Servicing Investments

9 Months Ended

Sep. 30, 2025

Investments, All Other Investments [Abstract]

Servicing Investments at September 30, 2025 and December 31, 2024 are summarized in the following table.

Table 11.1 – Components of Servicing Investments


(In Thousands)	September 30, 2025		December 31, 2024
Servicer advance investments, at fair value	$	221,656	$	233,820


Excess MSRs, at fair value	30,044		32,274
MSRs, at fair value	30,556		31,589

Total Servicing Investments	$	282,256	$	297,683

We account for our Servicer advance investments, Excess MSRs and MSRs at fair value. Refer to Note 6 for further information on the inputs into the fair valuation of these components. Refer to Note 11 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2024 for additional information regarding these components and related transactions.

For the three months ended September 30, 2025 and 2024, income from Servicing investments included Other interest income of $7 million and $8 million, respectively, Investment fair value changes, net of negative $1 million and $4 million, respectively, and Servicing income, net of $1 million and $0.3 million, respectively. For the nine months ended September 30, 2025 and 2024, income from Servicing investments included Other interest income of $21 million and $24 million, respectively, Investment fair value changes, net of negative $6 million and positive $4 million, respectively, and Servicing income, net of $6 million and $8 million, respectively.

Strategic Investments

Strategic Investments at September 30, 2025 and December 31, 2024 are summarized in the following table.

Table 12.1 – Components of Strategic Investments


(In Thousands)	September 30, 2025		December 31, 2024

Strategic investments, equity method	$	43,580	$	48,767
Strategic investments, measurement alternative	25,756		25,896
Strategic investments, at fair value	6,460		3,460
Other investments	6,697		—



Total Strategic Investments	$	82,493	$	78,123

Income from Strategic Investments for the three and nine months ended September 30, 2025 and 2024 are summarized in the following tables.

Table 12.2 – Components of Income From Strategic Investments, net


	Three Months Ended September 30,
(In Thousands)	2025		2024




Other (loss) income, net (1)	$	(1,172)	$	(52)
Investment fair value changes, net (2)	1,512		(236)





Total Strategic Investments Income, Net	$	340	$	(288)


	Nine Months Ended September 30,
(In Thousands)	2025		2024




Other income (loss), net (1)	$	(203)	$	(997)
Investment fair value changes, net (2)	1,300		(1,036)





Total Strategic Investments Income, Net	$	1,097	$	(2,033)

(1)Represents net equity method earnings from our Strategic investments that are accounted for under the equity method.

(2)Includes Investment fair value changes related to our Strategic investments that are accounted for under the measurement alternative for equity securities without readily determinable fair values. For the three and nine months ended September 30, 2025, includes Investment fair value earnings of $0.3 million and $1 million, respectively, under the measurement alternative. For the three and nine months ended September 30, 2024, we recognized net equity method losses of $0.2 million and $1 million, respectively, under the measurement alternative.

Depending on the terms of the strategic investments, we may account for these investments under the fair value option, as non-marketable equity securities under the equity method of accounting or the measurement alternative for equity securities without readily determinable fair values. Refer to Note 6 for further information on the inputs into the fair valuation of these components. Refer to Note 11 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2024 for additional information regarding these components and related transactions.

Joint Ventures

We have established joint ventures with institutional investment managers to invest in residential investor bridge loans and term loans originated by our CoreVest subsidiary and directly by us. As of September 30, 2025, the carrying values of our investments in these joint ventures were $1 million and $8 million, respectively. We account for these investments under the equity method of accounting, reflecting our approximately 20% non-controlling interests and our ability to exert significant influence over the operations of the joint ventures. The carrying values are adjusted quarterly to reflect our share of earnings or losses, dividends received, or returns of capital. For the three and nine months ended September 30, 2025, we recognized net equity method earnings of $0.1 million and $0.1 million, respectively, for one joint venture, and net equity method losses of $1 million and net equity method earnings of $1 million, respectively, for the other. These amounts are recorded within “Other income, net” in our Consolidated Statements of Income.

In connection with one of these joint ventures, we entered into a promissory note receivable with a taxable subsidiary of the joint venture entity. The note provides for a total revolving credit facility of up to $150 million, with interest accruing at one-month SOFR plus a spread. Interest payments are due quarterly and may be paid in cash or capitalized as payment-in-kind ("PIK") interest. The note receivable matures on June 1, 2031 with two optional one-year extensions available at the joint venture's election, and can be prepaid at any time without penalty. At September 30, 2025, the outstanding balance on this note receivable was $7 million and is included in Other Investments in Table 12.1 above. For the three and nine-month periods ended September 30, 2025, we recognized $0.2 million and $0.2 million, respectively, in interest on this note.

In the first quarter of 2025, we made a minority equity investment in a newly-formed mortgage loan origination company focused on originating construction loans for builders of single-family homes. These loans generally carry final maturity dates of 12-24 months and finance in a first lien position either (i) the acquisition and development of land by the homebuilder while it prepares the real estate for vertical construction, or (ii) the vertical construction of the homes themselves, primarily for sale to owner occupants. In connection with our investment, this mortgage loan origination company committed to sell loans it originates to Redwood and future capital partners. At September 30, 2025, the carrying value of our investment in this company was $3 million. We account for our investment under the equity method of accounting as we currently have a minority non-controlling interest equal to 35% in this company, which may subsequently go up or down depending upon the company's ability to meet pre-determined financial targets. We are deemed to be able to exert significant influence over the affairs of this company. We adjust the carrying value of our equity method investment for our share of earnings or losses, dividends or return of capital on a quarterly basis. As this company is continuing to ramp up operations, we did not recognize any net equity method earnings for both the three and nine months ended September 30, 2025. During the three and nine months ended September 30, 2025, we acquired $80 million and $105 million, respectively, of residential construction loans from this company. These loans are recorded in Residential investor loans on our Consolidated balance sheets.

See Note 8 for further information on residential bridge loans sold to these joint ventures.

REDWOOD TRUST INC 10-Q