Note: This is an earnings call transcript. Content may contain errors.

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Date

Wednesday, Oct. 29, 2025, at 5 p.m. ET

Call participants

  • Chief Executive Officer — Christopher J. Abate
  • President — Dashiell I. Robinson
  • Chief Financial Officer — Brooke E. Carillo
  • Managing Director — Kaitlyn J. Mauritz

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Risks

  • Chief Financial Officer Carillo reported, "The GAAP loss primarily reflected transaction-related expenses associated with the resolution or transfer of approximately $100 million of legacy bridge assets and an ongoing net interest income drag from our legacy investment portfolio."
  • Christopher J. Abate stated that the noise from the legacy transition continues to affect consolidated results, which Dashiell I. Robinson and Brooke E. Carillo will address, contributing to a slight decline in book value to $7.35 per share as of Sept. 30, 2025.

Takeaways

  • Loan production -- Nearly $7 billion of loans were locked and originated in Q3 2025, setting a new quarterly record even as industry volumes remained flat quarter over quarter.
  • Sequoia loan locks -- $5.1 billion in loans were locked in Q3 2025, up 53% from Q2 2025, with estimated jumbo market share rising to 7% from 1%-2% in 2023.
  • Aspire platform growth -- $1.2 billion in loan locks in Q3 2025, nearly four times the Q2 volume; Aspire originated a record $550 million in Sept. 2025.
  • CoreVest loan funding -- $521 million was funded in Q3 2025, up 14% year over year and representing the highest volume since mid-2022.
  • Core segment earnings -- Earnings available for distribution (non-GAAP) reached $27 million, or $0.20 per share, yielding a 17% return on equity in Q3 2025; compared to $0.18 per share in Q2 2025 (non-GAAP).
  • Mortgage banking returns -- The mortgage banking segment’s return on equity exceeded 20% for five consecutive quarters, reaching 28% in Q3 2025.
  • Sequoia segment net income -- $34 million in segment net income and a 29% return on equity in Q3 2025, up from $22 million and 19% in the prior quarter, while gain on sale margins averaged 93 basis points in Q3 2025.
  • Distribution -- Nearly $9 billion in collateral was distributed year to date through Q3 2025 across 13 securitizations and whole loan sales, already surpassing full-year 2024 levels.
  • Legacy capital allocation -- Capital allocated to the legacy segment was reduced to 25% from 33% as of June 30, 2025, with further reductions anticipated through year-end.
  • Share repurchases -- 6.5 million shares have been repurchased since June 2025, representing 5% of outstanding common shares.
  • Recourse leverage -- The leverage ratio increased from 3.2x to 4.0x in Q3 2025, driven by warehouse utilization from record mortgage banking activity; while corporate and portfolio leverage declined from 1.9x to 1.6x in Q3 2025.
  • Credit performance -- Delinquencies on securitized bridge loans below 3% for ninety-plus-day delinquencies, indicating healthy repayment velocity.
  • Revolving credit facility -- Corporate secured borrowing facility expanded by $150 million, now totaling $400 million, and maturity extended to Sept. 2028.

Summary

Redwood Trust (RWT 2.73%) highlighted record quarterly loan origination and a substantial increase in mortgage banking returns in Q3 2025, which management attributes to a capital reallocation strategy executed during the quarter. The company emphasized the accelerated shrinkage of its legacy portfolio, freeing $150 million in capital for investment in higher-return core platforms during Q3 2025. Management reported that the expanded partnership with CPP Investments raised the joint venture facility limit to $400 million in Q3 2025, signaling further growth potential for the Sequoia platform. Redwood Trust cited its growing use of artificial intelligence to drive operational scale and efficiency while maintaining rigorous underwriting standards as a differentiating factor. The company announced it has already surpassed its prior full-year 2024 distribution benchmarks year to date and identified year-to-date improvement in credit quality metrics, particularly with sub-3% 90-plus-day delinquencies in the bridge loan book as of Q3 2025.

  • Chief Executive Officer Abate stated, "We committed to proactively repositioning our balance sheet, freeing up capital from legacy assets, and redeploying it into our highly profitable operating platforms."
  • President Robinson asserted, "Our estimated jumbo market share is now 7%, up from 1% to 2% as recently as 2023."
  • Management projected the ongoing redeployment of approximately $100 million in legacy capital per quarter.
  • The company stressed that further market share gains in prime jumbo and non-QM segments will require continued capital allocation and expansion of seller networks.

Industry glossary

  • Non-QM: Non-qualified mortgage loans that do not meet standard agency underwriting criteria but are supported by alternative income verification and higher credit quality.
  • EAD (Earnings Available for Distribution): A non-GAAP measure representing recurring core segment earnings before certain transaction and legacy costs, reflecting the company's ability to pay dividends.
  • DSCR (Debt Service Coverage Ratio): A metric used in business purpose lending to assess a borrower's ability to cover debt obligations from property cash flows.
  • RTLs (Residential Transition Loans): Short-term loans typically provided to real estate investors for the purchase and renovation of residential properties.
  • HEI (Home Equity Investment): Investment structures that enable sharing in the value appreciation of residential properties in exchange for upfront capital.
  • SLST (Structured Loan Sale Transaction): The sale or transfer of re-performing or non-performing mortgage loan portfolios, often under specialized, negotiated terms.
  • SOFR (Secured Overnight Financing Rate): A benchmark interest rate used for pricing and settlement of short-term U.S. dollar-denominated lending and derivatives.
  • REO (Real Estate Owned): Properties owned by the lender, typically as a result of foreclosure, pending liquidation or sale.

Full Conference Call Transcript

Kaitlyn J. Mauritz: Thank you, operator. Hello, everyone, and thank you for joining us today for Redwood Trust, Inc.'s third quarter 2025 earnings conference call. With me on today's call are Christopher J. Abate, Chief Executive Officer, Dashiell I. Robinson, President, and Brooke E. Carillo, Chief Financial Officer. Before we begin today, I want to remind you that certain statements made during management's presentation today with respect to financial and business performance may constitute forward-looking statements. Forward-looking statements are based on current expectations, forecasts, and assumptions and include risks and uncertainties that could cause actual results to differ materially.

We encourage you to read the company's annual report on Form 10-Ks, which provides a description of some of the factors that could have a material impact on the company's performance and cause actual results to differ from those that may be expressed in forward-looking statements. On this call, we may also refer to both GAAP and non-GAAP financial measures. The non-GAAP financial measures provided should not be utilized in isolation or considered as a substitute for measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial measures is provided in our third quarter Redwood review, which is available on our website, redwoodtrust.com.

Also note that the contents of today's conference call contain time-sensitive information that is accurate only as of today. We do not intend and undertake no obligation to update this information to reflect subsequent events or circumstances. Finally, today's call is being recorded and will be available on our website later today. And with that, I'll turn the call over to Christopher J. Abate for opening remarks.

Christopher J. Abate: Thanks, Kaitlyn, and thank you, everyone, for joining us today. Our last earnings call, we announced the acceleration of our strategic transition to a more scalable, simplified operating model. One designed to capitalize on the transformative opportunities we see emerging for our business. We committed to proactively repositioning our balance sheet, freeing up capital from legacy assets, and redeploying it into our highly profitable operating platforms. We set a target of reducing our legacy exposure from 33% of our capital at July 30 to 20% by year-end. In support of this transition, we repurchased common shares. We can look back now in the third quarter as one of our most productive to date.

Across our businesses, we locked and originated nearly $7 billion of loans, a new quarterly record for Redwood Trust, Inc. This was despite an otherwise subdued housing market where industry volumes are roughly flat quarter over quarter. Our production included a record $5.1 billion of loans locked at Sequoia, $2 billion of loans locked at Aspire, which has rapidly ascended to become a market-leading non-QM loan aggregator, and $521 million of loans funded at CorVest across residential investor products. Volume drivers for the quarter included record contributions from bank sellers and a host of new distribution partners that have enabled us to turn our capital quickly and speak for more production.

In step with the growing opportunity across our mortgage banking platforms, we've continued to scale them profitably, generating a core segment's EAD of $0.20 per share for the third quarter. We've now maintained mortgage banking segment ROEs above 20% for five consecutive quarters while boosting capital allocated to these businesses by 80% over that time. Importantly, this growth hasn't come at the expense of efficiency. We continue to build out an AI infrastructure and core in-house capabilities. Owning our data, models, and workflows, while leveraging AI-driven document intelligence to extract data at scale and accelerate turn times. We're also partnering with leading Silicon Valley tech firms to stay ahead of the curve. Our AI tools aren't just operational upgrades.

Expect them to become strategic assets that will help us drive scale and manage risk as volumes reach new heights. Just as they did this past quarter. On the heels of such a productive period, in recognition of the ongoing success of our existing partnership, announced today that we have expanded our relationship with CPP Investments. Extending the investment period of our joint venture our corporate secured borrowing facility to $400 million from $250 million. We look forward to building on this foundational momentum with CPP Investments and will now turn our attention to fundraising for our flagship Sequoia platform. Where growth prospects underscore the opportunity for additional institutional capital.

Turning to our legacy portfolio, we significantly reduced our capital allocated to the segment in the third quarter with it now representing 25% of our total capital. The noise of the legacy transition continues to play a part in our consolidated results which Dashiell I. Robinson and Brooke E. Carillo will cover contributing to a small decline in GAAP book value to $7.34 per share at September 30. Book value also included the effect of our $0.18 share dividend paid to stockholders and 5 million shares of stock repurchased during the quarter. Zooming out on the broader markets, we are closely watching developments across the credit landscape and U.S. economy.

Recent bankruptcies affecting clients of several large banks underscore growing pressure in certain consumer asset-backed sectors. While these events may appear isolated, they echo earlier chapters of the credit cycle reminiscent of conditions that preceded the mortgage reforms implemented after the global financial crisis. By contrast, today's residential mortgage market benefits from more rigorous underwriting standards, enhanced transparency, and stronger data integrity. Principles deeply embedded in Redwood Trust, Inc.'s credit culture and capital markets practices. And as we continue to see strong growth in the private label securitization market, our advocacy in Washington to make capital flows into securitization more efficient is bearing fruit.

And amidst a very ambitious agenda, SEC chair Atkins launched a concept release in late September on how to streamline non-Agency RMBS disclosures, which we think has the potential to crowd significant new capital into the sector and deepen demand for the assets we create. As we progress through the final quarter of the year, we continue to capture market share in what has been a very subdued housing market. However, with mortgage rates on the decline, and with the prospect of further monetary easing ahead, we're optimistic that the housing finance sector will once again resume strong growth in the year ahead. With that, I'll turn the call over to Dashiell I.

Robinson to discuss our operating results in more detail.

Dashiell I. Robinson: Thank you, Chris. The third quarter witnessed our strongest operating performance in the company's history. With ample progress in further reallocating capital, to continue profitably scaling our core activities. To start, Sequoia locked $5.1 billion of loans in the third quarter. A 53% increase from Q2 and a record for the platform. Against the more muted market backdrop in which many other large players reported minimal to no production growth. Our volumes with both bank and non-bank sellers grew by over 50%. We estimate that our seller network now covers approximately 80% of market share for jumbo production. Up from 20% to 30% as recently as 2023.

In step, our estimated jumbo market share is now 7%, up from 1% to 2% over the same time period. This deeper access must be complemented by crisp execution. A continued strength of our platform across a deepening set of products. Sequoia's third quarter activity was split between traditional thirty-year fixed hybrid ARMs, closed-end second liens, and a number of other products, underscoring our role as a one-stop provider of timely and flexible liquidity for our loan origination partners. Of note, 48% of our third quarter volumes were bank collateral, and 25% was tied to seasoned loans. Reflective of trends we have anticipated for some time. Namely a resurgence in bank M&A activity and increased rigor within bank C suites.

In evaluating the true return profile of funding long-duration mortgages with deposits. Irrespective of where the final Basel endgame rules land. By design, our operating progress has been coupled with continued momentum and distribution. Year to date, we have distributed nearly $9 billion of collateral, tops in the market, across 13 securitizations and whole loan sales to a variety of partners, including $2.6 billion in the third quarter. This already eclipses full-year 2024 activity and demand for securitization is still elevated. Notwithstanding a modest recent backup and overall execution. We expect activity to continue apace heading into year-end. Complementing Sequoia's growth is our emergent Aspire platform, whose expanded loan program we launched in January.

This business primarily focuses on loans for prime quality borrowers who require an alternative underwriting approach. Including evaluation of personal bank statements or rental income tied to the property. Aspire's $1.2 billion of third quarter locks were nearly four times second quarter volume. The business closed the quarter with a record month, $550 million in September alone. Profitably establishing a run rate we expect to build upon in the quarters ahead. The pipeline continues to reflect a focus on well-underwritten loans to high-quality borrowers. With third quarter production carrying an average credit score of 749 and average LTV of 71%.

Aspire's emergence as a top five aggregator of non-QM loans underscores both the institutional strengths of our platform and sellers' growing preference to consolidate relationships, as they expand their own product offerings. A key element of Aspire's business plan has already played out. The existing sellers are meaningfully broadening the range of products they deliver through the platform. As recently as eighteen to twenty-four months ago, many of our core seller relationships were brokering out or otherwise not directly addressed the expanded credit market. Which market observers estimate could be up 40% from a year ago and top $125 billion in size in 2025.

The shift has been noticeable and bodes well for the expanded credit market overall and Aspire's growth prospects in particular. Sellers seeking seamless and one-stop solutions for their products can now come to Redwood Trust, Inc. for their entire suite of non-agency offerings. Concurrently, Aspire continues to make important inroads with new to our platform. Critical progress to grow the platform responsibly, diversifying our seller base and thereby driving reliable margins. The platform grew its loan originator partner base by nearly 50% in the third quarter. With plans to continue growing further. Including with several top originators in the coming quarters.

While Aspire's distribution thus far has been focused on whole loan sales, we are in process to expand our distribution efforts further through securitization and joint ventures. Outlets where we have had success in other channels of our business. Our residential investor loan platform CorVest continued to evolve its production mix while achieving its higher quarterly volume since mid-2022. Notably, originations within CorVest are increasingly driven by smaller balanced products. Originations of residential transition loans or RTLs and DSCR comprised 40% of Q3 volume and are up 45% versus the same period last year.

The smaller balance market remains a significant opportunity for CorVest given we have been relatively underpenetrated in a space that continues to grow and remains in demand with our capital partners. The broader origination landscape for investor loans remains robust but uneven, as many platforms' competitive posture as always ebbs and flows in step with their access to capital. Depth of distribution remains a competitive advantage for CorVest, which has distributed nearly $1.5 billion of loans year to date, via joint ventures and whole loan sales. Concurrent with our operating progress, we significantly reduced our exposure to legacy investments since the end of the second quarter.

We sold our full re-performing loan portfolio SLST and approximately half of our third-party HEI investments. At accretive levels versus our 06/30/2025 marks while also resolving or transferring a significant portion of our legacy bridge loans. Including selling over half of the portfolio into a partnership structure capitalized with multi-year non-recourse borrowings. With preferred and residual co-investments by a third party. Pro forma for these activities, legacy now represents approximately 25% of total capital down from 33% at 06/30/2025. With further reductions expected through year-end, primarily through additional resolutions in the legacy Bridge portfolio. Now turn the call over to Brooke E. Carillo to discuss our financial results.

Brooke E. Carillo: Thank you, Dash. For the third quarter, we reported a GAAP net loss of $9.5 million or $0.08 per share compared to a loss of $100 million or $0.76 per share in the second quarter. The GAAP loss primarily reflected transaction-related expenses associated with the resolution or transfer of approximately $100 million of legacy bridge assets and an ongoing net interest income drag from our legacy investment portfolio. Book value per common share was $7.35 at September 30 compared to $7.49 at June 30. And our economic return on book value was 0.5% including $6 per share of accretion from share repurchases. Total repurchase activity since June with 6.5 million shares or 5% of our outstanding common shares.

On a non-GAAP basis, core segments earnings available for distribution, or core segment's EAD, was $27 million or $0.20 per share, representing a 17% return on equity. This compares to $0.18 per share in the second quarter and underscores the continued earnings strength of our three core segments the Sequoia mortgage banking, which currently includes our Aspire platform, CoreVest mortgage banking, and Redwood Investments. Across our operating platforms, we've increased capital allocation by more than 80% since mid-2024. Including a $160 million increase since the end of the second quarter. Combined GAAP return on equity for mortgage banking segments reached 28 in Q3, marking the fifth consecutive quarter of returns exceeded 20%.

At Sequoia Mortgage Banking, segment net income rose to $34 million producing a 29% ROE compared to $22 million and a 19% ROE in the prior quarter. Total lock volume reached $6.3 billion including $5.1 billion from Sequoia and $1.2 billion from Aspire. Gain on sale margins averaged 93 basis points at the high end of our long-term target range. CoreVest Mortgage Banking generated $3.5 million of segment net income and a 38% EAD return on equity. Funding volume of $521 million the highest since 2022, was up 14% year over year, supported by strong loan distribution and a shift in production mix towards term, DSCR, and smaller balance bridge products.

Redwood Investments delivered segment net income of $10 million and a 10% EAD ROE. The modest decline in net income relative to the second quarter was attributable to pay downs and sales of third-party securities partially offset by gains on retained investments as rates declined and spreads tightened. We deployed approximately $30 million of capital into assets sourced from our operating businesses and completed our fourth non-recourse financing trade of retained investments, reducing total securities repo balances to just $28 million which is down 85% from Q3 2024. The investment portfolio saw steady to declining delinquencies across products, including ninety-plus day delinquencies on securitized bridge loans announced at below 3% and where we continue to see healthy repayment velocity.

Turning to legacy investments, the segment reported a $22 million net loss driven by the transaction costs and continued net interest margin pressure. On the $1 billion of assets sold or transferred this quarter, we recorded an approximate $0.5 EAD loss equating to negative 15% return, versus returns exceeding 20% across our operating businesses where the $150 million of capital generated from resolution activity will be redeployed. Total operating expenses decreased 3% or $1.7 million from the quarter driven by lower portfolio management costs. This was partially offset by higher G&A related to personnel and other expenses supporting the growth of our newer platforms.

Across all operating segments, we saw continued gains in operating efficiency with notable improvements in cost per loan reflecting the benefits of record quarter origination volumes this quarter. Turning to our balance sheet and capital structure, Our overall recourse leverage increased from 3.2 times to 4x driven by warehouse utilization tied to record mortgage banking activity. Excluding recourse leverage from our mortgage banking businesses, our combined corporate and portfolio leverage ratio declined from 1.9 to 1.6 times consistent with the ongoing repositioning of the balance sheet towards our operating platform. The 2.3 turns of recourse leverage associated with the warehouse lines remain well supported by highly liquid jumbo loans where we return capital quickly.

Recourse debt balances increased by $771 million from the second quarter reflecting record funding volume of $5.1 billion and $2 billion of which has already been sold or securitized month to date. Subsequent to quarter end, retired our 2025 convertible notes and, as announced today, expanded our revolving credit facility by $150 million to $400 million in total capacity, extending the maturity to September 2028. These actions strengthen our liquidity, simplify our debt profile, and increase flexibility to support continued growth in our core platform. In addition, our company-wide cost of funds declined approximately 40 basis points from the prior quarter driven both by lower SOFR rates and narrow net spreads across our aggregate facilities.

To close, Redwood Trust, Inc. is executing with focus and consistency. We are simplifying our business, scaling our core platforms, and redeploying capital into higher return opportunities. The progress this quarter underscores the strength of our operating model and the earnings potential of our core segments. Repositioning Redwood Trust, Inc. to deliver sustainable profitability and long-term value for our shareholders. And with that, I'll turn the call back over to the operator for questions.

Operator: Thank you. We will now be conducting a question and answer session where selected analysts are invited to ask a question. Our first question comes from Bose Thomas George from KBW. You may proceed with your question.

Bose Thomas George: Hey, everyone. Good afternoon. Actually, first, I wanted to ask about the EADs. Of longer-term earnings power. You know, you noted you largely expect the legacy assets to be rolled off by 2026. And so when you look at the earnings power after that, should we look at you know, the non-GAAP core number this quarter was 20¢. Plus the deployment of all the capital that comes out of that's still in the legacy piece. Is that kind of the way to bridge to the earnings power after?

Christopher J. Abate: Hey, Bose. I can start on that one. The short answer is yes. You know, I think as the legacy segment winds down, our earnings our consolidated earnings will start to look a lot closer to what we're generating in EAD today, in core EAD. As you said, that was $0.20 exceeded the dividend. You know, I think the redeployment is going to be a question of how quickly we can wind that down. But certainly, in the third quarter, we turboed it, so to speak. And, I think Brooke mentioned we'd freed up $150 million of capital for reinvestment.

So that was capital that was generating a negative return on a consolidated basis and now can be into the mortgage banking segments, which I think we stated have generated greater than 20% ROEs for the past four or five quarters.

Bose Thomas George: Okay. And but just in terms of the 20¢, that basically just strips out the legacy piece. But as you redeploy that, there'll be the essentially, whatever, 20% in return on that piece. Right? So that's sort of incremental to the 20¢. Is that fair?

Brooke E. Carillo: Yeah. That's right. We still have $400 million of capital, associated with our legacy segment. So as that capital is freed up, that will be redeployed into mortgage banking.

Bose Thomas George: Okay. Great. And then just one other quick one. The gap the ROE on the Redwood Investments, the non-GAAP EAD ROE looked like it was last quarter, I think, was 16. This quarter, it looked like was 10. Is that was that right? So what could you just discuss, like, what drove that?

Brooke E. Carillo: Yes. I'm happy to. So a lot of it came from just lower NII from our investment portfolio. He actually saw our net interest income up about a million dollars overall, and you're really starting to see kind of the benefit of our mix shift here where our capital is being redeployed from the portfolio into mortgage banking. So our mortgage banking NII is about $5 million. This was really from sales primarily in payoff. We had about $450 million of payoffs in our bridge and term loans across, you know, our consolidated assets. So that was part of the reason for this.

Bose Thomas George: Okay. That makes sense. Thank you.

Kaitlyn J. Mauritz: Yep.

Operator: Our next question comes from Richard Shane from JPMorgan. You may proceed with your question.

Richard Shane: Hey, everybody. Thanks for taking my questions. I have to queue in a little faster because Bose asked most of what I wanted to discuss. But, look, basically, if you sort of look at the timeline in terms of what you're describing, for releasing capital from the legacy investment portfolio? It's about $100 million a quarter that's gonna run off over the next four or five quarters. When we look at the three remaining core businesses, I'm curious if which of those businesses will actually generate additional net income with additional capital? For example, does the mortgage banking business is it capital constrained right now? Or is it a market share issue?

And that additional cap it will be about market share growing regardless of capital. Or and so how should we think about that actual capital be out being allocated to the three different businesses?

Christopher J. Abate: Hey, Rick. I'll take a stab at this one to start. You know, I would say, we've shown I think we said we've grown capital to that sector 80% or so over the past four or five quarters. So effectively what that means is every dollar that we've been able to free up, we've deployed. And I think that dynamic will continue into the foreseeable future. So as we free up more capital, we have uses for it fairly quickly in mortgage banking across the three platforms candidly. We have a record quarter in Sequoia. We mentioned that Aspire grew 4x quarter over quarter.

So when you think about those growth rates, the need for capital is going to continue to be there. It's a big reason why we continued, extended our relationship with CPP Investments which is a great partnership for us. And so I think we're pretty excited about our ability to deploy capital in the core businesses here over the next year or so.

Richard Shane: Got it. Okay. That's helpful, Chris. And when we think about it and, you know, you know, over the last two quarters, the math, the ROE math, for Sequoia is book ended 19% to 28% ROE. Even on the low end, that's obviously very attractive and supports the dividend. I am curious when you think about what drove the expansion and how we think about that going forward. Is that ROE expansion a function of scale? Or is it more a function of shape of the curve and a particularly favorable environment in terms of margin in that business?

Dashiell I. Robinson: Hey, Rick, it's Dash. Great question. Probably a little bit of all of the above. We've always strived to be as capital efficient in that business as possible. You know, loans on average are coming on and leaving the balance sheet within a month. We could probably continue to do that more efficiently. We've done now 13 securitizations already year to date, which is obviously, you know, above one per month. So that's, that's very, very helpful. So capital efficiency is part of it. Our operating efficiency, just in terms of just expenses to revenues, continue to improve. Those improved notably. From quarter on quarter. So that's obviously helpful from just an overall you know, expense ratio perspective.

The other big emerging story, which we talked about, is just the synergies between Aspire and Sequoia as well. We're just scratching the surface with Aspire in terms of our market share. Our implied market share annualized in that business in Q3 is probably like 3% or so if you extrapolate our volumes or versus full-year volume. So you asked about market share, and I think for different reasons within Sequoia and Aspire, those businesses are prime to continue to grow wallet share. Aspire, in particular, onboarding new sellers and penetrating existing Sequoia sellers, and as I mentioned, are adding their product suite. That's a very big deal.

We talked a lot about bank posture, just the percentage of bank collateral that Sequoia did in the third quarter was close to 50%. That's very meaningful, particularly when you think about what's going on in C suites, dispositions, rationalization of ROEs. The runway is really long to continue to grow share notwithstanding the size of the pie with the rate etcetera. And so I think when you put all of that together, those can continue to drive ROEs hopefully to the wider end of the bookend that you talked about?

Richard Shane: Got it. Hey. Thank you guys very much.

Operator: Our next question comes from Douglas Michael Harter with UBS. You may proceed with your question.

Douglas Michael Harter: Thanks. I guess, sticking with returns, know, just how do you think about the total size of the corporate expense you know, as you look to maximize kind of the overall ROE And then also, how do you think about what the third-party investment ROE can be know, as you look to know, kind of allow the high mortgage banking ROE to fall to the bottom line as much as possible.

Brooke E. Carillo: Yeah. And, Doug, I'm happy to take that. You know, I think we I think it's really important not to view our expense base just in the context kind of our capital base. You know, we've talked today a lot about our three scale, but still rapidly growing operating businesses. And when we think we're about who we're competing and what we're producing there, you know, on the jumbo side, we've kind of been neck and neck with the biggest bank dealer desk as a top prime issue of the top issuer of prime jumbo loans. We're running that business on a fairly know, lean operating expense base.

Aspire, as Dash just mentioned, just moved quickly into a top five non-QM aggregator. CoreVest continues to kind of lead in the investment in small business lending. And so And meanwhile, for several years, we've really chosen not to raise dilutive capital and instead focus on returning capital to shareholders through buybacks. So you know, our operating expenses, it might look elevated as a percentage of equity, but we think the kind of right way to look at it is the amount of operating leverage and productivity that we have and manage on our platform today. We basically manage $20 billion of assets with about 300 people.

And so we remain highly focused on our expense structure, but we also believe that the real path to earnings creation is coming from, you know, further scaling our models and addressing our legacy capital rather than shrinking our infrastructure. So I think the third-party focus will remain you know, fairly limited. We kind of talked a lot about our strategic pivot last quarter to focusing on our operating businesses that are franchise. I think we're within third-party, we're focused on assets that meet our cost of capital today. And obviously, you know, with where we were marked, that helped move assets we thought were suboptimal from that perspective.

Douglas Michael Harter: Great. Thank you, Brooke.

Operator: Our next question comes from Donald James Fandetti with Wells Fargo. You may proceed with your question.

Donald James Fandetti: Yes. On the Aspire non-QM, can you talk a little bit about how you see the growth of that underlying market, whether or not the GSE footprint shrinking could potentially increase that?

Dashiell I. Robinson: Thanks, Don, for the question. I think setting aside the GSEs for just a second, think we see that market just organically know, having significant growth runway. If you look at just the employment mix in this country, there's more and more consumers you know, who earn nontraditional income away from w two. I think that's you know, that's a very big deal. The other piece is awareness. I think particularly with, you know, more originators, particularly larger IMVs, you know, involved in non-QM originations, I think more of the eligible consumer population that can take out some of these loans, is being reached, frankly. Now that more originators are involved in this space.

Technology, particularly AI, that's a very, very big deal in terms of managing cost to produce. In the space. If you think back to when like bank statement loans really emerged ten or twelve years ago, very manual, You know, it took quite a while for an underwriter to responsibly get through underwriting one of those loans. That's significantly shorter now, I think we're probably just at the tip of the iceberg in a good way in terms of, you know, how those efficiencies can come into bear. There's a lot to be careful about in terms of how those underwriting processes evolve. That's something we're very on, but that's also a big deal.

And then on DSCR, you know, just for context, about 40% of Aspire's volume was DSCR, which is sort of smaller balance rental loans. Rentership in this country continues to grow. I think rentership was up 23% annualized last quarter. When you think about just continued challenges with housing affordability, etcetera. And so I just think organically, you know, Aspire's TAM is gonna continue to grow for good reasons. As it relates to the GSE footprint, these are not products that they really do right now, far be it for me to fully prognosticate around, you know, how they think about the footprint going forward. We need to be ready for anything.

Obviously, an overall footprint reduction with the GSEs on loan limits would be a huge boon for all of our businesses, probably most notably Sequoia. But even away from what's going on in D.C., we just think the Aspire TAM is growing for you know, for good reasons.

Operator: Thank you. Our next question comes from Steven Cole Delaney with JMP Securities. You may proceed with your question.

Steven Cole Delaney: Thanks. Good afternoon, everyone. So I wanna ask a question about rates, which is probably dangerous after Chairman Powell didn't do a very good job at his little speech earlier today. So I guess we don't know where they're going. But what I wanna get at is looking at your securitized prime jumbo portfolio, and the WAC kind of the coupons within those seasoned loans versus what you're quoting now on new prime jumbo loans. Help us get a picture maybe of what that dynamic looks like. Are you are do you think your book is gonna extend, or could it accelerate in terms of CPR you know, picking up?

And just curious how you're gonna approach that and got a follow-up related to that. If you would just kinda comment on where you stand with the in with respect to coupon risk.

Christopher J. Abate: Sure, Steve. Good to hear your voice. I will take a shot here. You know, I think a third or so of our volume this quarter was refi, refi related. So you know, a lot of know, most of you know, most homeowners are sort of out of the money and know, I think that's reflected in our book as well. So I'm not sure we're going to see much on the back of Powell's remarks today even though, of course, you know, the market's gonna likely sell off in the near term. But by and large, you know, we're growing the portfolio at a rate where it's trending towards current coupon.

And, to the extent that continues, the extent we run a pace of more than a deal a month and we're retaining subs and likely IO, you know, that puts us in a good position to continue to move the coupon up. And over time, you know, with the combination of IO, you know, we've got a good balance in the book today. So, I'm not sure it's going to be overly meaningful. For us, because again, our business today is primarily the moving business. It's mortgage banking, and, you know, it's less and less portfolio investing.

Steven Cole Delaney: Curious. What is the current I haven't been in the market lately, but what is the sort of current range for thirty-year fixed? Prime jumbo loans?

Christopher J. Abate: We were around six and a quarter this week. You know, again, we'll see what happens on the back of Powell's remarks. Aspire is maybe 100 basis points higher than that. So the market has come down meaningfully and you know, again, we're starting to see more refi business in our pipeline. But it's that's been largely absent for the last we do see more easing QT is officially done, So, heading into 2026, you know, if that could become a more meaningful component of our business, that just adds to the opportunity.

Steven Cole Delaney: And the refi the refi pickup that you're hearing here recently, is that kind of HPA driven where you know, people have built up some nice equity and looking at that. You know? I know that's probably an aspect of the Aspire program, but do you see that even in Sequoia where know, the people are really coming in and they wanna do a little bit of a cash out, whether it's education or whatever the issues are.

Christopher J. Abate: Yeah. We're certainly seeing some of that. We have those products I'd also say that just given the capacity you know, in the origination system, know, people are getting calls sooner. So the old adage that you had to be 50, 75, a 100 basis points in the money to refi I think the combination of capacity and technology is really shortened that up. We're seeing some homeowners refi ing perhaps twenty-five thirty-five basis in the money. So, I think that presents an opportunity for us. Again, technology is a big part of that. We talked about AI and just processing loans faster. Getting approvals faster. Those real upside opportunities for us as we build out the infrastructure.

Steven Cole Delaney: Appreciate the comments. The business mortgage business is changing. For sure, but it sounds like you are you guys are kinda riding the wave and right on top of what's going on. So thanks for the feedback.

Christopher J. Abate: Thank you.

Operator: Our next question comes from Eric J. Hagen with BTIG. You may proceed with your question.

Eric J. Hagen: Hey. Thanks, guys. I appreciate you. You know, really strong quarter for jumbo volume. We're looking out now, like, you know, call it a year and looking at your capital needs. So if you stay on this pace, what do you think will be the amount of jumbo volume that you securitize versus sell to third parties? Over the next year?

Christopher J. Abate: Well, right now, securitization has been a great option for us. I think we have the most liquid shelf in the sector, so our financing costs are the lowest. In jumbo, the subordinates, the we retain aren't overly fixed. So the actual investment size isn't what it is at Aspire. Or certainly CorVest. So that business we have the potential to grow through securitization, for an extended period. Without necessarily needing outside capital per se. I would say, though, you know, we've been able to invest every dollar of capital that we've put in that business. And, I know that we can do more.

So I think I mentioned fundraising for Sequoia in my prepared remarks, and we're going to be very focused on that. Over the next few months. We also I think bank business was half of our volume in Q3. Again, that's way beyond where it's ever been. And I think it's reflective of why we're able to grow market share so significantly in a market that's essentially flat from housing origination activity perspective. So that's another area, partnering with banks. So we've got great options. In Sequoia. And to the extent we can grow Aspire, and CorVest as well, You know, I think the mortgage banking piece of the business has been pretty exciting for us.

Dashiell I. Robinson: Just one thing I'd add to that, Eric. Sorry. Is we talked a little bit about the upsize of the room CPP secured facility, which I think is important to return to for a second in terms of your question, because not only did we upsize that facility by $150 million of capacity, but the basically the borrowing base eligibility is moving in the direction you're indicating, which is more ability for us to use that facility to finance our operating activities in mortgage banking and not just hard assets. And, you know, that's the upside is a big deal, but in terms of how we're able to use that capital going forward, that's pretty important too.

Eric J. Hagen: Yeah. That's helpful. That's helpful. What are you guys looking at right now to give you confidence or some visibility that the credit performance in the BPL portfolio has basically been stabilized? At this point.

Dashiell I. Robinson: I think it continues to be you know, a vintage issue. We've talked about that for quite a while. I think the issues are, certainly the issues that have taken longer to you know, deal with or, you know, have resulted in higher severities are still very much limited to that really first half 2022 vintage. As Brooke articulated in her remarks, our securitized bridge portfolio, which is basically the last three years of production net of prepays is now below 3%, 90 plus That's a good number. We're seeing prepay velocity pick up.

And if you look at the loss mid within those portfolios, we've seen delinquencies come but be resolved efficiently and in many cases with little to severity. Which is a function of our pivot over the past few years to smaller balance, more single-family focused collateral. So, Eric, as you know, business is not a no-loss business. But if you look at the composition of what we've been originating, I think multifamily was like 1% of our overall production last quarter. You're seeing it in the overall roll rates, but also the efficiency of being able to resolve whatever does go delinquent the last two, three years of production.

Brooke E. Carillo: One thing I would just add to Dash's comment and I know I mentioned the amount of pay downs we had in the quarter. You know, $280 million or so that was bridge. That includes about $67 million of REO and some of our special assets. So we are, I think, not only seeing the payment velocity repayment velocity in performing assets. But also moving that legacy book as well.

Eric J. Hagen: Mhmm. Thanks, guys. I appreciate it.

Operator: This now concludes our question and answer session. I would like to turn the floor back over to Kaitlyn J. Mauritz for closing comments.

Kaitlyn J. Mauritz: Thank you everyone for joining today. We appreciate the ongoing engagement and sponsorship. If you haven't already, we encourage you also to check out our earnings materials including the Redwood Review and Shareholder Letter on our website. We're always here to answer questions if you have any. And thank you, and have a good rest of your evening.

Operator: Ladies and gentlemen, thank you for your participation. This concludes today's teleconference. Please disconnect your lines, have a wonderful day.