Redwood Trust Inc (RWT) 2025 Q4 法說會逐字稿

Good afternoon and welcome to the Redwood Trust, Inc., fourth-quarter 2025 financial results conference call.

Today's conference is being recorded.

I will now turn the call over to Kaitlyn Mauritz, Redwood's Head of Investor Relations. Please go ahead, ma'am.

Thank you, operator. Hello, everyone. Thank you for joining us today for Redwood's fourth-quarter 2025 and full-year 2025 earnings conference call.

With me on today's call are Chris Abate, Chief Executive Officer; Dash Robinson, President; and Brooke 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 future financial and business performance may constitute forward-looking statements. Forward-looking statements are based on current expectations, forecasts, and assumptions; 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-K, which provides a description of some of the factors that could have a material impact on the company's performance that could 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 are provided in our fourth-quarter Redwood review, which is available on our website, redwoodtrust.com.

Also note that the content of today's conference call contains time-sensitive information that are 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.

With that, I'll turn the call over to Chris for opening remarks.

Thank you, Kate. Thanks to everyone for joining our fourth-quarter earnings call today.

Before I turn the call over to Dash and Brooke, I'll share some thoughts on our recent performance and our outlook for 2026.

Fourth-quarter 2025 capped a year of meaningful progress for Redwood, marked by record Mortgage Banking activity, improved capital efficiency, and a more durable earnings profile. We closed out the final quarter of the year delivering positive GAAP consolidated earnings and very strong earnings available for distribution across our core segments.

For the full year, our three operating platforms, Sequoia, CoreVest, and Aspire generated $23 billion of volume, the highest in our company's history. Hitting a new gear with production, we've 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 than we have seen in a very long time.

Tracking the operations focused metrics, as opposed to more traditional REIT investment portfolio metrics, is something we'll be emphasizing in the quarters ahead. This also coincides with our strategic shift towards increasing capital to our Mortgage Banking platforms, with over 80% now invested in core operating and related activities at year-end 2025, up from 57% in 2024.

On the back of recent new product roll-outs, the runway to continue profitably growing volume supports additional capital deployment to these platforms, capital both sourced internally and in tandem with a growing cohort of external partners.

This shift also reflects our decision in the second quarter to accelerate the wind-down of our legacy investment portfolio. We saw further progress on this front in the fourth quarter, with resolutions and dispositions and more, thus far, in the first quarter. As we work to fully wind down this portfolio, we'll continue freeing up investment capital to redeploy, while also simplifying the balance sheet.

Turning to the broader economy:

Housing affordability has been a key focus in Washington, with a $200 billion agency MBS buying initiative recently announced, in tandem with other efforts to lower borrowing costs. The announcement tightened spreads and pushed mortgage rates lower, initially. But rates have since stabilized, leaving markets still looking for a broader revival of the refinance mortgage market, which, [at] more accommodative times, has represented 50% or more of total originations.

Case for lower jumbo mortgage rates was recently bolstered by the long-awaited nomination of a new Fed chair, who, as anticipated, favors additional rate cuts in 2026. Mortgage rates currently sit meaningfully off their highs, with 30-year fixed-rate prime jumbo mortgages, covering just above 6% in coupon. At levels modestly below 6%, we estimate between $200 billion and $300 billion of jumbo mortgages could become [refinanceable].

An important distinction here for Redwood, unlike many mortgage businesses, is that we don't maintain large holdings of mortgage servicing rights, whose values are reliant upon significant levels of customer recapture volume. In other words, the prospect of a new refinance wave is entirely good news for us, particularly for our Sequoia business, where higher refinance volume could significantly expand our volume expectations and further scale our operations.

Complementing our Sequoia business in the consumer mortgage space is our Aspire non-QM business. Leveraging Redwood's best-in-class 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 Aspire, 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 [done] 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 CoreVest, 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, CoreVest 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 have scaled to complement CoreVest's flagship term and bridge offerings.

I'll close with some context for the year ahead:

Redwood's market and structural positioning is now meaningfully stronger across all channels in which we operate. We're 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 our 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.

With that, I will turn the call over to Dash to discuss our operating businesses and investments.

Thank you, Chris.

We entered 2025 with record production and strong margins, driven by operational efficiencies, accretive capital reallocation, and continued progress in deepening distribution channels.

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 $5.3 billion of loans, a 5% increase from the third quarter and up 130% for the fourth quarter of 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 million pool sourced from our regional bank, housed under a new Sequoia loan program that we expect to contribute meaningfully to 2026 volumes.

Flow volume, which represented just over 40% of fourth-quarter production, remained well diversified, with a notable pick-up [in closed-end second] and adjustable rate loan buys.

Sequoia's competitive position continues to strengthen. Our network now spans over 210 originators across banks and independent mortgage bankers or IMBs. 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 billion through securitizations and over $1 billion through [whole loan] sales, supporting strong turnover and attractive returns.

By design, we are running the platform to turn capital faster. 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 standalone basis. As a reminder, in 2025, we generated more volume than in 2021, when overall mortgage market was roughly 3 times larger, driven by growth in our purchase money loan volume. But, as Chris noted, the refinance market is, once again, contributing to Sequoia's volume, representing approximately 35% of the second -half 2025 locks, up from 25% for the first half of the year.

With our network, products, and distribution, we are well-positioned to benefit from a broader refinance wave, should mortgage rates fall below 6%. As importantly, any increase in observed pre-payment speeds is mitigated by the nature of the premium we carry on balance sheets, whose value is used largely to hedge a growing pipeline and is not contingent on significant [recapture] return.

Growth prospects also remain promising within Aspire, our non-qualified mortgage or non-QM platform, that commenced activities one year ago. Aspire locked a record $1.5 billion of loans during the fourth quarter, a 20% sequential increase, with strong contributions from both flow and bulk change, establishing a run rate we expect to build upon.

Fourth-quarter volume brought total 2025 lock volume to over $3 billion, with close to 70% sourced through our flow channel and 65% from sellers with whom we do business in Sequoia, validating the differentiated model we envisioned when launching the platform.

On the distribution side, Aspire sold $648 million of loans through bulk loan sales to several counterparties, including the platform's first-ever sale to a bank, bringing full-year distribution near $1 billion.

For both Sequoia and Aspire, we are making strong progress on third-party capital partnerships to further broaden distribution; and, as Chris noted, are close to launching the first securitization under the Aspire shelf.

CoreVest, 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 (inaudible) towards smaller-balanced products, including residential transition loans or RTL; and DSCR loans.

RTL represented nearly 40% of fourth-quarter productions, 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 and cross-collateralized portfolio loans, a critical complement to our traditional term loan product. This shift in the origination mix is improving the platform's overall efficiency and aligns well with continued institutional demand for CoreVest's 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 legacy bridge work-outs and positioning of [RAO] assets for sale.

As a result, 90-day-plus delinquencies declined to $82 million at year end, down over 65% from earlier in the year, as our asset management team continues to reduce risk throughout the portfolio. With the loan book now concentrated in a small number of assets, 31 loans with an unpaid principal balance of $309 million, we continue to execute on our plans for dispositions and unlocking of freedom capital to redeploy into the core activities.

The final theme I'll touch on is technology enablement across our platform. Through RWT Horizons, we are increasingly focused on applying AI and 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 Redwood review highlights some early benefits from this work, including the elimination of more than 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 bar 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 costs per loan.

Rather than relying on incremental staffing to support higher volumes, we're using automation to increase throughput, shorten turn times, and maintain underwriting discipline as production scales. As a result, Horizons is evolving into a fully integrated driver of efficient growth across Sequoia, Aspire, and CoreVest, increasingly embedded in how we operate these platforms day-to-day, as we support higher volumes.

I'll now turn the call over to Brooke to discuss our financial results.

Thank you, Dash.

For the fourth quarter, we reported GAAP net income of $18.3 million or $0.13 per share compared to a GAAP loss of $9.5 million or $0.08 per share in the third quarter. Book value per common share was $7.36 at December 31, up slightly from $7.35 at September 30. Our economic return on book value was 2.6% for the quarter, inclusive of the $0.04 of accretion from our share repurchases and the $0.18 per share common dividend.

On a non-GAAP basis, consolidated earnings available for distribution, or EAD, increased from $0.01 in Q3 to $0.20 in Q4; and exceeded our common dividend. This reflects both a reduction in the earnings drag associated with legacy assets, which improved by $0.08, relative to Q3, as well as the initial redeployment of freed-up capital into our higher return Mortgage Banking platforms.

Core segment's EAD was $0.33 per share for the fourth quarter, up from $0.20 per share in Q3, demonstrating the earnings power of our operating businesses, as capital is reallocated away from under-earning legacy investments. Combined Mortgage Banking returns remained strong, resulting in total return on capital of 26% for the full-year 2025.

In the fourth quarter, the Sequoia Mortgage Banking segment, which includes Aspire activity, generated segment net income of $43.8 million and a 29% return on capital, supported by record quarterly lock volumes. Gain on sale margins expanded to 127 basis points, exceeding our historical target range, reflecting strong execution and continued operating leverage as volumes scaled.

CoreVest Mortgage Banking generated $7.5 million of segment net income, delivering a 30% GAAP return on capital and a 36% non-GAAP EAD return on capital. 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've 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 6 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. 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 are typically on our balance sheet for approximately 35 days, meaning that incremental production continues to translate directly into earnings.

Furthermore, recent organizational streamlining actions are expected to reduce annualized back-office run rate costs by approximately $10 million to $15 million in 2026.

Redwood Investments delivered segment net income of $21 million and a 17% annualized return on capital. Results improved quarter over quarter due to positive fair value changes from spread tightening and higher net interest income from assets that we've created from our Mortgage banking businesses.

With nearly $1 billion of financing or roughly 50% of our financing in this segment callable within the next year, 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 record Mortgage Banking activity. Approximately 62% of recourse debt resides in our Mortgage Banking platforms for capital turns quickly and borrowings are repaid, as loans are sold or securitized.

Liquidity remained strong, with $256 million of unrestricted cash at quarter end, providing us meaningful flexibility.

With that, I'll turn the call back to the operator for questions.

(Operator Instructions)

Crispin Love, Piper Sandler.

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's 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?

Sure.

Crispin, maybe the easiest way to answer that directly is just to provide our January numbers. We were at $3.6 billion of volume for January. We were [$7 billion and change], total, for Q4. Obviously, the run rate has just continued to accelerate.

From our standpoint, the rally has helped, although our business has largely been about taking market share across non-agencies. We've got high expectations for volume this year.

But the jumbo business has been somewhat insulated from some of the things we're observing in agency. There's indirect impacts. But the rally hasn't been as steep. Jumbo mortgage rates are still maybe 0.25 point behind conforming.

A lot of that rally has since leveled off, as well. Obviously, we had today's job's print. We'll see where we go from here. But, I think, overall, we're pretty bullish on our volume potential, based on how we started the year.

Great. I appreciate that. And then, you've been leaning into the Aspire non-QM platform. That's 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 reform, if anything happens over the next couple of quarters or even years? Would you see that as an additional opportunity for that business?

Crispin, 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've been doing. Obviously, the business has shown fantastic momentum in the second half of the year, with close to $3 billion of locks alone in just Q3 and Q4.

I think that's a function of a couple of things:

First of all, a huge competitive advantage we have is that the existing Sequoia network -- folks we've been buying jumbos from for years have and real operational intimacy with, over the past couple of years, they've 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 the 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. We have a slide on this in the review this quarter.

I think we estimated the non-QM market for 2025 to be $130 billion, which was up significantly from 2024. I think a lot of market observers expect another 10% to 15% increase this year. And so there's 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's largely non-bank competitors, where we can really lean in and win share, as Chris articulated, with our service level and with our relationships. So that's 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. I think it's all very much going according to plan. There's a very long runway for growth in the business. We estimate we'll probably have --last year, at 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's been a lot of evolution in messaging out of DC. But specific to these types of products, in our view, it's 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. There's technology capabilities there that they don't particularly have. And so we think there's some, probably, 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 buy investors, these are probably smaller investors [that] would be impacted by that but that's an element that you need to take into account, too, in terms of the probability that the GSEs entered the DSCR market as it's currently contemplated with the non-QM.

Our expectation is that private capital, thankfully, will continue to really speak for these products. We expect to lean into the opportunity a lot more this year.

Don Fandetti, Wells Fargo.

With volumes being so strong on the origination side, how are you thinking about third-party capital providers, going forward?

I'm happy to take that, Don.

Dash, I think, in his prepared remarks included a comment about, really, across both Aspire and CoreVest, increasingly, all of our loans are being spoken for. We are gearing up for securitization in Aspire.

But, to date, we've sold to multiple handfuls of insurance companies and asset managers. The demand is just really strong for our production.

Increasingly so, on the Sequoia side, especially given some of our success with teasing these season pools out of banks, we've seen multiple levels of oversubscription on some of our seasoned securitizations that we've done, just really giving investors a different convexity profile than we have historically through our Sequoia program.

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 Chris was mentioning to continue to scale these platforms this year.

Doing it outside of our corporate balance sheet is helpful, given where our capital options lie today. That's really the numbers that you're seeing, in terms of our capital efficiency.

The amount of production that we've been able to really put through the system this year is a byproduct of those capital partners. We expect it to continue to fuel growth in '26.

Bose George, KBW.

What are the margins like in the non-QM channel; the gain on sale margins, currently? How does that compare to margins currently in the jumbo channel?

Bose, this is Dash. I can take that.

We're targeting pretty much in line with the Sequoia 75 basis points to 100 basis points that we've traditionally targeted. Obviously, it's 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're targeting something contextual to what we've historically targeted for Sequoia.

Okay. Great. And then, can you just talk about the competitive landscape in non-QM? The market is growing quite a bit but there's different companies entering the space, as well. Can you just talk broadly about that?

Sure. Yeah. I think the space is definitely competitive. I think that's 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's a very, very deep bid from whole loan buyers. We see loan spreads in that space, right now, at or very close to the tightest we've seen in years, frankly.

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 challenges in private credit, away from mortgage, I think what we've anecdotally heard from our partners is that there's increasing capital allocation to this space, maybe away from some of the other sectors in private credit that have been a bit more challenging.

I think those are all real tailwinds for the space. It does lead to increased competition. As you know, for years, in Sequoia, we've seen entrants, folks come and go. I think there's similar operational hurdles to running a non-QM business well, as there is in jumbo.

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're still very, very excited about the runway in front of us, like I said.

Rick Shane, JP Morgan.

I'm looking at slide 15. It's really interesting. 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; now, your mix is much, much more aligned with the market mix. I'm curious if -- as your distribution -- is your bank -- as you have increased the number of partners, if that's really what's happening; that you're 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 balance between purchase and refi?

I'll take the one, Rick.

The '21 comparison that we did was really to highlight that, as much progress as we made with volumes and actually exceeding 2021 levels in 2025, it was substantially without significant Refi business. In '21, thanks to the Fed, mortgage rates were into the [3s] or even the [2s]; and refi was huge.

And so the real goal of the slide is to basically say, for jumbo, for Redwood, it's been largely purchased business, up until very recently. If we add Refi business, it would not be at the expense of purchase, it will be in addition to purchase.

From a margin standpoint, that should continue to leverage the platform. As we push more business through the same amount of capital or thereabouts and a similar work structure, we should continue to see more of that revenue make it to the bottom line.

That's why we really rolled out some new operating metrics this quarter. I think we sometimes get mixed in with more traditional business models, which look at expenses to capital and other metrics. For us, it's 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.

Jumbo has not experienced the same amount of Refi business as conforming. Rates didn't snap in as quickly. I don't think the fourth-quarter experience was the same.

And so that's still a business that's potentially ahead of us. I think we mentioned there's a couple of hundred billion dollars of jumbo that could become "in the money", if rates dip below; meaningfully below [6].

So there's a lot of that ahead of us. We think that just scales the platform further.

Understood. Chris, I think the takeaway from this is that, as you achieve that normalized volume, as markets normalize, in terms of purchase and refi, you are indifferent from -- on the margin between an incremental $1 million origination on the purchase side and on the refi? Or is there anything we should think about, in terms of profitability that's a little bit different between the two?

Well, generally, refis are a little bit quicker. From that standpoint, our Refi business, you're dealing with an existing borrower with a home that's been appraised. From that standpoint, you could see some efficiencies.

But with our model, largely, it's not big enough where we're substantially rooting for one or the other. I think what we're really trying to do is continue to be a great partner to our network of originators.

Dash made the point earlier: one of the reasons why we're entering non-QM and growing quickly is not because we really had a different take on the products. It's because the very, very large originators -- particularly the IMBs -- top 5, top 10 originators in the country have entered the space.

It's 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. Really, we're just going to continue to leverage our network.

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. [4.17% or 4.20%], [10-year], is giving us a lot of indication on which way things are going to go.

Fair enough. Look, it's a timing issue. It's when, not if, in my mind. But I agree with you. Who knows how soon that will happen. But I appreciate the answer, guys.

Eric Hagen, BTIG.

All right. How do you think the focus on affordability in this, like, overwhelming support for home ownership and lower mortgage rates has an impact on the resi transition lending business? Would you say, like, there's a catalyst which would get you to allocate more capital over the near term to the CoreVest side of the business?

I'll kick that up high level. And then, I'm sure Dash will have some comments, specifically focused on RTL and some of the affordability initiatives.

But CoreVest is where our deepest JV partnerships are. The way we're thinking about that business is primarily in terms of profitability for shareholders. It's 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.

The reason why I say that is much of CoreVest volume is spoken for by CPP and others. And so what that does is it generates asset management fees for us. Obviously, we're co-investing. But, ultimately, the goal is with CoreVest is to really dial in the products.

We certainly expect to grow volume this year. But we're very focused on margins back to shareholders.

Dash, do you want to take the other?

Yeah. Thanks, Eric. I think it's a great question. I think it's nuanced, right, because there's 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, I think, what's desired at the federal level and some of the reality of getting through, like the local or municipal hurdles, to actually create accessible housing for people.

By that, I mean price point but also turnkey housing. Like, as you all know, consumers, whether they're buying their third or fourth house or their first, there's just very, very little interest in putting a bunch of CapEx into the home themselves.

The desire, really, is to buy a home that they can move right into, right? Which is a big reason why the RTL business has expanded so much. There's obsolescence in housing. There's just been an evolution in the consumer over the last couple of decades where there's just a desire to have someone else get the home ready to move into.

And 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's with subsidies or whether it's 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. There's existing homes that need to be refurbished. There's lots that could be used in more effective ways.

And to the extent that some of these affordability initiatives -- at the federal level, obviously, Congress is one of the very few issuers that there's significant bipartisan support on. The issues that we see, in large part, are really at the local 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.

There's some other potential knock-on effects but I think greasing the skids on that would be a very big deal.

Really good color there. I appreciate that.

Really quickly, I think we heard you say there was $10 million to $15 million 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?

Yes. No. I think we -- that's really concentrated, I would say -- I mentioned back office but, really, across corporate and CoreVest segments. Of our $200 million 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've done both through our process technology but also our scaling our volumes and grabbing market share, we are pointing to some of the marginal cost on loans that we've seen this year, just because outside of our fixed cost, it will really be variable OpEx tied to increased volumes this year.

We did about -- just for some context, our OpEx was up about $30 million 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 billion of volume with that $30 million of expense. 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're 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.

Mikhail Goberman, Citizens JMP.

Just to follow up a little bit on Eric's question in CoreVest: What do the originations there look like; and if there's any sort of color you can give us on first-quarter volumes and how margins are holding up there?

Again, I'll start and kick it over to Dash.

Across our businesses, including CoreVest, we're projecting higher volumes in the first quarter, sequentially; Pretty consistent margins.

Again, with CoreVest, it's a little bit different because much of our production goes to our JV partners -- and we -- the capital partners that are focused on that segment. So the volume-to-profitability dynamics are a little bit different. The math is a little bit different. But, overall, we have metrics in the review.

CoreVest had a very profitable year. One of the reasons is because of capital efficiency. We did take some further expense out of the business, as Brooke mentioned. that's going to improve. That should improve margins, all things equal, in 2026.

High level, I think we're expecting higher volume in the first quarter. But, as far as the make-up of the products, which has evolved over the past year, I'll let Dash answer that.

Yeah, Chris. Thank you.

I would say, Mikhail, we're still really tracking and making great progress with focusing production on the 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 significant strategic progress in that business, which we expect to continue.

CoreVest 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're going to continue to push in that direction.

Chris articulated it correctly, obviously, with our joint venture with CPP, that's a great way to not only turn capital quickly but there's 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. 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 with the affordability pieces -- a big potential tailwind for production for CoreVest -- and we talked about this in the prepared remarks -- was just with rental products.

We're 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've securitized and sold for years.

A tailwind there -- depending on how some of these housing initiatives at the DC play out -- is that smaller investors and more mid-cap investors, which are really the target audience for CoreVest, could be winners, to the extent that 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're going to continue to do.

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

Just one last (multiple speakers) -- on mix, we continue to see our term and portfolio DSCR product as an increasing mix of originations for CoreVest [is our two] higher-margin products, as well.

You saw in the fourth quarter that despite volume being down, our gain on sale activity for CoreVest was up. Those are contributions to that dynamic.

Just one more, I think, for me. Just looking out over the space. Are there any other real estate loan products that might interest you, going forward? Or are you guys in a grow-what-you-have situation and execute throughout this year?

With that in mind -- I know you guys have your history with the FHLB -- could there possibly be any value to owning a bank in order to get back in that system for funding?

Well, I never say never but it's not in our current plan.

Although banks -- we're obviously doing a lot of partnering with banks. I think with with the capital partnerships comes ancillary opportunities, warehouse partnerships, and otherwise.

So I think we're still extracting value from a lot of the bank partnerships, particularly the regional banks, more recently, that we've brought online. They brought us online.

From a product perspective, I think we're largely going to stick to our knitting. There's obviously been a lot of conjecture in Washington about some alternative products, whether it's 50-year term or otherwiseFor a lot of reasons, I think those are going to be hard; not technically eligible for delivery in many other reasons.

I think, for Redwood, we're going to largely lean in on non-QM, which we've talked a lot about today.

We've already got a fantastic business in the BPL space with CoreVest. With Sequoia, I think we're underpenetrated in second lien mortgages. Certainly, HEI, other interesting ways to to really leverage our seller base.

All of those will be in the mix this year. But I think the core products are going to really carry the flag.

We have reached the end of the question-and-answer session.

I would like to turn the floor back to Kaitlyn Mauritz for closing remarks.

Great. Thank you, operator. Thank you, everyone, for joining today.

We appreciate the sponsorship and your time.

We look forward to continued engagement across 2026.

Thank you.

Thank you. This concludes today's conference.

You may disconnect your lines at this time.

Thank you for your participation. Have a great day.