income (expense), net | 1,825 | 3,453 | 7,819 | 8,893 |
Realized gains, net | 4,714 | 7,275 | 18,227 | 21,352 |
Total non-interest income, net | 27,498 | 32,284 | 101,771 | 91,471 |
Direct operating expenses | (26,815) | (21,490) | (76,229) | (63,529) |
(Provision for) benefit from income taxes | 114 | (4,919) | (3,102) | (12,343) |
Net Income | 34,310 | 40,921 | 120,040 | 120,513 |
Non-cash amortization income (expense), net | (720) | 2,789 | (892) | 10,170 |
Operating Segments | Investment Portfolio | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 132,894 | 79,556 | 380,394 | 202,882 |
Interest expense | (94,519) | (40,852) | (266,318) | (87,719) |
Net Interest Income | 38,375 | 38,704 | 114,076 | 115,163 |
Non-interest Income | ||||
Mortgage banking activities, net | 0 | 0 | 0 | 0 |
Investment fair value changes, net | 11,896 | 10,566 | 35,749 | 13,756 |
Other income (expense), net | 2,313 | 3,334 | 6,408 | 8,774 |
Realized gains, net | 4,714 | 7,275 | 18,227 | 21,352 |
Total non-interest income, net | 18,923 | 21,175 | 60,384 | 43,882 |
Direct operating expenses | (2,191) | (2,659) | (7,110) | (6,524) |
(Provision for) benefit from income taxes | (89) | (2,840) | (1,327) | (4,858) |
Net Income | 55,018 | 54,380 | 166,023 | 147,663 |
Non-cash amortization income (expense), net | 2,456 | 4,019 | 7,446 | 13,290 |
Operating Segments | Mortgage Banking | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 12,491 | 14,427 | 34,220 | 40,408 |
Interest expense | (6,657) | (7,537) | (18,816) | (21,303) |
Net Interest Income | 5,834 | 6,890 | 15,404 | 19,105 |
Non-interest Income | ||||
Mortgage banking activities, net | 9,515 | 11,224 | 40,984 | 48,396 |
Investment fair value changes, net | 0 | 0 | 0 | 0 |
Other income (expense), net | (252) | 0 | (575) | 0 |
Realized gains, net | 0 | 0 | 0 | 0 |
Total non-interest income, net | 9,263 | 11,224 | 40,409 | 48,396 |
Direct operating expenses | (11,907) | (6,570) | (31,582) | (20,941) |
(Provision for) benefit from income taxes | 203 | (2,079) | (1,775) | (7,485) |
Net Income | 3,393 | 9,465 | 22,456 | 39,075 |
Non-cash amortization income (expense), net | (2,028) | (54) | (4,765) | (99) |
Corporate/ Other | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 4,732 | 5,414 | 15,086 | 15,702 |
Interest expense | (15,428) | (15,962) | (46,966) | (45,056) |
Net Interest Income | (10,696) | (10,548) | (31,880) | (29,354) |
Non-interest Income | ||||
Mortgage banking activities, net | 0 | 0 | 0 | 0 |
Investment fair value changes, net | (452) | (234) | (1,008) | (926) |
Other income (expense), net | (236) | 119 | 1,986 | 119 |
Realized gains, net | 0 | 0 | 0 | 0 |
Total non-interest income, net | (688) | (115) | 978 | (807) |
Direct operating expenses | (12,717) | (12,261) | (37,537) | (36,064) |
(Provision for) benefit from income taxes | 0 | 0 | 0 | 0 |
Net Income | (24,101) | (22,924) | (68,439) | (66,225) |
Non-cash amortization income (expense), net | $ (1,148) | $ (1,176) | $ (3,573) | $ (3,021) |
Segment Information - Component
Segment Information - Components of Corporate/Other (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Segment Reporting Information [Line Items] | ||||
Interest income | $ 150,117 | $ 99,397 | $ 429,700 | $ 258,992 |
Interest expense | (116,604) | (64,351) | (332,100) | (154,078) |
Net Interest Income | 33,513 | 35,046 | 97,600 | 104,914 |
Investment fair value changes, net | 11,444 | 10,332 | 34,741 | 12,830 |
Total non-interest income, net | 27,498 | 32,284 | 101,771 | 91,471 |
Direct operating expenses | (26,815) | (21,490) | (76,229) | (63,529) |
Net Income | 34,310 | 40,921 | 120,040 | 120,513 |
Corporate/ Other | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 4,732 | 5,414 | 15,086 | 15,702 |
Interest expense | (15,428) | (15,962) | (46,966) | (45,056) |
Net Interest Income | (10,696) | (10,548) | (31,880) | (29,354) |
Investment fair value changes, net | (452) | (234) | (1,008) | (926) |
Other income | (236) | 119 | 1,986 | 119 |
Total non-interest income, net | (688) | (115) | 978 | (807) |
Direct operating expenses | (12,717) | (12,261) | (37,537) | (36,064) |
Net Income | (24,101) | (22,924) | (68,439) | (66,225) |
Corporate/ Other | Legacy Consolidated VIEs | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 4,295 | 5,174 | 13,924 | 15,003 |
Interest expense | (3,452) | (4,257) | (11,548) | (12,324) |
Net Interest Income | 843 | 917 | 2,376 | 2,679 |
Investment fair value changes, net | (407) | (248) | (904) | (976) |
Other income | 0 | 0 | 0 | 0 |
Total non-interest income, net | (407) | (248) | (904) | (976) |
Direct operating expenses | 0 | 0 | 0 | 0 |
Net Income | 436 | 669 | 1,472 | 1,703 |
Corporate/ Other | Other | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 437 | 240 | 1,162 | 699 |
Interest expense | (11,976) | (11,705) | (35,418) | (32,732) |
Net Interest Income | (11,539) | (11,465) | (34,256) | (32,033) |
Investment fair value changes, net | (45) | 14 | (104) | 50 |
Other income | (236) | 119 | 1,986 | 119 |
Total non-interest income, net | (281) | 133 | 1,882 | 169 |
Direct operating expenses | (12,717) | (12,261) | (37,537) | (36,064) |
Net Income | $ (24,537) | $ (23,593) | $ (69,911) | $ (67,928) |
Segment Information - Supplemen
Segment Information - Supplemental Information by Segment (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 | |
Segment Reporting Information [Line Items] | |||
Real estate securities | [1] | $ 1,285,426 | $ 1,452,494 |
Other investments | [1] | 347,707 | 438,518 |
Goodwill and intangible assets | [1] | 49,121 | 0 |
Total Assets | [1] | 15,476,283 | 11,937,406 |
Residential loans | |||
Segment Reporting Information [Line Items] | |||
Loans, at fair value | 8,681,803 | 7,254,742 | |
Business purpose residential loans | |||
Segment Reporting Information [Line Items] | |||
Loans, at fair value | 336,035 | 141,258 | |
Multifamily loans | |||
Segment Reporting Information [Line Items] | |||
Loans, at fair value | 3,791,622 | 2,144,598 | |
Operating Segments | Investment Portfolio | |||
Segment Reporting Information [Line Items] | |||
Real estate securities | 1,285,426 | 1,452,494 | |
Other investments | 346,136 | 427,764 | |
Goodwill and intangible assets | 0 | ||
Total Assets | 13,347,460 | 10,093,993 | |
Operating Segments | Investment Portfolio | Residential loans | |||
Segment Reporting Information [Line Items] | |||
Loans, at fair value | 7,326,757 | 5,685,983 | |
Operating Segments | Investment Portfolio | Business purpose residential loans | |||
Segment Reporting Information [Line Items] | |||
Loans, at fair value | 225,601 | 112,798 | |
Operating Segments | Investment Portfolio | Multifamily loans | |||
Segment Reporting Information [Line Items] | |||
Loans, at fair value | 3,791,622 | 2,144,598 | |
Operating Segments | Mortgage Banking | |||
Segment Reporting Information [Line Items] | |||
Real estate securities | 0 | 0 | |
Other investments | 1,571 | 0 | |
Goodwill and intangible assets | 49,121 | ||
Total Assets | 1,166,639 | 1,103,090 | |
Operating Segments | Mortgage Banking | Residential loans | |||
Segment Reporting Information [Line Items] | |||
Loans, at fair value | 925,887 | 1,048,801 | |
Operating Segments | Mortgage Banking | Business purpose residential loans | |||
Segment Reporting Information [Line Items] | |||
Loans, at fair value | 110,434 | 28,460 | |
Operating Segments | Mortgage Banking | Multifamily loans | |||
Segment Reporting Information [Line Items] | |||
Loans, at fair value | 0 | 0 | |
Corporate/ Other | |||
Segment Reporting Information [Line Items] | |||
Real estate securities | 0 | 0 | |
Other investments | 0 | 10,754 | |
Goodwill and intangible assets | 0 | ||
Total Assets | 962,184 | 740,323 | |
Corporate/ Other | Residential loans | |||
Segment Reporting Information [Line Items] | |||
Loans, at fair value | 429,159 | 519,958 | |
Corporate/ Other | Business purpose residential loans | |||
Segment Reporting Information [Line Items] | |||
Loans, at fair value | 0 | 0 | |
Corporate/ Other | Multifamily loans | |||
Segment Reporting Information [Line Items] | |||
Loans, at fair value | $ 0 | $ 0 | |
[1] | Our consolidated balance sheets include assets of consolidated variable interest entities (“VIEs”) that can only be used to settle obligations of these VIEs and liabilities of consolidated VIEs for which creditors do not have recourse to Redwood Trust, Inc. or its affiliates. At September 30, 2019 and December 31, 2018 , assets of consolidated VIEs totaled $9,596,537 and $6,331,191 , respectively. At September 30, 2019 and December 31, 2018 , liabilities of consolidated VIEs totaled $8,582,595 and $5,709,807 , respectively. See Note 4 for further discussion. |
Subsequent Events (Details)
Subsequent Events (Details) - CoreVest American Finance Lender LLC - Subsequent Event $ in Millions | Oct. 14, 2019USD ($) |
Subsequent Event [Line Items] | |
Percent acquired | 100.00% |
Total consideration | $ 492 |