RWT - Earnings call transcript Q4 2021

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Operator

Good afternoon, and welcome to the Redwood Trust Fourth Quarter 2021 Financial Results Conference Call. Today’s conference is being recorded. I will now turn the call over to Kaitlyn Mauritz, Redwood’s Senior Vice President of Investor Relations. Please go ahead, Kaitlyn.

Kaitlyn Mauritz

Thank you, operator. you conference us call. thank quarter Redwood’s and earnings XXXX everyone, for for joining fourth Hello, Carillo, Officer. With Abate, Robinson, Brooke Redwood’s on CEO; Chief me today’s Dash Redwood’s call President; are Chris Redwood’s Financial and

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

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

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

Chris Abate

are you Thank We and today. continued performance good truly within our record they afternoon, operating as for was Kate, a year you, profitably for proud year. everyone. transformative progress throughout XXXX we scale. here to team joining Thank continued companies, the generated and extremely reflection, of us made in we our the Redwood

executed deployment strategies while and we product our objectives key on and addition, strategic In advancing capital development. also technology

collaboration GAAP operator performance share and quarterly December detail. marginal establish provider increase XX, over much from third generated Our proud finance, people. reflected vision. financial diluted quarter, will fifth of in published per six I’m In book our the over as of averages the dividend third X.X% leading a our enterprise. QX last that is quarters. strategic outpaced significantly say the services ourselves helped maintained in for dedication, to quarter, our sector employees because dividend and we’ve and which discipline, only XXXX. was the in our great We cover possible This of quarter. share across capital the recap increased this value us per a our greater to raise rate the of of housing increased and We $X.XX $X.XX performance Quickly Brooke to corporate for all have for retention fourth earnings $XX.X this heart our the at

exist our businesses a portfolio. are through total a do shareholder and not economic return. in we and complementary XX% isolation clear On reflection our of to These generate XX% numbers return a on delivered investment the operating and equity, durable year, return potential a earnings XX%

expected But based as decade positioned the has the a prospect by the volatile reality anticipated page high turn level We by Markets inflation recently this of struggling platform of broad reached response the XXXX. a many as pandemic, that been start signals yields end on we be to accommodation. current but as still and flexible Fed to as series environment is positions hikes. XX-year no COVID-XX interest navigate Fed a the had well market. the their year a the of plus embarks and has Higher an elusive. the have the benchmark highest country probability, are great expect long and to a or our have to rate since reached continue now aggressive rates evolves been interest to the Meanwhile, economic readiness longer upon recovery

finance benchmark been of Redwood’s never business As company, rates, same but steep to other participants, subsidies, we easing, incur or many a government yield housing a low interest beholden market has curve. model the challenges quantitative as

this In fact, model has XXXX evolved Redwood’s was even XXXX, began stabilized our in to lending rate include the housing we gained business book of Great Today, into a in housing a rates. XX% the taking long-term revenue late and correlated compressed. last rates and total and benchmark streams, cohort time grew, where rose refurbish to stock. yield economic our cycle less expansion of the path with antiquated access a hiking as example growing value purpose return of of curve the we delivered investors, Fed further

rate business. and and business depth first scenarios, we has since to only this of entered BPL Our immediate us provided across credit a expanded balance depth variety that interest

are managing of primarily shareholders life purpose the interest the loans eliminating know or rate loan either just businesses our loans. many the for rate pipeline floating consumer of exposure, mortgage have their As of ahead business in effectively incur a funding rate grown residential to locked

approximately volumes us our the increased of for Given we rising which was of products, segment this deployed fourth the the new of pandemic in investments fourth performance by credit sale most the far outlook in that at capital important business, included falling rise. very and spreads ability quarter including third wider are demand to in challenging the of team, prices. about flip capital inventory, including ROEs party investments, investment we advantage optimistic our We housing, attractive team’s $XXX points. as at outlook million to bonds and deployed for $XXX BPL our market by even This for our strategically the and home acquiring for prices, of rates in portfolio rising the deploy on took quarter entry the since have team’s million script the Complementing rates also validation began. conditions

and by Importantly assets improve delinquencies credit remains across indicated our fundamentally, or our the strong performance and as declining in portfolio continue portfolio. to flattening

into demand quarter, the late mortgage prioritizing as inventory end brunt our year, faced of of year-end. origination the this took higher range a we our decades. to up posture sector. and but outperform avoiding observed a of business volumes Residential headwinds kept that most Certainly industry. the We the the the market a of in if Our margins, still in is that in loan spreads XXXX managed the high And fourth team all conservative platform healthy market the with and credit to has testament not some broader of over-hiring in historical in risk management to witnessed the volumes while highest margins lot experienced heading the also pressure typical over

whole quickly market we related. further. market of record for locked as our securitization loan something in we headwinds on and loans, QX sale them But elaborate distributed a well year, will efficiently the platforms, Dash and an the as only faced number into the best-in-class During were

loans LLPA market very greater where are underwriting mission for to driven important GSE activities, objectives. in increases One, and and Washington second well. forth The is efficiently. Sandra high as safety and director, private homes, of certain following of recent at support areas private acting the the and needed parts acknowledgement clearest serve GSEs the two, capital government some them conforming changes bold by expertise there the the increases where particularly for some By three, effectively most, yet created out and FHFA achieving crowding continues loans These limit serve Thompson more our focusing move soundness, loan home fee News subsidies and loan are balance noise of buyers. were the administration but capital, when market in November. the end increase continued the in unnecessary are the mortgage specialized FHFA resources,

a FHFA. partner a and voice the housing applaud finance, quality leading we GSEs leading to and this the innovation by As and for move

highlight RWT initiative. be continued Horizons remiss Finally, to our the would I progress from not

From meaningful alpha the financial off and in grow stage the advance Horizons, homegrown of that XXXX, strategy, has most and investors. which housing now as technology demonstrated investment as quickly in Horizons by consumers estate serve to goals investing supporting industry’s for year nearing venture our We launching early strategic one, one with our day support is at technology real of anniversary believe poised of companies which Redwood’s ability commitment, We’re our value. firm business enterprise enhances financial companies. portfolio is and geared this their

today’s that, not our to we to President a our our volatility I markets results. strategies, deliver through And Dash, companies to for Redwood over consider call and forward. ability markets, discuss but the the Certainly going our we our positioning the see in to of portfolio, operating investment turn to operating about over hand our for perform in these Redwood’s that but is persist, unique are I excited call I I’ll and to navigate Before business. tailwinds When shareholders. Dash want our supportive reiterate with Robinson just number will

Dash Robinson

everyone. you, and Thank good afternoon, Chris,

context focus will on Redwood and the recent framing a model business remarks year for rounded in continue quarter value for create conditions balanced the Chris our mentioned, we how current to of and believe market out As performance fourth impressive will very I my our shareholders.

we hike this to some The cycle, impacting the of its X% part and of The time. yield of It’s substantial backdrop rise X% now late XXXX health last with think natural segments pandemic. the from it in significant with during by and last rates XX-year rates volumes is period mortgage once an of conflict. more inflation touches grapple The industry of north interest hasn’t Fed time middle in the the changed through the ongoing helpful late were witnessed volatility been bouts the the excess since, volatility, own back cases, to makers production which but amids XXXX. close to As again of what’s ask capacity. XXXX geopolitical namely treasury last course, tenure, in policy to leaving as crap since market,

a is Redwood, answer bit. For the quite

now of full operating our covers model and cycle, portfolio While have been a model a our broader to designed business housing much investment landscape rate outperform finance. through interest always

occupants have demand critical prices housing dynamics. supply We owner for and investors path of the products balance, home a like and persistence suited given

leading help innovator also a are the homes. into equity their new as ways to We in emerging finding tap in consumers

key XXXX split in And Funded our series billion Single which in funding. rental a due to total extending during setting their million December, handful into $X.X by strategy of growth was in which the of the XX% the January. million diversification between over continues $XXX bridge. fourth our has evenly fourth production The up balance the further business mentioned, Full from latter volumes largely CoreVest, in versus quick QX of As quarter in lending $XXX already platform bar QX declined records many double multifamily purpose approach, year closed to family funding increased quarter driven our as timelines, source during a our third-party BPL represented succession, closing launch versus recently, XXXX. space see the the originators, to we of rental Chris production slightly and been which over funded transactions and entry raise overall. year-end in and mix. of quarter were to of began quarter-over-quarter, loans effort funding’s volume in XX% our single in XX% to and family where

we seasonally rentals for demand CoreVest with the and enters serve for of most leadership equity outlook family reliably activity. even attract ability the exceeded strengthen fundings And will CoreVest a volume January evidenced its notably consistently million, believe the lies overall significant by BPL for its repeat excited XXXX also fact, business. capital And part to to market quarter continue in rates while be customer rise. single tends in that a to client rate business, about as XX%. base to QX In growth we CoreVest $XXX as space a sustain for consistent about the more Prevailing remain pipeline dynamics, industry strong

hand construction demand accessible in funded increase base and notable and in build been overall including and by for has activities lending sectors. evidence higher. particularly the across in housing high hand the over communities continue quarter securitization in traditional short, loan rent a $XXX $XXX corporate we products, all must the to million higher alike. multi-family Align a BPL sale. case of the benefiting the million witnessed of market and recently the CoreVest $XXX of client with distributed Redwood’s have Growth and never BPL distribution SFR million our renters as our a within In loans, products capital stock, fourth local rental mission, stabilization go believe and whole was and importance and volumes support We to quality housing such

We replenishment bridge in inaugural also feature. to loan contributed XX-month additional securitization our a quarter, loans which the in third a reminder has as completed

We more during the transactions parts country this recent of type important first before. access than of private also made expect of to explore for home additional prices The executing label XXXX. has consumers the ever of in half path to mortgages

loans. billion off in locking own historic in records As year Chris few noted, a funding fourth to and in platform, $XX a business of its set $XX the our approximately quarter residential for billion XXXX capped the close

ever a were start, $X.X end above of totaled bulk of high in volumes year. off of February Gross itself December the the at points origination competitive last and as target lock ability depth face advantage. significant channels during the fourth benefited and from were purchases volatility also and our to including to is strong from a than residential volumes but and year’s move certainly XX quarter, record our locks quickly the risk More billion tailwinds, business the efficiently January weeks Last partners. macro quarter few and distribution acquisition of the the remains margins sellers key our positioned During Locks basis of days, totaled billion range. packages XX% $X.X average accordingly for XX in we platform just peers. In several our quickly than the two faster the historical our the XXXX, from and peak efficiency. loans ago XX% years more any an reflect than of funded of at operating

billion market will Most we program Our consumers. rapid the believe primed in to private markets higher on and are we eligible offer the again eclipsed for agency $X execution superior recently balanced where volume, transaction reengage products. notably, funding loans once

Over the are markets base evolve our support ability partners to with than ever currently years, deeper before. the as we have go demonstrated consistently origination our poised to seller and

in Sequoia of XXXX deals our size and January, market. million of our we approximately testament late As to tighter distribution other balance RMBS concurrently completed transaction that price principle first the than strength significantly $XXX in

consumer market rates volumes until trigger residential expect lower overall. will of transition a excess originators due year this be we for Looking ahead, the contractions past for prologue rising if margins Refinance with mortgage and will to capacity stabilize.

has few of Our of past activity in the our the still resilient purchase us. over an area XX% for continued represented quarters, market emphasis volume

such to purchase had We also as We’ve access country rise. likely who for to in year’s especially non-conforming, last impactful. private GSE’s home while adjustments point Chris’s most balance the GSE on substantial recent of certain in the an reiterate Redwood be regime a driver credit originators experience home on where assist declining this shift home expect as expanded to market a is loan label as who more will XXXX, impact high renewed will of limits, months, for are actively products focus second private toward parts rely it including and power capital home rates where and been to the products, buyers influence, across the for preparing market, the proportional mortgage of geographies by ownership products become ours, pricing price important preserving appreciation

investments Point quarter’s $XXX portfolio home volatility capital million as Our of and of our The investment Chris mix fresh full investment through flow agency arrangement overall. the of a Digital. bonds took CRT deploying or advantage included HEI with fourth equity referenced,

excess of through an from completed existing servicing issued additional venture. rights securitizations also acquisition joint pre-XXXX We season the

from over seasoned work is our also this effort profile securitizations. the highly years The cure investment several our few securitization the certain given less driven by a loans, and rate transactions, of reminder, SFR the venture interest calling underlying of calling opportunities separate sensitive a to ongoing next unique borrower provides more in As jumbo rates. joint and the related underlying adjacent

accretively, avenues, the operating and through remain environment been order deploy to including more find for Redwood in to our in I today’s distribution funding and We overall fundamentals have highlighted pre-pay opportunistic, innovative to to remain additional capital discuss an near-term call transactions Overall, continue that raise elevated investible delinquencies remain our our also speeds, platforms. capital opportunities waiting strong, previously, investment Brooke will while ways as low needs still to portfolio like unique for to capital unlock as further.

inaugural fourth capped on a the primarily company. As platforms. first companies. a follow is Horizons, the investments investments goal in early business during an remains for we portfolio Chris that do. XXXX quarter million $XX to portfolio housing highlighted to diversified with to direct horizons done productive we in end our and and frontiers our have committed included XX, companies December of non-agency to initiative. gets fourth partnership of and overall our investments our mid horizons off the including first the to Life have launching to market operating approaching XXXX, emphasized in earlier, existing increasingly date We our the five horizons through innovation to how quarter, nexus stage two investment capital in portfolio an completed year At XX new RWT capital $XXX Since imagine by deployment strived for all million of the $XX million with

many companies, drive standardization critical tech we at the a intelligence to companies especially built ways, Sequoia allowing on business January, now We assessment mortgage’s progress securitization assess may potentially Financial of recently early reliable analysis Officer. networks. and our in the Horizon’s Brooke encouraging of bringing tangible will we our to fund remittances. year real One with underlying five to Chief believe is class. points Redwood’s as diffuse I and investors large HEI for of to on, now blockchain continue data first we unexpected turn yield new our companies Other access and asset step loan is our and initiatives information to portfolio beginning, call include live portfolio that efforts. strategic time within issuance in to overlaps point completed businesses technology construction benefits just addition Liquid most emerging recent management amongst is over portfolio including enabled can see by innovations. each In touch our that Carillo, several platform believe one our transactions,

Brooke Carillo

The historic operating complimentary Thank combination and our in segment powerful results financial of produced you, XXXX. Dash.

highlighted Chris in we annualized the quarter, reported or the million $X.XX income quarter. share, remarks, As in per diluted $XX fourth for on return his of GAAP XX% delivering a net equity overall

Our to nearly up during $X.XX announced more XX% on dividend share book share $XX.XX. per up increase consecutive value notably XX% quarter And year. fourth or the we per increased the our to

We value the XX% several on unchanged At in the to which the platforms, In realigns our XX% terms led from diluted for to clearly XXXX, allocated business. our of XX% grew roughly quarter. of full Business our was highlights contributions share, The book banking Purpose and $X.XX distinct book Banking approximately was new year results portfolio per a and present to segment. of saw drive earned GAAP our they company. both were end, value evaluating our remaining year was value our our and portfolio businesses year. investment dividend which and our the the investment XX% believe I’ll the how capital the for XX%. ROE overall growth segments operating mortgage quarter our in we with total this towards reflect Mortgage We segments, begin and managing are the economic how return with we

in ending on the had record The up saw XX% into on was SFR securitization to in relative to in and for segment’s we volume. year quarter growth continued quarter-over-quarter, XX% generated negatively XXXX. continued XX% capital during capital XX% which year new volume loans, has in decline CoreVest mentioned, pipeline as Residential return we Mortgage quarter. Dash approached growth compared funding to driven of to compared volume end, fourth quarter the a where by QX, quarter return the which a products, As The primarily Banking a XX% prior was adjusted due lower QX. primarily on impacted widening to lock pricing the The loan spreads segment

costs fourth on Additionally, rate volatility was higher widening quarter, and during on by we spreads. pipeline interest gain our sale resulted pressure impacted our heightened margins saw the as in hedging

historical managed QX our high we and XX are and order profitability, basis XXX proactively in levels range near the saw we in XXXX. end the volume we maintain able preserve our at However, margins to to point to of

driven seasonality and As our to volume were volatility related policy. year of and in given uncertainty trade-offs the risk declines our largely reward monetary Dash by going mentioned, into view end,

light be dividends as or of residential period securitized Our strong beginning another volatility, investment to to CoreVest quarter, as pay XX/XX balance or of were we our committed discretion SFR on $X.X generating at Investment The of and sold billion XX% is from recent RPL this loans value the have contributed inventory and January. also enter changes the segment sheet that been securities. fair Portfolio over of most carrying additional sold end positive of

book. the further $XXX Following experienced value fair through quarter, performance million of credit the QX of in changes reflects across the improvement third in increase end million $X the we investment

the portfolio third capital in Our on quarter, quarter. XX% investment in adjusted the return fourth to delivered XX% compared

$XXX active we quarter we new had an towards million of As investments. capital have mentioned, deploying

us both $XXX nearly loans settled brings on also to We par, total of securitizations, million rights Sequoia loans at and XXXX. called of which CAFL call million in $XX acquiring

these As financing we on execution. have optimize several and capital loans exploring our outlets we to are sheet, we seasoned amass balance

financing we higher a net bridge a quarter lower from point a statement, and securitization in bridge QX income loan balance income our implemented experienced XXXX. funds basis the full to within the benefit a portfolio, was deployment robust XX leading average improvements the as cost interest and investment we line impacted investments average of of by positively warehouse Turning to the on

for sales to securities near benefited called. also available prospects our Additionally, of higher intermediate with accretion on net income assumed being interest from

$X.XX performance improve. premium rate. upside callable of XXXX, quarter-over-quarter, of fourth higher and we per loans arrived quarter $XXX attributable to upside net have remains share estimate underlying Sequoia ahead, potential roughly of securities loans callable which gains through portfolio a discount the could of as Looking We our continues from from in combination the book slowing through estimated to speeds currently of million around giving lower become end prepayment value

Importantly, the remains robust to portfolio well-paced. we’ve given and fundamentally responsible our this of our the home growth Despite commitment record growth year, underwriting, tailwinds double our digit remains disciplined achieved volume sound markets. nationwide, labor economic price favorable appreciation

despite mortgage We improving to to of in current stable And experience recent rates. remain delinquencies average rates, across in continue our portfolios. in our residential excess the uptick coupons portfolio

XXXX million, So XX% capital our represented $X to prepayments $XXX fallen maintained from Switching is unrestricted we December for continued and liquidity position XX billion which exposure. funding elevated, they that over of capital, our our at strength of excellent total which structure, their credit while have of positive cash including our peaks, marginal in remain build investments. with

capital XXXX. investment to driven decreased largest our of capital since available by Our for end at year quarter deployed $XXX million

increased with X.X warehouse QX approximately to a $XXX of inventory compared times times Our to finance at end. we higher year incremental residential debt recourse million as loans and leverage in utilized of slightly balance X.X

XX% total of non-marginable capacity capacity billion marginable $X.X non-marginable facilities, capacity. to balance our warehouse over between and growing to by warehouse continue warehouse XX% funding to and capacity overall We our

$X.X posture performance. with general portfolio our strong commensurate Relative of alignment maintained earnings, compensation pay our either given administrative XX% of of risk billion funding recourse declined to debt. with over we conservative with the portfolio debt with in third expenses funded programs investment decreased a assets, or our of variable and as the non-mark-to-market quarter, the Additionally, it’s

on focused as we people our in our acutely rise to XXXX grow levels did to and capabilities expense invest in absolute franchise. While management, expense our continue

have margin such own within our few expense demonstrating GAAP creating to income of operating relative the we’re ratios prior platform. the as percentage a efficiency improved years, as different However, pre-tax scalability net and

few I Redwood’s rate Fed to some the make opening of drivers. rising upon hikes, want financial tone changing the our expand about rates and a commentary impending to of around Given points

interest that market capital operate allocated have XX% resilient assets investment and of changing to environments. a Relative that intended purpose sensitivity earlier. We mentioned as company sit which the complimentary exhibit and is built lower to rates our are Redwood over Dash experienced, deliver earning business portfolio, to with cycle last across our hiking streams lending today, activities and in

fact, our XX% over investment to values assets and billion of limited rising bridge $X.X impact In are other that subordinate have in of securities, the portfolio rates. investments loans from

margin hedge like in volatile much so saw impact our rising our the pipeline, rates rates to increase on liquidity. rate costs our net We impact also margin to loan both exposure hedge interest structure the quarter. we environments funding of in limits mitigating and our interest exposure fourth the from And to profitability and

which or debt are either that those rate, our a on third floating investment Sequoia the convertible months. of average fact weighted financing rate, remaining our rate funding asset few in our called a of securitize fixed majority is in funds assets. portfolio we extend vast have loans, than net next interest fixed The which Of year. expect a terms drives the less a corporate significant are of we’ve that that of loans portfolio, our XX% spread approximately bridge year to from the meaning of over is approximately locked two-thirds, addition bridge has to than or income life in our a XX% In portion the more

to competition to our is than distribution depth the a zero times a one average from others market continues management three the where risk and perspective channels compared in X differentiator securitization like to of months. today. with to residential of Our our speed weighted in to market age four to loan Redwood markets the faster turn month X on collateral

for be reporting of we to shared thorough materials that none. the to Redwood’s conclude, our with market quarter. management document commitment tradition this The personalized a about and to enhancements each Before has the that firm outreach been review, with our second centerpiece of the conditions. package financial will I I XXXX, current changes disclosure unique results making address and wanted has recent to in detail Redwood some blends rich founding Since been

on transparency must of and pace. disclosures our utility expand we As our company, scale keep the

assume As such, have its to we current on we for it our of This all believe, related changes name our other and back stakeholders earnings valued to the digest Redwood disclosures, that, and make changes this last going We be detail have operator easier With sought quarterly outline Review augmented make will and to assessed we which the some and would in forward. and decided reporting presentation, the to enhanced these to your the it we call I open Redwood form will for you Q&A. results. our will evaluate like quarter input thank investor Redwood the have quarter’s in will present feedback. turn will particularly that for the our Review in financial Review instead

Operator

time, state Thank our comes Bose we’ll session you. with conduct question-and-answer Our KBW. George this Instructions] Please from question. At [Operator your first question

Bose George

quarter? to afternoon. are terms just sale gain margin to in looking they the first, quarter how of on you saw residential everyone. what in last Actually Good relative Hey, trends, first

Dash Robinson

quarter. closer the to still fourth we XX than end Bose, points had probably basis that our long-term So range, a the they’re the within in bit lower historical

consistently Just able a to interest have we volatility terms seeing speed been couple A this somewhat issuer in obviously there’s fair a brand the year-to-date. executions our points securitizing, of leverage right couple enhance the rate of of in of rate in amount a been year-to-date of of of seen securitization we’ve we’re that insight now, things, what market amidst function obviously and lower coupons our backup. some general, execution to

powerful think ability securitize particularly I markets it’s more like in to quickly, this. our So

a is and market month the perspective, typical our reminder, less, a rates are coupon helps or we moving possible current an be leads just when which execution loan to securitize close As age as really to from around. when as

that order some we the just competitors. slot to between like pricing in I wide volume our spot more opportunity that general relatively array observing pricing now thing range. competitors, other And long-term The that of within margins are an to our an market compelling think There’s is we’re we’re drive always of banks, what our at a is in et with our in strategies observing, direct cetera.

Bose George

Okay, great. you in And to put quarter. of terms the this Thanks. channel then That’s third-party in just work helpful. the investments

the have Just you to what securitization how the investments. compare returns target curious, and rate retained for they – what are for your your like

Brooke Carillo

Yes.

but throughout differ think I were by product, that we a quarter. given were little widening fact returns teens bit of the as spreads fourth kind they deploying just really we’re those the seeing mid

really terms So we like securities. basis which were entry of owning the the at in points,

of we So level heading subordinated into it to retention seeing had compares terms quarter. favorably in relative fourth been what

Bose George

a Thanks quarter-to-date, quick Actually, just just value one changes more, one book any lot. there.

Brooke Carillo

Yes. were X.X% book Through January, we about in of terms value. lower

Bose George

lot. Okay, great. Thanks a

Operator

Thank you.

question. Fargo. with Fandetti Our question Don your from state comes Please Wells next

Don Fandetti

in Good follow-up mortgage I think simple. evening. Thanks little be permanent make blip where the a think a originations, you $X guess to for on the back step you do less this more where to billion market you just down quarter? efforts like the just could a lock to sort this per is of active? residential things that get you’ll is like market range Or

Chris Abate

Chris. it’s Don, Hey,

change, makeup here. will think volume we’re production of the optimistic our from can but that grow I we

We in more, seeing happened what or clearing most you’re But think new our dash more. headlines certain. is are in the securitized of I in we’re another a with three of mentioned, today most old collateral. that space, the months in And to transition the what there’s for loans. months space – month February go loans four of lot And last or out non-agency are aged state three is the of seeing of rates. or And issuers a

and we’ve think So the to LLPA go to with some homes. seen transitioning changes on of agency which for happening hit side, we’re another but to the where there’s now is that month most the what’s the is there April, market second PLS, in notably, I adjustments start

see still a lot of You occupied. non-owner

can makeup non-agency we grow our the change, that we time. over what think position, I of for see you but going in to volume So remain somebody is optimistic in

This I is think transition. quarter, of a quarter definitely

there’s So perspective where talk, we’ll markets next a better lot we to think from our like have guidance I but time on headed. the the

Don Fandetti

it. that was now? think provided the we XXXX. I And for there with How I Investor some Got about think should Day, September guidance know

Brooke Carillo

of where we in midst just and comments are of being a massive Chris’s echoing the think in I all of in markets. terms of transition about kind terms

heading pace both hike into rate the March, but a lot have in learn here. with from pace the to runoff, We of landscape here of the

draw And we want wouldn’t so first think I through trends we’re seeing quarter. in the a straight what line terms in of

of year year remains all the long-term out objectives track a they we thing drivers seen performance. to that is Day. if – our seeing I And So update XX% that each kind plan, that we’re commensurate lot almost very we the just with the another our guidance. a the contribution that return. the segments, have our given that you what in quarters, it’s tremendous this that have Investor with demonstrated lot segments, of with early look on we one laid There’s around on – between of was XX% we’ve they of different ended give to at And think, of terms remains, variability between one

something seeing so quarter. to business the we’re And – highly generated a we residential just return a investment of with the BPL there’s the the volume. we’re from that this on adjusted And that that in XX% on lot constructive portfolio is that outlook Obviously, on respect quarter. we’re here too constructive with terms

an it guidance So track, stage. a would that on lot this remains early on to update but be at give

Don Fandetti

it. Thank you. Got

Operator

Laws your James. Stephen with question state Our Raymond from comes question. next Please

Stephen Laws

half on is about and think you’re volume. talk in Hi, forward good the don’t I bridge. you I increase going Can that between side sensitive, react very bridge BPL but mix you the the looks expect talk seeing guess, change SFR that, can any stabilized how and bridge interest like that maybe you about product the SFR afternoon. how rate about pricing?

Chris Abate

Sure. three past We really and closer or SFR question. to thanks quarters, and probably one-third the for it’s been two-thirds like four balance, bridge. the over Stephen, Historically, the

of bridge adapted, to particularly CoreVest cycle like turning historically a has been really life lender we the SFR investors. number housing to including loans, for the reasons, so the And balance portfolio into for opportunities

the very and So we between bridge that see for positively we the buttress organically really us. think SFR, more balance pipeline

opportunities, bridge investors, lines of like the things but collateralized products, of we’re which traditional bread a nature. of credit, butter lot things to of doing our are that terms and In cross

of to see long our important step, space because provides starting multifamily bridge belt of in a come tenured way. very duration risk nature with loans. stable under opportunities carries just are Having bridge really to the no our us obviously the financing from more a and securitization the that efficient. portfolio it for right, you’re We last the was And little really it because is year

to of family fully the On to single that we peel still side, a layers rental market. back are think there lot serve

repeat balance, the has even have exit. obviously loans HPA both hasn’t from customer tailwind there which have our been between to platform folks One obviously, that size debt to we coverage, around when good new and is underwrite service but in are repeat rates. the values our is extremely path to rents, a right are Obviously, the and general. SFR resilient, XX%, been to it’s Our a to attention perspective, customers home because close retail general been. mix rents also interest pay rate the Those space again historically we benchmark in new of carefully

the big still out attractive XX more worked And to there. we equity bullish of continue come that that but rate as But efficient come a is years to on capital And investment. and an quite will lot the capital into It’s know, a continue as past fact asset tailwind over will the think space, to agnostic, so you purely class, attract we see very nothing that’s continue the sponsorship to well space. and the very it’s into a we’re space.

Stephen Laws

And then purchase you sorted you as out little to is products Chris. from, supply equity coming, more market is about seems products think a sizable and going as given a refis refi market. of point? talked about think likely And – certainly or as you needs picture, and it various could is their expanded wave Appreciate these bit less prime out? in the that cash we get going what benefit forward, touching rate homeowners this to refis see When lot bigger the opportunities in a for past. HPA about head tap of more like you stimulus at do comments homes, prime the there, pretty driven purchase in think expanded bottlenecks which homeowners But

Chris Abate

Sure.

just QM DTI pretty rule excited there’s And we was that about roll the we’re a that of largely changes, in. products to We’re non-QM it lineup interested different number plan the before driven. now out,

are a of runway pivoting types big products. So there a towards think I I originators of those think and there’s lot

We’re having really good engagement base. with seller our

investment their And first very forward. you ways equity not the as did much of you’ll sure we’re at I’m on given see talk refis, that home cash in options to lot more far are equity look people of As going going securitization in Obviously, homes. to should cycle do that, out that’s the into but for about see so to where we quarter tap focused I think a and something have been third we’ve we the with internally in Digital. Point

there’s do. be should us, to that there cure for I there’s credit a bigger feel non-QM. think a and a do And going step like, we’re definitely like to lot So to overall, ahead of what a transition credit But or expanded there. big piece be we we

Operator

Thank you.

from Piper question next comes your state Kevin with Barker Sandler. Please Our question.

Kevin Barker

Thank much. you very

also or the that quantify and transparency, Your that quantify has the the the to you liquid quantify maybe Could in payments assets execution efficiencies transparency of developed. us developed? technology Sequoia and in order help – and very securitization on efficient. not least only utilizing mortgage the the Can help been impact the remittance are some time – bid help being at that’s for but market just you real those of

Chris Abate

our costs execute. where underlying get all it at I focused financing on transparency is day of the think And blockchain greater technology of on performance the investors and factors into help I Sequoia the our to the loans. we into Yes. mean, end early

we first in known roll And out, to widely interest in for rolled not those that that’s some January, through out and current at executed disclosures it’s So was think market the of And that see ESG how look I that, Sequoia deals first But something quantify continuing continue the I when completed points. basis have strong enhancements you well very certainly program. based. sort January, those think levels. to the we we SASB time we our

those very and we in lead front from we our to continue work work types keeps innovations, over execution are mortgage and enhance of blockchain. focused with think to the we the deals continue to time, what with I on And as ahead. trying liquid the is So program

still You’ll market, And in real kind start you to now, is of until will there, phase most innings. on a we’re see start through more the transitionary to there focused see in market, the which the hard apparent, broader do I a to early is differentiation is position. heavy but refi more stay get to trying – where of ahead just think I markets coupon become more which think we’ve current been. very for it’s this what think tangibles I And

Kevin Barker

end – that was classes of There’s be asset historical going biggest rates significant some in potential the risk where it’s months. Okay. pressure of consumers a year relative a And the then that’s with whether rates to the – changes, we stimulus or when couple moratoriums your going of loan the this look from up like less today, That’s any at dollars seen amount you higher look we’ve repayment. combined appreciation exorbitant top here portfolio likely decades are as there move combined past? on through you we highs feel specific amount price as see HPA When well. there’s those to at than home slowing you higher past several to student on with to

Chris Abate

back at overall Yeah. speaking. less – feel or amounts levels. great more portfolio. Delinquencies of is I record equity about the point are pre-pandemic this we There home to mean, broadly I

today. loan deep the on subs some of So no have concern we’ve point or area there RPLs, sheet got we and Clearly, performing deals. balance we is particular

we So downturn. perspective, a is there well. quality a from we’re basis and And But areas as those would bit marginally collateral look risks at the we of quite a see significant pretty factored when where down are are greater. the where to at need

we’ve monitor, So very right we capital opportunistic good about work. of we’re and credit the now currently. we itself putting to feel the very, we not number that don’t a But that model. We now, pretty right we’re – got expect metrics and track obviously book

Kevin Barker

Okay, great. questions. taking Thank you my for

Operator

you. Thank

next comes Harter with Our state Doug Credit from your Please Suisse. question question.

Doug Harter

Thanks.

lending costs lower in financing trending? You talked been so securitization about how and into those about the any volatility and to higher due kind in the on of was there’s whether purpose quarter of sale One, of are pass gain talk kind spreads And two, business transactions kind the you on execution. your can rate? note first to far ability

Chris Abate

been There’s a transactions Yes. Doug. couple year-to-date, of

emphasize would to we market remotely There’s scale that that are. I on we one out only traditional loans. Although, are is no the that there those core the platform the close that doing capital securitizing our

capital couple backed unique one tend loans balance historically very be by offerings term bridge smaller and couple a There of one backed then our a accordingly. And to SFR by been loans, backed by and transactions so have which home. are XX-year they’ve just executed

solid on margin that But power. would is, And we’ve just every we competitive. the those significant pass reset, between offerings and historically two our historically capital we margins and to think fundamentally thing frankly, I And That would day. the is to terms to be the our in borrowers, that error, pricing of obviously for line market products. ability of variety of said I pricing executions with to it ability pretty in core the draw look So different hard one a of that the say reasons. had have business, at

those like we advantage like of And healthy just passing loans even room it’s at fully so still bar. the along It’s competitive feel platform margins a we’ve doing without scale. really we’re because to I us, to – make huge only costs the types got said, for

really And quite market, So in through what that big again, but terms traditionally observable the compares to of issue prints CoreVest. mitigants. are we nothing those there’s pretty in

Doug Harter

private it you be like Can happening then, just kind are And in competitive CoreVest, with transactions that of through coming companies feel seems how and the into capital equity you about is dynamics there. to that BPL, that lender sticking Great. other or a there positioned? space is more talk CoreVest back

Chris Abate

a changed platforms it’s competitors quarter the originally to was I shakes then competitive from over larger one Sure. of CoreVest or certainly exactly right. I think early past you’re Well, and by held tell that to, perspective. seen bit that of a a a couple hands probably would We’ve out changed of note bank hands. landscape the how

we to competitive. the capital prior exactly – how to tough the from current. that evolve – will it’s of owners how the market they’re So to costs the But remain expect tell very

the pretty around things with I prior are deal I how Competitive think processes power just are think good advantages quickly. a housing one, big competitive is durable. pricing feel we’ve more space. in are we strongly really there. the we It’s be couple to the our these investors deep institutionalized And like to that to automated CoreVest feel pretty a our serve question able really we’ve that mode which got and another reason big why got technology your and process number

is finance products, to when to of the the the has to to stabilize the lender CoreVest financing thing The all them of they’ve or ability been portfolio. other the actions first always the just investor, suite got end way end

hadn’t we rent which diversify to those focus, is continuing of build mentioned for We’re yet area another products today.

a who and new has market stop to CoreVest but any got right. you’re given so continues is competitive, one these that we strong it a I think shop, clearly expect with do The competition call when diverse the phone said, been on be has choice, loan, And to but needs owners. favorable borrower remain

Doug Harter

Thank you. Great.

Operator

you. Thank

with your question from Please Eric Our BTIG. Hagen state next comes question.

Eric Hagen

Good Thanks. afternoon.

just I and accretion earnings? timing accrete rough left one the much under have you portfolio Can to that to discount think repeat how you in through for from the me. flow

Brooke Carillo

Yes.

portfolio majority of the our well. the but is RPL in financial quarter We as book. capital include portfolio of per We didn’t in in the our that investor tables of and have presentation, breakdown about one of discount in $X.XX this is in tables, but the remaining share that the vast our it

Eric Hagen

how earnings timing pulling some maybe of on to that the about conditions into And you’ve with Okay. is then call. the sensitive the all associated that talked on

Brooke Carillo

Yes.

of loans $XXX slightly see discount RPL that Fees that So coming the have well while million remain some called into think about are that we could the book. accelerate year we elevated. that slowed they’ve this We across and as quarter, obviously tailwind of across a remained last that portfolio, quarters has a continued number of about the which fees portfolio been pays XX for Choice high and well. our over our CPR last Select shelves

driver main mentioned So performance continue that’s and strength and – delinquencies at of in Dash are subsequent to to stable in we credit in main see be addition consumer tailwinds these have to remarks prepared to Chris and all continue those as lot for a then, the underlying and the the levels.

all for that those So should us support capturing of provide discount.

Eric Hagen

Great. Thanks lot. a

Operator

Thank you.

JMP Steve go Our ahead. next Delaney question comes with Please from Securities.

Steve Delaney

do well thought out things think, financials, I evening, evolve. I saving to me. need Thanks. Excuse changes everyone. obviously the Good in the do you shareholders’ Look, the letter. appreciate

legacy, nice had I think to it on read it’s and that props connection that. I’ve this history your chance with just so yet. Not quarter a

Number I you pretty be be out your to want and there the the volatile lines and least businesses use BPL. move just focus think exactly one and higher through guys look, on I mean, investment impacted business being little the you with have as financing the the of to appreciate candor in terms So what would portfolio. here. said okay, much going I credit spreads obviously summarize CoreVest number fact business expressed tight a I that usual of, the two, widening will and kind would be that investment rates sensitivity

get in step availability, Brooke equipped a we’re but well you guys But of that. didn’t have million. $XXX are said, lot and think location that’s you advantage if going obviously to I take this of wide, to spread very

statements more maybe much where especially business, first like to And management higher products, It is mean, creative the to it’s where guess, I – you’re like really to it slowdown a in like switch residential the you. more saying, challenge it’s agency looking I questions. in of whether that’s prime up most in how I summarize for two. of area, real how the you make option kind be off, at whether did business. So to from where standpoint I’m need that’s the And sounds from I do of Thank going kind residential to XXXX? these guess you respect area you to how the choice rates, paper. seems quickly, terms with the can expanded refis? the of approach with have

Chris Abate

Steve, at first Hey crack take that. I’ll a

you think summarized I it well.

business, – the types these We’re BPL that the entering in CoreVest were business, space for we strategic circumstances. of very

Steve Delaney

Yes, great. Great move.

Chris Abate

Yes, more spreads and that expect as happening that’s so credit we expected, than – credit When particularly hoped the spreads, you’re had widen, another well. to portfolio, we as rates in we’re platform. spreads The exactly our right strong book. sensitive year for and

go down. prices Asset

our mark-to-market in out deploy also capital, deployment definitely as capital the quarter played impact began. fourth to but has before biggest of opportunities the that that so And on quarter creates great your a existing book, and pandemic since

And the in should few think for in with you in. span an points we’ve more the I mortgage the They’re quickly capacity a us signaling highlight fourth back the mortgages good with cycle the not that higher. were on $X a of all of that higher story the annually in losing we that ago. you money. how prints be months is was saw industry so the the clearly trying make than originations. to quarter, rates we’re tried to happened to in what of where and on is started focused significantly had differentiated. And inflation more quarter, they interesting gapped And Fed resi. lot originate trillion record of And The with than And money news and there is

in all have to which needs inventory clear market, the this process of we the so doing. is that And

would first fact, going headline here our offense consumer say We’ve pipeline a to the And middle out the quarter. that’s in I So resi in very we’re space. cleared in be the to in substantially on though. continue much of

and from mortgages We’re actively successfully buying originators. pools bulk

seller a much adjustments of we’re to be a pre-placing for make lot LLPA boosting having these And our in in with base that effectively risk. we’re and production our are share. our success very to preparing sure position We

I story command to in of macro going So story first a is the lot our ink not think quarter. that’s the

sized on do. sure I efficient, point they to investors that to our think at clearly, were and originators And be and for expect creative. of turnover be us, continuing it’s we’re securities core too what capital capacity for most the are based expenses that high issuing that the needs this investments to correct same make types and know

with very for of this got entrepreneurial. – rollout having consumers in expanded products. We’ve environment, Our power meeting non-QM the team type declining success rate we’re purchasing needs of products need is the and the of great just and

goals. and jobs should we be is So And our for I’d do it be profitable. is us really able about will meet share here, take if positioned. we market good to interesting, our say business feel but the can headline we how The we’re

Steve Delaney

great Yes. That’s to hear.

you’re be I year, and it. the think for a positive would for it’s go to but attitude it going different,

So appreciate I thanks Chris. it. for the comments,

Chris Abate

Steve. Thanks,

Operator

that Thank All our today’s parties call. concludes last ladies evening. is And And and today. may disconnect. with a that, for question you. that gentlemen, Have great

Redwood Trust (RWT) 10 Feb 222021 Q4 Earnings call transcript