Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Nov. 03, 2017 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2017 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | RWT | |
Entity Registrant Name | REDWOOD TRUST INC | |
Entity Central Index Key | 930,236 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 77,114,790 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 | |
ASSETS | |||
Residential loans, held-for-sale and investment, at fair value | $ 4,184,920 | $ 3,888,051 | |
Real estate securities, at fair value | [1] | 1,356,272 | 1,018,439 |
Mortgage servicing rights, at fair value | [1] | 62,928 | 118,526 |
Cash and cash equivalents | [1] | 257,611 | 212,844 |
Total earning assets | [1] | 5,861,731 | 5,237,860 |
Restricted cash | [1] | 26,258 | 8,623 |
Accrued interest receivable | [1] | 21,256 | 18,454 |
Derivative assets | [1] | 11,948 | 36,595 |
Other assets | [1] | 209,506 | 181,945 |
Total Assets | [1] | 6,130,699 | 5,483,477 |
Liabilities | |||
Short-term debt | [1],[2] | 1,238,196 | 791,539 |
Accrued interest payable | [1] | 18,836 | 9,608 |
Derivative liabilities | [1] | 65,238 | 66,329 |
Accrued expenses and other liabilities | [1] | 81,062 | 72,428 |
Asset-backed securities issued, at fair value | [1] | 944,288 | 773,462 |
Long-term debt, net | [1] | 2,574,439 | 2,620,683 |
Total liabilities | [1] | 4,922,059 | 4,334,049 |
Equity | |||
Common stock, par value $0.01 per share, 180,000,000 shares authorized; 77,122,687 and 76,834,663 issued and outstanding | [1] | 771 | 768 |
Additional paid-in capital | [1] | 1,681,968 | 1,676,486 |
Accumulated other comprehensive income | [1] | 82,316 | 71,853 |
Cumulative earnings | [1] | 1,259,408 | 1,149,935 |
Cumulative distributions to stockholders | [1] | (1,815,823) | (1,749,614) |
Total equity | [1] | 1,208,640 | 1,149,428 |
Total Liabilities and Equity | [1] | 6,130,699 | 5,483,477 |
Residential loans, held-for-sale, at fair value | |||
ASSETS | |||
Residential loans, held-for-sale and investment, at fair value | [1] | 925,681 | 835,399 |
Residential loans, held-for-investment, at fair value | |||
ASSETS | |||
Residential loans, held-for-sale and investment, at fair value | [1] | $ 3,259,239 | $ 3,052,652 |
[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, 2017 and December 31, 2016, assets of consolidated VIEs totaled $995,768 and $798,317, respectively. At September 30, 2017 and December 31, 2016, liabilities of consolidated VIEs totaled $945,873 and $773,980, respectively. See Note 4 for further discussion. | ||
[2] | Includes $250 million of convertible notes, which were reclassified from Long-term debt, net to Short-term debt as the maturity of the notes was less than one year as of April 2017. See Note 11 for further discussion. |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2017 | Apr. 30, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | |||
Common stock, par value (usd per share) | $ 0.01 | $ 0.01 | |
Common stock, shares authorized (shares) | 180,000,000 | 180,000,000 | |
Common stock, issued (shares) | 77,122,687 | 76,834,663 | |
Common stock, outstanding (shares) | 77,122,687 | 76,834,663 | |
Variable interest held by entity, assets | $ 995,768 | $ 798,317 | |
Variable interest held by entity, liabilities | $ 945,873 | $ 773,980 | |
Convertible notes | $ 250,000 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Interest Income | ||||
Residential loans | $ 38,541 | $ 35,595 | $ 109,538 | $ 102,149 |
Commercial loans | 0 | 6,453 | 345 | 28,834 |
Real estate securities | 23,425 | 18,600 | 65,068 | 58,112 |
Other interest income | 771 | 258 | 1,638 | 926 |
Total interest income | 62,737 | 60,906 | 176,589 | 190,021 |
Interest Expense | ||||
Short-term debt | (10,182) | (5,405) | (23,985) | (17,439) |
Asset-backed securities issued | (3,956) | (3,193) | (11,191) | (11,457) |
Long-term debt | (13,305) | (12,999) | (37,532) | (39,095) |
Total Interest Expense | (27,443) | (21,597) | (72,708) | (67,991) |
Net Interest Income | 35,294 | 39,309 | 103,881 | 122,030 |
Reversal of provision for loan losses | 0 | 859 | 0 | 7,102 |
Net Interest Income after Provision | 35,294 | 40,168 | 103,881 | 129,132 |
Non-interest Income | ||||
Mortgage banking activities, net | 21,200 | 9,766 | 50,850 | 24,712 |
Mortgage servicing rights income, net | 1,615 | 3,770 | 6,106 | 12,834 |
Investment fair value changes, net | 324 | 11,918 | 9,990 | (18,686) |
Other income | 1,197 | 1,643 | 3,367 | 4,157 |
Realized gains, net | 1,734 | 6,615 | 8,809 | 26,037 |
Total non-interest income, net | 26,070 | 33,712 | 79,122 | 49,054 |
Operating expenses | (19,922) | (20,355) | (56,789) | (70,962) |
Net Income before Provision for Income Taxes | 41,442 | 53,525 | 126,214 | 107,224 |
Provision for income taxes | (5,262) | (972) | (16,741) | (1,327) |
Net Income | $ 36,180 | $ 52,553 | $ 109,473 | $ 105,897 |
Basic earnings per common share (in dollars per share) | $ 0.46 | $ 0.67 | $ 1.39 | $ 1.34 |
Diluted earnings per common share (in dollars per share) | 0.41 | 0.58 | 1.26 | 1.23 |
Regular dividends declared per common share (in dollars per share) | $ 0.28 | $ 0.28 | $ 0.84 | $ 0.84 |
Basic weighted average shares outstanding (in shares) | 76,850,830 | 76,680,183 | 76,803,324 | 76,827,026 |
Diluted weighted average shares outstanding (in shares) | 102,703,108 | 97,831,617 | 99,397,866 | 97,991,678 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | ||
Statement of Comprehensive Income [Abstract] | |||||
Net Income | $ 36,180 | $ 52,553 | $ 109,473 | $ 105,897 | |
Other comprehensive income (loss): | |||||
Net unrealized gain on available-for-sale securities | [1] | 13,158 | 9,038 | 17,899 | 5,195 |
Reclassification of unrealized gain on available-for-sale securities to net income | (853) | (1,319) | (7,103) | (19,983) | |
Net unrealized gain (loss) on interest rate agreements | 321 | 647 | (375) | (22,545) | |
Reclassification of unrealized loss on interest rate agreements to net income | 14 | 18 | 42 | 55 | |
Total other comprehensive income (loss) | 12,640 | 8,384 | 10,463 | (37,278) | |
Total Comprehensive Income | $ 48,820 | $ 60,937 | $ 119,936 | $ 68,619 | |
[1] | Amounts are presented net of tax benefit (provision) of zero and $(0.1) million for the three and nine months ended September 30, 2017, respectively, and $0.2 million and $0.6 million for the three and nine months ended September 30, 2016, respectively. |
CONSOLIDATED STATEMENTS OF COM6
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Statement of Comprehensive Income [Abstract] | ||||
Net unrealized gain (loss) on available-for-sale securities, tax benefit (provision) | $ 0 | $ 200,000 | $ (100,000) | $ 600,000 |
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 at Dec. 31, 2015 | $ 1,146,265 | $ 782 | $ 1,695,956 | $ 91,993 | $ 1,018,683 | $ (1,661,149) |
Beginning balance (in shares) at Dec. 31, 2015 | 78,162,765 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net Income | 105,897 | 105,897 | ||||
Other comprehensive income (loss) | (37,278) | (37,278) | ||||
Employee stock purchase and incentive plans | (4,179) | $ 4 | (4,183) | |||
Employee stock purchase and incentive plans (in shares) | 437,441 | |||||
Non-cash equity award compensation | 10,595 | 10,595 | ||||
Share repurchases | (24,764) | $ (19) | (24,745) | |||
Share repurchases (in shares) | (1,917,873) | |||||
Common dividends declared | (66,406) | (66,406) | ||||
Ending balance at Sep. 30, 2016 | 1,130,130 | $ 767 | 1,677,623 | 54,715 | 1,124,580 | (1,727,555) |
Ending balance (in shares) at Sep. 30, 2016 | 76,682,333 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net Income | 52,553 | |||||
Other comprehensive income (loss) | 8,384 | |||||
Ending balance at Sep. 30, 2016 | 1,130,130 | $ 767 | 1,677,623 | 54,715 | 1,124,580 | (1,727,555) |
Ending balance (in shares) at Sep. 30, 2016 | 76,682,333 | |||||
Beginning balance at Dec. 31, 2016 | 1,149,428 | $ 768 | 1,676,486 | 71,853 | 1,149,935 | (1,749,614) |
Beginning balance (in shares) at Dec. 31, 2016 | 76,834,663 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net Income | 109,473 | 109,473 | ||||
Other comprehensive income (loss) | 10,463 | 10,463 | ||||
Employee stock purchase and incentive plans | (2,312) | $ 3 | (2,315) | |||
Employee stock purchase and incentive plans (in shares) | 288,024 | |||||
Non-cash equity award compensation | 7,797 | 7,797 | ||||
Common dividends declared | (66,209) | (66,209) | ||||
Ending balance at Sep. 30, 2017 | 1,208,640 | $ 771 | 1,681,968 | 82,316 | 1,259,408 | (1,815,823) |
Ending balance (in shares) at Sep. 30, 2017 | 77,122,687 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net Income | 36,180 | |||||
Other comprehensive income (loss) | 12,640 | |||||
Ending balance at Sep. 30, 2017 | $ 1,208,640 | $ 771 | $ 1,681,968 | $ 82,316 | $ 1,259,408 | $ (1,815,823) |
Ending balance (in shares) at Sep. 30, 2017 | 77,122,687 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | ||
Cash Flows From Operating Activities: | |||
Net Income | $ 109,473 | $ 105,897 | |
Adjustments to reconcile net income to net cash used in operating activities: | |||
Amortization of premiums, discounts, and securities issuance costs, net | (14,246) | (20,251) | |
Depreciation and amortization of non-financial assets | 909 | 849 | |
Purchases of held-for-sale loans | (3,760,110) | (3,817,445) | |
Proceeds from sales of held-for-sale loans | 3,079,877 | 2,930,641 | |
Principal payments on held-for-sale loans | 38,500 | 55,694 | |
Net settlements of derivatives | (10,570) | (13,914) | |
Provision for loan losses | 0 | (7,102) | |
Non-cash equity award compensation expense | 7,797 | 10,595 | |
Market valuation adjustments | (50,352) | 9,238 | |
Realized gains, net | (8,809) | (26,037) | |
Net change in: | |||
Accrued interest receivable and other assets | (19,868) | 7,983 | |
Accrued interest payable and accrued expenses and other liabilities | (1,677) | 7,728 | |
Net cash used in operating activities | (629,076) | (756,124) | |
Cash Flows From Investing Activities: | |||
Purchases of loans held-for-investment | 0 | 0 | |
Proceeds from sales of loans held-for-investment | 0 | 219,639 | |
Principal payments on loans held-for-investment | 370,595 | 574,037 | |
Purchases of real estate securities | (396,721) | (212,364) | |
Proceeds from sales of real estate securities | 142,931 | 482,716 | |
Principal payments on real estate securities | 55,544 | 60,978 | |
Purchase of mortgage servicing rights | (574) | (15,286) | |
Proceeds from sales of mortgage servicing rights | 51,279 | 35,717 | |
Net change in restricted cash | (17,635) | 3,523 | |
Net cash provided by investing activities | 205,419 | 1,148,960 | |
Cash Flows From Financing Activities: | |||
Proceeds from borrowings on short-term debt | 3,126,949 | 3,156,642 | |
Repayments on short-term debt | (2,968,050) | (3,894,240) | |
Proceeds from issuance of asset-backed securities | 286,898 | 0 | |
Repayments on asset-backed securities issued | (146,357) | (208,801) | |
Proceeds from issuance of long-term debt | 245,000 | 771,287 | |
Deferred long-term debt issuance costs | (7,380) | 0 | |
Repayments on long-term debt | 0 | (118,146) | |
Net settlements of derivatives | (115) | (119) | |
Net proceeds from issuance of common stock | 224 | 220 | |
Net payments on repurchase of common stock | 0 | (27,731) | |
Taxes paid on equity award distributions | (2,536) | (4,399) | |
Dividends paid | (66,209) | (66,406) | |
Net cash provided by (used in) financing activities | 468,424 | (391,693) | |
Net increase in cash and cash equivalents | 44,767 | 1,143 | |
Cash and cash equivalents at beginning of period | 212,844 | [1] | 220,229 |
Cash and cash equivalents at end of period | 257,611 | [1] | 221,372 |
Cash paid during the period for: | |||
Interest | 67,339 | 62,053 | |
Taxes | 1,476 | 826 | |
Supplemental Noncash Information: | |||
Real estate securities retained from loan securitizations | 67,083 | 3,673 | |
Retention of mortgage servicing rights from loan securitizations and sales | 7,387 | 7,679 | |
Transfers from loans held-for-sale to loans held-for-investment | 643,876 | 877,744 | |
Transfers from loans held-for-investment to loans held-for-sale | 98,853 | 359,005 | |
Transfers from residential loans to real estate owned | $ 3,177 | $ 8,479 | |
[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, 2017 and December 31, 2016, assets of consolidated VIEs totaled $995,768 and $798,317, respectively. At September 30, 2017 and December 31, 2016, liabilities of consolidated VIEs totaled $945,873 and $773,980, respectively. See Note 4 for further discussion. |
Organization
Organization | 9 Months Ended |
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Organization Redwood Trust, Inc., together with its subsidiaries, focuses on investing in mortgages and other real estate-related assets and engaging in mortgage banking activities. We seek to invest in real estate-related assets that have the potential to generate attractive cash flow returns over time and to generate income through our mortgage banking activities. We operate our business in two segments: Investment Portfolio and Residential Mortgage Banking. Redwood was incorporated in the State of Maryland on April 11, 1994, and commenced operations on August 19, 1994. References herein to “Redwood,” the “company,” “we,” “us,” and “our” include Redwood Trust, Inc. and its consolidated subsidiaries, unless the context otherwise requires. 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.” We sponsor our Sequoia securitization program, which we use for the securitization of residential mortgage loans. References to Sequoia with respect to any time or period generally refer collectively to all the then consolidated Sequoia securitization entities for the periods presented. We have also engaged in securitization transactions in order to obtain financing for certain of our securities and commercial loans. |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The consolidated financial statements presented herein are at September 30, 2017 and December 31, 2016 , and for the three and nine months ended September 30, 2017 and 2016 . 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, 2016 . In the opinion of management, all normal and recurring adjustments to present fairly the financial condition of the company at September 30, 2017 and results of operations for all periods presented have been made. The results of operations for the three and nine months ended September 30, 2017 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 an entity formed in connection with the securitization of Redwood Choice expanded-prime loans during the third quarter of 2017 ("Sequoia Choice"). 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 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. For financial reporting purposes, the underlying loans owned at the consolidated Sequoia entities are shown under Residential 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 12 for further discussion on ABS issued. 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. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2017 | |
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 2016 Annual Report on Form 10-K 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 condition and results of operations for the three and nine months ended September 30, 2017 . Recent Accounting Pronouncements Newly Adopted Accounting Standards Updates ("ASUs") In January 2017, the FASB issued ASU 2017-03, "Accounting Changes and Error Corrections (Topic 250) and Investments - Equity Method and Joint Ventures (Topic 323)." This new guidance requires that companies evaluate ASUs that have not been adopted to determine the appropriate financial statement disclosures about the potential material effects of those ASUs on the financial statements when adopted. This new guidance was effective immediately. We adopted this guidance, as required, in the first quarter of 2017, which did not have a material impact on our consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting." This new guidance provides simplifications of the accounting for share-based payment transactions, including related income tax accounting, classification of awards, and classification on the statement of cash flows. In addition, this guidance permits the withholding of employee taxes related to the distribution of equity awards up to the maximum individual employee statutory tax rates. This new guidance is effective for fiscal years beginning after December 15, 2016 and early adoption is permitted. In the second quarter of 2016, we adopted this new guidance. Upon adoption, we elected to account for forfeitures on employee equity awards as they occur, rather than estimating expected forfeitures. The adoption of this guidance did not have a material impact on our consolidated financial statements. Other Recent Accounting Pronouncements 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. Early adoption is permitted. We plan to adopt this new guidance by the required date and we are currently evaluating the impact that this update will have 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. Early adoption is permitted. 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 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. Early adoption is permitted. 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 November 2016, the FASB issued ASU 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash." This new guidance amends previous guidance on how to classify and present changes in restricted cash on the statement of cash flows. This new guidance is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted. We plan to adopt this new guidance by the required date and we will modify the presentation of our cash flow statement as required. In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory." This new guidance allows an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. It also eliminates the exceptions for an intra-entity transfer of assets other than inventory. This new guidance is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted. 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 August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments." This new guidance provides guidance on how to present and classify certain cash receipts and cash payments in the statement of cash flows. This new guidance is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted. 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 December 15, 2018. Currently, a significant portion of our financial instruments are measured at fair value, for which we do not maintain any allowances for loan losses in accordance with fair value accounting. As such, based on our initial evaluation of this new guidance, we do not believe the provisions in this guidance will have a material impact to how we account for these instruments. Separately, we account for our available-for-sale securities under the other-than-temporary impairment ("OTTI") model for debt securities. This new guidance changes the accounting for available-for-sale securities, including AFS securities purchased with credit deterioration. We are currently evaluating the impact that this update will have on our consolidated financial statements in regard to our available-for-sale securities. We plan to adopt this new guidance by the required date. 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. Early adoption is permitted. As discussed in Note 14 , our only material leases are those related to our leased office space, for which future payments under these leases total $18 million at September 30, 2017. Upon adoption of this standard in the first quarter of 2019, we will record a right-of-use asset and lease liability equal to the present value of these future lease payments discounted at our incremental borrowing rate. Based on our initial evaluation of this new guidance, and taking into consideration our current in-place leases, we do not expect that its adoption will have a material impact on our consolidated financial statements. We will continue evaluating this new standard and caution that any changes in our business or additional leases we may enter into could change our initial assessment. In January 2016, the FASB issued ASU 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities." This new guidance amends accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. This new guidance also amends certain disclosure requirements associated with the fair value of financial instruments and it is effective for fiscal years beginning after December 15, 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 May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers.” The update modifies the guidance companies use to recognize revenue from contracts with customers for transfers of goods or services and transfers of nonfinancial assets, unless those contracts are within the scope of other standards. The guidance also requires new qualitative and quantitative disclosures, including information about contract balances and performance obligations. In July 2015, the FASB approved a one year deferral of the effective date. Accordingly, the update is effective for us in the first quarter of 2018 with retrospective application to prior periods presented or as a cumulative effect adjustment in the period of adoption. Early adoption is permitted in the first quarter of 2017. In March 2016, the FASB issued ASU 2016-08, "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)." This new guidance provides additional implementation guidance on how an entity should identify the unit of accounting for the principal versus agent evaluations. In May 2016, the FASB issued ASU 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients," and in December 2016, the FASB issued ASU 2016-20, "Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers." These new ASUs provide more specific guidance on certain aspects of Topic 606. In September 2017, the FASB issued ASU 2017-13, "Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments (SEC Update). This new ASU allows certain public business entities to use the nonpublic business entity effective dates for adoption of the new revenue standard. Based on our initial evaluation of these new accounting standards, we do not expect that their adoption will have a material impact on our consolidated financial statements, as financial instruments are explicitly scoped out of the standards and nearly all of our income is generated from financial instruments. 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, 2017 and December 31, 2016 . 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, 2017 Financial Instruments Cash Collateral (Received) Pledged Assets (2) Interest rate agreements $ 3,942 $ — $ 3,942 $ (3,644 ) $ (298 ) $ — TBAs 2,875 — 2,875 (2,806 ) — 69 Futures 135 — 135 — — 135 Total Assets $ 6,952 $ — $ 6,952 $ (6,450 ) $ (298 ) $ 204 Liabilities (2) Interest rate agreements $ (57,994 ) $ — $ (57,994 ) $ 3,644 $ 54,350 $ — TBAs (3,946 ) — (3,946 ) 2,807 976 (163 ) Futures (423 ) — (423 ) — 423 — Loan warehouse debt (438,243 ) — (438,243 ) 438,243 — — Security repurchase agreements (549,811 ) — (549,811 ) 549,811 — — Total Liabilities $ (1,050,417 ) $ — $ (1,050,417 ) $ 994,505 $ 55,749 $ (163 ) 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, 2016 Financial Instruments Cash Collateral (Received) Pledged Assets (2) Interest rate agreements $ 24,980 $ — $ 24,980 $ (7,736 ) $ (4,784 ) $ 12,460 TBAs 8,300 — 8,300 (3,936 ) (4,364 ) — Total Assets $ 33,280 $ — $ 33,280 $ (11,672 ) $ (9,148 ) $ 12,460 Liabilities (2) Interest rate agreements $ (56,919 ) $ — $ (56,919 ) $ 7,736 $ 49,183 $ — TBAs (4,681 ) — (4,681 ) 3,936 — (745 ) Futures (928 ) — (928 ) — 928 — Loan warehouse debt (485,544 ) — (485,544 ) 485,544 — — Security repurchase agreements (305,995 ) — (305,995 ) 305,995 — — Total Liabilities $ (854,067 ) $ — $ (854,067 ) $ 803,211 $ 50,111 $ (745 ) (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, TBAs, credit default index swaps, and futures 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. 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. |
Principles of Consolidation
Principles of Consolidation | 9 Months Ended |
Sep. 30, 2017 | |
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, 2017 , we consolidated certain Legacy Sequoia securitization entities that we determined were VIEs and for which we determined we were the primary beneficiary. In addition, we consolidated the Sequoia Choice securitization entity beginning in the third quarter of 2017. 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 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, 2017 , the estimated fair value of our investments in the consolidated Legacy Sequoia entities and the Sequoia Choice entity was $19 million and $31 million , respectively. 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, 2017 Legacy Sequoia Sequoia Choice Total Consolidated VIEs (Dollars in Thousands) Residential loans, held-for-investment $ 673,134 $ 317,303 $ 990,437 Restricted cash 147 — 147 Accrued interest receivable 898 1,266 2,164 REO 3,020 — 3,020 Total Assets $ 677,199 $ 318,569 $ 995,768 Accrued interest payable $ 540 $ 1,045 $ 1,585 Asset-backed securities issued 657,960 286,328 944,288 Total Liabilities $ 658,500 $ 287,373 $ 945,873 Number of VIEs 20 1 21 December 31, 2016 Legacy Sequoia Sequoia Total Consolidated VIEs (Dollars in Thousands) Residential loans, held-for-investment $ 791,636 $ — $ 791,636 Restricted cash 148 — 148 Accrued interest receivable 1,000 — 1,000 REO 5,533 — 5,533 Total Assets $ 798,317 $ — $ 798,317 Accrued interest payable $ 518 $ — $ 518 Asset-backed securities issued 773,462 — 773,462 Total Liabilities $ 773,980 $ — $ 773,980 Number of VIEs 20 — 20 Analysis of Unconsolidated VIEs with Continuing Involvement Since 2012, we have transferred residential loans to 35 Sequoia securitization entities sponsored by us 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 the transferred loans where we held the servicing rights prior to the transfer and continue to hold the servicing rights, we recorded 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 residential MSRs (which we retain a third-party sub-servicer to perform) and the receipt of interest income associated with the securities we retained. The following table presents information related to securitization transactions that occurred during the three and nine months ended September 30, 2017 and 2016 . Table 4.2 – Securitization Activity Related to Unconsolidated VIEs Sponsored by Redwood Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2017 2016 2017 2016 Principal balance of loans transferred $ 839,264 $ 348,537 $ 2,223,387 $ 693,427 Trading securities retained, at fair value 24,617 — 55,607 — AFS securities retained, at fair value 4,416 1,839 11,476 3,673 MSRs recognized — 1,971 7,123 4,102 The following table summarizes the cash flows during the three and nine months ended September 30, 2017 and 2016 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) 2017 2016 2017 2016 Proceeds from new transfers $ 839,642 $ 356,497 $ 2,213,151 $ 708,539 MSR fees received 3,631 3,473 10,804 10,397 Funding of compensating interest, net (35 ) (98 ) (114 ) (254 ) Cash flows received on retained securities 6,882 6,384 19,843 24,314 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, 2017 and 2016 . Table 4.4 – Assumptions Related to Assets Retained from Unconsolidated VIEs Sponsored by Redwood Three Months Ended September 30, 2017 Three Months Ended September 30, 2016 At Date of Securitization MSRs Senior IO Securities Subordinate Securities MSRs Subordinate Securities Prepayment rates N/A 11 % 10 % 24 % 15 % Discount rates N/A 14 % 5 % 11 % 7 % Credit loss assumptions N/A 0.25 % 0.25 % N/A 0.25 % Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 At Date of Securitization MSRs Senior IO Securities Subordinate Securities MSRs Subordinate Securities Prepayment rates 9 % 10 % 10 % 20 % 15 % Discount rates 11 % 13 % 5 % 11 % 7 % Credit loss assumptions N/A 0.25 % 0.25 % N/A 0.25 % The following table presents additional information at September 30, 2017 and December 31, 2016 , 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, 2017 December 31, 2016 On-balance sheet assets, at fair value: Interest-only, senior and subordinate securities, classified as trading $ 94,491 $ 41,909 Subordinate securities, classified as AFS 228,764 234,025 Mortgage servicing rights 60,377 58,800 Maximum loss exposure (1) $ 383,632 $ 334,734 Assets transferred: Principal balance of loans outstanding $ 8,329,635 $ 6,870,398 Principal balance of loans 30+ days delinquent 12,651 21,427 (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, 2017 and December 31, 2016 . Table 4.6 – Key Assumptions and Sensitivity Analysis for Assets Retained from Unconsolidated VIEs Sponsored by Redwood September 30, 2017 MSRs Senior Securities (1) Subordinate Securities (Dollars in Thousands) Fair value at September 30, 2017 $ 60,377 $ 34,276 $ 288,979 Expected life (in years) (2) 7 5 13 Prepayment speed assumption (annual CPR) (2) 9 % 10 % 11 % Decrease in fair value from: 10% adverse change $ 1,694 $ 1,575 $ 667 25% adverse change 4,278 3,734 1,683 Discount rate assumption (2) 11 % 9 % 5 % Decrease in fair value from: 100 basis point increase $ 2,311 $ 1,281 $ 25,377 200 basis point increase 4,453 2,472 47,107 Credit loss assumption (2) N/A 0.25 % 0.25 % Decrease in fair value from: 10% higher losses N/A $ 4 $ 1,505 25% higher losses N/A 9 3,764 December 31, 2016 MSRs Senior Securities (1) Subordinate Securities (Dollars in Thousands) Fair value at December 31, 2016 $ 58,800 $ 26,618 $ 249,317 Expected life (in years) (2) 7 6 12 Prepayment speed assumption (annual CPR) (2) 11 % 8 % 12 % Decrease in fair value from: 10% adverse change $ 2,226 $ 1,075 $ 997 25% adverse change 5,284 2,569 2,494 Discount rate assumption (2) 11 % 8 % 6 % Decrease in fair value from: 100 basis point increase $ 2,088 $ 1,105 $ 19,574 200 basis point increase 4,032 2,128 36,574 Credit loss assumption (2) N/A 0.25 % 0.25 % Decrease in fair value from: 10% higher losses N/A $ 19 $ 1,174 25% higher losses N/A 49 2,933 (1) Senior securities included $34 million and $27 million of interest only securities at September 30, 2017 and December 31, 2016 , respectively. (2) Expected life, prepayment speed assumption, discount rate assumption, and credit loss assumption presented in the tables above represent weighted averages. Analysis of 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 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, 2017 , grouped by security type. Table 4.7 – Third-Party Sponsored VIE Summary (Dollars in Thousands) September 30, 2017 Mortgage-Backed Securities Senior $ 181,723 Re-REMIC 39,033 Subordinate 812,260 Total Investments in Third-Party Sponsored VIEs $ 1,033,016 We determined that we are not the primary beneficiary of any 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. Our assessments of whether we are required to consolidate a VIE may change in subsequent reporting periods based upon changing facts and circumstances pertaining to each VIE. Any related accounting changes could result in a material impact to our financial statements. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 9 Months Ended |
Sep. 30, 2017 | |
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, 2017 and December 31, 2016 . Table 5.1 – Carrying Values and Fair Values of Assets and Liabilities September 30, 2017 December 31, 2016 Carrying Value Fair Value Carrying Value Fair Value (In Thousands) Assets Residential loans, held-for-sale At fair value $ 924,594 $ 924,594 $ 834,193 $ 834,193 At lower of cost or fair value 1,087 1,227 1,206 1,365 Residential loans, held-for-investment At fair value 3,259,239 3,259,239 3,052,652 3,052,652 Trading securities 820,134 820,134 445,687 445,687 Available-for-sale securities 536,138 536,138 572,752 572,752 MSRs 62,928 62,928 118,526 118,526 Cash and cash equivalents 257,611 257,611 212,844 212,844 Restricted cash 26,258 26,258 8,623 8,623 Accrued interest receivable 21,256 21,256 18,454 18,454 Derivative assets 11,948 11,948 36,595 36,595 REO (1) 3,020 3,441 5,533 5,560 Margin receivable (1) 93,679 93,679 68,038 68,038 FHLBC stock (1) 43,393 43,393 43,393 43,393 Guarantee asset (1) 3,049 3,049 4,092 4,092 Commercial loans (1) — — 2,700 2,700 Pledged collateral (1) 42,933 42,933 42,875 42,875 Liabilities Short-term debt facilities $ 988,054 $ 988,054 $ 791,539 $ 791,539 Accrued interest payable 18,836 18,836 9,608 9,608 Margin payable 841 841 12,783 12,783 Guarantee obligation 20,101 19,682 21,668 22,181 Derivative liabilities 65,238 65,238 66,329 66,329 ABS issued at fair value, net 944,288 944,288 773,462 773,462 FHLBC long-term borrowings 1,999,999 1,999,999 1,999,999 1,999,999 Convertible notes, net 686,058 705,703 482,195 493,365 Trust preferred securities and subordinated notes, net 138,524 101,138 138,489 96,255 (1) These assets are included in Other assets on our consolidated balance sheets. During the three and nine months ended September 30, 2017 , we elected the fair value option for $16 million and $32 million of residential senior securities, $167 million and $412 million of subordinate securities, $1.43 billion and $3.72 billion of residential loans (principal balance), and $0.3 million and $8 million of MSRs, respectively. We anticipate electing the fair value option for all future purchases of residential loans that we may sell to third parties or transfer to securitizations, for MSRs purchased or retained from sales of residential loans, and 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, 2017 and December 31, 2016 , 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, 2017 Carrying Value Fair Value Measurements Using (In Thousands) Level 1 Level 2 Level 3 Assets Residential loans $ 4,183,833 $ — $ — $ 4,183,833 Trading securities 820,134 — — 820,134 Available-for-sale securities 536,138 — — 536,138 Derivative assets 11,948 3,010 3,942 4,996 MSRs 62,928 — — 62,928 Pledged collateral 42,933 42,933 — — FHLBC stock 43,393 — 43,393 — Guarantee asset 3,049 — — 3,049 Liabilities Derivative liabilities $ 65,238 $ 4,369 $ 57,994 $ 2,875 ABS issued 944,288 — — 944,288 December 31, 2016 Carrying Value Fair Value Measurements Using (In Thousands) Level 1 Level 2 Level 3 Assets Residential loans $ 3,886,845 $ — $ — $ 3,886,845 Trading securities 445,687 — — 445,687 Available-for-sale securities 572,752 — — 572,752 Derivative assets 36,595 8,300 24,980 3,315 MSRs 118,526 — — 118,526 Pledged collateral 42,875 42,875 — — FHLBC stock 43,393 — 43,393 — Guarantee asset 4,092 — — 4,092 Liabilities Derivative liabilities $ 66,329 $ 5,609 $ 56,919 $ 3,801 ABS issued 773,462 — — 773,462 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, 2017 . Table 5.3 – Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis Assets Liabilities Residential Loans Trading Securities AFS Securities MSRs Guarantee Asset Derivatives (1) ABS Issued (In Thousands) Beginning balance - December 31, 2016 $ 3,886,845 $ 445,687 $ 572,752 $ 118,526 $ 4,092 $ (486 ) $ 773,462 Acquisitions 3,791,471 444,073 31,654 7,957 — — 286,898 Sales (3,147,707 ) (87,092 ) (60,801 ) (52,966 ) — — — Principal paydowns (405,888 ) (13,219 ) (42,325 ) — — — (146,358 ) Gains (losses) in net income, net 62,290 30,685 24,011 (10,589 ) (1,043 ) 33,686 30,286 Unrealized losses in OCI, net — — 10,847 — — — — Other settlements, net (2) (3,178 ) — — — — (31,079 ) — Ending Balance - September 30, 2017 $ 4,183,833 $ 820,134 $ 536,138 $ 62,928 $ 3,049 $ 2,121 $ 944,288 (1) For the purpose of this presentation, derivative assets and liabilities, which consist of loan purchase commitments, are presented on a net basis. (2) Other settlements, net for derivatives represents the transfer of the fair value of loan purchase commitments at the time loans are acquired to the basis of residential loans. 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, 2017 and 2016 . Gains or losses incurred on assets or liabilities sold, matured, called, or fully written down during the three and nine months ended September 30, 2017 and 2016 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, 2017 and 2016 Included in Net Income Included in Net Income Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2017 2016 2017 2016 Assets Residential loans at Redwood $ 14,359 $ 3,818 $ 24,227 $ 32,202 Residential loans at consolidated Sequoia entities 3,497 9,200 22,949 (18,864 ) Trading securities (36 ) 8,646 24,452 978 Available-for-sale securities (3 ) — (248 ) (305 ) MSRs 317 6,549 (1,005 ) (36,738 ) Loan purchase commitments 2,117 5,381 2,121 5,896 Other assets - Guarantee asset (239 ) 307 (1,043 ) (2,070 ) Liabilities ABS issued $ (7,771 ) $ 10,522 $ (30,286 ) $ (14,419 ) The following table presents information on assets recorded at fair value on a non-recurring basis at September 30, 2017 . 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 sheet at September 30, 2017 . Table 5.5 – Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis at September 30, 2017 Gain (Loss) for September 30, 2017 Carrying Value Fair Value Measurements Using Three Months Ended Nine Months Ended (In Thousands) Level 1 Level 2 Level 3 September 30, 2017 September 30, 2017 Assets Residential loans, at lower of cost or fair value $ 866 $ — $ — $ 866 $ 18 $ 21 REO 1,725 — — 1,725 — (81 ) 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, 2017 and 2016 . Table 5.6 – Market Valuation Gains and Losses, Net Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2017 2016 2017 2016 Mortgage Banking Activities, Net Residential loans held-for-sale, at fair value $ 14,859 $ 650 $ 29,175 $ 11,948 Residential loan purchase commitments 13,276 12,021 33,947 35,508 Commercial loans, at fair value — — — 433 Sequoia securities — — — 1,455 Risk management derivatives, net (7,077 ) (3,287 ) (13,787 ) (25,281 ) Total mortgage banking activities, net (1) $ 21,058 $ 9,384 $ 49,335 $ 24,063 Investment Fair Value Changes, Net Residential loans held-for-investment, at Redwood $ 2,881 $ (655 ) $ 8,902 $ 22,161 Trading securities 607 8,898 30,676 3,728 Valuation adjustments on commercial loans held-for-sale — (307 ) 300 (307 ) Net investments in Legacy Sequoia entities (2) (1,045 ) (255 ) (3,842 ) (2,086 ) Net investment in Sequoia Choice entity (2) (256 ) — (256 ) — Risk sharing investments (267 ) 15 (985 ) (689 ) Risk management derivatives, net (1,592 ) 4,222 (24,557 ) (41,188 ) Impairments on AFS securities (4 ) — (248 ) (305 ) Total investment fair value changes, net $ 324 $ 11,918 $ 9,990 $ (18,686 ) MSR Income (Loss), Net MSRs $ (1,351 ) $ 1,380 $ (10,842 ) $ (70,489 ) Risk management derivatives, net (422 ) (6,336 ) 1,869 55,874 Total MSR loss, net (3) $ (1,773 ) $ (4,956 ) $ (8,973 ) $ (14,615 ) Total Market Valuation Gains (Losses), Net $ 19,609 $ 16,346 $ 50,352 $ (9,238 ) (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-sale, REO and the ABS issued at the entities, which netted together represent the change in value of our retained investments at the consolidated VIEs. (3) MSR income (loss), net presented above does not include net fee income or provisions for repurchases that are components of MSR income, net on our consolidated statements of income, as these amounts do not represent market valuation adjustments. At September 30, 2017 , 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, 2016 . 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, 2017 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 $ 2,450,845 Whole loan spread to TBA price $ 2.13 - $ 3.15 $ 3.13 Whole loan spread to swap rate 180 - 270 bps 265 bps Jumbo hybrid loans 168,138 Prepayment rate (annual CPR) 15 - 15 % 15 % Whole loan spread to swap rate 100 - 190 bps 163 bps Jumbo loans committed to sell 574,413 Whole loan committed sales price $ 102.42 - $ 103.08 $ 102.89 Loans held by Legacy Sequoia (1) 673,134 Liability price N/A N/A Loans held by Sequoia Choice (1) 317,303 Liability price N/A N/A Residential loans, at lower of cost or fair value 866 Loss severity 13 - 30 % 18 % Trading and AFS securities 1,356,272 Discount rate 2 - 25 % 5 % Prepayment rate (annual CPR) — - 50 % 10 % Default rate — - 32 % 3 % Loss severity — - 40 % 22 % MSRs 62,928 Discount rate 10 - 35 % 11 % Prepayment rate (annual CPR) 5 - 31 % 9 % Per loan annual cost to service $ 82 - $ 84 $ 82 Guarantee asset 3,049 Discount rate 11 - 11 % 11 % Prepayment rate (annual CPR) 14 - 14 % 14 % REO 1,725 Loss severity 4 - 39 % 18 % Loan purchase commitments, net (2) 2,121 MSR multiple 1.9 - 5.1 x 3.8 x Pull-through rate 13 - 100 % 72 % Whole loan spread to TBA price $ 2.13 - $ 3.10 $ 3.07 Whole loan spread to swap rate - fixed rate 180 - 270 bps 268 bps Prepayment rate (annual CPR) 15 - 15 % 15 % Whole loan spread to swap rate - hybrid 100 - 190 bps 133 bps Liabilities ABS issued: (1) 944,288 Discount rate 3 - 15 % 4 % Prepayment rate (annual CPR) 11 - 20 % 18 % Default rate — - 12 % 5 % Loss severity 20 - 32 % 26 % (1) The fair value of the loans held by consolidated Sequoia entities was based on the fair value of the ABS issued by these entities, which we determined were more readily observable, in accordance with accounting guidance for collateralized financing entities. (2) For the purpose of this presentation, loan purchase commitment assets and liabilities are presented net. 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. At September 30, 2017 , our jumbo fixed-rate loans that were not committed to sell were priced using whole loan sale inputs. These assets would generally decrease in value based upon an increase in the credit spread, prepayment speed, or credit support assumptions. Residential loans at Consolidated Sequoia entities We have elected to account for the consolidated Sequoia securitization entities as collateralized financing entities ("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 Sequoia 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 Sequoia CFEs. Real estate securities Real estate securities include residential, commercial, and other asset-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, loss severity and credit support. The estimated fair value of our securities would generally decrease based upon an increase in default rates, serious delinquencies, or a decrease in prepayment rates or credit support. 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, 2017 , we received dealer price indications on 73% of our securities, representing 81% 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, financial futures, and loan purchase commitments ("LPCs"). 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 fair values for jumbo loans are estimated based on the estimated fair values of the underlying loans (as described in " Residential loans " above) as well as 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). MSRs MSRs include the rights to service jumbo and conforming 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 2% of the third-party valuation. FHLBC Stock Our Federal Home Loan Bank ("FHLB") member subsidiary is required to purchase Federal Home Loan Bank of Chicago ("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, 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). REO 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). Guarantee Obligations In association with our risk sharing transactions with the Agencies, we have made certain guarantees. These obligations are initially recorded at fair value and subsequently carried at amortized cost. Fair values of guarantee obligations are determined using internal models that incorporate certain significant inputs that are considered unobservable and are therefore Level 3 in nature. Pricing inputs include assumed future prepayment rates, credit losses, and market discount rates. A decrease in future prepayment rates or discount rates, or an increase in credit losses, would generally cause the fair value of the guarantee obligations to decrease (become a larger liability). Short-term debt Short-term debt includes our credit facilities that mature within one year. As these borrowings are secured and subject to margin calls and as the rates on these borrowings reset frequently to market rates, we believe that carrying values approximate fair values (Level 2). Additionally, at September 30, 2017, short-term debt included unsecured convertible senior notes with a maturity of less than one year. The fair value of the convertible notes is determined using quoted prices in generally active markets (Level 2). ABS issued ABS issued includes asset-backed securities issued through the Legacy Sequoia and Sequoia Choice securitization entities. These instruments are generally illiquid in nature and trade infrequently. 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. For ABS issued, we utilize both market comparable pricing and discounted cash flow analysis valuation techniques. Relevant market indicators factored into the analysis include bid/ask spreads, the amount and timing of collateral 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). A decrease in credit losses or discount rate, or an increase in prepayment rates, would generally cause the fair value of the ABS issued to decrease (become a larger liability). FHLBC Borrowings FHLBC borrowings include amounts borrowed from the FHLBC that are secured, generally by residential mortgage loans. As these borrowings are secured and subject to margin calls and as the rates on these borrowings reset frequently to market rates, we believe that carrying values approximate fair values (Level 2). Convertible notes Convertible notes include unsecured convertible and exchangeable senior notes. Fair values are determined using quoted prices in generally active markets (Level 2). Trust preferred securities and subordinated notes Estimated fair values of trust preferred securities and subordinated notes are determined using discounted cash flow analysis valuation techniques. 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. Estimated fair values are based on applying the market indicators to generate discounted cash flows (Level 3). |
Residential Loans
Residential Loans | 9 Months Ended |
Sep. 30, 2017 | |
Receivables [Abstract] | |
Residential Loans | Residential Loans We acquire jumbo residential loans from third-party originators. The following table summarizes the classifications and carrying values of the residential loans owned at Redwood and at consolidated Sequoia entities at September 30, 2017 and December 31, 2016 . Table 6.1 – Classifications and Carrying Values of Residential Loans September 30, 2017 Legacy Sequoia (In Thousands) Redwood Sequoia Choice Total Held-for-sale At fair value $ 924,594 $ — $ — $ 924,594 At lower of cost or fair value 1,087 — — 1,087 Total held-for-sale 925,681 — — 925,681 Held-for-investment at fair value 2,268,802 673,134 317,303 3,259,239 Total Residential Loans $ 3,194,483 $ 673,134 $ 317,303 $ 4,184,920 December 31, 2016 Legacy Sequoia (In Thousands) Redwood Sequoia Choice Total Held-for-sale At fair value $ 834,193 $ — $ — $ 834,193 At lower of cost or fair value 1,206 — — 1,206 Total held-for-sale 835,399 — — 835,399 Held-for-investment at fair value 2,261,016 791,636 — 3,052,652 Total Residential Loans $ 3,096,415 $ 791,636 $ — $ 3,888,051 At September 30, 2017 , we owned mortgage servicing rights associated with $2.41 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, 2017 , we owned 1,233 loans held-for-sale at fair value with an aggregate unpaid principal balance of $0.90 billion and a fair value of $0.92 billion , compared to 1,114 loans with an aggregate unpaid principal balance of $0.83 billion and a fair value of $0.83 billion at December 31, 2016 . At September 30, 2017 and December 31, 2016 , none of these loans were greater than 90 days delinquent or in foreclosure. During the three and nine months ended September 30, 2017 , we purchased $1.43 billion and $3.72 billion (principal balance) of loans, respectively, for which we elected the fair value option, and we sold $1.05 billion and $3.08 billion (principal balance) of loans, respectively, for which we recorded net market valuation gains of $15 million and $29 million , respectively, through Mortgage banking activities, net on our consolidated statements of income. At September 30, 2017 , loans held-for-sale with a market value of $493 million were pledged as collateral under short-term borrowing agreements. During the three and nine months ended September 30, 2016 , we purchased $1.22 billion and $3.73 billion (principal balance) of loans, respectively, for which we elected the fair value option, and we sold $0.76 billion and $2.80 billion (principal balance) of loans, respectively, for which we recorded net market valuation gains of $1 million and $12 million , respectively, through Mortgage banking activities, net on our consolidated statements of income. At Lower of Cost or Fair Value At September 30, 2017 and December 31, 2016 , we held six and seven residential loans, respectively, at the lower of cost or fair value with $1 million and $2 million in outstanding principal balance, respectively, and a carrying value of $1 million for both periods. At both September 30, 2017 and December 31, 2016 , one of these loans with an unpaid principal balance of $0.3 million was greater than 90 days delinquent and none of these loans were in foreclosure. Residential Loans Held-for-Investment at Fair Value At Redwood At September 30, 2017 , we owned 3,081 held-for-investment loans at Redwood with an aggregate unpaid principal balance of $2.23 billion and a fair value of $2.27 billion , compared to 3,068 loans with an aggregate unpaid principal balance of $2.23 billion and a fair value of $2.26 billion at December 31, 2016 . At September 30, 2017 , none of these loans were greater than 90 days delinquent or in foreclosure. At December 31, 2016 , one of these loans with an unpaid principal balance of $0.2 million was greater than 90 days delinquent and none of these loans were in foreclosure. During the three and nine months ended September 30, 2017 , we transferred loans with a fair value of $78 million and $326 million , respectively, from held-for-sale to held-for-investment. During both the three and nine months ended September 30, 2017 , we transferred loans with a fair value of $98 million from held-for-investment to held-for-sale. During the three and nine months ended September 30, 2017 , we recorded net market valuation gains of $3 million and $9 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, 2017 , loans with a fair value of $2.26 billion were pledged as collateral under a borrowing agreement with the FHLBC. During the three and nine months ended September 30, 2016 , we transferred loans with a fair value of $152 million and $878 million , respectively, from held-for-sale to held-for-investment. During the three and nine months ended September 30, 2016 , we transferred loans with a fair value of zero and $56 million , respectively, from held-for-investment to held-for-sale. During the three and nine months ended September 30, 2016 , we recorded a net market valuation loss of $1 million and a net market valuation gain of $22 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, 2017 , the outstanding loans held-for-investment at Redwood were prime-quality, first lien loans, of which 95% were originated between 2013 and 2017, and 5% were originated in 2012 and prior years. The weighted average FICO score of borrowers backing these loans was 772 (at origination) and the weighted average loan-to-value ("LTV") ratio of these loans was 65% (at origination). At September 30, 2017 , these loans were comprised of 94% fixed-rate loans with a weighted average coupon of 4.08% , and the remainder were hybrid or ARM loans with a weighted average coupon of 4.00% . At Consolidated Legacy Sequoia Entities At September 30, 2017 , we owned 3,308 held-for-investment loans at consolidated Legacy Sequoia entities, with an aggregate unpaid balance of $738 million and a fair value of $673 million , as compared to 3,735 loans at December 31, 2016 , with an aggregate unpaid principal balance of $887 million and a fair value of $792 million . At origination, the weighted average FICO score of borrowers backing these loans was 728 , the weighted average LTV ratio of these loans was 66% , and the loans were nearly all first lien and prime-quality. At September 30, 2017 and December 31, 2016 , the unpaid principal balance of loans at consolidated Legacy Sequoia entities delinquent greater than 90 days was $14 million and $19 million , respectively, and the unpaid principal balance of loans in foreclosure was $12 million and $11 million , respectively. During the three and nine months ended September 30, 2017 , we recorded net market valuation gain s of $4 million and $24 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, 2016 , we recorded a net market valuation gain of $9 million and a net market valuation loss of $19 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 is 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 Entity At September 30, 2017 , we owned 409 held-for-investment loans at the consolidated Sequoia Choice entity, with an aggregate unpaid balance of $308 million and a fair value of $317 million . There were no loans held at the Sequoia Choice entity a t December 31, 2016. At origination, the weighted average FICO score of borrowers backing these loans was 744 , the weighted average LTV ratio of these loans was 75% , and the loans were all first lien and prime-quality. At September 30, 2017 , none of these loans were greater than 90 days delinquent or in foreclosure. During both the three and nine months ended September 30, 2017 , we transferred loans with a fair value of $318 million from held-for-sale to held-for-investment, associated with this transaction. During both the three and nine months ended September 30, 2017, we recorded a net market valuation loss of $1 million 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 is based on the estimated fair value of the ABS issued associated with this transaction . The net impact to our income statement associated with our retained economic investment in the Sequoia Choice securitization entity is presented in Note 5. |
Real Estate Securities
Real Estate Securities | 9 Months Ended |
Sep. 30, 2017 | |
Investments, Debt and Equity Securities [Abstract] | |
Real Estate Securities | Real Estate Securities We invest in real estate securities. The following table presents the fair values of our real estate securities by type at September 30, 2017 and December 31, 2016 . Table 7.1 – Fair Values of Real Estate Securities by Type (In Thousands) September 30, 2017 December 31, 2016 Trading $ 820,134 $ 445,687 Available-for-sale 536,138 572,752 Total Real Estate Securities $ 1,356,272 $ 1,018,439 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. Re-REMIC securities, as presented herein, were created through the resecuritization of certain senior security interests to provide additional credit support to those interests. These re-REMIC securities are therefore subordinate to the remaining senior security interests, but senior to any subordinate tranches of the securitization from which they were created. Subordinate securities are all interests below senior and re-REMIC interests. We further separate our subordinate securities into mezzanine and subordinate, where mezzanine includes securities initially rated AA through BBB- and issued in 2012 or later. Nearly all of our securities are supported by collateral that was designated as prime as of issuance. Trading Securities The following table presents the fair value of trading securities by position and collateral type at September 30, 2017 and December 31, 2016 . Table 7.2 – Trading Securities by Position and Collateral Type (In Thousands) September 30, 2017 December 31, 2016 Senior Securities $ 62,767 $ 37,067 Subordinate Securities Mezzanine 458,299 256,226 Subordinate 299,068 152,394 Total Subordinate Securities 757,367 408,620 Total Trading Securities $ 820,134 $ 445,687 We elected the fair value option for certain securities and classify them as trading securities. Our trading securities include both residential and commercial/multifamily securities. At September 30, 2017 , trading securities with a carrying value of $435 million were pledged as collateral under short-term borrowing agreements. See Note 11 for additional information on short-term debt. At September 30, 2017 and December 31, 2016 , our senior trading securities were comprised of interest-only securities, for which there is no principal balance, and our subordinate trading securities had an unpaid principal balance of $767 million and $434 million , respectively. At September 30, 2017 and December 31, 2016 , subordinate trading securities included $287 million and $152 million , respectively, of Agency residential mortgage credit risk transfer (or "CRT") securities, $60 million and $15 million , respectively, of Sequoia securities, $167 million and $149 million , respectively, of other third-party residential securities, and $243 million and $92 million , respectively, of third-party commercial/multifamily securities. During the three and nine months ended September 30, 2017 , we acquired $171 million and $432 million (principal balance), respectively, of senior and subordinate securities for which we elected the fair value option and classified as trading, and sold $25 million and $85 million , respectively, of such securities. During the three and nine months ended September 30, 2016 , we acquired $65 million and $198 million (principal balance), respectively, of senior and subordinate securities for which we elected the fair value option and classified as trading, and sold $2 million and $238 million , respectively, of such securities. During the three and nine months ended September 30, 2017 , we recorded net market valuation gains of $1 million and $31 million , respectively, on trading securities, included in Investment fair value changes, net and Mortgage banking activities, net on our consolidated statements of income. During the three and nine months ended September 30, 2016 , we recorded net market valuation gains of $9 million and $5 million , respectively, on trading securities, included in Investment fair value changes, net and Mortgage banking activities, 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, 2017 and December 31, 2016 . Table 7.3 – Available-for-Sale Securities by Position and Collateral Type (In Thousands) September 30, 2017 December 31, 2016 Senior Securities $ 153,232 $ 136,546 Re-REMIC Securities 39,033 85,479 Subordinate Securities Mezzanine 119,687 163,715 Subordinate 224,186 187,012 Total Subordinate Securities 343,873 350,727 Total AFS Securities $ 536,138 $ 572,752 At September 30, 2017 and December 31, 2016 , all of our available-for-sale securities were comprised of residential mortgage-backed securities. At September 30, 2017 , AFS securities with a carrying value of $229 million were pledged as collateral under short-term borrowing agreements. See Note 11 for additional information on short-term debt. During the three and nine months ended September 30, 2017 , we purchased $4 million and $32 million of AFS securities, respectively, and sold $23 million and $61 million of AFS securities, respectively, which resulted in net realized gains of $2 million and $9 million , respectively. During the three and nine months ended September 30, 2016 , we purchased $11 million and $29 million of AFS securities, respectively, and sold $26 million and $241 million of AFS securities, respectively, which resulted in net realized gains of $2 million and $20 million , respectively. In addition, during the nine months ended September 30, 2017, we exchanged our interests in three Re-REMICs, which together had a fair value of $47 million , for the senior securities underlying the Re-REMICs, and reclassified our interests from Re-REMIC to Senior. 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, 2017 , there were $0.1 million of AFS securities with contractual maturities less than five years , $0.4 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, 2017 and December 31, 2016 . Table 7.4 – Carrying Value of AFS Securities September 30, 2017 (In Thousands) Senior Re-REMIC Subordinate Total Principal balance $ 156,936 $ 44,896 $ 442,219 $ 644,051 Credit reserve (3,024 ) (5,810 ) (38,041 ) (46,875 ) Unamortized discount, net (36,575 ) (10,412 ) (142,405 ) (189,392 ) Amortized cost 117,337 28,674 261,773 407,784 Gross unrealized gains 37,155 10,359 83,185 130,699 Gross unrealized losses (1,260 ) — (1,085 ) (2,345 ) Carrying Value $ 153,232 $ 39,033 $ 343,873 $ 536,138 December 31, 2016 (In Thousands) Senior Re-REMIC Subordinate Total Principal balance $ 148,862 $ 95,608 $ 456,359 $ 700,829 Credit reserve (4,814 ) (6,857 ) (35,802 ) (47,473 ) Unamortized discount, net (41,877 ) (19,613 ) (136,622 ) (198,112 ) Amortized cost 102,171 69,138 283,935 455,244 Gross unrealized gains 36,304 16,341 68,032 120,677 Gross unrealized losses (1,929 ) — (1,240 ) (3,169 ) Carrying Value $ 136,546 $ 85,479 $ 350,727 $ 572,752 The following table presents the changes for the three and nine months ended September 30, 2017 , in unamortized discount and designated credit reserves on residential AFS securities. Table 7.5 – Changes in Unamortized Discount and Designated Credit Reserves on AFS Securities Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017 Credit Reserve Unamortized Discount, Net Credit Unamortized (In Thousands) Beginning balance $ 47,588 $ 192,063 $ 47,473 $ 198,112 Amortization of net discount — (4,631 ) — (14,697 ) Realized credit losses (795 ) — (3,232 ) — Acquisitions 1,665 2,732 8,256 11,375 Sales, calls, other (144 ) (2,214 ) (3,405 ) (7,863 ) Impairments 3 — 248 — Transfers to (release of) credit reserves, net (1,442 ) 1,442 (2,465 ) 2,465 Ending Balance $ 46,875 $ 189,392 $ 46,875 $ 189,392 AFS Securities with Unrealized Losses The following table presents the components comprising the total carrying value of residential AFS securities that were in a gross unrealized loss position at September 30, 2017 and December 31, 2016 . Table 7.6 – Components of Fair Value of Residential 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, 2017 $ 10,164 $ (694 ) $ 9,470 $ 31,001 $ (1,651 ) $ 29,350 December 31, 2016 15,772 (330 ) 15,442 60,035 (2,839 ) 57,196 At September 30, 2017 , after giving effect to purchases, sales, and extinguishment due to credit losses, our consolidated balance sheet included 173 AFS securities, of which 14 were in an unrealized loss position and six were in a continuous unrealized loss position for 12 consecutive months or longer. At December 31, 2016 , our consolidated balance sheet included 186 AFS securities, of which 19 were in an unrealized loss position and 10 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 $2 million at September 30, 2017 . 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, 2017 , 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 the nine months ended September 30, 2017 , other-than-temporary impairments related to our AFS securities were $0.6 million , of which $0.2 million were recognized through our consolidated statements of income and $0.4 million were recognized in Accumulated other comprehensive income, a component of our consolidated balance sheet. 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, 2017 . Table 7.7 – Significant Valuation Assumptions September 30, 2017 Range for Securities Prepayment rates 8% - 15% Projected losses 0.25% - 8% 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, 2017 and 2016 , for which a portion of an OTTI was recognized in other comprehensive income. Table 7.8 – Activity of the Credit Component of Other-than-Temporary Impairments Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2017 2016 2017 2016 Balance at beginning of period $ 25,802 $ 28,198 $ 28,261 $ 28,277 Additions Initial credit impairments — — 178 291 Subsequent credit impairments — — 47 — Reductions Securities sold, or expected to sell — — (2,282 ) (261 ) Securities with no outstanding principal at period end (42 ) — (444 ) (109 ) Balance at End of Period $ 25,760 $ 28,198 $ 25,760 $ 28,198 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, 2017 and 2016 . Table 7.9 – Gross Realized Gains and Losses on AFS Securities Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2017 2016 2017 2016 Gross realized gains - sales $ 1,734 $ 1,990 $ 9,381 $ 22,395 Gross realized gains - calls — — 677 1,210 Gross realized losses - sales — — — (2,293 ) Gross realized losses - calls — — (497 ) — Total Realized Gains on Sales and Calls of AFS Securities, net $ 1,734 $ 1,990 $ 9,561 $ 21,312 |
Mortgage Servicing Rights
Mortgage Servicing Rights | 9 Months Ended |
Sep. 30, 2017 | |
Transfers and Servicing [Abstract] | |
Mortgage Servicing Rights | 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 following table presents the fair value of MSRs and the aggregate principal amounts of associated loans as of September 30, 2017 and December 31, 2016 . Table 8.1 – Fair Value of MSRs and Aggregate Principal Amounts of Associated Loans September 30, 2017 December 31, 2016 (In Thousands) MSR Fair Value Associated Principal MSR Fair Value Associated Principal Mortgage Servicing Rights Conforming Loans $ 1,125 $ 107,298 $ 58,523 $ 4,989,720 Jumbo Loans 61,803 5,639,708 60,003 5,467,169 Total Mortgage Servicing Rights $ 62,928 $ 5,747,006 $ 118,526 $ 10,456,889 The following table presents activity for MSRs for the three and nine months ended September 30, 2017 and 2016 . Table 8.2 – Activity for MSRs Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2017 2016 2017 2016 Balance at beginning of period $ 63,770 $ 110,046 $ 118,526 $ 191,976 Additions 256 3,443 7,957 22,941 Sales — (8,860 ) (52,966 ) (38,419 ) Changes in fair value due to: Changes in assumptions (1) 563 7,085 (3,450 ) (52,723 ) Other changes (2) (1,661 ) (5,705 ) (7,139 ) (17,766 ) Balance at End of Period $ 62,928 $ 106,009 $ 62,928 $ 106,009 (1) Primarily reflects changes in prepayment assumptions due to changes in market interest rates. (2) Represents changes due to receipt of expected cash flows. During the three months ended September 30, 2017 , we did no t sell any MSRs. During the nine months ended September 30, 2017 , we sold conforming MSRs with a fair value of $53 million . We make investments in MSRs through the retention of servicing rights associated with the residential mortgage loans that we acquire and subsequently transfer to third parties or through the direct acquisition of MSRs sold by third parties. We hold our MSR investments at our taxable REIT subsidiary. The following table details the retention and purchase of MSRs during the three and nine months ended September 30, 2017 . Table 8.3 – MSR Additions Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017 (In Thousands) MSR Fair Value Associated Principal MSR Fair Value Associated Principal Jumbo MSR additions: From securitization $ — $ — $ 7,123 $ 654,605 From loan sales — — 263 31,658 Total jumbo MSR additions — — 7,386 686,263 Conforming MSR additions: From purchases 256 41,263 571 95,595 Total MSR Additions $ 256 $ 41,263 $ 7,957 $ 781,858 The following table presents the components of our MSR income for the three and nine months ended September 30, 2017 and 2016 . Table 8.4 – Components of MSR Income, net Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2017 2016 2017 2016 Servicing income $ 3,872 $ 9,943 $ 17,290 $ 32,199 Cost of sub-servicer (476 ) (1,217 ) (2,515 ) (4,958 ) Net servicing fee income 3,396 8,726 14,775 27,241 Market valuation changes of MSRs (1,351 ) 1,380 (10,842 ) (70,489 ) Market valuation changes of associated derivatives (422 ) (6,336 ) 1,869 55,874 MSR provision for repurchases (8 ) — 304 208 MSR Income, Net $ 1,615 $ 3,770 $ 6,106 $ 12,834 |
Derivative Financial Instrument
Derivative Financial Instruments | 9 Months Ended |
Sep. 30, 2017 | |
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, 2017 and December 31, 2016 . Table 9.1 – Fair Value and Notional Amount of Derivative Financial Instruments September 30, 2017 December 31, 2016 Fair Value Notional Amount Fair Value Notional Amount (In Thousands) Assets - Risk Management Derivatives Interest rate swaps $ 3,645 $ 509,000 $ 19,859 $ 1,009,000 TBAs 2,875 985,000 8,300 850,000 Futures 135 7,500 — — Swaptions 297 300,000 5,121 345,000 Assets - Other Derivatives Loan purchase commitments 4,996 802,550 3,315 352,981 Total Assets $ 11,948 $ 2,604,050 $ 36,595 $ 2,556,981 Liabilities - Cash Flow Hedges Interest rate swaps $ (45,093 ) $ 139,500 $ (44,822 ) $ 139,500 Liabilities - Risk Management Derivatives Interest rate swaps (12,901 ) 1,838,500 (12,097 ) 1,101,500 TBAs (3,946 ) 950,000 (4,681 ) 510,000 Futures (423 ) 29,000 (928 ) 87,500 Liabilities - Other Derivatives Loan purchase commitments (2,875 ) 683,709 (3,801 ) 584,862 Total Liabilities $ (65,238 ) $ 3,640,709 $ (66,329 ) $ 2,423,362 Total Derivative Financial Instruments, Net $ (53,290 ) $ 6,244,759 $ (29,734 ) $ 4,980,343 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, 2017 , we were party to swaps and swaptions with an aggregate notional amount of $2.65 billion , TBA agreements sold with an aggregate notional amount of $1.94 billion , and financial futures contracts with an aggregate notional amount of $37 million . At December 31, 2016 , we were party to swaps and swaptions with an aggregate notional amount of $2.46 billion , TBA agreements sold with an aggregate notional amount of $1.36 billion , and financial futures contracts with an aggregate notional amount of $88 million . During the three and nine months ended September 30, 2017 , risk management derivatives had net market valuation losses of $9 million and $36 million , respectively. During the three and nine months ended September 30, 2016 , risk management derivatives had net market valuation losses of $5 million and $11 million , respectively. These market valuation gains and losses are recorded in Mortgage banking activities, net, Investment fair value changes, net, and MSR income, net on our consolidated statements of income. Loan Purchase Commitments LPCs that qualify as derivatives are recorded at their estimated fair values. Net market valuation gains on LPCs were $13 million and $34 million for the three and nine months ended September 30, 2017 , respectively, and were $12 million and $36 million for the three and nine months ended September 30, 2016 , respectively. The market valuation gains and losses 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, 2017 , changes in the values of designated cash flow hedges were positive $0.3 million and negative $0.4 million , respectively, and were recorded in Accumulated other comprehensive income, a component of equity. For the three and nine months ended September 30, 2016 , changes in the values of designated cash flow hedges were positive $1 million and negative $23 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 $44 million at both September 30, 2017 and December 31, 2016 . 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, 2017 and 2016 . Table 9.2 – 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) 2017 2016 2017 2016 Net interest expense on cash flows hedges $ (1,119 ) $ (1,314 ) $ (3,516 ) $ (4,049 ) Realized net losses reclassified from other comprehensive income (14 ) (18 ) (42 ) (55 ) Total Interest Expense $ (1,133 ) $ (1,332 ) $ (3,558 ) $ (4,104 ) Derivative Counterparty Credit Risk As discussed in our Annual Report on Form 10-K for the year ended December 31, 2016 , we consider counterparty risk as part of our fair value assessments of all derivative financial instruments at each quarter-end. At September 30, 2017 , we assessed this risk as remote and did not record a specific valuation adjustment. At September 30, 2017 , we had outstanding derivative agreements with three 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, 2017 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Other Assets and Liabilities | Other Assets and Liabilities Other assets at September 30, 2017 and December 31, 2016 , are summarized in the following table. Table 10.1 – Components of Other Assets (In Thousands) September 30, 2017 December 31, 2016 Margin receivable $ 93,679 $ 68,038 FHLBC stock 43,393 43,393 Pledged collateral 42,933 42,875 MSR holdback receivable 9,754 1,862 Investment receivable 6,095 1,068 Guarantee asset 3,049 4,092 REO 3,020 5,533 Fixed assets and leasehold improvements (1) 2,852 2,750 Other 4,731 12,334 Total Other Assets $ 209,506 $ 181,945 (1) Fixed assets and leasehold improvements had a basis of $6 million and accumulated depreciation of $3 million at September 30, 2017 . Accrued expenses and other liabilities at September 30, 2017 and December 31, 2016 are summarized in the following table. Table 10.2 – Components of Accrued Expenses and Other Liabilities (In Thousands) September 30, 2017 December 31, 2016 Guarantee obligations $ 20,101 $ 21,668 Accrued compensation 18,978 18,830 Accrued taxes payable 15,835 525 Unsettled trades 12,005 24 Residential loan and MSR repurchase reserve 4,755 5,432 Legal reserve 2,000 2,000 Current accounts payable 1,920 1,151 Accrued operating expenses 1,097 4,493 Deferred tax liability 898 898 Margin payable 841 12,783 Other 2,632 4,624 Total Other Liabilities $ 81,062 $ 72,428 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. FHLB 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 13 for additional detail. Guarantee Asset, Pledged Collateral, and Guarantee Obligations The pledged collateral, guarantee asset, and guarantee obligations presented in the tables above are related to our risk sharing arrangements with Fannie Mae and Freddie Mac. In accordance with these arrangements, we are required to pledge collateral to secure our guarantee obligations. See Note 14 for additional information on our risk sharing arrangements. Investment Receivable and Unsettled Trades 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. MSR Holdback Receivable MSR holdback receivable represents amounts owed to us from third parties related to the sale of MSRs. REO The carrying value of REO at September 30, 2017 was $3 million , which includes the net effect of $3 million related to transfers into REO during the nine months ended September 30, 2017 , offset by $9 million of REO liquidations, and $3 million of unrealized gains resulting from market valuation adjustments. At September 30, 2017 and December 31, 2016 , there were 12 and 23 REO properties, respectively, recorded on our consolidated balance sheets, all of which were owned at consolidated Legacy Sequoia entities. Accrued Taxes Payable Accrued taxes payable at September 30, 2017 represents the interim period current and deferred tax provisions, less any estimated tax payments made during the interim period. Annually, we record separate current and deferred tax provisions and at December 31, 2016, the accrued taxes payable represents income taxes currently payable to federal and state tax authorities. Legal and Repurchase Reserves See Note 14 for additional information on the legal and residential repurchase reserves. |
Short-Term Debt
Short-Term Debt | 9 Months Ended |
Sep. 30, 2017 | |
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, 2017 , 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, 2016 . 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, 2017 and December 31, 2016 . Table 11.1 – Short-Term Debt September 30, 2017 (Dollars in Thousands) Number of Facilities Outstanding Balance Limit Weighted Average Interest Rate Maturity Weighted Average Days Until Maturity Facilities Residential loan warehouse 4 $ 438,243 $ 1,325,000 2.80 % 12/2017-8/2018 150 Real estate securities repo 8 549,811 — 2.46 % 10/2017-12/2017 28 Total Short-Term Debt Facilities 12 988,054 Convertible notes, net N/A 250,142 — 4.63 % 4/2018 197 Total Short-Term Debt $ 1,238,196 December 31, 2016 (Dollars in Thousands) Number of Facilities Outstanding Balance Limit Weighted Average Interest Rate Maturity Weighted Average Days Until Maturity Facilities Residential loan warehouse 4 $ 485,544 $ 1,325,000 2.40 % 1/2017-12/2017 206 Real estate securities repo 7 305,995 — 1.91 % 1/2017-3/2017 24 Total Short-Term Debt 11 $ 791,539 Borrowings under our facilities are generally charged interest based on a specified margin over the one-month LIBOR interest rate. At September 30, 2017 , all of these borrowings were under uncommitted facilities and were due within 364 days (or less) of the borrowing date. During the three months ended June 30, 2017, $288 million principal amount of 4.625% convertible senior notes and $2 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 April 2017. Additionally, during the three months ended June 30, 2017, we repurchased $37 million par value of these notes at a premium and recorded a loss on extinguishment of debt of $1 million in Realized gains, net on our consolidated statements of income. At September 30, 2017 , the accrued interest payable balance on this debt was $5 million . See Note 13 for additional information on our convertible notes. The fair value of held-for-sale residential loans and real estate securities pledged as collateral under our short-term debt facilities was $493 million and $663 million , respectively, at September 30, 2017 and $534 million and $363 million , respectively, at December 31, 2016 . For the three and nine months ended September 30, 2017 , the average balances of our short-term debt facilities were $1.07 billion and $0.97 billion , respectively. At September 30, 2017 and December 31, 2016 , accrued interest payable on our short-term debt facilities was $5 million and $3 million , respectively. 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 $6 million at September 30, 2017 . At both September 30, 2017 and December 31, 2016 , 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, 2017 . Table 11.2 – Short-Term Debt by Collateral Type and Remaining Maturities September 30, 2017 (In Thousands) Within 30 days 31 to 90 days Over 90 days Total Collateral Type Held-for-sale residential loans $ — $ 120,219 $ 318,024 $ 438,243 Real estate securities 422,300 127,511 — 549,811 Total Secured Short-Term Debt 422,300 247,730 318,024 988,054 Convertible notes, net — — 250,142 250,142 Total Short-Term Debt $ 422,300 $ 247,730 $ 568,166 $ 1,238,196 |
Asset-Backed Securities Issued
Asset-Backed Securities Issued | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Asset-Backed Securities Issued | Asset-Backed Securities Issued Through our Sequoia securitization program, we sponsor securitization transactions in which ABS backed by residential mortgage loans are issued by Sequoia entities. We consolidated the Legacy Sequoia securitization entities, and beginning in September 2017, the Sequoia Choice securitization entity, 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. The ABS issued by these entities consist of various classes of securities that pay interest on a monthly or quarterly basis. All ABS issued by the Sequoia Choice entity 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. Some ABS issued by the Legacy Sequoia entities pay hybrid rates, which are fixed rates that subsequently adjust to variable rates. 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, 2017 and December 31, 2016 , along with other selected information, are summarized in the following table. Table 12.1 – Asset-Backed Securities Issued September 30, 2017 Legacy Sequoia Sequoia Total (Dollars in Thousands) Certificates with principal balance $ 730,312 $ 276,873 $ 1,007,185 Interest-only certificates 2,829 4,153 6,982 Market valuation adjustments (75,181 ) 5,302 (69,879 ) ABS Issued, Net $ 657,960 $ 286,328 $ 944,288 Range of weighted average interest rates, by series 1.20% to 2.56% 4.53% Stated maturities 2024 - 2036 2047 Number of series 20 1 December 31, 2016 Legacy Sequoia Sequoia Total (Dollars in Thousands) Certificates with principal balance $ 880,517 $ — $ 880,517 Interest-only certificates 3,774 — 3,774 Market valuation adjustments (110,829 ) — (110,829 ) ABS Issued, Net $ 773,462 $ — $ 773,462 Range of weighted average interest rates, by series 0.74% to 2.23% — % Stated maturities 2024 - 2036 N/A Number of series 20 — 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, 2017 , all of the ABS issued and outstanding had contractual maturities beyond five years . At both September 30, 2017 and December 31, 2016 , accrued interest payable on ABS issued by the Legacy Sequoia entities was $1 million . At September 30, 2017 , accrued interest payable on ABS issued by the Sequoia Choice entity was $1 million . Interest due on consolidated ABS issued is payable monthly. The following table summarizes the carrying value components of the collateral for ABS issued and outstanding at September 30, 2017 and December 31, 2016 . Table 12.2 – Collateral for Asset-Backed Securities Issued September 30, 2017 Legacy Sequoia Sequoia Choice Total (In Thousands) Residential loans $ 673,134 $ 317,303 $ 990,437 Restricted cash 147 — 147 Accrued interest receivable 898 1,266 2,164 REO 3,020 — 3,020 Total Collateral for ABS Issued $ 677,199 $ 318,569 $ 995,768 December 31, 2016 Legacy Sequoia Sequoia Total (In Thousands) Residential loans $ 791,636 $ — $ 791,636 Restricted cash 148 — 148 Accrued interest receivable 1,000 — 1,000 REO 5,533 — 5,533 Total Collateral for ABS Issued $ 798,317 $ — $ 798,317 |
Long-Term Debt
Long-Term Debt | 9 Months Ended |
Sep. 30, 2017 | |
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, 2017 , 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, 2017 , 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, 2017 , $2.00 billion of advances were outstanding under this agreement, which were classified as long-term debt, with a weighted average interest rate of 1.3% and a weighted average maturity of approximately eight years. At December 31, 2016 , $2.00 billion of advances were outstanding under this agreement, which were classified as long-term debt, with a weighted average interest rate of 0.64% and a weighted average maturity of nine 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. Total advances under this agreement were secured by residential mortgage loans with a fair value of $2.26 billion at September 30, 2017 . In addition, cash of $24 million served as collateral for these borrowings at September 30, 2017 , and is presented as restricted cash on our consolidated balance sheet. 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, 2017 , 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, 2017 . Table 13.1 – Maturities of FHLBC Borrowings by Year (In Thousands) September 30, 2017 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. ” Convertible Notes 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 securities issuance costs, the weighted average interest expense yield on these convertible notes is approximately 5.3% per annum. At September 30, 2017 , these notes were convertible at the option of the holder at a conversion rate of 53.8394 common shares per $1,000 principal amount of convertible senior notes (equivalent to a conversion price of $18.57 per common share). Upon conversion of these notes by a holder, the holder will receive shares of our common stock. At September 30, 2017 , the outstanding principal amount of these notes was $245 million . At September 30, 2017 , the accrued interest payable balance on this debt was $1 million and the unamortized deferred issuance costs were $7 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 securities issuance costs, the weighted average interest expense yield on these exchangeable notes is approximately 6.3% per annum. At September 30, 2017 , these notes were exchangeable at the option of the holder at an exchange rate of 46.1798 common shares per $1,000 principal amount of exchangeable senior notes (equivalent to an exchange price of $21.65 per common share). Upon exchange of these notes by a holder, the holder will receive shares of our common stock. During the nine months ended September 30, 2017 , we did no t repurchase any of these notes. During the nine months ended September 30, 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. At September 30, 2017 , the outstanding principal amount of these notes was $201 million . At September 30, 2017 , the accrued interest payable balance on this debt was $4 million and the unamortized deferred issuance costs were $3 million . In March 2013, we issued $288 million principal amount of 4.625% convertible senior notes due 2018 . These convertible notes require semi-annual interest payments at a fixed coupon rate of 4.625% until maturity or conversion, which will be no later than April 15, 2018 . After deducting the underwriting discount and offering costs, we received $279 million of net proceeds. Including amortization of deferred securities issuance costs, the weighted average interest expense yield on these convertible notes is approximately 4.8% per annum. At September 30, 2017 , these notes were convertible at the option of the holder at a conversion rate of 41.1320 common shares per $1,000 principal amount of convertible senior notes (equivalent to a conversion price of $24.31 per common share). Upon conversion of these notes by a holder, the holder will receive shares of our common stock. During the three months ended June 30, 2017, $288 million principal amount of these convertible notes and $2 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 April 2017. Additionally, during the three months ended June 30, 2017, we repurchased $37 million par value of these notes at a premium and recorded a loss on extinguishment of debt of $1 million in Realized gains, net on our consolidated statements of income. At September 30, 2017 , the outstanding principal amount of these notes was $250 million . At September 30, 2017 , the accrued interest payable balance on this debt was $5 million and the unamortized deferred issuance costs were $0.3 million . Trust Preferred Securities and Subordinated Notes At September 30, 2017 , 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 securities issuance costs, the weighted average interest expense yield on our trust preferred securities and subordinated notes is approximately 6.8% per annum. At both September 30, 2017 and December 31, 2016 , the accrued interest payable balance on our trust preferred securities and subordinated notes was $1 million . Under the terms of this debt, we covenant, among other things, to use our best efforts to continue to qualify as a REIT. If an event of default were to occur in respect of this debt, we would generally be restricted under its terms (subject to certain exceptions) from making dividend distributions to stockholders, from repurchasing common stock or repurchasing or redeeming any other then-outstanding equity securities, and from making any other payments in respect of any equity interests in us or in respect of any then-outstanding debt that is pari passu or subordinate to this debt. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Lease Commitments At September 30, 2017 , we were obligated under four non-cancelable operating leases with expiration dates through 2028 for $18 million of cumulative lease payments. Our operating lease expense was $2 million for both nine -month periods ended September 30, 2017 and 2016. The following table presents our future lease commitments at September 30, 2017 . Table 14.1 – Future Lease Commitments by Year (In Thousands) September 30, 2017 2017 (3 months) $ 387 2018 1,948 2019 1,987 2020 1,965 2021 and thereafter 11,691 Total Lease Commitments $ 17,978 Loss Contingencies — Risk Sharing At September 30, 2017 , we had 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, 2017 , 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, 2017 , we had not incurred any losses under these arrangements. For the three and nine months ended September 30, 2017 , other income related to these arrangements was $1 million and $2 million , respectively. For the three and nine months ended September 30, 2016 , other income related to these arrangements was $1 million and $3 million , respectively. For the three and nine months ended September 30, 2017 , net market valuation losses related to these investments were $0.3 million and $1 million , respectively. For the three and nine months ended September 30, 2016 , net market valuation losses related to these investments were zero and $1 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, 2017 , the loans had an unpaid principal balance of $2.19 billion and a weighted average FICO score of 758 (at origination) and LTV of 77% (at origination). At September 30, 2017 , $3 million of the loans were 90 days or more delinquent, and $1 million were in foreclosure. At September 30, 2017 , the carrying value of our guarantee obligation was $20 million and included $10 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, 2017 and December 31, 2016 , assets of such SPEs totaled $47 million and $49 million , respectively, and liabilities of such SPEs totaled $20 million and $22 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, 2017 and December 31, 2016 , our repurchase reserve associated with our residential loans and MSRs was $5 million and was recorded in Accrued expenses and other liabilities on our consolidated balance sheets. We received 13 repurchase requests during the nine months ended September 30, 2017 , and repurchased one loan during this period. During the nine months ended September 30, 2017 and 2016, we recorded $0.5 million of reversal of provision for repurchases and $0.3 million of provision for repurchases, respectively, that were recorded in Mortgage banking activities, net and MSR 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”) alleging 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. Specifically, the complaint alleged that the alleged misstatements concerned the (1) loan-to-value ratio of mortgage loans and the appraisals of the properties that secured loans supporting the 2005-4 RMBS, (2) occupancy status of the properties, (3) standards used to underwrite the loans, and (4) ratings assigned to the Seattle Certificate. The FHLB-Seattle alleges claims under the Securities Act of Washington (Section 21.20.005, et seq.) and sought to rescind the purchase of the Seattle Certificate and to collect interest on the original purchase price at the statutory interest rate of 8% per annum from the date of original purchase (net of interest received) as well as attorneys’ fees and costs. The Seattle Certificate was issued with an original principal amount of approximately $133 million , and, at September 30, 2017 , the FHLB-Seattle has received approximately $125 million of principal and $11 million of interest payments 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”) alleging 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. Specifically, the complaint alleged that the misstatements for the 2005-4 RMBS concerned the (1) loan-to-value ratio of mortgage loans and the appraisals of the properties that secured loans supporting the 2005-4 RMBS, (2) occupancy status of the properties, (3) standards used to underwrite the loans, and (4) ratings assigned to the Schwab Certificate. The Schwab Certificate was issued with an original principal amount of approximately $15 million , and, at September 30, 2017 , approximately $14 million of principal and $1 million of interest payments have 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 are the subject of the complaint, two are Sequoia mortgage pass-through certificates issued in 2004 and two are 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. At the time these four 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 outcome 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, 2017 , 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, 2017 | |
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, 2017 and 2016 . Table 15.1 – Changes in Accumulated Other Comprehensive Income by Component Three Months Ended September 30, 2017 Three Months Ended September 30, 2016 (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 $ 114,364 $ (44,688 ) $ 116,849 $ (70,518 ) Other comprehensive income (loss) before reclassifications (1) 13,158 321 9,038 647 Amounts reclassified from other accumulated comprehensive income (853 ) 14 (1,319 ) 18 Net current-period other comprehensive income (loss) 12,305 335 7,719 665 Balance at End of Period $ 126,669 $ (44,353 ) $ 124,568 $ (69,853 ) Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 (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 $ 115,873 $ (44,020 ) $ 139,356 $ (47,363 ) Other comprehensive income (loss) (1) 17,899 (375 ) 5,195 (22,545 ) Amounts reclassified from other (7,103 ) 42 (19,983 ) 55 Net current-period other comprehensive income (loss) 10,796 (333 ) (14,788 ) (22,490 ) Balance at End of Period $ 126,669 $ (44,353 ) $ 124,568 $ (69,853 ) (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, 2017 , respectively, and $0.2 million and $0.6 million for the three and nine months ended September 30, 2016 , respectively. The following table provides a summary of reclassifications out of accumulated other comprehensive income for three and nine months ended September 30, 2017 and 2016 . Table 15.2 – 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 2017 2016 Net Realized (Gain) Loss on AFS Securities Other than temporary impairment (1) Investment fair value changes, net $ 3 $ — Gain on sale of AFS securities Realized gains, net (856 ) (1,319 ) $ (853 ) $ (1,319 ) Net Realized Loss on Interest Rate Amortization of deferred loss Interest expense $ 14 $ 18 $ 14 $ 18 Amount Reclassified From Accumulated Other Comprehensive Income Affected Line Item in the Nine Months Ended September 30, (In Thousands) Income Statement 2017 2016 Net Realized (Gain) Loss on AFS Securities Other than temporary impairment (1) Investment fair value changes, net $ 248 $ 305 Gain on sale of AFS securities Realized gains, net (7,351 ) (20,288 ) $ (7,103 ) $ (19,983 ) Net Realized Loss on Interest Rate Amortization of deferred loss Interest expense $ 42 $ 55 $ 42 $ 55 (1) For the nine months ended September 30, 2017 , other-than-temporary impairments were $0.6 million , of which $0.2 million were recognized through our consolidated statements of income and $0.4 million were recognized in Accumulated other comprehensive income, a component of our consolidated balance sheet. For the three months ended September 30, 2016, there were no other-than-temporary impairments. For the nine months ended September 30, 2016, other-than-temporary impairments were $3 million , of which $0.3 million were recognized through our consolidated statements of income and $2 million were recognized in Accumulated other comprehensive income, a component of our consolidated balance sheet. 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, 2017 and 2016 . Table 15.3 – Basic and Diluted Earnings per Common Share Three Months Ended September 30, Nine Months Ended September 30, (In Thousands, except Share Data) 2017 2016 2017 2016 Basic Earnings per Common Share: Net income attributable to Redwood $ 36,180 $ 52,553 $ 109,473 $ 105,897 Less: Dividends and undistributed earnings allocated to participating securities (948 ) (1,485 ) (2,800 ) (3,040 ) Net income allocated to common shareholders $ 35,232 $ 51,068 $ 106,673 $ 102,857 Basic weighted average common shares outstanding 76,850,830 76,680,183 76,803,324 76,827,026 Basic Earnings per Common Share $ 0.46 $ 0.67 $ 1.39 $ 1.34 Diluted Earnings per Common Share: Net income attributable to Redwood $ 36,180 $ 52,553 $ 109,473 $ 105,897 Less: Dividends and undistributed earnings allocated to participating securities (986 ) (1,439 ) (2,926 ) (3,226 ) Add back: Interest expense on convertible notes for the period, net of tax 6,564 6,115 18,639 18,263 Net income allocated to common shareholders $ 41,758 $ 57,229 $ 125,186 $ 120,934 Weighted average common shares outstanding 76,850,830 76,680,183 76,803,324 76,827,026 Net effect of dilutive equity awards 298,955 54,696 215,141 18,665 Net effect of assumed convertible notes conversion to common shares 25,553,323 21,096,738 22,379,401 21,145,987 Diluted weighted average common shares outstanding 102,703,108 97,831,617 99,397,866 97,991,678 Diluted Earnings per Common Share $ 0.41 $ 0.58 $ 1.26 $ 1.23 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, 2017 and 2016 , 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, 2017 , the number of outstanding equity awards that were antidilutive totaled 6,149 and 5,843 , respectively. For the three and nine months ended September 30, 2016 , the number of outstanding equity awards that were antidilutive totaled 6,623 and 6,565 , respectively. Stock Repurchases In February 2016, our Board of Directors approved an authorization for the repurchase of up to $100 million of our common stock and also authorized the repurchase of outstanding debt securities, including convertible and exchangeable debt. This authorization replaced all previous share repurchase plans 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. During the three and nine months ended September 30, 2017 , there were no shares of common stock acquired under this authorization. At September 30, 2017 , approximately $86 million of this current authorization remained available for the repurchase of shares of our common stock. |
Equity Compensation Plans
Equity Compensation Plans | 9 Months Ended |
Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Equity Compensation Plans | Equity Compensation Plans At September 30, 2017 and December 31, 2016 , 1,469,991 and 1,787,974 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 $18 million at September 30, 2017 , as shown in the following table. Table 16.1 – Activities of Equity Compensation Costs by Award Type Nine Months Ended September 30, 2017 (In Thousands) Restricted Stock Deferred Stock Units Performance Stock Units Employee Stock Purchase Plan Total Unrecognized compensation cost at beginning of period $ 2,091 $ 11,506 $ 4,549 $ — $ 18,146 Equity grants 2,237 5,747 — 129 8,113 Equity grant forfeitures (174 ) (472 ) — — (646 ) Equity compensation expense (934 ) (4,866 ) (1,738 ) (96 ) (7,634 ) Unrecognized Compensation Cost at End of Period $ 3,220 $ 11,915 $ 2,811 $ 33 $ 17,979 At September 30, 2017 , the weighted average amortization period remaining for all of our equity awards was less than two years. Restricted Stock At September 30, 2017 and December 31, 2016 , there were 265,842 and 204,515 shares, respectively, of restricted stock outstanding. Restrictions on these shares lapse through 2021 . During the nine months ended September 30, 2017 , there were 134,364 shares of restricted stock granted, restrictions on 61,285 shares of restricted stock lapsed and those shares were distributed, and 11,752 shares of restricted stock awards were forfeited. Deferred Stock Units (“DSUs”) At September 30, 2017 and December 31, 2016 , there were 1,869,577 and 1,848,861 DSUs, respectively, outstanding of which 1,006,394 and 939,899 , respectively, had vested. During the nine months ended September 30, 2017 , there were 359,501 DSUs granted, 306,911 DSUs distributed, and 31,875 DSUs forfeited. Unvested DSUs at September 30, 2017 vest through 2021 . During the first quarter of 2016, equity compensation expense of $3 million was recognized in connection with the announced departures of two executives due to the full vesting of their DSUs in accordance with the terms of their employment agreements. Performance Stock Units (“PSUs”) At both September 30, 2017 and December 31, 2016 , the target number of PSUs that were unvested was 642,879 . Vesting for PSUs will generally occur at the end of three years from their grant date based on various total shareholder return (“TSR”) performance calculations, as discussed in our Annual Report on Form 10-K for the year ended December 31, 2016. Employee Stock Purchase Plan ("ESPP") The ESPP allows a maximum of 450,000 shares of common stock to be purchased in aggregate for all employees. As of September 30, 2017 and December 31, 2016 , 354,801 and 337,271 shares had been purchased, respectively, and there remained a negligible amount of uninvested employee contributions in the ESPP at September 30, 2017 . |
Mortgage Banking Activities, Ne
Mortgage Banking Activities, Net | 9 Months Ended |
Sep. 30, 2017 | |
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, 2017 and 2016 . Table 17.1 – Mortgage Banking Activities Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2017 2016 2017 2016 Residential Mortgage Banking Activities, Net Changes in fair value of: Residential loans, at fair value (1) $ 28,135 $ 12,671 $ 63,122 $ 47,456 Sequoia securities — — — 1,455 Risk management derivatives (2) (7,077 ) (3,287 ) (13,787 ) (22,743 ) Other income, net (3) 142 382 1,515 606 Total residential mortgage banking activities, net 21,200 9,766 50,850 26,774 Commercial Mortgage Banking Activities, Net — — — (2,062 ) Mortgage Banking Activities, Net $ 21,200 $ 9,766 $ 50,850 $ 24,712 (1) Includes changes in fair value for associated loan purchase commitments. (2) Represents market valuation changes of derivatives that were used to manage risks associated with our accumulation of residential loans. (3) Amounts in this line item include other fee income from loan acquisitions and the provision for repurchases expense, presented net. |
Investment Fair Value Changes,
Investment Fair Value Changes, Net | 9 Months Ended |
Sep. 30, 2017 | |
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, 2017 and 2016 . Table 18.1 – Investment Fair Value Changes Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2017 2016 2017 2016 Investment Fair Value Changes, Net Changes in fair value of: Residential loans held-for-investment, at Redwood $ 2,881 $ (655 ) $ 8,902 $ 22,161 Trading securities 607 8,898 30,676 3,728 Net investments in Legacy Sequoia entities (1) (1,045 ) (255 ) (3,842 ) (2,086 ) Net investment in Sequoia Choice entity (1) (256 ) — (256 ) — Risk sharing investments (267 ) 15 (985 ) (689 ) Risk management derivatives, net (1,592 ) 4,222 (24,557 ) (41,188 ) Valuation adjustments on commercial loans held-for-sale — (307 ) 300 (307 ) Impairments on AFS securities (4 ) — (248 ) (305 ) Investment Fair Value Changes, Net $ 324 $ 11,918 $ 9,990 $ (18,686 ) (1) Includes changes in fair value of the residential loans held-for-sale, REO and the ABS issued at the entities, which netted together represent the change in value of our retained investments at the consolidated VIEs. |
Operating Expenses
Operating Expenses | 9 Months Ended |
Sep. 30, 2017 | |
Other Income and Expenses [Abstract] | |
Operating Expenses | Operating Expenses Components of our operating expenses for the three and nine months ended September 30, 2017 and 2016 are presented in the following table. Table 19.1 – Components of Operating Expenses Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2017 2016 2017 2016 Fixed compensation expense $ 5,233 $ 5,253 $ 16,556 $ 19,022 Variable compensation expense 6,467 5,802 14,713 11,824 Equity compensation expense 2,337 2,031 7,634 7,117 Total compensation expense 14,037 13,086 38,903 37,963 Systems and consulting 1,856 2,692 5,183 7,274 Loan acquisition costs (1) 1,187 1,393 3,397 4,680 Office costs 988 1,056 3,231 3,501 Accounting and legal 519 721 2,322 3,043 Corporate costs 415 478 1,363 1,589 Other operating expenses 920 925 2,390 2,367 Operating expenses before restructuring charges 19,922 20,351 56,789 60,417 Restructuring charges (2) — 4 — 10,545 Total Operating Expenses $ 19,922 $ 20,355 $ 56,789 $ 70,962 (1) Loan acquisition costs primarily includes underwriting and due diligence costs related to the acquisition of residential loans held-for-sale at fair value. (2) For the nine months ended September 30, 2016, restructuring charges included $5 million of fixed compensation expense and $4 million of equity compensation expense related to one-time termination benefits, as well as $2 million of other contract termination costs, associated with the restructuring of our conforming and commercial mortgage banking operations and related charges associated with the departure of Redwood's President announced in the first quarter of 2016. |
Taxes
Taxes | 9 Months Ended |
Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Taxes | Taxes For the nine months ended September 30, 2017 and 2016 , we recognized a provision for income taxes of $17 million and $1 million , respectively. The following is a reconciliation of the statutory federal and state tax rates to our effective tax rate at September 30, 2017 and 2016 . Table 20.1 – Reconciliation of Statutory Tax Rate to Effective Tax Rate September 30, 2017 September 30, 2016 Federal statutory rate 34.0 % 34.0 % State statutory rate, net of Federal tax effect 7.2 % 7.2 % Differences in taxable (loss) income from GAAP income (6.8 )% (21.7 )% Change in valuation allowance (2.8 )% 6.6 % Dividends paid deduction (18.3 )% (24.9 )% Effective Tax Rate 13.3 % 1.2 % We assessed our tax positions for all open tax years (i.e., Federal, 2014 to 2017, and State, 2013 to 2017) at September 30, 2017 and December 31, 2016 , 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, 2017 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information During the first quarter of 2017, we reorganized our segments to align with changes in how we view our segments for making operating decisions and assessing performance. Specifically, we eliminated our Commercial segment and renamed our Residential Investments segment as the Investment Portfolio segment. This Investment Portfolio segment now includes both residential investments and our commercial investments, which are primarily comprised of investments in multifamily securities. Our Commercial segment previously included our commercial mortgage banking operations and our commercial loan investments, which were wound-down and sold, respectively, during 2016. We conformed the presentation of prior periods, whereby commercial loan investments are included in the Investment Portfolio segment and commercial mortgage banking activities are included in Corporate/Other. Following is a full description of our current segments. Our Investment Portfolio segment primarily consists of investments in residential jumbo loans and real estate securities. Our securities portfolio primarily includes investments in residential mortgage-backed securities ("RMBS") retained from our Sequoia securitizations and RMBS issued by third parties, Agency issued CRT securities, as well as investments in Agency issued multifamily securities. Our residential loan investments are primarily made through a subsidiary of Redwood Trust that is a member of the Federal Home Loan Bank of Chicago ("FHLBC") that utilizes attractive long-term financing from the FHLBC to make long-term investments directly in residential loans. This segment also includes residential loans from our consolidated Sequoia Choice entity. The Investment Portfolio segment’s main sources of revenue are interest income from investment portfolio securities and residential loans held-for-investment. Additionally, this segment may realize gains and losses upon the sale of securities. Funding expenses, hedging expenses, direct operating expenses, and tax provisions associated with these activities are also included in this segment. Our Residential Mortgage Banking segment primarily consists of operating a mortgage loan conduit that acquires residential loans from third-party originators for subsequent sale, securitization, or transfer to our investment portfolio. We typically acquire prime, jumbo mortgages and the related mortgage servicing rights on a flow basis from our network of loan sellers and distribute those loans through our Sequoia private-label securitization program or to institutions that acquire pools of whole loans. We occasionally supplement our flow purchases with bulk loan acquisitions. This segment also includes various derivative financial instruments that we utilize to manage certain risks associated with residential loans we acquire. Our Residential Mortgage Banking segment’s main source of revenue is income from mortgage banking activities, which includes valuation increases (or gains) on the sale or securitization of loans and valuation changes from hedges used to manage risks associated with these activities. Additionally, this segment may generate interest income on loans held pending securitization or sale. Funding expenses, direct operating expenses, and tax expenses associated with these activities are also included in this segment. Segment contribution represents the measure of profit that we use to assess the performance of our business segments and make resource allocation and operating decisions. Certain expenses not directly assigned or allocated to one of our two segments, as well as activity from certain consolidated Sequoia entities and commercial mortgage banking activities (in the prior year), are included in the Corporate/Other column as reconciling items to our consolidated financial statements. These unallocated 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, 2017 and 2016 . Table 21.1 – Business Segment Financial Information Three Months Ended September 30, 2017 (In Thousands) Investment Portfolio Residential Mortgage Banking Corporate/ Other Total Interest income $ 47,023 $ 10,626 $ 5,088 $ 62,737 Interest expense (9,445 ) (4,135 ) (13,863 ) (27,443 ) Net interest income (loss) 37,578 6,491 (8,775 ) 35,294 Non-interest income Mortgage banking activities, net — 21,200 — 21,200 MSR income, net 1,615 — — 1,615 Investment fair value changes, net 1,372 — (1,048 ) 324 Other income 1,197 — — 1,197 Realized gains, net 1,734 — — 1,734 Total non-interest income, net 5,918 21,200 (1,048 ) 26,070 Direct operating expenses (1,324 ) (6,107 ) (12,491 ) (19,922 ) Provision for income taxes (433 ) (4,829 ) — (5,262 ) Segment Contribution $ 41,739 $ 16,755 $ (22,314 ) Net Income $ 36,180 Non-cash amortization income (expense) $ 5,222 $ (25 ) $ (787 ) $ 4,410 Three Months Ended September 30, 2016 (In Thousands) Investment Portfolio Residential Mortgage Banking Corporate/ Total Interest income $ 47,176 $ 8,831 $ 4,899 $ 60,906 Interest expense (5,013 ) (3,826 ) (12,758 ) (21,597 ) Net interest income (loss) 42,163 5,005 (7,859 ) 39,309 Reversal of provision for loan losses 859 — — 859 Non-interest income Mortgage banking activities, net — 9,766 — 9,766 MSR income, net 3,770 — — 3,770 Investment fair value changes, net 12,176 — (258 ) 11,918 Other income 1,643 — — 1,643 Realized gains, net 6,615 — — 6,615 Total non-interest income, net 24,204 9,766 (258 ) 33,712 Direct operating expenses (2,751 ) (5,807 ) (11,797 ) (20,355 ) Provision for income taxes (732 ) (240 ) — (972 ) Segment Contribution $ 63,743 $ 8,724 $ (19,914 ) Net Income $ 52,553 Non-cash amortization income (expense) $ 6,123 $ (28 ) $ (983 ) $ 5,112 Nine Months Ended September 30, 2017 (In Thousands) Investment Portfolio Residential Mortgage Banking Corporate/ Total Interest income $ 135,106 $ 26,515 $ 14,968 $ 176,589 Interest expense (21,940 ) (11,462 ) (39,306 ) (72,708 ) Net interest income (loss) 113,166 15,053 (24,338 ) 103,881 Non-interest income Mortgage banking activities, net — 50,850 — 50,850 MSR income, net 6,106 — — 6,106 Investment fair value changes, net 13,846 — (3,856 ) 9,990 Other income 3,367 — — 3,367 Realized gains, net 9,561 — (752 ) 8,809 Total non-interest income, net 32,880 50,850 (4,608 ) 79,122 Direct operating expenses (4,371 ) (18,009 ) (34,409 ) (56,789 ) Provision for income taxes (4,490 ) (12,251 ) — (16,741 ) Segment Contribution $ 137,185 $ 35,643 $ (63,355 ) Net Income $ 109,473 Non-cash amortization income (expense) $ 16,263 $ (79 ) $ (2,528 ) $ 13,656 Nine Months Ended September 30, 2016 (In Thousands) Investment Portfolio Residential Mortgage Banking Corporate/ Total Interest income $ 149,985 $ 24,610 $ 15,426 $ 190,021 Interest expense (18,679 ) (10,719 ) (38,593 ) (67,991 ) Net interest income (loss) 131,306 13,891 (23,167 ) 122,030 Reversal of provision for loan losses 7,102 — — 7,102 Non-interest income Mortgage banking activities, net — 26,774 (2,062 ) 24,712 MSR income, net 12,834 — — 12,834 Investment fair value changes, net (16,505 ) — (2,181 ) (18,686 ) Other income 4,157 — — 4,157 Realized gains, net 25,745 — 292 26,037 Total non-interest income, net 26,231 26,774 (3,951 ) 49,054 Direct operating expenses (1) (7,689 ) (17,175 ) (46,098 ) (70,962 ) Provision for income taxes (1,087 ) (240 ) — (1,327 ) Segment Contribution $ 155,863 $ 23,250 $ (73,216 ) Net Income $ 105,897 Non-cash amortization income (expense) $ 20,507 $ (102 ) $ (2,978 ) $ 17,427 (1) For the nine months ended September 30, 2016, $11 million of costs associated with the restructuring of our conforming residential mortgage loan operations and commercial operations, included in the direct operating expense line item, are presented under the Corporate/Other column. The following tables present the components of Corporate/Other for the three and nine months ended September 30, 2017 and 2016 . Table 21.2 – Components of Corporate/Other Three Months Ended September 30, 2017 2016 (In Thousands) Legacy Consolidated VIEs (1) Other Total Legacy Consolidated VIEs (1) Other Total Interest income $ 4,875 $ 213 $ 5,088 $ 4,837 $ 62 $ 4,899 Interest expense (3,838 ) (10,025 ) (13,863 ) (3,274 ) (9,484 ) (12,758 ) Net interest income (loss) 1,037 (9,812 ) (8,775 ) 1,563 (9,422 ) (7,859 ) Non-interest income Investment fair value changes, net (1,045 ) (3 ) (1,048 ) (255 ) (3 ) (258 ) Total non-interest income, net (1,045 ) (3 ) (1,048 ) (255 ) (3 ) (258 ) Direct operating expenses — (12,491 ) (12,491 ) — (11,797 ) (11,797 ) Total $ (8 ) $ (22,306 ) $ (22,314 ) $ 1,308 $ (21,222 ) $ (19,914 ) Nine Months Ended September 30, 2017 2016 (In Thousands) Legacy Consolidated VIEs (1) Other Total Legacy Consolidated VIEs (1) Other Total Interest income $ 14,576 $ 392 $ 14,968 $ 14,525 $ 901 $ 15,426 Interest expense (11,046 ) (28,260 ) (39,306 ) (9,842 ) (28,751 ) (38,593 ) Net interest income (loss) 3,530 (27,868 ) (24,338 ) 4,683 (27,850 ) (23,167 ) Non-interest income Investment fair value changes, net (3,842 ) (14 ) (3,856 ) (2,086 ) (95 ) (2,181 ) Realized gains, net — (752 ) (752 ) — 292 292 Total non-interest income, net (3,842 ) (766 ) (4,608 ) (2,086 ) (1,865 ) (3,951 ) Direct operating expenses — (34,409 ) (34,409 ) — (46,098 ) (46,098 ) Total $ (312 ) $ (63,043 ) $ (63,355 ) $ 2,597 $ (75,813 ) $ (73,216 ) (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, 2017 and December 31, 2016 . Table 21.3 – Supplemental Segment Information (In Thousands) Investment Portfolio Residential Mortgage Banking Corporate/ Other Total September 30, 2017 Residential loans $ 2,586,105 $ 925,681 $ 673,134 $ 4,184,920 Real estate securities 1,356,272 — — 1,356,272 Mortgage servicing rights 62,928 — — 62,928 Total assets 4,236,023 947,503 947,173 6,130,699 December 31, 2016 Residential loans $ 2,261,016 $ 835,399 $ 791,636 $ 3,888,051 Real estate securities 1,018,439 — — 1,018,439 Mortgage servicing rights 118,526 — — 118,526 Total assets 3,615,535 866,356 1,001,586 5,483,477 |
Summary of Significant Accoun30
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | The consolidated financial statements presented herein are at September 30, 2017 and December 31, 2016 , and for the three and nine months ended September 30, 2017 and 2016 . 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, 2016 . In the opinion of management, all normal and recurring adjustments to present fairly the financial condition of the company at September 30, 2017 and results of operations for all periods presented have been made. The results of operations for the three and nine months ended September 30, 2017 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 an entity formed in connection with the securitization of Redwood Choice expanded-prime loans during the third quarter of 2017 ("Sequoia Choice"). 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 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. For financial reporting purposes, the underlying loans owned at the consolidated Sequoia entities are shown under Residential 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. |
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. |
Recent Accounting Pronouncements | Newly Adopted Accounting Standards Updates ("ASUs") In January 2017, the FASB issued ASU 2017-03, "Accounting Changes and Error Corrections (Topic 250) and Investments - Equity Method and Joint Ventures (Topic 323)." This new guidance requires that companies evaluate ASUs that have not been adopted to determine the appropriate financial statement disclosures about the potential material effects of those ASUs on the financial statements when adopted. This new guidance was effective immediately. We adopted this guidance, as required, in the first quarter of 2017, which did not have a material impact on our consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting." This new guidance provides simplifications of the accounting for share-based payment transactions, including related income tax accounting, classification of awards, and classification on the statement of cash flows. In addition, this guidance permits the withholding of employee taxes related to the distribution of equity awards up to the maximum individual employee statutory tax rates. This new guidance is effective for fiscal years beginning after December 15, 2016 and early adoption is permitted. In the second quarter of 2016, we adopted this new guidance. Upon adoption, we elected to account for forfeitures on employee equity awards as they occur, rather than estimating expected forfeitures. The adoption of this guidance did not have a material impact on our consolidated financial statements. Other Recent Accounting Pronouncements 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. Early adoption is permitted. We plan to adopt this new guidance by the required date and we are currently evaluating the impact that this update will have 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. Early adoption is permitted. 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 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. Early adoption is permitted. 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 November 2016, the FASB issued ASU 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash." This new guidance amends previous guidance on how to classify and present changes in restricted cash on the statement of cash flows. This new guidance is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted. We plan to adopt this new guidance by the required date and we will modify the presentation of our cash flow statement as required. In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory." This new guidance allows an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. It also eliminates the exceptions for an intra-entity transfer of assets other than inventory. This new guidance is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted. 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 August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments." This new guidance provides guidance on how to present and classify certain cash receipts and cash payments in the statement of cash flows. This new guidance is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted. 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 December 15, 2018. Currently, a significant portion of our financial instruments are measured at fair value, for which we do not maintain any allowances for loan losses in accordance with fair value accounting. As such, based on our initial evaluation of this new guidance, we do not believe the provisions in this guidance will have a material impact to how we account for these instruments. Separately, we account for our available-for-sale securities under the other-than-temporary impairment ("OTTI") model for debt securities. This new guidance changes the accounting for available-for-sale securities, including AFS securities purchased with credit deterioration. We are currently evaluating the impact that this update will have on our consolidated financial statements in regard to our available-for-sale securities. We plan to adopt this new guidance by the required date. 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. Early adoption is permitted. As discussed in Note 14 , our only material leases are those related to our leased office space, for which future payments under these leases total $18 million at September 30, 2017. Upon adoption of this standard in the first quarter of 2019, we will record a right-of-use asset and lease liability equal to the present value of these future lease payments discounted at our incremental borrowing rate. Based on our initial evaluation of this new guidance, and taking into consideration our current in-place leases, we do not expect that its adoption will have a material impact on our consolidated financial statements. We will continue evaluating this new standard and caution that any changes in our business or additional leases we may enter into could change our initial assessment. In January 2016, the FASB issued ASU 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities." This new guidance amends accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. This new guidance also amends certain disclosure requirements associated with the fair value of financial instruments and it is effective for fiscal years beginning after December 15, 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 May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers.” The update modifies the guidance companies use to recognize revenue from contracts with customers for transfers of goods or services and transfers of nonfinancial assets, unless those contracts are within the scope of other standards. The guidance also requires new qualitative and quantitative disclosures, including information about contract balances and performance obligations. In July 2015, the FASB approved a one year deferral of the effective date. Accordingly, the update is effective for us in the first quarter of 2018 with retrospective application to prior periods presented or as a cumulative effect adjustment in the period of adoption. Early adoption is permitted in the first quarter of 2017. In March 2016, the FASB issued ASU 2016-08, "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)." This new guidance provides additional implementation guidance on how an entity should identify the unit of accounting for the principal versus agent evaluations. In May 2016, the FASB issued ASU 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients," and in December 2016, the FASB issued ASU 2016-20, "Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers." These new ASUs provide more specific guidance on certain aspects of Topic 606. In September 2017, the FASB issued ASU 2017-13, "Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments (SEC Update). This new ASU allows certain public business entities to use the nonpublic business entity effective dates for adoption of the new revenue standard. Based on our initial evaluation of these new accounting standards, we do not expect that their adoption will have a material impact on our consolidated financial statements, as financial instruments are explicitly scoped out of the standards and nearly all of our income is generated from financial instruments. 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. |
Summary of Significant Accoun31
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
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, 2017 and December 31, 2016 . 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, 2017 Financial Instruments Cash Collateral (Received) Pledged Assets (2) Interest rate agreements $ 3,942 $ — $ 3,942 $ (3,644 ) $ (298 ) $ — TBAs 2,875 — 2,875 (2,806 ) — 69 Futures 135 — 135 — — 135 Total Assets $ 6,952 $ — $ 6,952 $ (6,450 ) $ (298 ) $ 204 Liabilities (2) Interest rate agreements $ (57,994 ) $ — $ (57,994 ) $ 3,644 $ 54,350 $ — TBAs (3,946 ) — (3,946 ) 2,807 976 (163 ) Futures (423 ) — (423 ) — 423 — Loan warehouse debt (438,243 ) — (438,243 ) 438,243 — — Security repurchase agreements (549,811 ) — (549,811 ) 549,811 — — Total Liabilities $ (1,050,417 ) $ — $ (1,050,417 ) $ 994,505 $ 55,749 $ (163 ) 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, 2016 Financial Instruments Cash Collateral (Received) Pledged Assets (2) Interest rate agreements $ 24,980 $ — $ 24,980 $ (7,736 ) $ (4,784 ) $ 12,460 TBAs 8,300 — 8,300 (3,936 ) (4,364 ) — Total Assets $ 33,280 $ — $ 33,280 $ (11,672 ) $ (9,148 ) $ 12,460 Liabilities (2) Interest rate agreements $ (56,919 ) $ — $ (56,919 ) $ 7,736 $ 49,183 $ — TBAs (4,681 ) — (4,681 ) 3,936 — (745 ) Futures (928 ) — (928 ) — 928 — Loan warehouse debt (485,544 ) — (485,544 ) 485,544 — — Security repurchase agreements (305,995 ) — (305,995 ) 305,995 — — Total Liabilities $ (854,067 ) $ — $ (854,067 ) $ 803,211 $ 50,111 $ (745 ) (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, TBAs, credit default index swaps, and futures 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, 2017 | |
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, 2017 Legacy Sequoia Sequoia Choice Total Consolidated VIEs (Dollars in Thousands) Residential loans, held-for-investment $ 673,134 $ 317,303 $ 990,437 Restricted cash 147 — 147 Accrued interest receivable 898 1,266 2,164 REO 3,020 — 3,020 Total Assets $ 677,199 $ 318,569 $ 995,768 Accrued interest payable $ 540 $ 1,045 $ 1,585 Asset-backed securities issued 657,960 286,328 944,288 Total Liabilities $ 658,500 $ 287,373 $ 945,873 Number of VIEs 20 1 21 December 31, 2016 Legacy Sequoia Sequoia Total Consolidated VIEs (Dollars in Thousands) Residential loans, held-for-investment $ 791,636 $ — $ 791,636 Restricted cash 148 — 148 Accrued interest receivable 1,000 — 1,000 REO 5,533 — 5,533 Total Assets $ 798,317 $ — $ 798,317 Accrued interest payable $ 518 $ — $ 518 Asset-backed securities issued 773,462 — 773,462 Total Liabilities $ 773,980 $ — $ 773,980 Number of VIEs 20 — 20 |
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, 2017 and 2016 . Table 4.2 – Securitization Activity Related to Unconsolidated VIEs Sponsored by Redwood Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2017 2016 2017 2016 Principal balance of loans transferred $ 839,264 $ 348,537 $ 2,223,387 $ 693,427 Trading securities retained, at fair value 24,617 — 55,607 — AFS securities retained, at fair value 4,416 1,839 11,476 3,673 MSRs recognized — 1,971 7,123 4,102 |
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, 2017 and 2016 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) 2017 2016 2017 2016 Proceeds from new transfers $ 839,642 $ 356,497 $ 2,213,151 $ 708,539 MSR fees received 3,631 3,473 10,804 10,397 Funding of compensating interest, net (35 ) (98 ) (114 ) (254 ) Cash flows received on retained securities 6,882 6,384 19,843 24,314 |
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, 2017 and 2016 . Table 4.4 – Assumptions Related to Assets Retained from Unconsolidated VIEs Sponsored by Redwood Three Months Ended September 30, 2017 Three Months Ended September 30, 2016 At Date of Securitization MSRs Senior IO Securities Subordinate Securities MSRs Subordinate Securities Prepayment rates N/A 11 % 10 % 24 % 15 % Discount rates N/A 14 % 5 % 11 % 7 % Credit loss assumptions N/A 0.25 % 0.25 % N/A 0.25 % Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 At Date of Securitization MSRs Senior IO Securities Subordinate Securities MSRs Subordinate Securities Prepayment rates 9 % 10 % 10 % 20 % 15 % Discount rates 11 % 13 % 5 % 11 % 7 % Credit loss assumptions N/A 0.25 % 0.25 % N/A 0.25 % |
Unconsolidated Variable Interest Entity's Sponsored by Redwood | The following table presents additional information at September 30, 2017 and December 31, 2016 , 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, 2017 December 31, 2016 On-balance sheet assets, at fair value: Interest-only, senior and subordinate securities, classified as trading $ 94,491 $ 41,909 Subordinate securities, classified as AFS 228,764 234,025 Mortgage servicing rights 60,377 58,800 Maximum loss exposure (1) $ 383,632 $ 334,734 Assets transferred: Principal balance of loans outstanding $ 8,329,635 $ 6,870,398 Principal balance of loans 30+ days delinquent 12,651 21,427 (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, 2017 and December 31, 2016 . Table 4.6 – Key Assumptions and Sensitivity Analysis for Assets Retained from Unconsolidated VIEs Sponsored by Redwood September 30, 2017 MSRs Senior Securities (1) Subordinate Securities (Dollars in Thousands) Fair value at September 30, 2017 $ 60,377 $ 34,276 $ 288,979 Expected life (in years) (2) 7 5 13 Prepayment speed assumption (annual CPR) (2) 9 % 10 % 11 % Decrease in fair value from: 10% adverse change $ 1,694 $ 1,575 $ 667 25% adverse change 4,278 3,734 1,683 Discount rate assumption (2) 11 % 9 % 5 % Decrease in fair value from: 100 basis point increase $ 2,311 $ 1,281 $ 25,377 200 basis point increase 4,453 2,472 47,107 Credit loss assumption (2) N/A 0.25 % 0.25 % Decrease in fair value from: 10% higher losses N/A $ 4 $ 1,505 25% higher losses N/A 9 3,764 December 31, 2016 MSRs Senior Securities (1) Subordinate Securities (Dollars in Thousands) Fair value at December 31, 2016 $ 58,800 $ 26,618 $ 249,317 Expected life (in years) (2) 7 6 12 Prepayment speed assumption (annual CPR) (2) 11 % 8 % 12 % Decrease in fair value from: 10% adverse change $ 2,226 $ 1,075 $ 997 25% adverse change 5,284 2,569 2,494 Discount rate assumption (2) 11 % 8 % 6 % Decrease in fair value from: 100 basis point increase $ 2,088 $ 1,105 $ 19,574 200 basis point increase 4,032 2,128 36,574 Credit loss assumption (2) N/A 0.25 % 0.25 % Decrease in fair value from: 10% higher losses N/A $ 19 $ 1,174 25% higher losses N/A 49 2,933 (1) Senior securities included $34 million and $27 million of interest only securities at September 30, 2017 and December 31, 2016 , 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, 2017 , grouped by security type. Table 4.7 – Third-Party Sponsored VIE Summary (Dollars in Thousands) September 30, 2017 Mortgage-Backed Securities Senior $ 181,723 Re-REMIC 39,033 Subordinate 812,260 Total Investments in Third-Party Sponsored VIEs $ 1,033,016 |
Fair Value of Financial Instr33
Fair Value of Financial Instruments (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
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, 2017 and December 31, 2016 . Table 5.1 – Carrying Values and Fair Values of Assets and Liabilities September 30, 2017 December 31, 2016 Carrying Value Fair Value Carrying Value Fair Value (In Thousands) Assets Residential loans, held-for-sale At fair value $ 924,594 $ 924,594 $ 834,193 $ 834,193 At lower of cost or fair value 1,087 1,227 1,206 1,365 Residential loans, held-for-investment At fair value 3,259,239 3,259,239 3,052,652 3,052,652 Trading securities 820,134 820,134 445,687 445,687 Available-for-sale securities 536,138 536,138 572,752 572,752 MSRs 62,928 62,928 118,526 118,526 Cash and cash equivalents 257,611 257,611 212,844 212,844 Restricted cash 26,258 26,258 8,623 8,623 Accrued interest receivable 21,256 21,256 18,454 18,454 Derivative assets 11,948 11,948 36,595 36,595 REO (1) 3,020 3,441 5,533 5,560 Margin receivable (1) 93,679 93,679 68,038 68,038 FHLBC stock (1) 43,393 43,393 43,393 43,393 Guarantee asset (1) 3,049 3,049 4,092 4,092 Commercial loans (1) — — 2,700 2,700 Pledged collateral (1) 42,933 42,933 42,875 42,875 Liabilities Short-term debt facilities $ 988,054 $ 988,054 $ 791,539 $ 791,539 Accrued interest payable 18,836 18,836 9,608 9,608 Margin payable 841 841 12,783 12,783 Guarantee obligation 20,101 19,682 21,668 22,181 Derivative liabilities 65,238 65,238 66,329 66,329 ABS issued at fair value, net 944,288 944,288 773,462 773,462 FHLBC long-term borrowings 1,999,999 1,999,999 1,999,999 1,999,999 Convertible notes, net 686,058 705,703 482,195 493,365 Trust preferred securities and subordinated notes, net 138,524 101,138 138,489 96,255 (1) These assets are included in Other assets 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, 2017 and December 31, 2016 , 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, 2017 Carrying Value Fair Value Measurements Using (In Thousands) Level 1 Level 2 Level 3 Assets Residential loans $ 4,183,833 $ — $ — $ 4,183,833 Trading securities 820,134 — — 820,134 Available-for-sale securities 536,138 — — 536,138 Derivative assets 11,948 3,010 3,942 4,996 MSRs 62,928 — — 62,928 Pledged collateral 42,933 42,933 — — FHLBC stock 43,393 — 43,393 — Guarantee asset 3,049 — — 3,049 Liabilities Derivative liabilities $ 65,238 $ 4,369 $ 57,994 $ 2,875 ABS issued 944,288 — — 944,288 December 31, 2016 Carrying Value Fair Value Measurements Using (In Thousands) Level 1 Level 2 Level 3 Assets Residential loans $ 3,886,845 $ — $ — $ 3,886,845 Trading securities 445,687 — — 445,687 Available-for-sale securities 572,752 — — 572,752 Derivative assets 36,595 8,300 24,980 3,315 MSRs 118,526 — — 118,526 Pledged collateral 42,875 42,875 — — FHLBC stock 43,393 — 43,393 — Guarantee asset 4,092 — — 4,092 Liabilities Derivative liabilities $ 66,329 $ 5,609 $ 56,919 $ 3,801 ABS issued 773,462 — — 773,462 |
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, 2017 . Table 5.3 – Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis Assets Liabilities Residential Loans Trading Securities AFS Securities MSRs Guarantee Asset Derivatives (1) ABS Issued (In Thousands) Beginning balance - December 31, 2016 $ 3,886,845 $ 445,687 $ 572,752 $ 118,526 $ 4,092 $ (486 ) $ 773,462 Acquisitions 3,791,471 444,073 31,654 7,957 — — 286,898 Sales (3,147,707 ) (87,092 ) (60,801 ) (52,966 ) — — — Principal paydowns (405,888 ) (13,219 ) (42,325 ) — — — (146,358 ) Gains (losses) in net income, net 62,290 30,685 24,011 (10,589 ) (1,043 ) 33,686 30,286 Unrealized losses in OCI, net — — 10,847 — — — — Other settlements, net (2) (3,178 ) — — — — (31,079 ) — Ending Balance - September 30, 2017 $ 4,183,833 $ 820,134 $ 536,138 $ 62,928 $ 3,049 $ 2,121 $ 944,288 (1) For the purpose of this presentation, derivative assets and liabilities, which consist of loan purchase commitments, are presented on a net basis. (2) Other settlements, net for derivatives represents the transfer of the fair value of loan purchase commitments at the time loans are acquired to the basis of residential loans. |
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, 2017 and 2016 . Gains or losses incurred on assets or liabilities sold, matured, called, or fully written down during the three and nine months ended September 30, 2017 and 2016 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, 2017 and 2016 Included in Net Income Included in Net Income Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2017 2016 2017 2016 Assets Residential loans at Redwood $ 14,359 $ 3,818 $ 24,227 $ 32,202 Residential loans at consolidated Sequoia entities 3,497 9,200 22,949 (18,864 ) Trading securities (36 ) 8,646 24,452 978 Available-for-sale securities (3 ) — (248 ) (305 ) MSRs 317 6,549 (1,005 ) (36,738 ) Loan purchase commitments 2,117 5,381 2,121 5,896 Other assets - Guarantee asset (239 ) 307 (1,043 ) (2,070 ) Liabilities ABS issued $ (7,771 ) $ 10,522 $ (30,286 ) $ (14,419 ) |
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, 2017 . 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 sheet at September 30, 2017 . Table 5.5 – Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis at September 30, 2017 Gain (Loss) for September 30, 2017 Carrying Value Fair Value Measurements Using Three Months Ended Nine Months Ended (In Thousands) Level 1 Level 2 Level 3 September 30, 2017 September 30, 2017 Assets Residential loans, at lower of cost or fair value $ 866 $ — $ — $ 866 $ 18 $ 21 REO 1,725 — — 1,725 — (81 ) |
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, 2017 and 2016 . Table 5.6 – Market Valuation Gains and Losses, Net Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2017 2016 2017 2016 Mortgage Banking Activities, Net Residential loans held-for-sale, at fair value $ 14,859 $ 650 $ 29,175 $ 11,948 Residential loan purchase commitments 13,276 12,021 33,947 35,508 Commercial loans, at fair value — — — 433 Sequoia securities — — — 1,455 Risk management derivatives, net (7,077 ) (3,287 ) (13,787 ) (25,281 ) Total mortgage banking activities, net (1) $ 21,058 $ 9,384 $ 49,335 $ 24,063 Investment Fair Value Changes, Net Residential loans held-for-investment, at Redwood $ 2,881 $ (655 ) $ 8,902 $ 22,161 Trading securities 607 8,898 30,676 3,728 Valuation adjustments on commercial loans held-for-sale — (307 ) 300 (307 ) Net investments in Legacy Sequoia entities (2) (1,045 ) (255 ) (3,842 ) (2,086 ) Net investment in Sequoia Choice entity (2) (256 ) — (256 ) — Risk sharing investments (267 ) 15 (985 ) (689 ) Risk management derivatives, net (1,592 ) 4,222 (24,557 ) (41,188 ) Impairments on AFS securities (4 ) — (248 ) (305 ) Total investment fair value changes, net $ 324 $ 11,918 $ 9,990 $ (18,686 ) MSR Income (Loss), Net MSRs $ (1,351 ) $ 1,380 $ (10,842 ) $ (70,489 ) Risk management derivatives, net (422 ) (6,336 ) 1,869 55,874 Total MSR loss, net (3) $ (1,773 ) $ (4,956 ) $ (8,973 ) $ (14,615 ) Total Market Valuation Gains (Losses), Net $ 19,609 $ 16,346 $ 50,352 $ (9,238 ) (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-sale, REO and the ABS issued at the entities, which netted together represent the change in value of our retained investments at the consolidated VIEs. (3) MSR income (loss), net presented above does not include net fee income or provisions for repurchases that are components of MSR income, net on our consolidated statements of income, 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, 2017 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 $ 2,450,845 Whole loan spread to TBA price $ 2.13 - $ 3.15 $ 3.13 Whole loan spread to swap rate 180 - 270 bps 265 bps Jumbo hybrid loans 168,138 Prepayment rate (annual CPR) 15 - 15 % 15 % Whole loan spread to swap rate 100 - 190 bps 163 bps Jumbo loans committed to sell 574,413 Whole loan committed sales price $ 102.42 - $ 103.08 $ 102.89 Loans held by Legacy Sequoia (1) 673,134 Liability price N/A N/A Loans held by Sequoia Choice (1) 317,303 Liability price N/A N/A Residential loans, at lower of cost or fair value 866 Loss severity 13 - 30 % 18 % Trading and AFS securities 1,356,272 Discount rate 2 - 25 % 5 % Prepayment rate (annual CPR) — - 50 % 10 % Default rate — - 32 % 3 % Loss severity — - 40 % 22 % MSRs 62,928 Discount rate 10 - 35 % 11 % Prepayment rate (annual CPR) 5 - 31 % 9 % Per loan annual cost to service $ 82 - $ 84 $ 82 Guarantee asset 3,049 Discount rate 11 - 11 % 11 % Prepayment rate (annual CPR) 14 - 14 % 14 % REO 1,725 Loss severity 4 - 39 % 18 % Loan purchase commitments, net (2) 2,121 MSR multiple 1.9 - 5.1 x 3.8 x Pull-through rate 13 - 100 % 72 % Whole loan spread to TBA price $ 2.13 - $ 3.10 $ 3.07 Whole loan spread to swap rate - fixed rate 180 - 270 bps 268 bps Prepayment rate (annual CPR) 15 - 15 % 15 % Whole loan spread to swap rate - hybrid 100 - 190 bps 133 bps Liabilities ABS issued: (1) 944,288 Discount rate 3 - 15 % 4 % Prepayment rate (annual CPR) 11 - 20 % 18 % Default rate — - 12 % 5 % Loss severity 20 - 32 % 26 % (1) The fair value of the loans held by consolidated Sequoia entities was based on the fair value of the ABS issued by these entities, which we determined were more readily observable, in accordance with accounting guidance for collateralized financing entities. (2) For the purpose of this presentation, loan purchase commitment assets and liabilities are presented net. |
Residential Loans (Tables)
Residential Loans (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
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, 2017 and December 31, 2016 . Table 6.1 – Classifications and Carrying Values of Residential Loans September 30, 2017 Legacy Sequoia (In Thousands) Redwood Sequoia Choice Total Held-for-sale At fair value $ 924,594 $ — $ — $ 924,594 At lower of cost or fair value 1,087 — — 1,087 Total held-for-sale 925,681 — — 925,681 Held-for-investment at fair value 2,268,802 673,134 317,303 3,259,239 Total Residential Loans $ 3,194,483 $ 673,134 $ 317,303 $ 4,184,920 December 31, 2016 Legacy Sequoia (In Thousands) Redwood Sequoia Choice Total Held-for-sale At fair value $ 834,193 $ — $ — $ 834,193 At lower of cost or fair value 1,206 — — 1,206 Total held-for-sale 835,399 — — 835,399 Held-for-investment at fair value 2,261,016 791,636 — 3,052,652 Total Residential Loans $ 3,096,415 $ 791,636 $ — $ 3,888,051 |
Real Estate Securities (Tables)
Real Estate Securities (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
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, 2017 and December 31, 2016 . Table 7.1 – Fair Values of Real Estate Securities by Type (In Thousands) September 30, 2017 December 31, 2016 Trading $ 820,134 $ 445,687 Available-for-sale 536,138 572,752 Total Real Estate Securities $ 1,356,272 $ 1,018,439 |
Trading Securities by Collateral Type | The following table presents the fair value of trading securities by position and collateral type at September 30, 2017 and December 31, 2016 . Table 7.2 – Trading Securities by Position and Collateral Type (In Thousands) September 30, 2017 December 31, 2016 Senior Securities $ 62,767 $ 37,067 Subordinate Securities Mezzanine 458,299 256,226 Subordinate 299,068 152,394 Total Subordinate Securities 757,367 408,620 Total Trading Securities $ 820,134 $ 445,687 |
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, 2017 and December 31, 2016 . Table 7.3 – Available-for-Sale Securities by Position and Collateral Type (In Thousands) September 30, 2017 December 31, 2016 Senior Securities $ 153,232 $ 136,546 Re-REMIC Securities 39,033 85,479 Subordinate Securities Mezzanine 119,687 163,715 Subordinate 224,186 187,012 Total Subordinate Securities 343,873 350,727 Total AFS Securities $ 536,138 $ 572,752 |
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, 2017 and December 31, 2016 . Table 7.4 – Carrying Value of AFS Securities September 30, 2017 (In Thousands) Senior Re-REMIC Subordinate Total Principal balance $ 156,936 $ 44,896 $ 442,219 $ 644,051 Credit reserve (3,024 ) (5,810 ) (38,041 ) (46,875 ) Unamortized discount, net (36,575 ) (10,412 ) (142,405 ) (189,392 ) Amortized cost 117,337 28,674 261,773 407,784 Gross unrealized gains 37,155 10,359 83,185 130,699 Gross unrealized losses (1,260 ) — (1,085 ) (2,345 ) Carrying Value $ 153,232 $ 39,033 $ 343,873 $ 536,138 December 31, 2016 (In Thousands) Senior Re-REMIC Subordinate Total Principal balance $ 148,862 $ 95,608 $ 456,359 $ 700,829 Credit reserve (4,814 ) (6,857 ) (35,802 ) (47,473 ) Unamortized discount, net (41,877 ) (19,613 ) (136,622 ) (198,112 ) Amortized cost 102,171 69,138 283,935 455,244 Gross unrealized gains 36,304 16,341 68,032 120,677 Gross unrealized losses (1,929 ) — (1,240 ) (3,169 ) Carrying Value $ 136,546 $ 85,479 $ 350,727 $ 572,752 |
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, 2017 , in unamortized discount and designated credit reserves on residential AFS securities. Table 7.5 – Changes in Unamortized Discount and Designated Credit Reserves on AFS Securities Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017 Credit Reserve Unamortized Discount, Net Credit Unamortized (In Thousands) Beginning balance $ 47,588 $ 192,063 $ 47,473 $ 198,112 Amortization of net discount — (4,631 ) — (14,697 ) Realized credit losses (795 ) — (3,232 ) — Acquisitions 1,665 2,732 8,256 11,375 Sales, calls, other (144 ) (2,214 ) (3,405 ) (7,863 ) Impairments 3 — 248 — Transfers to (release of) credit reserves, net (1,442 ) 1,442 (2,465 ) 2,465 Ending Balance $ 46,875 $ 189,392 $ 46,875 $ 189,392 |
Components of Fair Value of Available for Sale Securities Securities by Holding Periods | The following table presents the components comprising the total carrying value of residential AFS securities that were in a gross unrealized loss position at September 30, 2017 and December 31, 2016 . Table 7.6 – Components of Fair Value of Residential 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, 2017 $ 10,164 $ (694 ) $ 9,470 $ 31,001 $ (1,651 ) $ 29,350 December 31, 2016 15,772 (330 ) 15,442 60,035 (2,839 ) 57,196 |
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, 2017 . Table 7.7 – Significant Valuation Assumptions September 30, 2017 Range for Securities Prepayment rates 8% - 15% Projected losses 0.25% - 8% |
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, 2017 and 2016 , for which a portion of an OTTI was recognized in other comprehensive income. Table 7.8 – Activity of the Credit Component of Other-than-Temporary Impairments Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2017 2016 2017 2016 Balance at beginning of period $ 25,802 $ 28,198 $ 28,261 $ 28,277 Additions Initial credit impairments — — 178 291 Subsequent credit impairments — — 47 — Reductions Securities sold, or expected to sell — — (2,282 ) (261 ) Securities with no outstanding principal at period end (42 ) — (444 ) (109 ) Balance at End of Period $ 25,760 $ 28,198 $ 25,760 $ 28,198 |
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, 2017 and 2016 . Table 7.9 – Gross Realized Gains and Losses on AFS Securities Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2017 2016 2017 2016 Gross realized gains - sales $ 1,734 $ 1,990 $ 9,381 $ 22,395 Gross realized gains - calls — — 677 1,210 Gross realized losses - sales — — — (2,293 ) Gross realized losses - calls — — (497 ) — Total Realized Gains on Sales and Calls of AFS Securities, net $ 1,734 $ 1,990 $ 9,561 $ 21,312 |
Mortgage Servicing Rights (Tabl
Mortgage Servicing Rights (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Transfers and Servicing [Abstract] | |
Fair Value of MSRs and Aggregate Principal Amounts of Associated Loans | The following table presents the fair value of MSRs and the aggregate principal amounts of associated loans as of September 30, 2017 and December 31, 2016 . Table 8.1 – Fair Value of MSRs and Aggregate Principal Amounts of Associated Loans September 30, 2017 December 31, 2016 (In Thousands) MSR Fair Value Associated Principal MSR Fair Value Associated Principal Mortgage Servicing Rights Conforming Loans $ 1,125 $ 107,298 $ 58,523 $ 4,989,720 Jumbo Loans 61,803 5,639,708 60,003 5,467,169 Total Mortgage Servicing Rights $ 62,928 $ 5,747,006 $ 118,526 $ 10,456,889 |
Activity for Mortgage Servicing Rights | The following table presents activity for MSRs for the three and nine months ended September 30, 2017 and 2016 . Table 8.2 – Activity for MSRs Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2017 2016 2017 2016 Balance at beginning of period $ 63,770 $ 110,046 $ 118,526 $ 191,976 Additions 256 3,443 7,957 22,941 Sales — (8,860 ) (52,966 ) (38,419 ) Changes in fair value due to: Changes in assumptions (1) 563 7,085 (3,450 ) (52,723 ) Other changes (2) (1,661 ) (5,705 ) (7,139 ) (17,766 ) Balance at End of Period $ 62,928 $ 106,009 $ 62,928 $ 106,009 (1) Primarily reflects changes in prepayment assumptions due to changes in market interest rates. (2) Represents changes due to receipt of expected cash flows. |
MSR Additions | The following table details the retention and purchase of MSRs during the three and nine months ended September 30, 2017 . Table 8.3 – MSR Additions Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017 (In Thousands) MSR Fair Value Associated Principal MSR Fair Value Associated Principal Jumbo MSR additions: From securitization $ — $ — $ 7,123 $ 654,605 From loan sales — — 263 31,658 Total jumbo MSR additions — — 7,386 686,263 Conforming MSR additions: From purchases 256 41,263 571 95,595 Total MSR Additions $ 256 $ 41,263 $ 7,957 $ 781,858 |
Components of Mortgage Servicing Rights Income (Loss), net | The following table presents the components of our MSR income for the three and nine months ended September 30, 2017 and 2016 . Table 8.4 – Components of MSR Income, net Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2017 2016 2017 2016 Servicing income $ 3,872 $ 9,943 $ 17,290 $ 32,199 Cost of sub-servicer (476 ) (1,217 ) (2,515 ) (4,958 ) Net servicing fee income 3,396 8,726 14,775 27,241 Market valuation changes of MSRs (1,351 ) 1,380 (10,842 ) (70,489 ) Market valuation changes of associated derivatives (422 ) (6,336 ) 1,869 55,874 MSR provision for repurchases (8 ) — 304 208 MSR Income, Net $ 1,615 $ 3,770 $ 6,106 $ 12,834 |
Derivative Financial Instrume37
Derivative Financial Instruments (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
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, 2017 and December 31, 2016 . Table 9.1 – Fair Value and Notional Amount of Derivative Financial Instruments September 30, 2017 December 31, 2016 Fair Value Notional Amount Fair Value Notional Amount (In Thousands) Assets - Risk Management Derivatives Interest rate swaps $ 3,645 $ 509,000 $ 19,859 $ 1,009,000 TBAs 2,875 985,000 8,300 850,000 Futures 135 7,500 — — Swaptions 297 300,000 5,121 345,000 Assets - Other Derivatives Loan purchase commitments 4,996 802,550 3,315 352,981 Total Assets $ 11,948 $ 2,604,050 $ 36,595 $ 2,556,981 Liabilities - Cash Flow Hedges Interest rate swaps $ (45,093 ) $ 139,500 $ (44,822 ) $ 139,500 Liabilities - Risk Management Derivatives Interest rate swaps (12,901 ) 1,838,500 (12,097 ) 1,101,500 TBAs (3,946 ) 950,000 (4,681 ) 510,000 Futures (423 ) 29,000 (928 ) 87,500 Liabilities - Other Derivatives Loan purchase commitments (2,875 ) 683,709 (3,801 ) 584,862 Total Liabilities $ (65,238 ) $ 3,640,709 $ (66,329 ) $ 2,423,362 Total Derivative Financial Instruments, Net $ (53,290 ) $ 6,244,759 $ (29,734 ) $ 4,980,343 |
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, 2017 and 2016 . Table 9.2 – 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) 2017 2016 2017 2016 Net interest expense on cash flows hedges $ (1,119 ) $ (1,314 ) $ (3,516 ) $ (4,049 ) Realized net losses reclassified from other comprehensive income (14 ) (18 ) (42 ) (55 ) Total Interest Expense $ (1,133 ) $ (1,332 ) $ (3,558 ) $ (4,104 ) |
Other Assets and Liabilities (T
Other Assets and Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Components of Other Assets | Other assets at September 30, 2017 and December 31, 2016 , are summarized in the following table. Table 10.1 – Components of Other Assets (In Thousands) September 30, 2017 December 31, 2016 Margin receivable $ 93,679 $ 68,038 FHLBC stock 43,393 43,393 Pledged collateral 42,933 42,875 MSR holdback receivable 9,754 1,862 Investment receivable 6,095 1,068 Guarantee asset 3,049 4,092 REO 3,020 5,533 Fixed assets and leasehold improvements (1) 2,852 2,750 Other 4,731 12,334 Total Other Assets $ 209,506 $ 181,945 (1) Fixed assets and leasehold improvements had a basis of $6 million and accumulated depreciation of $3 million at September 30, 2017 . |
Components of Accrued Expenses and Other Liabilities | Accrued expenses and other liabilities at September 30, 2017 and December 31, 2016 are summarized in the following table. Table 10.2 – Components of Accrued Expenses and Other Liabilities (In Thousands) September 30, 2017 December 31, 2016 Guarantee obligations $ 20,101 $ 21,668 Accrued compensation 18,978 18,830 Accrued taxes payable 15,835 525 Unsettled trades 12,005 24 Residential loan and MSR repurchase reserve 4,755 5,432 Legal reserve 2,000 2,000 Current accounts payable 1,920 1,151 Accrued operating expenses 1,097 4,493 Deferred tax liability 898 898 Margin payable 841 12,783 Other 2,632 4,624 Total Other Liabilities $ 81,062 $ 72,428 |
Short-Term Debt (Tables)
Short-Term Debt (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
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, 2017 and December 31, 2016 . Table 11.1 – Short-Term Debt September 30, 2017 (Dollars in Thousands) Number of Facilities Outstanding Balance Limit Weighted Average Interest Rate Maturity Weighted Average Days Until Maturity Facilities Residential loan warehouse 4 $ 438,243 $ 1,325,000 2.80 % 12/2017-8/2018 150 Real estate securities repo 8 549,811 — 2.46 % 10/2017-12/2017 28 Total Short-Term Debt Facilities 12 988,054 Convertible notes, net N/A 250,142 — 4.63 % 4/2018 197 Total Short-Term Debt $ 1,238,196 December 31, 2016 (Dollars in Thousands) Number of Facilities Outstanding Balance Limit Weighted Average Interest Rate Maturity Weighted Average Days Until Maturity Facilities Residential loan warehouse 4 $ 485,544 $ 1,325,000 2.40 % 1/2017-12/2017 206 Real estate securities repo 7 305,995 — 1.91 % 1/2017-3/2017 24 Total Short-Term Debt 11 $ 791,539 |
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, 2017 . Table 11.2 – Short-Term Debt by Collateral Type and Remaining Maturities September 30, 2017 (In Thousands) Within 30 days 31 to 90 days Over 90 days Total Collateral Type Held-for-sale residential loans $ — $ 120,219 $ 318,024 $ 438,243 Real estate securities 422,300 127,511 — 549,811 Total Secured Short-Term Debt 422,300 247,730 318,024 988,054 Convertible notes, net — — 250,142 250,142 Total Short-Term Debt $ 422,300 $ 247,730 $ 568,166 $ 1,238,196 |
Asset-Backed Securities Issued
Asset-Backed Securities Issued (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Asset-Backed Securities Issued | The carrying values of ABS issued by Sequoia securitization entities we sponsored at September 30, 2017 and December 31, 2016 , along with other selected information, are summarized in the following table. Table 12.1 – Asset-Backed Securities Issued September 30, 2017 Legacy Sequoia Sequoia Total (Dollars in Thousands) Certificates with principal balance $ 730,312 $ 276,873 $ 1,007,185 Interest-only certificates 2,829 4,153 6,982 Market valuation adjustments (75,181 ) 5,302 (69,879 ) ABS Issued, Net $ 657,960 $ 286,328 $ 944,288 Range of weighted average interest rates, by series 1.20% to 2.56% 4.53% Stated maturities 2024 - 2036 2047 Number of series 20 1 December 31, 2016 Legacy Sequoia Sequoia Total (Dollars in Thousands) Certificates with principal balance $ 880,517 $ — $ 880,517 Interest-only certificates 3,774 — 3,774 Market valuation adjustments (110,829 ) — (110,829 ) ABS Issued, Net $ 773,462 $ — $ 773,462 Range of weighted average interest rates, by series 0.74% to 2.23% — % Stated maturities 2024 - 2036 N/A Number of series 20 — |
Collateral for ABS Issued | The following table summarizes the carrying value components of the collateral for ABS issued and outstanding at September 30, 2017 and December 31, 2016 . Table 12.2 – Collateral for Asset-Backed Securities Issued September 30, 2017 Legacy Sequoia Sequoia Choice Total (In Thousands) Residential loans $ 673,134 $ 317,303 $ 990,437 Restricted cash 147 — 147 Accrued interest receivable 898 1,266 2,164 REO 3,020 — 3,020 Total Collateral for ABS Issued $ 677,199 $ 318,569 $ 995,768 December 31, 2016 Legacy Sequoia Sequoia Total (In Thousands) Residential loans $ 791,636 $ — $ 791,636 Restricted cash 148 — 148 Accrued interest receivable 1,000 — 1,000 REO 5,533 — 5,533 Total Collateral for ABS Issued $ 798,317 $ — $ 798,317 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Maturities of FHLBC Borrowings by Year | The following table presents maturities of our FHLBC borrowings by year at September 30, 2017 . Table 13.1 – Maturities of FHLBC Borrowings by Year (In Thousands) September 30, 2017 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, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Future Lease Commitments by Year | The following table presents our future lease commitments at September 30, 2017 . Table 14.1 – Future Lease Commitments by Year (In Thousands) September 30, 2017 2017 (3 months) $ 387 2018 1,948 2019 1,987 2020 1,965 2021 and thereafter 11,691 Total Lease Commitments $ 17,978 |
Equity (Tables)
Equity (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
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, 2017 and 2016 . Table 15.1 – Changes in Accumulated Other Comprehensive Income by Component Three Months Ended September 30, 2017 Three Months Ended September 30, 2016 (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 $ 114,364 $ (44,688 ) $ 116,849 $ (70,518 ) Other comprehensive income (loss) before reclassifications (1) 13,158 321 9,038 647 Amounts reclassified from other accumulated comprehensive income (853 ) 14 (1,319 ) 18 Net current-period other comprehensive income (loss) 12,305 335 7,719 665 Balance at End of Period $ 126,669 $ (44,353 ) $ 124,568 $ (69,853 ) Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 (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 $ 115,873 $ (44,020 ) $ 139,356 $ (47,363 ) Other comprehensive income (loss) (1) 17,899 (375 ) 5,195 (22,545 ) Amounts reclassified from other (7,103 ) 42 (19,983 ) 55 Net current-period other comprehensive income (loss) 10,796 (333 ) (14,788 ) (22,490 ) Balance at End of Period $ 126,669 $ (44,353 ) $ 124,568 $ (69,853 ) (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, 2017 , respectively, and $0.2 million and $0.6 million for the three and nine months ended September 30, 2016 , respectively. |
Reclassifications out of Accumulated Other Comprehensive Income | The following table provides a summary of reclassifications out of accumulated other comprehensive income for three and nine months ended September 30, 2017 and 2016 . Table 15.2 – 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 2017 2016 Net Realized (Gain) Loss on AFS Securities Other than temporary impairment (1) Investment fair value changes, net $ 3 $ — Gain on sale of AFS securities Realized gains, net (856 ) (1,319 ) $ (853 ) $ (1,319 ) Net Realized Loss on Interest Rate Amortization of deferred loss Interest expense $ 14 $ 18 $ 14 $ 18 Amount Reclassified From Accumulated Other Comprehensive Income Affected Line Item in the Nine Months Ended September 30, (In Thousands) Income Statement 2017 2016 Net Realized (Gain) Loss on AFS Securities Other than temporary impairment (1) Investment fair value changes, net $ 248 $ 305 Gain on sale of AFS securities Realized gains, net (7,351 ) (20,288 ) $ (7,103 ) $ (19,983 ) Net Realized Loss on Interest Rate Amortization of deferred loss Interest expense $ 42 $ 55 $ 42 $ 55 (1) For the nine months ended September 30, 2017 , other-than-temporary impairments were $0.6 million , of which $0.2 million were recognized through our consolidated statements of income and $0.4 million were recognized in Accumulated other comprehensive income, a component of our consolidated balance sheet. For the three months ended September 30, 2016, there were no other-than-temporary impairments. For the nine months ended September 30, 2016, other-than-temporary impairments were $3 million , of which $0.3 million were recognized through our consolidated statements of income and $2 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, 2017 and 2016 . Table 15.3 – Basic and Diluted Earnings per Common Share Three Months Ended September 30, Nine Months Ended September 30, (In Thousands, except Share Data) 2017 2016 2017 2016 Basic Earnings per Common Share: Net income attributable to Redwood $ 36,180 $ 52,553 $ 109,473 $ 105,897 Less: Dividends and undistributed earnings allocated to participating securities (948 ) (1,485 ) (2,800 ) (3,040 ) Net income allocated to common shareholders $ 35,232 $ 51,068 $ 106,673 $ 102,857 Basic weighted average common shares outstanding 76,850,830 76,680,183 76,803,324 76,827,026 Basic Earnings per Common Share $ 0.46 $ 0.67 $ 1.39 $ 1.34 Diluted Earnings per Common Share: Net income attributable to Redwood $ 36,180 $ 52,553 $ 109,473 $ 105,897 Less: Dividends and undistributed earnings allocated to participating securities (986 ) (1,439 ) (2,926 ) (3,226 ) Add back: Interest expense on convertible notes for the period, net of tax 6,564 6,115 18,639 18,263 Net income allocated to common shareholders $ 41,758 $ 57,229 $ 125,186 $ 120,934 Weighted average common shares outstanding 76,850,830 76,680,183 76,803,324 76,827,026 Net effect of dilutive equity awards 298,955 54,696 215,141 18,665 Net effect of assumed convertible notes conversion to common shares 25,553,323 21,096,738 22,379,401 21,145,987 Diluted weighted average common shares outstanding 102,703,108 97,831,617 99,397,866 97,991,678 Diluted Earnings per Common Share $ 0.41 $ 0.58 $ 1.26 $ 1.23 |
Equity Compensation Plans (Tabl
Equity Compensation Plans (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [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 $18 million at September 30, 2017 , as shown in the following table. Table 16.1 – Activities of Equity Compensation Costs by Award Type Nine Months Ended September 30, 2017 (In Thousands) Restricted Stock Deferred Stock Units Performance Stock Units Employee Stock Purchase Plan Total Unrecognized compensation cost at beginning of period $ 2,091 $ 11,506 $ 4,549 $ — $ 18,146 Equity grants 2,237 5,747 — 129 8,113 Equity grant forfeitures (174 ) (472 ) — — (646 ) Equity compensation expense (934 ) (4,866 ) (1,738 ) (96 ) (7,634 ) Unrecognized Compensation Cost at End of Period $ 3,220 $ 11,915 $ 2,811 $ 33 $ 17,979 |
Mortgage Banking Activities, 45
Mortgage Banking Activities, Net (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
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, 2017 and 2016 . Table 17.1 – Mortgage Banking Activities Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2017 2016 2017 2016 Residential Mortgage Banking Activities, Net Changes in fair value of: Residential loans, at fair value (1) $ 28,135 $ 12,671 $ 63,122 $ 47,456 Sequoia securities — — — 1,455 Risk management derivatives (2) (7,077 ) (3,287 ) (13,787 ) (22,743 ) Other income, net (3) 142 382 1,515 606 Total residential mortgage banking activities, net 21,200 9,766 50,850 26,774 Commercial Mortgage Banking Activities, Net — — — (2,062 ) Mortgage Banking Activities, Net $ 21,200 $ 9,766 $ 50,850 $ 24,712 (1) Includes changes in fair value for associated loan purchase commitments. (2) Represents market valuation changes of derivatives that were used to manage risks associated with our accumulation of residential loans. (3) Amounts in this line item include other fee income from loan acquisitions and the provision for repurchases expense, presented net. |
Investment Fair Value Changes46
Investment Fair Value Changes, Net (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
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, 2017 and 2016 . Table 18.1 – Investment Fair Value Changes Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2017 2016 2017 2016 Investment Fair Value Changes, Net Changes in fair value of: Residential loans held-for-investment, at Redwood $ 2,881 $ (655 ) $ 8,902 $ 22,161 Trading securities 607 8,898 30,676 3,728 Net investments in Legacy Sequoia entities (1) (1,045 ) (255 ) (3,842 ) (2,086 ) Net investment in Sequoia Choice entity (1) (256 ) — (256 ) — Risk sharing investments (267 ) 15 (985 ) (689 ) Risk management derivatives, net (1,592 ) 4,222 (24,557 ) (41,188 ) Valuation adjustments on commercial loans held-for-sale — (307 ) 300 (307 ) Impairments on AFS securities (4 ) — (248 ) (305 ) Investment Fair Value Changes, Net $ 324 $ 11,918 $ 9,990 $ (18,686 ) (1) Includes changes in fair value of the residential loans held-for-sale, REO and the ABS issued at the entities, which netted together represent the change in value of our retained investments at the consolidated VIEs. |
Operating Expenses (Tables)
Operating Expenses (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Other Income and Expenses [Abstract] | |
Components of Operating Expenses | Components of our operating expenses for the three and nine months ended September 30, 2017 and 2016 are presented in the following table. Table 19.1 – Components of Operating Expenses Three Months Ended September 30, Nine Months Ended September 30, (In Thousands) 2017 2016 2017 2016 Fixed compensation expense $ 5,233 $ 5,253 $ 16,556 $ 19,022 Variable compensation expense 6,467 5,802 14,713 11,824 Equity compensation expense 2,337 2,031 7,634 7,117 Total compensation expense 14,037 13,086 38,903 37,963 Systems and consulting 1,856 2,692 5,183 7,274 Loan acquisition costs (1) 1,187 1,393 3,397 4,680 Office costs 988 1,056 3,231 3,501 Accounting and legal 519 721 2,322 3,043 Corporate costs 415 478 1,363 1,589 Other operating expenses 920 925 2,390 2,367 Operating expenses before restructuring charges 19,922 20,351 56,789 60,417 Restructuring charges (2) — 4 — 10,545 Total Operating Expenses $ 19,922 $ 20,355 $ 56,789 $ 70,962 (1) Loan acquisition costs primarily includes underwriting and due diligence costs related to the acquisition of residential loans held-for-sale at fair value. (2) For the nine months ended September 30, 2016, restructuring charges included $5 million of fixed compensation expense and $4 million of equity compensation expense related to one-time termination benefits, as well as $2 million of other contract termination costs, associated with the restructuring of our conforming and commercial mortgage banking operations and related charges associated with the departure of Redwood's President announced in the first quarter of 2016. |
Taxes (Tables)
Taxes (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
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, 2017 and 2016 . Table 20.1 – Reconciliation of Statutory Tax Rate to Effective Tax Rate September 30, 2017 September 30, 2016 Federal statutory rate 34.0 % 34.0 % State statutory rate, net of Federal tax effect 7.2 % 7.2 % Differences in taxable (loss) income from GAAP income (6.8 )% (21.7 )% Change in valuation allowance (2.8 )% 6.6 % Dividends paid deduction (18.3 )% (24.9 )% Effective Tax Rate 13.3 % 1.2 % |
Segment Information (Tables)
Segment Information (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Segment Reporting [Abstract] | |
Business Segment Financial Information | The following tables present financial information by segment for the three and nine months ended September 30, 2017 and 2016 . Table 21.1 – Business Segment Financial Information Three Months Ended September 30, 2017 (In Thousands) Investment Portfolio Residential Mortgage Banking Corporate/ Other Total Interest income $ 47,023 $ 10,626 $ 5,088 $ 62,737 Interest expense (9,445 ) (4,135 ) (13,863 ) (27,443 ) Net interest income (loss) 37,578 6,491 (8,775 ) 35,294 Non-interest income Mortgage banking activities, net — 21,200 — 21,200 MSR income, net 1,615 — — 1,615 Investment fair value changes, net 1,372 — (1,048 ) 324 Other income 1,197 — — 1,197 Realized gains, net 1,734 — — 1,734 Total non-interest income, net 5,918 21,200 (1,048 ) 26,070 Direct operating expenses (1,324 ) (6,107 ) (12,491 ) (19,922 ) Provision for income taxes (433 ) (4,829 ) — (5,262 ) Segment Contribution $ 41,739 $ 16,755 $ (22,314 ) Net Income $ 36,180 Non-cash amortization income (expense) $ 5,222 $ (25 ) $ (787 ) $ 4,410 Three Months Ended September 30, 2016 (In Thousands) Investment Portfolio Residential Mortgage Banking Corporate/ Total Interest income $ 47,176 $ 8,831 $ 4,899 $ 60,906 Interest expense (5,013 ) (3,826 ) (12,758 ) (21,597 ) Net interest income (loss) 42,163 5,005 (7,859 ) 39,309 Reversal of provision for loan losses 859 — — 859 Non-interest income Mortgage banking activities, net — 9,766 — 9,766 MSR income, net 3,770 — — 3,770 Investment fair value changes, net 12,176 — (258 ) 11,918 Other income 1,643 — — 1,643 Realized gains, net 6,615 — — 6,615 Total non-interest income, net 24,204 9,766 (258 ) 33,712 Direct operating expenses (2,751 ) (5,807 ) (11,797 ) (20,355 ) Provision for income taxes (732 ) (240 ) — (972 ) Segment Contribution $ 63,743 $ 8,724 $ (19,914 ) Net Income $ 52,553 Non-cash amortization income (expense) $ 6,123 $ (28 ) $ (983 ) $ 5,112 Nine Months Ended September 30, 2017 (In Thousands) Investment Portfolio Residential Mortgage Banking Corporate/ Total Interest income $ 135,106 $ 26,515 $ 14,968 $ 176,589 Interest expense (21,940 ) (11,462 ) (39,306 ) (72,708 ) Net interest income (loss) 113,166 15,053 (24,338 ) 103,881 Non-interest income Mortgage banking activities, net — 50,850 — 50,850 MSR income, net 6,106 — — 6,106 Investment fair value changes, net 13,846 — (3,856 ) 9,990 Other income 3,367 — — 3,367 Realized gains, net 9,561 — (752 ) 8,809 Total non-interest income, net 32,880 50,850 (4,608 ) 79,122 Direct operating expenses (4,371 ) (18,009 ) (34,409 ) (56,789 ) Provision for income taxes (4,490 ) (12,251 ) — (16,741 ) Segment Contribution $ 137,185 $ 35,643 $ (63,355 ) Net Income $ 109,473 Non-cash amortization income (expense) $ 16,263 $ (79 ) $ (2,528 ) $ 13,656 Nine Months Ended September 30, 2016 (In Thousands) Investment Portfolio Residential Mortgage Banking Corporate/ Total Interest income $ 149,985 $ 24,610 $ 15,426 $ 190,021 Interest expense (18,679 ) (10,719 ) (38,593 ) (67,991 ) Net interest income (loss) 131,306 13,891 (23,167 ) 122,030 Reversal of provision for loan losses 7,102 — — 7,102 Non-interest income Mortgage banking activities, net — 26,774 (2,062 ) 24,712 MSR income, net 12,834 — — 12,834 Investment fair value changes, net (16,505 ) — (2,181 ) (18,686 ) Other income 4,157 — — 4,157 Realized gains, net 25,745 — 292 26,037 Total non-interest income, net 26,231 26,774 (3,951 ) 49,054 Direct operating expenses (1) (7,689 ) (17,175 ) (46,098 ) (70,962 ) Provision for income taxes (1,087 ) (240 ) — (1,327 ) Segment Contribution $ 155,863 $ 23,250 $ (73,216 ) Net Income $ 105,897 Non-cash amortization income (expense) $ 20,507 $ (102 ) $ (2,978 ) $ 17,427 (1) For the nine months ended September 30, 2016, $11 million of costs associated with the restructuring of our conforming residential mortgage loan operations and commercial operations, included in the direct operating expense line item, are presented under the Corporate/Other column. |
Components of Corporate and Other | The following tables present the components of Corporate/Other for the three and nine months ended September 30, 2017 and 2016 . Table 21.2 – Components of Corporate/Other Three Months Ended September 30, 2017 2016 (In Thousands) Legacy Consolidated VIEs (1) Other Total Legacy Consolidated VIEs (1) Other Total Interest income $ 4,875 $ 213 $ 5,088 $ 4,837 $ 62 $ 4,899 Interest expense (3,838 ) (10,025 ) (13,863 ) (3,274 ) (9,484 ) (12,758 ) Net interest income (loss) 1,037 (9,812 ) (8,775 ) 1,563 (9,422 ) (7,859 ) Non-interest income Investment fair value changes, net (1,045 ) (3 ) (1,048 ) (255 ) (3 ) (258 ) Total non-interest income, net (1,045 ) (3 ) (1,048 ) (255 ) (3 ) (258 ) Direct operating expenses — (12,491 ) (12,491 ) — (11,797 ) (11,797 ) Total $ (8 ) $ (22,306 ) $ (22,314 ) $ 1,308 $ (21,222 ) $ (19,914 ) Nine Months Ended September 30, 2017 2016 (In Thousands) Legacy Consolidated VIEs (1) Other Total Legacy Consolidated VIEs (1) Other Total Interest income $ 14,576 $ 392 $ 14,968 $ 14,525 $ 901 $ 15,426 Interest expense (11,046 ) (28,260 ) (39,306 ) (9,842 ) (28,751 ) (38,593 ) Net interest income (loss) 3,530 (27,868 ) (24,338 ) 4,683 (27,850 ) (23,167 ) Non-interest income Investment fair value changes, net (3,842 ) (14 ) (3,856 ) (2,086 ) (95 ) (2,181 ) Realized gains, net — (752 ) (752 ) — 292 292 Total non-interest income, net (3,842 ) (766 ) (4,608 ) (2,086 ) (1,865 ) (3,951 ) Direct operating expenses — (34,409 ) (34,409 ) — (46,098 ) (46,098 ) Total $ (312 ) $ (63,043 ) $ (63,355 ) $ 2,597 $ (75,813 ) $ (73,216 ) (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, 2017 and December 31, 2016 . Table 21.3 – Supplemental Segment Information (In Thousands) Investment Portfolio Residential Mortgage Banking Corporate/ Other Total September 30, 2017 Residential loans $ 2,586,105 $ 925,681 $ 673,134 $ 4,184,920 Real estate securities 1,356,272 — — 1,356,272 Mortgage servicing rights 62,928 — — 62,928 Total assets 4,236,023 947,503 947,173 6,130,699 December 31, 2016 Residential loans $ 2,261,016 $ 835,399 $ 791,636 $ 3,888,051 Real estate securities 1,018,439 — — 1,018,439 Mortgage servicing rights 118,526 — — 118,526 Total assets 3,615,535 866,356 1,001,586 5,483,477 |
Organization (Details)
Organization (Details) | 9 Months Ended |
Sep. 30, 2017Segment | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of operating segments (in segments) | 2 |
Summary of Significant Accoun51
Summary of Significant Accounting Policies - Offsetting of Financial Assets, Liabilities, and Collateral (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 | |
Accounting Policies [Abstract] | |||
Future lease commitments with expiration date | $ 17,978 | ||
Offsetting Asset and Liabilities [Line Items] | |||
Net Amounts of Assets Presented in Consolidated Balance Sheet | [1] | 11,948 | $ 36,595 |
Gross Amounts of Recognized Liabilities, Including Assets Under Repurchase Agreements | (1,050,417) | (854,067) | |
Gross Amounts Offset in Consolidated Balance Sheet Including Assets Under Repurchase Agreement | 0 | 0 | |
Net Amounts of Liabilities Presented in Consolidated Balance Sheet | [1] | (65,238) | (66,329) |
Net Amounts of Liabilities Presented in Consolidated Balance Sheet Including Assets Under Repurchase Agreement | (1,050,417) | (854,067) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments Including Assets Under Repurchase Agreement | 994,505 | 803,211 | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral Pledged Including Assets Under Repurchase Agreement | 55,749 | 50,111 | |
Net Amount Including Assets Under Repurchase Agreement | (163) | (745) | |
Interest Rate Agreement, TBAs, And Futures | |||
Offsetting Asset and Liabilities [Line Items] | |||
Gross Amounts of Recognized Assets | 6,952 | 33,280 | |
Net Amounts of Assets Presented in Consolidated Balance Sheet | 6,952 | 33,280 | |
Gross Amounts Not Offset in Consolidated Balance Sheet - Financial Instruments | (6,450) | (11,672) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral Pledged | (298) | (9,148) | |
Net Amount | 204 | 12,460 | |
Interest rate agreements | |||
Offsetting Asset and Liabilities [Line Items] | |||
Gross Amounts of Recognized Assets | 3,942 | 24,980 | |
Gross Amounts Offset in Consolidated Balance Sheet | 0 | 0 | |
Net Amounts of Assets Presented in Consolidated Balance Sheet | 3,942 | 24,980 | |
Gross Amounts Not Offset in Consolidated Balance Sheet - Financial Instruments | (3,644) | (7,736) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral Pledged | (298) | (4,784) | |
Net Amount | 0 | 12,460 | |
Gross Amounts of Recognized Liabilities | (57,994) | (56,919) | |
Gross Amounts Offset in Consolidated Balance Sheet | 0 | 0 | |
Net Amounts of Liabilities Presented in Consolidated Balance Sheet | (57,994) | (56,919) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments | 3,644 | 7,736 | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral Pledged | 54,350 | 49,183 | |
Net Amount | 0 | 0 | |
TBAs | |||
Offsetting Asset and Liabilities [Line Items] | |||
Gross Amounts of Recognized Assets | 2,875 | 8,300 | |
Gross Amounts Offset in Consolidated Balance Sheet | 0 | 0 | |
Net Amounts of Assets Presented in Consolidated Balance Sheet | 2,875 | 8,300 | |
Gross Amounts Not Offset in Consolidated Balance Sheet - Financial Instruments | (2,806) | (3,936) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral Pledged | 0 | (4,364) | |
Net Amount | 69 | 0 | |
Gross Amounts of Recognized Liabilities | (3,946) | (4,681) | |
Gross Amounts Offset in Consolidated Balance Sheet | 0 | 0 | |
Net Amounts of Liabilities Presented in Consolidated Balance Sheet | (3,946) | (4,681) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments | 2,807 | 3,936 | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral Pledged | 976 | 0 | |
Net Amount | (163) | (745) | |
Futures | |||
Offsetting Asset and Liabilities [Line Items] | |||
Gross Amounts of Recognized Assets | 135 | ||
Gross Amounts Offset in Consolidated Balance Sheet | 0 | ||
Net Amounts of Assets Presented in Consolidated Balance Sheet | 135 | ||
Gross Amounts Not Offset in Consolidated Balance Sheet - Financial Instruments | 0 | ||
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral Pledged | 0 | ||
Net Amount | 135 | ||
Gross Amounts of Recognized Liabilities | (423) | (928) | |
Gross Amounts Offset in Consolidated Balance Sheet | 0 | 0 | |
Net Amounts of Liabilities Presented in Consolidated Balance Sheet | (423) | (928) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments | 0 | 0 | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral Pledged | 423 | 928 | |
Net Amount | 0 | 0 | |
Loan warehouse debt | |||
Offsetting Asset and Liabilities [Line Items] | |||
Gross Amounts of Recognized Liabilities - Under Repurchase Agreements | (438,243) | (485,544) | |
Gross Amounts Offset in Consolidated Balance Sheet - Under Repurchase Agreement | 0 | 0 | |
Net Amounts of Liabilities Presented in Consolidated Balance Sheet - Under Repurchase Agreement | (438,243) | (485,544) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments - Under Repurchase Agreement | 438,243 | 485,544 | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral Pledged - Under Repurchase Agreement | 0 | 0 | |
Security repurchase agreements | |||
Offsetting Asset and Liabilities [Line Items] | |||
Gross Amounts of Recognized Liabilities - Under Repurchase Agreements | (549,811) | (305,995) | |
Gross Amounts Offset in Consolidated Balance Sheet - Under Repurchase Agreement | 0 | 0 | |
Net Amounts of Liabilities Presented in Consolidated Balance Sheet - Under Repurchase Agreement | (549,811) | (305,995) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments - Under Repurchase Agreement | 549,811 | 305,995 | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral Pledged - Under Repurchase Agreement | 0 | 0 | |
Net Amount - Under Repurchase Agreement | $ 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, 2017 and December 31, 2016, assets of consolidated VIEs totaled $995,768 and $798,317, respectively. At September 30, 2017 and December 31, 2016, liabilities of consolidated VIEs totaled $945,873 and $773,980, respectively. See Note 4 for further discussion. |
Principles of Consolidation - A
Principles of Consolidation - Additional Information (Details) $ in Millions | 57 Months Ended |
Sep. 30, 2017USD ($)Entity | |
Variable Interest Entity, Not Primary Beneficiary | |
Variable Interest Entity [Line Items] | |
Number of securitization entities to which asset transferred (in entities) | Entity | 35 |
Legacy Sequoia | Variable Interest Entity, Primary Beneficiary | |
Variable Interest Entity [Line Items] | |
Estimated fair value of investments | $ 19 |
Sequoia Choice | Variable Interest Entity, Primary Beneficiary | |
Variable Interest Entity [Line Items] | |
Estimated fair value of investments | $ 31 |
Principles of Consolidation -53
Principles of Consolidation - Assets and Liabilities of Consolidated Variable Interest Entity's (Details) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017USD ($)Investment | Dec. 31, 2016USD ($)Investment | |
Variable Interest Entity [Line Items] | ||
Assets | $ 995,768 | $ 798,317 |
Liabilities | 945,873 | 773,980 |
Sequoia | ||
Variable Interest Entity [Line Items] | ||
Assets | 995,768 | 798,317 |
Liabilities | $ 945,873 | $ 773,980 |
Number of VIEs (in investments) | Investment | 21 | 20 |
Sequoia | Residential loans held-for-investment, at Redwood | ||
Variable Interest Entity [Line Items] | ||
Assets | $ 990,437 | $ 791,636 |
Sequoia | Restricted cash | ||
Variable Interest Entity [Line Items] | ||
Assets | 147 | 148 |
Sequoia | Accrued interest receivable | ||
Variable Interest Entity [Line Items] | ||
Assets | 2,164 | 1,000 |
Sequoia | REO | ||
Variable Interest Entity [Line Items] | ||
Assets | 3,020 | 5,533 |
Sequoia | Accrued interest payable | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 1,585 | 518 |
Sequoia | Asset-backed securities issued | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 944,288 | 773,462 |
Legacy Sequoia | ||
Variable Interest Entity [Line Items] | ||
Assets | 677,199 | 798,317 |
Liabilities | $ 658,500 | $ 773,980 |
Number of VIEs (in investments) | Investment | 20 | 20 |
Legacy Sequoia | Residential loans held-for-investment, at Redwood | ||
Variable Interest Entity [Line Items] | ||
Assets | $ 673,134 | $ 791,636 |
Legacy Sequoia | Restricted cash | ||
Variable Interest Entity [Line Items] | ||
Assets | 147 | 148 |
Legacy Sequoia | Accrued interest receivable | ||
Variable Interest Entity [Line Items] | ||
Assets | 898 | 1,000 |
Legacy Sequoia | REO | ||
Variable Interest Entity [Line Items] | ||
Assets | 3,020 | 5,533 |
Legacy Sequoia | Accrued interest payable | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 540 | 518 |
Legacy Sequoia | Asset-backed securities issued | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 657,960 | 773,462 |
Sequoia Choice | ||
Variable Interest Entity [Line Items] | ||
Assets | 318,569 | 0 |
Liabilities | $ 287,373 | $ 0 |
Number of VIEs (in investments) | Investment | 1 | 0 |
Sequoia Choice | Residential loans held-for-investment, at Redwood | ||
Variable Interest Entity [Line Items] | ||
Assets | $ 317,303 | $ 0 |
Sequoia Choice | Restricted cash | ||
Variable Interest Entity [Line Items] | ||
Assets | 0 | 0 |
Sequoia Choice | Accrued interest receivable | ||
Variable Interest Entity [Line Items] | ||
Assets | 1,266 | 0 |
Sequoia Choice | REO | ||
Variable Interest Entity [Line Items] | ||
Assets | 0 | 0 |
Sequoia Choice | Accrued interest payable | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 1,045 | 0 |
Sequoia Choice | Asset-backed securities issued | ||
Variable Interest Entity [Line Items] | ||
Liabilities | $ 286,328 | $ 0 |
Principles of Consolidation - S
Principles of Consolidation - Securitization Activity Related to Unconsolidated Variable Interest Entity's Sponsored by Redwood (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Variable Interest Entity [Line Items] | ||||
MSRs recognized | $ 7,387 | $ 7,679 | ||
Variable Interest Entity, Not Primary Beneficiary | ||||
Variable Interest Entity [Line Items] | ||||
Principal balance of loans transferred | $ 839,264 | $ 348,537 | 2,223,387 | 693,427 |
MSRs recognized | 0 | 1,971 | 7,123 | 4,102 |
Variable Interest Entity, Not Primary Beneficiary | Trading securities retained, at fair value | ||||
Variable Interest Entity [Line Items] | ||||
Securities retained, at fair value | 24,617 | 0 | 55,607 | 0 |
Variable Interest Entity, Not Primary Beneficiary | AFS securities retained, at fair value | ||||
Variable Interest Entity [Line Items] | ||||
Securities retained, at fair value | $ 4,416 | $ 1,839 | $ 11,476 | $ 3,673 |
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, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Variable Interest Entity [Line Items] | ||||
Proceeds from new transfers | $ 839,642 | $ 356,497 | $ 2,213,151 | $ 708,539 |
MSR fees received | 3,631 | 3,473 | 10,804 | 10,397 |
Funding of compensating interest, net | (35) | (98) | (114) | (254) |
Cash flows received on retained securities | $ 6,882 | $ 6,384 | $ 19,843 | $ 24,314 |
Principles of Consolidation -56
Principles of Consolidation - Assumptions Related to Unconsolidated Variable Interest Entity's Sponsored by Redwood (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Senior IO Securities | ||||
Fair Value Assumption, Date of Securitization or Asset-backed Financing Arrangement, Transferor's Continuing Involvement, Servicing Assets or Liabilities [Line Items] | ||||
Credit loss assumptions (as a percent) | 0.25% | |||
Variable Interest Entity, Not Primary Beneficiary | MSRs | ||||
Fair Value Assumption, Date of Securitization or Asset-backed Financing Arrangement, Transferor's Continuing Involvement, Servicing Assets or Liabilities [Line Items] | ||||
Prepayment rates (as a percent) | 24.00% | 9.00% | 20.00% | |
Discount rates (as a percent) | 11.00% | 11.00% | 11.00% | |
Variable Interest Entity, Not Primary Beneficiary | 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 (as a percent) | 11.00% | 10.00% | ||
Discount rates (as a percent) | 14.00% | 13.00% | ||
Credit loss assumptions (as a percent) | 0.25% | |||
Variable Interest Entity, Not Primary Beneficiary | 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 (as a percent) | 10.00% | 15.00% | 10.00% | 15.00% |
Discount rates (as a percent) | 5.00% | 7.00% | 5.00% | 7.00% |
Credit loss assumptions (as a percent) | 0.25% | 0.25% | 0.25% | 0.25% |
Principles of Consolidation -57
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, 2017 | Dec. 31, 2016 |
On-balance sheet assets, at fair value: | ||
Maximum loss exposure | $ 383,632 | $ 334,734 |
Assets transferred: | ||
Principal balance of loans outstanding | 8,329,635 | 6,870,398 |
Principal balance of loans 30 days delinquent | 12,651 | 21,427 |
Interest-only, senior and subordinate securities, classified as trading | ||
On-balance sheet assets, at fair value: | ||
Securities | 94,491 | 41,909 |
Subordinate securities, classified as AFS | ||
On-balance sheet assets, at fair value: | ||
Securities | 228,764 | 234,025 |
Mortgage servicing rights | ||
On-balance sheet assets, at fair value: | ||
Securities | $ 60,377 | $ 58,800 |
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 | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
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 | $ 60,377 | $ 58,800 |
Expected life (in years) | 7 years | 7 years |
Prepayment speed assumption (annual CPR) | 9.00% | 11.00% |
Decrease in fair value from: | ||
10% adverse change | $ 1,694 | $ 2,226 |
25% adverse change | $ 4,278 | $ 5,284 |
Discount rate assumption | 11.00% | 11.00% |
Decrease in fair value from: | ||
100 basis point increase | $ 2,311 | $ 2,088 |
200 basis point increase | $ 4,453 | 4,032 |
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 IO 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 | $ 34,276 | $ 26,618 |
Expected life (in years) | 5 years | 6 years |
Prepayment speed assumption (annual CPR) | 10.00% | 8.00% |
Decrease in fair value from: | ||
10% adverse change | $ 1,575 | $ 1,075 |
25% adverse change | $ 3,734 | $ 2,569 |
Discount rate assumption | 9.00% | 8.00% |
Decrease in fair value from: | ||
100 basis point increase | $ 1,281 | $ 1,105 |
200 basis point increase | $ 2,472 | $ 2,128 |
Credit loss assumption | 0.25% | 0.25% |
Decrease in fair value from: | ||
10% higher losses | $ 4 | $ 19 |
25% higher losses | $ 9 | 49 |
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 | $ 288,979 | $ 249,317 |
Expected life (in years) | 13 years | 12 years |
Prepayment speed assumption (annual CPR) | 11.00% | 12.00% |
Decrease in fair value from: | ||
10% adverse change | $ 667 | $ 997 |
25% adverse change | $ 1,683 | $ 2,494 |
Discount rate assumption | 5.00% | 6.00% |
Decrease in fair value from: | ||
100 basis point increase | $ 25,377 | $ 19,574 |
200 basis point increase | $ 47,107 | $ 36,574 |
Credit loss assumption | 0.25% | 0.25% |
Decrease in fair value from: | ||
10% higher losses | $ 1,505 | $ 1,174 |
25% higher losses | $ 3,764 | $ 2,933 |
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 -59
Principles of Consolidation - Summary of Redwood's Interest in Third-Party Variable Interest Entity's (Details) - REO $ in Thousands | Sep. 30, 2017USD ($) |
Variable Interest Entity [Line Items] | |
Assets | $ 1,033,016 |
Senior | |
Variable Interest Entity [Line Items] | |
Assets | 181,723 |
Re-REMIC | |
Variable Interest Entity [Line Items] | |
Assets | 39,033 |
Subordinate | |
Variable Interest Entity [Line Items] | |
Assets | $ 812,260 |
Fair Value of Financial Instr60
Fair Value of Financial Instruments - Carrying Values and Estimated Fair Values of Assets and Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 | |
Assets | |||
Trading securities | $ 820,134 | $ 445,687 | |
Available-for-sale securities | 536,138 | 572,752 | |
MSRs | [1] | 62,928 | 118,526 |
Derivative assets | [1] | 11,948 | 36,595 |
Pledged collateral | 42,933 | 42,875 | |
Liabilities | |||
Derivative liabilities | [1] | 65,238 | 66,329 |
Carrying Value | |||
Assets | |||
Trading securities | 820,134 | 445,687 | |
Available-for-sale securities | 536,138 | 572,752 | |
MSRs | 62,928 | 118,526 | |
Cash and cash equivalents | 257,611 | 212,844 | |
Restricted cash | 26,258 | 8,623 | |
Accrued interest receivable | 21,256 | 18,454 | |
Derivative assets | 11,948 | 36,595 | |
REO | 3,020 | 5,533 | |
Margin receivable | 93,679 | 68,038 | |
FHLBC stock | 43,393 | 43,393 | |
Guarantee asset | 3,049 | 4,092 | |
Pledged collateral | 42,933 | 42,875 | |
Liabilities | |||
Short-term debt facilities | 988,054 | 791,539 | |
Accrued interest payable | 18,836 | 9,608 | |
Margin payable | 841 | 12,783 | |
Guarantee obligation | 20,101 | 21,668 | |
Derivative liabilities | 65,238 | 66,329 | |
ABS issued, net, Fair value | 944,288 | 773,462 | |
FHLBC long-term borrowings | 1,999,999 | 1,999,999 | |
Convertible notes, net | 686,058 | 482,195 | |
Trust preferred securities and subordinated notes, net | 138,524 | 138,489 | |
Carrying Value | Residential Loans | Residential loans | |||
Assets | |||
Loans, held-for-sale | 924,594 | 834,193 | |
Carrying Value | Residential loans, at lower of cost or fair value | Residential loans | |||
Assets | |||
Loans, held-for-sale | 1,087 | 1,206 | |
Carrying Value | Residential Loans Held For Investment at Fair Value | Residential loans | |||
Assets | |||
Loans receivable, fair value | 3,259,239 | 3,052,652 | |
Carrying Value | Commercial Loans | Valuation adjustments on commercial loans held-for-sale | |||
Assets | |||
Loans, held-for-sale | 0 | 2,700 | |
Fair Value | |||
Assets | |||
Trading securities | 820,134 | 445,687 | |
Available-for-sale securities | 536,138 | 572,752 | |
MSRs | 62,928 | 118,526 | |
Cash and cash equivalents | 257,611 | 212,844 | |
Restricted cash | 26,258 | 8,623 | |
Accrued interest receivable | 21,256 | 18,454 | |
Derivative assets | 11,948 | 36,595 | |
REO | 3,441 | 5,560 | |
Margin receivable | 93,679 | 68,038 | |
FHLBC stock | 43,393 | 43,393 | |
Guarantee asset | 3,049 | 4,092 | |
Pledged collateral | 42,933 | 42,875 | |
Liabilities | |||
Short-term debt facilities | 988,054 | 791,539 | |
Accrued interest payable | 18,836 | 9,608 | |
Margin payable | 841 | 12,783 | |
Guarantee obligation | 19,682 | 22,181 | |
Derivative liabilities | 65,238 | 66,329 | |
ABS issued, net, Fair value | 944,288 | 773,462 | |
FHLBC long-term borrowings | 1,999,999 | 1,999,999 | |
Convertible notes, net | 705,703 | 493,365 | |
Trust preferred securities and subordinated notes, net | 101,138 | 96,255 | |
Fair Value | Residential Loans | Residential loans | |||
Assets | |||
Loans, held-for-sale | 924,594 | 834,193 | |
Fair Value | Residential loans, at lower of cost or fair value | Residential loans | |||
Assets | |||
Loans, held-for-sale | 1,227 | 1,365 | |
Fair Value | Residential Loans Held For Investment at Fair Value | Residential loans | |||
Assets | |||
Loans receivable, fair value | 3,259,239 | 3,052,652 | |
Fair Value | Commercial Loans | Valuation adjustments on commercial loans held-for-sale | |||
Assets | |||
Loans, held-for-sale | $ 0 | $ 2,700 | |
[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, 2017 and December 31, 2016, assets of consolidated VIEs totaled $995,768 and $798,317, respectively. At September 30, 2017 and December 31, 2016, liabilities of consolidated VIEs totaled $945,873 and $773,980, respectively. See Note 4 for further discussion. |
Fair Value of Financial Instr61
Fair Value of Financial Instruments - Additional Information (Details) $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2017USD ($) | Sep. 30, 2017USD ($) | |
Subordinate Securities | ||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | ||
Fair value option elected aggregate carrying amount, asset | $ 167 | |
Residential loans | ||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | ||
Fair value option elected aggregate carrying amount, asset | 1,430 | $ 3,720 |
Mortgage servicing rights | ||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | ||
Fair value option elected aggregate carrying amount, asset | $ 0.3 | |
Real estate securities | Maximum | ||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | ||
Dealer marks of securities (as a percent) | 73.00% | 73.00% |
Carrying value for which dealer quotes have been received (as a percent) | 81.00% | 81.00% |
Difference of internal valuation than dealer marks (as a percent) | 1.00% | 1.00% |
Residential Senior Securities | ||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | ||
Fair value option elected aggregate carrying amount, asset | $ 16 | $ 32 |
Residential Subordinate Securities | Subordinate Securities | ||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | ||
Fair value option elected aggregate carrying amount, asset | $ 412 | |
Mortgage servicing rights | Maximum | ||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | ||
Difference of internal valuation than dealer marks (as a percent) | 2.00% | 2.00% |
Mortgage servicing rights | Mortgage servicing rights | ||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | ||
Fair value option elected aggregate carrying amount, asset | $ 8 |
Fair Value of Financial Instr62
Fair Value of Financial Instruments - Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 | |
Assets | |||
Trading securities | $ 820,134 | $ 445,687 | |
Available-for-sale securities | 536,138 | 572,752 | |
Derivative assets | [1] | 11,948 | 36,595 |
MSRs | [1] | 62,928 | 118,526 |
Pledged collateral | 42,933 | 42,875 | |
Liabilities | |||
Derivative liabilities | [1] | 65,238 | 66,329 |
Fair Value, Measurements, Recurring | |||
Assets | |||
Trading securities | 820,134 | 445,687 | |
Available-for-sale securities | 536,138 | 572,752 | |
Derivative assets | 11,948 | 36,595 | |
MSRs | 62,928 | 118,526 | |
Pledged collateral | 42,933 | 42,875 | |
FHLBC stock | 43,393 | 43,393 | |
Guarantee asset | 3,049 | 4,092 | |
Liabilities | |||
Derivative liabilities | 65,238 | 66,329 | |
ABS issued | 944,288 | 773,462 | |
Fair Value, Measurements, Recurring | Residential Loans | |||
Assets | |||
Residential loans | 4,183,833 | 3,886,845 | |
Fair Value, Measurements, Recurring | Level 1 | |||
Assets | |||
Trading securities | 0 | 0 | |
Available-for-sale securities | 0 | 0 | |
Derivative assets | 3,010 | 8,300 | |
MSRs | 0 | 0 | |
Pledged collateral | 42,933 | 42,875 | |
FHLBC stock | 0 | 0 | |
Guarantee asset | 0 | 0 | |
Liabilities | |||
Derivative liabilities | 4,369 | 5,609 | |
ABS issued | 0 | 0 | |
Fair Value, Measurements, Recurring | Level 1 | Residential Loans | |||
Assets | |||
Residential loans | 0 | 0 | |
Fair Value, Measurements, Recurring | Level 2 | |||
Assets | |||
Trading securities | 0 | 0 | |
Available-for-sale securities | 0 | 0 | |
Derivative assets | 3,942 | 24,980 | |
MSRs | 0 | 0 | |
Pledged collateral | 0 | 0 | |
FHLBC stock | 43,393 | 43,393 | |
Guarantee asset | 0 | 0 | |
Liabilities | |||
Derivative liabilities | 57,994 | 56,919 | |
ABS issued | 0 | 0 | |
Fair Value, Measurements, Recurring | Level 2 | Residential Loans | |||
Assets | |||
Residential loans | 0 | 0 | |
Fair Value, Measurements, Recurring | Level 3 | |||
Assets | |||
Trading securities | 820,134 | 445,687 | |
Available-for-sale securities | 536,138 | 572,752 | |
Derivative assets | 4,996 | 3,315 | |
MSRs | 62,928 | 118,526 | |
Pledged collateral | 0 | 0 | |
FHLBC stock | 0 | 0 | |
Guarantee asset | 3,049 | 4,092 | |
Liabilities | |||
Derivative liabilities | 2,875 | 3,801 | |
ABS issued | 944,288 | 773,462 | |
Fair Value, Measurements, Recurring | Level 3 | Residential Loans | |||
Assets | |||
Residential loans | $ 4,183,833 | $ 3,886,845 | |
[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, 2017 and December 31, 2016, assets of consolidated VIEs totaled $995,768 and $798,317, respectively. At September 30, 2017 and December 31, 2016, liabilities of consolidated VIEs totaled $945,873 and $773,980, respectively. See Note 4 for further discussion. |
Fair Value of Financial Instr63
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, 2017USD ($) | |
Asset-backed securities issued | |
Liabilities | |
Beginning balance | $ 773,462 |
Acquisitions | 286,898 |
Sales | 0 |
Principal paydowns | (146,358) |
Gains (losses) in net income, net | 30,286 |
Unrealized gains in OCI, net | 0 |
Other settlements, net | 0 |
Ending balance | 944,288 |
Residential Loans | |
Assets | |
Beginning balance | 3,886,845 |
Acquisitions | 3,791,471 |
Sales | (3,147,707) |
Principal paydowns | (405,888) |
Gains (losses) in net income, net | 62,290 |
Unrealized losses in OCI, net | 0 |
Other settlements, net | (3,178) |
Ending balance | 4,183,833 |
Trading securities retained, at fair value | |
Assets | |
Beginning balance | 445,687 |
Acquisitions | 444,073 |
Sales | (87,092) |
Principal paydowns | (13,219) |
Gains (losses) in net income, net | 30,685 |
Unrealized losses in OCI, net | 0 |
Other settlements, net | 0 |
Ending balance | 820,134 |
AFS Securities | |
Assets | |
Beginning balance | 572,752 |
Acquisitions | 31,654 |
Sales | (60,801) |
Principal paydowns | (42,325) |
Gains (losses) in net income, net | 24,011 |
Unrealized losses in OCI, net | 10,847 |
Other settlements, net | 0 |
Ending balance | 536,138 |
MSRs | |
Assets | |
Beginning balance | 118,526 |
Acquisitions | 7,957 |
Sales | (52,966) |
Principal paydowns | 0 |
Gains (losses) in net income, net | (10,589) |
Unrealized losses in OCI, net | 0 |
Other settlements, net | 0 |
Ending balance | 62,928 |
Guarantee Asset | |
Assets | |
Beginning balance | 4,092 |
Acquisitions | 0 |
Sales | 0 |
Principal paydowns | 0 |
Gains (losses) in net income, net | (1,043) |
Unrealized losses in OCI, net | 0 |
Other settlements, net | 0 |
Ending balance | 3,049 |
Derivatives | |
Assets | |
Beginning balance | (486) |
Acquisitions | 0 |
Sales | 0 |
Principal paydowns | 0 |
Gains (losses) in net income, net | 33,686 |
Unrealized losses in OCI, net | 0 |
Other settlements, net | (31,079) |
Ending balance | $ 2,121 |
Fair Value of Financial Instr64
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, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Asset-backed securities 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 | $ (7,771) | $ 10,522 | $ (30,286) | $ (14,419) |
Residential Loans 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 | 14,359 | 3,818 | 24,227 | 32,202 |
Residential Loans 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 | 3,497 | 9,200 | 22,949 | (18,864) |
Trading securities retained, at fair value | ||||
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 | (36) | 8,646 | 24,452 | 978 |
AFS securities retained, at fair value | ||||
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 | (3) | 0 | (248) | (305) |
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 | 317 | 6,549 | (1,005) | (36,738) |
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 | 2,117 | 5,381 | 2,121 | 5,896 |
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 | $ (239) | $ 307 | $ (1,043) | $ (2,070) |
Fair Value of Financial Instr65
Fair Value of Financial Instruments - Assets and Liabilities Measured at Fair Value on Non-Recurring Basis (Details) - Fair Value, Measurements, Nonrecurring $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2017USD ($) | Sep. 30, 2017USD ($) | |
Residential loans, at lower of cost or fair value | ||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | ||
Loans, at lower of cost or fair value | $ 866 | $ 866 |
Gain (loss) on assets measured at fair value on a non-recurring basis | 18 | 21 |
Residential loans, at lower of cost or fair value | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | ||
Loans, at lower of cost or fair value | 0 | 0 |
Residential loans, at lower of cost or fair value | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | ||
Loans, at lower of cost or fair value | 0 | 0 |
Residential loans, at lower of cost or fair value | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | ||
Loans, at lower of cost or fair value | 866 | 866 |
REO | ||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | ||
REO | 1,725 | 1,725 |
Gain (loss) on assets measured at fair value on a non-recurring basis | 0 | (81) |
REO | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | ||
REO | 0 | 0 |
REO | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | ||
REO | 0 | 0 |
REO | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | ||
REO | $ 1,725 | $ 1,725 |
Fair Value of Financial Instr66
Fair Value of Financial Instruments - Market Valuation Adjustments, Net (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Mortgage servicing rights income, net | $ 1,615 | $ 3,770 | $ 6,106 | $ 12,834 |
Total Market Valuation Gains (Losses), Net | 19,609 | 16,346 | 50,352 | (9,238) |
Mortgage Banking Activities, Net | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | 21,058 | 9,384 | 49,335 | 24,063 |
Mortgage Banking Activities, Net | Residential Loans | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | 14,859 | 650 | 29,175 | 11,948 |
Mortgage Banking Activities, Net | Residential loan purchase commitments | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | 13,276 | 12,021 | 33,947 | 35,508 |
Mortgage Banking Activities, Net | Commercial loans | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | 0 | 0 | 0 | 433 |
Mortgage Banking Activities, Net | Consolidated Sequoia entities | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | 0 | 0 | 0 | 1,455 |
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 | (7,077) | (3,287) | (13,787) | (25,281) |
Investment Fair Value Changes, Net | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | 324 | 11,918 | 9,990 | (18,686) |
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 | (1,592) | 4,222 | (24,557) | (41,188) |
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 | 2,881 | (655) | 8,902 | 22,161 |
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 | 607 | 8,898 | 30,676 | 3,728 |
Investment Fair Value Changes, Net | Valuation adjustments on commercial loans held-for-sale | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Market valuations gains and losses, net | 0 | (307) | 300 | (307) |
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 | (1,045) | (255) | (3,842) | (2,086) |
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 | (256) | 0 | (256) | 0 |
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 | (267) | 15 | (985) | (689) |
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 | (4) | 0 | (248) | (305) |
MSR Income (Loss), Net | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Mortgage servicing rights income, net | (1,773) | (4,956) | (8,973) | (14,615) |
MSR Income (Loss), Net | Risk management derivatives, net | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Mortgage servicing rights income, net | (422) | (6,336) | 1,869 | 55,874 |
MSR Income (Loss), Net | MSRs | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Mortgage servicing rights income, net | $ (1,351) | $ 1,380 | $ (10,842) | $ (70,489) |
Fair Value of Financial Instr67
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) | 9 Months Ended |
Sep. 30, 2017USD ($)$ / loan | |
ABS Issued | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Fair Value | $ 944,288,000 |
ABS Issued | Minimum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Prepayment rate (annual CPR) | 11.00% |
Loss severity | 20.00% |
Discount rate | 3.00% |
Default rate | 0.00% |
ABS Issued | Maximum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Prepayment rate (annual CPR) | 20.00% |
Loss severity | 32.00% |
Discount rate | 15.00% |
Default rate | 12.00% |
ABS Issued | Weighted Average | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Prepayment rate (annual CPR) | 18.00% |
Loss severity | 26.00% |
Discount rate | 4.00% |
Default rate | 5.00% |
Residential Loans Priced To Securitization and Whole Loan Market, Uncommitted to Sell | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Fair Value | $ 2,450,845,000 |
Residential Loans Priced To Securitization and Whole Loan Market, Uncommitted to Sell | Minimum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Whole loan spread to TBA (in dollars per loan) | $ / loan | 2.13 |
Whole loan spread to swap rate | 1.80% |
Residential Loans Priced To Securitization and Whole Loan Market, Uncommitted to Sell | Maximum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Whole loan spread to TBA (in dollars per loan) | $ / loan | 3.15 |
Whole loan spread to swap rate | 2.70% |
Residential Loans Priced To Securitization and Whole Loan Market, Uncommitted to Sell | Weighted Average | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Whole loan spread to TBA (in dollars per loan) | $ / loan | 3.13 |
Whole loan spread to swap rate | 2.65% |
Residential Jumbo Hybrid Loans Priced To Whole Loan Market Uncommitted To Sell | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Fair Value | $ 168,138,000 |
Residential Jumbo Hybrid Loans Priced To Whole Loan Market Uncommitted To Sell | Minimum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Whole loan spread to swap rate | 1.00% |
Prepayment rate (annual CPR) | 15.00% |
Residential Jumbo Hybrid Loans Priced To Whole Loan Market Uncommitted To Sell | Maximum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Whole loan spread to swap rate | 1.90% |
Prepayment rate (annual CPR) | 15.00% |
Residential Jumbo Hybrid Loans Priced To Whole Loan Market Uncommitted To Sell | Weighted Average | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Whole loan spread to swap rate | 1.63% |
Prepayment rate (annual CPR) | 15.00% |
Residential Loans Priced To Whole Loan Market and Committed to Sell | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Fair Value | $ 574,413,000 |
Residential Loans Priced To Whole Loan Market and Committed to Sell | Minimum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Whole loan committed sales price (in dollars per loan) | $ / loan | 102.42 |
Residential Loans Priced To Whole Loan Market and Committed to Sell | Maximum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Whole loan committed sales price (in dollars per loan) | $ / loan | 103.08 |
Residential Loans Priced To Whole Loan Market and Committed to Sell | Weighted Average | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Whole loan committed sales price (in dollars per loan) | $ / loan | 102.89 |
Legacy Sequoia | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Fair Value | $ 673,134,000 |
Sequoia Choice | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Fair Value | 317,303,000 |
Residential loans, at lower of cost or fair value | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Fair Value | $ 866,000 |
Residential loans, at lower of cost or fair value | Minimum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Loss severity | 13.00% |
Residential loans, at lower of cost or fair value | Maximum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Loss severity | 30.00% |
Residential loans, at lower of cost or fair value | Weighted Average | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Loss severity | 18.00% |
Investment Securities | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Fair Value | $ 1,356,272,000 |
Investment Securities | Minimum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Prepayment rate (annual CPR) | 0.00% |
Loss severity | 0.00% |
Discount rate | 2.00% |
Default rate | 0.00% |
Investment Securities | Maximum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Prepayment rate (annual CPR) | 50.00% |
Loss severity | 40.00% |
Discount rate | 25.00% |
Default rate | 32.00% |
Investment Securities | Weighted Average | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Prepayment rate (annual CPR) | 10.00% |
Loss severity | 22.00% |
Discount rate | 5.00% |
Default rate | 3.00% |
MSRs | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Fair Value | $ 62,928,000 |
MSRs | Minimum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Prepayment rate (annual CPR) | 5.00% |
Discount rate | 10.00% |
Per loan annual cost to service | $ 82 |
MSRs | Maximum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Prepayment rate (annual CPR) | 31.00% |
Discount rate | 35.00% |
Per loan annual cost to service | $ 84 |
MSRs | Weighted Average | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Prepayment rate (annual CPR) | 9.00% |
Discount rate | 11.00% |
Per loan annual cost to service | $ 82 |
Guarantee asset | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Fair Value | $ 3,049,000 |
Guarantee asset | Minimum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Prepayment rate (annual CPR) | 14.00% |
Discount rate | 11.00% |
Guarantee asset | Maximum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Prepayment rate (annual CPR) | 14.00% |
Discount rate | 11.00% |
Guarantee asset | Weighted Average | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Prepayment rate (annual CPR) | 14.00% |
Discount rate | 11.00% |
REO | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Fair Value | $ 1,725,000 |
REO | Minimum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Loss severity | 4.00% |
REO | Maximum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Loss severity | 39.00% |
REO | Weighted Average | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Loss severity | 18.00% |
Loan purchase commitments | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Fair Value | $ 2,121,000 |
Loan purchase commitments | Minimum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Whole loan spread to TBA (in dollars per loan) | $ / loan | 2.13 |
Whole loan spread to swap rate | 1.80% |
Prepayment rate (annual CPR) | 15.00% |
MSR Multiple | 1.9 |
Pull-through rate | 13.00% |
Whole loan spread to swap rate - hybrid | 1.00% |
Loan purchase commitments | Maximum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Whole loan spread to TBA (in dollars per loan) | $ / loan | 3.10 |
Whole loan spread to swap rate | 2.70% |
Prepayment rate (annual CPR) | 15.00% |
MSR Multiple | 5.1 |
Pull-through rate | 100.00% |
Whole loan spread to swap rate - hybrid | 1.90% |
Loan purchase commitments | Weighted Average | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Whole loan spread to TBA (in dollars per loan) | $ / loan | 3.07 |
Whole loan spread to swap rate | 2.68% |
Prepayment rate (annual CPR) | 15.00% |
MSR Multiple | 3.8 |
Pull-through rate | 72.00% |
Whole loan spread to swap rate - hybrid | 1.33% |
Residential Loans - Summary of
Residential Loans - Summary of Classifications and Carrying Value of Residential Loans (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 | |
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | $ 4,184,920 | $ 3,888,051 | |
Residential Loans Held For Sale | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | [1] | 925,681 | 835,399 |
Residential Loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 920,000 | 830,000 | |
Residential Loans | Residential loans | Jumbo Loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 924,594 | 834,193 | |
Residential loans, at lower of cost or fair value | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 1,000 | 1,000 | |
Residential loans, at lower of cost or fair value | Residential loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 1,087 | 1,206 | |
Residential Loans Held For Investment at Fair Value | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 2,260,000 | ||
Residential Loans Held For Investment at Fair Value | Residential loans | Jumbo Loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 3,259,239 | 3,052,652 | |
Redwood | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 3,194,483 | 3,096,415 | |
Redwood | Residential Loans Held For Sale | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 925,681 | 835,399 | |
Redwood | Residential Loans | Residential loans | Jumbo Loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 924,594 | 834,193 | |
Redwood | Residential loans, at lower of cost or fair value | Residential loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 1,087 | 1,206 | |
Redwood | Residential Loans Held For Investment at Fair Value | Residential loans | Jumbo Loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 2,268,802 | 2,261,016 | |
Legacy Sequoia | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 673,134 | 791,636 | |
Legacy Sequoia | Residential Loans Held For Sale | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 0 | 0 | |
Legacy Sequoia | Residential Loans | Residential loans | Jumbo Loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 0 | 0 | |
Legacy Sequoia | Residential loans, at lower of cost or fair value | Residential loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 0 | 0 | |
Legacy Sequoia | Residential Loans Held For Investment at Fair Value | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 673,000 | 792,000 | |
Legacy Sequoia | Residential Loans Held For Investment at Fair Value | Residential loans | Jumbo Loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 673,134 | 791,636 | |
Sequoia Choice | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 317,303 | 0 | |
Sequoia Choice | Residential Loans Held For Sale | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 0 | 0 | |
Sequoia Choice | Residential Loans | Residential loans | Jumbo Loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 0 | 0 | |
Sequoia Choice | Residential loans, at lower of cost or fair value | Residential loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 0 | 0 | |
Sequoia Choice | Residential Loans Held For Investment at Fair Value | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 317,000 | ||
Sequoia Choice | Residential Loans Held For Investment at Fair Value | Residential loans | Jumbo Loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | $ 317,303 | $ 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, 2017 and December 31, 2016, assets of consolidated VIEs totaled $995,768 and $798,317, respectively. At September 30, 2017 and December 31, 2016, liabilities of consolidated VIEs totaled $945,873 and $773,980, respectively. See Note 4 for further discussion. |
Residential Loans - Additional
Residential Loans - Additional Information (Details) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017USD ($)loan | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($)loan | Sep. 30, 2016USD ($) | Dec. 31, 2016USD ($)loan | |
Mortgage Loans on Real Estate [Line Items] | |||||
Loan market valuation adjustment | $ 4,184,920,000 | $ 4,184,920,000 | $ 3,888,051,000 | ||
Transfers from loans held-for-sale to loans held-for-investment | 643,876,000 | $ 877,744,000 | |||
Transfers from loans held-for-investment to loans held-for-sale | $ 98,853,000 | 359,005,000 | |||
Fixed-rate loans | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Weighted average coupon rate (as a percent) | 4.08% | 4.08% | |||
Redwood | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Loan market valuation adjustment | $ 3,194,483,000 | $ 3,194,483,000 | 3,096,415,000 | ||
Legacy Sequoia | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Loan market valuation adjustment | 673,134,000 | 673,134,000 | 791,636,000 | ||
Sequoia Choice | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Loan market valuation adjustment | 317,303,000 | 317,303,000 | 0 | ||
Residential loans | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Loan pledged as collateral | 493,000,000 | 493,000,000 | $ 534,000,000 | ||
Held-for-sale residential loans | FHLB Chicago | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Loans pledged as collateral under borrowing agreement with FHLBC | 2,260,000,000 | $ 2,260,000,000 | |||
Residential Loans | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Number of loans (in loans) | loan | 1,233 | 1,114 | |||
Loan Principal | 900,000,000 | $ 900,000,000 | $ 830,000,000 | ||
Loan market valuation adjustment | 920,000,000 | 920,000,000 | 830,000,000 | ||
Principal value of loans purchased | 1,430,000,000 | $ 1,220,000,000 | 3,720,000,000 | 3,730,000,000 | |
Principal balance of loans sold during period | 1,050,000,000 | 760,000,000 | 3,080,000,000 | 2,800,000,000 | |
Gain (loss) on assets measured at fair value on a non-recurring basis | 15,000,000 | 1,000,000 | 29,000,000 | 12,000,000 | |
Loans held-for-investment, in foreclosure | 1,000,000 | 1,000,000 | |||
Residential Loans | Jumbo Loans | Held-for-sale residential loans | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Loan market valuation adjustment | 924,594,000 | 924,594,000 | 834,193,000 | ||
Residential Loans | Jumbo Loans | Redwood | Held-for-sale residential loans | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Loan market valuation adjustment | 924,594,000 | 924,594,000 | 834,193,000 | ||
Residential Loans | Jumbo Loans | Legacy Sequoia | Held-for-sale residential loans | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Loan market valuation adjustment | 0 | 0 | 0 | ||
Residential Loans | Jumbo Loans | Sequoia Choice | Held-for-sale residential loans | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Loan market valuation adjustment | $ 0 | $ 0 | $ 0 | ||
Residential Loans | Financing Receivables, Equal to Greater than 90 Days Past Due | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Number of loans past due (in loans) | loan | 0 | 0 | 0 | ||
Residential loans, at lower of cost or fair value | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Number of loans (in loans) | loan | 6 | 7 | |||
Loan Principal | $ 1,000,000 | $ 1,000,000 | $ 2,000,000 | ||
Loan market valuation adjustment | $ 1,000,000 | $ 1,000,000 | 1,000,000 | ||
Number of loans in foreclosure (in loans) | loan | 0 | 0 | |||
Residential loans, at lower of cost or fair value | Held-for-sale residential loans | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Loan market valuation adjustment | $ 1,087,000 | $ 1,087,000 | 1,206,000 | ||
Residential loans, at lower of cost or fair value | Redwood | Held-for-sale residential loans | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Loan market valuation adjustment | 1,087,000 | 1,087,000 | 1,206,000 | ||
Residential loans, at lower of cost or fair value | Legacy Sequoia | Held-for-sale residential loans | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Loan market valuation adjustment | 0 | 0 | 0 | ||
Residential loans, at lower of cost or fair value | Sequoia Choice | Held-for-sale residential loans | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Loan market valuation adjustment | $ 0 | $ 0 | $ 0 | ||
Residential loans, at lower of cost or fair value | Financing Receivables, Equal to Greater than 90 Days Past Due | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Number of loans past due (in loans) | loan | 1 | 1 | 1 | ||
Loans held-for-investment, delinquent greater than 90 days | $ 300,000 | $ 300,000 | $ 300,000 | ||
Residential Loans Held For Investment at Fair Value | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Number of loans (in loans) | loan | 3,081 | 3,068 | |||
Loan Principal | 2,230,000,000 | $ 2,230,000,000 | $ 2,230,000,000 | ||
Loan market valuation adjustment | $ 2,260,000,000 | ||||
Gain (loss) on assets measured at fair value on a non-recurring basis | 3,000,000 | (1,000,000) | 9,000,000 | 22,000,000 | |
Number of loans in foreclosure (in loans) | loan | 0 | ||||
Transfers from loans held-for-sale to loans held-for-investment | 78,000,000 | 152,000,000 | 326,000,000 | 878,000,000 | |
Transfers from loans held-for-investment to loans held-for-sale | $ 98,000,000 | 0 | $ 500,000 | 56,000,000 | |
Weighted average original Fair Isaac Corporation (FICO) score | 772 | 772 | |||
Weighted average original loan-to-value (LTV) (as a percent) | 65.00% | 65.00% | |||
Percentage of fixed-rate loans (as a percent) | 94.00% | 94.00% | |||
Residential Loans Held For Investment at Fair Value | Originated Between 2013 and 2017 | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Percentage of loan portfolio originated in year (as a percent) | 95.00% | 95.00% | |||
Residential Loans Held For Investment at Fair Value | Originated 2012 and prior years | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Percentage of loan portfolio originated in year (as a percent) | 5.00% | 5.00% | |||
Residential Loans Held For Investment at Fair Value | Hybrid loans | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Weighted average coupon rate (as a percent) | 4.00% | 4.00% | |||
Residential Loans Held For Investment at Fair Value | Legacy Sequoia | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Number of loans (in loans) | loan | 3,308 | 3,735 | |||
Loan Principal | $ 738,000,000 | $ 738,000,000 | $ 887,000,000 | ||
Loan market valuation adjustment | 673,000,000 | 673,000,000 | 792,000,000 | ||
Loans held-for-investment, delinquent greater than 90 days | $ 14,000,000 | $ 14,000,000 | 19,000,000 | ||
Weighted average original Fair Isaac Corporation (FICO) score | 728 | 728 | |||
Weighted average original loan-to-value (LTV) (as a percent) | 66.00% | 66.00% | |||
Loans held-for-investment, in foreclosure | $ 12,000,000 | $ 12,000,000 | $ 11,000,000 | ||
Valuation adjustment gain (loss) | 4,000,000 | $ 9,000,000 | $ 24,000,000 | $ (19,000,000) | |
Residential Loans Held For Investment at Fair Value | Sequoia Choice | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Number of loans (in loans) | loan | 409 | 0 | |||
Loan Principal | 308,000,000 | $ 308,000,000 | |||
Loan market valuation adjustment | 317,000,000 | 317,000,000 | |||
Loans held-for-investment, delinquent greater than 90 days | 0 | 0 | |||
Transfers from loans held-for-investment to loans held-for-sale | $ 318,000,000 | $ 318,000,000 | |||
Weighted average original Fair Isaac Corporation (FICO) score | 744 | 744 | |||
Weighted average original loan-to-value (LTV) (as a percent) | 75.00% | 75.00% | |||
Valuation adjustment gain (loss) | $ (1,000,000) | $ (1,000,000) | |||
Residential Loans Held For Investment at Fair Value | Jumbo Loans | Held-for-sale residential loans | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Loan market valuation adjustment | 3,259,239,000 | 3,259,239,000 | $ 3,052,652,000 | ||
Residential Loans Held For Investment at Fair Value | Jumbo Loans | Redwood | Held-for-sale residential loans | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Loan market valuation adjustment | 2,268,802,000 | 2,268,802,000 | 2,261,016,000 | ||
Residential Loans Held For Investment at Fair Value | Jumbo Loans | Legacy Sequoia | Held-for-sale residential loans | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Loan market valuation adjustment | 673,134,000 | 673,134,000 | 791,636,000 | ||
Residential Loans Held For Investment at Fair Value | Jumbo Loans | Sequoia Choice | Held-for-sale residential loans | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Loan market valuation adjustment | $ 317,303,000 | $ 317,303,000 | 0 | ||
Residential Loans Held For Investment at Fair Value | Financing Receivables, Equal to Greater than 90 Days Past Due | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Loan Principal | $ 200,000 | ||||
Number of loans past due (in loans) | loan | 0 | 0 | 1 | ||
MSRs | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Mortgage servicing rights, at amortized cost | $ 2,410,000,000 | $ 2,410,000,000 |
Real Estate Securities - Fair V
Real Estate Securities - Fair Values of Real Estate Securities (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 | |
Investments, Debt and Equity Securities [Abstract] | |||
Trading | $ 820,134 | $ 445,687 | |
Available-for-sale | 536,138 | 572,752 | |
Total Real Estate Securities | [1] | $ 1,356,272 | $ 1,018,439 |
[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, 2017 and December 31, 2016, assets of consolidated VIEs totaled $995,768 and $798,317, respectively. At September 30, 2017 and December 31, 2016, liabilities of consolidated VIEs totaled $945,873 and $773,980, respectively. See Note 4 for further discussion. |
Real Estate Securities - Tradin
Real Estate Securities - Trading Securities by Collateral Type (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Investment Holdings [Line Items] | ||
Trading securities | $ 820,134 | $ 445,687 |
Senior IO Securities | ||
Investment Holdings [Line Items] | ||
Trading securities | 62,767 | 37,067 |
Subordinate Securities | ||
Investment Holdings [Line Items] | ||
Trading securities | 757,367 | 408,620 |
Subordinate Securities | Mezzanine | ||
Investment Holdings [Line Items] | ||
Trading securities | 458,299 | 256,226 |
Subordinate Securities | Subordinate | ||
Investment Holdings [Line Items] | ||
Trading securities | $ 299,068 | $ 152,394 |
Real Estate Securities - Additi
Real Estate Securities - Additional Information (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017USD ($)Investment | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($)Investment | Sep. 30, 2016USD ($) | Dec. 31, 2016USD ($)Investment | |
Investment Holdings [Line Items] | |||||
Trading securities pledged as collateral | $ 435,000 | $ 435,000 | |||
Trading securities | 820,134 | 820,134 | $ 445,687 | ||
Trading securities acquired | 171,000 | $ 65,000 | 432,000 | $ 198,000 | |
Trading securities sold | 25,000 | 2,000 | 85,000 | 238,000 | |
Increase (decrease) in valuation of trading securities | 1,000 | 9,000 | 31,000 | 5,000 | |
Available-for-sale securities purchased | 4,000 | 11,000 | 32,000 | 29,000 | |
Available-for-sale securities sold | 23,000 | 26,000 | 61,000 | 241,000 | |
Net realized gains on AFS securities | $ 2,000 | 2,000 | $ 9,000 | 20,000 | |
Number of AFS securities (in investments) | Investment | 173 | 173 | 186 | ||
Number of securities in unrealized loss position (in investments) | Investment | 14 | 14 | 19 | ||
Number of securities in a continuous unrealized loss position for twelve consecutive months or longer (in investments) | Investment | 6 | 6 | 10 | ||
Investment fair value changes, net | $ 324 | 11,918 | $ 9,990 | (18,686) | |
Other than temporary impairment recognized in AOCI | 0 | 400 | 2,000 | ||
Reclassification out of Accumulated Other Comprehensive Income | Net Unrealized Gains on Available-for-Sale Securities | |||||
Investment Holdings [Line Items] | |||||
Other than temporary impairment | 600 | (305) | |||
Investment fair value changes, net | (3) | $ 0 | (248) | $ 3,000 | |
Residential | |||||
Investment Holdings [Line Items] | |||||
Gross unrealized losses | 2,345 | 2,345 | $ 3,169 | ||
Subordinate Securities | |||||
Investment Holdings [Line Items] | |||||
Trading securities | 757,367 | 757,367 | 408,620 | ||
Subordinate Securities | Residential | |||||
Investment Holdings [Line Items] | |||||
Gross unrealized losses | 1,085 | $ 1,085 | 1,240 | ||
Re-REMIC | |||||
Investment Holdings [Line Items] | |||||
Number Of Re-REMICs exchanged during the period (in investments) | Investment | 3 | ||||
Fair value of equity trading securities | 47,000 | $ 47,000 | |||
Re-REMIC | Residential | |||||
Investment Holdings [Line Items] | |||||
Gross unrealized losses | 0 | 0 | 0 | ||
Trading securities | Residential Subordinate Securities | |||||
Investment Holdings [Line Items] | |||||
Unpaid principal balance | 767,000 | 767,000 | 434,000 | ||
CRT securities | Subordinate Securities | |||||
Investment Holdings [Line Items] | |||||
Trading securities | 287,000 | 287,000 | 152,000 | ||
Sequoia securities | Subordinate Securities | |||||
Investment Holdings [Line Items] | |||||
Trading securities | 60,000 | 60,000 | 15,000 | ||
Other third party securities | Subordinate Securities | |||||
Investment Holdings [Line Items] | |||||
Trading securities | 167,000 | 167,000 | 149,000 | ||
Third-party multifamily mortgage-backed securities | Subordinate Securities | |||||
Investment Holdings [Line Items] | |||||
Trading securities | 243,000 | 243,000 | $ 92,000 | ||
Residential | |||||
Investment Holdings [Line Items] | |||||
Marketable securities, less than five years | 100 | 100 | |||
Marketable securities, due from five to ten years | 400 | 400 | |||
Residential | AFS securities retained, at fair value | |||||
Investment Holdings [Line Items] | |||||
Securities pledged as collateral | $ 229,000 | $ 229,000 |
Real Estate Securities - Availa
Real Estate Securities - Available for Sale Securities by Collateral Type (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Investment Holdings [Line Items] | ||
Available-for-sale securities | $ 536,138 | $ 572,752 |
Senior IO Securities | ||
Investment Holdings [Line Items] | ||
Available-for-sale securities | 153,232 | 136,546 |
Re-REMIC | ||
Investment Holdings [Line Items] | ||
Available-for-sale securities | 39,033 | 85,479 |
Subordinate Securities | ||
Investment Holdings [Line Items] | ||
Available-for-sale securities | 343,873 | 350,727 |
Subordinate Securities | Mezzanine | ||
Investment Holdings [Line Items] | ||
Available-for-sale securities | 119,687 | 163,715 |
Subordinate Securities | Subordinate | ||
Investment Holdings [Line Items] | ||
Available-for-sale securities | $ 224,186 | $ 187,012 |
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, 2017 | Dec. 31, 2016 |
Schedule of Available-for-sale Securities [Line Items] | ||
Carrying Value | $ 536,138 | $ 572,752 |
Senior IO Securities | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Carrying Value | 153,232 | 136,546 |
Re-REMIC | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Carrying Value | 39,033 | 85,479 |
Subordinate Securities | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Carrying Value | 343,873 | 350,727 |
Residential | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Principal balance | 644,051 | 700,829 |
Credit reserve | (46,875) | (47,473) |
Unamortized discount, net | (189,392) | (198,112) |
Amortized cost | 407,784 | 455,244 |
Gross unrealized gains | 130,699 | 120,677 |
Gross unrealized losses | (2,345) | (3,169) |
Carrying Value | 536,138 | 572,752 |
Residential | Senior IO Securities | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Principal balance | 156,936 | 148,862 |
Credit reserve | (3,024) | (4,814) |
Unamortized discount, net | (36,575) | (41,877) |
Amortized cost | 117,337 | 102,171 |
Gross unrealized gains | 37,155 | 36,304 |
Gross unrealized losses | (1,260) | (1,929) |
Carrying Value | 153,232 | 136,546 |
Residential | Re-REMIC | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Principal balance | 44,896 | 95,608 |
Credit reserve | (5,810) | (6,857) |
Unamortized discount, net | (10,412) | (19,613) |
Amortized cost | 28,674 | 69,138 |
Gross unrealized gains | 10,359 | 16,341 |
Gross unrealized losses | 0 | 0 |
Carrying Value | 39,033 | 85,479 |
Residential | Subordinate Securities | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Principal balance | 442,219 | 456,359 |
Credit reserve | (38,041) | (35,802) |
Unamortized discount, net | (142,405) | (136,622) |
Amortized cost | 261,773 | 283,935 |
Gross unrealized gains | 83,185 | 68,032 |
Gross unrealized losses | (1,085) | (1,240) |
Carrying Value | $ 343,873 | $ 350,727 |
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, 2017 | Sep. 30, 2017 | |
Credit Reserve | ||
Beginning balance | $ 47,588 | $ 47,473 |
Amortization of net discount | 0 | 0 |
Realized credit losses | (795) | (3,232) |
Acquisitions | 1,665 | 8,256 |
Sales, calls, other | (144) | (3,405) |
Impairments | 3 | 248 |
Transfers to (release of) credit reserves, net | (1,442) | (2,465) |
Ending Balance | 46,875 | 46,875 |
Unamortized Discount, Net | ||
Beginning balance | 192,063 | 198,112 |
Amortization of net discount | (4,631) | (14,697) |
Realized credit losses | 0 | 0 |
Acquisitions | 2,732 | 11,375 |
Sales, calls, other | (2,214) | (7,863) |
Impairments | 0 | 0 |
Transfers to (release of) credit reserves, net | 1,442 | 2,465 |
Ending Balance | $ 189,392 | $ 189,392 |
Real Estate Securities - Comp76
Real Estate Securities - Components of Carrying Value of Residential Available for Sale Securities in Unrealized Loss Position (Details) - Residential - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Schedule of Available-for-sale Securities [Line Items] | ||
Less Than 12 Consecutive Months Amortized Cost | $ 10,164 | $ 15,772 |
Less Than 12 Consecutive Months Unrealized Losses | (694) | (330) |
Less Than 12 Consecutive Months Fair Value | 9,470 | 15,442 |
12 Consecutive Months or Longer Amortized Cost | 31,001 | 60,035 |
12 Consecutive Months or Longer Unrealized Losses | (1,651) | (2,839) |
12 Consecutive Months or Longer Fair Value | $ 29,350 | $ 57,196 |
Real Estate Securities - Summar
Real Estate Securities - Summary of Significant Valuation Assumptions for Available for Sale Securities (Details) - Prime | 9 Months Ended |
Sep. 30, 2017 | |
Minimum | |
Schedule of Available-for-sale Securities [Line Items] | |
Prepayment rates (as a percent) | 8.00% |
Projected losses (as a percent) | 0.25% |
Maximum | |
Schedule of Available-for-sale Securities [Line Items] | |
Prepayment rates (as a percent) | 15.00% |
Projected losses (as a percent) | 8.00% |
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, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Activity of the Credit Component of Other-than-Temporary Impairments | ||||
Balance at beginning of period | $ 25,802 | $ 28,198 | $ 28,261 | $ 28,277 |
Additions | ||||
Initial credit impairments | 0 | 0 | 178 | 291 |
Subsequent credit impairments | 0 | 0 | 47 | 0 |
Reductions | ||||
Securities sold, or expected to sell | 0 | 0 | (2,282) | (261) |
Securities with no outstanding principal at period end | (42) | 0 | (444) | (109) |
Balance at End of Period | $ 25,760 | $ 28,198 | $ 25,760 | $ 28,198 |
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, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Schedule of Available-for-sale Securities [Line Items] | ||||
Total Realized Gains on Sales and Calls of AFS Securities, net | $ 1,734 | $ 1,990 | $ 9,561 | $ 21,312 |
Sales | ||||
Schedule of Available-for-sale Securities [Line Items] | ||||
Gross realized gains | 1,734 | 1,990 | 9,381 | 22,395 |
Gross realized losses | 0 | 0 | 0 | (2,293) |
Calls | ||||
Schedule of Available-for-sale Securities [Line Items] | ||||
Gross realized gains | 0 | 0 | 677 | 1,210 |
Gross realized losses | $ 0 | $ 0 | $ (497) | $ 0 |
Mortgage Servicing Rights - Sch
Mortgage Servicing Rights - Schedule of Fair Value of MSRs and Aggregate Principal Amounts of Associated Loans (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Jun. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Dec. 31, 2015 | |
Servicing Assets at Fair Value [Line Items] | |||||||
Mortgage servicing rights, at fair value | [1] | $ 62,928 | $ 118,526 | ||||
Associated Principal | 5,747,006 | 10,456,889 | |||||
MSRs | |||||||
Servicing Assets at Fair Value [Line Items] | |||||||
Mortgage servicing rights, at fair value | 62,928 | $ 63,770 | 118,526 | $ 106,009 | $ 110,046 | $ 191,976 | |
MSRs | Conforming Loans | |||||||
Servicing Assets at Fair Value [Line Items] | |||||||
Mortgage servicing rights, at fair value | 1,125 | 58,523 | |||||
Associated Principal | 107,298 | 4,989,720 | |||||
MSRs | Jumbo Loans | |||||||
Servicing Assets at Fair Value [Line Items] | |||||||
Mortgage servicing rights, at fair value | 61,803 | 60,003 | |||||
Associated Principal | $ 5,639,708 | $ 5,467,169 | |||||
[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, 2017 and December 31, 2016, assets of consolidated VIEs totaled $995,768 and $798,317, respectively. At September 30, 2017 and December 31, 2016, liabilities of consolidated VIEs totaled $945,873 and $773,980, respectively. See Note 4 for further discussion. |
Mortgage Servicing Rights - Act
Mortgage Servicing Rights - Activity for Residential First-Lien Mortgage Servicing Rights (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | ||
Servicing Asset at Fair Value, Amount [Roll Forward] | |||||
Balance at beginning of period | [1] | $ 118,526 | |||
Additions | 7,387 | $ 7,679 | |||
Changes in fair value due to: | |||||
Balance at End of Period | [1] | $ 62,928 | 62,928 | ||
MSRs | |||||
Servicing Asset at Fair Value, Amount [Roll Forward] | |||||
Balance at beginning of period | 63,770 | $ 110,046 | 118,526 | 191,976 | |
Additions | 256 | 3,443 | 7,957 | 22,941 | |
Sales | 0 | (8,860) | (52,966) | (38,419) | |
Changes in fair value due to: | |||||
Changes in assumptions | 563 | 7,085 | (3,450) | (52,723) | |
Other changes | (1,661) | (5,705) | (7,139) | (17,766) | |
Balance at End of Period | $ 62,928 | $ 106,009 | $ 62,928 | $ 106,009 | |
[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, 2017 and December 31, 2016, assets of consolidated VIEs totaled $995,768 and $798,317, respectively. At September 30, 2017 and December 31, 2016, liabilities of consolidated VIEs totaled $945,873 and $773,980, respectively. See Note 4 for further discussion. |
Mortgage Servicing Rights - Det
Mortgage Servicing Rights - Details of Retention and Purchase of MSRs (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Mortgage Servicing Rights [Line Items] | ||||
MSRs recognized | $ 7,387 | $ 7,679 | ||
MSRs | ||||
Mortgage Servicing Rights [Line Items] | ||||
MSRs recognized | $ 256 | $ 3,443 | 7,957 | $ 22,941 |
Associated Principal | 41,263 | 781,858 | ||
MSRs | Jumbo Loans | ||||
Mortgage Servicing Rights [Line Items] | ||||
MSRs recognized | 0 | 7,386 | ||
Associated Principal | 0 | 686,263 | ||
MSRs | Jumbo Loans | From securitization | ||||
Mortgage Servicing Rights [Line Items] | ||||
MSRs recognized | 0 | 7,123 | ||
Associated Principal | 0 | 654,605 | ||
MSRs | Jumbo Loans | From loan sales | ||||
Mortgage Servicing Rights [Line Items] | ||||
MSRs recognized | 0 | 263 | ||
Associated Principal | 0 | 31,658 | ||
MSRs | Conforming Loans | From purchases | ||||
Mortgage Servicing Rights [Line Items] | ||||
MSRs recognized | 256 | 571 | ||
Associated Principal | $ 41,263 | $ 95,595 |
Mortgage Servicing Rights - Com
Mortgage Servicing Rights - Components of Mortgage Servicing Rights Income (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Transfers and Servicing [Abstract] | ||||
Servicing income | $ 3,872 | $ 9,943 | $ 17,290 | $ 32,199 |
Cost of sub-servicer | (476) | (1,217) | (2,515) | (4,958) |
Net servicing fee income | 3,396 | 8,726 | 14,775 | 27,241 |
Market valuation changes of MSRs | (1,351) | 1,380 | (10,842) | (70,489) |
Market valuation changes of associated derivatives | (422) | (6,336) | 1,869 | 55,874 |
MSR provision for repurchases | (8) | 0 | 304 | 208 |
MSR Income, Net | $ 1,615 | $ 3,770 | $ 6,106 | $ 12,834 |
Derivative Financial Instrume84
Derivative Financial Instruments - Aggregate Fair Value and Notional Amount of Derivative Financial Instruments (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Derivative [Line Items] | ||
Fair Value | $ (53,290) | $ (29,734) |
Notional Amount | 6,244,759 | 4,980,343 |
TBAs | ||
Derivative [Line Items] | ||
Notional Amount | 1,940,000 | 1,360,000 |
Futures | ||
Derivative [Line Items] | ||
Notional Amount | 37,000 | 88,000 |
Derivative Liabilities | ||
Derivative [Line Items] | ||
Fair Value | (65,238) | (66,329) |
Notional Amount | 3,640,709 | 2,423,362 |
Derivative Liabilities | Interest rate swaps | ||
Derivative [Line Items] | ||
Fair Value | (12,901) | (12,097) |
Notional Amount | 1,838,500 | 1,101,500 |
Derivative Liabilities | Interest rate swaps | Cash Flow Hedging | ||
Derivative [Line Items] | ||
Fair Value | (45,093) | (44,822) |
Notional Amount | 139,500 | 139,500 |
Derivative Liabilities | TBAs | ||
Derivative [Line Items] | ||
Fair Value | (3,946) | (4,681) |
Notional Amount | 950,000 | 510,000 |
Derivative Liabilities | Futures | ||
Derivative [Line Items] | ||
Fair Value | (423) | (928) |
Notional Amount | 29,000 | 87,500 |
Derivative Liabilities | Loan purchase commitments | ||
Derivative [Line Items] | ||
Fair Value | (2,875) | (3,801) |
Notional Amount | 683,709 | 584,862 |
Derivative Assets | ||
Derivative [Line Items] | ||
Fair Value | 11,948 | 36,595 |
Notional Amount | 2,604,050 | 2,556,981 |
Derivative Assets | Interest rate swaps | ||
Derivative [Line Items] | ||
Fair Value | 3,645 | 19,859 |
Notional Amount | 509,000 | 1,009,000 |
Derivative Assets | TBAs | ||
Derivative [Line Items] | ||
Fair Value | 2,875 | 8,300 |
Notional Amount | 985,000 | 850,000 |
Derivative Assets | Futures | ||
Derivative [Line Items] | ||
Fair Value | 135 | 0 |
Notional Amount | 7,500 | 0 |
Derivative Assets | Swaptions | ||
Derivative [Line Items] | ||
Fair Value | 297 | 5,121 |
Notional Amount | 300,000 | 345,000 |
Derivative Assets | Loan purchase commitments | ||
Derivative [Line Items] | ||
Fair Value | 4,996 | 3,315 |
Notional Amount | $ 802,550 | $ 352,981 |
Derivative Financial Instrume85
Derivative Financial Instruments - Additional Information (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2017USD ($)counterparty | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($)counterparty | Sep. 30, 2016USD ($) | Jun. 30, 2017USD ($) | Dec. 31, 2016USD ($) | Jun. 30, 2016USD ($) | Dec. 31, 2015USD ($) | |
Derivative [Line Items] | ||||||||
Notional amount | $ 6,244,759 | $ 6,244,759 | $ 4,980,343 | |||||
Accumulated other comprehensive income | $ 1,208,640 | $ 1,130,130 | $ 1,208,640 | $ 1,130,130 | 1,149,428 | $ 1,146,265 | ||
Number of counterparties (in counterparties) | counterparty | 3 | 3 | ||||||
Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges | ||||||||
Derivative [Line Items] | ||||||||
Accumulated other comprehensive income | $ (44,353) | (69,853) | $ (44,353) | (69,853) | $ (44,688) | (44,020) | $ (70,518) | $ (47,363) |
Mortgage Banking Activities, Net | ||||||||
Derivative [Line Items] | ||||||||
Market valuations gains and losses, net | 21,058 | 9,384 | 49,335 | 24,063 | ||||
Loan purchase commitments | Mortgage Banking Activities, Net | ||||||||
Derivative [Line Items] | ||||||||
Market valuations gains and losses, net | 13,276 | 12,021 | 33,947 | 35,508 | ||||
Interest rate contract | ||||||||
Derivative [Line Items] | ||||||||
Notional amount | 2,650,000 | 2,650,000 | 2,460,000 | |||||
TBAs | ||||||||
Derivative [Line Items] | ||||||||
Notional amount | 1,940,000 | 1,940,000 | 1,360,000 | |||||
Futures | ||||||||
Derivative [Line Items] | ||||||||
Notional amount | 37,000 | 37,000 | $ 88,000 | |||||
Unsecuritized Residential and Commercial Loans | ||||||||
Derivative [Line Items] | ||||||||
Derivative gain (loss) | (9,000) | (5,000) | (36,000) | (11,000) | ||||
Interest rate swaps | Cash Flow Hedging | ||||||||
Derivative [Line Items] | ||||||||
Derivative gain (loss) | $ 300 | $ 1,000 | $ (400) | $ (23,000) |
Derivative Financial Instrume86
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, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Derivative [Line Items] | ||||
Total Interest Expense | $ (27,443) | $ (21,597) | $ (72,708) | $ (67,991) |
Cash Flow Hedging | Interest rate contract | ||||
Derivative [Line Items] | ||||
Net interest expense on cash flows hedges | (1,119) | (1,314) | (3,516) | (4,049) |
Realized net losses reclassified from other comprehensive income | (14) | (18) | (42) | (55) |
Total Interest Expense | $ (1,133) | $ (1,332) | $ (3,558) | $ (4,104) |
Other Assets and Liabilities -
Other Assets and Liabilities - Components of Other Assets (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||
Margin receivable | $ 93,679 | $ 68,038 | |
FHLBC stock | 43,393 | 43,393 | |
Pledged collateral | 42,933 | 42,875 | |
MSR holdback receivable | 9,754 | 1,862 | |
Investment receivable | 6,095 | 1,068 | |
Guarantee asset | 3,049 | 4,092 | |
REO | 3,020 | 5,533 | |
Fixed assets and leasehold improvements | 2,852 | 2,750 | |
Other | 4,731 | 12,334 | |
Total Other Assets | [1] | 209,506 | $ 181,945 |
Fixed assets | 6,000 | ||
Accumulated depreciation | $ 3,000 | ||
[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, 2017 and December 31, 2016, assets of consolidated VIEs totaled $995,768 and $798,317, respectively. At September 30, 2017 and December 31, 2016, liabilities of consolidated VIEs totaled $945,873 and $773,980, respectively. See Note 4 for further discussion. |
Other Assets and Liabilities 88
Other Assets and Liabilities - Accrued Expenses and Other Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Guarantee obligations | $ 20,101 | $ 21,668 |
Accrued compensation | 18,978 | 18,830 |
Accrued taxes payable | 15,835 | 525 |
Unsettled trades | 12,005 | 24 |
Residential loan and MSR repurchase reserve | 4,755 | 5,432 |
Legal reserve | 2,000 | 2,000 |
Current accounts payable | 1,920 | 1,151 |
Accrued operating expenses | 1,097 | 4,493 |
Deferred tax liability | 898 | 898 |
Margin payable | 841 | 12,783 |
Other | 2,632 | 4,624 |
Total Other Liabilities | $ 81,062 | $ 72,428 |
Other Assets and Liabilities 89
Other Assets and Liabilities - Additional Information (Details) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017USD ($)property | Dec. 31, 2016USD ($)property | |
Other Assets and Other Liabilities [Line Items] | ||
Real estate owned (REO) | $ 3,020 | $ 5,533 |
Amount related to transfers into REO | 3,000 | |
REO liquidations | (9,000) | |
Unrealized gain resulting from market valuation adjustments on REO | $ 3,000 | |
Sequoia | ||
Other Assets and Other Liabilities [Line Items] | ||
Number of REO properties recorded on balance sheet (in properties) | property | 12 | 23 |
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, 2017USD ($)Facility | Dec. 31, 2016USD ($)Facility | ||
Short-term Debt [Line Items] | |||
Number of Facilities (in facilities) | Facility | |||
Outstanding Balance | [1],[2] | $ 1,238,196,000 | $ 791,539,000 |
Facilities | |||
Short-term Debt [Line Items] | |||
Number of Facilities (in facilities) | Facility | 12 | 11 | |
Outstanding Balance | $ 988,054,000 | $ 791,539,000 | |
Facilities | Residential loan warehouse | |||
Short-term Debt [Line Items] | |||
Number of Facilities (in facilities) | Facility | 4 | 4 | |
Outstanding Balance | $ 438,243,000 | $ 485,544,000 | |
Limit | $ 1,325,000,000 | $ 1,325,000,000 | |
Weighted Average Interest Rate | 2.80% | 2.40% | |
Weighted Average Days Until Maturity (in days) | 150 days | 206 days | |
Facilities | Real estate securities repo | |||
Short-term Debt [Line Items] | |||
Number of Facilities (in facilities) | Facility | 8 | 7 | |
Outstanding Balance | $ 549,811,000 | $ 305,995,000 | |
Limit | $ 0 | $ 0 | |
Weighted Average Interest Rate | 2.46% | 1.91% | |
Weighted Average Days Until Maturity (in days) | 28 days | 24 days | |
Convertible notes, net | |||
Short-term Debt [Line Items] | |||
Outstanding Balance | $ 250,142,000 | ||
Weighted Average Interest Rate | 4.63% | ||
Weighted Average Days Until Maturity (in days) | 197 days | ||
[1] | Includes $250 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 April 2017. See Note 11 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, 2017 and December 31, 2016, assets of consolidated VIEs totaled $995,768 and $798,317, respectively. At September 30, 2017 and December 31, 2016, liabilities of consolidated VIEs totaled $945,873 and $773,980, respectively. See Note 4 for further discussion. |
Short-Term Debt - Additional In
Short-Term Debt - Additional Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Jun. 30, 2017 | Sep. 30, 2017 | Dec. 31, 2016 | Mar. 31, 2013 | |
Short-term Debt [Line Items] | |||||
Accrued interest payable on short-term debt | $ 5,000,000 | $ 5,000,000 | $ 3,000,000 | ||
Average balance of short-term debt | 1,070,000,000 | 970,000,000 | |||
Committed line of credit | 10,000,000 | 10,000,000 | |||
Fair value of mortgage backed securities securing loan (in excess) | 6,000,000 | 6,000,000 | |||
Committed line of credit with financial institutions, outstanding | 0 | 0 | 0 | ||
Residential loans | |||||
Short-term Debt [Line Items] | |||||
Loan pledged as collateral | 493,000,000 | 493,000,000 | 534,000,000 | ||
Residential | |||||
Short-term Debt [Line Items] | |||||
Securities pledged as collateral | 663,000,000 | 663,000,000 | $ 363,000,000 | ||
Convertible Debt | Convertible Senior Notes Due 2018 | |||||
Short-term Debt [Line Items] | |||||
Convertible notes | $ 288,000,000 | $ 288,000,000 | |||
Debt Instrument interest rate | 4.625% | ||||
Unamortized deferred issuance costs | 2,000,000 | ||||
Amount of debt repurchased | 37,000,000 | ||||
Gain (loss) on extinguishment of debt | $ (1,000,000) | ||||
Accrued interest payable on short-term debt | $ 5,000,000 | $ 5,000,000 |
Short-Term Debt - Remaining Mat
Short-Term Debt - Remaining Maturities of Short Term Debt (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 | |
Short-term Debt [Line Items] | |||
Short-term debt | [1],[2] | $ 1,238,196 | $ 791,539 |
Within 30 Days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 422,300 | ||
31 to 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 247,730 | ||
Over 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 568,166 | ||
Facilities | |||
Short-term Debt [Line Items] | |||
Short-term debt | 988,054 | 791,539 | |
Facilities | Within 30 Days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 422,300 | ||
Facilities | 31 to 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 247,730 | ||
Facilities | Over 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 318,024 | ||
Facilities | Residential loan warehouse | |||
Short-term Debt [Line Items] | |||
Short-term debt | 438,243 | 485,544 | |
Facilities | Residential loan warehouse | Within 30 Days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 0 | ||
Facilities | Residential loan warehouse | 31 to 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 120,219 | ||
Facilities | Residential loan warehouse | Over 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 318,024 | ||
Facilities | Real estate securities repo | |||
Short-term Debt [Line Items] | |||
Short-term debt | 549,811 | $ 305,995 | |
Facilities | Real estate securities repo | Within 30 Days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 422,300 | ||
Facilities | Real estate securities repo | 31 to 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 127,511 | ||
Facilities | Real estate securities repo | Over 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 0 | ||
Convertible notes, net | |||
Short-term Debt [Line Items] | |||
Short-term debt | 250,142 | ||
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 | 0 | ||
Convertible notes, net | Over 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | $ 250,142 | ||
[1] | Includes $250 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 April 2017. See Note 11 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, 2017 and December 31, 2016, assets of consolidated VIEs totaled $995,768 and $798,317, respectively. At September 30, 2017 and December 31, 2016, liabilities of consolidated VIEs totaled $945,873 and $773,980, respectively. See Note 4 for further discussion. |
Asset-Backed Securities Issue93
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, 2017USD ($)series | Dec. 31, 2016USD ($)series | |
Debt Instrument [Line Items] | |||
Total FHLBC Borrowings | [1] | $ 2,574,439 | $ 2,620,683 |
Asset-backed securities issued | |||
Debt Instrument [Line Items] | |||
Market valuation adjustments | (69,879) | (110,829) | |
Total FHLBC Borrowings | 944,288 | 773,462 | |
Asset-backed securities issued | Certificates with principal balance | |||
Debt Instrument [Line Items] | |||
Certificates with principal balance | 1,007,185 | 880,517 | |
Asset-backed securities issued | Interest-only certificates | |||
Debt Instrument [Line Items] | |||
Certificates with principal balance | 6,982 | 3,774 | |
Asset-backed securities issued | Legacy Sequoia | |||
Debt Instrument [Line Items] | |||
Market valuation adjustments | (75,181) | (110,829) | |
Total FHLBC Borrowings | $ 657,960 | $ 773,462 | |
Number of series (in series) | series | 20 | 20 | |
Asset-backed securities issued | Legacy Sequoia | Minimum | |||
Debt Instrument [Line Items] | |||
Weighted average interest rates, by series | 1.20% | 0.74% | |
Asset-backed securities issued | Legacy Sequoia | Maximum | |||
Debt Instrument [Line Items] | |||
Weighted average interest rates, by series | 2.56% | 2.23% | |
Asset-backed securities issued | Legacy Sequoia | Certificates with principal balance | |||
Debt Instrument [Line Items] | |||
Certificates with principal balance | $ 730,312 | $ 880,517 | |
Asset-backed securities issued | Legacy Sequoia | Interest-only certificates | |||
Debt Instrument [Line Items] | |||
Certificates with principal balance | 2,829 | 3,774 | |
Asset-backed securities issued | Sequoia Choice | |||
Debt Instrument [Line Items] | |||
Market valuation adjustments | 5,302 | 0 | |
Total FHLBC Borrowings | $ 286,328 | $ 0 | |
Weighted average interest rates, by series | 4.53% | ||
Number of series (in series) | series | 1 | 0 | |
Asset-backed securities issued | Sequoia Choice | Certificates with principal balance | |||
Debt Instrument [Line Items] | |||
Certificates with principal balance | $ 276,873 | $ 0 | |
Asset-backed securities issued | Sequoia Choice | Interest-only certificates | |||
Debt Instrument [Line Items] | |||
Certificates with principal balance | $ 4,153 | $ 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, 2017 and December 31, 2016, assets of consolidated VIEs totaled $995,768 and $798,317, respectively. At September 30, 2017 and December 31, 2016, liabilities of consolidated VIEs totaled $945,873 and $773,980, respectively. See Note 4 for further discussion. |
Asset-Backed Securities Issue94
Asset-Backed Securities Issued - Additional Information (Details) - Asset-backed securities issued - USD ($) $ in Millions | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Legacy Sequoia | ||
Debt Instrument [Line Items] | ||
Amortization of debt issuance costs | $ 1 | $ 1 |
Sequoia Choice | ||
Debt Instrument [Line Items] | ||
Amortization of debt issuance costs | $ 1 | |
Contractual maturities of over five years | ||
Debt Instrument [Line Items] | ||
Contractual maturities of ABS (in years) | 5 years |
Asset-Backed Securities Issue95
Asset-Backed Securities Issued - Summary of Carrying Value Components of Collateral for Asset-Backed Securities Issued and Outstanding (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | $ 995,768 | $ 798,317 |
Residential loans | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 990,437 | 791,636 |
Restricted cash | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 147 | 148 |
Accrued interest receivable | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 2,164 | 1,000 |
REO | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 3,020 | 5,533 |
Legacy Sequoia | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 677,199 | 798,317 |
Legacy Sequoia | Residential loans | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 673,134 | 791,636 |
Legacy Sequoia | Restricted cash | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 147 | 148 |
Legacy Sequoia | Accrued interest receivable | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 898 | 1,000 |
Legacy Sequoia | REO | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 3,020 | 5,533 |
Sequoia Choice | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | $ 318,569 | 0 |
Sequoia Choice | Residential loans | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 0 | |
Sequoia Choice | Restricted cash | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 0 | |
Sequoia Choice | Accrued interest receivable | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 0 | |
Sequoia Choice | REO | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | $ 0 |
Long-Term Debt - Additional Inf
Long-Term Debt - Additional Information (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||
Aug. 31, 2017 | Jan. 31, 2016 | Nov. 30, 2014 | Mar. 31, 2013 | Sep. 30, 2017 | Jun. 30, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | ||
Debt Instrument [Line Items] | ||||||||||
Transition period for subsidiary to be a FHLB-member (in years) | 5 years | |||||||||
Existing debt | $ 0 | $ 0 | $ 0 | |||||||
Federal home loan bank stock | 43,393,000 | 43,393,000 | 43,393,000 | |||||||
Accrued interest payable | 5,000,000 | 5,000,000 | 3,000,000 | |||||||
Notional amount | 6,244,759,000 | 6,244,759,000 | 4,980,343,000 | |||||||
Accrued interest payable | [1] | $ 18,836,000 | $ 18,836,000 | 9,608,000 | ||||||
Trust Preferred Securities And Subordinated Notes | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Weighted average interest rates, by series | 6.80% | 6.80% | ||||||||
Accrued interest payable | $ 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 | $ 140,000,000 | ||||||||
Trust Preferred Securities And Subordinated Notes | LIBOR | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Basis spread on variable rate | 2.25% | |||||||||
Trust Preferred Securities | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Debt instrument face amount | 100,000,000 | $ 100,000,000 | ||||||||
Subordinated Notes | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Debt instrument face amount | 40,000,000 | 40,000,000 | ||||||||
Senior Notes Due 2023 | Convertible Debt | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Convertible notes | $ 245,000,000 | $ 245,000,000 | $ 245,000,000 | |||||||
Debt Instrument interest rate | 4.75% | |||||||||
Debt instrument maturity year | 2,023 | |||||||||
Net proceeds from issuance of convertible debt | $ 238,000,000 | |||||||||
Interest expense yield | 5.30% | |||||||||
Convertible senior notes conversion rate | 0.0538394 | |||||||||
Convertible senior notes conversion per share (in dollars per share) | $ 18.57 | $ 18.57 | ||||||||
Accrued interest payable | $ 1,000,000 | $ 1,000,000 | ||||||||
Unamortized debt issuance costs | 7,000,000 | 7,000,000 | ||||||||
Exchangeable Senior Notes Due 2019 | Convertible Debt | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Convertible notes | $ 205,000,000 | $ 201,000,000 | $ 201,000,000 | |||||||
Debt Instrument interest rate | 5.625% | |||||||||
Debt instrument maturity year | 2,019 | |||||||||
Net proceeds from issuance of convertible debt | $ 198,000,000 | |||||||||
Interest expense yield | 6.30% | |||||||||
Convertible senior notes conversion rate | 0.0461798 | |||||||||
Convertible senior notes conversion per share (in dollars per share) | $ 21.65 | $ 21.65 | ||||||||
Accrued interest payable | $ 4,000,000 | $ 4,000,000 | ||||||||
Unamortized debt issuance costs | 3,000,000 | 3,000,000 | ||||||||
Debt instrument redemption date | Nov. 15, 2019 | |||||||||
Amount of debt repurchased | $ 0 | $ 0 | $ 4,000,000 | |||||||
Exchangeable Senior Notes Due 2019 | Convertible Debt | Gain (loss) on investments | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Gain on extinguishment of debt | $ 300,000 | |||||||||
Convertible Senior Notes Due 2018 | Convertible Debt | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Convertible notes | $ 288,000,000 | $ 288,000,000 | ||||||||
Debt Instrument interest rate | 4.625% | |||||||||
Net proceeds from issuance of convertible debt | $ 279,000,000 | |||||||||
Interest expense yield | 4.80% | |||||||||
Convertible senior notes conversion rate | 0.0411320 | |||||||||
Convertible senior notes conversion per share (in dollars per share) | $ 24.31 | $ 24.31 | ||||||||
Accrued interest payable | $ 5,000,000 | $ 5,000,000 | ||||||||
Unamortized debt issuance costs | 300,000 | 300,000 | ||||||||
Amount of debt repurchased | 37,000,000 | |||||||||
Gain on extinguishment of debt | (1,000,000) | |||||||||
Unamortized deferred issuance costs | $ 2,000,000 | |||||||||
Current maturities of long-term debt | 250,000,000 | $ 250,000,000 | ||||||||
FHLB Chicago | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Federal home loan bank advances, reset period of basis margin (in days) | 91 days | |||||||||
FHLB Chicago | Held-for-sale residential loans | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Loans pledged as collateral under borrowing agreement with FHLBC | 2,260,000,000 | $ 2,260,000,000 | ||||||||
FHLB Chicago | Cash [Member] | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Loans pledged as collateral under borrowing agreement with FHLBC | 24,000,000 | 24,000,000 | ||||||||
FHLB Member Subsidiary | FHLB Chicago | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Maximum borrowing limit | 2,000,000,000 | 2,000,000,000 | ||||||||
Additional borrowings from FHLBC | 0 | 0 | ||||||||
Existing debt | 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 | |||||||
Weighted average interest rate | 1.30% | 1.30% | 0.64% | |||||||
Weighted average maturity (in years) | 8 years | 9 years | ||||||||
[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, 2017 and December 31, 2016, assets of consolidated VIEs totaled $995,768 and $798,317, respectively. At September 30, 2017 and December 31, 2016, liabilities of consolidated VIEs totaled $945,873 and $773,980, respectively. See Note 4 for further discussion. |
Long-Term Debt - FHLBC Borrowin
Long-Term Debt - FHLBC Borrowings (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 | |
Debt Instrument [Line Items] | |||
Total FHLBC Borrowings | [1] | $ 2,574,439 | $ 2,620,683 |
FHLB Chicago | FHLB Member Subsidiary | |||
Debt Instrument [Line Items] | |||
2,024 | 470,171 | ||
2,025 | 887,639 | ||
2,026 | 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, 2017 and December 31, 2016, assets of consolidated VIEs totaled $995,768 and $798,317, respectively. At September 30, 2017 and December 31, 2016, liabilities of consolidated VIEs totaled $945,873 and $773,980, respectively. See Note 4 for further discussion. |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Details) $ in Thousands | Jul. 15, 2010Plaintiff | Sep. 30, 2017USD ($)lease | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($)loanleasecertificaterepurchase_request | Sep. 30, 2016USD ($) | Dec. 31, 2007certificate | Dec. 31, 2004certificate | Dec. 31, 2007certificate | Dec. 31, 2016USD ($) |
Loss Contingencies [Line Items] | |||||||||
Number of noncancelable leases (in leases) | lease | 4 | 4 | |||||||
Operating lease expiration dates | 2,028 | ||||||||
Future lease commitments with expiration date | $ 17,978 | $ 17,978 | |||||||
Operating lease expense | 2,000 | ||||||||
Guarantee obligations | 20,101 | 20,101 | $ 21,668 | ||||||
Guarantee obligations, credit reserve | 10,000 | 10,000 | |||||||
Special Purpose Entities (SPEs) assets | 47,000 | 47,000 | 49,000 | ||||||
Special Purpose Entities (SPEs) liabilities | 20,000 | 20,000 | 22,000 | ||||||
Residential repurchase reserve | 4,755 | $ 4,755 | 5,432 | ||||||
Number of residential repurchase requests (in repurchase requests) | repurchase_request | 13 | ||||||||
Number of loans repurchased | loan | 1 | ||||||||
Residential repurchase provisions recorded | $ (500) | $ 300 | |||||||
Aggregate amount of loss contingency reserves | 2,000 | $ 2,000 | 2,000 | ||||||
Morgan Stanley & Co. | |||||||||
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 | ||||||
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 | 900,000 | $ 900,000 | $ 830,000 | ||||||
Loans held-for-investment, in foreclosure | 1,000 | 1,000 | |||||||
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 changes in fair value of guarantee asset (less than for three months ending June 30, 2015) | (300) | $ 0 | (1,000) | $ (1,000) | |||||
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 | |||||||
Loan Principal | $ 2,190,000 | $ 2,190,000 | |||||||
Weighted average original Fair Isaac Corporation (FICO) score | 758 | 758 | |||||||
Weighted average original loan-to-value (LTV) (as a percent) | 77.00% | 77.00% | |||||||
Guarantee Obligations | Financing Receivables, Equal to Greater than 90 Days Past Due | |||||||||
Loss Contingencies [Line Items] | |||||||||
Balance of loans 90 days or more delinquent | $ 3,000 | $ 3,000 | |||||||
Residential | Sequoia | FHLB Seattle | |||||||||
Loss Contingencies [Line Items] | |||||||||
Statutory interest rate per annum (as a percent) | 8.00% | 8.00% | |||||||
Principal value | $ 133,000 | $ 133,000 | |||||||
Debt instrument principal payment amount | 125,000 | ||||||||
Debt instrument interest payment amount | 11,000 | ||||||||
Residential | Sequoia | Schwab | |||||||||
Loss Contingencies [Line Items] | |||||||||
Principal value | 15,000 | 15,000 | |||||||
Principal balance of securities | 14,000 | 14,000 | |||||||
Debt instrument interest amount | $ 1,000 | $ 1,000 |
Commitments and Contingencies99
Commitments and Contingencies - Future Lease Commitments (Details) $ in Thousands | Sep. 30, 2017USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2017 (3 months) | $ 387 |
2,018 | 1,948 |
2,019 | 1,987 |
2,020 | 1,965 |
2021 and thereafter | 11,691 |
Total | $ 17,978 |
Equity - Changes to Accumulated
Equity - Changes to Accumulated Other Comprehensive Income (Loss) by Component (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||||
Beginning balance | $ 1,149,428,000 | $ 1,146,265,000 | ||
Ending balance | $ 1,208,640,000 | $ 1,130,130,000 | 1,208,640,000 | 1,130,130,000 |
Net unrealized gain (loss) on available-for-sale securities, tax benefit (provision) | 0 | 200,000 | (100,000) | 600,000 |
Net Unrealized Gains on Available-for-Sale Securities | ||||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||||
Beginning balance | 114,364,000 | 116,849,000 | 115,873,000 | 139,356,000 |
Other comprehensive income (loss) before reclassifications | 13,158,000 | 9,038,000 | 17,899,000 | 5,195,000 |
Amounts reclassified from other accumulated comprehensive income | (853,000) | (1,319,000) | (7,103,000) | (19,983,000) |
Net current-period other comprehensive income (loss) | 12,305,000 | 7,719,000 | 10,796,000 | (14,788,000) |
Ending balance | 126,669,000 | 124,568,000 | 126,669,000 | 124,568,000 |
Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges | ||||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||||
Beginning balance | (44,688,000) | (70,518,000) | (44,020,000) | (47,363,000) |
Other comprehensive income (loss) before reclassifications | 321,000 | 647,000 | (375,000) | (22,545,000) |
Amounts reclassified from other accumulated comprehensive income | 14,000 | 18,000 | 42,000 | 55,000 |
Net current-period other comprehensive income (loss) | 335,000 | 665,000 | (333,000) | (22,490,000) |
Ending balance | $ (44,353,000) | $ (69,853,000) | $ (44,353,000) | $ (69,853,000) |
Equity - Reclassifications out
Equity - Reclassifications out of Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Investment fair value changes, net | $ (324) | $ (11,918) | $ (9,990) | $ 18,686 |
Realized gains, net | (1,734) | (6,615) | (8,809) | (26,037) |
Interest expense | 27,443 | 21,597 | 72,708 | 67,991 |
Net Income before Provision for Income Taxes | (41,442) | (53,525) | (126,214) | (107,224) |
Other than temporary impairment recognized in AOCI | 0 | 400 | 2,000 | |
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 | 3 | 0 | 248 | (3,000) |
Other than temporary impairment | 600 | (305) | ||
Realized gains, net | (856) | (1,319) | (7,351) | (20,288) |
Net Income before Provision for Income Taxes | (853) | (1,319) | (7,103) | (19,983) |
Reclassification out of Accumulated Other Comprehensive Income | Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Net Income before Provision for Income Taxes | 14 | 18 | 42 | 55 |
Reclassification out of Accumulated Other Comprehensive Income | Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges | Interest rate contract | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Interest expense | $ 14 | $ 18 | $ 42 | $ 55 |
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, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Equity [Abstract] | ||||
Net income attributable to Redwood | $ 36,180 | $ 52,553 | $ 109,473 | $ 105,897 |
Less: Dividends and undistributed earnings allocated to participating securities | (948) | (1,485) | (2,800) | (3,040) |
Net income allocated to common shareholders | $ 35,232 | $ 51,068 | $ 106,673 | $ 102,857 |
Basic weighted average common shares outstanding (in shares) | 76,850,830 | 76,680,183 | 76,803,324 | 76,827,026 |
Basic earnings per common share (in dollars per share) | $ 0.46 | $ 0.67 | $ 1.39 | $ 1.34 |
Less: Dividends and undistributed earnings allocated to participating securities | $ (986) | $ (1,439) | $ (2,926) | $ (3,226) |
Add back: Interest expense on convertible notes for the period, net of tax | 6,564 | 6,115 | 18,639 | 18,263 |
Net income allocated to common shareholders | $ 41,758 | $ 57,229 | $ 125,186 | $ 120,934 |
Net effect of dilutive equity awards (in shares) | 298,955 | 54,696 | 215,141 | 18,665 |
Net effect of assumed convertible notes conversion to common shares (in shares) | 25,553,323 | 21,096,738 | 22,379,401 | 21,145,987 |
Diluted weighted average common shares outstanding (in shares) | 102,703,108 | 97,831,617 | 99,397,866 | 97,991,678 |
Diluted earnings per common share (in dollars per share) | $ 0.41 | $ 0.58 | $ 1.26 | $ 1.23 |
Equity - Additional Information
Equity - Additional Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Feb. 29, 2016 | |
Stockholders Equity Note [Line Items] | |||||
Investment fair value changes, net | $ 324,000 | $ 11,918,000 | $ 9,990,000 | $ (18,686,000) | |
Other than temporary impairment recognized in AOCI | $ 0 | $ 400,000 | $ 2,000,000 | ||
Share Repurchase Plan, February 2016 | |||||
Stockholders Equity Note [Line Items] | |||||
Common stock authorized to repurchase by Board | $ 100,000,000 | ||||
Shares repurchased pursuant to authorization (in shares) | 0 | 0 | |||
Available authorization remaining for repurchase | $ 86,000,000 | $ 86,000,000 | |||
Equity awards | |||||
Stockholders Equity Note [Line Items] | |||||
Securities excluded in the calculation of diluted earnings per share (in shares) | 6,149 | 6,623 | 5,843 | 6,565 |
Equity Compensation Plans - Add
Equity Compensation Plans - Additional Information (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended |
Mar. 31, 2016USD ($)executive | Sep. 30, 2017USD ($)shares | Dec. 31, 2016USD ($)shares | |
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) | 1,469,991 | 1,787,974 | |
Unrecognized compensation cost | $ | $ 17,979 | $ 18,146 | |
Equity compensation expense | $ | $ 7,634 | ||
Number of shares purchased by employees (in shares) | 354,801 | 337,271 | |
Restricted Stock | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Unvested outstanding stock awards (in shares) | 265,842 | 204,515 | |
Number of stock awards granted (in shares) | 134,364 | ||
Number of stock awards vested (in shares) | 61,285 | ||
Number of stock awards forfeited (in shares) | 11,752 | ||
Deferred Stock Units | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Unvested outstanding stock awards (in shares) | 1,869,577 | 1,848,861 | |
Number of stock awards granted (in shares) | 359,501 | ||
Number of stock awards vested (in shares) | 1,006,394 | 939,899 | |
Number of stock awards forfeited (in shares) | 31,875 | ||
Number of stock awards distributed (in shares) | 306,911 | ||
Equity compensation expense | $ | $ 3,000 | ||
Number of executives departed (in executives) | executive | 2 | ||
Performance Stock Units | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Unvested outstanding stock awards (in shares) | 642,879 | 642,879 | |
Performance Stock Units | Performance Share Units (PSUs), 2016 | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share-based compensation, vesting period (in years) | 3 years | ||
Maximum | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Weighted average amortization period remaining for equity awards (less than) | 2 years | ||
Shares of common stock to be purchased in aggregate for all employees (in shares) | 450,000 |
Equity Compensation Plans - Unr
Equity Compensation Plans - Unrecognized Compensation Cost (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Mar. 31, 2016 | Sep. 30, 2017 | |
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Roll Forward] | ||
Unrecognized compensation cost at beginning of period | $ 18,146 | |
Equity grants | 8,113 | |
Equity grant forfeitures | (646) | |
Equity compensation expense | (7,634) | |
Unrecognized Compensation Cost at End of Period | 17,979 | |
Deferred Stock Units | ||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Roll Forward] | ||
Equity compensation expense | $ (3,000) | |
Incentive Plans | Restricted Stock | ||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Roll Forward] | ||
Unrecognized compensation cost at beginning of period | 2,091 | |
Equity grants | 2,237 | |
Equity grant forfeitures | (174) | |
Equity compensation expense | (934) | |
Unrecognized Compensation Cost at End of Period | 3,220 | |
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 | 11,506 | |
Equity grants | 5,747 | |
Equity grant forfeitures | (472) | |
Equity compensation expense | (4,866) | |
Unrecognized Compensation Cost at End of Period | 11,915 | |
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 | 4,549 | |
Equity grants | 0 | |
Equity grant forfeitures | 0 | |
Equity compensation expense | (1,738) | |
Unrecognized Compensation Cost at End of Period | 2,811 | |
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 | 129 | |
Equity grant forfeitures | 0 | |
Equity compensation expense | (96) | |
Unrecognized Compensation Cost at End of Period | $ 33 |
Mortgage Banking Activities,106
Mortgage Banking Activities, Net - Components of Mortgage Banking Activities (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Mortgage Loans on Real Estate [Line Items] | ||||
Mortgage banking activities, net | $ 21,200 | $ 9,766 | $ 50,850 | $ 24,712 |
Residential Mortgage Banking Activities | ||||
Mortgage Loans on Real Estate [Line Items] | ||||
Other income, net | 142 | 382 | 1,515 | 606 |
Mortgage banking activities, net | 21,200 | 9,766 | 50,850 | 26,774 |
Residential Mortgage Banking Activities | Residential loans, at fair value | ||||
Mortgage Loans on Real Estate [Line Items] | ||||
Changes in fair value of assets | 28,135 | 12,671 | 63,122 | 47,456 |
Residential Mortgage Banking Activities | Sequoia securities | ||||
Mortgage Loans on Real Estate [Line Items] | ||||
Changes in fair value of assets | 0 | 0 | 0 | 1,455 |
Residential Mortgage Banking Activities | Risk management derivatives, net | ||||
Mortgage Loans on Real Estate [Line Items] | ||||
Risk management derivatives | (7,077) | (3,287) | (13,787) | (22,743) |
Commercial Mortgage Banking Activities | ||||
Mortgage Loans on Real Estate [Line Items] | ||||
Mortgage banking activities, net | $ 0 | $ 0 | $ 0 | $ (2,062) |
Investment Fair Value Change107
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, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | $ 324 | $ 11,918 | $ 9,990 | $ (18,686) |
Residential loans held-for-investment, at Redwood | ||||
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | 2,881 | (655) | 8,902 | 22,161 |
Trading securities | ||||
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | 607 | 8,898 | 30,676 | 3,728 |
Legacy Sequoia | ||||
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | (1,045) | (255) | (3,842) | (2,086) |
Sequoia Choice | ||||
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | (256) | 0 | (256) | 0 |
Risk sharing investments | ||||
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | (267) | 15 | (985) | (689) |
Risk management derivatives, net | ||||
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | (1,592) | 4,222 | (24,557) | (41,188) |
Valuation adjustments on commercial loans held-for-sale | ||||
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | 0 | (307) | 300 | (307) |
Impairments on AFS securities | ||||
Investment Holdings [Line Items] | ||||
Changes in fair value of assets | $ (4) | $ 0 | $ (248) | $ (305) |
Operating Expenses - Components
Operating Expenses - Components of Operating Expenses (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Other Income and Expenses [Abstract] | ||||
Fixed compensation expense | $ 5,233 | $ 5,253 | $ 16,556 | $ 19,022 |
Variable compensation expense | 6,467 | 5,802 | 14,713 | 11,824 |
Equity compensation expense | 2,337 | 2,031 | 7,634 | 7,117 |
Total compensation expense | 14,037 | 13,086 | 38,903 | 37,963 |
Systems and consulting | 1,856 | 2,692 | 5,183 | 7,274 |
Loan acquisition costs | 1,187 | 1,393 | 3,397 | 4,680 |
Office costs | 988 | 1,056 | 3,231 | 3,501 |
Accounting and legal | 519 | 721 | 2,322 | 3,043 |
Corporate costs | 415 | 478 | 1,363 | 1,589 |
Other operating expenses | 920 | 925 | 2,390 | 2,367 |
Operating expenses before restructuring charges | 19,922 | 20,351 | 56,789 | 60,417 |
Restructuring charges | 0 | 4 | 0 | 10,545 |
Total Operating Expenses | $ 19,922 | $ 20,355 | $ 56,789 | $ 70,962 |
Operating Expenses - Additional
Operating Expenses - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges | $ 0 | $ 4 | $ 0 | $ 10,545 |
Fixed compensation | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges | 5,000 | |||
Equity compensation | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges | 4,000 | |||
Contract Termination Costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges | $ 2,000 |
Taxes - Additional Information
Taxes - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | ||||
Provision for income taxes | $ (5,262) | $ (972) | $ (16,741) | $ (1,327) |
Taxes - Reconciliation of Statu
Taxes - Reconciliation of Statutory Tax Rate to Effective Tax Rate (Details) | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | ||
Federal statutory rate | 34.00% | 34.00% |
State statutory rate, net of Federal tax effect | 7.20% | 7.20% |
Differences in taxable (loss) income from GAAP income | (6.80%) | (21.70%) |
Change in valuation allowance | (2.80%) | 6.60% |
Dividends paid deduction | (18.30%) | (24.90%) |
Effective Tax Rate | 13.30% | 1.20% |
Segment Information - Additiona
Segment Information - Additional Information (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($)Segment | Sep. 30, 2016USD ($) | |
Segment Reporting [Abstract] | ||||
Number of operating segments (in segments) | Segment | 2 | |||
Restructuring charges | $ | $ 0 | $ 4 | $ 0 | $ 10,545 |
Segment Information - Financial
Segment Information - Financial Information by Segment (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Segment Reporting Information [Line Items] | ||||
Interest income | $ 62,737 | $ 60,906 | $ 176,589 | $ 190,021 |
Interest expense | (27,443) | (21,597) | (72,708) | (67,991) |
Net Interest Income | 35,294 | 39,309 | 103,881 | 122,030 |
Reversal of provision for loan losses | 0 | 859 | 0 | 7,102 |
Non-interest Income | ||||
Mortgage banking activities, net | 21,200 | 9,766 | 50,850 | 24,712 |
MSR income, net | 1,615 | 3,770 | 6,106 | 12,834 |
Investment fair value changes, net | 324 | 11,918 | 9,990 | (18,686) |
Other income | 1,197 | 1,643 | 3,367 | 4,157 |
Realized gains, net | 1,734 | 6,615 | 8,809 | 26,037 |
Total non-interest income, net | 26,070 | 33,712 | 79,122 | 49,054 |
Direct operating expenses | (19,922) | (20,355) | (56,789) | (70,962) |
Provision for income taxes | (5,262) | (972) | (16,741) | (1,327) |
Net Income | 36,180 | 52,553 | 109,473 | 105,897 |
Non-cash amortization income (expense) | 4,410 | 5,112 | 13,656 | 17,427 |
Operating Segments | Investment Portfolio | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 47,023 | 47,176 | 135,106 | 149,985 |
Interest expense | (9,445) | (5,013) | (21,940) | (18,679) |
Net Interest Income | 37,578 | 42,163 | 113,166 | 131,306 |
Reversal of provision for loan losses | 859 | 7,102 | ||
Non-interest Income | ||||
Mortgage banking activities, net | 0 | 0 | 0 | 0 |
MSR income, net | 1,615 | 3,770 | 6,106 | 12,834 |
Investment fair value changes, net | 1,372 | 12,176 | 13,846 | (16,505) |
Other income | 1,197 | 1,643 | 3,367 | 4,157 |
Realized gains, net | 1,734 | 6,615 | 9,561 | 25,745 |
Total non-interest income, net | 5,918 | 24,204 | 32,880 | 26,231 |
Direct operating expenses | (1,324) | (2,751) | (4,371) | (7,689) |
Provision for income taxes | (433) | (732) | (4,490) | (1,087) |
Net Income | 41,739 | 63,743 | 137,185 | 155,863 |
Non-cash amortization income (expense) | 5,222 | 6,123 | 16,263 | 20,507 |
Operating Segments | Residential Mortgage Banking | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 10,626 | 8,831 | 26,515 | 24,610 |
Interest expense | (4,135) | (3,826) | (11,462) | (10,719) |
Net Interest Income | 6,491 | 5,005 | 15,053 | 13,891 |
Reversal of provision for loan losses | 0 | 0 | ||
Non-interest Income | ||||
Mortgage banking activities, net | 21,200 | 9,766 | 50,850 | 26,774 |
MSR income, net | 0 | 0 | 0 | 0 |
Investment fair value changes, net | 0 | 0 | 0 | 0 |
Other income | 0 | 0 | 0 | 0 |
Realized gains, net | 0 | 0 | 0 | 0 |
Total non-interest income, net | 21,200 | 9,766 | 50,850 | 26,774 |
Direct operating expenses | (6,107) | (5,807) | (18,009) | (17,175) |
Provision for income taxes | (4,829) | (240) | (12,251) | (240) |
Net Income | 16,755 | 8,724 | 35,643 | 23,250 |
Non-cash amortization income (expense) | (25) | (28) | (79) | (102) |
Corporate/Other | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 5,088 | 4,899 | 14,968 | 15,426 |
Interest expense | (13,863) | (12,758) | (39,306) | (38,593) |
Net Interest Income | (8,775) | (7,859) | (24,338) | (23,167) |
Reversal of provision for loan losses | 0 | 0 | ||
Non-interest Income | ||||
Mortgage banking activities, net | 0 | 0 | 0 | (2,062) |
MSR income, net | 0 | 0 | 0 | 0 |
Investment fair value changes, net | (1,048) | (258) | (3,856) | (2,181) |
Other income | 0 | 0 | 0 | 0 |
Realized gains, net | 0 | 0 | (752) | 292 |
Total non-interest income, net | (1,048) | (258) | (4,608) | (3,951) |
Direct operating expenses | (12,491) | (11,797) | (34,409) | (46,098) |
Provision for income taxes | 0 | 0 | 0 | 0 |
Net Income | (22,314) | (19,914) | (63,355) | (73,216) |
Non-cash amortization income (expense) | $ (787) | $ (983) | $ (2,528) | $ (2,978) |
Segment Information - Component
Segment Information - Components of Corporate/Other (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Segment Reporting Information [Line Items] | ||||
Interest income | $ 62,737 | $ 60,906 | $ 176,589 | $ 190,021 |
Interest expense | (27,443) | (21,597) | (72,708) | (67,991) |
Net Interest Income | 35,294 | 39,309 | 103,881 | 122,030 |
Investment fair value changes, net | 324 | 11,918 | 9,990 | (18,686) |
Realized gains, net | 1,734 | 6,615 | 8,809 | 26,037 |
Total non-interest income, net | 26,070 | 33,712 | 79,122 | 49,054 |
Direct operating expenses | (19,922) | (20,355) | (56,789) | (70,962) |
Net Income | 36,180 | 52,553 | 109,473 | 105,897 |
Corporate/Other | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 5,088 | 4,899 | 14,968 | 15,426 |
Interest expense | (13,863) | (12,758) | (39,306) | (38,593) |
Net Interest Income | (8,775) | (7,859) | (24,338) | (23,167) |
Investment fair value changes, net | (1,048) | (258) | (3,856) | (2,181) |
Realized gains, net | 0 | 0 | (752) | 292 |
Total non-interest income, net | (1,048) | (258) | (4,608) | (3,951) |
Direct operating expenses | (12,491) | (11,797) | (34,409) | (46,098) |
Net Income | (22,314) | (19,914) | (63,355) | (73,216) |
Corporate/Other | Legacy Consolidated VIEs | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 4,875 | 4,837 | 14,576 | 14,525 |
Interest expense | (3,838) | (3,274) | (11,046) | (9,842) |
Net Interest Income | 1,037 | 1,563 | 3,530 | 4,683 |
Investment fair value changes, net | (1,045) | (255) | (3,842) | (2,086) |
Realized gains, net | 0 | 0 | ||
Total non-interest income, net | (1,045) | (255) | (3,842) | (2,086) |
Direct operating expenses | 0 | 0 | 0 | 0 |
Net Income | (8) | 1,308 | (312) | 2,597 |
Corporate/Other | Other | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 213 | 62 | 392 | 901 |
Interest expense | (10,025) | (9,484) | (28,260) | (28,751) |
Net Interest Income | (9,812) | (9,422) | (27,868) | (27,850) |
Investment fair value changes, net | (3) | (3) | (14) | (95) |
Realized gains, net | (752) | 292 | ||
Total non-interest income, net | (3) | (3) | (766) | (1,865) |
Direct operating expenses | (12,491) | (11,797) | (34,409) | (46,098) |
Net Income | $ (22,306) | $ (21,222) | $ (63,043) | $ (75,813) |
Segment Information - Supplemen
Segment Information - Supplemental Information by Segment (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 | |
Segment Reporting Information [Line Items] | |||
Loan market valuation adjustment | $ 4,184,920 | $ 3,888,051 | |
Real estate securities | [1] | 1,356,272 | 1,018,439 |
Mortgage servicing rights, at fair value | [1] | 62,928 | 118,526 |
Total assets | [1] | 6,130,699 | 5,483,477 |
Residential loans | |||
Segment Reporting Information [Line Items] | |||
Loan market valuation adjustment | 4,184,920 | 3,888,051 | |
Operating Segments | Investment Portfolio | |||
Segment Reporting Information [Line Items] | |||
Real estate securities | 1,356,272 | 1,018,439 | |
Mortgage servicing rights, at fair value | 62,928 | 118,526 | |
Total assets | 4,236,023 | 3,615,535 | |
Operating Segments | Investment Portfolio | Residential loans | |||
Segment Reporting Information [Line Items] | |||
Loan market valuation adjustment | 2,586,105 | 2,261,016 | |
Operating Segments | Residential Mortgage Banking | |||
Segment Reporting Information [Line Items] | |||
Real estate securities | 0 | 0 | |
Mortgage servicing rights, at fair value | 0 | 0 | |
Total assets | 947,503 | 866,356 | |
Operating Segments | Residential Mortgage Banking | Residential loans | |||
Segment Reporting Information [Line Items] | |||
Loan market valuation adjustment | 925,681 | 835,399 | |
Corporate/Other | |||
Segment Reporting Information [Line Items] | |||
Real estate securities | 0 | 0 | |
Mortgage servicing rights, at fair value | 0 | 0 | |
Total assets | 947,173 | 1,001,586 | |
Corporate/Other | Residential loans | |||
Segment Reporting Information [Line Items] | |||
Loan market valuation adjustment | $ 673,134 | $ 791,636 | |
[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, 2017 and December 31, 2016, assets of consolidated VIEs totaled $995,768 and $798,317, respectively. At September 30, 2017 and December 31, 2016, liabilities of consolidated VIEs totaled $945,873 and $773,980, respectively. See Note 4 for further discussion. |