Redwood Trust Reports $98.5 Million Net Loss in Q2 2025, Despite 26% Revenue Growth

Redwood Trust, Inc. reported its financial results for the second quarter of 2025, revealing a net loss of $98.5 million, or $0.76 per share, compared to a net income of $15.5 million, or $0.10 per share, in the same quarter of the previous year. The company's total revenue for the quarter was $284.3 million, a 26% increase from $225.4 million in the prior year, driven primarily by a significant rise in interest income from residential consumer loans, which reached $184.4 million, up from $106.7 million year-over-year. However, the company faced challenges with its Legacy Investments segment, which reported a net loss of $104 million, largely due to fair value losses on legacy unsecuritized bridge and term loans.

In comparison to the first quarter of 2025, Redwood's net interest income decreased by $14.1 million, primarily due to a decline in the Legacy Investments segment, which saw an increase in non-accrual loans. The Sequoia Mortgage Banking segment contributed $22.2 million to the overall results, down from $25.8 million in the previous quarter, while CoreVest Mortgage Banking saw an increase in segment contribution to $6.1 million, up from $3 million. The company also reported a significant decline in investment fair value changes, resulting in a loss of $84.7 million for the quarter, attributed to adverse market conditions affecting its legacy assets.

Strategically, Redwood Trust is undergoing a transition to streamline its operations and reduce exposure to non-core legacy assets. The company has established a new reportable segment, Legacy Investments, to manage these assets, which are in the process of being sold or otherwise resolved. Redwood expects to free up between $200 million and $250 million in capital from these legacy investments by the end of 2025, which will be redeployed into its core mortgage banking platforms. The company has also initiated share repurchases, buying back 1.6 million shares in June 2025, with an increased repurchase authorization of up to $150 million approved in July.

Operationally, Redwood Trust's mortgage banking platforms have shown resilience, with Sequoia's jumbo loan lock volume reaching its highest level since 2021, despite a general slowdown in housing activity. The Aspire platform, which focuses on non-QM loans, has also gained traction, tripling its lock volume compared to the previous quarter. CoreVest funded over $500 million in loans during the second quarter, marking its highest volume since mid-2022, supported by strong borrower loyalty and demand for financing solutions in the single-family rental market.

Looking ahead, Redwood Trust remains focused on capitalizing on growth opportunities within its mortgage banking platforms while managing the wind-down of its legacy assets. The company anticipates continued strong performance in its core segments, with expectations for improved returns and a more streamlined revenue mix as it reallocates capital from legacy investments.