RWT - Earnings call transcript Q2 2021

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Operator

Good afternoon and welcome to the Redwood Trust, Inc.

Second Quarter 2021 Financial Results Conference Call. Today’s conference is being recorded. I will now turn the call over to Lisa Hartman, Redwood’s Senior Vice President of Investor Relations. Please go ahead, ma’am.

Lisa Hartman

you. Thank thank us. and for you everyone joining Hello, With Chief President; Executive today’s call and Abate, Redwood’s are Chris Officer; Officer. Carillo, Chief me Redwood’s on Brooke Financial Dash Robinson, Redwood’s

you we that presentation Before respect financial forward-looking may future business to want statements. I to with certain made during begin, statements management’s performance constitute or remind

company’s content the this information company to utilized financial considered time-sensitive accordance with as isolation be our our presentation, this in of reconciliation no GAAP to update website between that does Forward-looking involve to also to undertakes both obligation and the company’s should that differ refer and or the non-GAAP circumstances. uncertainties actual results A Also review to is have this report risks prepared differ available to The based We note annual today. not in could of performance current results is reflect substitute you accurate non-GAAP the at redwoodtrust.com. that material factors those On forecasts events actual that provided Redwood expectations, conference contains The XX-K, that and expressed call both financial maybe a on GAAP are as of cause could impact measures. information Form measures only intend for of and statements and provided that encourage from forward-looking materially. second in financial a may performance which or GAAP. not investor assumptions on description in of and cause subsequent and read provides non-GAAP we measures on statements. measures financial quarter on could call, some a

opening turn being Finally, for call on will Chief the I recorded over now will the company’s today’s Executive available Chris officer, to website remarks. Redwood’s later today. Abate, call be is and

Chris Abate

Lisa you, and Thank good afternoon everyone.

energized its to The exceptional the growth performance income for the of the diluted and dividend of can see our quality a quarter. results GAAP generated $X.XX the the $X.XX GAAP the quarter, economy, housing been in organization of second American are excess per Delta in reflective including value the making a in accessible variant per drove earnings share, share X.X% serving exceptional we share successfully at continued operating The entire monitoring business. contributed XX. has closely are and to for of in of valuations financial expand to strength June reopening This portfolio our thus latest business coronavirus. $XX.XX per mission profitably book our We market well to results housing that all in far of second XXXX increase rising while and Strong households.

government well by loan know, are borrowers or this all. whose not needs emphasizes you not served at As programs potentially mission

pullback potential Our something lending specific $XXX our a outside mortgage this is only in than occupied non-agency in of the a the big Redwood increase ignored sector significantly The reflect That’s provide past, could significant business market tailwind we loans, forecasted to residential Instead, going the non-owner regulatory of investors from the of for together market housing rate. represents from a beginning originations billion to XXXX that homeownership to the our to business consumers of By government-backed tied programs. and stimulus. residential comprehensive that market, both recently alike XXXX. the the forward. have that origination and market. now profile non-agency to direction due Many and borrower volumes a product market, a target mix segment offers non-agency residential have serves large purpose it’s in part targeting teams in universe mortgage rather Reserve a non-agency the Federal many absence as mortgage of the had not

fundings BPL and single-family acquiring has In focused highlighting eclipsed housing a buy no lender, Our nimble rental major market for also quarter. more lower alter million first result Leveraging and been reemerged significantly and our quality in has particularly interest for challenging and price results led single-family scarcity the they in despite lifecycle the rates as of the the quarter, of than a a remained consumers high-end despite in and costs managing were were from The the business platform as the a rental both shifting regions, multiple space, the quarter Rising loans across we $XXX living This largely Exaggerating target mortgage with alike. balanced margins of outstripped apartment sign products. shift trend refinance the including margins the became bridge sharp support the the agency balance more jumbo signs yield metros. CoreVest, rent Fed is this large that appreciation, $X with The hedging chain a that uncertainty curve industry. second The into of with conditions decline of of still of execution mortgage in sheet the homes detached homes. the second arose our on pro-cyclical rate close to their activity, quarter using of the has were us. market. towards driving reliable market a in reputation for to shortage investors forces well-earned historical significantly a out strong effects originations. lending inflation, of pipelines, residential second way for its recent in and value contraction in at will ebbing by billion competitive shown result, high-quality range. loan Against crowded home of the lending corresponding for reopening locked a the new quarter, demand backdrop, triggered space, aggressive and bridge growth to whether a those in homes, along strong purpose supply and the with significant of competition single-family and many that and of competitors most constituencies

the Our unique. showcased challenging of sustained and makes this foundation essence what is strategic performance Redwood through backdrop our

mortgage Our drive as investment upside that highly And portfolio economy earnings significant durable offer continues banking our recovers. streams. complementary the to products offer businesses

Our key assets our differentiators. credit and own create discipline remain ability to

portfolio. facilitated the driven strategic returns significantly of that foundation are Our XX% XXXX, operations, from our banking In with our remaining outpacing our adjusted has growing dividends. was mortgage of half first revenue approximately the XX% investment Redwood’s by

the a contrast as and cost in to path funding through book We recent shift through others double expect earnings in scale infrastructure, driver for our the ongoing percentage mortgage our and the market balance is talented banking be to stands continuing organically for subsidiaries, transformative revenue manage to acting supports have cultivated inspired earnings to our our to sheets. and model extension, strong highlights we taxable continued a capital business we to over avenue It formation retain Across realizing is both adapt by zero forward. need The in expansion continue our and banking, value mortgage nearly By generated workforce. to of in partnerships, years has as their marginal that of our conditions. contribution time, changing a space and going enterprise, also reduced reinvest clear.

early this We RWT is example launch will customers last ever of more approach technology This our investment in serve touch to something Horizons. quarter’s stage our have more than is quickly on detail. before. embraced platform, of Dash One great

us to As raise service separate continue and game, standard we in to infrastructure continues a invest we people with look that attack competition. ahead, from markets our and our our our

non-agency are market the mortgage it’s excited recent the years. been more regulatory in made than relevant We by that have in many changes landscape

our goal profile and for that, a build public mission I our important attractive turn call operating results. Redwood’s to return President the a Our an is serves Dash shareholders. business And to scale very will the and profitably Robinson, over generates that with discuss

Dash Robinson

you, Thank Chris.

reflect second and strong operating progress continued quarter momentum. results Our strategic

While non-agency new with credit homegrown these both ongoing market from benefited we coupled macro markets, housing ingredients familiar. our in and tailwinds strength and comprehensive the footprint

through execution fruit. partnerships both team’s was was Our In another new by our outperformance. quarter product the bearing infrastructure, already sum, technology significant usual with crisp organic final progress meaningful of and complemented

remain during of uptick around typically almost for rates may government The level mortgages agency in benchmark this uncertainty support backdrop, key an of of we drivers of our borrower see well area kind it’s rally. markets. very focus rates Against The this the activity referenced, of second across refinance platforms. moderate retraced. unpack of fully the level has for Chris amount the the quarter profitability in the As acute to important

immune non-agency’s grow As versus and we important evolution true markets footprint. driving for benchmark Chris an serve we the are while from consumer not expansion mix moves trends are regulatory of drivers point, product from diverse as MBS during lending. enjoyed noted, residential us And purpose our continue of rates, housing demand prices, of and unique in distribution compressed the to the margins the in and potential prices home while volume margins allow with business our market elsewhere durability to and sustained we benefit second demand. quarter, and strength in across in both channels Case different path

business. detached mortgages fact, are up potential price nationwide, along agency borrowers as with from single-family demand still Mortgage In capacity address home an ramping appreciation for tailwind ebbing consumer housing. originators increased to has jumbo for pent-up for the and represents our demand another preference rental

continues to loan in high residential pushing the expand. our highest loan into equity at is demand above of demand footprint suite its Our more remains Homeowner least addressable limits offerings and in Redwood’s geographic and market. levels businesses BPL a decade, at now conforming

observers existing trend XX represent expected the it of our new and than for if years we great loans locations know to XX% be Even prior Overall, with states continue track in this As X as we Collectively, XX% volume, XX% in states the home moderates market XXXX, locks pandemic. in have we country into single-family we updated markets. which investor more now to for the to respectively. XXXX continue expect non-agency there of supplement, price across homes these the year-to-date now in into forecast are our interest. locked to trend each more a year-to-date appreciation evolving of and

non-agency housing, high-quality credit solved on including in the more moderate borrowers Also single-family part to loans likely Another the The overall. market is market and homebuyers equation help critical borrowers. the credit to significant occupied can broader the address are projects. availability high-quality expand of to to Furthermore, is likely $XX of for key billion rules to non-agency by expanded the caps GSE year. meaningfully or place billion increase regulatory driver environment. $XX earlier boon purchases could an since mortgage on in the cohort, non-owner year per impact QM evolving by is issue to in estimated this custom-built there rental a an qualified an do and low income associated time the access detached, And first increase

single-family consumers As rent on dynamics, significant meaningfully demand we Single-family And supply desirable more expanded record prior average not costs, homes. remain single-family for on with housing up payment has price though moderating kept rents remain demand can Reflecting afford. homes. contributing in than buoyant single-family year. homes calls, XX% for a U.S. escalation rental supply can multifamily discussed last early with material occupancy building and the space of meet that and rents remained rental monthly rates demand weighted for neighborhoods more to these high, a at all since highs, have

our late quarter highest backdrop. since level highlights for reaching second broader highest Our our the of and second reinforced quarter Operating include locks jumbo BPL XXXX. volume results ever this

distributed As through of at Brooke platform fair sales subsidiary. loans mortgage X direct asset increased Collectively, mix value loan earnings our book on is driven of through will X.X%, from taxable and a $X.X appreciation banking earned retained changes our REIT ship on, by elaborate securitizations. billion to income value

our the residential volume historic QX. $X.X first of registered billion Following quarter, in lock business

and market of volatility. purchase delivered eligible margins impacting represented the our of basis and management backdrop at distribution the a the the quarter’s Despite GSE pipeline of volume. share and of reflecting anticipated, money strength high-end loans of lock points, XXX channels amidst As the driver range diversity XX business our to our competitive historical broader target pressures production, key interest XX% rate were a

During the $X.X billion billion. Sequoia second quarter, of $X.X loans we and X securitizations for sold completed

distribution, dramatic our with and a competitive of function June we yield advantage. market While to our scale and after curve end-to-end allow which they The us be coupled true meeting, facilitates of the with the in saw quarter coordination the securitization loan moves rates the remain teams as program, efficiency further during a flexibility fed collectively in the consistently. whole flattening

pipeline. than During the were distributing second faster competition again our and we to quarter, once market the

that serve key rules new prime channel QX. expanded emphasize as locks made of sleeve rules Redwood Choice’s reemergence. much bench of a QM public product tailwind rates, pre-pandemic, a of determinant we qualify Another be contribution rate non-agency XX% on the the volumes. continue underscores was that the QM in to second high encouraging this up our Choice, In meaningful as allow focused our from step to locks more competitive XX% borrowers we -quality potential mortgage be. represented to another If important deeper believe X% quarter, can Choice represented an metric safely, a of of the materially to that the will our reminder the will remarks, changes as adopted to Choice to market easily status for of how true consumers. recent a of in

These base tailwinds platform. also with are our business macro fruition. CoreVest, We engaging for trends purpose our to to lending bring meaningful this reflect actively seller

in The initiatives, $XXX in notably Finance. from advanced Churchill strategic million we most particularly overall quarter, key several as completing second second investment quarter CoreVest productive up our BPL XX% QX. in the was originated

In million Bridge utilize BPL strong, fourth was production consecutive XX% the Our The loans reflects of online repeat up high borrowers consistent quarter customers than consisted quarter over build-for-rent and several our increase funding levels credit repeat coming of of of which originations all, and our mix of in of opportunities. rental quarter for from loans QX, from borrowers, those increased bridge driven $XXX results including loan single-family multifamily refinance an funding. second one remains products. a in by and second of for by that the of total loans the of lines in the million strategy, on usage and multi-product pipeline for origination mix the loans. XX% and $XXX were strength mix more with new

from second with up the far, fundings in So production remains quarter, strong XX% QX.

robust increasingly achieving points all-time securities. As spreads That on and We syndicated tights, XX execution the we completed short-lived. benefited call, priced with our once has discussed follow-on first broadly last credit a April, markets. our on from again pipeline of transaction a securitization of securitization basis in bench the remains CoreVest constructive tights on spread including investors. proved week’s of the at rated record deep all-time Last year AAA

competition, of an type itself As choice. times of CoreVest inevitably we BPL which breeds lender to as for we the have this view execution many differentiating as additional seen before, opportunity continue market’s

upload it We progress interface, new expectations our have easier forthcoming high for refresh portal, loans. client clients of for especially its user and track which to even their will our documents make

continue advantage lender. a we as Additionally, nimble to lifecycle press our

sophisticated sourcing finding investors. will bridge suite cohort our end-to-end progress which on and expect rental are the deepening product this is we smaller emphasis to of our continue loans. a needs a with diversify partnership We of housing channels serving single-family particular with balanced a Churchill, Highlighting

an complement it’s our attractive to ways We competition, lending and see many important our an a products. have value like In increased loans in platform SFR loans the institutional pipeline CoreVest bridge near-term direct purchase Churchill that still now is from of market in of developing. periods closed reinforce and of first to

as We have CoreVest have play. on with matters sort optional many That X their least value a ago. for the CoreVest two more and at the the now record continues of Many on that track securitizations, and long has years loans underlying been of support borrowers immense platform evolution. calls completed platform field made to refinancing intangible now growth or of with

of Most are patent completed opportunities. recently and to enterprise-wide ecosystem. and business in tangible of an doing our collective covering keeping is had true Horizons, its X with formally earlier productive are RWT Horizons focused the we market bring a it’s apply for recently, our witness assessing new firm. progress. investments their investments a include all stage, to to a step this progress exciting on Since technology collaboration At mortgage, management initiative, Rent have procured pace Liquid direct launching leveraging newest a construction pipeline our part partnerships and Room platform year, efficiencies Our also to blockchain alpha the liquid mortgage big residential non-agency partners. quarters exciting our non-agency and early parties involved. key vast majority these to technology new or tech-enabled both blockchain the Rent meeting plan, the Most with efforts intellectual its development reflect rollout planned drive exceeding product and critically, initiatives. and Butter that this

streams engage and the stakeholders We across are working to are mortgage engaging work safely mortgages liquid industry. put developing to key directly on with and other the blockchain required together

borrower investments Butter, network, with For synergies base. we Rent client CoreVest and two broader facilitating sourced through Rent our Room are

to Brooke standing thrilled shoulder With working innovation on the to markets. are turn call I those CFO. the be in over with to Redwood’s will of Carillo, our We shoulder that, frontier

Brooke Carillo

Thank you, Dash.

previously As continued and entire strength our XXXX durability quarter the second model noted across reflect platform. results our of our

GAAP share The prior relative share earnings million $X.XX of have $X.XX value in per We of our or primary quarterly increase to of partially X.X% XX, increase reported a of end. book value $X.XX GAAP drivers $XX.XX offset at quarter the basic June $XX per or per by per the share. dividend share book

maintained strong book on first for the a have value economic of are of for generating total pleased XX% We momentum half first return quarter, XXXX. the to the

volumes. origination return saw only while which still from mortgage by first the million, up XX%. not dividend operations from our delivering operating QX mortgage with after-tax Our growth historic an but particularly XX% Income our second from operating of which results quarter from of purpose strong business in is increase which quarter a decreased economic in capital the $XX on return our XX% XX% return after-tax in also We banking operations, value, raised delivered XX% level, a we our spotlights contribution operating this on another book net in growth quarter. banking residential

commitments on and Even reiterate To increased down the despite high-end impacted second as point, hedging loan relative quarter. backdrop execution volume that macro challenging XX%, Dash’s gross our record. purchase of still marks range first securitization historical highest remained target to a at our were QX margins costs the

and XX% the performance $X had million RPL which given quarter fair portfolio, loans operating expand businesses, to $XX million from we in of and shortly. spread decline interest improved expense net value to primarily to yield $X.XX positive investment or first and further from due our had average at our portfolio. balance I our securities, will of Shifting growth a of interest of in credit Turning inventory upon $X.XX higher portfolio income quarter, increased share income. interest investment quarter the our changes on higher income maintenance the first higher bridge side, approximately SFR in we nearly retaxable income per this XXXX loan investment tightening the tax from primarily from versus Net assets,

Our banking down resulted in share quarter. by taxable partially the for utilizing and was On operating $X.XX in million our offset primarily income a businesses capital. of in lower annualized operating QX, from mortgage expenses QX, over provision REIT QX. average in $XXX basis, combined a after-tax tax subsidiaries per by XX% decrease driven earned $X of lower $X.XX million lower return an generated The

reminder, be a REIT. either these the earnings dividend or to can reinvested as into back our operating As businesses paid a

strategic that portfolio. focus investment our our assets continued businesses we higher quarter, produced margin This on for

represented revenue than adjusted but mortgage allocated quarter sales. XX% $XX the for Specifically, and Working through our SFR have to our and quarter. we reduced our of bridge less during million approximately the portfolio second million investment for $XX whole of third-party of deployed capital, our securities XX% produced Year-to-date opportunistic loans businesses banking we capital the loans. not to size capital of

mortgage on that we face capital that year $XXX of recent $XXX million returns value the value par we could resecuritized the call loans the loans options be to mentioned, continue underlying securitizations of sold call XXXX allow the our of million at or add revenue on book through loans new prepayment banking to securitization value. $X.XX these majority million near approximately the become in to value a to above and the our million requests securities creating accelerate speeds and by growing Securities. rights across zero. during Higher three expected loans per $X.XX to and remainder earnings jumbo with callable that faster current speeds operations XXXX, can our seasoned share. acquiring potential of to another hold depending quarter, to and in well by we are to the $XX billion generally potentially occur par, XXXX. portfolio growing credit delinquencies per one adjusted activity SFR benefit continue has and significantly further within those returns We the and us of CoreVest currently market of $X.XX Chris expected for of estimate improve share call to has of and book and a $X project outpacing and years benefited portfolio As of combination from could on average proportion which prepayment value our with conditions of end been Total forbearance another $XX on discount Furthermore, improved Sequoia the at dividends. end execution. We estimate their Net Sequoia upside share and rose by $X.XX portfolios about by of at per book Sequoia second all settled seasoned capital facilitated

aren’t well current loan support several and securities a remaining low our exceed million average levels and low quarter and It’s At hold with original portfolio and the which coupons portfolio or balance rate overall to improve mortgage of Specifically noting improved and XX-day funds expectations. in of RPL with and shape to improvement RPL improved the including from during quarter-end, capital experiencing delinquencies XX profile in delinquency pre-COVID XXX during following QX continue voluntary the speeds keep flat the below securities our added and of excess our excellent sheet to and are now LTVs were our options prepayment quarter. trends delinquencies Choice worth the provide levels, point liability modeled XX-day basis actions operating investment points. experience to continue select portfolio. stable million $XXX roughly platforms growth borrowers capacity taken our our of help funding cost basis financing should for bridge $XXX losses financing actual We over low. to a refinance contributed of management which of distressed absolute

quarter Importantly, sales with another marked $X.X securitizations and the for and source combined record Redwood distribute in second billion underscoring side. of loan residential whole to ability our

an recourse unrestricted the X.Xx of higher additional loan Our higher leverage second June at to over size which was inventory. the marginally our of at not we end, finance secured was including at is capital marginable $XXX million, At end as outlook. debt, close borrowings $XXX half quarter cash warehouse on XXth the generated early incurred and our our closed update term XXXX investable July. $XXX incremental million, with in capital quarter million our outstanding of I’ll we was financing financial from a

our to across We continue for a highlight grounded investment of businesses. in trend financial to to earlier subsidiary. our guidance our value in review detailed through published book encourage today, seeing and earnings ability at and of We to both from which the remainder our achieve key our support the see upside inputs provide anticipated activity of we guidance ability here our our the we’re quarterly from supplemental that year some in narrative. the refresh retain portfolio our sustainable materials and taxable more to REIT Confidence call you grow potential in

ROE outlined, to create allocating our markets. continuing capital efficiency, to technology As using and through portfolio drive value further the strategies Chris that partnerships in and other have our key growth drive using wallet target our share efforts themes and include, more will increasing platforms, to higher to investment our Dash M&A operating the performance

ahead, have which robust and As to of first of year-over-year. another half jumbo that the nearly BPL approximately volumes billion look track $X seen lock the business the anticipating second on with of to for $X $X the keep doubled we’ve of of volume we we half the originations remain year, through year billion the would pace

Small year half For volumes just residential volume, the demonstrated full years ago. a share and and We’ve our we a second can to across have over not continue our each our our in successfully market meaningful market channel. ability to of origination our platform perspective, changes scale and we approach volume only impact profitability can on planning what couple believe to time. but that’s in do and to share our front underlying of overall grow the that do their also we’re

on anticipate For between of to an we allocated to year, XX% our and generating the portfolio. the for banking remainder operations, capital adjusted return XX% XX% from XX% mortgage investment the

net $XXX or improvements open at with the this portfolio As significantly since back that after yield I’d approximately turn And in discount since and that reflects and increased share in of credit time $XXX discount costs the book financing have spreads forecast million call our year in accretable optimization. portfolio, have the year the like our per potential have it we million With the $XXX of for potential the operator our $X.XX book to that to or in per of of upside fair investment to sources to we is value the the time. $X.XX million share on growing value recognize roughly and we even over have capital tightened remaining Q&A. fairly values forward beginning terms the portfolio, finally, which began in of with and line

Operator

Instructions] [Operator from Laws of Our first Stephen Raymond comes you. with question the James. your question. Thank line Please with proceed

Stephen Laws

quarter. nice on a Congratulations afternoon. good Hi, very

scale way in could but financing a job number facility. when you ROE XXX or Rapid great do starting I talked biggest remarks, there. to like Horizons, expansion Chris, the for these, facility What the did the Dash next most you’ve different opportunities You about the when as maybe as covered achieve, cost look are of covering your expansion, do of to two guys think XX a financing And through which I then prepared Funding, the ROE excited historically run have at you volumes but the you XX% about is and the the about you think opportunities XX that phrased in you if well opportunities company Choice one between I think lower Churchill, maybe impact ROE will you transformative you for expansion going months? a

Dash Robinson

are, we It’s a fashion of all great Stephen. question, excited obviously we are Candidly, about some them. in

at realize the residential continuing to these think probably near-term, I as their both would opportunities are operating some are leverage, I expansion ROE and existing those for categorize scale of businesses certainly that BPL. have we

our do but way us from like really that our market alpha link allows really seen I that I a in of produce, more sort expansion seeing as where Horizons next efficient businesses, CoreVest. contributors. can and essence elaborate newer accretively access rather own, they cost really up are that could to think originate and with of quarters, will the near-term. pretty than entrepreneurs that to time to we be Churchill nice of come are frankly a think obviously and leverage real of both and and all tangible as we things our others I’m will is ideas it can we several allows what’s margins enterprise-wide quarters we take evolutionize Chris the the to the is those of complement online, our And of to products and durability at parts It to perspective us directly partnership meaningful benefits operating cost efforts businesses Medium already trying to lies that’s to which perspective. that over those its of some Horizons and that see think how from bench so as are terms sure so us really several much bit Horizons in frankly we’ve trying through to market penetrate we on Churchill have in in revolutionize work. like a more our your really that past how on efficiency over an the pretty access cost we’re in long-term, to expect it we, some advance relates us because of just deep we and

longer core businesses I produce investments said, we their how will our own online but bit within Horizons to work really right, also come to evolve ultimately in take only efficiently not that expect today. we a like So, and good

Stephen Laws

Brooke maybe ahead I that net it’s due for a strong the was either quarter loan A think balances pretty the of the on of color. of high some thanks transactions. income, lot I deck. interest the And Great, in to read review

costs see NII in back $XX sequentially? of think should a put how number will of I rate that the there the been a about securitization the So little because just moving of is financing know bit a or we pull given have after securitization lower is million run we that end quarter place? good kind

Brooke Carillo

advancements there with which be cost quarter end So side, just facilities our by we quarter-end. execution, there coupled It higher on to I past and balance on the we’ve on good going made to refinancing room depending some will our support further as out and little just that which of forward, around bit of financing to are of phenomenal quarter we interest see with noise our continuing some was going inventories, forward to $X although of terms in be million correctly continue even securitization BPL think around going see driven up NIM Dash quarter-over-quarter, inventories a you would higher cost I say pointed potentially that this mentioned sheet income net some

mentioned that cost improvement the alone. $X.XX from So, the that financing investment could to for going forward just deal NIM instance, quarter add about of that XXX points and a portfolio basis we

kinds stable forward. So fairly to RMM on going and the of focus continue keep are to that will things those

Stephen Laws

color. I that appreciate

landscape? Book business and been strong. current and you business or grown Lastly, has you do positive. risk for really value what has in your biggest it’s BPL, macro COVID as post something recovered I from model today the outlooks or outlook specific view extremely to jumbo the think Chris Whether here as sit ROE or the

Chris Abate

internally about a talk COVID, and in right I at level, now I there so as was Fed a volatile worry able variance delta is is Stephen, we’ve there today so I got really the executing the much to tapering. execute rates second you don’t with quite and question, were us high company Good and meeting quarter think about know being a don’t,

you’re mortgage is I think present is market when running space, those, very that There can nonetheless lot the we attractive they entering the prove a a pipeline. we but a manage BPL of challenges through competitors market.

I think to we are as in are mentioned best but we attempting way via rate their breed, of in prepared some our buy sheet. remarks,

performing here. are I you businesses execute we the good economy more recover if natural when and to our us we expect and others all So going to and position competition. you the think evolutions are way But overall, those really are see continues things of

I think growth story. it’s a good

of check right we but which So, a second forecast now to the refined I Brook well mentioned encourage half we’re out, positioned. the for released year everybody

Stephen Laws

also you That’s increasingly sprouting beginning topic. press of helpful the thanks. release. and on an to Great, And important ESG guys want the thank bullets your

as that So, well. thanks care. for Take

Dash Robinson

you. Thank

Chris Abate

Stephen. Thanks,

Operator

with Sandler. next question question. of line your Please Kevin the comes Our Barker from Piper proceed with

Kevin Barker

Hello, the you’re in and good referring segment? sector the, you’re residential that you some some that increased seeing afternoon. of to Could you the how framework to just banking BPL the competition what of compares and in about talk the are competitive seeing

Chris Abate

of crisis, robust securitization quite we very, about competitive COVID you’ve the tag I loan of good so one forces a resi, markets, the and great a In maybe on AAA thing one. issuers very whole we’re but think just that year space a can distribution post the been head I seen new I serial a it’s us to differentiates are think pass-throughs, pressure the same issuers, is as And start financial in is as and activity seeing think got probably We as in especially this it’s lot well resi spreads ago on as aren’t BPL. is a as entering since that lot competition now our right issuance off the lot and issuers of team strong.

second history than the have may in think whole we the more I loans we in quarter sold fact, In of the company.

has So things on rate side, rates, that and and a very been and good and dealing only not more of that matter the hedges. managing distribution but mortgages also of impact managing I the the our with tapering and durable volatility resi to pipeline think price us it’s

good. ongoing So business, mortgage cover in something we’re pretty Dash, battle you the that’s an BPL? want but to where

Dash Robinson

loan and landscape, a do you, emerge, and to loan lower Yes that Chris. a lot that just lot as equity do, the barrier a a penetration Thank seen heated a been different on group smaller It’s always good as flow and We Sure. a feel frankly on. on borrower as more the of capital we has lenders that last folks with capital both what really, mode, a we products different observing we with SFR focus CoreVest. We’ve operational come reemerge into products. we compete, from On space. type of we depending market of BPL. entry of a slightly the every case bridge core and the really our with focus is operationally perspective more on up, has as what compete about strategic perspective from the have with we’re that and it’s well

can lenders but we don’t that that well. of compete Just there is a smaller to say do there, cohort

of obviously some for a on. sort to has that there frankly expertise smaller smaller the we single for into as those is lot a loans loans, online family or don’t rental products strong think here really jobs in tailwind by is bid loans of bridge somewhat year of this which or much balanced I a come the house backed operational lot quickly the as those also much a more focus and require products that really, but traditionally a portfolios, single backed traditional by products, market the other us, get of people

end product going because for be and day speed traits expect those feel there we is to the flexibility landscape, business, manage definitely the to day, to as market the So but borrowers competition reliability, it very about these good is the leverage at the win given you’d our in of that’s can we the dynamics.

Kevin Barker

half very mortgage on the a in it the seems the resi And or the first you volumes half slowdown XXXX? going the structural out strong, that year, but year back lay than non-agency start like non-agency of grow, to the XXXX strong then side, pretty you market in now the softer follow-up a argument the to the do going that but continue should out be bit expect to little you see growth half of was first market be before transitory to lock obviously

Dash Robinson

sector, but an I a and know the quarter sector. definitely visibility these really to and space. but capability profile occupied convexity change of strong demand strategy has to had, the so you in of the business size the non-agency should to rules say. very rates fair absolute private and still macro Washington private there these quarter regulatory is of direction that are forces also emergence securitizations. started as remain or impact that the non-owner means non-agency have project into like to that in things is resi, you’ve emphasis resi in strong and very hard it’s opportunities we see the the the expand month-to-month, There to we seen and and a good is limited is and be There week-to-week the, the with the chance That changes refi of in amount non-owner significantly people the Yes, product high don’t which on affordability, in probably occupied

I I quickly to and the big said, that continues think built, certainly it macros to of it the So, in good us of a when move COVID how our built team has like years past think we’re be a there is lot and advantage. course allowed many I very and positioned and we’ve crisis over the the what market relationships

Chris Abate

that what country One a the and in price those you, really product is to trajectory to to you made need markets but for view the think that the purchasing requiring a is about home evolving for markets codes to purchase home occur time. take thing that to growth of I’d about more facilitate once multi-year to trends It’s non-agency the period all MSAs that if business. in you’ve going zip Kevin move or to that add across Certain about and a if markets not inherently statements happen we’ve that occur. at identified means obviously going is non-agency

pretty immediate think statement an powerful over that’s really it’s about we us, a and the view and big into. that’s, for how multi-year opportunity long-term, footprint So but the evolve

Kevin Barker

my you Thank taking question. Okay. for

Operator

of from Please Bose question the your proceed line next question. George with with Our comes KBW.

Bose George

can Hey, you just on securitizations Actually, difference and execution loans? sales first, between loan good afternoon. jumbo about talk the whole the

Chris Abate

would has probably, to balanced pretty we when each tenure the Bose, long other bit securitization challenge off total but close are now have yield given to staring total and right in right loan a end backed they IXX that the are pretty the return particularly as Sure, been for would whole a just sales, that. have answer low parity been off better the at are of curve close they slightly end its have I’d yields, say now. now of as we of

Bose George

did back the half but that, little a relative just that, million BPL I of about the like up back great, to longer the curious, this up. should to of on about actually, which in just we that? is year then term which, had thanks just a $XXX around how below the mean the mean, think is was think Okay, $XXX million But the your in switching And for guidance it we year, thanks. reflects the your half looks should outlook quarter, the it’s guidance you that bump I XQ fact guidance sort quarter. a or of XQ

Brooke Carillo

that’s fact, were up Yes, mentioned of originations reflective the think that we quarter-over-quarter. I XX%, BPL

the in And coming grounded to And since our fourth those guidance, so on deliver make that we forecast is our as for of business. off set the of we highest have want to results. up the we seen quarter we quarter are sure that ability XXXX, that

been And capital to the BPL coming has for year-over-year. dynamics, been phenomenal. been what and so, are the competitive year, the has our the originations to the have, has And business to and billion complement produce strategic sourcing fairly organically, that coupled $X additional nascent business able partnerships that which of would we mentioned, other volume the double there we sector of fact with channels as

But up the been we seeing have been right So, trying what just originating set products years. that to I for we are we in ourselves are reality understanding, have for new market the of others, now. products, think for

have bridge feel confident And very in we ability on footprint growing, been volumes so that. our in market, to our our deliver

Bose George

to that sense. your there then, curious whether whether change actually be Okay, that? could properties, just X% that And thoughts any one seconds Thanks. cap the given at question, regulatory on makes FHFA, investment the about the change and on

Chris Abate

that; Bose, to Yes, means. that any we here don’t have has But sort the of one, number picked thus subscribe sector inside notion far do I relatively up any info by efficiently. think we business the private

that So, the so questions private business or the industry. facets necessarily quickly. of the GSEs, capacity aren’t as an of of fully for the homebuyers met that supply, first quarter investor And continues two mission. mortgage anything, about time affordability back not those of I scope also If am to sure those impact homes we come markets other products that with the absorb subsidizing that rates the I others. necessarily challenge just But I think at to and have a least or think quarters. aligned

Director lifted obvious those that it’s So, caps are not of the to That going with FHFA through new regime. soon. me are the anytime to new go a we transition a said, and

what see happens. will have wait So, and we to just

Bose George

Okay, great. That makes sense. Thanks.

Chris Abate

Thanks.

Operator

of your comes from Suisse. proceed the question question. Please Our Doug next Harter with with line Credit

Doug Harter

per ultimately type – talk about book was potential for timing that potential I hoping on $X.XX underlying guess, And for recognized? of needed collateral what what required how kind of of should or I the that? you gains, is that value be is what to about share we think could Thanks.

Brooke Carillo

answer say Short would of I the more same. is

prepared deals. the running is same just value for I would our as be of then changes the in We of XX% to across side seen been few elevated that continued RPL to around really XX back fair million, we four our the realized note, a tailwind trends speeds to have us portfolios value our in we And driven quarters, our our that accretable day, day of and been which that to the well as on see XX residential performance $XXX of credit trends be continue mentioned delinquency too. kind our that’s think discount, real past if BPL past and million commentary, a and we $XXX fair would point some the I those as strong XX%. changes, have net just investment quarters percent prepayment over statistics more of by to necessitated

given of prepayments, – have have a might it the has seeing strong moderate terms strength would of been the just and really HPA how been seen we So, trends that that think strong I we our to in elevated portfolio, in but just expect those discount continuation instance, how we SLST be continue is to the on that really we have reforming net to modeled loan in point voluntary for prepayment low to we excess value. capture expectations. seen can to which our And mid-teens, well par of to

even relative that And entered the trades. our of X%. timing what these some we accelerated when anticipated crosswalk on around So, has to selective we on residential side, originally had the

on in market So, this continue purchase our terms in given a the plenty we of to. of happened mix there quarter. commentary room that what’s is lot of to But pickup resize run, a in made would

those we fair value credit than investment discount help we XX% that actually would continued faster securities, our around. think tightening over call of recognition of changes in speeds rights So, your own prepayment the spread around presentation that time. And I the and investor noted model accelerate

help So, accelerate those all to that would – discount. of those us

Doug Harter

you, Alright. Brooke. Thank

Operator

BTIG. from your comes question. the of Eric question line proceed with next Please Our with Hagen

Eric Hagen

guys bridge target Good like single at talk you up Lots thanks. has typically that been to significant afternoon. you to for course just portfolio, more the to HPA curious just given of become the rental mass increased about been programmatic it’s a to particularly Hey, through think of financing see locking the And already, there family side, to of about profile feel ability getting the more have if issuer show CoreVest? noted. you do on credit guys CoreVest business attracted whether And bridge Can same And critical there securitization, enough just durable capital potentially? the you the that, getting more is able lending. challenging one like into side purpose competition. how you then

Dash Robinson

sequence. take will in Eric. those I Dash. Thanks, It’s

great the what quality. space, was credit You to sort bring Clearly, and enters up I earlier an overall point question. a whenever of on competition articulating,

cohort seeing stretch stuff to You do, a easier standards. are that’s focus the of lenders potentially clearly on credit

our do serve, but to are We to of that hard always bars we in two securitizations. referenced the effectively as we head we competitors terms really to the the have. have we It’s, knitting. And stick think we the the that what multi-year also overall of do working fact book fact many versus I us remarks, now allows I sophistication prepared cases, that got the business start have in that of called CoreVest a is that

and business, given ultimately have that strategies. efficiency structure, book continuing a again, things are on the focus of are loans obviously, that years but types is products needs we versus what That our duration financing borrower for, our we think We And this focused provided really been whose continue which as this point. different knitting. to pointing stick sorts to attracting important. new only us, have any lead only to to we plus with of traditional have standards grown effective over speak whose at mote does a is very on are years really you more are loans. term correctly lot serve, day. portfolios relationships we the on. think, have will And I make lot X structure of the space, of at becoming borrowers been to of our of in that so the the evolution over have that win all get reliability that borrowers sure on they have our and what not we of and into years we And the These collective, that just very more loan fact are the existing is an flexibility customers, to credit I been offered, the are with a they also But matters and us what mitigant being out. for but Clearly, not the

as book. of As for get it question we discussed there. your did on past would I the before, say referenced, as market at were lot bridge, couple relates the have team the for That looking in done optimizing look the financed investment to in out we for everything. terms the funds a portfolio. of further driver months, Brooke what’s bps structure the of we always the the at over bridge behind But, cost funds cost was blended XXX how we of a improvement of

of certainly and aware always very we ours getting it’s done We to competitors are monitor closely. are of going deals something

Eric Hagen

Thanks for the comments.

Operator

line next Please your of proceed Our Delaney JMP comes with question with the from Steve question. Securities.

Steve Delaney

that maybe loans. transaction question. how of today. then references open securities any structured But looking you. your investment total $X are. Thank billion acquired taking am kind And Obviously, Good million we $XXX some billion what it’s books? looks afternoon, now RPL securities those subordinate of $XXX my everyone. large just time just Was know you I it comment your market under of those that like is it some and or there Thanks puts RPLs for about you your spending about on at can of securities? on about

Chris Abate

the in – out for the have. bought a RPL at on XXXX We These is on had over the we investments question. loans the largest and least securities syndicated risk Mac Thanks, Freddie are the late of the have which latter. books mostly XXXX their Steve, for from the years has to have balance put they couple re-performing through SLST programs two they investments their acronym on credit sheet. did respectively. we It’s

our from at have So loans of them know extremely as XX they season, the and point. perspective many seasoning this underlying XX, then some got plus are you

Brooke term your amounts of we attractive and here by able there put than that’s at are come better swoop also Freddie. point, was really piece top referenced returns modeled, the underlying one guaranteed those attractive capital been to originally performance a in attractive to had investments those financing at chunky as but has work with the fell the what So, of to we very

headache a book to a So, or as it’s over financed funded off years. our plate how it relates of at very takes term the debt that essentially which to rate, attractive manage two having is

a very it’s So, for attractive reasons. number of

Steve Delaney

Got it.

Now recall mind. slipped that that had had your you multifamily arrangement Mac, with but Freddie my investments

sound really there on you because it is play as of on – doesn’t like any is your it right angle the CAFL of locked have CMT call up? is way term given just financing, So kind attractive and there some these no that deals, or of RPLs it seasoned

Chris Abate

we There down the structured. of those immediate call XXXX some road just in transactions the is optionality some entered there and and CoreVest two lockout the and actually based the for a of the but of premiums structured that’s part as It’s some Yes, because or call how the a transactions, is. how within is less with into. on required to more not of that it’s originally year lockout big as are the we Sequoia potentially probably story, structures immediate periods and

Steve Delaney

crazy for yourself times. over that gosh, and Okay, marketplace Republic, just jumbos were some in competition, was I at First others? their great etcetera, you last going were thing to it’s and Dash years the How JPMorgan Wells, hard remember, of X can prime versus bank know. years really that’s terms ago, X footprint the guys today compete to ago, And in my – banks just

Dash Robinson

the and part years. actually products, for interest important in I is sold full significant loans also always more for perspective. think us, there we head and income we Wells’ really equation Bank to has it the obviously a depositories. year. a have your demand are calendar has compete net obviously the loan year-to-date from market, competitors us Year-to-date very the distribution And two-sided obviously but bank because have channels meaningful coin point, been a to quality with been credit challenges demand Whole of to have in are whole other any we been these Those Chase’s. speaks business a sales our part XXXX of high head than

a are market our they real helping competitors, very but also they participant the there and partners are So, in run business. are and us

Chris Abate

of are along banks lot have of our where right team loans visibility base, the moving maintaining be that I’d that that, I’d enough a risk Steve. pricing competitive, and to very to We and mitigated in rate of bank we than we we and deposit very, do we past. where advantages surveys service a with conscious to way. so Yes, have faster have very quickly. us add the more liquidity we have are standard understand aware been enabled turning the the don’t and by lies. but And mortgages capital say now is really faster, processing competitive a It’s

the more banks now, So as we we with but Dash I’d have clients. them probably at but been, are we as said, competitors, them we right ever also say than as look competitive look to

somewhat symbiotic relationship. of of kind it’s So, a

Steve Delaney

comments you forward a place the we we year. of thank second look company to Got and you to half fantastic for in it. forward look the and Thanks. position the the Well,

Chris Abate

you. Thank

Dash Robinson

Steve. Thanks,

Operator

the from question. of with Carr proceed comes your question next Our Ryan Jefferies. with line Please

Ryan Carr

good guys the great afternoon Hi, congratulations and quarter. on

quarter year? fourth be heavy foreclosure how that? your and impact third view quarter, to refi? guidance is half where on rates implies high-end that of would the back are to on of outlook then in year, terms of for or exploration And is at significant your view that given thoughts moratorium expect more where run-rate similar the you of will volumes how this the through the today, side, the the question in the that, in First the just any isn’t balance And of the within HPA much a point, resi on finally is your that

Dash Robinson

market. is where purchase our money Ryan, quarter it’s about On first to question, that your were Obviously, underscores what but hard XX% in results second rates purchase locks. really our predict I a footing will go, think solid

frankly. the on seen is have mix And so the forecast here refinance view rally forecast based probably to uptick is the will – with that well, past towards probably we That’s have the have a months. we it’s consistent a current really few been what over that few past been. not versus are upside benchmark massively reflects But not we the trending mix they in months, forecast, rates the where as that here in

plays As there we it’s where housing of something differs of to obviously XX perspective, the tracking been to is ago optimistic moratorium, From are impacted however an we re-perform moratorium, that state back in obviously XX just is that in this you ultimately of from can that very, at online but Obviously, of equity remain situation overall, in that our perspective, the orderly it borrowers to be just from where of were very we terms materially years housing the look closely. relates and it foreclosure supplier the borrowers cohort again. a housing part out, market. if our how market has for or that will begin terms come

in were do macro So, we it’s materially obviously having closely track back differ we the when we and a XXXX/XXXX. something think this trends very, very like from conversation

Ryan Carr

and within the real those call new your you. investments driving am and your how opportunities curious Thank your sides times within share, in of are the wallet you areas? those forward Horizons deck hear on thoughts then that business. synergies technology I the both of on And of some increasing quick several increasing on within particularly kinds your and going to initiatives in mentioned

Chris Abate

our have very to Horizons, you in tech we that’s to prop Valley Yes, The a proximity could platform because or I internally, we network traction excited in and our we And business. years. and it we in I the significant. Series the am at is Class especially of the number see, glad business strong for something of or been And looking transformative that that Horizons, our asked been with deployed think significant. to interesting a hasn’t have technology opportunities, And are been addition the it’s Series A, something resi deal, a the as to been BPL we it building that – always B that wanted just connection to it’s given side starting on too very starting had which business outside else, of A that our and just have, flow about every capital deal space to grows, about really we whether that admittedly network opportunities. kind in we and gain a have look to lot be has

some over definitely interesting so it’s there tech. turn is whether of areas expand these of an disclosed finance the And investments have we startups really to into time, the extent, some that opportunity prop stable in businesses, to or

but it’s again – said, on to like more lot term a deploying. focus going it’s is a a just and than behind is I story, very medium much here. the lot So we’ve early long it’s that I a And the Horizon days scenes, been capital think there

Ryan Carr

on and great Thanks very much congrats a quarter. again

Chris Abate

you. Thank

Dash Robinson

Thank Ryan. you,

Operator

the Ladies participation. and this your concludes does for gentlemen, Thank you today’s And Q&A call. end this session. everyone

may day. your You lines have disconnect and at a time wonderful this

Redwood Trust (RWT) 29 Jul 212021 Q2 Earnings call transcript