Redwood Trust RWT Q4 2025 Earnings Call Transcript

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Date

Feb. 11, 2026 at 5 p.m. ET

Call participants

• Chief Executive Officer — Christopher J. Abate
• President — Dashiell I. Robinson
• Chief Financial Officer — Brooke E. Carillo
• Head of Investor Relations — Kaitlyn J. Mauritz

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Takeaways

• Record volume -- The Sequoia, CorVest, and Aspire platforms generated $23 billion in combined production volume, the highest in company history.
• Sequoia platform jumbo lock volume -- $5.3 billion, representing a 5% rise from the third quarter and a 130% increase over 2024.
• Bulk activity share -- Close to 60% of Sequoia fourth-quarter production, including a $500 million pool from a regional bank.
• Jumbo market share -- Estimated 2025 market share at approximately 7%, a material increase from previous years.
• Sequoia distribution margins -- Margins increased nearly 40% sequentially from the third quarter, driven by expanded distribution channels.
• Securitization and whole loan sales -- Sequoia distributed about $3 billion via securitizations and over $1 billion via whole loan sales in the fourth quarter.
• Aspire Non-QM volume -- Aspire sold $648 million in one transaction and brought full-year distribution to near $1 billion; management expects to launch Aspire's inaugural securitization platform imminently.
• CorVest volume growth -- Full-year production increased 13%, led by a shift toward smaller balance products, including residential transition loans (RTL) and DSCR loans.
• Operating cost efficiency -- Redwood Trust (NYSE:RWT) achieved a 44% decrease in operating cost per loan year over year through automation and process improvements.
• Operating expense ratio -- Total operating expense reduced from 1.6% to roughly 0.9% of production volume over the past year.
• GAAP net income -- $18.3 million for the quarter, or $0.13 per share, as reported by CFO Brooke E. Carillo.
• Non-GAAP earnings available for distribution (EAD) -- Increased from $0.01 in the third quarter to $0.20 in the fourth quarter, surpassing the common dividend.
• Mortgage banking segment EAD -- $0.33 per share in the fourth quarter, indicating strong return on capital.
• Operating leverage -- Mortgage banking volumes in 2025 grew approximately six times faster than total operating expenses.
• Capital turnover -- Loans typically remain on the balance sheet for about 35 days, accelerating capital velocity and supporting increased earnings generation.
• Liquidity -- $256 million in unrestricted cash was held at quarter end.
• Recourse leverage -- Increased sequentially, with 85% of the change attributed to higher warehouse utilization for mortgage banking.
• Volume momentum into 2026 -- CEO Christopher J. Abate reported $3.6 billion of volume in January, reflecting acceleration beyond the fourth quarter's run rate.
• Non-QM gain on sale margin target -- President Dashiell I. Robinson stated, "It is 75 to 100 basis points that we have traditionally targeted," for the Aspire Non-QM channel.
• Third-party capital partnerships -- Management announced advanced discussions for capital partners in both Aspire and Sequoia, anticipating further scaling of platforms outside the corporate balance sheet.

Summary

Redwood Trust reported its highest-ever platform production volume and sequential growth in both earnings and operating margins across all major segments. Automation initiatives sharply reduced operating cost per loan, enabling the company to expand operating leverage without corresponding increases in expenses. Management highlighted strategies to drive capital efficiency, including shorter average loan hold times and new third-party capital partnerships, positioning the company to further grow both earnings and production capacity. A planned inaugural Aspire Non-QM securitization, accelerating volume trends at the start of 2026, and demonstrated ability to diversify capital sources signal strategic momentum behind management's stated goal that "core operating performance to drive consolidated earnings above our common dividend in 2026."

• The Sequoia jumbo residential channel achieved record volume despite low industry-wide activity, indicating the platform is gaining share in a stagnant market.
• Non-QM and business purpose lending platforms benefited from institutional and whole loan investor demand, which fueled both margin expansion and broader capital access.
• AI-driven process automation cut review times and reduced manual workload by 3,000 hours in the quarter, embedding efficiency gains across origination and underwriting.
• Management explicitly highlighted the upside potential from lower cost of funds and capital redeployment as warehouse lines are refinanced, supporting further earnings growth.

Industry glossary

• Non-QM: Non-qualified mortgage loans, which do not conform to standard government-sponsored enterprise (GSE) underwriting criteria, serving borrowers not eligible for agency mortgages.
• DSCR loan: Debt service coverage ratio loan; a type of business-purpose mortgage underwritten primarily on a property's ability to generate income exceeding debt obligations.
• RTL: Residential transition loan, typically a short-term loan for acquiring or renovating single-family or small multifamily properties before sale or permanent financing.
• Jumbo mortgage: Residential mortgage that exceeds conforming loan limits set by the Federal Housing Finance Agency, not eligible for purchase by Fannie Mae or Freddie Mac.
• IMB: Independent mortgage banker, a non-bank company originating, selling, and servicing home loans.
• EAD: Earnings available for distribution; a non-GAAP metric reflecting cash earnings available for dividends.
• Recourse leverage: Borrowings where the lender has claim on the borrower's other assets if the collateral does not cover the debt.

Full Conference Call Transcript

Christopher J. Abate: A more durable earnings profile. Our three operating platforms, Sequoia, CorVest, and Aspire, generated $23,000,000,000 of volume, the highest in our company's history. In hitting a new gear with production, we have also ensured that earnings have kept pace. Brooke will cover a few operating metrics that demonstrate how more revenue is making it to the bottom line tracking the operations focus we have seen in a very long time.

Operator: and related activities

Christopher J. Abate: At year end 2025. Up from 57% in 2024.

Operator: Growing

Christopher J. Abate: Journal partners. This shift also reflects in leveraging Redwood Trust, Inc.'s best in class is our Aspire Non-QM business. Complementing our Sequoia business in the consumer mortgage space, originator network, Aspire has already become a top Non-QM correspondent platform. On the back of strong Non-QM growth, we are pleased to launch our third branded securitization issuance platform under the moniker SPIRE which will speak for a large amount of our Non-QM production going forward. We expect our inaugural Aspire securitization to launch in the coming weeks. Turning back to affordability initiatives in Washington, institutional participation in housing has also drawn a renewed focus with proposals intended to limit the ownership of single family homes by large institutional investors.

We remind listeners that large investors continue to only own a small share of the country's single family housing stock and that with respect to CorVest, our business purpose lending platform, the vast majority of our lending footprint remains focused on smaller and mid sized housing investors. In serving this segment of the market, CorVest continues to thrive, having recently been named IMN's Lender of the Year for 2025. Our team is positioned to deliver additional growth in 2026, especially as our small balance products are scaled, to complement CorVest's flagship term and bridge offerings. Redwood Trust, Inc.'s market and structural positioning is now meaningfully stronger across all channels in which we operate.

Supported by a broader base of third party capital partners, more flexible, simpler balance sheet, and an infrastructure built to profitably scale volume as housing activity expands under a renewed focus in Washington in an evolving rate regime under a new Fed chair. As we look to grow earnings and market share in 2026, we are leveraging AI to enhance risk management, accelerate capital deployment, and extract further gains in operating leverage. Based on the progress we have made to date, we expect core operating performance to drive consolidated earnings above our common dividend in 2026, enabling earnings retention and reinvestment to help fund organic growth. And with that, I will turn the call over to Dashiell I.

Robinson to our operating businesses and investments.

Operator: Thank you, Chris. We exited 2025 with record production and strong margins.

Christopher J. Abate: Driven by operational efficiencies, accretive capital reallocation, and continued progress in deepening distribution channels.

Dashiell I. Robinson: Mortgage banking activity for the quarter was once again headlined by our Sequoia platform, which delivered a second consecutive quarter of record volumes amidst housing activity levels that remain well below historical norms. In all, Sequoia locked $5,300,000,000 of loans, a 5% increase in the third quarter and up 130% for the 2024. Bulk activity, much of it with banks and a continued competitive moat for our platform, represented close to 60% of volume and included a $500,000,000 pool sourced from a regional bank. Housed under a new Sequoia loan program that we expect to contribute meaningfully to 2026 volume.

Flow volume, which represented just over 40% of fourth quarter production, remained well diversified with a notable pickup in closed-end second and adjustable rate loan volume. Sequoia's competitive position continues to strengthen. Our network now spans over 210 originators across banks and independent mortgage bankers, or IMBs. And we estimate our full year 2025 jumbo market share at approximately 7%, up materially from prior years. Importantly, these gains are driven by market trends we have now observed for some time. We continue to actively engage with banks that are increasingly choosing distribution over balance sheet retention, a dynamic that continues to expand our addressable opportunity.

While IMBs represented roughly two thirds of fourth quarter production, we expect the mix to evolve further in 2026 as additional large bank relationships come online. Distribution also remains a core differentiator, driving fourth quarter margins up nearly 40% sequentially from Q3. During the quarter, Sequoia distributed approximately $3,000,000,000 to securitizations and over $1,000,000,000 to whole loan sales, supporting strong capital turnover and attractive returns. By design, we are running the platform to turn capital faster, and the breadth of our distribution options has become a durable operating advantage. In 2026, opportunities to profitably scale volume without a robust refinance market remain compelling on a stand-alone basis.

As a reminder, in 2025, we generated more volume than in 2021, when the overall mortgage market was roughly three times larger, driven by growth in our purchase money loan volume. But as Chris noted, the refinance market is once again as importantly, any increase in observed prepayment speed is mitigated by the nature of the premium we carry on balance sheet, recapture economics, whose value is used largely to hedge a growing pipeline and is not contingent on significant re growth prospects also remain promising within from both flow and bulk channel, establishing a run rate we expect to build upon.

Fourth quarter volume brought total 2025 lock volumes over $3,000,000,000 with close to 70% sourced through our flow channel and 5% from sellers with whom we do business in Sequoia, validating the differentiated model we envisioned when launching the platform.

Operator: On the distribution side, Aspire sold $648,000,000 in one due both

Dashiell I. Robinson: Loan sales to several counterparties, including the platform's first ever sale to a bank, bringing full year distribution near $1,000,000,000. For both Sequoia and Aspire, we are making strong progress on third party capital partnerships to further broaden distribution, and as Chris noted, close to launching the first securitization under the Aspire shelf. CorVest, our business purpose lending platform, closed out 2025 on a strong note, with full year volumes up 13% versus 2024 as we further reposition production back towards smaller balanced products, including residential transition loans, or RTL, and DSCR loans. RTL represented nearly 40% of fourth quarter production, the first time the product has headlined our quarterly funding mix, and hit another high watermark for production.

DSCR volumes increased 43% versus the third quarter, highlighted by momentum in cross-collateralized portfolio loans, a critical complement to our traditional term loan product. This shift in origination mix is improving the platform's overall and aligns well with continued institutional demand for CorVest-originated assets. Away from our core operating activities, we continue to make progress winding down the legacy investment portfolio. During the fourth quarter, we reduced the legacy bridge portfolio's principal balance by nearly 40%, including multiple asset sales and executing loan resolutions and modifications, including a number of complex

Operator: legacy And then

Dashiell I. Robinson: Through RWT Horizons, we are increasingly focused on applying AI automation directly into our core operating workflows, both organically and in partnership with certain Horizons portfolio companies. Activities that support scale, consistency of execution, and risk management. This quarter's 3,000 manual hours and a reduction in document review times by approximately 75%, with certain quality control reviews now achievable in under a minute. These capabilities are now embedded in areas such as data validation, analysis of our organizational structures, covenant tracking, and due diligence standardization. Importantly, this technology enablement is a meaningful contributor to the operating leverage Brooke will discuss, including our 44% year-over-year reduction in operating cost per loan.

Operator: in

Dashiell I. Robinson: We are using automation to increase throughput, rather than relying on incremental staffing to support higher volumes, shorten turn times, and maintain underwriting discipline as production scales. As a result, Horizons is evolving into a fully integrated driver of growth across Sequoia, Aspire, and Core

Operator: are fine.

Dashiell I. Robinson: I will now turn the call over to Brooke E. Carillo to discuss our financial results.

Operator: Thank you, Dash.

Brooke E. Carillo: For the fourth quarter, we reported GAAP net income of $18,300,000, or $0.13. On a non-GAAP basis, consolidated earnings available for distribution, or EAD, increased from $0.01 in Q3 to $0.20 in Q4, exceeded our common dividend.

Kaitlyn J. Mauritz: This reflects both

Operator: improved by $0.8 relative to Q3,

Brooke E. Carillo: As well as the initial redeployment of freed up capital into our higher return mortgage banking platform. For segment's EAD was $0.33 per share for the fourth

Operator: Segment

Brooke E. Carillo: Income of $43,800,000 and a 20 historical target range

Operator: nine

Brooke E. Carillo: Reflecting strong

Kaitlyn J. Mauritz: execution

Operator: banking

Kaitlyn J. Mauritz: return on capital.

Brooke E. Carillo: Earnings improved sequentially despite modestly lower funded volumes driven by accretive distribution activity, improved net interest income, and continued efficiency gains across the platform. As we have scaled our mortgage banking platform, volume and revenue growth has materially outpaced operating expense growth, reinforcing the operating leverage embedded in our model. In 2025, mortgage banking volumes grew roughly six times faster than our total operating expenses, reducing total operating expense to approximately 0.9% of production volume from 1.6% in the prior year.

This improvement reflects both structural cost efficiencies and disciplined execution, and because the majority of our cost base is variable or tied to production, we are increasingly focused on how effectively incremental volume converts into earnings once fixed costs are covered, supporting margin expansion as the model continues to scale. This operating leverage reflects our transition to a capital efficient, originate-to-distribute model where earnings power is driven by margin and capital velocity rather than balance sheet size. As production scales, operating expenses naturally rise with volume even as returns improve, which can make traditional mortgage REIT efficiency metrics anchored to assets or equity appear less indicative of performance when production is growing faster than common equity.

In practice, this reflects the efficiency of pushing more production through our equity base without increasing our balance sheet risk. We have industry-leading capital velocity as our loans typically are on our balance sheet for approximately 35 days, meaning that incremental production continues to translate directly into earnings. Percent annualized return on cap

Operator: things.

Brooke E. Carillo: Roughly 50% of our financing in this segment

Kaitlyn J. Mauritz: callable within the next year,

Brooke E. Carillo: We see further upside to earnings from this segment as we take advantage of the potential to refinance at a lower cost of funds as the front end of the curve is expected to continue to decline. With respect to the balance sheet, recourse leverage increased sequentially, 85% of which was driven by higher warehouse utilization supporting mortgage banking activity. Approximately 62% of recourse debt resides in our mortgage banking platforms, where capital turns quickly and borrowings are repaid as loans are sold or securitized. With put liquidity remains strong with $256,000,000 of unrestricted cash at quarter end, providing us meaningful flexibility. And with that, I will turn the call back to the Operator for questions.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. And one moment, please, while we poll for questions.

Kaitlyn J. Mauritz: Our first question

Operator: Comes from the line of Crispin Elliot Love with Piper Sandler. Please proceed with your question. Thank you. Good afternoon, everyone. I hope you are well. I'm

Dashiell I. Robinson: First, just on the recent move in mortgage rates. The rally earlier in the year and support from the administration, can you just discuss how that has been impacting your businesses into the early part of 2026 from a volume perspective? Compared to the fourth quarter? Have you seen momentum continue or an acceleration into the new year?

Christopher J. Abate: Sure. Hey, Crispin. Maybe the easiest way to answer that directly is just to provide our January numbers. We were at $3,600,000,000 of volume for January, so we were $7 or and change total for Q4. So obviously, the run rate has just continued to accelerate. So from our standpoint, the rally has helped. Although, you know, our business has largely been about taking market share across nonagencies. So we have high expectations for volume this year, but the jumbo business has been somewhat insulated from, you know, some of the things we are observing in agency—you know, there are indirect impacts, but the rally has not been as steep.

Jumbo mortgage rates are still maybe a quarter point behind conforming. And a lot of that rally has since kind of leveled off as well. So, obviously, we had today's jobs print, so we will see where we go from here. But I think overall we are pretty bullish on our volume potential, based on how we started the year.

Dashiell I. Robinson: Great. Thank you. Appreciate that.

Bose Thomas George: And then you have been leaning into the Aspire Non-QM platform. That is definitely showing up in your growth. Can you just discuss some of the opportunities there? And then how that business could be impacted from GSE performance, if anything happens over the next couple of quarters or even years? Would you see that as an additional opportunity for that business?

Dashiell I. Robinson: Hey, Chris. This is Dash. I can take that. In terms of the near-term opportunity, I think a lot of it is continuing to execute on what we have been doing. Obviously, the business has shown fantastic momentum in the second half of the year, with close to $3,000,000,000 of locks alone in just Q3 and Q4. And I think that is a function of a couple things. First of all, a huge competitive advantage we have is that the existing Sequoia network—folks we have been buying jumbos from for years and have real operational intimacy with. The past couple of years, they have really started to lean into Non-QM products.

A lot of that was a function of rates having been persistently high notwithstanding this recent rally and just a desire to expand their product suite. But also, I think a recognition that the Non-QM market continues to grow and has a lot of really high-quality borrowers that are underserved, and we think about—you know, we have a slide on this in the review this quarter. We estimated the Non-QM market for 2025 to be $130,000,000,000, which was up significantly from 2024. I think a lot of market observers expect another 10% to 15% increase this year. And so a lot for us to lean into in this space.

As you know, depositories have a much, much smaller footprint, if any, in Non-QM. We did sell a Non-QM pool to a bank last quarter, which was a great achievement for the business. But beyond that, it is largely nonbank competitors where we can really lean in and win share, as Chris articulated, with our service level and with our relationships. So that is a really, really big deal. The ability to securitize will be an important element for this business. As Chris articulated, we expect that in the coming weeks. So, I think it is all very much going according to plan, there is a very long runway for growth in the business.

We estimate we probably had last year a 2% market share of the volumes I just articulated. It should be higher than that in 2026 as the business rounds out. On GSE reform, specific to Aspire, anything could potentially happen. Obviously, there has been a lot of evolution in messaging out of DC. But specific to these types of products, it is in our view, it is unlikely to be impacted. The types of consumers that are being served through Non-QM—bank statement borrowers, things of that nature—have been outside of the GSE purview, and there are technology capabilities there that they do not particularly have. And so we think there is some insulation there.

The other big thing, and who knows how this evolves, but with the administration's recent mandate around GSEs not supporting single-family ownership by investors, these are probably smaller than would be impacted by that, but that is an element that you need to take into account too in terms of the probability that the GSEs enter the DSCR market as it is currently contemplated within the Non-QM. So our expectation is that private capital, thankfully, will continue to really speak for these products, and we expect to lean into the opportunity a lot more this year.

Bose Thomas George: Great. Thank you for all that color.

Kaitlyn J. Mauritz: Thank you.

Operator: Our next question comes from the line of Donald James Fandetti with Wells Fargo. Please proceed with your question.

Dashiell I. Robinson: Hi. With volumes being so strong on the origination side, how are you thinking about third party capital providers going forward?

Brooke E. Carillo: I am happy to take that, Don. Yeah. Dash, I think in his prepared remarks included a comment about really across both Aspire and CorVest, increasingly, all of our loans are being spoken for. We are gearing up for securitization in Aspire, but to date, we have sold to multiple handfuls of insurance companies and asset managers. The demand is just really strong for our production and increasingly so on the Sequoia side, especially given some of our success with teasing these seasoned pools out of banks. We have seen multiple levels of oversubscription on some of our seasoned securitizations that we have done, just really giving investors a different convexity profile than we have historically through our Sequoia program.

So we are catching the eye of several third party capital providers. We are in evolved discussions for both a capital partner for Aspire and Sequoia, which will really help launch the growth that Chris is mentioning to continue to scale these platforms this year. And doing it outside of our corporate balance sheet is helpful given where capital options lie today. So that is really the numbers that you are seeing in terms of our capital efficiency, the amount of production that we have been able to really put through the system this year is a byproduct of those capital partners, and we expect

Kaitlyn J. Mauritz: it to continue fuel growth in '26.

Dashiell I. Robinson: Thank you.

Operator: Thank you. Our next question comes from the line of Bose Thomas George with KBW. Please proceed with your question. Hey, everyone. What are the margins like in the Non-QM channel, the gain on sale margins currently? And how does that compare to margins currently in the jumbo channel?

Dashiell I. Robinson: Hey, Bose. It is 75 to 100 basis points that we have traditionally targeted. Obviously, it is a similar business model. I think the fact that we will be rolling out a securitization platform will be very accretive to that in terms of optimizing execution versus whole loan sale. But we are targeting something contextual to what we have historically targeted for Sequoia.

Operator: Okay. Great. And then can you just talk about the competitive landscape in Non-QM? So the market is growing quite a bit, but there are different companies entering the space as well. Can you just talk broadly about that?

Dashiell I. Robinson: Sure. Yeah. I think the space is definitely competitive. I mean, I think that is largely driven by what continues to be an increasing demand from large capital allocators for the asset class. The securitization market is extremely strong right now. There is a very, very deep bid from whole loan buyers. We see loan spreads in that space right now sort of at or very close to the tightest we have seen in years, frankly, and I think what that speaks to is that overall, the asset class has performed well. I think the convexity story that a lot of investors have signed up for has played out.

Frankly, a lot of the sort of challenges in private credit away from mortgage—I think what we have sort of anecdotally heard from our partners is there is increasing capital allocation to this space, maybe away from some of the other sectors in private credit that have been a bit more challenging. So Sequoia, we have seen entrants—those are all real tailwinds for the space. It does lead to increased competition, as you know, for years and folks come and go. I think there are similar operational hurdles running a Non-QM business well as there is in jumbo. So the market is definitely competitive.

But we feel we have a lot to lean into, frankly, in terms of continuing to grow our share and things of that nature. So we are still very, very excited about the runway in front of us, like I said.

Operator: Okay. Great. Thanks. Thank you. Our next question comes from the line of Richard Shane with JPMorgan. Please proceed with your question.

Crispin Elliot Love: Thanks, everybody, for taking my question. Hey, I am looking at slide 15, and it is really interesting. And

Eric J. Hagen: Two questions here. One is if we compare the Sequoia volume in '21 versus '25, historically, you guys were a little bit more of a purchase shop versus the market. And now your mix is much, much more aligned with the market mix. I am curious if as your distribution—as your bank part—as you have increased the number of partners, if that is really what is happening, that you are going to mirror the market a little bit more closely, or is it some function of the refi market being so small right now?

And then the other part of the question is, when we think about margins for you, both in terms of gain on sale but also expenses, is there anything that we should think about as the market eventually shifts to more of a refi market or more between purchase and refi?

Christopher J. Abate: I will take the one, Rick. The '21 comparison that we did was really to highlight that as much progress as we have made with volumes and actually exceeding 2021 levels, 2025 was substantially without significant refi business. And in '21, thanks to the Fed, mortgage rates were into the threes or even the twos, and refi was huge. And so, the real goal of the slide is to basically say, for jumbo, for Redwood Trust, Inc., it has been largely purchase business up until very recently. And if we add refi business, it will not be at the expense of purchase. It will be in addition to purchase.

And from a margin standpoint, that should continue to leverage the platform. So as we push more business through the same amount of capital or thereabouts, and a similar org structure, we should continue to see more of that revenue make it to the bottom line. And that is why we really rolled out some new operating metrics this quarter. I think we sometimes get mixed in with more traditional REIT business models which look at expenses to capital, and other metrics. And for us, it is really capital turnover and then how much can we grow revenue without growing expenses. And so some of the metrics there comparing those, I think will be really valuable.

So, jumbo has not experienced the same amount of refi business as conforming. Rates did not snap in as quickly. I do not think that the fourth quarter experience was the same. And so that is still business that is potentially ahead of us. I think we mentioned there is a couple hundred billion dollars of jumbo that could become, quote unquote, in the money if rates dip below—meaningfully below 6. So there is a lot of that ahead of us, and we think that just scales the platform further.

Operator: Understood. And

Richard Shane: Chris, I think the takeaway from this is that as you sort of achieve that normalized volume as markets normalize, in terms of purchase and refi, you are indifferent on the margin between incremental million dollar origination on the purchase side and on the refi? Or is there anything we should think about in terms of profitability that is a little bit different between the two?

Christopher J. Abate: Well, generally, refis are a little bit quicker. So from that standpoint, your refi business—you are dealing with an existing borrower, with a home that has been appraised. From that standpoint, you could see some efficiencies, but with our model, it is not big enough where we are substantially rooting for one or the other. I think what we are really trying to do is continue to be a great partner to our network of originators, and Dash made the point earlier. One of the reasons why we are entering Non-QM and growing quickly is not because we really had a different take on the products.

It is because the very, very large originators, particularly the IMBs—top five, top 10 originators in the country—have entered the space. And it is much easier for them to do business with somebody like us that has been a capital partner for, in some cases, decades, than to introduce themselves to a new counterparty. So really, we are just going to continue to leverage our network, and I hope that the refi business picks up. It would be great for us and for the industry, but, as we saw today, rates are still pretty volatile. And a 4.17% to 4.20% 10-year has been giving us a lot of indication on which way things are going to go. Fair enough.

I mean, look. It is a timing issue. It is when, not if, in my mind, but I agree with you. Who knows how soon that will happen? But I appreciate the answer, guys. Thank you. Thanks. Thank you. Our next question comes from the line of Eric J. Hagen with BTIG.

Operator: Please proceed with your question. Hey. Thanks. Good afternoon, guys.

Eric J. Hagen: So how do you think the focus on affordability in this overwhelming support for homeownership and lower mortgage rates has an impact on the resi transition lending business? And would you say there is a catalyst which would get you to allocate more capital over the near term to the CorVest side of the business? I will kick that up high level, and then I am sure Dash will have

Christopher J. Abate: Some comments specifically focused on RTL and some of the affordability initiatives. But CorVest is where our deepest JV partnerships are. And the way we are thinking about that business is primarily in terms of profitability for shareholders. So it is going to be less about how much can we raise volumes in x amount of time and more about continuing to scale it and generate high margins for shareholders. And the reason why I say that is much of CorVest volume is spoken for by CPP and others. And so, what that does is it generates asset management fees for us. And, obviously, we are coinvesting. But, ultimately, the goal with CorVest is to really dial in the products.

We certainly expect to grow volume this year, but we are very focused on margins back to shareholders. Dash, do you want to take the other

Dashiell I. Robinson: Yeah. Thanks, Eric. I think it is a great question. And I think it is nuanced. Right? Because there are so many shades of gray as to what an affordability initiative or initiatives may look like. As you know, one of the big challenges with the overall housing picture in this country is just the disconnect between what is desired at the federal level and some of the reality of getting through the local or municipal hurdles to actually create accessible housing for people. By that, I mean price point, but also turnkey housing. As you all know, consumers, whether they are buying their third or fourth house or their first, there is just very, very little interest

Eric J. Hagen: And,

Dashiell I. Robinson: In putting a bunch of CapEx into the home themselves. The desire really is buy a home that they can move right into, which is a big reason why the RTL business has expanded so much. There is obsolescence in housing, and there has just been an evolution in the consumer over the last couple decades where there is the desire to have someone else get the home ready to move into.

So to the extent that these funds that are already allocated can be more efficiently dispersed, and can open up opportunities for builders or developers—whether it is with subsidies or whether it is just easier to get through the red tape of developing or redeveloping a lot, lot meaning a piece of property—I think that could be a huge tailwind. Because there is a lot of pent-up demand for refurbished homes, existing homes that need to be refurbished. There are lots that could be used in more ways.

And to the extent that some of these affordability initiatives at the federal level—obviously, Congress, this is one of the very few issues that there is significant bipartisan support on—the issues that we see at large part are really at the local and municipal level in terms of actually allowing some of these developers to get to work. And so to the extent that actually loosens up a bit, it could be a huge opportunity for our client base to serve more ultimate homebuyers by cheapening the cost and the time it currently takes to get through some of these project approvals.

So there are some other potential knock-on effects, but I think greasing the skids on that would be a very big deal.

Eric J. Hagen: Really good color there. Appreciate that. Really quickly, I think we heard you say there was $10,000,000 to $15,000,000 of expense savings that you mentioned in the opening remarks. Can you say what that was again? Are you offering any broader guidance for expenses this year? For the full year?

Brooke E. Carillo: Yeah. No. I think that is really concentrated, I would say. I mentioned back office, but really across corporate and CorVest segments. Of our $200,000,000 or so of OpEx for the year, about 45% of that was fixed. And so just in terms of broader guidance on OpEx, a lot of what Chris made in terms of remarks around our efficiency we have done both through our process technology, but also our scaling our volumes and grabbing market share. We are pointing to some of the marginal costs on loans that we have seen this year. Just because outside of our fixed cost, it will really be variable OpEx tied to increased volumes this year.

So we did about—just for some context—our OpEx is up about $30,000,000 on the year. All of that nearly was tied to the growth in Sequoia and Aspire where we had very profitable volume on the year. So we generated an incremental $12,000,000,000 of volume with $30,000,000 of expense. So call it, like, a marginal cost per loan of about 25 basis points. We think we can continue to drive that down through added efficiencies with initiatives that we are focused on today that have been mentioned. But that can help you model the incremental G&A that we would have tied to additional volume.

Eric J. Hagen: Okay. That is really helpful. Thank you, guys.

Kaitlyn J. Mauritz: Yep.

Eric J. Hagen: Thank you.

Operator: Our next question comes from the line of Mikhail Goberman with Citizens GMP. Please proceed with your question.

Eric J. Hagen: Hey, guys. Good afternoon. Hope everybody is doing well.

Mikhail Goberman: Just to follow up a little bit on Eric's question on CorVest. What do the originations there look like? And if there is any sort of color you can give us on first quarter volumes and how margins are holding up there? Thank you.

Christopher J. Abate: I will begin. I will start and kick it over to Dash. Across our businesses, including CorVest, we are projecting higher volumes in the first quarter, sequentially, and pretty consistent margins. Again, with CorVest, it is a little bit different because much of our production goes to our JV partners, or the capital partners that are focused on that segment. So the volume profitability dynamics are a little bit different. The math is a little bit different. But, overall, we have metrics in the review. CorVest had a very profitable year. One of the reasons is because of capital efficiency and we did take some further expense out of the business, as Brooke mentioned.

So that is going to improve—that should improve—margins, all things equal, in 2026. So high level, I think we are expecting higher volume in the first quarter. But as far as the makeup of the products, which has evolved over the past year, I will let Dash answer that.

Dashiell I. Robinson: Yeah, Chris. Thank you. I would say, Mikhail, we are still really tracking and making great progress with focusing production on these smaller balance RTL and DSCR products. As I mentioned in the prepared remarks, RTL is our largest product type in the fourth quarter for the first time. And so I think it reflects some significant strategic progress in that business, which we expect to continue. CorVest has always been unique with its relatively broad set of products, but the smaller balance products are particularly well bid right now, both in securitization and whole loan buyers. And so we are going to continue to push in that direction. Chris articulated correctly, obviously, with our joint venture with CPP.

That is a great way to not only turn capital quickly, but there are very reliable economics there where we are earning a very certain amount of economics on loans going into the JV, and then we obviously participate in the upside and the outcomes as a 20% stakeholder in that JV. So I would say those are tracking very consistently for a few reasons, including that one. The other point I would make, and Eric touched on this a little bit, but with the affordability pieces, a big potential tailwind for production for CorVest—and we talked about this in the prepared remarks—was just with rental products.

We are doing more on the DSCR side on a portfolio basis, cross-collateralized loans, which are starting to look a little bit similar to our traditional term loan product, which we have securitized and sold for years. And a tailwind there, depending on how some of these housing initiatives out of DC play out, is that smaller investors and more mid-cap investors, which are really the target audience for CorVest, could be winners to the extent larger players are moved a bit to the sidelines. Obviously, a lot remains to be seen there, but leaning in on these rental products and continuing to fill what the market wants is something we are going to continue to do.

As Chris articulated, the ability to turn capital quickly and reliably into these joint ventures is very important.

Mikhail Goberman: Just one last comment on

Kaitlyn J. Mauritz: on next

Brooke E. Carillo: You know, we continue to see our term and portfolio DSCR product as an increasing mix of originations for CorVest. These are our two higher margin products as well. You saw in the fourth quarter that despite volume being down, our gain on sale activity for CorVest was up. So those are contributions to that dynamic.

Mikhail Goberman: Thank you all for those comments. Just one more, I think, for me. Just kind of looking out over the space, are there any other sort of real estate loan products that might interest you going forward, or are you guys kind of in a grow-what-you-have kind of situation and execute throughout this year? And with that in mind, I know you guys have your history with the FHLB. Is there any—there possibly be any value to owning a bank in order to get back in that system for funding?

Dashiell I. Robinson: Well, I

Christopher J. Abate: Never say never, but it is not in our current plan. Although, banks—we are obviously doing a lot of partnering with banks, and I think with the capital partnerships comes ancillary opportunities, warehouse partnerships, and otherwise. So I think we are still sort of extracting value from a lot of the bank partnerships, particularly the regional banks more recently that we have brought online. And they have brought us online. From a product perspective, I think we are largely going to stick to our knitting. There has obviously been a lot of in Washington about some alternative products, whether it is 50-year term or otherwise. And for a lot of reasons, I think those are going to be hard.

Not technically eligible for delivery, and many other reasons. So I think for Redwood Trust, Inc., we are going to largely lean in on Non-QM, which we talked a lot about today. We have already got fantastic business in the BPO space with CorVest. And with Sequoia, I think we are underpenetrated in second lien mortgages. Certainly, HEI, other sort of interesting ways to really leverage our seller base. So all of those will be in the mix this year, but I think the core products are going to really carry the flag.

Eric J. Hagen: Alright. Thank you.

Operator: Thank you. We have reached the end of the question and answer session. I would like to turn the floor back to Kaitlyn J. Mauritz for closing remarks.

Kaitlyn J. Mauritz: Great. Thank you, Operator, and thank you, everyone, for joining today. We appreciate the sponsorship and your time, and we look forward to continued engagement across 2026. Thank you.

Operator: Thank you. And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation. Have a great day.

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