Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | May 04, 2018 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 | |
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 | 75,704,884 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | |
ASSETS | |||
Real estate securities, at fair value | [1] | $ 1,357,720 | $ 1,476,510 |
Mortgage servicing rights, at fair value | [1] | 66,496 | 63,598 |
Cash and cash equivalents | [1] | 178,562 | 144,663 |
Total earning assets | [1] | 6,748,518 | 6,799,981 |
Restricted cash | [1] | 2,406 | 2,144 |
Accrued interest receivable | [1] | 27,257 | 27,013 |
Derivative assets | [1] | 63,544 | 15,718 |
Other assets | [1] | 157,848 | 194,966 |
Total Assets | [1] | 6,999,573 | 7,039,822 |
Liabilities | |||
Short-term debt | [1],[2] | 1,504,460 | 1,938,682 |
Accrued interest payable | [1] | 23,492 | 18,435 |
Derivative liabilities | [1] | 56,201 | 63,081 |
Accrued expenses and other liabilities | [1] | 77,762 | 67,729 |
Asset-backed securities issued, at fair value | [1] | 1,542,087 | 1,164,585 |
Long-term debt, net | [1] | 2,575,588 | 2,575,023 |
Total liabilities | [1] | 5,779,590 | 5,827,535 |
Equity | |||
Common stock, par value $0.01 per share, 180,000,000 shares authorized; 75,703,107 and 76,599,972 issued and outstanding | [1] | 757 | 766 |
Additional paid-in capital | [1] | 1,661,701 | 1,673,845 |
Accumulated other comprehensive income | [1] | 80,055 | 85,248 |
Cumulative earnings | [1] | 1,337,186 | 1,290,341 |
Cumulative distributions to stockholders | [1] | (1,859,716) | (1,837,913) |
Total equity | [1] | 1,219,983 | 1,212,287 |
Total Liabilities and Equity | [1] | 6,999,573 | 7,039,822 |
Residential loans, held-for-sale, at fair value | |||
ASSETS | |||
Residential loans, held-for-sale and investment, at fair value | [1] | 1,130,185 | 1,427,945 |
Residential loans, held-for-investment, at fair value | |||
ASSETS | |||
Residential loans, held-for-sale and investment, at fair value | [1] | $ 4,015,555 | $ 3,687,265 |
[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 March 31, 2018 and December 31, 2017, assets of consolidated VIEs totaled $1,647,850 and $1,259,774, respectively. At March 31, 2018 and December 31, 2017, liabilities of consolidated VIEs totaled $1,546,066 and $1,167,157, respectively. See Note 4 for further discussion. | ||
[2] | Includes $250 million of convertible notes, which were reclassified from Long-term debt, net to Short-term debt as the maturity of the notes was less than one year as of March 31, 2018 and December 31, 2017. See Note 11 for further discussion. |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
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) | 75,703,107 | 76,599,972 |
Common stock, outstanding (shares) | 75,703,107 | 76,599,972 |
Variable interest held by entity, assets | $ 1,647,850 | $ 1,259,774 |
Variable interest held by entity, liabilities | 1,546,066 | 1,167,157 |
Convertible notes | $ 250,000 | $ 250,000 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Interest Income | ||
Residential loans | $ 50,231 | $ 34,362 |
Real estate securities | 25,695 | 19,817 |
Other interest income | 693 | 449 |
Total interest income | 76,619 | 54,628 |
Interest Expense | ||
Short-term debt | (13,435) | (4,453) |
Asset-backed securities issued | (11,401) | (3,530) |
Long-term debt | (16,678) | (13,048) |
Total Interest Expense | (41,514) | (21,031) |
Net Interest Income | 35,105 | 33,597 |
Non-interest Income | ||
Mortgage banking activities, net | 26,576 | 17,604 |
Mortgage servicing rights income, net | 957 | 1,713 |
Investment fair value changes, net | 1,609 | 1,551 |
Other income | 1,161 | 1,184 |
Realized gains, net | 9,363 | 5,703 |
Total non-interest income, net | 39,666 | 27,755 |
Operating expenses | (23,030) | (18,226) |
Net Income before Provision for Income Taxes | 51,741 | 43,126 |
Provision for income taxes | (4,896) | (6,157) |
Net Income | $ 46,845 | $ 36,969 |
Basic earnings per common share (in dollars per share) | $ 0.60 | $ 0.47 |
Diluted earnings per common share (in dollars per share) | 0.50 | 0.43 |
Regular dividends declared per common share (in dollars per share) | $ 0.28 | $ 0.28 |
Basic weighted average shares outstanding (in shares) | 75,396,649 | 76,738,202 |
Diluted weighted average shares outstanding (in shares) | 108,194,597 | 97,946,137 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | ||
Statement of Comprehensive Income [Abstract] | |||
Net Income | $ 46,845 | $ 36,969 | |
Other comprehensive (loss) income: | |||
Net unrealized (loss) gain on available-for-sale securities | [1] | (4,237) | 2,930 |
Reclassification of unrealized gain on available-for-sale securities to net income | (9,387) | (3,928) | |
Net unrealized gain on interest rate agreements | 8,431 | 1,733 | |
Reclassification of unrealized loss on interest rate agreements to net income | 0 | 14 | |
Total other comprehensive (loss) income | (5,193) | 749 | |
Total Comprehensive Income | $ 41,652 | $ 37,718 | |
[1] | Amounts are presented net of tax provision of $0.1 million for both the three months ended March 31, 2018 and 2017. |
CONSOLIDATED STATEMENTS OF COM6
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Statement of Comprehensive Income [Abstract] | ||
Net unrealized gain (loss) on available-for-sale securities, tax provision (benefit) | $ 0.1 | $ 0.1 |
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, 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 | 36,969 | 36,969 | ||||
Other comprehensive income (loss) | 749 | 749 | ||||
Employee stock purchase and incentive plans | (1,528) | $ 2 | (1,530) | |||
Employee stock purchase and incentive plans (in shares) | 204,062 | |||||
Non-cash equity award compensation | 2,242 | 2,242 | ||||
Common dividends declared | (22,089) | (22,089) | ||||
Ending balance at Mar. 31, 2017 | 1,165,771 | $ 770 | 1,677,198 | 72,602 | 1,186,904 | (1,771,703) |
Ending balance (in shares) at Mar. 31, 2017 | 77,038,725 | |||||
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 | |||||
Ending balance at Dec. 31, 2017 | 1,212,287 | $ 766 | 1,673,845 | 85,248 | 1,290,341 | (1,837,913) |
Ending balance (in shares) at Dec. 31, 2017 | 76,599,972 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net Income | 46,845 | 46,845 | ||||
Other comprehensive income (loss) | (5,193) | (5,193) | ||||
Employee stock purchase and incentive plans | (283) | $ 1 | (284) | |||
Employee stock purchase and incentive plans (in shares) | 143,964 | |||||
Non-cash equity award compensation | 3,674 | 3,674 | ||||
Share repurchases | (15,544) | $ (10) | (15,534) | |||
Share repurchases (in shares) | (1,040,829) | |||||
Common dividends declared | (21,803) | (21,803) | ||||
Ending balance at Mar. 31, 2018 | $ 1,219,983 | $ 757 | $ 1,661,701 | $ 80,055 | $ 1,337,186 | $ (1,859,716) |
Ending balance (in shares) at Mar. 31, 2018 | 75,703,107 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | ||
Cash Flows From Operating Activities: | |||
Net Income | $ 46,845 | $ 36,969 | |
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | |||
Amortization of premiums, discounts, and securities issuance costs, net | (3,939) | (5,023) | |
Depreciation and amortization of non-financial assets | 299 | 306 | |
Purchases of held-for-sale loans | (1,820,002) | (1,103,047) | |
Proceeds from sales of held-for-sale loans | 1,581,806 | 1,347,575 | |
Principal payments on held-for-sale loans | 16,332 | 13,001 | |
Net settlements of derivatives | 19,296 | 10,238 | |
Non-cash equity award compensation expense | 3,674 | 2,242 | |
Market valuation adjustments | (25,600) | (15,129) | |
Realized gains, net | (9,363) | (5,703) | |
Net change in: | |||
Accrued interest receivable and other assets | 35,824 | (10,490) | |
Accrued interest payable and accrued expenses and other liabilities | 11,581 | (17,301) | |
Net cash (used in) provided by operating activities | (143,247) | 253,638 | |
Cash Flows From Investing Activities: | |||
Principal payments on loans held-for-investment | 159,889 | 147,127 | |
Purchases of real estate securities | (128,069) | (144,948) | |
Proceeds from sales of real estate securities | 241,570 | 26,887 | |
Principal payments on real estate securities | 16,246 | 17,529 | |
Purchase of mortgage servicing rights | 0 | (100) | |
Proceeds from sales of mortgage servicing rights | 3,827 | 9,136 | |
Net cash provided by investing activities | 293,463 | 55,631 | |
Cash Flows From Financing Activities: | |||
Proceeds from borrowings on short-term debt | 1,318,754 | 877,495 | |
Repayments on short-term debt | (1,753,090) | (1,105,261) | |
Proceeds from issuance of asset-backed securities | 441,741 | 0 | |
Repayments on asset-backed securities issued | (84,974) | (55,609) | |
Net settlements of derivatives | (85) | (34) | |
Net proceeds from issuance of common stock | 88 | 73 | |
Net payments on repurchase of common stock | (16,315) | 0 | |
Taxes paid on equity award distributions | (371) | (1,601) | |
Dividends paid | (21,803) | (22,089) | |
Net cash used in financing activities | (116,055) | (307,026) | |
Net increase in cash, cash equivalents and restricted cash | 34,161 | 2,243 | |
Cash, cash equivalents and restricted cash at beginning of period | [1] | 146,807 | 221,467 |
Cash, cash equivalents, and restricted cash at end of period | [1] | 180,968 | 223,710 |
Cash paid during the period for: | |||
Interest | 38,285 | 14,726 | |
Taxes | 42 | 4 | |
Supplemental Noncash Information: | |||
Real estate securities retained from loan securitizations | 16,396 | 25,858 | |
Retention of mortgage servicing rights from loan securitizations and sales | 0 | 7,386 | |
Transfers from loans held-for-sale to loans held-for-investment | 507,616 | 184,996 | |
Transfers from residential loans to real estate owned | $ 1,268 | $ 968 | |
[1] | Cash, cash equivalents, and restricted cash at March 31, 2018 includes cash and cash equivalents of $179 million and restricted cash of $2 million, and at December 31, 2017 includes cash and cash equivalents of $145 million and restricted cash of $2 million. |
CONSOLIDATED STATEMENTS OF CAS9
CONSOLIDATED STATEMENTS OF CASH FLOWS (PARENTHETICAL) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | |
Statement of Cash Flows [Abstract] | |||
Cash and cash equivalents | [1] | $ 178,562 | $ 144,663 |
Restricted cash | [1] | $ 2,406 | $ 2,144 |
[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 March 31, 2018 and December 31, 2017, assets of consolidated VIEs totaled $1,647,850 and $1,259,774, respectively. At March 31, 2018 and December 31, 2017, liabilities of consolidated VIEs totaled $1,546,066 and $1,167,157, respectively. See Note 4 for further discussion. |
Organization
Organization | 3 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Organization Redwood Trust, Inc., together with its subsidiaries, is a specialty finance company focused on making credit-sensitive investments in residential mortgages and related assets and engaging in mortgage banking activities. Our goal is to provide attractive returns to shareholders through a stable and growing stream of earnings and dividends, as well as through capital appreciation. We operate our business in two segments: Investment Portfolio and Residential Mortgage Banking. Our primary sources of income are net interest income from our investment portfolios and non-interest income from our mortgage banking activities. Net interest income consists of the interest income we earn on investments less the interest expense we incur on borrowed funds and other liabilities. Income from mortgage banking activities consists of the profit we seek to generate through the acquisition of loans and their subsequent sale or securitization. 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.” 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. |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The consolidated financial statements presented herein are at March 31, 2018 and December 31, 2017 , and for the three months ended March 31, 2018 and 2017 . 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, 2017 . In the opinion of management, all normal and recurring adjustments to present fairly the financial condition of the company at March 31, 2018 and results of operations for all periods presented have been made. The results of operations for the three months ended March 31, 2018 should not be construed as indicative of the results to be expected for the full year. Principles of Consolidation In accordance with GAAP, we determine whether we must consolidate transferred financial assets and variable interest entities (“VIEs”) for financial reporting purposes. We currently consolidate the assets and liabilities of certain Sequoia securitization entities issued prior to 2012 where we maintain an ongoing involvement ("Legacy Sequoia"), as well as entities formed in connection with the securitization of Redwood Choice expanded-prime loans beginning in the third quarter of 2017 ("Sequoia Choice"). 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 | 3 Months Ended |
Mar. 31, 2018 | |
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 2017 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 position and results of operations for the three months ended March 31, 2018 . Recent Accounting Pronouncements Newly Adopted Accounting Standards Updates ("ASUs") In May 2017, the FASB issued ASU 2017-09, "Compensation - Stock Compensation (Topic 718)." This new guidance provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This new guidance is effective for fiscal years beginning after December 15, 2017, and should be applied prospectively to an award modified on or after the adoption date. We adopted this guidance, as required, in the first quarter of 2018, which did not 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. We adopted this guidance, as required, in the first quarter of 2018, which did not have a material impact on our results of operations but impacted the presentation of the statements of cash flows and related footnote disclosures. 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. We adopted this guidance, as required, in the first quarter of 2018, which did not 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. We adopted this guidance, as required, in the first quarter of 2018, which did not have a material impact on our consolidated financial statements. 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. In February 2018, the FASB issued ASU 2018-03, "Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities," which clarified certain aspects of the guidance issued in ASU 2016-01. We adopted this guidance, as required, in the first quarter of 2018. This did not have a material impact on our consolidated financial statements as our investments in debt securities and loans were not subject to the amendments in this ASU. In accordance with this guidance, we amended certain fair value disclosures related to financial instruments that are carried at amortized cost on the consolidated balance sheets. 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. 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. In November 2017, the FASB issued ASU 2017-14, "Income Statement - Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606): Amendments to SEC Paragraphs Pursuant to Staff Accounting Bulletin No. 116 and SEC Release No. 33-10403." This new ASU amends various paragraphs that contain SEC guidance. We adopted this guidance, as required, in the first quarter of 2018. This did not have a material impact on our consolidated financial statements as nearly all of our income is generated from financial instruments, which are explicitly scoped out of these standards. Other Recent Accounting Pronouncements In February 2018, the FASB issued ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." This new guidance allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (the "Tax Act"). This new guidance is effective for fiscal years beginning after December 15, 2018. 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 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 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, we have no financial instruments for which we maintain an allowance for loan losses. 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 on 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 requires that credit impairments on our available-for-sale securities be recorded in earnings using an allowance for credit losses, with the allowance limited to the amount by which the security's fair value is less than its amortized cost basis. Subsequent reversals in credit loss estimates are recognized in income. We plan to adopt this new guidance by the required date and continue to evaluate the impact that this update will have on our consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, "Leases." This new guidance requires lessees to recognize most leases on their balance sheet as a right-of-use asset and a lease liability. This new guidance retains a dual lease accounting model, which requires leases to be classified as either operating or capital leases for lessees, for purposes of income statement recognition. This new guidance is effective for fiscal years beginning after December 15, 2018. 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 totaled $17 million at March 31, 2018. 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. 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 March 31, 2018 and December 31, 2017 . 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 March 31, 2018 Financial Instruments Cash Collateral (Received) Pledged Assets (2) Interest rate agreements $ 50,919 $ — $ 50,919 $ (8,850 ) $ (12,010 ) $ 30,059 TBAs 8,625 — 8,625 (3,951 ) (4,643 ) 31 Total Assets $ 59,544 $ — $ 59,544 $ (12,801 ) $ (16,653 ) $ 30,090 Liabilities (2) Interest rate agreements $ (46,513 ) $ — $ (46,513 ) $ 8,850 $ 37,663 $ — TBAs (5,457 ) — (5,457 ) 3,951 263 (1,243 ) Futures (357 ) — (357 ) — 357 — Loan warehouse debt (661,782 ) — (661,782 ) 661,782 — — Security repurchase agreements (592,294 ) — (592,294 ) 592,294 — — Total Liabilities $ (1,306,403 ) $ — $ (1,306,403 ) $ 1,266,877 $ 38,283 $ (1,243 ) 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, 2017 Financial Instruments Cash Collateral (Received) Pledged Assets (2) Interest rate agreements $ 10,164 $ — $ 10,164 $ (6,196 ) $ (42 ) $ 3,926 TBAs 133 — 133 (133 ) — — Futures 1 — 1 — — 1 Total Assets $ 10,298 $ — $ 10,298 $ (6,329 ) $ (42 ) $ 3,927 Liabilities (2) Interest rate agreements $ (55,567 ) $ — $ (55,567 ) $ 6,196 $ 49,371 $ — TBAs (3,808 ) — (3,808 ) 133 1,376 (2,299 ) Loan warehouse debt (1,039,666 ) — (1,039,666 ) 1,039,666 — — Security repurchase agreements (648,746 ) — (648,746 ) 648,746 — — Total Liabilities $ (1,747,787 ) $ — $ (1,747,787 ) $ 1,694,741 $ 50,747 $ (2,299 ) (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, 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 | 3 Months Ended |
Mar. 31, 2018 | |
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 March 31, 2018 , we consolidated certain Legacy Sequoia and our Sequoia Choice securitization entities that we determined were VIEs and for which we determined we were the primary beneficiary. Each of these entities is independent of Redwood and of each other and the assets and liabilities of these entities are not owned by and are not legal obligations of ours. Our exposure to these entities is primarily through the financial interests we have retained, although 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 March 31, 2018 , the estimated fair value of our investments in the consolidated Legacy Sequoia and Sequoia Choice entities was $14 million and $88 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 March 31, 2018 Legacy Sequoia Sequoia Choice Total Consolidated VIEs (Dollars in Thousands) Residential loans, held-for-investment $ 626,151 $ 1,013,619 $ 1,639,770 Restricted cash 148 7 155 Accrued interest receivable 753 4,057 4,810 REO 3,115 — 3,115 Total Assets $ 630,167 $ 1,017,683 $ 1,647,850 Accrued interest payable $ 534 $ 3,438 $ 3,972 Accrued expenses and other liabilities — 7 7 Asset-backed securities issued 615,849 926,238 1,542,087 Total Liabilities $ 616,383 $ 929,683 $ 1,546,066 Number of VIEs 20 3 23 December 31, 2017 Legacy Sequoia Sequoia Total Consolidated VIEs (Dollars in Thousands) Residential loans, held-for-investment $ 632,817 $ 620,062 $ 1,252,879 Restricted cash 147 4 151 Accrued interest receivable 867 2,524 3,391 REO 3,353 — 3,353 Total Assets $ 637,184 $ 622,590 $ 1,259,774 Accrued interest payable $ 537 $ 2,031 $ 2,568 Accrued expenses and other liabilities — 4 4 Asset-backed securities issued 622,445 542,140 1,164,585 Total Liabilities $ 622,982 $ 544,175 $ 1,167,157 Number of VIEs 20 2 22 We consolidate the assets and liabilities of certain Sequoia securitization entities, as we did not meet the GAAP sale criteria at the time we transferred financial assets to these entities. Our involvement in consolidated Sequoia entities continues in the following ways: (i) we continue to hold subordinate investments in each entity, and for certain entities, more senior investments; (ii) we maintain certain discretionary rights associated with our sponsorship of, or our subordinate investments in, each entity; and (iii) we continue to hold a right to call the assets of certain entities (once they have been paid down below a specified threshold) at a price equal to, or in excess of, the current outstanding principal amount of the entity’s asset-backed securities issued. These factors have resulted in our continuing to consolidate the assets and liabilities of these Sequoia entities in accordance with GAAP. Analysis of Unconsolidated VIEs with Continuing Involvement Since 2012, we have transferred residential loans to 39 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 certain of these transfers to securitization entities, for the transferred loans where we held the servicing rights prior to the transfer and continued to hold the servicing rights following the transfer, we recorded MSRs on our consolidated balance sheets, and classified those MSRs as Level 3 assets. We also retained senior and subordinate securities in these securitizations that we classified as Level 3 assets. Our continuing involvement in these securitizations is limited to customary servicing obligations associated with retaining servicing rights (which we retain a third-party sub-servicer to perform) and the receipt of interest income associated with the securities we retained. The following table presents information related to securitization transactions that occurred during the three months ended March 31, 2018 and 2017 . Table 4.2 – Securitization Activity Related to Unconsolidated VIEs Sponsored by Redwood Three Months Ended March 31, (In Thousands) 2018 2017 Principal balance of loans transferred $ 1,280,468 $ 1,035,524 Trading securities retained, at fair value 12,491 20,703 AFS securities retained, at fair value 3,905 5,155 MSRs recognized — 7,123 The following table summarizes the cash flows during the three months ended March 31, 2018 and 2017 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 March 31, (In Thousands) 2018 2017 Proceeds from new transfers $ 1,289,687 $ 1,022,024 MSR fees received 3,414 3,475 Funding of compensating interest, net (25 ) (38 ) Cash flows received on retained securities 7,043 6,373 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 months ended March 31, 2018 and 2017 . Table 4.4 – Assumptions Related to Assets Retained from Unconsolidated VIEs Sponsored by Redwood Three Months Ended March 31, 2018 Three Months Ended March 31, 2017 At Date of Securitization MSRs Senior IO Securities Subordinate Securities MSRs Senior Securities Subordinate Securities Prepayment rates N/A 8 % 10 % 9 % 10 % 10 % Discount rates N/A 14 % 7 % 11 % 11 % 5 % Credit loss assumptions N/A 0.20 % 0.20 % N/A 0.25 % 0.25 % The following table presents additional information at March 31, 2018 and December 31, 2017 , related to unconsolidated VIEs sponsored by Redwood and accounted for as sales since 2012. Table 4.5 – Unconsolidated VIEs Sponsored by Redwood (In Thousands) March 31, 2018 December 31, 2017 On-balance sheet assets, at fair value: Interest-only, senior and subordinate securities, classified as trading $ 103,854 $ 101,426 Subordinate securities, classified as AFS 193,029 219,255 Mortgage servicing rights 63,915 60,980 Maximum loss exposure (1) $ 360,798 $ 381,661 Assets transferred: Principal balance of loans outstanding $ 9,411,927 $ 8,364,148 Principal balance of loans 30+ days delinquent 26,524 27,926 (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 March 31, 2018 and December 31, 2017 . Table 4.6 – Key Assumptions and Sensitivity Analysis for Assets Retained from Unconsolidated VIEs Sponsored by Redwood March 31, 2018 MSRs Senior Securities (1) Subordinate Securities (Dollars in Thousands) Fair value at March 31, 2018 $ 63,915 $ 49,299 $ 247,584 Expected life (in years) (2) 8 7 14 Prepayment speed assumption (annual CPR) (2) 7 % 9 % 10 % Decrease in fair value from: 10% adverse change $ 1,816 $ 1,671 $ 643 25% adverse change 4,388 4,087 1,587 Discount rate assumption (2) 11 % 11 % 5 % Decrease in fair value from: 100 basis point increase $ 2,596 $ 1,772 $ 22,876 200 basis point increase 5,009 3,486 42,351 Credit loss assumption (2) N/A 0.20 % 0.20 % Decrease in fair value from: 10% higher losses N/A $ — $ 1,285 25% higher losses N/A — 3,213 December 31, 2017 MSRs Senior Securities (1) Subordinate Securities (Dollars in Thousands) Fair value at December 31, 2017 $ 60,980 $ 33,773 $ 286,908 Expected life (in years) (2) 8 6 13 Prepayment speed assumption (annual CPR) (2) 9 % 10 % 11 % Decrease in fair value from: 10% adverse change $ 2,022 $ 1,371 $ 611 25% adverse change 4,839 3,289 1,506 Discount rate assumption (2) 11 % 11 % 5 % Decrease in fair value from: 100 basis point increase $ 2,386 $ 1,158 $ 25,827 200 basis point increase 4,597 2,265 47,885 Credit loss assumption (2) N/A 0.25 % 0.25 % Decrease in fair value from: 10% higher losses N/A $ — $ 1,551 25% higher losses N/A — 3,873 (1) Senior securities included $49 million and $34 million of interest-only securities at March 31, 2018 and December 31, 2017 , 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 March 31, 2018 , grouped by security type. Table 4.7 – Third-Party Sponsored VIE Summary (Dollars in Thousands) March 31, 2018 Mortgage-Backed Securities Senior $ 198,373 Mezzanine 487,679 Subordinate 374,785 Total Investments in Third-Party Sponsored VIEs $ 1,060,837 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 | 3 Months Ended |
Mar. 31, 2018 | |
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 March 31, 2018 and December 31, 2017 . Table 5.1 – Carrying Values and Fair Values of Assets and Liabilities March 31, 2018 December 31, 2017 Carrying Value Fair Value Carrying Value Fair Value (In Thousands) Assets Residential loans, held-for-sale At fair value $ 1,129,890 $ 1,129,890 $ 1,427,052 $ 1,427,052 At lower of cost or fair value 295 388 893 993 Residential loans, held-for-investment At fair value 4,015,555 4,015,555 3,687,265 3,687,265 Trading securities 907,432 907,432 968,844 968,844 Available-for-sale securities 450,288 450,288 507,666 507,666 MSRs 66,496 66,496 63,598 63,598 Cash and cash equivalents 178,562 178,562 144,663 144,663 Restricted cash 2,406 2,406 2,144 2,144 Accrued interest receivable 27,257 27,257 27,013 27,013 Derivative assets 63,544 63,544 15,718 15,718 REO (1) 3,115 4,651 3,354 3,806 Margin receivable (1) 50,200 50,200 85,044 85,044 FHLBC stock (1) 43,393 43,393 43,393 43,393 Guarantee asset (1) 3,055 3,055 2,869 2,869 Pledged collateral (1) 42,290 42,290 42,615 42,615 Liabilities Short-term debt facilities $ 1,254,076 $ 1,254,076 $ 1,688,412 $ 1,688,412 Accrued interest payable 23,492 23,492 18,435 18,435 Margin payable (2) 16,878 16,878 390 390 Guarantee obligation (2) 18,931 18,551 19,487 18,878 Derivative liabilities 56,201 56,201 63,081 63,081 ABS issued at fair value, net 1,542,087 1,542,087 1,164,585 1,164,585 FHLBC long-term borrowings 1,999,999 1,999,999 1,999,999 1,999,999 Convertible notes, net 687,426 691,535 686,759 692,369 Trust preferred securities and subordinated notes, net 138,547 106,020 138,535 103,230 (1) These assets are included in Other assets on our consolidated balance sheets. (2) These liabilities are included in Accrued expenses and other liabilities on our consolidated balance sheets. During the three months ended March 31, 2018 , we elected the fair value option for $12 million of residential senior securities, $128 million of subordinate securities, and $1.80 billion of residential loans (principal balance). We anticipate electing the fair value option for all future purchases of residential loans that we intend to sell to third parties or transfer to securitizations, as well as for MSRs 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 March 31, 2018 and December 31, 2017 , 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 March 31, 2018 Carrying Value Fair Value Measurements Using (In Thousands) Level 1 Level 2 Level 3 Assets Residential loans $ 5,145,445 $ — $ — $ 5,145,445 Trading securities 907,432 — — 907,432 Available-for-sale securities 450,288 — — 450,288 Derivative assets 63,544 8,625 50,919 4,000 MSRs 66,496 — — 66,496 Pledged collateral 42,290 42,290 — — FHLBC stock 43,393 — 43,393 — Guarantee asset 3,055 — — 3,055 Liabilities Derivative liabilities $ 56,201 $ 5,814 $ 46,513 $ 3,874 ABS issued 1,542,087 — — 1,542,087 December 31, 2017 Carrying Value Fair Value Measurements Using (In Thousands) Level 1 Level 2 Level 3 Assets Residential loans $ 5,114,317 $ — $ — $ 5,114,317 Trading securities 968,844 — — 968,844 Available-for-sale securities 507,666 — — 507,666 Derivative assets 15,718 134 10,164 5,420 MSRs 63,598 — — 63,598 Pledged collateral 42,615 42,615 — — FHLBC stock 43,393 — 43,393 — Guarantee asset 2,869 — — 2,869 Liabilities Derivative liabilities $ 63,081 $ 3,808 $ 55,567 $ 3,706 ABS issued 1,164,585 — — 1,164,585 The following table presents additional information about Level 3 assets and liabilities measured at fair value on a recurring basis for the three months ended March 31, 2018 . 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, 2017 $ 5,114,317 $ 968,844 $ 507,666 $ 63,598 $ 2,869 $ 1,714 $ 1,164,585 Acquisitions 1,814,944 140,560 3,905 — — — 441,741 Sales (1,594,521 ) (193,130 ) (50,742 ) — — — — Principal paydowns (175,525 ) (5,834 ) (10,412 ) — — — (84,974 ) Gains (losses) in net income, net (12,502 ) (3,008 ) 13,423 2,898 186 (6,923 ) 20,735 Unrealized losses in OCI, net — — (13,552 ) — — — — Other settlements, net (2) (1,268 ) — — — — 5,335 — Ending Balance - March 31, 2018 $ 5,145,445 $ 907,432 $ 450,288 $ 66,496 $ 3,055 $ 126 $ 1,542,087 (1) For the purpose of this presentation, derivative assets and liabilities, which consist of loan purchase and forward sale commitments, are presented on a net basis. (2) Other settlements, net for residential loans represents the transfer of loans to REO, and for derivatives, the settlement of forward sale commitments and the transfer of the fair value of loan purchase commitments at the time loans are acquired to the basis of residential loans. 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 March 31, 2018 and 2017 . Gains or losses incurred on assets or liabilities sold, matured, called, or fully written down during the three months ended March 31, 2018 and 2017 are not included in this presentation. Table 5.4 – Portion of Net Gains (Losses) Attributable to Level 3 Assets and Liabilities Still Held at March 31, 2018 and 2017 Included in Net Income Included in Net Income Three Months Ended March 31, (In Thousands) 2018 2017 Assets Residential loans at Redwood $ (42,195 ) $ 3,723 Residential loans at consolidated Sequoia entities 20,548 8,414 Trading securities (3,951 ) 10,051 Available-for-sale securities — (117 ) MSRs 3,933 (916 ) Loan purchase commitments 3,919 4,823 Other assets - Guarantee asset 186 (246 ) Liabilities Loan purchase commitments $ (2,554 ) $ — Loan forward sale commitments (1,269 ) — ABS issued (20,735 ) (10,538 ) The following table presents information on assets recorded at fair value on a non-recurring basis at March 31, 2018 . This table does not include the carrying value and gains or losses associated with the asset types below that were not recorded at fair value on our consolidated balance sheets at March 31, 2018 . Table 5.5 – Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis at March 31, 2018 Gain (Loss) for March 31, 2018 Carrying Value Fair Value Measurements Using Three Months Ended (In Thousands) Level 1 Level 2 Level 3 March 31, 2018 Assets Residential loans, at lower of cost or fair value $ 251 $ — $ — $ 251 $ 1 REO 2,034 — — 2,034 (146 ) 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 months ended March 31, 2018 and 2017 . Table 5.6 – Market Valuation Gains and Losses, Net Three Months Ended March 31, (In Thousands) 2018 2017 Mortgage Banking Activities, Net Residential loans held-for-sale, at fair value $ 4,774 $ 8,532 Residential loan purchase and forward sale commitments (6,968 ) 10,265 Risk management derivatives, net 28,432 (1,400 ) Total mortgage banking activities, net (1) $ 26,238 $ 17,397 Investment Fair Value Changes, Net Residential loans held-for-investment, at Redwood $ (38,985 ) $ (2,333 ) Trading securities (2,955 ) 11,143 Net investments in Legacy Sequoia entities (2) (8 ) (1,810 ) Net investments in Sequoia Choice entities (2) (86 ) — Risk-sharing investments (139 ) (205 ) Risk management derivatives, net 43,782 (5,127 ) Impairments on AFS securities — (117 ) Total investment fair value changes, net $ 1,609 $ 1,551 MSR Income (Loss), Net MSRs $ 2,892 $ (3,070 ) Risk management derivatives, net (5,139 ) (749 ) Total MSR loss, net (3) $ (2,247 ) $ (3,819 ) Total Market Valuation Gains, Net $ 25,600 $ 15,129 (1) Mortgage banking activities, net presented above does not include fee income or provisions for repurchases that are components of Mortgage banking activities, net presented on our consolidated statements of income, as these amounts do not represent market valuation changes. (2) Includes changes in fair value of the residential loans held-for-investment, REO and the ABS issued at the entities, which netted together represent the change in value of our 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 March 31, 2018 , 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, 2017 . 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 March 31, 2018 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 $ 3,162,491 Whole loan spread to TBA price $ 1.78 - $ 2.97 $ 2.90 Whole loan spread to swap rate 160 - 210 bps 200 bps Jumbo hybrid loans 258,789 Prepayment rate (annual CPR) 15 - 15 % 15 % Whole loan spread to swap rate 90 - 165 bps 148 bps Jumbo loans committed to sell 84,395 Whole loan committed sales price $ 100.56 - $ 101.32 $ 101.12 Loans held by Legacy Sequoia (1) 626,151 Liability price N/A N/A Loans held by Sequoia Choice (1) 1,013,619 Liability price N/A N/A Residential loans, at lower of cost or fair value 251 Loss severity 30 - 30 % 30 % Trading and AFS securities 1,357,720 Discount rate 3 - 14 % 6 % Prepayment rate (annual CPR) — - 50 % 9 % Default rate — - 27 % 3 % Loss severity — - 40 % 22 % MSRs 66,496 Discount rate 11 - 29 % 11 % Prepayment rate (annual CPR) 6 - 27 % 7 % Per loan annual cost to service $ 79 - $ 82 $ 82 Guarantee asset 3,055 Discount rate 11 - 11 % 11 % Prepayment rate (annual CPR) 9 - 9 % 9 % REO 2,260 Loss severity 12 - 43 % 26 % Loan purchase commitments, net (2) 1,395 MSR multiple 1.0 - 5.2 x 3.4 x Pull-through rate 9 - 100 % 68 % Whole loan spread to TBA price $ 1.78 - $ 2.78 $ 2.77 Whole loan spread to swap rate - fixed rate 201 - 201 bps 201 bps Prepayment rate (annual CPR) 15 - 15 % 15 % Whole loan spread to swap rate - hybrid 90 - 165 bps 119 bps Liabilities ABS issued (1) 1,542,087 Discount rate 3 - 15 % 4 % Prepayment rate (annual CPR) 8 - 25 % 18 % Default rate — - 16 % 3 % Loss severity 20 - 54 % 22 % Loan forward sale commitments 1,269 Whole loan spread to TBA price $ 2.80 $ 2.80 $ 2.80 (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. 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 and loss severity. The estimated fair value of our securities would generally decrease based upon an increase in default rates, loss severities, or a decrease in prepayment rates. As part of our securities valuation process, we request and consider indications of value from third-party securities dealers. For purposes of pricing our securities at March 31, 2018 , we received dealer price indications on 72% of our securities, representing 79% 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, loan purchase commitments ("LPCs"), and forward sale commitments ("FSCs"). Fair values of derivative instruments are determined using quoted prices from active markets, when available, or from valuation models and are supported by valuations provided by dealers active in derivative markets. Fair values of TBAs and financial futures are generally obtained using quoted prices from active markets (Level 1). Our derivative valuation models for swaps and swaptions require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, prepayment rates, and correlations of certain inputs. Model inputs can generally be verified and model selection does not involve significant management judgment (Level 2). LPC and FSC fair values for jumbo loans are estimated based on the estimated fair values of the underlying loans (as described in " Residential loans " above). In addition, fair values for LPCs are estimated based on the probability that the mortgage loan will be purchased (the "Pull-through rate") (Level 3). For other derivatives, valuations are based on various factors such as liquidity, bid/ask spreads, and credit considerations for which we rely on available market inputs. In the absence of such inputs, management’s best estimate is used (Level 3). 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). 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 March 31, 2018 , 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). These cash flow models use significant unobservable inputs such as a discount rate, prepayment rate, default rate, loss severity and credit support. 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 (i.e., 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). Financial Instruments Carried at Amortized Cost Guarantee obligations In association with our risk-sharing transactions with the Agencies, we have made certain guarantees which are carried on our balance sheet at amortized cost (Level 3). Convertible notes Convertible notes include unsecured convertible and exchangeable senior notes that are carried at their unpaid principal balance net of any unamortized deferred issuance costs (Level 2). Trust preferred securities and subordinated notes Trust preferred securities and subordinated notes are carried at their unpaid principal balance net of any unamortized deferred issuance costs (Level 3). |
Residential Loans
Residential Loans | 3 Months Ended |
Mar. 31, 2018 | |
Receivables [Abstract] | |
Residential Loans | Residential Loans We acquire residential loans from third-party originators and may sell or securitize these loans or hold them for investment. The following table summarizes the classifications and carrying values of the residential loans owned at Redwood and at consolidated Sequoia entities at March 31, 2018 and December 31, 2017 . Table 6.1 – Classifications and Carrying Values of Residential Loans March 31, 2018 Legacy Sequoia (In Thousands) Redwood Sequoia Choice Total Held-for-sale At fair value $ 1,129,890 $ — $ — $ 1,129,890 At lower of cost or fair value 295 — — 295 Total held-for-sale 1,130,185 — — 1,130,185 Held-for-investment at fair value 2,375,785 626,151 1,013,619 4,015,555 Total Residential Loans $ 3,505,970 $ 626,151 $ 1,013,619 $ 5,145,740 December 31, 2017 Legacy Sequoia (In Thousands) Redwood Sequoia Choice Total Held-for-sale At fair value $ 1,427,052 $ — $ — $ 1,427,052 At lower of cost or fair value 893 — — 893 Total held-for-sale 1,427,945 — — 1,427,945 Held-for-investment at fair value 2,434,386 632,817 620,062 3,687,265 Total Residential Loans $ 3,862,331 $ 632,817 $ 620,062 $ 5,115,210 At March 31, 2018 , we owned mortgage servicing rights associated with $2.81 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 March 31, 2018 , we owned 1,598 loans held-for-sale at fair value with an aggregate unpaid principal balance of $1.12 billion and a fair value of $1.13 billion , compared to 2,009 loans with an aggregate unpaid principal balance of $1.41 billion and a fair value of $1.43 billion at December 31, 2017 . At March 31, 2018 , none of these loans were greater than 90 days delinquent or in foreclosure. At December 31, 2017 , one of these loans with a fair value of $0.5 million was greater than 90 days delinquent and none of these loans were in foreclosure. During the three months ended March 31, 2018 and 2017, we purchased $1.80 billion and $1.09 billion (principal balance) of loans, respectively, for which we elected the fair value option, and we sold $2.01 billion and $1.36 billion (principal balance) of loans, respectively, for which we recorded a net market valuation gain of $5 million and a net market valuation loss of $9 million , respectively, through Mortgage banking activities, net on our consolidated statements of income. At March 31, 2018 , loans held-for-sale with a market value of $718 million were pledged as collateral under short-term borrowing agreements. At Lower of Cost or Fair Value At March 31, 2018 and December 31, 2017 , we held three and four residential loans, respectively, at the lower of cost or fair value with $0.4 million and $1 million in outstanding principal balance, respectively, and carrying values of $0.3 million and $1 million , respectively. At both March 31, 2018 and December 31, 2017 , 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 March 31, 2018 , we owned 3,279 held-for-investment loans at Redwood with an aggregate unpaid principal balance of $2.39 billion and a fair value of $2.38 billion , compared to 3,292 loans with an aggregate unpaid principal balance of $2.41 billion and a fair value of $2.43 billion at December 31, 2017 . At March 31, 2018 , three of these loans with a total unpaid principal balance of $2 million were greater than 90 days delinquent and none of these loans were in foreclosure. At December 31, 2017 , none of these loans were greater than 90 days delinquent or in foreclosure. During the three months ended March 31, 2018 and 2017, we transferred loans with a fair value of $56 million and $185 million , respectively, from held-for-sale to held-for-investment. During both the three months ended March 31, 2018 and 2017 , we did no t transfer loans from held-for-investment to held-for-sale. During the three months ended March 31, 2018 and 2017, we recorded net market valuation loss es of $39 million and $2 million , respectively, on residential loans held-for-investment at fair value through Investment fair value changes, net on our consolidated statements of income. At March 31, 2018 , loans with a fair value of $2.37 billion were pledged as collateral under a borrowing agreement with the FHLBC. At March 31, 2018 , the outstanding loans held-for-investment at Redwood were prime-quality, first lien loans, of which 96% were originated between 2013 and 2018, and 4% were originated in 2012 and prior years. The weighted average FICO score of borrowers backing these loans was 771 (at origination) and the weighted average loan-to-value ("LTV") ratio of these loans was 66% (at origination). At March 31, 2018 , these loans were comprised of 90% 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 4.10% . At Consolidated Legacy Sequoia Entities At March 31, 2018 , we owned 3,059 held-for-investment loans at consolidated Legacy Sequoia entities, with an aggregate unpaid principal balance of $662 million and a fair value of $626 million , as compared to 3,178 loans at December 31, 2017 , with an aggregate unpaid principal balance of $698 million and a fair value of $633 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 March 31, 2018 and December 31, 2017 , the unpaid principal balance of loans at consolidated Legacy Sequoia entities delinquent greater than 90 days was $23 million and $25 million , respectively, of which the unpaid principal balance of loans in foreclosure was $9 million and $10 million , respectively. During the three months ended March 31, 2018 and 2017, we recorded net market valuation gain s of $29 million and $8 million , respectively, on these loans through Investment fair value changes, net on our consolidated statements of income. Pursuant to the collateralized financing entity guidelines, the market valuation changes of these loans are based on the estimated fair value of the associated ABS issued. The net impact to our income statement associated with our retained economic investment in the Legacy Sequoia securitization entities is presented in Note 5. At Consolidated Sequoia Choice Entities At March 31, 2018 , we owned 1,335 held-for-investment loans at the consolidated Sequoia Choice entities, with an aggregate unpaid balance of $996 million and a fair value of $1.01 billion , as compared to 806 loans at December 31, 2017 with an aggregate unpaid principal balance of $605 million and a fair value of $620 million . At origination, the weighted average FICO score of borrowers backing these loans was 742 , the weighted average LTV ratio of these loans was 74% , and the loans were all first lien and prime-quality. At both March 31, 2018 and December 31, 2017 , none of these loans were greater than 90 days delinquent or in foreclosure. During the three months ended March 31, 2018 , we transferred loans with a fair value of $452 million from held-for-sale to held-for-investment associated with Choice securitizations. Pursuant to the collateralized financing entity guidelines, the market valuation changes of these loans are based on the estimated fair value of the ABS issued associated with Choice securitizations . The net impact to our income statement associated with our retained economic investment in the Sequoia Choice securitization entities is presented in Note 5. |
Real Estate Securities
Real Estate Securities | 3 Months Ended |
Mar. 31, 2018 | |
Investments, Debt and Equity Securities [Abstract] | |
Real Estate Securities | Real Estate Securities We invest in real estate securities that we acquire from third parties or create and retain from our Sequoia securitizations. The following table presents the fair values of our real estate securities by type at March 31, 2018 and December 31, 2017 . Table 7.1 – Fair Values of Real Estate Securities by Type (In Thousands) March 31, 2018 December 31, 2017 Trading $ 907,432 $ 968,844 Available-for-sale 450,288 507,666 Total Real Estate Securities $ 1,357,720 $ 1,476,510 Our real estate securities include mortgage-backed securities, which are presented in accordance with their general position within a securitization structure based on their rights to cash flows. Senior securities are those interests in a securitization that generally have the first right to cash flows and are last in line to absorb losses. Mezzanine securities are interests that are generally subordinate to senior securities in their rights to receive cash flows, and have subordinate securities below them that are first to absorb losses. Our mezzanine classified securities were initially rated AA through BBB- and issued in 2012 or later. Subordinate securities are all interests below mezzanine. Nearly all of our residential securities are supported by collateral that was designated as prime at the time of issuance. Trading Securities The following table presents the fair value of trading securities by position and collateral type at March 31, 2018 and December 31, 2017 . Table 7.2 – Trading Securities by Position and Collateral Type (In Thousands) March 31, 2018 December 31, 2017 Senior $ 82,062 $ 69,974 Mezzanine 537,831 563,475 Subordinate 287,539 335,395 Total Trading Securities $ 907,432 $ 968,844 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 March 31, 2018 , trading securities with a carrying value of $486 million and $57 million of securities retained from our consolidated Sequoia Choice securitizations were pledged as collateral under short-term borrowing agreements. See Note 11 for additional information on short-term debt. At March 31, 2018 and December 31, 2017 , our senior trading securities were comprised of interest-only securities, for which there is no principal balance, and our mezzanine and subordinate trading securities had an unpaid principal balance of $900 million and $943 million , respectively. At March 31, 2018 and December 31, 2017 , our mezzanine and subordinate trading securities included $246 million and $301 million , respectively, of Agency residential mortgage credit risk transfer (or "CRT") securities, $54 million and $68 million , respectively, of Sequoia securities, $148 million and $206 million , respectively, of other third-party residential securities, and $377 million and $324 million , respectively, of third-party commercial/multifamily securities. During the three months ended March 31, 2018 and 2017, we acquired $145 million and $154 million (principal balance), respectively, of securities for which we elected the fair value option and classified as trading, and sold $182 million and $9 million , respectively, of such securities. During the three months ended March 31, 2018 and 2017, we recorded a net market valuation loss of $3 million and a net market valuation gain of $11 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 March 31, 2018 and December 31, 2017 . Table 7.3 – Available-for-Sale Securities by Position and Collateral Type (In Thousands) March 31, 2018 December 31, 2017 Senior (1) $ 165,610 $ 179,864 Mezzanine 67,291 92,002 Subordinate 217,387 235,800 Total AFS Securities $ 450,288 $ 507,666 (1) Includes $38 million and $39 million of re-REMIC securities at March 31, 2018 and December 31, 2017, respectively. Re-REMIC securities 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. At March 31, 2018 and December 31, 2017 , all of our available-for-sale securities were comprised of residential mortgage-backed securities. At March 31, 2018 , AFS securities with a carrying value of $178 million were pledged as collateral under short-term borrowing agreements. See Note 11 for additional information on short-term debt. During the three months ended March 31, 2018 and 2017, we purchased $4 million and $25 million of AFS securities, respectively, and sold $51 million and $19 million of AFS securities, respectively, which resulted in net realized gains of $9 million and $5 million , respectively. We often purchase AFS securities at a discount to their outstanding principal balances. To the extent we purchase an AFS security that has a likelihood of incurring a loss, we do not amortize into income the portion of the purchase discount that we do not expect to collect due to the inherent credit risk of the security. We may also expense a portion of our investment in the security to the extent we believe that principal losses will exceed the purchase discount. We designate any amount of unpaid principal balance that we do not expect to receive and thus do not expect to earn or recover as a credit reserve on the security. Any remaining net unamortized discounts or premiums on the security are amortized into income over time using the effective yield method. At March 31, 2018 , there were $0.1 million of AFS securities with contractual maturities less than five years , $2 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 March 31, 2018 and December 31, 2017 . Table 7.4 – Carrying Value of AFS Securities March 31, 2018 (In Thousands) Senior Mezzanine Subordinate Total Principal balance $ 172,026 $ 67,995 $ 312,914 $ 552,935 Credit reserve (8,206 ) — (32,410 ) (40,616 ) Unamortized discount, net (39,174 ) (6,959 ) (132,169 ) (178,302 ) Amortized cost 124,646 61,036 148,335 334,017 Gross unrealized gains 41,919 6,255 69,419 117,593 Gross unrealized losses (955 ) — (367 ) (1,322 ) Carrying Value $ 165,610 $ 67,291 $ 217,387 $ 450,288 December 31, 2017 (In Thousands) Senior Mezzanine Subordinate Total Principal balance $ 189,125 $ 91,471 $ 327,549 $ 608,145 Credit reserve (8,756 ) — (37,793 ) (46,549 ) Unamortized discount, net (44,041 ) (9,407 ) (130,305 ) (183,753 ) Amortized cost 136,328 82,064 159,451 377,843 Gross unrealized gains 44,771 9,938 76,481 131,190 Gross unrealized losses (1,235 ) — (132 ) (1,367 ) Carrying Value $ 179,864 $ 92,002 $ 235,800 $ 507,666 The following table presents the changes for the three months ended March 31, 2018 , 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 March 31, 2018 Credit Reserve Unamortized Discount, Net (In Thousands) Beginning balance $ 46,549 $ 183,753 Amortization of net discount — (4,060 ) Realized credit losses (956 ) — Acquisitions 2,536 1,635 Sales, calls, other (767 ) (9,772 ) Transfers to (release of) credit reserves, net (6,746 ) 6,746 Ending Balance $ 40,616 $ 178,302 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 March 31, 2018 and December 31, 2017 . 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) March 31, 2018 $ 12,799 $ (367 ) $ 12,432 $ 27,186 $ (955 ) $ 26,231 December 31, 2017 8,637 (132 ) 8,505 28,557 (1,235 ) 27,322 At March 31, 2018 , after giving effect to purchases, sales, and extinguishment due to credit losses, our consolidated balance sheet included 152 AFS securities, of which 13 were in an unrealized loss position and three were in a continuous unrealized loss position for 12 consecutive months or longer. At December 31, 2017 , our consolidated balance sheet included 167 AFS securities, of which nine were in an unrealized loss position and three were in a continuous unrealized loss position for 12 consecutive months or longer. Evaluating AFS Securities for Other-than-Temporary Impairments Gross unrealized losses on our AFS securities were $1 million at March 31, 2018 . 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 March 31, 2018 , 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 three months ended March 31, 2018 , there were no other-than-temporary impairments related to our AFS securities. For the three months ended March 31, 2017, other-than-temporary impairments were $0.2 million , of which $0.1 million were recognized through our consolidated statements of income and $0.1 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 March 31, 2018 . Table 7.7 – Significant Valuation Assumptions March 31, 2018 Range for Securities Prepayment rates 8% - 20% Projected losses 0.20% - 5.25% 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 March 31, 2018 and 2017 , 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 March 31, (In Thousands) 2018 2017 Balance at beginning of period $ 21,037 $ 28,261 Additions Initial credit impairments — 97 Reductions Securities sold, or expected to sell (99 ) (1,566 ) Securities with no outstanding principal at period end (14 ) (402 ) Balance at End of Period $ 20,924 $ 26,390 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 months ended March 31, 2018 and 2017 . Table 7.9 – Gross Realized Gains and Losses on AFS Securities Three Months Ended March 31, (In Thousands) 2018 2017 Gross realized gains - sales $ 9,363 $ 5,092 Gross realized gains - calls — 611 Total Realized Gains on Sales and Calls of AFS Securities, net $ 9,363 $ 5,703 |
Mortgage Servicing Rights
Mortgage Servicing Rights | 3 Months Ended |
Mar. 31, 2018 | |
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 majority of our investments in MSRs were made through the retention of servicing rights associated with the residential jumbo mortgage loans that we acquire and subsequently transfer to third parties. We hold our MSR investments at our taxable REIT subsidiary. At March 31, 2018 and December 31, 2017, our MSRs had a fair value of $66 million and $64 million , respectively, and were associated with loans with an aggregate principal balance of $5.42 billion and $5.56 billion , respectively. The following table presents activity for MSRs for the three months ended March 31, 2018 and 2017 . Table 8.1 – Activity for MSRs Three Months Ended March 31, (In Thousands) 2018 2017 Balance at beginning of period $ 63,598 $ 118,526 Additions — 7,485 Sales — (11,928 ) Changes in fair value due to: Changes in assumptions (1) 4,346 (657 ) Other changes (2) (1,448 ) (2,413 ) Balance at End of Period $ 66,496 $ 111,013 (1) Primarily reflects changes in prepayment assumptions due to changes in market interest rates. (2) Represents changes due to the realization of expected cash flows. The following table presents the components of our MSR income for the three months ended March 31, 2018 and 2017 . Table 8.2 – Components of MSR Income, net Three Months Ended March 31, (In Thousands) 2018 2017 Servicing income $ 3,796 $ 6,907 Cost of sub-servicer (592 ) (1,380 ) Net servicing fee income 3,204 5,527 Market valuation changes of MSRs 2,892 (3,070 ) Market valuation changes of associated derivatives (5,139 ) (749 ) MSR reversal of provision for repurchases — 5 MSR Income, Net $ 957 $ 1,713 |
Derivative Financial Instrument
Derivative Financial Instruments | 3 Months Ended |
Mar. 31, 2018 | |
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 March 31, 2018 and December 31, 2017 . Table 9.1 – Fair Value and Notional Amount of Derivative Financial Instruments March 31, 2018 December 31, 2017 Fair Value Notional Amount Fair Value Notional Amount (In Thousands) Assets - Risk Management Derivatives Interest rate swaps $ 50,919 $ 2,869,500 $ 10,122 $ 1,765,000 TBAs 8,625 1,515,000 133 295,000 Futures — — 1 7,500 Swaptions — — 42 200,000 Assets - Other Derivatives Loan purchase commitments 4,000 570,552 3,243 547,434 Loan forward sale commitments — — 2,177 343,681 Total Assets $ 63,544 $ 4,955,052 $ 15,718 $ 3,158,615 Liabilities - Cash Flow Hedges Interest rate swaps $ (35,167 ) $ 139,500 $ (43,679 ) $ 139,500 Liabilities - Risk Management Derivatives Interest rate swaps (11,346 ) 451,500 (11,888 ) 1,248,000 TBAs (5,457 ) 1,110,000 (3,808 ) 1,400,000 Futures (357 ) 15,000 — — Liabilities - Other Derivatives Loan purchase commitments (2,605 ) 627,803 (3,706 ) 697,966 Loan forward sale commitments (1,269 ) 340,320 — — Total Liabilities $ (56,201 ) $ 2,684,123 $ (63,081 ) $ 3,485,466 Total Derivative Financial Instruments, Net $ 7,343 $ 7,639,175 $ (47,363 ) $ 6,644,081 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 March 31, 2018 , we were party to swaps and swaptions with an aggregate notional amount of $3.32 billion , TBA agreements sold with an aggregate notional amount of $2.63 billion , and financial futures contracts with an aggregate notional amount of $15 million . At December 31, 2017 , we were party to swaps and swaptions with an aggregate notional amount of $3.21 billion , TBA agreements sold with an aggregate notional amount of $1.70 billion , and financial futures contracts with an aggregate notional amount of $8 million . During the three months ended March 31, 2018 and 2017, risk management derivatives had a net market valuation gain of $67 million and a net market valuation loss of $7 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 and Forward Sale Commitments LPCs and FSCs that qualify as derivatives are recorded at their estimated fair values. For the three months ended March 31, 2018 and 2017, a net market valuation loss on LPCs and FSCs of $7 million and a net market valuation gain on LPCs of $10 million , respectively, 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 months ended March 31, 2018 and 2017, changes in the values of designated cash flow hedges were positive $8 million and positive $2 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 $35 million and $43 million at March 31, 2018 and December 31, 2017 , respectively. The following table illustrates the impact on interest expense of our interest rate agreements accounted for as cash flow hedges for the three months ended March 31, 2018 and 2017 . Table 9.2 – Impact on Interest Expense of Interest Rate Agreements Accounted for as Cash Flow Hedges Three Months Ended March 31, (In Thousands) 2018 2017 Net interest expense on cash flows hedges $ (998 ) $ (1,225 ) Realized net losses reclassified from other comprehensive income — (14 ) Total Interest Expense $ (998 ) $ (1,239 ) Derivative Counterparty Credit Risk As discussed in our Annual Report on Form 10-K for the year ended December 31, 2017 , we consider counterparty risk as part of our fair value assessments of all derivative financial instruments at each quarter-end. At March 31, 2018 , we assessed this risk as remote and did not record a specific valuation adjustment. At March 31, 2018 , we had outstanding derivative agreements with two counterparties (other than clearinghouses) and were in compliance with ISDA agreements governing our open derivative positions. |
Other Assets and Liabilities
Other Assets and Liabilities | 3 Months Ended |
Mar. 31, 2018 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Other Assets and Liabilities | Other Assets and Liabilities Other assets at March 31, 2018 and December 31, 2017 , are summarized in the following table. Table 10.1 – Components of Other Assets (In Thousands) March 31, 2018 December 31, 2017 Margin receivable $ 50,200 $ 85,044 FHLBC stock 43,393 43,393 Pledged collateral 42,290 42,615 MSR holdback receivable 3,952 8,141 Fixed assets and leasehold improvements (1) 3,794 2,645 REO 3,115 3,354 Guarantee asset 3,055 2,869 Other 8,049 6,905 Total Other Assets $ 157,848 $ 194,966 (1) Fixed assets and leasehold improvements had a basis of $8 million and accumulated depreciation of $4 million at March 31, 2018 . Accrued expenses and other liabilities at March 31, 2018 and December 31, 2017 are summarized in the following table. Table 10.2 – Components of Accrued Expenses and Other Liabilities (In Thousands) March 31, 2018 December 31, 2017 Guarantee obligations $ 18,931 $ 19,487 Margin payable 16,878 390 Accrued compensation 11,982 24,025 Deferred tax liabilities 11,764 11,764 Residential loan and MSR repurchase reserve 5,197 4,916 Accrued income taxes payable 4,950 — Legal reserve 2,000 2,000 Other 6,060 5,147 Total Accrued Expenses and Other Liabilities $ 77,762 $ 67,729 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 3 and Note 13 for additional information on this borrowing agreement. 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. 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 March 31, 2018 was $3 million , which includes the net effect of $1 million related to transfers into REO during the three months ended March 31, 2018 , offset by $2 million of REO liquidations, and $0.1 million of unrealized gains resulting from market valuation adjustments. At March 31, 2018 and December 31, 2017 , there were 11 and 14 REO properties, respectively, recorded on our consolidated balance sheets, all of which were owned at consolidated Legacy Sequoia entities. Legal and Repurchase Reserves See Note 14 for additional information on the legal and residential repurchase reserves. |
Short-Term Debt
Short-Term Debt | 3 Months Ended |
Mar. 31, 2018 | |
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 March 31, 2018 , 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, 2017 . 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 March 31, 2018 and December 31, 2017 . Table 11.1 – Short-Term Debt March 31, 2018 (Dollars in Thousands) Number of Facilities Outstanding Balance Limit Weighted Average Interest Rate Maturity Weighted Average Days Until Maturity Facilities Residential loan warehouse 4 $ 661,782 $ 1,425,000 3.51 % 8/2018-3/2019 246 Real estate securities repo 8 592,294 — 3.03 % 4/2018-6/2018 27 Total Short-Term Debt Facilities 12 1,254,076 Convertible notes, net N/A 250,384 — 4.63 % 4/2018 15 Total Short-Term Debt $ 1,504,460 December 31, 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 $ 1,039,666 $ 1,575,000 3.17 % 1/2018-12/2018 197 Real estate securities repo 9 648,746 — 2.69 % 1/2018-3/2018 28 Total Short-Term Debt Facilities 13 1,688,412 Convertible notes, net N/A 250,270 — 4.63 % 4/2018 105 Total Short-Term Debt $ 1,938,682 Borrowings under our facilities are generally charged interest based on a specified margin over the one-month LIBOR interest rate. At March 31, 2018 , all of these borrowings were under uncommitted facilities and were due within 364 days (or less) of the borrowing date. The fair value of held-for-sale residential loans and real estate securities pledged as collateral under our short-term debt facilities was $718 million and $721 million , respectively, at March 31, 2018 and $1.15 billion and $788 million , respectively, at December 31, 2017 . At March 31, 2018, the fair value of our real estate securities pledged as collateral included $57 million of securities retained from our consolidated Sequoia Choice securitizations. For the three months ended March 31, 2018 and 2017, the average balances of our short-term debt facilities were $1.37 billion and $794 million , respectively. At both March 31, 2018 and December 31, 2017 , accrued interest payable on our short-term debt facilities was $2 million . During the second quarter of 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 second quarter of 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 March 31, 2018 , the accrued interest payable balance on this debt was $5 million . In April 2018, we repaid these $250 million convertible notes and all related accrued interest in full. See Note 13 for additional information on our convertible notes. We also maintain a $10 million committed line of credit with a financial institution that is secured by certain mortgage-backed securities with a fair market value of $5 million at March 31, 2018 . At both March 31, 2018 and December 31, 2017 , 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 March 31, 2018 . Table 11.2 – Short-Term Debt by Collateral Type and Remaining Maturities March 31, 2018 (In Thousands) Within 30 days 31 to 90 days Over 90 days Total Collateral Type Held-for-sale residential loans $ — $ — $ 661,782 $ 661,782 Real estate securities 445,380 146,914 — 592,294 Total Secured Short-Term Debt 445,380 146,914 661,782 1,254,076 Convertible notes, net 250,384 — — 250,384 Total Short-Term Debt $ 695,764 $ 146,914 $ 661,782 $ 1,504,460 |
Asset-Backed Securities Issued
Asset-Backed Securities Issued | 3 Months Ended |
Mar. 31, 2018 | |
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 entities, that we determined were VIEs and for which we determined we were the primary beneficiary. Each consolidated securitization entity is independent of Redwood and of each other and the assets and liabilities are not owned by and are not legal obligations of Redwood. Our exposure to these entities is primarily through the financial interests we have retained, although we are exposed to certain financial risks associated with our role as a sponsor, servicing administrator, or depositor of these entities or as a result of our having sold assets directly or indirectly to these entities. We account for the ABS issued under our consolidated Sequoia entities at fair value, with periodic changes in fair value recorded in Investment fair value changes, net on our consolidated statements of income. Pursuant to the CFE guidelines, the market valuation changes on our Sequoia loans are based on the estimated fair value of the associated ABS issued. The net impact to our income statement associated with our retained economic investment in the Sequoia securitization entities is presented in Note 5. The ABS issued by these entities consist of various classes of securities that pay interest on a monthly or quarterly basis. All ABS issued by the Sequoia Choice entities pay fixed rates of interest and substantially all ABS issued by the Legacy Sequoia entities pay variable rates of interest, which are indexed to one-, three-, or six-month LIBOR. ABS issued also includes some interest-only classes with coupons set at a fixed spread to a benchmark rate, or set at a spread to the interest rates earned on the assets less the interest rates paid on the liabilities of a securitization entity. The carrying values of ABS issued by Sequoia securitization entities we sponsored at March 31, 2018 and December 31, 2017 , along with other selected information, are summarized in the following table. Table 12.1 – Asset-Backed Securities Issued March 31, 2018 Legacy Sequoia Sequoia Total (Dollars in Thousands) Certificates with principal balance $ 655,188 $ 905,713 $ 1,560,901 Interest-only certificates 1,809 13,641 15,450 Market valuation adjustments (41,148 ) 6,884 (34,264 ) ABS Issued, Net $ 615,849 $ 926,238 $ 1,542,087 Range of weighted average interest rates, by series 1.77% to 2.83% 4.49% to 4.66% Stated maturities 2024 - 2036 2047 - 2048 Number of series 20 3 December 31, 2017 Legacy Sequoia Sequoia Total (Dollars in Thousands) Certificates with principal balance $ 691,125 $ 526,657 $ 1,217,782 Interest-only certificates 1,972 7,695 9,667 Market valuation adjustments (70,652 ) 7,788 (62,864 ) ABS Issued, Net $ 622,445 $ 542,140 $ 1,164,585 Range of weighted average interest rates, by series 1.46% to 2.78% 4.52% to 4.73% Stated maturities 2024 - 2036 2047 Number of series 20 2 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 March 31, 2018 , all of the ABS issued and outstanding had contractual maturities beyond five years . At both March 31, 2018 and December 31, 2017 , accrued interest payable on ABS issued by the Legacy Sequoia entities was $1 million . At March 31, 2018 and December 31, 2017 , accrued interest payable on ABS issued by the Sequoia Choice entities was $3 million and $2 million , respectively. 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 March 31, 2018 and December 31, 2017 . Table 12.2 – Collateral for Asset-Backed Securities Issued March 31, 2018 Legacy Sequoia Sequoia Choice Total (In Thousands) Residential loans $ 626,151 $ 1,013,619 $ 1,639,770 Restricted cash 148 7 155 Accrued interest receivable 753 4,057 4,810 REO 3,115 — 3,115 Total Collateral for ABS Issued $ 630,167 $ 1,017,683 $ 1,647,850 December 31, 2017 Legacy Sequoia Sequoia Total (In Thousands) Residential loans $ 632,817 $ 620,062 $ 1,252,879 Restricted cash 147 4 151 Accrued interest receivable 867 2,524 3,391 REO 3,353 — 3,353 Total Collateral for ABS Issued $ 637,184 $ 622,590 $ 1,259,774 |
Long-Term Debt
Long-Term Debt | 3 Months Ended |
Mar. 31, 2018 | |
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 March 31, 2018 , 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 months ended March 31, 2018 , 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 March 31, 2018 , $2.00 billion of advances were outstanding under this agreement, which were classified as long-term debt, with a weighted average interest rate of 1.74% and a weighted average maturity of approximately seven years. At December 31, 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 1.38% and a weighted average maturity of eight 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 $2.37 billion at March 31, 2018 . 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 March 31, 2018 , 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 March 31, 2018 . Table 13.1 – Maturities of FHLBC Borrowings by Year (In Thousands) March 31, 2018 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 debt issuance costs, the weighted average interest expense yield on these convertible notes is approximately 5.3% per annum. At March 31, 2018 , 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 March 31, 2018 , the outstanding principal amount of these notes was $245 million . At March 31, 2018 , 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 debt issuance costs, the weighted average interest expense yield on these exchangeable notes is approximately 6.3% per annum. At March 31, 2018 , 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 first quarter of 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 March 31, 2018 , the outstanding principal amount of these notes was $201 million . At March 31, 2018 , the accrued interest payable balance on this debt was $4 million and the unamortized deferred issuance costs were $2 million . In March 2013, we issued $288 million principal amount of 4.625% convertible senior notes due in April 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 debt issuance costs, the weighted average interest expense yield on these convertible notes is approximately 4.8% per annum. At March 31, 2018 , 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 second quarter of 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 second quarter of 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 March 31, 2018 , the outstanding principal amount of these notes was $250 million . At March 31, 2018 , the accrued interest payable balance on this debt was $5 million and the unamortized deferred issuance costs were $0.1 million . In April 2018, we repaid these $250 million convertible notes and all related accrued interest in full. Trust Preferred Securities and Subordinated Notes At March 31, 2018 , we had trust preferred securities and subordinated notes outstanding of $100 million and $40 million , respectively. This debt requires quarterly interest payments at a floating rate equal to three-month LIBOR plus 2.25% until the notes are redeemed. The $100 million trust preferred securities will be redeemed no later than January 30, 2037, and the $40 million subordinated notes will be redeemed no later than July 30, 2037. Prior to 2014, we entered into interest rate swaps with aggregate notional values totaling $140 million to hedge the variability in this long-term debt interest expense. Including hedging costs and amortization of deferred debt issuance costs, the weighted average interest expense yield on our trust preferred securities and subordinated notes is approximately 6.8% per annum. At both March 31, 2018 and December 31, 2017 , 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 | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Lease Commitments At March 31, 2018 , we were obligated under four non-cancelable operating leases with expiration dates through 2028 for $17 million of cumulative lease payments. Our operating lease expense was $1 million for both three -month periods ended March 31, 2018 and 2017. The following table presents our future lease commitments at March 31, 2018 . Table 14.1 – Future Lease Commitments by Year (In Thousands) March 31, 2018 2018 (9 months) $ 1,467 2019 1,987 2020 1,965 2021 1,474 2022 and thereafter 10,217 Total Lease Commitments $ 17,110 Commitments to Fund Equity Investments At March 31, 2018 , we had committed to fund $50 million to a limited partnership created to finance clean energy projects. This obligation may be requested at any time by the investment manager, and will be recorded on our balance sheet as an equity method investment upon funding. At March 31, 2018 , no investments in this partnership had been funded. Loss Contingencies — Risk-Sharing During 2015 and 2016, we sold conforming loans to the Agencies with an original unpaid principal balance of $3.19 billion , subject to our risk-sharing arrangements with the Agencies. At March 31, 2018 , 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 March 31, 2018 , we had not incurred any losses under these arrangements. For the three months ended March 31, 2018 and 2017, other income related to these arrangements was $1 million for both periods, and net market valuation losses related to these investments were $0.1 million and $0.2 million , respectively. All of the loans in the reference pools subject to these risk-sharing arrangements were originated in 2014 and 2015, and at March 31, 2018 , the loans had an unpaid principal balance of $2.03 billion and a weighted average FICO score of 758 (at origination) and LTV of 76% (at origination). At March 31, 2018 , $8 million of the loans were 90 days or more delinquent, and $1 million were in foreclosure. At March 31, 2018 , the carrying value of our guarantee obligation was $19 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 both March 31, 2018 and December 31, 2017 , assets of such SPEs totaled $48 million and liabilities of such SPEs totaled $19 million . 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 March 31, 2018 and December 31, 2017 , 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 two and three repurchase requests during the three months ended March 31, 2018 and 2017, respectively, and did no t repurchase any loans during either of these periods. During the three months ended March 31, 2018 and 2017, we recorded repurchase provisions of $0.3 million and $0.2 million , 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”), which alleged that the FHLB-Seattle Defendants made false or misleading statements in offering materials for a mortgage pass-through certificate (the “Seattle Certificate”) issued in the Sequoia Mortgage Trust 2005-4 securitization transaction (the “2005-4 RMBS”) and purchased by the FHLB-Seattle. 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 alleged 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 March 31, 2018 , approximately $126 million of principal and $11 million of interest payments had been made in respect of the Seattle Certificate. The matter was subsequently resolved and the claims were dismissed by the FHLB Seattle as to all the FHLB Seattle Defendants. At the time the Seattle Certificate was issued, Redwood agreed to indemnify the underwriters of the 2005-4 RMBS, which underwriters were named as defendants in the action, for certain losses and expenses they might incur as a result of claims made against them relating to this RMBS, including, without limitation, certain legal expenses. Regardless of the resolution of this litigation, we could incur a loss as a result of these indemnities. On or about July 15, 2010, The Charles Schwab Corporation (“Schwab”) filed a complaint in the Superior Court for the State of California in San Francisco (case number CGC-10-501610) against SRF and 26 other defendants (collectively, the “Schwab Defendants”), which alleged that the Schwab Defendants made false or misleading statements in offering materials for various residential mortgage-backed securities sold or issued by the Schwab Defendants. Schwab alleged only a claim for negligent misrepresentation under California state law against SRF and sought unspecified damages and attorneys’ fees and costs from SRF. Schwab claimed that SRF made false or misleading statements in offering materials for a mortgage pass-through certificate (the “Schwab Certificate”) issued in the 2005-4 RMBS and purchased by Schwab. 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 March 31, 2018 , approximately $14 million of principal and $1 million of interest payments had been made in respect of the Schwab Certificate. On November 14, 2014, Schwab voluntarily dismissed with prejudice its negligent misrepresentation claim, which resulted in the dismissal with prejudice of SRF from the action. Subsequently, the matter was resolved and Schwab dismissed its claims against the lead underwriter of the 2005-4 RMBS. At the time the Schwab Certificate was issued, Redwood agreed to indemnify the underwriters of the 2005-4 RMBS, which underwriters were also named as defendants in the action, for certain losses and expenses they might incur as a result of claims made against them relating to this RMBS, including, without limitation, certain legal expenses. Regardless of the resolution of this litigation, Redwood could incur a loss as a result of these indemnities. Through certain of our wholly-owned subsidiaries, we have in the past engaged in, and expect to continue to engage in, activities relating to the acquisition and securitization of residential mortgage loans. In addition, certain of our wholly-owned subsidiaries have in the past engaged in activities relating to the acquisition and securitization of debt obligations and other assets through the issuance of collateralized debt obligations (commonly referred to as CDO transactions). Because of this involvement in the securitization and CDO businesses, we could become the subject of litigation relating to these businesses, including additional litigation of the type described above, and we could also become the subject of governmental investigations, enforcement actions, or lawsuits, and governmental authorities could allege that we violated applicable law or regulation in the conduct of our business. As an example, in July 2016 we became aware of a complaint filed by the State of California on April 1, 2016 against Morgan Stanley & Co. and certain of its affiliates alleging, among other things, that there were misleading statements contained in offering materials for 28 different mortgage pass-through certificates purchased by various California investors, including various California public pension systems, from Morgan Stanley and alleging that Morgan Stanley made false or fraudulent claims in connection with the sale of those certificates. Of the 28 mortgage pass-through certificates that were the subject of the complaint, two were Sequoia mortgage pass-through certificates issued in 2004 and two were Sequoia mortgage pass-through certificates issued in 2007. With respect to each of those certificates, our wholly-owned subsidiary, RWT Holdings, Inc., was the sponsor and our wholly-owned subsidiary, Sequoia Residential Funding, Inc., was the depositor. The plaintiffs subsequently withdrew from the litigation their claims based on eight of the 28 mortgage pass-through certificates, including one of the Sequoia mortgage pass-through certificates issued in 2004. At the time these Sequoia mortgage pass-through certificates were issued, Sequoia Residential Funding, Inc. and Redwood Trust agreed to indemnify the underwriters of these certificates for certain losses and expenses they might incur as a result of claims made against them relating to these certificates, including, without limitation, certain legal expenses. Regardless of the 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 March 31, 2018 , 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 | 3 Months Ended |
Mar. 31, 2018 | |
Equity [Abstract] | |
Equity | Equity The following table provides a summary of changes to accumulated other comprehensive income by component for the three months ended March 31, 2018 and 2017 . Table 15.1 – Changes in Accumulated Other Comprehensive Income by Component Three Months Ended March 31, 2018 Three Months Ended March 31, 2017 (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 $ 128,201 $ (42,953 ) $ 115,873 $ (44,020 ) Other comprehensive (loss) income before reclassifications (1) (4,237 ) 8,431 2,930 1,733 Amounts reclassified from other accumulated comprehensive income (9,387 ) — (3,928 ) 14 Net current-period other comprehensive (loss) income (13,624 ) 8,431 (998 ) 1,747 Balance at End of Period $ 114,577 $ (34,522 ) $ 114,875 $ (42,273 ) (1) Amounts presented for net unrealized gains on available-for-sale securities are net of tax provision of $0.1 million for both the three months ended March 31, 2018 and 2017. The following table provides a summary of reclassifications out of accumulated other comprehensive income for three months ended March 31, 2018 and 2017 . 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 March 31, (In Thousands) Income Statement 2018 2017 Net Realized (Gain) Loss on AFS Securities Other than temporary impairment (1) Investment fair value changes, net $ — $ 117 Gain on sale of AFS securities Realized gains, net (9,387 ) (4,045 ) $ (9,387 ) $ (3,928 ) Net Realized Loss on Interest Rate Amortization of deferred loss Interest expense $ — $ 14 $ — $ 14 (1) For the three months ended March 31, 2018 , there were no other-than-temporary impairments. For the three months ended March 31, 2017, other-than-temporary impairments were $0.2 million , of which $0.1 million were recognized through our consolidated statements of income and $0.1 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 months ended March 31, 2018 and 2017 . Table 15.3 – Basic and Diluted Earnings per Common Share Three Months Ended March 31, (In Thousands, except Share Data) 2018 2017 Basic Earnings per Common Share: Net income attributable to Redwood $ 46,845 $ 36,969 Less: Dividends and undistributed earnings allocated to participating securities (1,433 ) (968 ) Net income allocated to common shareholders $ 45,412 $ 36,001 Basic weighted average common shares outstanding 75,396,649 76,738,202 Basic Earnings per Common Share $ 0.60 $ 0.47 Diluted Earnings per Common Share: Net income attributable to Redwood $ 46,845 $ 36,969 Less: Dividends and undistributed earnings allocated to participating securities (1,394 ) (1,005 ) Add back: Interest expense on convertible notes for the period, net of tax 8,641 5,870 Net income allocated to common shareholders $ 54,092 $ 41,834 Weighted average common shares outstanding 75,396,649 76,738,202 Net effect of dilutive equity awards 34,827 111,197 Net effect of assumed convertible notes conversion to common shares 32,763,121 21,096,738 Diluted weighted average common shares outstanding 108,194,597 97,946,137 Diluted Earnings per Common Share $ 0.50 $ 0.43 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 months ended March 31, 2018 and 2017 , 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 months ended March 31, 2018 and 2017, the number of outstanding equity awards that were antidilutive totaled 6,838 and 5,826 , 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. During the year ended December 31, 2017, we repurchased 610,342 shares of common stock pursuant to this authorization for $9 million . At December 31, 2017, approximately $77 million of this current authorization remained available for the repurchase of shares of our common stock. During January 2018, we repurchased 1,040,829 shares of our common stock pursuant to this authorization for $16 million . In February 2018, our Board of Directors approved an authorization for the repurchase of an additional $39 million of our common stock, increasing the total amount authorized for repurchases of common stock to $100 million , and also authorized the repurchase of outstanding debt securities, including convertible and exchangeable debt. As noted above, this authorization increased the previous share repurchase authorization approved in February 2016 and has no expiration date. This repurchase authorization does not obligate us to acquire any specific number of shares or securities. Under this authorization, shares or securities may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. At March 31, 2018 , $100 million of the current authorization remained available for the repurchase of shares of our common stock. |
Equity Compensation Plans
Equity Compensation Plans | 3 Months Ended |
Mar. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Equity Compensation Plans | Equity Compensation Plans At March 31, 2018 and December 31, 2017 , 999,636 and 1,356,438 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 $25 million at March 31, 2018 , as shown in the following table. Table 16.1 – Activities of Equity Compensation Costs by Award Type Three Months Ended March 31, 2018 (In Thousands) Restricted Stock Deferred Stock Units Performance Stock Units Employee Stock Purchase Plan Total Unrecognized compensation cost at beginning of period $ 2,808 $ 13,364 $ 5,298 $ — $ 21,470 Equity grants 2,380 3,450 — 136 5,966 Equity grant forfeitures — — — — — Equity compensation expense (353 ) (1,673 ) (637 ) (34 ) (2,697 ) Unrecognized Compensation Cost at End of Period $ 4,835 $ 15,141 $ 4,661 $ 102 $ 24,739 At March 31, 2018 , the weighted average amortization period remaining for all of our equity awards was less than two years. Restricted Stock At March 31, 2018 and December 31, 2017 , there were 337,253 and 257,507 shares, respectively, of restricted stock outstanding. Restrictions on these shares lapse through 2022 . During the three months ended March 31, 2018 , there were 162,330 shares of restricted stock granted, restrictions on 82,584 shares of restricted stock lapsed and those shares were distributed, and no shares of restricted stock awards were forfeited. Deferred Stock Units (“DSUs”) At March 31, 2018 and December 31, 2017 , there were 2,179,977 and 1,878,491 DSUs, respectively, outstanding of which 1,050,211 and 889,835 , respectively, had vested. During the three months ended March 31, 2018 , there were 301,485 DSUs granted, no DSUs distributed, and no DSUs forfeited. Unvested DSUs at March 31, 2018 vest through 2022 . Performance Stock Units (“PSUs”) At both March 31, 2018 and December 31, 2017 , the target number of PSUs that were unvested was 704,270 . 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, 2017 . 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 March 31, 2018 and December 31, 2017 , 367,844 and 361,006 shares had been purchased, respectively, and there remained a negligible amount of uninvested employee contributions in the ESPP at March 31, 2018 . |
Mortgage Banking Activities, Ne
Mortgage Banking Activities, Net | 3 Months Ended |
Mar. 31, 2018 | |
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 months ended March 31, 2018 and 2017 . Table 17.1 – Mortgage Banking Activities Three Months Ended March 31, (In Thousands) 2018 2017 Mortgage Banking Activities, Net Changes in fair value of: Residential loans, at fair value (1) $ (2,194 ) $ 18,797 Risk management derivatives (2) 28,432 (1,400 ) Other income, net (3) 338 207 Mortgage Banking Activities, Net $ 26,576 $ 17,604 (1) Includes changes in fair value for associated loan purchase and forward sale commitments. (2) Represents market valuation changes of derivatives that were used to manage risks associated with our accumulation of 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 | 3 Months Ended |
Mar. 31, 2018 | |
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 months ended March 31, 2018 and 2017 . Table 18.1 – Investment Fair Value Changes Three Months Ended March 31, (In Thousands) 2018 2017 Investment Fair Value Changes, Net Changes in fair value of: Residential loans held-for-investment, at Redwood $ (38,985 ) $ (2,333 ) Trading securities (2,955 ) 11,143 Net investments in Legacy Sequoia entities (1) (8 ) (1,810 ) Net investments in Sequoia Choice entities (1) (86 ) — Risk-sharing investments (139 ) (205 ) Risk management derivatives, net 43,782 (5,127 ) Impairments on AFS securities — (117 ) Investment Fair Value Changes, Net $ 1,609 $ 1,551 (1) Includes changes in fair value of the residential loans held-for-investment, REO and the ABS issued at the entities, which netted together represent the change in value of our retained investments at the consolidated VIEs. |
Operating Expenses
Operating Expenses | 3 Months Ended |
Mar. 31, 2018 | |
Other Income and Expenses [Abstract] | |
Operating Expenses | Operating Expenses Components of our operating expenses for the three months ended March 31, 2018 and 2017 are presented in the following table. Table 19.1 – Components of Operating Expenses Three Months Ended March 31, (In Thousands) 2018 2017 Fixed compensation expense $ 6,439 $ 6,002 Variable compensation expense 6,907 3,933 Equity compensation expense 2,697 2,176 Total compensation expense 16,043 12,111 Systems and consulting 1,866 1,638 Loan acquisition costs (1) 1,818 1,205 Office costs 1,140 1,103 Accounting and legal 834 926 Corporate costs 504 440 Other operating expenses 825 803 Total Operating Expenses $ 23,030 $ 18,226 (1) Loan acquisition costs primarily includes underwriting and due diligence costs related to the acquisition of residential loans held-for-sale at fair value. |
Taxes
Taxes | 3 Months Ended |
Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Taxes | Taxes For the three months ended March 31, 2018 and 2017 , we recognized a provision for income taxes of $5 million and $6 million , respectively. The following is a reconciliation of the statutory federal and state tax rates to our effective tax rate at March 31, 2018 and 2017 . Table 20.1 – Reconciliation of Statutory Tax Rate to Effective Tax Rate March 31, 2018 March 31, 2017 Federal statutory rate 21.0 % 34.0 % State statutory rate, net of Federal tax effect 8.6 % 7.2 % Differences in taxable (loss) income from GAAP income (4.1 )% (8.5 )% Change in valuation allowance (3.9 )% (3.0 )% Dividends paid deduction (12.1 )% (15.4 )% Effective Tax Rate 9.5 % 14.3 % The reduction of the federal statutory rate from 34% to 21% is due to the enactment of the Tax Act. We assessed our tax positions for all open tax years (i.e., Federal, 2014 to 2018, and State, 2013 to 2018) at March 31, 2018 and December 31, 2017 , and concluded that we had no uncertain tax positions that resulted in material unrecognized tax benefits. |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information Redwood operates in two segments: Investment Portfolio and Residential Mortgage Banking. Our segments are based on our organizational and management structure, which aligns with how our results are monitored and performance is assessed. For a full description of our segments, see Item 1—Business in our Annual Report on Form 10-K for the year ended December 31, 2017 . Segment contribution represents the measure of profit that management uses to assess the performance of our business segments and make resource allocation and operating decisions. Certain corporate expenses not directly assigned or allocated to one of our two segments, as well as activity from certain consolidated Sequoia entities, are included in the Corporate/Other column as reconciling items to our consolidated financial statements. These unallocated corporate expenses primarily include interest expense associated with certain long-term debt, indirect operating expenses, and other expense. The following tables present financial information by segment for the three months ended March 31, 2018 and 2017 . Table 21.1 – Business Segment Financial Information Three Months Ended March 31, 2018 (In Thousands) Investment Portfolio Residential Mortgage Banking Corporate/ Other Total Interest income $ 58,757 $ 12,897 $ 4,965 $ 76,619 Interest expense (19,863 ) (6,137 ) (15,514 ) (41,514 ) Net interest income (loss) 38,894 6,760 (10,549 ) 35,105 Non-interest income Mortgage banking activities, net — 26,576 — 26,576 MSR income, net 957 — — 957 Investment fair value changes, net 1,590 — 19 1,609 Other income 1,161 — — 1,161 Realized gains, net 9,363 — — 9,363 Total non-interest income, net 13,071 26,576 19 39,666 Direct operating expenses (2,007 ) (8,632 ) (12,391 ) (23,030 ) Provision for income taxes (888 ) (4,008 ) — (4,896 ) Segment Contribution $ 49,070 $ 20,696 $ (22,921 ) Net Income $ 46,845 Non-cash amortization income (expense), net $ 4,617 $ (22 ) $ (858 ) $ 3,737 Three Months Ended March 31, 2017 (In Thousands) Investment Portfolio Residential Mortgage Banking Corporate/ Total Interest income $ 42,250 $ 7,474 $ 4,904 $ 54,628 Interest expense (5,264 ) (2,924 ) (12,843 ) (21,031 ) Net interest income (loss) 36,986 4,550 (7,939 ) 33,597 Non-interest income Mortgage banking activities, net — 17,604 — 17,604 MSR income, net 1,713 — — 1,713 Investment fair value changes, net 3,359 — (1,808 ) 1,551 Other income 1,184 — — 1,184 Realized gains, net 5,703 — — 5,703 Total non-interest income, net 11,959 17,604 (1,808 ) 27,755 Direct operating expenses (1,593 ) (5,881 ) (10,752 ) (18,226 ) Provision for income taxes (1,737 ) (4,420 ) — (6,157 ) Segment Contribution $ 45,615 $ 11,853 $ (20,499 ) Net Income $ 36,969 Non-cash amortization income (expense) $ 5,847 $ (27 ) $ (997 ) $ 4,823 The following table presents the components of Corporate/Other for the three months ended March 31, 2018 and 2017 . Table 21.2 – Components of Corporate/Other Three Months Ended March 31, 2018 2017 (In Thousands) Legacy Consolidated VIEs (1) Other Total Legacy Consolidated VIEs (1) Other Total Interest income $ 4,812 $ 153 $ 4,965 $ 4,838 $ 66 $ 4,904 Interest expense (3,852 ) (11,662 ) (15,514 ) (3,516 ) (9,327 ) (12,843 ) Net interest income (loss) 960 (11,509 ) (10,549 ) 1,322 (9,261 ) (7,939 ) Non-interest income Investment fair value changes, net (8 ) 27 19 (1,810 ) 2 (1,808 ) Total non-interest income, net (8 ) 27 19 (1,810 ) 2 (1,808 ) Direct operating expenses — (12,391 ) (12,391 ) — (10,752 ) (10,752 ) Total $ 952 $ (23,873 ) $ (22,921 ) $ (488 ) $ (20,011 ) $ (20,499 ) (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 March 31, 2018 and December 31, 2017 . Table 21.3 – Supplemental Segment Information (In Thousands) Investment Portfolio Residential Mortgage Banking Corporate/ Other Total March 31, 2018 Residential loans $ 3,389,404 $ 1,130,185 $ 626,151 $ 5,145,740 Real estate securities 1,357,720 — — 1,357,720 Mortgage servicing rights 66,496 — — 66,496 Total assets 5,012,235 1,154,413 832,925 6,999,573 December 31, 2017 Residential loans $ 3,054,448 $ 1,427,945 $ 632,817 $ 5,115,210 Real estate securities 1,476,510 — — 1,476,510 Mortgage servicing rights 63,598 — — 63,598 Total assets 4,743,873 1,453,069 842,880 7,039,822 |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events Upon its scheduled maturity in April 2018, we repaid the $250 million principal amount of our 4.625% convertible notes and all related accrued interest in full. In May 2018, we entered into an agreement to acquire a 20% minority interest in 5 Arches, LLC for $10 million , with a one -year option to purchase all remaining equity in the company for $40 million . In connection with this investment, we also entered into a loan purchase agreement with 5 Arches, LLC establishing a flow relationship to purchase business-purpose real estate loans originated by the company. |
Summary of Significant Accoun32
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | The consolidated financial statements presented herein are at March 31, 2018 and December 31, 2017 , and for the three months ended March 31, 2018 and 2017 . 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, 2017 . In the opinion of management, all normal and recurring adjustments to present fairly the financial condition of the company at March 31, 2018 and results of operations for all periods presented have been made. The results of operations for the three months ended March 31, 2018 should not be construed as indicative of the results to be expected for the full year. |
Principles of Consolidation | In accordance with GAAP, we determine whether we must consolidate transferred financial assets and variable interest entities (“VIEs”) for financial reporting purposes. We currently consolidate the assets and liabilities of certain Sequoia securitization entities issued prior to 2012 where we maintain an ongoing involvement ("Legacy Sequoia"), as well as entities formed in connection with the securitization of Redwood Choice expanded-prime loans beginning in the third quarter of 2017 ("Sequoia Choice"). 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 May 2017, the FASB issued ASU 2017-09, "Compensation - Stock Compensation (Topic 718)." This new guidance provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This new guidance is effective for fiscal years beginning after December 15, 2017, and should be applied prospectively to an award modified on or after the adoption date. We adopted this guidance, as required, in the first quarter of 2018, which did not 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. We adopted this guidance, as required, in the first quarter of 2018, which did not have a material impact on our results of operations but impacted the presentation of the statements of cash flows and related footnote disclosures. 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. We adopted this guidance, as required, in the first quarter of 2018, which did not 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. We adopted this guidance, as required, in the first quarter of 2018, which did not have a material impact on our consolidated financial statements. 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. In February 2018, the FASB issued ASU 2018-03, "Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities," which clarified certain aspects of the guidance issued in ASU 2016-01. We adopted this guidance, as required, in the first quarter of 2018. This did not have a material impact on our consolidated financial statements as our investments in debt securities and loans were not subject to the amendments in this ASU. In accordance with this guidance, we amended certain fair value disclosures related to financial instruments that are carried at amortized cost on the consolidated balance sheets. 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. 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. In November 2017, the FASB issued ASU 2017-14, "Income Statement - Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606): Amendments to SEC Paragraphs Pursuant to Staff Accounting Bulletin No. 116 and SEC Release No. 33-10403." This new ASU amends various paragraphs that contain SEC guidance. We adopted this guidance, as required, in the first quarter of 2018. This did not have a material impact on our consolidated financial statements as nearly all of our income is generated from financial instruments, which are explicitly scoped out of these standards. Other Recent Accounting Pronouncements In February 2018, the FASB issued ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." This new guidance allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (the "Tax Act"). This new guidance is effective for fiscal years beginning after December 15, 2018. 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 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 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, we have no financial instruments for which we maintain an allowance for loan losses. 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 on 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 requires that credit impairments on our available-for-sale securities be recorded in earnings using an allowance for credit losses, with the allowance limited to the amount by which the security's fair value is less than its amortized cost basis. Subsequent reversals in credit loss estimates are recognized in income. We plan to adopt this new guidance by the required date and continue to evaluate the impact that this update will have on our consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, "Leases." This new guidance requires lessees to recognize most leases on their balance sheet as a right-of-use asset and a lease liability. This new guidance retains a dual lease accounting model, which requires leases to be classified as either operating or capital leases for lessees, for purposes of income statement recognition. This new guidance is effective for fiscal years beginning after December 15, 2018. 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 totaled $17 million at March 31, 2018. 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. |
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. 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. |
Summary of Significant Accoun33
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
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 March 31, 2018 and December 31, 2017 . 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 March 31, 2018 Financial Instruments Cash Collateral (Received) Pledged Assets (2) Interest rate agreements $ 50,919 $ — $ 50,919 $ (8,850 ) $ (12,010 ) $ 30,059 TBAs 8,625 — 8,625 (3,951 ) (4,643 ) 31 Total Assets $ 59,544 $ — $ 59,544 $ (12,801 ) $ (16,653 ) $ 30,090 Liabilities (2) Interest rate agreements $ (46,513 ) $ — $ (46,513 ) $ 8,850 $ 37,663 $ — TBAs (5,457 ) — (5,457 ) 3,951 263 (1,243 ) Futures (357 ) — (357 ) — 357 — Loan warehouse debt (661,782 ) — (661,782 ) 661,782 — — Security repurchase agreements (592,294 ) — (592,294 ) 592,294 — — Total Liabilities $ (1,306,403 ) $ — $ (1,306,403 ) $ 1,266,877 $ 38,283 $ (1,243 ) 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, 2017 Financial Instruments Cash Collateral (Received) Pledged Assets (2) Interest rate agreements $ 10,164 $ — $ 10,164 $ (6,196 ) $ (42 ) $ 3,926 TBAs 133 — 133 (133 ) — — Futures 1 — 1 — — 1 Total Assets $ 10,298 $ — $ 10,298 $ (6,329 ) $ (42 ) $ 3,927 Liabilities (2) Interest rate agreements $ (55,567 ) $ — $ (55,567 ) $ 6,196 $ 49,371 $ — TBAs (3,808 ) — (3,808 ) 133 1,376 (2,299 ) Loan warehouse debt (1,039,666 ) — (1,039,666 ) 1,039,666 — — Security repurchase agreements (648,746 ) — (648,746 ) 648,746 — — Total Liabilities $ (1,747,787 ) $ — $ (1,747,787 ) $ 1,694,741 $ 50,747 $ (2,299 ) (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, 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) | 3 Months Ended |
Mar. 31, 2018 | |
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 March 31, 2018 Legacy Sequoia Sequoia Choice Total Consolidated VIEs (Dollars in Thousands) Residential loans, held-for-investment $ 626,151 $ 1,013,619 $ 1,639,770 Restricted cash 148 7 155 Accrued interest receivable 753 4,057 4,810 REO 3,115 — 3,115 Total Assets $ 630,167 $ 1,017,683 $ 1,647,850 Accrued interest payable $ 534 $ 3,438 $ 3,972 Accrued expenses and other liabilities — 7 7 Asset-backed securities issued 615,849 926,238 1,542,087 Total Liabilities $ 616,383 $ 929,683 $ 1,546,066 Number of VIEs 20 3 23 December 31, 2017 Legacy Sequoia Sequoia Total Consolidated VIEs (Dollars in Thousands) Residential loans, held-for-investment $ 632,817 $ 620,062 $ 1,252,879 Restricted cash 147 4 151 Accrued interest receivable 867 2,524 3,391 REO 3,353 — 3,353 Total Assets $ 637,184 $ 622,590 $ 1,259,774 Accrued interest payable $ 537 $ 2,031 $ 2,568 Accrued expenses and other liabilities — 4 4 Asset-backed securities issued 622,445 542,140 1,164,585 Total Liabilities $ 622,982 $ 544,175 $ 1,167,157 Number of VIEs 20 2 22 |
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 months ended March 31, 2018 and 2017 . Table 4.2 – Securitization Activity Related to Unconsolidated VIEs Sponsored by Redwood Three Months Ended March 31, (In Thousands) 2018 2017 Principal balance of loans transferred $ 1,280,468 $ 1,035,524 Trading securities retained, at fair value 12,491 20,703 AFS securities retained, at fair value 3,905 5,155 MSRs recognized — 7,123 |
Cash Flows Related to Unconsolidated Variable Interest Entity's Sponsored by Redwood | The following table summarizes the cash flows during the three months ended March 31, 2018 and 2017 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 March 31, (In Thousands) 2018 2017 Proceeds from new transfers $ 1,289,687 $ 1,022,024 MSR fees received 3,414 3,475 Funding of compensating interest, net (25 ) (38 ) Cash flows received on retained securities 7,043 6,373 |
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 months ended March 31, 2018 and 2017 . Table 4.4 – Assumptions Related to Assets Retained from Unconsolidated VIEs Sponsored by Redwood Three Months Ended March 31, 2018 Three Months Ended March 31, 2017 At Date of Securitization MSRs Senior IO Securities Subordinate Securities MSRs Senior Securities Subordinate Securities Prepayment rates N/A 8 % 10 % 9 % 10 % 10 % Discount rates N/A 14 % 7 % 11 % 11 % 5 % Credit loss assumptions N/A 0.20 % 0.20 % N/A 0.25 % 0.25 % |
Unconsolidated Variable Interest Entity's Sponsored by Redwood | The following table presents additional information at March 31, 2018 and December 31, 2017 , related to unconsolidated VIEs sponsored by Redwood and accounted for as sales since 2012. Table 4.5 – Unconsolidated VIEs Sponsored by Redwood (In Thousands) March 31, 2018 December 31, 2017 On-balance sheet assets, at fair value: Interest-only, senior and subordinate securities, classified as trading $ 103,854 $ 101,426 Subordinate securities, classified as AFS 193,029 219,255 Mortgage servicing rights 63,915 60,980 Maximum loss exposure (1) $ 360,798 $ 381,661 Assets transferred: Principal balance of loans outstanding $ 9,411,927 $ 8,364,148 Principal balance of loans 30+ days delinquent 26,524 27,926 (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 March 31, 2018 and December 31, 2017 . Table 4.6 – Key Assumptions and Sensitivity Analysis for Assets Retained from Unconsolidated VIEs Sponsored by Redwood March 31, 2018 MSRs Senior Securities (1) Subordinate Securities (Dollars in Thousands) Fair value at March 31, 2018 $ 63,915 $ 49,299 $ 247,584 Expected life (in years) (2) 8 7 14 Prepayment speed assumption (annual CPR) (2) 7 % 9 % 10 % Decrease in fair value from: 10% adverse change $ 1,816 $ 1,671 $ 643 25% adverse change 4,388 4,087 1,587 Discount rate assumption (2) 11 % 11 % 5 % Decrease in fair value from: 100 basis point increase $ 2,596 $ 1,772 $ 22,876 200 basis point increase 5,009 3,486 42,351 Credit loss assumption (2) N/A 0.20 % 0.20 % Decrease in fair value from: 10% higher losses N/A $ — $ 1,285 25% higher losses N/A — 3,213 December 31, 2017 MSRs Senior Securities (1) Subordinate Securities (Dollars in Thousands) Fair value at December 31, 2017 $ 60,980 $ 33,773 $ 286,908 Expected life (in years) (2) 8 6 13 Prepayment speed assumption (annual CPR) (2) 9 % 10 % 11 % Decrease in fair value from: 10% adverse change $ 2,022 $ 1,371 $ 611 25% adverse change 4,839 3,289 1,506 Discount rate assumption (2) 11 % 11 % 5 % Decrease in fair value from: 100 basis point increase $ 2,386 $ 1,158 $ 25,827 200 basis point increase 4,597 2,265 47,885 Credit loss assumption (2) N/A 0.25 % 0.25 % Decrease in fair value from: 10% higher losses N/A $ — $ 1,551 25% higher losses N/A — 3,873 (1) Senior securities included $49 million and $34 million of interest-only securities at March 31, 2018 and December 31, 2017 , 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 March 31, 2018 , grouped by security type. Table 4.7 – Third-Party Sponsored VIE Summary (Dollars in Thousands) March 31, 2018 Mortgage-Backed Securities Senior $ 198,373 Mezzanine 487,679 Subordinate 374,785 Total Investments in Third-Party Sponsored VIEs $ 1,060,837 |
Fair Value of Financial Instr35
Fair Value of Financial Instruments (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
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 March 31, 2018 and December 31, 2017 . Table 5.1 – Carrying Values and Fair Values of Assets and Liabilities March 31, 2018 December 31, 2017 Carrying Value Fair Value Carrying Value Fair Value (In Thousands) Assets Residential loans, held-for-sale At fair value $ 1,129,890 $ 1,129,890 $ 1,427,052 $ 1,427,052 At lower of cost or fair value 295 388 893 993 Residential loans, held-for-investment At fair value 4,015,555 4,015,555 3,687,265 3,687,265 Trading securities 907,432 907,432 968,844 968,844 Available-for-sale securities 450,288 450,288 507,666 507,666 MSRs 66,496 66,496 63,598 63,598 Cash and cash equivalents 178,562 178,562 144,663 144,663 Restricted cash 2,406 2,406 2,144 2,144 Accrued interest receivable 27,257 27,257 27,013 27,013 Derivative assets 63,544 63,544 15,718 15,718 REO (1) 3,115 4,651 3,354 3,806 Margin receivable (1) 50,200 50,200 85,044 85,044 FHLBC stock (1) 43,393 43,393 43,393 43,393 Guarantee asset (1) 3,055 3,055 2,869 2,869 Pledged collateral (1) 42,290 42,290 42,615 42,615 Liabilities Short-term debt facilities $ 1,254,076 $ 1,254,076 $ 1,688,412 $ 1,688,412 Accrued interest payable 23,492 23,492 18,435 18,435 Margin payable (2) 16,878 16,878 390 390 Guarantee obligation (2) 18,931 18,551 19,487 18,878 Derivative liabilities 56,201 56,201 63,081 63,081 ABS issued at fair value, net 1,542,087 1,542,087 1,164,585 1,164,585 FHLBC long-term borrowings 1,999,999 1,999,999 1,999,999 1,999,999 Convertible notes, net 687,426 691,535 686,759 692,369 Trust preferred securities and subordinated notes, net 138,547 106,020 138,535 103,230 (1) These assets are included in Other assets on our consolidated balance sheets. (2) These liabilities are included in Accrued expenses and other liabilities on our consolidated balance sheets. |
Assets and Liabilities Measured at Fair Value on Recurring Basis | The following table presents the assets and liabilities that are reported at fair value on our consolidated balance sheets on a recurring basis at March 31, 2018 and December 31, 2017 , 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 March 31, 2018 Carrying Value Fair Value Measurements Using (In Thousands) Level 1 Level 2 Level 3 Assets Residential loans $ 5,145,445 $ — $ — $ 5,145,445 Trading securities 907,432 — — 907,432 Available-for-sale securities 450,288 — — 450,288 Derivative assets 63,544 8,625 50,919 4,000 MSRs 66,496 — — 66,496 Pledged collateral 42,290 42,290 — — FHLBC stock 43,393 — 43,393 — Guarantee asset 3,055 — — 3,055 Liabilities Derivative liabilities $ 56,201 $ 5,814 $ 46,513 $ 3,874 ABS issued 1,542,087 — — 1,542,087 December 31, 2017 Carrying Value Fair Value Measurements Using (In Thousands) Level 1 Level 2 Level 3 Assets Residential loans $ 5,114,317 $ — $ — $ 5,114,317 Trading securities 968,844 — — 968,844 Available-for-sale securities 507,666 — — 507,666 Derivative assets 15,718 134 10,164 5,420 MSRs 63,598 — — 63,598 Pledged collateral 42,615 42,615 — — FHLBC stock 43,393 — 43,393 — Guarantee asset 2,869 — — 2,869 Liabilities Derivative liabilities $ 63,081 $ 3,808 $ 55,567 $ 3,706 ABS issued 1,164,585 — — 1,164,585 |
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 three months ended March 31, 2018 . 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, 2017 $ 5,114,317 $ 968,844 $ 507,666 $ 63,598 $ 2,869 $ 1,714 $ 1,164,585 Acquisitions 1,814,944 140,560 3,905 — — — 441,741 Sales (1,594,521 ) (193,130 ) (50,742 ) — — — — Principal paydowns (175,525 ) (5,834 ) (10,412 ) — — — (84,974 ) Gains (losses) in net income, net (12,502 ) (3,008 ) 13,423 2,898 186 (6,923 ) 20,735 Unrealized losses in OCI, net — — (13,552 ) — — — — Other settlements, net (2) (1,268 ) — — — — 5,335 — Ending Balance - March 31, 2018 $ 5,145,445 $ 907,432 $ 450,288 $ 66,496 $ 3,055 $ 126 $ 1,542,087 (1) For the purpose of this presentation, derivative assets and liabilities, which consist of loan purchase and forward sale commitments, are presented on a net basis. (2) Other settlements, net for residential loans represents the transfer of loans to REO, and for derivatives, the settlement of forward sale commitments and the transfer of the fair value of loan purchase commitments at the time loans are acquired to the basis of residential loans. |
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 March 31, 2018 and 2017 . Gains or losses incurred on assets or liabilities sold, matured, called, or fully written down during the three months ended March 31, 2018 and 2017 are not included in this presentation. Table 5.4 – Portion of Net Gains (Losses) Attributable to Level 3 Assets and Liabilities Still Held at March 31, 2018 and 2017 Included in Net Income Included in Net Income Three Months Ended March 31, (In Thousands) 2018 2017 Assets Residential loans at Redwood $ (42,195 ) $ 3,723 Residential loans at consolidated Sequoia entities 20,548 8,414 Trading securities (3,951 ) 10,051 Available-for-sale securities — (117 ) MSRs 3,933 (916 ) Loan purchase commitments 3,919 4,823 Other assets - Guarantee asset 186 (246 ) Liabilities Loan purchase commitments $ (2,554 ) $ — Loan forward sale commitments (1,269 ) — ABS issued (20,735 ) (10,538 ) |
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 March 31, 2018 . This table does not include the carrying value and gains or losses associated with the asset types below that were not recorded at fair value on our consolidated balance sheets at March 31, 2018 . Table 5.5 – Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis at March 31, 2018 Gain (Loss) for March 31, 2018 Carrying Value Fair Value Measurements Using Three Months Ended (In Thousands) Level 1 Level 2 Level 3 March 31, 2018 Assets Residential loans, at lower of cost or fair value $ 251 $ — $ — $ 251 $ 1 REO 2,034 — — 2,034 (146 ) |
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 months ended March 31, 2018 and 2017 . Table 5.6 – Market Valuation Gains and Losses, Net Three Months Ended March 31, (In Thousands) 2018 2017 Mortgage Banking Activities, Net Residential loans held-for-sale, at fair value $ 4,774 $ 8,532 Residential loan purchase and forward sale commitments (6,968 ) 10,265 Risk management derivatives, net 28,432 (1,400 ) Total mortgage banking activities, net (1) $ 26,238 $ 17,397 Investment Fair Value Changes, Net Residential loans held-for-investment, at Redwood $ (38,985 ) $ (2,333 ) Trading securities (2,955 ) 11,143 Net investments in Legacy Sequoia entities (2) (8 ) (1,810 ) Net investments in Sequoia Choice entities (2) (86 ) — Risk-sharing investments (139 ) (205 ) Risk management derivatives, net 43,782 (5,127 ) Impairments on AFS securities — (117 ) Total investment fair value changes, net $ 1,609 $ 1,551 MSR Income (Loss), Net MSRs $ 2,892 $ (3,070 ) Risk management derivatives, net (5,139 ) (749 ) Total MSR loss, net (3) $ (2,247 ) $ (3,819 ) Total Market Valuation Gains, Net $ 25,600 $ 15,129 (1) Mortgage banking activities, net presented above does not include fee income or provisions for repurchases that are components of Mortgage banking activities, net presented on our consolidated statements of income, as these amounts do not represent market valuation changes. (2) Includes changes in fair value of the residential loans held-for-investment, REO and the ABS issued at the entities, which netted together represent the change in value of our 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 March 31, 2018 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 $ 3,162,491 Whole loan spread to TBA price $ 1.78 - $ 2.97 $ 2.90 Whole loan spread to swap rate 160 - 210 bps 200 bps Jumbo hybrid loans 258,789 Prepayment rate (annual CPR) 15 - 15 % 15 % Whole loan spread to swap rate 90 - 165 bps 148 bps Jumbo loans committed to sell 84,395 Whole loan committed sales price $ 100.56 - $ 101.32 $ 101.12 Loans held by Legacy Sequoia (1) 626,151 Liability price N/A N/A Loans held by Sequoia Choice (1) 1,013,619 Liability price N/A N/A Residential loans, at lower of cost or fair value 251 Loss severity 30 - 30 % 30 % Trading and AFS securities 1,357,720 Discount rate 3 - 14 % 6 % Prepayment rate (annual CPR) — - 50 % 9 % Default rate — - 27 % 3 % Loss severity — - 40 % 22 % MSRs 66,496 Discount rate 11 - 29 % 11 % Prepayment rate (annual CPR) 6 - 27 % 7 % Per loan annual cost to service $ 79 - $ 82 $ 82 Guarantee asset 3,055 Discount rate 11 - 11 % 11 % Prepayment rate (annual CPR) 9 - 9 % 9 % REO 2,260 Loss severity 12 - 43 % 26 % Loan purchase commitments, net (2) 1,395 MSR multiple 1.0 - 5.2 x 3.4 x Pull-through rate 9 - 100 % 68 % Whole loan spread to TBA price $ 1.78 - $ 2.78 $ 2.77 Whole loan spread to swap rate - fixed rate 201 - 201 bps 201 bps Prepayment rate (annual CPR) 15 - 15 % 15 % Whole loan spread to swap rate - hybrid 90 - 165 bps 119 bps Liabilities ABS issued (1) 1,542,087 Discount rate 3 - 15 % 4 % Prepayment rate (annual CPR) 8 - 25 % 18 % Default rate — - 16 % 3 % Loss severity 20 - 54 % 22 % Loan forward sale commitments 1,269 Whole loan spread to TBA price $ 2.80 $ 2.80 $ 2.80 (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) | 3 Months Ended |
Mar. 31, 2018 | |
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 March 31, 2018 and December 31, 2017 . Table 6.1 – Classifications and Carrying Values of Residential Loans March 31, 2018 Legacy Sequoia (In Thousands) Redwood Sequoia Choice Total Held-for-sale At fair value $ 1,129,890 $ — $ — $ 1,129,890 At lower of cost or fair value 295 — — 295 Total held-for-sale 1,130,185 — — 1,130,185 Held-for-investment at fair value 2,375,785 626,151 1,013,619 4,015,555 Total Residential Loans $ 3,505,970 $ 626,151 $ 1,013,619 $ 5,145,740 December 31, 2017 Legacy Sequoia (In Thousands) Redwood Sequoia Choice Total Held-for-sale At fair value $ 1,427,052 $ — $ — $ 1,427,052 At lower of cost or fair value 893 — — 893 Total held-for-sale 1,427,945 — — 1,427,945 Held-for-investment at fair value 2,434,386 632,817 620,062 3,687,265 Total Residential Loans $ 3,862,331 $ 632,817 $ 620,062 $ 5,115,210 |
Real Estate Securities (Tables)
Real Estate Securities (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
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 March 31, 2018 and December 31, 2017 . Table 7.1 – Fair Values of Real Estate Securities by Type (In Thousands) March 31, 2018 December 31, 2017 Trading $ 907,432 $ 968,844 Available-for-sale 450,288 507,666 Total Real Estate Securities $ 1,357,720 $ 1,476,510 |
Trading Securities by Collateral Type | The following table presents the fair value of trading securities by position and collateral type at March 31, 2018 and December 31, 2017 . Table 7.2 – Trading Securities by Position and Collateral Type (In Thousands) March 31, 2018 December 31, 2017 Senior $ 82,062 $ 69,974 Mezzanine 537,831 563,475 Subordinate 287,539 335,395 Total Trading Securities $ 907,432 $ 968,844 |
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 March 31, 2018 and December 31, 2017 . Table 7.3 – Available-for-Sale Securities by Position and Collateral Type (In Thousands) March 31, 2018 December 31, 2017 Senior (1) $ 165,610 $ 179,864 Mezzanine 67,291 92,002 Subordinate 217,387 235,800 Total AFS Securities $ 450,288 $ 507,666 (1) Includes $38 million and $39 million of re-REMIC securities at March 31, 2018 and December 31, 2017, respectively. Re-REMIC securities 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. |
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 March 31, 2018 and December 31, 2017 . Table 7.4 – Carrying Value of AFS Securities March 31, 2018 (In Thousands) Senior Mezzanine Subordinate Total Principal balance $ 172,026 $ 67,995 $ 312,914 $ 552,935 Credit reserve (8,206 ) — (32,410 ) (40,616 ) Unamortized discount, net (39,174 ) (6,959 ) (132,169 ) (178,302 ) Amortized cost 124,646 61,036 148,335 334,017 Gross unrealized gains 41,919 6,255 69,419 117,593 Gross unrealized losses (955 ) — (367 ) (1,322 ) Carrying Value $ 165,610 $ 67,291 $ 217,387 $ 450,288 December 31, 2017 (In Thousands) Senior Mezzanine Subordinate Total Principal balance $ 189,125 $ 91,471 $ 327,549 $ 608,145 Credit reserve (8,756 ) — (37,793 ) (46,549 ) Unamortized discount, net (44,041 ) (9,407 ) (130,305 ) (183,753 ) Amortized cost 136,328 82,064 159,451 377,843 Gross unrealized gains 44,771 9,938 76,481 131,190 Gross unrealized losses (1,235 ) — (132 ) (1,367 ) Carrying Value $ 179,864 $ 92,002 $ 235,800 $ 507,666 |
Changes of Unamortized Discount and Designated Credit Reserves on Residential Available for Sale Securities | The following table presents the changes for the three months ended March 31, 2018 , 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 March 31, 2018 Credit Reserve Unamortized Discount, Net (In Thousands) Beginning balance $ 46,549 $ 183,753 Amortization of net discount — (4,060 ) Realized credit losses (956 ) — Acquisitions 2,536 1,635 Sales, calls, other (767 ) (9,772 ) Transfers to (release of) credit reserves, net (6,746 ) 6,746 Ending Balance $ 40,616 $ 178,302 |
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 March 31, 2018 and December 31, 2017 . 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) March 31, 2018 $ 12,799 $ (367 ) $ 12,432 $ 27,186 $ (955 ) $ 26,231 December 31, 2017 8,637 (132 ) 8,505 28,557 (1,235 ) 27,322 |
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 March 31, 2018 . Table 7.7 – Significant Valuation Assumptions March 31, 2018 Range for Securities Prepayment rates 8% - 20% Projected losses 0.20% - 5.25% |
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 March 31, 2018 and 2017 , 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 March 31, (In Thousands) 2018 2017 Balance at beginning of period $ 21,037 $ 28,261 Additions Initial credit impairments — 97 Reductions Securities sold, or expected to sell (99 ) (1,566 ) Securities with no outstanding principal at period end (14 ) (402 ) Balance at End of Period $ 20,924 $ 26,390 |
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 months ended March 31, 2018 and 2017 . Table 7.9 – Gross Realized Gains and Losses on AFS Securities Three Months Ended March 31, (In Thousands) 2018 2017 Gross realized gains - sales $ 9,363 $ 5,092 Gross realized gains - calls — 611 Total Realized Gains on Sales and Calls of AFS Securities, net $ 9,363 $ 5,703 |
Mortgage Servicing Rights (Tabl
Mortgage Servicing Rights (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Transfers and Servicing [Abstract] | |
Activity for Mortgage Servicing Rights | The following table presents activity for MSRs for the three months ended March 31, 2018 and 2017 . Table 8.1 – Activity for MSRs Three Months Ended March 31, (In Thousands) 2018 2017 Balance at beginning of period $ 63,598 $ 118,526 Additions — 7,485 Sales — (11,928 ) Changes in fair value due to: Changes in assumptions (1) 4,346 (657 ) Other changes (2) (1,448 ) (2,413 ) Balance at End of Period $ 66,496 $ 111,013 (1) Primarily reflects changes in prepayment assumptions due to changes in market interest rates. (2) Represents changes due to the realization of expected cash flows. |
Components of Mortgage Servicing Rights Income (Loss), net | The following table presents the components of our MSR income for the three months ended March 31, 2018 and 2017 . Table 8.2 – Components of MSR Income, net Three Months Ended March 31, (In Thousands) 2018 2017 Servicing income $ 3,796 $ 6,907 Cost of sub-servicer (592 ) (1,380 ) Net servicing fee income 3,204 5,527 Market valuation changes of MSRs 2,892 (3,070 ) Market valuation changes of associated derivatives (5,139 ) (749 ) MSR reversal of provision for repurchases — 5 MSR Income, Net $ 957 $ 1,713 |
Derivative Financial Instrume39
Derivative Financial Instruments (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
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 March 31, 2018 and December 31, 2017 . Table 9.1 – Fair Value and Notional Amount of Derivative Financial Instruments March 31, 2018 December 31, 2017 Fair Value Notional Amount Fair Value Notional Amount (In Thousands) Assets - Risk Management Derivatives Interest rate swaps $ 50,919 $ 2,869,500 $ 10,122 $ 1,765,000 TBAs 8,625 1,515,000 133 295,000 Futures — — 1 7,500 Swaptions — — 42 200,000 Assets - Other Derivatives Loan purchase commitments 4,000 570,552 3,243 547,434 Loan forward sale commitments — — 2,177 343,681 Total Assets $ 63,544 $ 4,955,052 $ 15,718 $ 3,158,615 Liabilities - Cash Flow Hedges Interest rate swaps $ (35,167 ) $ 139,500 $ (43,679 ) $ 139,500 Liabilities - Risk Management Derivatives Interest rate swaps (11,346 ) 451,500 (11,888 ) 1,248,000 TBAs (5,457 ) 1,110,000 (3,808 ) 1,400,000 Futures (357 ) 15,000 — — Liabilities - Other Derivatives Loan purchase commitments (2,605 ) 627,803 (3,706 ) 697,966 Loan forward sale commitments (1,269 ) 340,320 — — Total Liabilities $ (56,201 ) $ 2,684,123 $ (63,081 ) $ 3,485,466 Total Derivative Financial Instruments, Net $ 7,343 $ 7,639,175 $ (47,363 ) $ 6,644,081 |
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 months ended March 31, 2018 and 2017 . Table 9.2 – Impact on Interest Expense of Interest Rate Agreements Accounted for as Cash Flow Hedges Three Months Ended March 31, (In Thousands) 2018 2017 Net interest expense on cash flows hedges $ (998 ) $ (1,225 ) Realized net losses reclassified from other comprehensive income — (14 ) Total Interest Expense $ (998 ) $ (1,239 ) |
Other Assets and Liabilities (T
Other Assets and Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Components of Other Assets | Other assets at March 31, 2018 and December 31, 2017 , are summarized in the following table. Table 10.1 – Components of Other Assets (In Thousands) March 31, 2018 December 31, 2017 Margin receivable $ 50,200 $ 85,044 FHLBC stock 43,393 43,393 Pledged collateral 42,290 42,615 MSR holdback receivable 3,952 8,141 Fixed assets and leasehold improvements (1) 3,794 2,645 REO 3,115 3,354 Guarantee asset 3,055 2,869 Other 8,049 6,905 Total Other Assets $ 157,848 $ 194,966 (1) Fixed assets and leasehold improvements had a basis of $8 million and accumulated depreciation of $4 million at March 31, 2018 . |
Components of Accrued Expenses and Other Liabilities | Accrued expenses and other liabilities at March 31, 2018 and December 31, 2017 are summarized in the following table. Table 10.2 – Components of Accrued Expenses and Other Liabilities (In Thousands) March 31, 2018 December 31, 2017 Guarantee obligations $ 18,931 $ 19,487 Margin payable 16,878 390 Accrued compensation 11,982 24,025 Deferred tax liabilities 11,764 11,764 Residential loan and MSR repurchase reserve 5,197 4,916 Accrued income taxes payable 4,950 — Legal reserve 2,000 2,000 Other 6,060 5,147 Total Accrued Expenses and Other Liabilities $ 77,762 $ 67,729 |
Short-Term Debt (Tables)
Short-Term Debt (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
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 March 31, 2018 and December 31, 2017 . Table 11.1 – Short-Term Debt March 31, 2018 (Dollars in Thousands) Number of Facilities Outstanding Balance Limit Weighted Average Interest Rate Maturity Weighted Average Days Until Maturity Facilities Residential loan warehouse 4 $ 661,782 $ 1,425,000 3.51 % 8/2018-3/2019 246 Real estate securities repo 8 592,294 — 3.03 % 4/2018-6/2018 27 Total Short-Term Debt Facilities 12 1,254,076 Convertible notes, net N/A 250,384 — 4.63 % 4/2018 15 Total Short-Term Debt $ 1,504,460 December 31, 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 $ 1,039,666 $ 1,575,000 3.17 % 1/2018-12/2018 197 Real estate securities repo 9 648,746 — 2.69 % 1/2018-3/2018 28 Total Short-Term Debt Facilities 13 1,688,412 Convertible notes, net N/A 250,270 — 4.63 % 4/2018 105 Total Short-Term Debt $ 1,938,682 |
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 March 31, 2018 . Table 11.2 – Short-Term Debt by Collateral Type and Remaining Maturities March 31, 2018 (In Thousands) Within 30 days 31 to 90 days Over 90 days Total Collateral Type Held-for-sale residential loans $ — $ — $ 661,782 $ 661,782 Real estate securities 445,380 146,914 — 592,294 Total Secured Short-Term Debt 445,380 146,914 661,782 1,254,076 Convertible notes, net 250,384 — — 250,384 Total Short-Term Debt $ 695,764 $ 146,914 $ 661,782 $ 1,504,460 |
Asset-Backed Securities Issued
Asset-Backed Securities Issued (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Asset-Backed Securities Issued | The carrying values of ABS issued by Sequoia securitization entities we sponsored at March 31, 2018 and December 31, 2017 , along with other selected information, are summarized in the following table. Table 12.1 – Asset-Backed Securities Issued March 31, 2018 Legacy Sequoia Sequoia Total (Dollars in Thousands) Certificates with principal balance $ 655,188 $ 905,713 $ 1,560,901 Interest-only certificates 1,809 13,641 15,450 Market valuation adjustments (41,148 ) 6,884 (34,264 ) ABS Issued, Net $ 615,849 $ 926,238 $ 1,542,087 Range of weighted average interest rates, by series 1.77% to 2.83% 4.49% to 4.66% Stated maturities 2024 - 2036 2047 - 2048 Number of series 20 3 December 31, 2017 Legacy Sequoia Sequoia Total (Dollars in Thousands) Certificates with principal balance $ 691,125 $ 526,657 $ 1,217,782 Interest-only certificates 1,972 7,695 9,667 Market valuation adjustments (70,652 ) 7,788 (62,864 ) ABS Issued, Net $ 622,445 $ 542,140 $ 1,164,585 Range of weighted average interest rates, by series 1.46% to 2.78% 4.52% to 4.73% Stated maturities 2024 - 2036 2047 Number of series 20 2 |
Collateral for ABS Issued | The following table summarizes the carrying value components of the collateral for ABS issued and outstanding at March 31, 2018 and December 31, 2017 . Table 12.2 – Collateral for Asset-Backed Securities Issued March 31, 2018 Legacy Sequoia Sequoia Choice Total (In Thousands) Residential loans $ 626,151 $ 1,013,619 $ 1,639,770 Restricted cash 148 7 155 Accrued interest receivable 753 4,057 4,810 REO 3,115 — 3,115 Total Collateral for ABS Issued $ 630,167 $ 1,017,683 $ 1,647,850 December 31, 2017 Legacy Sequoia Sequoia Total (In Thousands) Residential loans $ 632,817 $ 620,062 $ 1,252,879 Restricted cash 147 4 151 Accrued interest receivable 867 2,524 3,391 REO 3,353 — 3,353 Total Collateral for ABS Issued $ 637,184 $ 622,590 $ 1,259,774 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Maturities of FHLBC Borrowings by Year | The following table presents maturities of our FHLBC borrowings by year at March 31, 2018 . Table 13.1 – Maturities of FHLBC Borrowings by Year (In Thousands) March 31, 2018 2024 $ 470,171 2025 887,639 2026 642,189 Total FHLBC Borrowings $ 1,999,999 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Future Lease Commitments by Year | The following table presents our future lease commitments at March 31, 2018 . Table 14.1 – Future Lease Commitments by Year (In Thousands) March 31, 2018 2018 (9 months) $ 1,467 2019 1,987 2020 1,965 2021 1,474 2022 and thereafter 10,217 Total Lease Commitments $ 17,110 |
Equity (Tables)
Equity (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
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 months ended March 31, 2018 and 2017 . Table 15.1 – Changes in Accumulated Other Comprehensive Income by Component Three Months Ended March 31, 2018 Three Months Ended March 31, 2017 (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 $ 128,201 $ (42,953 ) $ 115,873 $ (44,020 ) Other comprehensive (loss) income before reclassifications (1) (4,237 ) 8,431 2,930 1,733 Amounts reclassified from other accumulated comprehensive income (9,387 ) — (3,928 ) 14 Net current-period other comprehensive (loss) income (13,624 ) 8,431 (998 ) 1,747 Balance at End of Period $ 114,577 $ (34,522 ) $ 114,875 $ (42,273 ) (1) Amounts presented for net unrealized gains on available-for-sale securities are net of tax provision of $0.1 million for both the three months ended March 31, 2018 and 2017. |
Reclassifications out of Accumulated Other Comprehensive Income | The following table provides a summary of reclassifications out of accumulated other comprehensive income for three months ended March 31, 2018 and 2017 . 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 March 31, (In Thousands) Income Statement 2018 2017 Net Realized (Gain) Loss on AFS Securities Other than temporary impairment (1) Investment fair value changes, net $ — $ 117 Gain on sale of AFS securities Realized gains, net (9,387 ) (4,045 ) $ (9,387 ) $ (3,928 ) Net Realized Loss on Interest Rate Amortization of deferred loss Interest expense $ — $ 14 $ — $ 14 (1) For the three months ended March 31, 2018 , there were no other-than-temporary impairments. For the three months ended March 31, 2017, other-than-temporary impairments were $0.2 million , of which $0.1 million were recognized through our consolidated statements of income and $0.1 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 months ended March 31, 2018 and 2017 . Table 15.3 – Basic and Diluted Earnings per Common Share Three Months Ended March 31, (In Thousands, except Share Data) 2018 2017 Basic Earnings per Common Share: Net income attributable to Redwood $ 46,845 $ 36,969 Less: Dividends and undistributed earnings allocated to participating securities (1,433 ) (968 ) Net income allocated to common shareholders $ 45,412 $ 36,001 Basic weighted average common shares outstanding 75,396,649 76,738,202 Basic Earnings per Common Share $ 0.60 $ 0.47 Diluted Earnings per Common Share: Net income attributable to Redwood $ 46,845 $ 36,969 Less: Dividends and undistributed earnings allocated to participating securities (1,394 ) (1,005 ) Add back: Interest expense on convertible notes for the period, net of tax 8,641 5,870 Net income allocated to common shareholders $ 54,092 $ 41,834 Weighted average common shares outstanding 75,396,649 76,738,202 Net effect of dilutive equity awards 34,827 111,197 Net effect of assumed convertible notes conversion to common shares 32,763,121 21,096,738 Diluted weighted average common shares outstanding 108,194,597 97,946,137 Diluted Earnings per Common Share $ 0.50 $ 0.43 |
Equity Compensation Plans (Tabl
Equity Compensation Plans (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
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 $25 million at March 31, 2018 , as shown in the following table. Table 16.1 – Activities of Equity Compensation Costs by Award Type Three Months Ended March 31, 2018 (In Thousands) Restricted Stock Deferred Stock Units Performance Stock Units Employee Stock Purchase Plan Total Unrecognized compensation cost at beginning of period $ 2,808 $ 13,364 $ 5,298 $ — $ 21,470 Equity grants 2,380 3,450 — 136 5,966 Equity grant forfeitures — — — — — Equity compensation expense (353 ) (1,673 ) (637 ) (34 ) (2,697 ) Unrecognized Compensation Cost at End of Period $ 4,835 $ 15,141 $ 4,661 $ 102 $ 24,739 |
Mortgage Banking Activities, 47
Mortgage Banking Activities, Net (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
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 months ended March 31, 2018 and 2017 . Table 17.1 – Mortgage Banking Activities Three Months Ended March 31, (In Thousands) 2018 2017 Mortgage Banking Activities, Net Changes in fair value of: Residential loans, at fair value (1) $ (2,194 ) $ 18,797 Risk management derivatives (2) 28,432 (1,400 ) Other income, net (3) 338 207 Mortgage Banking Activities, Net $ 26,576 $ 17,604 (1) Includes changes in fair value for associated loan purchase and forward sale commitments. (2) Represents market valuation changes of derivatives that were used to manage risks associated with our accumulation of 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 Changes48
Investment Fair Value Changes, Net (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
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 months ended March 31, 2018 and 2017 . Table 18.1 – Investment Fair Value Changes Three Months Ended March 31, (In Thousands) 2018 2017 Investment Fair Value Changes, Net Changes in fair value of: Residential loans held-for-investment, at Redwood $ (38,985 ) $ (2,333 ) Trading securities (2,955 ) 11,143 Net investments in Legacy Sequoia entities (1) (8 ) (1,810 ) Net investments in Sequoia Choice entities (1) (86 ) — Risk-sharing investments (139 ) (205 ) Risk management derivatives, net 43,782 (5,127 ) Impairments on AFS securities — (117 ) Investment Fair Value Changes, Net $ 1,609 $ 1,551 (1) Includes changes in fair value of the residential loans held-for-investment, REO and the ABS issued at the entities, which netted together represent the change in value of our retained investments at the consolidated VIEs. |
Operating Expenses (Tables)
Operating Expenses (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Other Income and Expenses [Abstract] | |
Components of Operating Expenses | Components of our operating expenses for the three months ended March 31, 2018 and 2017 are presented in the following table. Table 19.1 – Components of Operating Expenses Three Months Ended March 31, (In Thousands) 2018 2017 Fixed compensation expense $ 6,439 $ 6,002 Variable compensation expense 6,907 3,933 Equity compensation expense 2,697 2,176 Total compensation expense 16,043 12,111 Systems and consulting 1,866 1,638 Loan acquisition costs (1) 1,818 1,205 Office costs 1,140 1,103 Accounting and legal 834 926 Corporate costs 504 440 Other operating expenses 825 803 Total Operating Expenses $ 23,030 $ 18,226 (1) Loan acquisition costs primarily includes underwriting and due diligence costs related to the acquisition of residential loans held-for-sale at fair value. |
Taxes (Tables)
Taxes (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
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 March 31, 2018 and 2017 . Table 20.1 – Reconciliation of Statutory Tax Rate to Effective Tax Rate March 31, 2018 March 31, 2017 Federal statutory rate 21.0 % 34.0 % State statutory rate, net of Federal tax effect 8.6 % 7.2 % Differences in taxable (loss) income from GAAP income (4.1 )% (8.5 )% Change in valuation allowance (3.9 )% (3.0 )% Dividends paid deduction (12.1 )% (15.4 )% Effective Tax Rate 9.5 % 14.3 % |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
Business Segment Financial Information | The following tables present financial information by segment for the three months ended March 31, 2018 and 2017 . Table 21.1 – Business Segment Financial Information Three Months Ended March 31, 2018 (In Thousands) Investment Portfolio Residential Mortgage Banking Corporate/ Other Total Interest income $ 58,757 $ 12,897 $ 4,965 $ 76,619 Interest expense (19,863 ) (6,137 ) (15,514 ) (41,514 ) Net interest income (loss) 38,894 6,760 (10,549 ) 35,105 Non-interest income Mortgage banking activities, net — 26,576 — 26,576 MSR income, net 957 — — 957 Investment fair value changes, net 1,590 — 19 1,609 Other income 1,161 — — 1,161 Realized gains, net 9,363 — — 9,363 Total non-interest income, net 13,071 26,576 19 39,666 Direct operating expenses (2,007 ) (8,632 ) (12,391 ) (23,030 ) Provision for income taxes (888 ) (4,008 ) — (4,896 ) Segment Contribution $ 49,070 $ 20,696 $ (22,921 ) Net Income $ 46,845 Non-cash amortization income (expense), net $ 4,617 $ (22 ) $ (858 ) $ 3,737 Three Months Ended March 31, 2017 (In Thousands) Investment Portfolio Residential Mortgage Banking Corporate/ Total Interest income $ 42,250 $ 7,474 $ 4,904 $ 54,628 Interest expense (5,264 ) (2,924 ) (12,843 ) (21,031 ) Net interest income (loss) 36,986 4,550 (7,939 ) 33,597 Non-interest income Mortgage banking activities, net — 17,604 — 17,604 MSR income, net 1,713 — — 1,713 Investment fair value changes, net 3,359 — (1,808 ) 1,551 Other income 1,184 — — 1,184 Realized gains, net 5,703 — — 5,703 Total non-interest income, net 11,959 17,604 (1,808 ) 27,755 Direct operating expenses (1,593 ) (5,881 ) (10,752 ) (18,226 ) Provision for income taxes (1,737 ) (4,420 ) — (6,157 ) Segment Contribution $ 45,615 $ 11,853 $ (20,499 ) Net Income $ 36,969 Non-cash amortization income (expense) $ 5,847 $ (27 ) $ (997 ) $ 4,823 |
Components of Corporate and Other | The following table presents the components of Corporate/Other for the three months ended March 31, 2018 and 2017 . Table 21.2 – Components of Corporate/Other Three Months Ended March 31, 2018 2017 (In Thousands) Legacy Consolidated VIEs (1) Other Total Legacy Consolidated VIEs (1) Other Total Interest income $ 4,812 $ 153 $ 4,965 $ 4,838 $ 66 $ 4,904 Interest expense (3,852 ) (11,662 ) (15,514 ) (3,516 ) (9,327 ) (12,843 ) Net interest income (loss) 960 (11,509 ) (10,549 ) 1,322 (9,261 ) (7,939 ) Non-interest income Investment fair value changes, net (8 ) 27 19 (1,810 ) 2 (1,808 ) Total non-interest income, net (8 ) 27 19 (1,810 ) 2 (1,808 ) Direct operating expenses — (12,391 ) (12,391 ) — (10,752 ) (10,752 ) Total $ 952 $ (23,873 ) $ (22,921 ) $ (488 ) $ (20,011 ) $ (20,499 ) (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 March 31, 2018 and December 31, 2017 . Table 21.3 – Supplemental Segment Information (In Thousands) Investment Portfolio Residential Mortgage Banking Corporate/ Other Total March 31, 2018 Residential loans $ 3,389,404 $ 1,130,185 $ 626,151 $ 5,145,740 Real estate securities 1,357,720 — — 1,357,720 Mortgage servicing rights 66,496 — — 66,496 Total assets 5,012,235 1,154,413 832,925 6,999,573 December 31, 2017 Residential loans $ 3,054,448 $ 1,427,945 $ 632,817 $ 5,115,210 Real estate securities 1,476,510 — — 1,476,510 Mortgage servicing rights 63,598 — — 63,598 Total assets 4,743,873 1,453,069 842,880 7,039,822 |
Organization (Details)
Organization (Details) | 3 Months Ended |
Mar. 31, 2018Segment | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of operating segments | 2 |
Summary of Significant Accoun53
Summary of Significant Accounting Policies - Offsetting of Financial Assets, Liabilities, and Collateral (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | |
Accounting Policies [Abstract] | |||
Future lease commitments with expiration date | $ 17,110 | ||
Offsetting Asset and Liabilities [Line Items] | |||
Net Amounts of Assets Presented in Consolidated Balance Sheet | [1] | 63,544 | $ 15,718 |
Gross Amounts of Recognized Liabilities, Including Assets Under Repurchase Agreements | (1,306,403) | (1,747,787) | |
Gross Amounts Offset in Consolidated Balance Sheet Including Assets Under Repurchase Agreement | 0 | 0 | |
Net Amounts of Liabilities Presented in Consolidated Balance Sheet | [1] | (56,201) | (63,081) |
Net Amounts of Liabilities Presented in Consolidated Balance Sheet Including Assets Under Repurchase Agreement | (1,306,403) | (1,747,787) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments Including Assets Under Repurchase Agreement | 1,266,877 | 1,694,741 | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral Pledged Including Assets Under Repurchase Agreement | 38,283 | 50,747 | |
Net Amount Including Assets Under Repurchase Agreement | (1,243) | (2,299) | |
Interest Rate Agreement, TBAs, And Futures | |||
Offsetting Asset and Liabilities [Line Items] | |||
Gross Amounts of Recognized Assets | 59,544 | 10,298 | |
Net Amounts of Assets Presented in Consolidated Balance Sheet | 59,544 | 10,298 | |
Gross Amounts Not Offset in Consolidated Balance Sheet - Financial Instruments | (12,801) | (6,329) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral Pledged | (16,653) | (42) | |
Net Amount | 30,090 | 3,927 | |
Interest rate agreements | |||
Offsetting Asset and Liabilities [Line Items] | |||
Gross Amounts of Recognized Assets | 50,919 | 10,164 | |
Gross Amounts Offset in Consolidated Balance Sheet | 0 | 0 | |
Net Amounts of Assets Presented in Consolidated Balance Sheet | 50,919 | 10,164 | |
Gross Amounts Not Offset in Consolidated Balance Sheet - Financial Instruments | (8,850) | (6,196) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral Pledged | (12,010) | (42) | |
Net Amount | 30,059 | 3,926 | |
Gross Amounts of Recognized Liabilities | (46,513) | (55,567) | |
Gross Amounts Offset in Consolidated Balance Sheet | 0 | 0 | |
Net Amounts of Liabilities Presented in Consolidated Balance Sheet | (46,513) | (55,567) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments | 8,850 | 6,196 | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral Pledged | 37,663 | 49,371 | |
Net Amount | 0 | 0 | |
TBAs | |||
Offsetting Asset and Liabilities [Line Items] | |||
Gross Amounts of Recognized Assets | 8,625 | 133 | |
Gross Amounts Offset in Consolidated Balance Sheet | 0 | 0 | |
Net Amounts of Assets Presented in Consolidated Balance Sheet | 8,625 | 133 | |
Gross Amounts Not Offset in Consolidated Balance Sheet - Financial Instruments | (3,951) | (133) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral Pledged | (4,643) | 0 | |
Net Amount | 31 | 0 | |
Gross Amounts of Recognized Liabilities | (5,457) | (3,808) | |
Gross Amounts Offset in Consolidated Balance Sheet | 0 | 0 | |
Net Amounts of Liabilities Presented in Consolidated Balance Sheet | (5,457) | (3,808) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments | 3,951 | 133 | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral Pledged | 263 | 1,376 | |
Net Amount | (1,243) | (2,299) | |
Futures | |||
Offsetting Asset and Liabilities [Line Items] | |||
Gross Amounts of Recognized Assets | 1 | ||
Gross Amounts Offset in Consolidated Balance Sheet | 0 | ||
Net Amounts of Assets Presented in Consolidated Balance Sheet | 1 | ||
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 | 1 | ||
Gross Amounts of Recognized Liabilities | (357) | ||
Gross Amounts Offset in Consolidated Balance Sheet | 0 | ||
Net Amounts of Liabilities Presented in Consolidated Balance Sheet | (357) | ||
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments | 0 | ||
Gross Amounts Not Offset in Consolidated Balance Sheet, Cash Collateral Pledged | 357 | ||
Net Amount | 0 | ||
Loan warehouse debt | |||
Offsetting Asset and Liabilities [Line Items] | |||
Gross Amounts of Recognized Liabilities - Under Repurchase Agreements | (661,782) | (1,039,666) | |
Gross Amounts Offset in Consolidated Balance Sheet - Under Repurchase Agreement | 0 | 0 | |
Net Amounts of Liabilities Presented in Consolidated Balance Sheet - Under Repurchase Agreement | (661,782) | (1,039,666) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments - Under Repurchase Agreement | 661,782 | 1,039,666 | |
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 | (592,294) | (648,746) | |
Gross Amounts Offset in Consolidated Balance Sheet - Under Repurchase Agreement | 0 | 0 | |
Net Amounts of Liabilities Presented in Consolidated Balance Sheet - Under Repurchase Agreement | (592,294) | (648,746) | |
Gross Amounts Not Offset in Consolidated Balance Sheet, Financial Instruments - Under Repurchase Agreement | 592,294 | 648,746 | |
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 March 31, 2018 and December 31, 2017, assets of consolidated VIEs totaled $1,647,850 and $1,259,774, respectively. At March 31, 2018 and December 31, 2017, liabilities of consolidated VIEs totaled $1,546,066 and $1,167,157, respectively. See Note 4 for further discussion. |
Principles of Consolidation - A
Principles of Consolidation - Additional Information (Details) $ in Millions | 63 Months Ended |
Mar. 31, 2018USD ($)Entity | |
Variable Interest Entity, Not Primary Beneficiary | |
Variable Interest Entity [Line Items] | |
Number of securitization entities to which asset transferred (in entities) | Entity | 39 |
Legacy Sequoia | Variable Interest Entity, Primary Beneficiary | |
Variable Interest Entity [Line Items] | |
Estimated fair value of investments | $ 14 |
Sequoia Choice | Variable Interest Entity, Primary Beneficiary | |
Variable Interest Entity [Line Items] | |
Estimated fair value of investments | $ 88 |
Principles of Consolidation -55
Principles of Consolidation - Assets and Liabilities of Consolidated Variable Interest Entity's (Details) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018USD ($)Investment | Dec. 31, 2017USD ($)Investment | |
Variable Interest Entity [Line Items] | ||
Assets | $ 1,647,850 | $ 1,259,774 |
Liabilities | 1,546,066 | 1,167,157 |
Sequoia | ||
Variable Interest Entity [Line Items] | ||
Assets | 1,647,850 | 1,259,774 |
Liabilities | $ 1,546,066 | $ 1,167,157 |
Number of VIEs (in investments) | Investment | 23 | 22 |
Sequoia | Residential loans held-for-investment, at Redwood | ||
Variable Interest Entity [Line Items] | ||
Assets | $ 1,639,770 | $ 1,252,879 |
Sequoia | Restricted cash | ||
Variable Interest Entity [Line Items] | ||
Assets | 155 | 151 |
Sequoia | Accrued interest receivable | ||
Variable Interest Entity [Line Items] | ||
Assets | 4,810 | 3,391 |
Sequoia | REO | ||
Variable Interest Entity [Line Items] | ||
Assets | 3,115 | 3,353 |
Sequoia | Accrued interest payable | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 3,972 | 2,568 |
Sequoia | Accrued expenses and other liabilities | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 7 | 4 |
Sequoia | Asset-backed securities issued | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 1,542,087 | 1,164,585 |
Legacy Sequoia | ||
Variable Interest Entity [Line Items] | ||
Assets | 630,167 | 637,184 |
Liabilities | $ 616,383 | $ 622,982 |
Number of VIEs (in investments) | Investment | 20 | 20 |
Legacy Sequoia | Residential loans held-for-investment, at Redwood | ||
Variable Interest Entity [Line Items] | ||
Assets | $ 626,151 | $ 632,817 |
Legacy Sequoia | Restricted cash | ||
Variable Interest Entity [Line Items] | ||
Assets | 148 | 147 |
Legacy Sequoia | Accrued interest receivable | ||
Variable Interest Entity [Line Items] | ||
Assets | 753 | 867 |
Legacy Sequoia | REO | ||
Variable Interest Entity [Line Items] | ||
Assets | 3,115 | 3,353 |
Legacy Sequoia | Accrued interest payable | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 534 | 537 |
Legacy Sequoia | Accrued expenses and other liabilities | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 0 | 0 |
Legacy Sequoia | Asset-backed securities issued | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 615,849 | 622,445 |
Sequoia Choice | ||
Variable Interest Entity [Line Items] | ||
Assets | 1,017,683 | 622,590 |
Liabilities | $ 929,683 | $ 544,175 |
Number of VIEs (in investments) | Investment | 3 | 2 |
Sequoia Choice | Residential loans held-for-investment, at Redwood | ||
Variable Interest Entity [Line Items] | ||
Assets | $ 1,013,619 | $ 620,062 |
Sequoia Choice | Restricted cash | ||
Variable Interest Entity [Line Items] | ||
Assets | 7 | 4 |
Sequoia Choice | Accrued interest receivable | ||
Variable Interest Entity [Line Items] | ||
Assets | 4,057 | 2,524 |
Sequoia Choice | REO | ||
Variable Interest Entity [Line Items] | ||
Assets | 0 | 0 |
Sequoia Choice | Accrued interest payable | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 3,438 | 2,031 |
Sequoia Choice | Accrued expenses and other liabilities | ||
Variable Interest Entity [Line Items] | ||
Liabilities | 7 | 4 |
Sequoia Choice | Asset-backed securities issued | ||
Variable Interest Entity [Line Items] | ||
Liabilities | $ 926,238 | $ 542,140 |
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 | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Variable Interest Entity [Line Items] | ||
MSRs recognized | $ 0 | $ 7,386 |
Variable Interest Entity, Not Primary Beneficiary | ||
Variable Interest Entity [Line Items] | ||
Principal balance of loans transferred | 1,280,468 | 1,035,524 |
MSRs recognized | 0 | 7,123 |
Variable Interest Entity, Not Primary Beneficiary | Trading securities retained, at fair value | ||
Variable Interest Entity [Line Items] | ||
Securities retained, at fair value | 12,491 | 20,703 |
Variable Interest Entity, Not Primary Beneficiary | AFS securities retained, at fair value | ||
Variable Interest Entity [Line Items] | ||
Securities retained, at fair value | $ 3,905 | $ 5,155 |
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 | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Variable Interest Entity [Line Items] | ||
Proceeds from new transfers | $ 1,289,687 | $ 1,022,024 |
MSR fees received | 3,414 | 3,475 |
Funding of compensating interest, net | (25) | (38) |
Cash flows received on retained securities | $ 7,043 | $ 6,373 |
Principles of Consolidation -58
Principles of Consolidation - Assumptions Related to Unconsolidated Variable Interest Entity's Sponsored by Redwood (Details) - Variable Interest Entity, Not Primary Beneficiary | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
MSRs | ||
Fair Value Assumption, Date of Securitization or Asset-backed Financing Arrangement, Transferor's Continuing Involvement, Servicing Assets or Liabilities [Line Items] | ||
Prepayment rates | 9.00% | |
Discount rates | 11.00% | |
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 | 8.00% | 10.00% |
Discount rates | 14.00% | 11.00% |
Credit loss assumptions | 0.20% | 0.25% |
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 | 10.00% | 10.00% |
Discount rates | 7.00% | 5.00% |
Credit loss assumptions | 0.20% | 0.25% |
Principles of Consolidation -59
Principles of Consolidation - Summary of Unconsolidated Variable Interest Entity's Sponsored by Redwood (Details) - Variable Interest Entity, Not Primary Beneficiary - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
On-balance sheet assets, at fair value: | ||
Maximum loss exposure | $ 360,798 | $ 381,661 |
Assets transferred: | ||
Principal balance of loans outstanding | 9,411,927 | 8,364,148 |
Principal balance of loans 30 days delinquent | 26,524 | 27,926 |
Interest-only, senior and subordinate securities, classified as trading | ||
On-balance sheet assets, at fair value: | ||
Securities | 103,854 | 101,426 |
Subordinate securities, classified as AFS | ||
On-balance sheet assets, at fair value: | ||
Securities | 193,029 | 219,255 |
Mortgage servicing rights | ||
On-balance sheet assets, at fair value: | ||
Securities | $ 63,915 | $ 60,980 |
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 | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
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 | $ 63,915 | $ 60,980 |
Expected life (in years) | 8 years | 8 years |
Prepayment speed assumption (annual CPR) | 7.00% | 9.00% |
Decrease in fair value from: | ||
10% adverse change | $ 1,816 | $ 2,022 |
25% adverse change | $ 4,388 | $ 4,839 |
Discount rate assumption | 11.00% | 11.00% |
Decrease in fair value from: | ||
100 basis point increase | $ 2,596 | $ 2,386 |
200 basis point increase | $ 5,009 | 4,597 |
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 | $ 49,299 | $ 33,773 |
Expected life (in years) | 7 years | 6 years |
Prepayment speed assumption (annual CPR) | 9.00% | 10.00% |
Decrease in fair value from: | ||
10% adverse change | $ 1,671 | $ 1,371 |
25% adverse change | $ 4,087 | $ 3,289 |
Discount rate assumption | 11.00% | 11.00% |
Decrease in fair value from: | ||
100 basis point increase | $ 1,772 | $ 1,158 |
200 basis point increase | $ 3,486 | $ 2,265 |
Credit loss assumption | 0.20% | 0.25% |
Decrease in fair value from: | ||
10% higher losses | $ 0 | $ 0 |
25% higher losses | $ 0 | 0 |
Impact of adverse change in prepayment speed | 25.00% | |
Impact of increase in discount rate assumption | 1.00% | |
Impact of adverse change in expected credit losses | 25.00% | |
Subordinate Securities | ||
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items] | ||
Fair value | $ 247,584 | $ 286,908 |
Expected life (in years) | 14 years | 13 years |
Prepayment speed assumption (annual CPR) | 10.00% | 11.00% |
Decrease in fair value from: | ||
10% adverse change | $ 643 | $ 611 |
25% adverse change | $ 1,587 | $ 1,506 |
Discount rate assumption | 5.00% | 5.00% |
Decrease in fair value from: | ||
100 basis point increase | $ 22,876 | $ 25,827 |
200 basis point increase | $ 42,351 | $ 47,885 |
Credit loss assumption | 0.20% | 0.25% |
Decrease in fair value from: | ||
10% higher losses | $ 1,285 | $ 1,551 |
25% higher losses | $ 3,213 | $ 3,873 |
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 -61
Principles of Consolidation - Summary of Redwood's Interest in Third-Party Variable Interest Entity's (Details) - REO $ in Thousands | Mar. 31, 2018USD ($) |
Variable Interest Entity [Line Items] | |
Assets | $ 1,060,837 |
Senior | |
Variable Interest Entity [Line Items] | |
Assets | 198,373 |
Mezzanine | |
Variable Interest Entity [Line Items] | |
Assets | 487,679 |
Subordinate | |
Variable Interest Entity [Line Items] | |
Assets | $ 374,785 |
Fair Value of Financial Instr62
Fair Value of Financial Instruments - Carrying Values and Estimated Fair Values of Assets and Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | |
Assets | |||
Trading securities | $ 907,432 | $ 968,844 | |
Available-for-sale securities | 450,288 | 507,666 | |
MSRs | [1] | 66,496 | 63,598 |
Derivative assets | [1] | 63,544 | 15,718 |
Pledged collateral | 42,290 | 42,615 | |
Liabilities | |||
Derivative liabilities | [1] | 56,201 | 63,081 |
Carrying Value | |||
Assets | |||
Trading securities | 907,432 | 968,844 | |
Available-for-sale securities | 450,288 | 507,666 | |
MSRs | 66,496 | 63,598 | |
Cash and cash equivalents | 178,562 | 144,663 | |
Restricted cash | 2,406 | 2,144 | |
Accrued interest receivable | 27,257 | 27,013 | |
Derivative assets | 63,544 | 15,718 | |
REO | 3,115 | 3,354 | |
Margin receivable | 50,200 | 85,044 | |
FHLBC stock | 43,393 | 43,393 | |
Guarantee asset | 3,055 | 2,869 | |
Pledged collateral | 42,290 | 42,615 | |
Liabilities | |||
Short-term debt facilities | 1,254,076 | 1,688,412 | |
Accrued interest payable | 23,492 | 18,435 | |
Margin payable | 16,878 | 390 | |
Guarantee obligation | 18,931 | 19,487 | |
Derivative liabilities | 56,201 | 63,081 | |
ABS issued at fair value, net | 1,542,087 | 1,164,585 | |
FHLBC long-term borrowings | 1,999,999 | 1,999,999 | |
Convertible notes, net | 687,426 | 686,759 | |
Trust preferred securities and subordinated notes, net | 138,547 | 138,535 | |
Carrying Value | Residential Loans | Residential loans | |||
Assets | |||
Loans, held-for-sale | 1,129,890 | 1,427,052 | |
Carrying Value | Residential loans, at lower of cost or fair value | Residential loans | |||
Assets | |||
Loans, held-for-sale | 295 | 893 | |
Carrying Value | Residential Loans Held For Investment at Fair Value | Residential loans | |||
Assets | |||
Loans receivable, fair value | 4,015,555 | 3,687,265 | |
Fair Value | |||
Assets | |||
Trading securities | 907,432 | 968,844 | |
Available-for-sale securities | 450,288 | 507,666 | |
MSRs | 66,496 | 63,598 | |
Cash and cash equivalents | 178,562 | 144,663 | |
Restricted cash | 2,406 | 2,144 | |
Accrued interest receivable | 27,257 | 27,013 | |
Derivative assets | 63,544 | 15,718 | |
REO | 4,651 | 3,806 | |
Margin receivable | 50,200 | 85,044 | |
FHLBC stock | 43,393 | 43,393 | |
Guarantee asset | 3,055 | 2,869 | |
Pledged collateral | 42,290 | 42,615 | |
Liabilities | |||
Short-term debt facilities | 1,254,076 | 1,688,412 | |
Accrued interest payable | 23,492 | 18,435 | |
Margin payable | 16,878 | 390 | |
Guarantee obligation | 18,551 | 18,878 | |
Derivative liabilities | 56,201 | 63,081 | |
ABS issued at fair value, net | 1,542,087 | 1,164,585 | |
FHLBC long-term borrowings | 1,999,999 | 1,999,999 | |
Convertible notes, net | 691,535 | 692,369 | |
Trust preferred securities and subordinated notes, net | 106,020 | 103,230 | |
Fair Value | Residential Loans | Residential loans | |||
Assets | |||
Loans, held-for-sale | 1,129,890 | 1,427,052 | |
Fair Value | Residential loans, at lower of cost or fair value | Residential loans | |||
Assets | |||
Loans, held-for-sale | 388 | 993 | |
Fair Value | Residential Loans Held For Investment at Fair Value | Residential loans | |||
Assets | |||
Loans receivable, fair value | $ 4,015,555 | $ 3,687,265 | |
[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 March 31, 2018 and December 31, 2017, assets of consolidated VIEs totaled $1,647,850 and $1,259,774, respectively. At March 31, 2018 and December 31, 2017, liabilities of consolidated VIEs totaled $1,546,066 and $1,167,157, respectively. See Note 4 for further discussion. |
Fair Value of Financial Instr63
Fair Value of Financial Instruments - Additional Information (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Residential loans | |
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | |
Fair value option elected aggregate carrying amount, asset | $ 1,800 |
Real estate securities | Maximum | |
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | |
Dealer marks of securities (as a percent) | 72.00% |
Carrying value for which dealer quotes have been received (as a percent) | 79.00% |
Difference of internal valuation than dealer marks (as a percent) | 1.00% |
Residential Senior Securities | |
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | |
Fair value option elected aggregate carrying amount, asset | $ 12 |
Residential Subordinate Securities | Subordinate Securities | |
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | |
Fair value option elected aggregate carrying amount, asset | $ 128 |
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% |
Fair Value of Financial Instr64
Fair Value of Financial Instruments - Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | |
Assets | |||
Trading securities | $ 907,432 | $ 968,844 | |
Available-for-sale securities | 450,288 | 507,666 | |
Derivative assets | [1] | 63,544 | 15,718 |
MSRs | [1] | 66,496 | 63,598 |
Pledged collateral | 42,290 | 42,615 | |
Liabilities | |||
Derivative liabilities | [1] | 56,201 | 63,081 |
Fair Value, Measurements, Recurring | |||
Assets | |||
Trading securities | 907,432 | 968,844 | |
Available-for-sale securities | 450,288 | 507,666 | |
Derivative assets | 63,544 | 15,718 | |
MSRs | 66,496 | 63,598 | |
Pledged collateral | 42,290 | 42,615 | |
FHLBC stock | 43,393 | 43,393 | |
Guarantee asset | 3,055 | 2,869 | |
Liabilities | |||
Derivative liabilities | 56,201 | 63,081 | |
ABS issued | 1,542,087 | 1,164,585 | |
Fair Value, Measurements, Recurring | Residential Loans | |||
Assets | |||
Residential loans | 5,145,445 | 5,114,317 | |
Fair Value, Measurements, Recurring | Level 1 | |||
Assets | |||
Trading securities | 0 | 0 | |
Available-for-sale securities | 0 | 0 | |
Derivative assets | 8,625 | 134 | |
MSRs | 0 | 0 | |
Pledged collateral | 42,290 | 42,615 | |
FHLBC stock | 0 | 0 | |
Guarantee asset | 0 | 0 | |
Liabilities | |||
Derivative liabilities | 5,814 | 3,808 | |
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 | 50,919 | 10,164 | |
MSRs | 0 | 0 | |
Pledged collateral | 0 | 0 | |
FHLBC stock | 43,393 | 43,393 | |
Guarantee asset | 0 | 0 | |
Liabilities | |||
Derivative liabilities | 46,513 | 55,567 | |
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 | 907,432 | 968,844 | |
Available-for-sale securities | 450,288 | 507,666 | |
Derivative assets | 4,000 | 5,420 | |
MSRs | 66,496 | 63,598 | |
Pledged collateral | 0 | 0 | |
FHLBC stock | 0 | 0 | |
Guarantee asset | 3,055 | 2,869 | |
Liabilities | |||
Derivative liabilities | 3,874 | 3,706 | |
ABS issued | 1,542,087 | 1,164,585 | |
Fair Value, Measurements, Recurring | Level 3 | Residential Loans | |||
Assets | |||
Residential loans | $ 5,145,445 | $ 5,114,317 | |
[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 March 31, 2018 and December 31, 2017, assets of consolidated VIEs totaled $1,647,850 and $1,259,774, respectively. At March 31, 2018 and December 31, 2017, liabilities of consolidated VIEs totaled $1,546,066 and $1,167,157, respectively. See Note 4 for further discussion. |
Fair Value of Financial Instr65
Fair Value of Financial Instruments - Changes in Level 3 Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Asset-backed securities issued | |
Liabilities | |
Beginning balance | $ 1,164,585 |
Acquisitions | 441,741 |
Sales | 0 |
Principal paydowns | (84,974) |
Gains (losses) in net income, net | 20,735 |
Unrealized gains in OCI, net | 0 |
Other settlements, net | 0 |
Ending balance | 1,542,087 |
Residential Loans | |
Assets | |
Beginning balance | 5,114,317 |
Acquisitions | 1,814,944 |
Sales | (1,594,521) |
Principal paydowns | (175,525) |
Gains (losses) in net income, net | (12,502) |
Unrealized losses in OCI, net | 0 |
Other settlements, net | (1,268) |
Ending balance | 5,145,445 |
Trading securities retained, at fair value | |
Assets | |
Beginning balance | 968,844 |
Acquisitions | 140,560 |
Sales | (193,130) |
Principal paydowns | (5,834) |
Gains (losses) in net income, net | (3,008) |
Unrealized losses in OCI, net | 0 |
Other settlements, net | 0 |
Ending balance | 907,432 |
AFS Securities | |
Assets | |
Beginning balance | 507,666 |
Acquisitions | 3,905 |
Sales | (50,742) |
Principal paydowns | (10,412) |
Gains (losses) in net income, net | 13,423 |
Unrealized losses in OCI, net | (13,552) |
Other settlements, net | 0 |
Ending balance | 450,288 |
MSRs | |
Assets | |
Beginning balance | 63,598 |
Acquisitions | 0 |
Sales | 0 |
Principal paydowns | 0 |
Gains (losses) in net income, net | 2,898 |
Unrealized losses in OCI, net | 0 |
Other settlements, net | 0 |
Ending balance | 66,496 |
Guarantee Asset | |
Assets | |
Beginning balance | 2,869 |
Acquisitions | 0 |
Sales | 0 |
Principal paydowns | 0 |
Gains (losses) in net income, net | 186 |
Unrealized losses in OCI, net | 0 |
Other settlements, net | 0 |
Ending balance | 3,055 |
Derivatives | |
Assets | |
Beginning balance | 1,714 |
Acquisitions | 0 |
Sales | 0 |
Principal paydowns | 0 |
Gains (losses) in net income, net | (6,923) |
Unrealized losses in OCI, net | 0 |
Other settlements, net | 5,335 |
Ending balance | $ 126 |
Fair Value of Financial Instr66
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 | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Loan purchase commitments | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Net gains (losses) attributable to level 3 liabilities still held included in net income | $ (2,554) | $ 0 |
Loan forward sale commitments | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Net gains (losses) attributable to level 3 liabilities still held included in net income | (1,269) | 0 |
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 | (20,735) | (10,538) |
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 | (42,195) | 3,723 |
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 | 20,548 | 8,414 |
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 | (3,951) | 10,051 |
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 | 0 | (117) |
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 | 3,933 | (916) |
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 | 3,919 | 4,823 |
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 | $ 186 | $ (246) |
Fair Value of Financial Instr67
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 |
Mar. 31, 2018USD ($) | |
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 | $ 251 |
Gain (loss) on assets measured at fair value on a non-recurring basis | 1 |
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 |
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 |
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 | 251 |
REO | |
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |
REO | 2,034 |
Gain (loss) on assets measured at fair value on a non-recurring basis | (146) |
REO | Level 1 | |
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |
REO | 0 |
REO | Level 2 | |
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |
REO | 0 |
REO | Level 3 | |
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items] | |
REO | $ 2,034 |
Fair Value of Financial Instr68
Fair Value of Financial Instruments - Market Valuation Adjustments, Net (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgage servicing rights income, net | $ 957 | $ 1,713 |
Total Market Valuation Gains, Net | 25,600 | 15,129 |
Mortgage Banking Activities, Net | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Market valuations gains and losses, net | 26,238 | 17,397 |
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 | 4,774 | 8,532 |
Mortgage Banking Activities, Net | Residential loan purchase and forward sale commitments | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Market valuations gains and losses, net | (6,968) | 10,265 |
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 | 28,432 | (1,400) |
Investment Fair Value Changes, Net | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Market valuations gains and losses, net | 1,609 | 1,551 |
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 | 43,782 | (5,127) |
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 | (38,985) | (2,333) |
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 | (2,955) | 11,143 |
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 | (8) | (1,810) |
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 | (86) | 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 | (139) | (205) |
Investment Fair Value Changes, Net | Impairments on AFS securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Market valuations gains and losses, net | 0 | (117) |
MSR Income (Loss), Net | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgage servicing rights income, net | (2,247) | (3,819) |
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 | (5,139) | (749) |
MSR Income (Loss), Net | MSRs | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgage servicing rights income, net | $ 2,892 | $ (3,070) |
Fair Value of Financial Instr69
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) | 3 Months Ended |
Mar. 31, 2018USD ($)$ / loan | |
ABS Issued | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Fair Value | $ 1,542,087,000 |
ABS Issued | Minimum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Prepayment rate (annual CPR) | 8.00% |
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) | 25.00% |
Loss severity | 54.00% |
Discount rate | 15.00% |
Default rate | 16.00% |
ABS Issued | Weighted Average | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Prepayment rate (annual CPR) | 18.00% |
Loss severity | 22.00% |
Discount rate | 4.00% |
Default rate | 3.00% |
Loan Forward Sales Commitments | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Fair Value | $ 1,269,000 |
Loan Forward Sales Commitments | Minimum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Whole loan spread to TBA (in dollars per loan) | $ / loan | 2.80 |
Loan Forward Sales Commitments | Maximum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Whole loan spread to TBA (in dollars per loan) | $ / loan | 2.80 |
Loan Forward Sales Commitments | Weighted Average | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Whole loan spread to TBA (in dollars per loan) | $ / loan | 2.80 |
Residential Loans Priced To Securitization and Whole Loan Market, Uncommitted to Sell | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Fair Value | $ 3,162,491,000 |
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 | 1.78 |
Whole loan spread to swap rate | 1.60% |
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 | 2.97 |
Whole loan spread to swap rate | 2.10% |
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 | 2.90 |
Whole loan spread to swap rate | 2.00% |
Residential Jumbo Hybrid Loans Priced To Whole Loan Market Uncommitted To Sell | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Fair Value | $ 258,789,000 |
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 | 0.90% |
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 | 1.65% |
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 | 1.48% |
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 | $ 84,395,000 |
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 | 100.56 |
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 | 101.32 |
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 | 101.12 |
Legacy Sequoia | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Fair Value | $ 626,151,000 |
Sequoia Choice | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Fair Value | 1,013,619,000 |
Residential loans, at lower of cost or fair value | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Fair Value | $ 251,000 |
Residential loans, at lower of cost or fair value | Minimum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Loss severity | 30.00% |
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 | 30.00% |
Investment Securities | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Fair Value | $ 1,357,720,000 |
Investment Securities | Minimum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Prepayment rate (annual CPR) | 0.00% |
Loss severity | 0.00% |
Discount rate | 3.00% |
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 | 14.00% |
Default rate | 27.00% |
Investment Securities | Weighted Average | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Prepayment rate (annual CPR) | 9.00% |
Loss severity | 22.00% |
Discount rate | 6.00% |
Default rate | 3.00% |
MSRs | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Fair Value | $ 66,496,000 |
MSRs | Minimum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Prepayment rate (annual CPR) | 6.00% |
Discount rate | 11.00% |
Per loan annual cost to service | $ 79 |
MSRs | Maximum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Prepayment rate (annual CPR) | 27.00% |
Discount rate | 29.00% |
Per loan annual cost to service | $ 82 |
MSRs | Weighted Average | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Prepayment rate (annual CPR) | 7.00% |
Discount rate | 11.00% |
Per loan annual cost to service | $ 82 |
Guarantee asset | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Fair Value | $ 3,055,000 |
Guarantee asset | Minimum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Prepayment rate (annual CPR) | 9.00% |
Discount rate | 11.00% |
Guarantee asset | Maximum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Prepayment rate (annual CPR) | 9.00% |
Discount rate | 11.00% |
Guarantee asset | Weighted Average | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Prepayment rate (annual CPR) | 9.00% |
Discount rate | 11.00% |
REO | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Fair Value | $ 2,260,000 |
REO | Minimum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Loss severity | 12.00% |
REO | Maximum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Loss severity | 43.00% |
REO | Weighted Average | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Loss severity | 26.00% |
Loan purchase commitments | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Fair Value | $ 1,395,000 |
Loan purchase commitments | Minimum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Whole loan spread to TBA (in dollars per loan) | $ / loan | 1.78 |
Whole loan spread to swap rate | 2.01% |
Prepayment rate (annual CPR) | 15.00% |
MSR Multiple | 1 |
Pull-through rate | 9.00% |
Whole loan spread to swap rate - hybrid | 0.90% |
Loan purchase commitments | Maximum | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Whole loan spread to TBA (in dollars per loan) | $ / loan | 2.78 |
Whole loan spread to swap rate | 2.01% |
Prepayment rate (annual CPR) | 15.00% |
MSR Multiple | 5.2 |
Pull-through rate | 100.00% |
Whole loan spread to swap rate - hybrid | 1.65% |
Loan purchase commitments | Weighted Average | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | |
Whole loan spread to TBA (in dollars per loan) | $ / loan | 2.77 |
Whole loan spread to swap rate | 2.01% |
Prepayment rate (annual CPR) | 15.00% |
MSR Multiple | 3.4 |
Pull-through rate | 68.00% |
Whole loan spread to swap rate - hybrid | 1.19% |
Residential Loans - Summary of
Residential Loans - Summary of Classifications and Carrying Value of Residential Loans (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | |
Residential loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | $ 5,145,740 | $ 5,115,210 | |
Residential Loans Held For Sale | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | [1] | 1,130,185 | 1,427,945 |
Residential Loans Held For Sale | Residential loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 1,130,185 | 1,427,945 | |
Residential Loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 1,130,000 | 1,430,000 | |
Residential Loans | Residential loans | Jumbo Loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 1,129,890 | 1,427,052 | |
Residential loans, at lower of cost or fair value | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 300 | 1,000 | |
Residential loans, at lower of cost or fair value | Residential loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 295 | 893 | |
Residential Loans Held For Investment at Fair Value | Residential loans | Jumbo Loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 4,015,555 | 3,687,265 | |
Legacy Sequoia | Residential loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 626,151 | 632,817 | |
Legacy Sequoia | Residential Loans Held For Sale | Residential loans | |||
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 | 626,000 | 633,000 | |
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 | 626,151 | 632,817 | |
Sequoia Choice | Residential loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 1,013,619 | 620,062 | |
Sequoia Choice | Residential Loans Held For Sale | Residential loans | |||
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 | 1,010,000 | 620,000 | |
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 | 1,013,619 | 620,062 | |
Redwood | Residential loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 3,505,970 | 3,862,331 | |
Redwood | Residential Loans Held For Sale | Residential loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 1,130,185 | 1,427,945 | |
Redwood | Residential Loans | Residential loans | Jumbo Loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 1,129,890 | 1,427,052 | |
Redwood | Residential loans, at lower of cost or fair value | Residential loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 295 | 893 | |
Redwood | Residential Loans Held For Investment at Fair Value | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 2,430,000 | ||
Redwood | Residential Loans Held For Investment at Fair Value | Residential loans | Jumbo Loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | $ 2,375,785 | $ 2,434,386 | |
[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 March 31, 2018 and December 31, 2017, assets of consolidated VIEs totaled $1,647,850 and $1,259,774, respectively. At March 31, 2018 and December 31, 2017, liabilities of consolidated VIEs totaled $1,546,066 and $1,167,157, respectively. See Note 4 for further discussion. |
Residential Loans - Additional
Residential Loans - Additional Information (Details) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2018USD ($)loan | Mar. 31, 2017USD ($) | Dec. 31, 2017USD ($)loan | |
Mortgage Loans on Real Estate [Line Items] | |||
Transfers from loans held-for-sale to loans held-for-investment | $ 507,616,000 | $ 184,996,000 | |
Held-for-sale residential loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 5,145,740,000 | $ 5,115,210,000 | |
Legacy Sequoia | Held-for-sale residential loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 626,151,000 | 632,817,000 | |
Sequoia Choice | Held-for-sale residential loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 1,013,619,000 | 620,062,000 | |
Redwood | Held-for-sale residential loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | $ 3,505,970,000 | $ 3,862,331,000 | |
Redwood | Fixed-rate loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Weighted average coupon rate | 4.08% | ||
Redwood | Held-for-sale residential loans | FHLB Chicago | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loans pledged as collateral under borrowing agreement with FHLBC | $ 2,370,000,000 | ||
Residential Loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Number of loans (in loans) | loan | 1,598 | 2,009 | |
Loan Principal | $ 1,120,000,000 | $ 1,410,000,000 | |
Loan market valuation adjustment | 1,130,000,000 | 1,430,000,000 | |
Loans held-for-investment, delinquent greater than 90 days | $ 500,000 | ||
Principal value of loans purchased | 1,800,000,000 | 1,090,000,000 | |
Principal balance of loans sold during period | 2,010,000,000 | 1,360,000,000 | |
Gain (loss) on assets measured at fair value on a non-recurring basis | 5,000,000 | (9,000,000) | |
Loan pledged as collateral | 718,000,000 | ||
Number of loans in foreclosure (in loans) | loan | 0 | ||
Loans held-for-investment, in foreclosure | 1,000,000 | ||
Residential Loans | Jumbo Loans | Held-for-sale residential loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 1,129,890,000 | $ 1,427,052,000 | |
Residential Loans | Jumbo Loans | Legacy Sequoia | Held-for-sale residential loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 0 | 0 | |
Residential Loans | Jumbo Loans | Sequoia Choice | Held-for-sale residential loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | 0 | 0 | |
Residential Loans | Jumbo Loans | Redwood | Held-for-sale residential loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan market valuation adjustment | $ 1,129,890,000 | $ 1,427,052,000 | |
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 | 1 | |
Residential loans, at lower of cost or fair value | |||
Mortgage Loans on Real Estate [Line Items] | |||
Number of loans (in loans) | loan | 3 | 4 | |
Loan Principal | $ 400,000 | $ 1,000,000 | |
Loan market valuation adjustment | $ 300,000 | $ 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 | $ 295,000 | $ 893,000 | |
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 | |
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 | |
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 | $ 295,000 | $ 893,000 | |
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 | |
Loans held-for-investment, delinquent greater than 90 days | $ 300,000 | $ 300,000 | |
Residential Loans Held For Investment at Fair Value | |||
Mortgage Loans on Real Estate [Line Items] | |||
Number of loans in foreclosure (in loans) | loan | 0 | ||
Residential Loans Held For Investment at Fair Value | Legacy Sequoia | |||
Mortgage Loans on Real Estate [Line Items] | |||
Valuation adjustment gain (loss) | $ 29,000,000 | 8,000,000 | |
Residential Loans Held For Investment at Fair Value | Sequoia Choice | |||
Mortgage Loans on Real Estate [Line Items] | |||
Transfers from loans held-for-sale to loans held-for-investment | $ 452,000,000 | ||
Residential Loans Held For Investment at Fair Value | Legacy Sequoia | |||
Mortgage Loans on Real Estate [Line Items] | |||
Number of loans (in loans) | loan | 3,059 | 3,178 | |
Loan Principal | $ 662,000,000 | $ 698,000,000 | |
Loan market valuation adjustment | 626,000,000 | 633,000,000 | |
Loans held-for-investment, delinquent greater than 90 days | 23,000,000 | $ 25,000,000 | |
Weighted average original Fair Isaac Corporation (FICO) score | 728 | ||
Weighted average original loan-to-value (LTV) | 66.00% | ||
Loans held-for-investment, in foreclosure | $ 9,000,000 | $ 10,000,000 | |
Residential Loans Held For Investment at Fair Value | Sequoia Choice | |||
Mortgage Loans on Real Estate [Line Items] | |||
Number of loans (in loans) | loan | 1,335 | 806 | |
Loan Principal | $ 996,000,000 | $ 605,000,000 | |
Loan market valuation adjustment | 1,010,000,000 | 620,000,000 | |
Loans held-for-investment, delinquent greater than 90 days | $ 0 | $ 0 | |
Weighted average original Fair Isaac Corporation (FICO) score | 742 | ||
Weighted average original loan-to-value (LTV) | 74.00% | ||
Residential Loans Held For Investment at Fair Value | Redwood | |||
Mortgage Loans on Real Estate [Line Items] | |||
Number of loans (in loans) | loan | 3,279 | 3,292 | |
Loan Principal | $ 2,390,000,000 | $ 2,410,000,000 | |
Loan market valuation adjustment | 2,430,000,000 | ||
Gain (loss) on assets measured at fair value on a non-recurring basis | (39,000,000) | (2,000,000) | |
Transfers from loans held-for-sale to loans held-for-investment | 56,000,000 | 185,000,000 | |
Transfers from loans held-for-investment to loans held-for-sale | $ 0 | $ 0 | |
Weighted average original Fair Isaac Corporation (FICO) score | 771 | ||
Weighted average original loan-to-value (LTV) | 66.00% | ||
Percentage of fixed-rate loans | 90.00% | ||
Residential Loans Held For Investment at Fair Value | Redwood | Originated Between 2013 and 2017 | |||
Mortgage Loans on Real Estate [Line Items] | |||
Percentage of loan portfolio originated in year | 96.00% | ||
Residential Loans Held For Investment at Fair Value | Redwood | Originated 2012 and prior years | |||
Mortgage Loans on Real Estate [Line Items] | |||
Percentage of loan portfolio originated in year | 4.00% | ||
Residential Loans Held For Investment at Fair Value | Redwood | Hybrid loans | |||
Mortgage Loans on Real Estate [Line Items] | |||
Weighted average coupon rate | 4.10% | ||
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 | $ 4,015,555,000 | 3,687,265,000 | |
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 | 626,151,000 | 632,817,000 | |
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 | 1,013,619,000 | 620,062,000 | |
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 | 2,375,785,000 | $ 2,434,386,000 | |
Residential Loans Held For Investment at Fair Value | Financing Receivables, Equal to Greater than 90 Days Past Due | Redwood | |||
Mortgage Loans on Real Estate [Line Items] | |||
Loan Principal | $ 2,000,000 | ||
Number of loans past due (in loans) | loan | 3 | 0 | |
MSRs | |||
Mortgage Loans on Real Estate [Line Items] | |||
Mortgage servicing rights, at amortized cost | $ 2,810,000,000 |
Real Estate Securities - Fair V
Real Estate Securities - Fair Values of Real Estate Securities (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | |
Investments, Debt and Equity Securities [Abstract] | |||
Trading | $ 907,432 | $ 968,844 | |
Available-for-sale | 450,288 | 507,666 | |
Total Real Estate Securities | [1] | $ 1,357,720 | $ 1,476,510 |
[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 March 31, 2018 and December 31, 2017, assets of consolidated VIEs totaled $1,647,850 and $1,259,774, respectively. At March 31, 2018 and December 31, 2017, liabilities of consolidated VIEs totaled $1,546,066 and $1,167,157, respectively. See Note 4 for further discussion. |
Real Estate Securities - Tradin
Real Estate Securities - Trading Securities by Collateral Type (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Investment Holdings [Line Items] | ||
Trading securities | $ 907,432 | $ 968,844 |
Senior IO Securities | ||
Investment Holdings [Line Items] | ||
Trading securities | 82,062 | 69,974 |
Subordinate Securities | Mezzanine | ||
Investment Holdings [Line Items] | ||
Trading securities | 537,831 | 563,475 |
Subordinate Securities | Subordinate | ||
Investment Holdings [Line Items] | ||
Trading securities | $ 287,539 | $ 335,395 |
Real Estate Securities - Additi
Real Estate Securities - Additional Information (Details) | 3 Months Ended | ||
Mar. 31, 2018USD ($)Investment | Mar. 31, 2017USD ($) | Dec. 31, 2017USD ($)Investment | |
Investment Holdings [Line Items] | |||
Trading securities pledged as collateral | $ 486,000,000 | ||
Trading securities | 907,432,000 | $ 968,844,000 | |
Trading securities acquired | 145,000,000 | $ 154,000,000 | |
Trading securities sold | 182,000,000 | 9,000,000 | |
Increase (decrease) in valuation of trading securities | (3,000,000) | 11,000,000 | |
Available-for-sale securities purchased | 4,000,000 | 25,000,000 | |
Available-for-sale securities sold | 51,000,000 | 19,000,000 | |
Net realized gains on AFS securities | $ 9,000,000 | 5,000,000 | |
Number of AFS securities (in investments) | Investment | 152 | 167 | |
Number of securities in unrealized loss position (in investments) | Investment | 13 | 9 | |
Number of securities in a continuous unrealized loss position for twelve consecutive months or longer (in investments) | Investment | 3 | 3 | |
Impairment losses, investments | $ 0 | ||
Investment fair value changes, net | (1,609,000) | (1,551,000) | |
Other than temporary impairment recognized in AOCI | 100,000 | ||
Reclassification out of Accumulated Other Comprehensive Income | Net Unrealized Gains on Available-for-Sale Securities | |||
Investment Holdings [Line Items] | |||
Impairment losses, investments | 200,000 | ||
Investment fair value changes, net | 0 | $ 117,000 | |
Residential | |||
Investment Holdings [Line Items] | |||
Gross unrealized losses | 1,322,000 | $ 1,367,000 | |
REO | |||
Investment Holdings [Line Items] | |||
Assets | 1,060,837,000 | ||
Subordinate Securities | Residential | |||
Investment Holdings [Line Items] | |||
Gross unrealized losses | 367,000 | 132,000 | |
Subordinate Securities | REO | |||
Investment Holdings [Line Items] | |||
Assets | 374,785,000 | ||
Re-REMIC | REO | |||
Investment Holdings [Line Items] | |||
Assets | 38,000,000 | 39,000,000 | |
Trading securities | Residential Subordinate Securities | |||
Investment Holdings [Line Items] | |||
Unpaid principal balance | 900,000,000 | 943,000,000 | |
CRT securities | Subordinate Securities | |||
Investment Holdings [Line Items] | |||
Trading securities | 246,000,000 | 301,000,000 | |
Sequoia securities | |||
Investment Holdings [Line Items] | |||
Trading securities pledged as collateral | 57,000,000 | ||
Sequoia securities | Subordinate Securities | |||
Investment Holdings [Line Items] | |||
Trading securities | 54,000,000 | 68,000,000 | |
Other third party securities | Subordinate Securities | |||
Investment Holdings [Line Items] | |||
Trading securities | 148,000,000 | 206,000,000 | |
Third-party multifamily mortgage-backed securities | Subordinate Securities | |||
Investment Holdings [Line Items] | |||
Trading securities | 377,000,000 | $ 324,000,000 | |
Residential | |||
Investment Holdings [Line Items] | |||
Marketable securities, less than five years | 100,000 | ||
Marketable securities, due from five to ten years | 2,000,000 | ||
Residential | AFS securities retained, at fair value | |||
Investment Holdings [Line Items] | |||
Securities pledged as collateral | $ 178,000,000 |
Real Estate Securities - Availa
Real Estate Securities - Available for Sale Securities by Collateral Type (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Investment Holdings [Line Items] | ||
Available-for-sale securities | $ 450,288 | $ 507,666 |
Senior IO Securities | ||
Investment Holdings [Line Items] | ||
Available-for-sale securities | 165,610 | 179,864 |
Subordinate Securities | Mezzanine | ||
Investment Holdings [Line Items] | ||
Available-for-sale securities | 67,291 | 92,002 |
Subordinate Securities | Subordinate | ||
Investment Holdings [Line Items] | ||
Available-for-sale securities | $ 217,387 | $ 235,800 |
Real Estate Securities - Compon
Real Estate Securities - Components of Carrying Value (Which Equals Fair Value) of Residential Available for Sale Securities (Details) - Residential - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Schedule of Available-for-sale Securities [Line Items] | ||
Principal balance | $ 552,935 | $ 608,145 |
Credit reserve | (40,616) | (46,549) |
Unamortized discount, net | (178,302) | (183,753) |
Amortized cost | 334,017 | 377,843 |
Gross unrealized gains | 117,593 | 131,190 |
Gross unrealized losses | (1,322) | (1,367) |
Carrying Value | 450,288 | 507,666 |
Senior IO Securities | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Principal balance | 172,026 | 189,125 |
Credit reserve | (8,206) | (8,756) |
Unamortized discount, net | (39,174) | (44,041) |
Amortized cost | 124,646 | 136,328 |
Gross unrealized gains | 41,919 | 44,771 |
Gross unrealized losses | (955) | (1,235) |
Carrying Value | 165,610 | 179,864 |
Mezzanine | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Principal balance | 67,995 | 91,471 |
Credit reserve | 0 | 0 |
Unamortized discount, net | (6,959) | (9,407) |
Amortized cost | 61,036 | 82,064 |
Gross unrealized gains | 6,255 | 9,938 |
Gross unrealized losses | 0 | 0 |
Carrying Value | 67,291 | 92,002 |
Subordinate Securities | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Principal balance | 312,914 | 327,549 |
Credit reserve | (32,410) | (37,793) |
Unamortized discount, net | (132,169) | (130,305) |
Amortized cost | 148,335 | 159,451 |
Gross unrealized gains | 69,419 | 76,481 |
Gross unrealized losses | (367) | (132) |
Carrying Value | $ 217,387 | $ 235,800 |
Real Estate Securities - Change
Real Estate Securities - Changes of Unamortized Discount and Designated Credit Reserves on Residential Available for Sale Securities (Details) - Residential $ in Thousands | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Credit Reserve | |
Beginning balance | $ 46,549 |
Amortization of net discount | 0 |
Realized credit losses | (956) |
Acquisitions | 2,536 |
Sales, calls, other | (767) |
Transfers to (release of) credit reserves, net | (6,746) |
Ending Balance | 40,616 |
Unamortized Discount, Net | |
Beginning balance | 183,753 |
Amortization of net discount | (4,060) |
Realized credit losses | 0 |
Acquisitions | 1,635 |
Sales, calls, other | (9,772) |
Transfers to (release of) credit reserves, net | 6,746 |
Ending Balance | $ 178,302 |
Real Estate Securities - Comp78
Real Estate Securities - Components of Carrying Value of Residential Available for Sale Securities in Unrealized Loss Position (Details) - Residential - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Schedule of Available-for-sale Securities [Line Items] | ||
Less Than 12 Consecutive Months Amortized Cost | $ 12,799 | $ 8,637 |
Less Than 12 Consecutive Months Unrealized Losses | (367) | (132) |
Less Than 12 Consecutive Months Fair Value | 12,432 | 8,505 |
12 Consecutive Months or Longer Amortized Cost | 27,186 | 28,557 |
12 Consecutive Months or Longer Unrealized Losses | (955) | (1,235) |
12 Consecutive Months or Longer Fair Value | $ 26,231 | $ 27,322 |
Real Estate Securities - Summar
Real Estate Securities - Summary of Significant Valuation Assumptions for Available for Sale Securities (Details) - Prime | 3 Months Ended |
Mar. 31, 2018 | |
Minimum | |
Schedule of Available-for-sale Securities [Line Items] | |
Prepayment rates | 8.00% |
Projected losses | 0.20% |
Maximum | |
Schedule of Available-for-sale Securities [Line Items] | |
Prepayment rates | 20.00% |
Projected losses | 5.25% |
Real Estate Securities - Activi
Real Estate Securities - Activity of Credit Component of Other-than-Temporary Impairments (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Activity of the Credit Component of Other-than-Temporary Impairments | ||
Balance at beginning of period | $ 21,037 | $ 28,261 |
Additions | ||
Initial credit impairments | 0 | 97 |
Reductions | ||
Securities sold, or expected to sell | (99) | (1,566) |
Securities with no outstanding principal at period end | (14) | (402) |
Balance at End of Period | $ 20,924 | $ 26,390 |
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 | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Schedule of Available-for-sale Securities [Line Items] | ||
Total Realized Gains on Sales and Calls of AFS Securities, net | $ 9,363 | $ 5,703 |
Sales | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Gross realized gains | 9,363 | 5,092 |
Calls | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Gross realized gains | $ 0 | $ 611 |
Mortgage Servicing Rights - Sch
Mortgage Servicing Rights - Schedule of Fair Value of MSRs and Aggregate Principal Amounts of Associated Loans (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | |
Servicing Assets at Fair Value [Line Items] | |||||
Mortgage servicing rights, at fair value | [1] | $ 66,496 | $ 63,598 | ||
MSRs | |||||
Servicing Assets at Fair Value [Line Items] | |||||
Mortgage servicing rights, at fair value | 66,496 | 63,598 | $ 111,013 | $ 118,526 | |
Associated Principal | $ 5,420,000 | $ 5,560,000 | |||
[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 March 31, 2018 and December 31, 2017, assets of consolidated VIEs totaled $1,647,850 and $1,259,774, respectively. At March 31, 2018 and December 31, 2017, liabilities of consolidated VIEs totaled $1,546,066 and $1,167,157, respectively. See Note 4 for further discussion. |
Mortgage Servicing Rights - Act
Mortgage Servicing Rights - Activity for Residential First-Lien Mortgage Servicing Rights (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | ||
Servicing Asset at Fair Value, Amount [Roll Forward] | |||
Balance at beginning of period | [1] | $ 63,598 | |
Additions | 0 | $ 7,386 | |
Changes in fair value due to: | |||
Balance at End of Period | [1] | 66,496 | |
MSRs | |||
Servicing Asset at Fair Value, Amount [Roll Forward] | |||
Balance at beginning of period | 63,598 | 118,526 | |
Additions | 0 | 7,485 | |
Sales | 0 | (11,928) | |
Changes in fair value due to: | |||
Changes in assumptions | 4,346 | (657) | |
Other changes | (1,448) | (2,413) | |
Balance at End of Period | $ 66,496 | $ 111,013 | |
[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 March 31, 2018 and December 31, 2017, assets of consolidated VIEs totaled $1,647,850 and $1,259,774, respectively. At March 31, 2018 and December 31, 2017, liabilities of consolidated VIEs totaled $1,546,066 and $1,167,157, respectively. See Note 4 for further discussion. |
Mortgage Servicing Rights - Com
Mortgage Servicing Rights - Components of Mortgage Servicing Rights Income (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Transfers and Servicing [Abstract] | ||
Servicing income | $ 3,796 | $ 6,907 |
Cost of sub-servicer | (592) | (1,380) |
Net servicing fee income | 3,204 | 5,527 |
Market valuation changes of MSRs | 2,892 | (3,070) |
Market valuation changes of associated derivatives | (5,139) | (749) |
MSR reversal of provision for repurchases | 0 | 5 |
MSR Income, Net | $ 957 | $ 1,713 |
Derivative Financial Instrume85
Derivative Financial Instruments - Aggregate Fair Value and Notional Amount of Derivative Financial Instruments (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Derivative [Line Items] | ||
Fair Value | $ 7,343 | $ (47,363) |
Notional Amount | 7,639,175 | 6,644,081 |
TBAs | ||
Derivative [Line Items] | ||
Notional Amount | 2,630,000 | 1,700,000 |
Futures | ||
Derivative [Line Items] | ||
Notional Amount | 15,000 | 8,000 |
Derivative Liabilities | ||
Derivative [Line Items] | ||
Fair Value | (56,201) | (63,081) |
Notional Amount | 2,684,123 | 3,485,466 |
Derivative Liabilities | Interest rate swaps | ||
Derivative [Line Items] | ||
Fair Value | (11,346) | (11,888) |
Notional Amount | 451,500 | 1,248,000 |
Derivative Liabilities | Interest rate swaps | Cash Flow Hedging | ||
Derivative [Line Items] | ||
Fair Value | (35,167) | (43,679) |
Notional Amount | 139,500 | 139,500 |
Derivative Liabilities | TBAs | ||
Derivative [Line Items] | ||
Fair Value | (5,457) | (3,808) |
Notional Amount | 1,110,000 | 1,400,000 |
Derivative Liabilities | Futures | ||
Derivative [Line Items] | ||
Fair Value | (357) | 0 |
Notional Amount | 15,000 | 0 |
Derivative Liabilities | Loan purchase commitments | ||
Derivative [Line Items] | ||
Fair Value | (2,605) | (3,706) |
Notional Amount | 627,803 | 697,966 |
Derivative Liabilities | Loan forward sale commitments | ||
Derivative [Line Items] | ||
Fair Value | (1,269) | 0 |
Notional Amount | 340,320 | 0 |
Derivative Assets | ||
Derivative [Line Items] | ||
Fair Value | 63,544 | 15,718 |
Notional Amount | 4,955,052 | 3,158,615 |
Derivative Assets | Interest rate swaps | ||
Derivative [Line Items] | ||
Fair Value | 50,919 | 10,122 |
Notional Amount | 2,869,500 | 1,765,000 |
Derivative Assets | TBAs | ||
Derivative [Line Items] | ||
Fair Value | 8,625 | 133 |
Notional Amount | 1,515,000 | 295,000 |
Derivative Assets | Futures | ||
Derivative [Line Items] | ||
Fair Value | 0 | 1 |
Notional Amount | 0 | 7,500 |
Derivative Assets | Swaptions | ||
Derivative [Line Items] | ||
Fair Value | 0 | 42 |
Notional Amount | 0 | 200,000 |
Derivative Assets | Loan purchase commitments | ||
Derivative [Line Items] | ||
Fair Value | 4,000 | 3,243 |
Notional Amount | 570,552 | 547,434 |
Derivative Assets | Loan forward sale commitments | ||
Derivative [Line Items] | ||
Fair Value | 0 | 2,177 |
Notional Amount | $ 0 | $ 343,681 |
Derivative Financial Instrume86
Derivative Financial Instruments - Additional Information (Details) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2018USD ($)counterparty | Mar. 31, 2017USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | |
Derivative [Line Items] | ||||
Notional amount | $ 7,639,175 | $ 6,644,081 | ||
Accumulated other comprehensive income | $ 1,219,983 | $ 1,165,771 | 1,212,287 | $ 1,149,428 |
Number of counterparties (in counterparties) | counterparty | 2 | |||
Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges | ||||
Derivative [Line Items] | ||||
Accumulated other comprehensive income | $ (34,522) | (42,273) | (42,953) | $ (44,020) |
Mortgage Banking Activities, Net | ||||
Derivative [Line Items] | ||||
Market valuations gains and losses, net | 26,238 | 17,397 | ||
Derivative Liabilities | ||||
Derivative [Line Items] | ||||
Notional amount | 2,684,123 | 3,485,466 | ||
Loan purchase commitments | Mortgage Banking Activities, Net | ||||
Derivative [Line Items] | ||||
Market valuations gains and losses, net | (6,968) | 10,265 | ||
Interest rate contract | ||||
Derivative [Line Items] | ||||
Notional amount | 3,320,000 | 3,210,000 | ||
TBAs | ||||
Derivative [Line Items] | ||||
Notional amount | 2,630,000 | 1,700,000 | ||
TBAs | Derivative Liabilities | ||||
Derivative [Line Items] | ||||
Notional amount | 1,110,000 | 1,400,000 | ||
Futures | ||||
Derivative [Line Items] | ||||
Notional amount | 15,000 | 8,000 | ||
Futures | Derivative Liabilities | ||||
Derivative [Line Items] | ||||
Notional amount | 15,000 | 0 | ||
Unsecuritized Residential and Commercial Loans | ||||
Derivative [Line Items] | ||||
Derivative gain (loss) | 67,000 | (7,000) | ||
Interest rate swaps | Cash Flow Hedging | ||||
Derivative [Line Items] | ||||
Derivative gain (loss) | 8,000 | $ 2,000 | ||
Interest rate swaps | Derivative Liabilities | ||||
Derivative [Line Items] | ||||
Notional amount | 451,500 | 1,248,000 | ||
Interest rate swaps | Derivative Liabilities | Cash Flow Hedging | ||||
Derivative [Line Items] | ||||
Notional amount | $ 139,500 | $ 139,500 |
Derivative Financial Instrume87
Derivative Financial Instruments - Impact on Interest Expense of Interest Rate Agreements Accounted for as Cash Flow Hedges (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Derivative [Line Items] | ||
Total Interest Expense | $ (41,514) | $ (21,031) |
Cash Flow Hedging | Interest rate contract | ||
Derivative [Line Items] | ||
Net interest expense on cash flows hedges | (998) | (1,225) |
Realized net losses reclassified from other comprehensive income | 0 | (14) |
Total Interest Expense | $ (998) | $ (1,239) |
Other Assets and Liabilities -
Other Assets and Liabilities - Components of Other Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||
Margin receivable | $ 50,200 | $ 85,044 | |
FHLBC stock | 43,393 | 43,393 | |
Pledged collateral | 42,290 | 42,615 | |
MSR holdback receivable | 3,952 | 8,141 | |
Fixed assets and leasehold improvements | 3,794 | 2,645 | |
REO | 3,115 | 3,354 | |
Guarantee asset | 3,055 | 2,869 | |
Other | 8,049 | 6,905 | |
Total Other Assets | [1] | 157,848 | $ 194,966 |
Fixed assets | 8,000 | ||
Accumulated depreciation | $ 4,000 | ||
[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 March 31, 2018 and December 31, 2017, assets of consolidated VIEs totaled $1,647,850 and $1,259,774, respectively. At March 31, 2018 and December 31, 2017, liabilities of consolidated VIEs totaled $1,546,066 and $1,167,157, respectively. See Note 4 for further discussion. |
Other Assets and Liabilities 89
Other Assets and Liabilities - Accrued Expenses and Other Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||
Guarantee obligations | $ 18,931 | $ 19,487 | |
Margin payable | 16,878 | 390 | |
Accrued compensation | 11,982 | 24,025 | |
Deferred tax liabilities | 11,764 | 11,764 | |
Residential loan and MSR repurchase reserve | 5,197 | 4,916 | |
Accrued income taxes payable | 4,950 | 0 | |
Legal reserve | 2,000 | 2,000 | |
Other | 6,060 | 5,147 | |
Total Accrued Expenses and Other Liabilities | [1] | $ 77,762 | $ 67,729 |
[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 March 31, 2018 and December 31, 2017, assets of consolidated VIEs totaled $1,647,850 and $1,259,774, respectively. At March 31, 2018 and December 31, 2017, liabilities of consolidated VIEs totaled $1,546,066 and $1,167,157, respectively. See Note 4 for further discussion. |
Other Assets and Liabilities 90
Other Assets and Liabilities - Additional Information (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018USD ($)property | Dec. 31, 2017USD ($)property | |
Other Assets and Other Liabilities [Line Items] | ||
Real estate owned (REO) | $ 3,115 | $ 3,354 |
Amount related to transfers into REO | 1,000 | |
REO liquidations | 2,000 | |
Unrealized gain resulting from market valuation adjustments on REO | $ 100 | |
Legacy Sequoia | ||
Other Assets and Other Liabilities [Line Items] | ||
Number of REO properties recorded on balance sheet (in properties) | property | 11 | 14 |
Short-Term Debt - Outstanding B
Short-Term Debt - Outstanding Balances of Short-Term Debt by Type of Collateral Securing Debt (Details) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2018USD ($)Facility | Dec. 31, 2017USD ($)Facility | ||
Short-term Debt [Line Items] | |||
Outstanding Balance | [1],[2] | $ 1,504,460,000 | $ 1,938,682,000 |
Facilities | |||
Short-term Debt [Line Items] | |||
Number of Facilities | Facility | 12 | 13 | |
Outstanding Balance | $ 1,254,076,000 | $ 1,688,412,000 | |
Facilities | Residential loan warehouse | |||
Short-term Debt [Line Items] | |||
Number of Facilities | Facility | 4 | 4 | |
Outstanding Balance | $ 661,782,000 | $ 1,039,666,000 | |
Limit | $ 1,425,000,000 | $ 1,575,000,000 | |
Weighted Average Interest Rate | 3.51% | 3.17% | |
Weighted Average Days Until Maturity (in days) | 246 days | 197 days | |
Facilities | Real estate securities repo | |||
Short-term Debt [Line Items] | |||
Number of Facilities | Facility | 8 | 9 | |
Outstanding Balance | $ 592,294,000 | $ 648,746,000 | |
Limit | $ 0 | $ 0 | |
Weighted Average Interest Rate | 3.03% | 2.69% | |
Weighted Average Days Until Maturity (in days) | 27 days | 28 days | |
Convertible notes, net | |||
Short-term Debt [Line Items] | |||
Outstanding Balance | $ 250,384,000 | $ 250,270,000 | |
Weighted Average Interest Rate | 4.63% | 4.63% | |
Weighted Average Days Until Maturity (in days) | 15 days | 105 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 March 31, 2018 and December 31, 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 March 31, 2018 and December 31, 2017, assets of consolidated VIEs totaled $1,647,850 and $1,259,774, respectively. At March 31, 2018 and December 31, 2017, liabilities of consolidated VIEs totaled $1,546,066 and $1,167,157, respectively. See Note 4 for further discussion. |
Short-Term Debt - Additional In
Short-Term Debt - Additional Information (Details) - USD ($) | 3 Months Ended | |||||
Mar. 31, 2018 | Jun. 30, 2017 | Mar. 31, 2017 | Apr. 30, 2018 | Dec. 31, 2017 | Mar. 31, 2013 | |
Short-term Debt [Line Items] | ||||||
Trading securities pledged as collateral | $ 486,000,000 | |||||
Average balance of short-term debt | 1,370,000,000 | $ 794,000,000 | ||||
Accrued interest payable on short-term debt | 2,000,000 | $ 2,000,000 | ||||
Committed line of credit | 10,000,000 | |||||
Fair value of mortgage backed securities securing loan (in excess) | 5,000,000 | |||||
Committed line of credit with financial institutions, outstanding | 0 | 0 | ||||
Convertible Debt | Convertible Senior Notes Due 2018 | ||||||
Short-term Debt [Line Items] | ||||||
Accrued interest payable on short-term debt | 5,000,000 | |||||
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) | |||||
Convertible Debt | Convertible Senior Notes Due 2018 | Subsequent Event | ||||||
Short-term Debt [Line Items] | ||||||
Debt Instrument interest rate | 4.625% | |||||
Amount of debt repurchased | $ 250,000,000 | |||||
Sequoia securities | ||||||
Short-term Debt [Line Items] | ||||||
Trading securities pledged as collateral | 57,000,000 | |||||
Residential loans | ||||||
Short-term Debt [Line Items] | ||||||
Loan pledged as collateral | 1,150,000,000 | |||||
Residential | ||||||
Short-term Debt [Line Items] | ||||||
Securities pledged as collateral | 721,000,000 | $ 788,000,000 | ||||
Residential Loans | ||||||
Short-term Debt [Line Items] | ||||||
Loan pledged as collateral | $ 718,000,000 |
Short-Term Debt - Remaining Mat
Short-Term Debt - Remaining Maturities of Short Term Debt (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | |
Short-term Debt [Line Items] | |||
Short-term debt | [1],[2] | $ 1,504,460 | $ 1,938,682 |
Within 30 Days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 695,764 | ||
31 to 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 146,914 | ||
Over 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 661,782 | ||
Facilities | |||
Short-term Debt [Line Items] | |||
Short-term debt | 1,254,076 | 1,688,412 | |
Facilities | Within 30 Days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 445,380 | ||
Facilities | 31 to 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 146,914 | ||
Facilities | Over 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 661,782 | ||
Facilities | Residential loan warehouse | |||
Short-term Debt [Line Items] | |||
Short-term debt | 661,782 | 1,039,666 | |
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 | 0 | ||
Facilities | Residential loan warehouse | Over 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 661,782 | ||
Facilities | Real estate securities repo | |||
Short-term Debt [Line Items] | |||
Short-term debt | 592,294 | 648,746 | |
Facilities | Real estate securities repo | Within 30 Days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 445,380 | ||
Facilities | Real estate securities repo | 31 to 90 days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 146,914 | ||
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 | 250,384 | $ 250,270 | |
Convertible notes, net | Within 30 Days | |||
Short-term Debt [Line Items] | |||
Short-term debt | 250,384 | ||
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 | $ 0 | ||
[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 March 31, 2018 and December 31, 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 March 31, 2018 and December 31, 2017, assets of consolidated VIEs totaled $1,647,850 and $1,259,774, respectively. At March 31, 2018 and December 31, 2017, liabilities of consolidated VIEs totaled $1,546,066 and $1,167,157, respectively. See Note 4 for further discussion. |
Asset-Backed Securities Issue94
Asset-Backed Securities Issued - Components of Asset-Backed Securities Issued by Consolidated Securitization Entities Sponsored, Along With Other Selected Information (Details) $ in Thousands | Mar. 31, 2018USD ($)series | Dec. 31, 2017USD ($)series | |
Debt Instrument [Line Items] | |||
Total FHLBC Borrowings | [1] | $ 2,575,588 | $ 2,575,023 |
Asset-backed securities issued | |||
Debt Instrument [Line Items] | |||
Market valuation adjustments | (34,264) | (62,864) | |
Total FHLBC Borrowings | 1,542,087 | 1,164,585 | |
Asset-backed securities issued | Certificates with principal balance | |||
Debt Instrument [Line Items] | |||
Certificates with principal balance | 1,560,901 | 1,217,782 | |
Asset-backed securities issued | Interest-only certificates | |||
Debt Instrument [Line Items] | |||
Certificates with principal balance | 15,450 | 9,667 | |
Asset-backed securities issued | Legacy Sequoia | |||
Debt Instrument [Line Items] | |||
Market valuation adjustments | (41,148) | (70,652) | |
Total FHLBC Borrowings | $ 615,849 | $ 622,445 | |
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 | 1.77% | 1.46% | |
Asset-backed securities issued | Legacy Sequoia | Maximum | |||
Debt Instrument [Line Items] | |||
Weighted average interest rates, by series | 2.83% | 2.78% | |
Asset-backed securities issued | Legacy Sequoia | Certificates with principal balance | |||
Debt Instrument [Line Items] | |||
Certificates with principal balance | $ 655,188 | $ 691,125 | |
Asset-backed securities issued | Legacy Sequoia | Interest-only certificates | |||
Debt Instrument [Line Items] | |||
Certificates with principal balance | 1,809 | 1,972 | |
Asset-backed securities issued | Sequoia Choice | |||
Debt Instrument [Line Items] | |||
Market valuation adjustments | 6,884 | 7,788 | |
Total FHLBC Borrowings | $ 926,238 | $ 542,140 | |
Number of series (in series) | series | 3 | 2 | |
Asset-backed securities issued | Sequoia Choice | Minimum | |||
Debt Instrument [Line Items] | |||
Weighted average interest rates, by series | 4.49% | 4.52% | |
Asset-backed securities issued | Sequoia Choice | Maximum | |||
Debt Instrument [Line Items] | |||
Weighted average interest rates, by series | 4.66% | 4.73% | |
Asset-backed securities issued | Sequoia Choice | Certificates with principal balance | |||
Debt Instrument [Line Items] | |||
Certificates with principal balance | $ 905,713 | $ 526,657 | |
Asset-backed securities issued | Sequoia Choice | Interest-only certificates | |||
Debt Instrument [Line Items] | |||
Certificates with principal balance | $ 13,641 | $ 7,695 | |
[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 March 31, 2018 and December 31, 2017, assets of consolidated VIEs totaled $1,647,850 and $1,259,774, respectively. At March 31, 2018 and December 31, 2017, liabilities of consolidated VIEs totaled $1,546,066 and $1,167,157, respectively. See Note 4 for further discussion. |
Asset-Backed Securities Issue95
Asset-Backed Securities Issued - Additional Information (Details) - Asset-backed securities issued - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
Legacy Sequoia | ||
Debt Instrument [Line Items] | ||
Amortization of debt issuance costs | $ 1 | $ 1 |
Sequoia Choice | ||
Debt Instrument [Line Items] | ||
Amortization of debt issuance costs | $ 3 | $ 2 |
Contractual maturities of over five years | ||
Debt Instrument [Line Items] | ||
Contractual maturities of ABS (in years) | 5 years |
Asset-Backed Securities Issue96
Asset-Backed Securities Issued - Summary of Carrying Value Components of Collateral for Asset-Backed Securities Issued and Outstanding (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | $ 1,647,850 | $ 1,259,774 |
Residential loans | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 1,639,770 | 1,252,879 |
Restricted cash | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 155 | 151 |
Accrued interest receivable | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 4,810 | 3,391 |
REO | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 3,115 | 3,353 |
Legacy Sequoia | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 630,167 | 637,184 |
Legacy Sequoia | Residential loans | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 626,151 | 632,817 |
Legacy Sequoia | Restricted cash | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 148 | 147 |
Legacy Sequoia | Accrued interest receivable | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 753 | 867 |
Legacy Sequoia | REO | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 3,115 | 3,353 |
Sequoia Choice | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 1,017,683 | 622,590 |
Sequoia Choice | Residential loans | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 1,013,619 | 620,062 |
Sequoia Choice | Restricted cash | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 7 | 4 |
Sequoia Choice | Accrued interest receivable | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | 4,057 | 2,524 |
Sequoia Choice | REO | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Collateral for ABS Issued | $ 0 | $ 0 |
Long-Term Debt - Additional Inf
Long-Term Debt - Additional Information (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||||||
Aug. 31, 2017 | Jan. 31, 2016 | Nov. 30, 2014 | Mar. 31, 2013 | Mar. 31, 2018 | Jun. 30, 2017 | Mar. 31, 2016 | Dec. 31, 2017 | Apr. 30, 2018 | ||
Debt Instrument [Line Items] | ||||||||||
Transition period for subsidiary to be a FHLB-member (in years) | 5 years | |||||||||
Existing debt | $ 0 | $ 0 | ||||||||
Federal home loan bank stock | 43,393,000 | 43,393,000 | ||||||||
Accrued interest payable | 2,000,000 | 2,000,000 | ||||||||
Notional amount | 7,639,175,000 | 6,644,081,000 | ||||||||
Accrued interest payable | [1] | $ 23,492,000 | 18,435,000 | |||||||
Trust Preferred Securities And Subordinated Notes | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Weighted average interest rates, by series | 6.80% | |||||||||
Accrued interest payable | $ 1,000,000 | 1,000,000 | ||||||||
Trust Preferred Securities And Subordinated Notes | Interest rate swaps | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Notional amount | $ 140,000,000 | |||||||||
Trust Preferred Securities And Subordinated Notes | LIBOR | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Basis spread on variable rate | 2.25% | |||||||||
Trust Preferred Securities | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Debt instrument face amount | $ 100,000,000 | |||||||||
Subordinated Notes | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Debt instrument face amount | 40,000,000 | |||||||||
Senior Notes Due 2023 | Convertible Debt | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Convertible notes | $ 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 | |||||||||
Accrued interest payable | $ 1,000,000 | |||||||||
Unamortized debt issuance costs | 7,000,000 | |||||||||
Exchangeable Senior Notes Due 2019 | Convertible Debt | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Convertible notes | $ 205,000,000 | $ 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 | |||||||||
Accrued interest payable | $ 4,000,000 | |||||||||
Unamortized debt issuance costs | $ 2,000,000 | |||||||||
Debt instrument redemption date | Nov. 15, 2019 | |||||||||
Amount of debt repurchased | $ 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 | |||||||||
Accrued interest payable | $ 5,000,000 | |||||||||
Unamortized debt issuance costs | 100,000 | |||||||||
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 | |||||||||
Convertible Senior Notes Due 2018 | Convertible Debt | Subsequent Event | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Debt Instrument interest rate | 4.625% | |||||||||
Amount of debt repurchased | $ 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 | Redwood | Held-for-sale residential loans | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Loans pledged as collateral under borrowing agreement with FHLBC | $ 2,370,000,000 | |||||||||
FHLB Member Subsidiary | FHLB Chicago | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Maximum borrowing limit | 2,000,000,000 | |||||||||
Additional borrowings from FHLBC | 0 | |||||||||
Existing debt | 2,000,000,000 | |||||||||
Federal home loan bank advances outstanding | $ 2,000,000,000 | $ 2,000,000,000 | ||||||||
Weighted average interest rate | 1.74% | 1.38% | ||||||||
Weighted average maturity (in years) | 7 years | 8 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 March 31, 2018 and December 31, 2017, assets of consolidated VIEs totaled $1,647,850 and $1,259,774, respectively. At March 31, 2018 and December 31, 2017, liabilities of consolidated VIEs totaled $1,546,066 and $1,167,157, respectively. See Note 4 for further discussion. |
Long-Term Debt - FHLBC Borrowin
Long-Term Debt - FHLBC Borrowings (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | |
Debt Instrument [Line Items] | |||
Total FHLBC Borrowings | [1] | $ 2,575,588 | $ 2,575,023 |
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 March 31, 2018 and December 31, 2017, assets of consolidated VIEs totaled $1,647,850 and $1,259,774, respectively. At March 31, 2018 and December 31, 2017, liabilities of consolidated VIEs totaled $1,546,066 and $1,167,157, respectively. See Note 4 for further discussion. |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Details) $ in Thousands | Jul. 15, 2010Plaintiff | Mar. 31, 2018USD ($)loanleaserepurchase_requestcertificate | Mar. 31, 2017USD ($)loanrepurchase_request | Dec. 31, 2007certificate | Dec. 31, 2004certificate | Dec. 31, 2007certificate | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Dec. 23, 2009 |
Loss Contingencies [Line Items] | |||||||||
Number of noncancelable leases | lease | 4 | ||||||||
Operating lease expiration dates | 2,028 | ||||||||
Future lease commitments with expiration date | $ 17,110 | ||||||||
Operating lease expense | 1,000 | $ 1,000 | |||||||
Remaining commitment to fund equity investments | 50,000 | ||||||||
Guarantee obligations | 18,931 | $ 19,487 | |||||||
Guarantee obligations, credit reserve | 10,000 | ||||||||
Special Purpose Entities (SPEs) assets | 48,000 | 48,000 | |||||||
Special Purpose Entities (SPEs) liabilities | 19,000 | 19,000 | |||||||
Residential repurchase reserve | $ 5,197 | 4,916 | |||||||
Number of residential repurchase requests (in repurchase requests) | repurchase_request | 2 | 3 | |||||||
Number of loans repurchased | loan | 0 | 0 | |||||||
Residential repurchase provisions recorded | $ 300 | $ 200 | |||||||
Aggregate amount of loss contingency reserves | $ 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 | $ 1,120,000 | $ 1,410,000 | |||||||
Loans held-for-investment, in foreclosure | 1,000 | ||||||||
Other income | |||||||||
Loss Contingencies [Line Items] | |||||||||
Other income related to risk sharing agreement | 1,000 | 1,000 | |||||||
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) | (100) | $ (200) | |||||||
Guarantee Obligations | |||||||||
Loss Contingencies [Line Items] | |||||||||
Original unpaid balance of loans subject to risk sharing agreements | $ 3,190,000 | ||||||||
Potential future payments on loans | 44,000 | ||||||||
Loan Principal | $ 2,030,000 | ||||||||
Weighted average original Fair Isaac Corporation (FICO) score | 758 | ||||||||
Weighted average original loan-to-value (LTV) | 76.00% | ||||||||
Guarantee Obligations | Financing Receivables, Equal to Greater than 90 Days Past Due | |||||||||
Loss Contingencies [Line Items] | |||||||||
Balance of loans 90 days or more delinquent | $ 8,000 | ||||||||
Residential | Sequoia | FHLB Seattle | |||||||||
Loss Contingencies [Line Items] | |||||||||
Statutory interest rate per annum (as a percent) | 8.00% | ||||||||
Principal value | 133,000 | ||||||||
Debt instrument principal payment amount | 126,000 | ||||||||
Debt instrument interest payment amount | 11,000 | ||||||||
Residential | Sequoia | Schwab | |||||||||
Loss Contingencies [Line Items] | |||||||||
Principal value | 15,000 | ||||||||
Principal balance of securities | 14,000 | ||||||||
Debt instrument interest amount | $ 1,000 |
Commitments and Contingencie100
Commitments and Contingencies - Future Lease Commitments (Details) $ in Thousands | Mar. 31, 2018USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2018 (9 months) | $ 1,467 |
2,019 | 1,987 |
2,020 | 1,965 |
2,021 | 1,474 |
2022 and thereafter | 10,217 |
Total | $ 17,110 |
Equity - Changes to Accumulated
Equity - Changes to Accumulated Other Comprehensive Income (Loss) by Component (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||
Beginning balance | $ 1,212,287 | $ 1,149,428 |
Ending balance | 1,219,983 | 1,165,771 |
Net unrealized gain (loss) on available-for-sale securities, tax benefit (provision) | (100) | (100) |
Net Unrealized Gains on Available-for-Sale Securities | ||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||
Beginning balance | 128,201 | 115,873 |
Other comprehensive income (loss) before reclassifications | (4,237) | 2,930 |
Amounts reclassified from other accumulated comprehensive income | (9,387) | (3,928) |
Net current-period other comprehensive (loss) income | (13,624) | (998) |
Ending balance | 114,577 | 114,875 |
Net Unrealized Losses on Interest Rate Agreements Accounted for as Cash Flow Hedges | ||
Accumulated Other Comprehensive Income (Loss) [Roll Forward] | ||
Beginning balance | (42,953) | (44,020) |
Other comprehensive income (loss) before reclassifications | 8,431 | 1,733 |
Amounts reclassified from other accumulated comprehensive income | 0 | 14 |
Net current-period other comprehensive (loss) income | 8,431 | 1,747 |
Ending balance | $ (34,522) | $ (42,273) |
Equity - Reclassifications out
Equity - Reclassifications out of Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Investment fair value changes, net | $ (1,609,000) | $ (1,551,000) |
Realized gains, net | (9,363,000) | (5,703,000) |
Interest expense | 41,514,000 | 21,031,000 |
Net Income before Provision for Income Taxes | (51,741,000) | (43,126,000) |
Impairment losses, investments | 0 | |
Other than temporary impairment recognized in AOCI | 100,000 | |
Reclassification out of Accumulated Other Comprehensive Income | Net Unrealized Gains on Available-for-Sale Securities | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Investment fair value changes, net | 0 | 117,000 |
Realized gains, net | (9,387,000) | (4,045,000) |
Net Income before Provision for Income Taxes | (9,387,000) | (3,928,000) |
Impairment losses, investments | 200,000 | |
Impairment losses recognized in earnings | 100,000 | |
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 | 0 | 14,000 |
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 | $ 0 | $ 14,000 |
Equity - Basic and Diluted Earn
Equity - Basic and Diluted Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Equity [Abstract] | ||
Net income attributable to Redwood | $ 46,845 | $ 36,969 |
Less: Dividends and undistributed earnings allocated to participating securities | (1,433) | (968) |
Net income allocated to common shareholders | $ 45,412 | $ 36,001 |
Basic weighted average common shares outstanding (in shares) | 75,396,649 | 76,738,202 |
Basic earnings per common share (in dollars per share) | $ 0.60 | $ 0.47 |
Less: Dividends and undistributed earnings allocated to participating securities | $ (1,394) | $ (1,005) |
Add back: Interest expense on convertible notes for the period, net of tax | 8,641 | 5,870 |
Net income allocated to common shareholders | $ 54,092 | $ 41,834 |
Net effect of dilutive equity awards (in shares) | 34,827 | 111,197 |
Net effect of assumed convertible notes conversion to common shares (in shares) | 32,763,121 | 21,096,738 |
Diluted weighted average common shares outstanding (in shares) | 108,194,597 | 97,946,137 |
Diluted earnings per common share (in dollars per share) | $ 0.50 | $ 0.43 |
Equity - Additional Information
Equity - Additional Information (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||
Feb. 28, 2018 | Jan. 31, 2018 | Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | Feb. 29, 2016 | |
Stockholders Equity Note [Line Items] | ||||||
Share repurchases | $ 15,544,000 | |||||
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) | 1,040,829 | 610,342 | ||||
Share repurchases | $ 16,000,000 | $ 9,000,000 | ||||
Available authorization remaining for repurchase | $ 77,000,000 | |||||
Share Repurchase Plan, February 2018 | ||||||
Stockholders Equity Note [Line Items] | ||||||
Common stock authorized to repurchase by Board | $ 100,000,000 | |||||
Available authorization remaining for repurchase | $ 100,000,000 | |||||
Increase in authorized repurchase amount | $ 39,000,000 | |||||
Equity awards | ||||||
Stockholders Equity Note [Line Items] | ||||||
Securities excluded in the calculation of diluted earnings per share (in shares) | 6,838 | 5,826 |
Equity Compensation Plans - Add
Equity Compensation Plans - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
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) | 999,636 | 1,356,438 |
Unrecognized compensation cost | $ 24,739 | $ 21,470 |
Number of shares purchased by employees (in shares) | 367,844 | 361,006 |
Restricted Stock | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Unvested outstanding stock awards (in shares) | 337,253 | 257,507 |
Number of stock awards granted (in shares) | 162,330 | |
Number of stock awards vested (in shares) | 82,584 | |
Number of stock awards forfeited (in shares) | 0 | |
Deferred Stock Units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Unvested outstanding stock awards (in shares) | 2,179,977 | 1,878,491 |
Number of stock awards granted (in shares) | 301,485 | |
Number of stock awards vested (in shares) | 1,050,211 | 889,835 |
Number of stock awards forfeited (in shares) | 0 | |
Number of stock awards distributed (in shares) | 0 | |
Performance Stock Units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Unvested outstanding stock awards (in shares) | 704,270 | 704,270 |
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) $ in Thousands | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Roll Forward] | |
Unrecognized compensation cost at beginning of period | $ 21,470 |
Equity grants | 5,966 |
Equity grant forfeitures | 0 |
Equity compensation expense | (2,697) |
Unrecognized Compensation Cost at End of Period | 24,739 |
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 | 2,808 |
Equity grants | 2,380 |
Equity grant forfeitures | 0 |
Equity compensation expense | (353) |
Unrecognized Compensation Cost at End of Period | 4,835 |
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 | 13,364 |
Equity grants | 3,450 |
Equity grant forfeitures | 0 |
Equity compensation expense | (1,673) |
Unrecognized Compensation Cost at End of Period | 15,141 |
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 | 5,298 |
Equity grants | 0 |
Equity grant forfeitures | 0 |
Equity compensation expense | (637) |
Unrecognized Compensation Cost at End of Period | 4,661 |
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 | 136 |
Equity grant forfeitures | 0 |
Equity compensation expense | (34) |
Unrecognized Compensation Cost at End of Period | $ 102 |
Mortgage Banking Activities,107
Mortgage Banking Activities, Net - Components of Mortgage Banking Activities (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Mortgage Loans on Real Estate [Line Items] | ||
Mortgage banking activities, net | $ 26,576 | $ 17,604 |
Residential Mortgage Banking Activities | ||
Mortgage Loans on Real Estate [Line Items] | ||
Other income, net | 338 | 207 |
Residential Mortgage Banking Activities | Residential loans, at fair value | ||
Mortgage Loans on Real Estate [Line Items] | ||
Changes in fair value of assets | (2,194) | 18,797 |
Residential Mortgage Banking Activities | Risk management derivatives, net | ||
Mortgage Loans on Real Estate [Line Items] | ||
Risk management derivatives | $ 28,432 | $ (1,400) |
Investment Fair Value Change108
Investment Fair Value Changes, Net - Components of Investment Activities (Details) - Investment Fair Value Changes, Net - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Investment Holdings [Line Items] | ||
Changes in fair value of assets | $ 1,609 | $ 1,551 |
Residential loans held-for-investment, at Redwood | ||
Investment Holdings [Line Items] | ||
Changes in fair value of assets | (38,985) | (2,333) |
Trading securities | ||
Investment Holdings [Line Items] | ||
Changes in fair value of assets | (2,955) | 11,143 |
Legacy Sequoia | ||
Investment Holdings [Line Items] | ||
Changes in fair value of assets | (8) | (1,810) |
Sequoia Choice | ||
Investment Holdings [Line Items] | ||
Changes in fair value of assets | (86) | 0 |
Risk-sharing investments | ||
Investment Holdings [Line Items] | ||
Changes in fair value of assets | (139) | (205) |
Risk management derivatives, net | ||
Investment Holdings [Line Items] | ||
Changes in fair value of assets | 43,782 | (5,127) |
Impairments on AFS securities | ||
Investment Holdings [Line Items] | ||
Changes in fair value of assets | $ 0 | $ (117) |
Operating Expenses - Components
Operating Expenses - Components of Operating Expenses (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Other Income and Expenses [Abstract] | ||
Fixed compensation expense | $ 6,439 | $ 6,002 |
Variable compensation expense | 6,907 | 3,933 |
Equity compensation expense | 2,697 | 2,176 |
Total compensation expense | 16,043 | 12,111 |
Systems and consulting | 1,866 | 1,638 |
Loan acquisition costs | 1,818 | 1,205 |
Office costs | 1,140 | 1,103 |
Accounting and legal | 834 | 926 |
Corporate costs | 504 | 440 |
Other operating expenses | 825 | 803 |
Total Operating Expenses | $ 23,030 | $ 18,226 |
Taxes - Additional Information
Taxes - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Provision for income taxes | $ (4,896) | $ (6,157) |
Taxes - Reconciliation of Statu
Taxes - Reconciliation of Statutory Tax Rate to Effective Tax Rate (Details) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Federal statutory rate | 21.00% | 34.00% |
State statutory rate, net of Federal tax effect | 8.60% | 7.20% |
Differences in taxable (loss) income from GAAP income | (4.10%) | (8.50%) |
Change in valuation allowance | (3.90%) | (3.00%) |
Dividends paid deduction | (12.10%) | (15.40%) |
Effective Tax Rate | 9.50% | 14.30% |
Segment Information - Additiona
Segment Information - Additional Information (Details) | 3 Months Ended |
Mar. 31, 2018Segment | |
Segment Reporting [Abstract] | |
Number of operating segments | 2 |
Segment Information - Financial
Segment Information - Financial Information by Segment (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Segment Reporting Information [Line Items] | ||
Interest income | $ 76,619 | $ 54,628 |
Interest expense | (41,514) | (21,031) |
Net Interest Income | 35,105 | 33,597 |
Non-interest Income | ||
Mortgage banking activities, net | 26,576 | 17,604 |
MSR income, net | 957 | 1,713 |
Investment fair value changes, net | 1,609 | 1,551 |
Other income | 1,161 | 1,184 |
Realized gains, net | 9,363 | 5,703 |
Total non-interest income, net | 39,666 | 27,755 |
Direct operating expenses | (23,030) | (18,226) |
Provision for income taxes | (4,896) | (6,157) |
Net Income | 46,845 | 36,969 |
Non-cash amortization income (expense), net | 3,737 | 4,823 |
Operating Segments | Investment Portfolio | ||
Segment Reporting Information [Line Items] | ||
Interest income | 58,757 | 42,250 |
Interest expense | (19,863) | (5,264) |
Net Interest Income | 38,894 | 36,986 |
Non-interest Income | ||
Mortgage banking activities, net | 0 | 0 |
MSR income, net | 957 | 1,713 |
Investment fair value changes, net | 1,590 | 3,359 |
Other income | 1,161 | 1,184 |
Realized gains, net | 9,363 | 5,703 |
Total non-interest income, net | 13,071 | 11,959 |
Direct operating expenses | (2,007) | (1,593) |
Provision for income taxes | (888) | (1,737) |
Net Income | 49,070 | 45,615 |
Non-cash amortization income (expense), net | 4,617 | 5,847 |
Operating Segments | Residential Mortgage Banking | ||
Segment Reporting Information [Line Items] | ||
Interest income | 12,897 | 7,474 |
Interest expense | (6,137) | (2,924) |
Net Interest Income | 6,760 | 4,550 |
Non-interest Income | ||
Mortgage banking activities, net | 26,576 | 17,604 |
MSR income, net | 0 | 0 |
Investment fair value changes, net | 0 | 0 |
Other income | 0 | 0 |
Realized gains, net | 0 | 0 |
Total non-interest income, net | 26,576 | 17,604 |
Direct operating expenses | (8,632) | (5,881) |
Provision for income taxes | (4,008) | (4,420) |
Net Income | 20,696 | 11,853 |
Non-cash amortization income (expense), net | (22) | (27) |
Corporate/Other | ||
Segment Reporting Information [Line Items] | ||
Interest income | 4,965 | 4,904 |
Interest expense | (15,514) | (12,843) |
Net Interest Income | (10,549) | (7,939) |
Non-interest Income | ||
Mortgage banking activities, net | 0 | 0 |
MSR income, net | 0 | 0 |
Investment fair value changes, net | 19 | (1,808) |
Other income | 0 | 0 |
Realized gains, net | 0 | 0 |
Total non-interest income, net | 19 | (1,808) |
Direct operating expenses | (12,391) | (10,752) |
Provision for income taxes | 0 | 0 |
Net Income | (22,921) | (20,499) |
Non-cash amortization income (expense), net | $ (858) | $ (997) |
Segment Information - Component
Segment Information - Components of Corporate/Other (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Segment Reporting Information [Line Items] | ||
Interest income | $ 76,619 | $ 54,628 |
Interest expense | (41,514) | (21,031) |
Net Interest Income | 35,105 | 33,597 |
Investment fair value changes, net | 1,609 | 1,551 |
Total non-interest income, net | 39,666 | 27,755 |
Direct operating expenses | (23,030) | (18,226) |
Net Income | 46,845 | 36,969 |
Corporate/Other | ||
Segment Reporting Information [Line Items] | ||
Interest income | 4,965 | 4,904 |
Interest expense | (15,514) | (12,843) |
Net Interest Income | (10,549) | (7,939) |
Investment fair value changes, net | 19 | (1,808) |
Total non-interest income, net | 19 | (1,808) |
Direct operating expenses | (12,391) | (10,752) |
Net Income | (22,921) | (20,499) |
Corporate/Other | Legacy Consolidated VIEs | ||
Segment Reporting Information [Line Items] | ||
Interest income | 4,812 | 4,838 |
Interest expense | (3,852) | (3,516) |
Net Interest Income | 960 | 1,322 |
Investment fair value changes, net | (8) | (1,810) |
Total non-interest income, net | (8) | (1,810) |
Direct operating expenses | 0 | 0 |
Net Income | 952 | (488) |
Corporate/Other | Other | ||
Segment Reporting Information [Line Items] | ||
Interest income | 153 | 66 |
Interest expense | (11,662) | (9,327) |
Net Interest Income | (11,509) | (9,261) |
Investment fair value changes, net | 27 | 2 |
Total non-interest income, net | 27 | 2 |
Direct operating expenses | (12,391) | (10,752) |
Net Income | $ (23,873) | $ (20,011) |
Segment Information - Supplemen
Segment Information - Supplemental Information by Segment (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | |
Segment Reporting Information [Line Items] | |||
Real estate securities | [1] | $ 1,357,720 | $ 1,476,510 |
Mortgage servicing rights, at fair value | [1] | 66,496 | 63,598 |
Total assets | [1] | 6,999,573 | 7,039,822 |
Residential loans | |||
Segment Reporting Information [Line Items] | |||
Loan market valuation adjustment | 5,145,740 | 5,115,210 | |
Operating Segments | Investment Portfolio | |||
Segment Reporting Information [Line Items] | |||
Real estate securities | 1,357,720 | 1,476,510 | |
Mortgage servicing rights, at fair value | 66,496 | 63,598 | |
Total assets | 5,012,235 | 4,743,873 | |
Operating Segments | Investment Portfolio | Residential loans | |||
Segment Reporting Information [Line Items] | |||
Loan market valuation adjustment | 3,389,404 | 3,054,448 | |
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 | 1,154,413 | 1,453,069 | |
Operating Segments | Residential Mortgage Banking | Residential loans | |||
Segment Reporting Information [Line Items] | |||
Loan market valuation adjustment | 1,130,185 | 1,427,945 | |
Corporate/Other | |||
Segment Reporting Information [Line Items] | |||
Real estate securities | 0 | 0 | |
Mortgage servicing rights, at fair value | 0 | 0 | |
Total assets | 832,925 | 842,880 | |
Corporate/Other | Residential loans | |||
Segment Reporting Information [Line Items] | |||
Loan market valuation adjustment | $ 626,151 | $ 632,817 | |
[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 March 31, 2018 and December 31, 2017, assets of consolidated VIEs totaled $1,647,850 and $1,259,774, respectively. At March 31, 2018 and December 31, 2017, liabilities of consolidated VIEs totaled $1,546,066 and $1,167,157, respectively. See Note 4 for further discussion. |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) | May 01, 2018 | Apr. 30, 2018 | Jun. 30, 2017 | Mar. 31, 2013 |
Convertible Debt | Convertible Senior Notes Due 2018 | ||||
Subsequent Event [Line Items] | ||||
Amount of debt repurchased | $ 37,000,000 | |||
Debt Instrument interest rate | 4.625% | |||
Subsequent Event | 5 Arches, LLC | ||||
Subsequent Event [Line Items] | ||||
Minority interest, purchase agreement | 20.00% | |||
Purchase agreement, preliminary amount | $ 10,000,000 | |||
Purchase agreement, option to purchase remaining amount period | 1 year | |||
Purchase agreement, potential remaining purchase amount | $ 40,000,000 | |||
Subsequent Event | Convertible Debt | Convertible Senior Notes Due 2018 | ||||
Subsequent Event [Line Items] | ||||
Amount of debt repurchased | $ 250,000,000 | |||
Debt Instrument interest rate | 4.625% |