Redwood Trust Inc Q1 FY2025 Earnings Call

Greetings and welcome to the Redwood Trust First Quarter 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce Kate Mauritz, Head of Investor Relations. Please go ahead.

Thank you, operator. Hello, everyone and thank you for joining us today for Redwood's first quarter 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, 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 and include risks and uncertainties that could cause actual results to differ materially. We encourage you to read the company's annual report on Form 10-K which provides a description of some of the factors that could have a material impact on the company's performance and cause actual results to differ from those that may be expressed in forward-looking statements. On this call, we may also refer to both GAAP and non-GAAP financial measures. The non-GAAP financial measures provided should not be utilized in isolation or considered as a substitute for measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial measures is provided in our first 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 is only accurate 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. Good afternoon, everyone and thank you for joining Redwood's first quarter conference call. A month into the second quarter, it's safe to say that the latest new normal is now sweeping the markets, rendering most macro projections for 2025 either obsolete or at best under review. Many have analogized this April with March of 2020 in terms of the extreme price and spread volatility we've seen across most financial markets. Fortunately, for the mortgage market, we have not seen any disproportionate effects this time around. Redwood continues to navigate this current bout of market volatility from a position of strength. As mentioned in the Q1 shareholder letter we published last week, our GAAP book value per share was estimated at April 21 to be up 1% to 1.5% from quarter-end and we believe that estimate still holds today. As we move forward, it's worth reiterating that the results of our strategic initiatives have begun to take hold. We believe the way mortgages are financed is undergoing a period of transformation. The risk/reward balance has shifted for many originators with banks actively looking for balance sheet solutions for both new production and legacy collateral. To that end, we saw billions of dollars of seasoned jumbo loans change hands in the first quarter and we positioned ourselves to be in the hunt for much of that production. We are also in the early stages of shifts in housing finance policy in Washington that have the potential to create a significant greenfield for our platform. We have witnessed a flurry of activity at the GSEs, including mass voluntary and involuntary workforce reductions and an almost complete board-level turnover that we believe reflects ideological shifts aimed at reassessing the GSE housing footprint. This isn't a surprise to us. In recent years, taxpayers have found themselves backstopping GSE mortgages with balances over $1 million, mortgages on investment and vacation homes, second-lien mortgages and other products not squarely aligned with the federal government's housing mission. All of these are examples of products that we believe can and should be financed by the private sector without government support. We remain optimistic that over time, the GSEs can be reoriented back to their core housing missions with much of this work able to precede any plan for a full release from conservatorship. We've also recently been spending time in Washington to advocate to members of the new administration as well as lawmakers on both sides of the aisle for a leveling of the playing field between private capital and the GSEs, particularly through streamlining regulatory burdens that drive up costs. For example, there is room to rationalize outdated securitization rules that are holding back private capital formation and to sensibly update disclosure and execution burdens that would make the mortgage capital markets far more efficient, ultimately benefiting mortgage borrowers and supporting broader housing finance reform. As we look ahead, there remains strong demand for the assets we create. With trillions of dollars raised by private credit institutions, we're actively looking to crowd their capital into the residential mortgage space. The fact that they have not already done so in greater scale is a direct byproduct of the government's outsized role in housing. As the landscape in Washington evolves, our role as an intermediary between these large capital sources and our extensive network of loan originators and sponsors has the potential to become transformative. As we pursue our 2025 volume objectives, strategic partnerships with entities on both the supply and demand side of this market will remain a key part of our growth initiatives. And with that, I'll turn it over to Dash to cover our operating results for the first quarter.

Thank you, Chris. I'll cover our operating results before handing the call over to Brooke to conclude with our financial highlights. Sequoia's first quarter performance underscores the significant runway for the business even amidst the continued period of relatively tepid housing activity. While money center banks reported steep mortgage volume declines of between 20% to 30%, Sequoia's $4 billion of first quarter locks represented 73% quarter-on-quarter growth. The source of the momentum is twofold: continued wallet share growth across our seller base for on-the-run production and the long-awaited emergence of seasoned bulk portfolios, primarily from banks as a viable expansion of our funnel. Combined with an outlook for distribution that once again includes certain depositories seeking to bolster loan growth with third-party mortgage portfolios, this primes the business to grow market share even while prudently navigating the recent macro volatility. With a network of over 200 sellers, we are actively engaged with originators that represent close to 75% of overall jumbo originations. This includes several top 20 banks and a deep group of independent mortgage bankers, or IMBs, who are benefiting from many depositories deemphasizing mortgage lending. First quarter volume was split evenly between banks and IMBs and notably, included a $1 billion portfolio of seasoned 30-year and hybrid production acquired from a large depository, our second large portfolio acquisition from a bank in the past three quarters. Even net of this important transaction, we estimate our market share of on-the-run jumbo production to be between 6% and 7%, up from 4% to 5% in 2024 and from the platform's long-term average of approximately 2%. As our product offerings deepen and more banks prioritize distribution over balance sheet retention, we expect this footprint to continue growing. Efficient distribution drove another quarter of Sequoia gain on sale margins well above our historical targets. Sequoia distributed $2.5 billion of loans during the first quarter through three securitizations and several bulk whole loan sales. Notably, the majority of our whole loan distribution was to banks seeking to bolster overall loan growth, reflecting an emerging two-way flow between bank sellers and bank buyers that we're well positioned to continue facilitating. Amidst April's unprecedented market fluctuations, we continue to defend margins, executing our fourth securitization of the year earlier this week while carefully managing pipeline and hedging risk to position us favorably into the second half of Q2 and beyond. A core complement to Sequoia's growth is the expansion of our Aspire platform which now includes both directly originated home equity investments or HEI and expanded loan products acquired from third parties, many of them existing sellers. While loan acquisition volume for the first quarter was just over $100 million, the platform has now locked loans with 25 discrete sellers and remains active in onboarding new origination partners. Inflows are being efficiently distributed and we have sold Aspire pools to two different end investors with several others actively engaged in acquiring loans from the platform. While Aspire loans serve consumers requiring an alternative approach to underwriting income or other key attributes, the focus remains on high-quality borrowers with strong equity positions in their homes. Life-to-date, Aspire loan production has averaged 755 FICO and 68% LTV. Looking ahead, we expect to grow Aspire's volumes meaningfully in the second half of 2025 with a full-year share goal of 2% to 3% of an addressable market that continues to expand. Aspire is leveraging Sequoia's playbook of speed and reliability of execution to capture production from a growing base of sellers. This will be coupled with an important technology overlay to more effectively transform the experience for our loan sellers and the prospective homeowners they serve. By providing these innovations to both new origination partners and the sellers we've served for decades, our loan acquisition funnel could emerge over time as a distinct competitive advantage in the sector. CoreVest maintained its recent momentum in the first quarter, funding $482 million of loans, a 4% decrease from the fourth quarter but up 48% year-over-year. As the market landscape continues to evolve, our increased focus in recent quarters on smaller balanced loans backed by single-family homes, namely residential transition loans or RTL and DSCR loans, continues to serve the platform well. These two products comprised about 30% of CoreVest's first quarter volumes, a proportion we expect to grow throughout the remainder of the year. During the first quarter, 98% of our bridge volume was backed by single-family homes and we continue to expand the sourcing funnels for these strategies and see ongoing runway to gain share in conjunction with existing bellwether products like term loans, for which volume dipped slightly quarter-over-quarter given interest rate volatility but where we maintain a strong pipeline for Q2. CoreVest continues to execute on its capital-light strategy, prioritizing products in which the market sees value. The platform distributed over $400 million of loans during the first quarter, largely to whole loan buyers and our joint ventures and maintained an efficient working capital ratio while focusing on products prioritized by private credit investors. In the past year alone, CoreVest has distributed over $1.8 billion of loans into dedicated sources of capital, specifically joint ventures, whole loan sales and existing securitizations with revolving features. Overall credit strategy across our platforms reflects a more nuanced national housing landscape than we've seen in some time. While the U.S. remains structurally undersupplied in turnkey homes, both new and secondary inventory has grown in several markets as buyers face higher borrowing and maintenance costs. Though recent softness is modest relative to the appreciation of recent years, we're adjusting our production priorities in response to emerging local trends that we believe will allow us to meet our growth goals at attractive risk-adjusted returns. Within Redwood Investments, credit performance for organically retained and third-party assets, particularly ones with consumer-related strategies remains strong. We've talked before about the ability to unlock the discount from these investments which at quarter-end stood at $1.87 per share through relevering and other portfolio optimization and see a path towards achieving that in the coming quarters. Underlying repayment velocity in the bridge loan portfolio remains solid as we saw over 10% of the portfolio repaid in Q1. We continue to actively reduce exposure in the legacy bridge portfolio, specifically from the 2021 and 2022 vintage, prioritizing resolutions that optimize net present value, including traditional property liquidations and restructurings that better position a sponsor to refinance, as well as more recently pursuing partnership-based solutions with other capital providers in the space at both an asset-specific and portfolio level. At times, this value-driven approach may result in short-term increases in delinquencies as it did this quarter, largely tied to two sponsor relationships and still concentrated in the legacy multifamily bridge cohort we've previously discussed. Of note, during the first quarter, approximately 10% of loans that were 90-plus days delinquent at year-end were resolved, progress that has continued into the second quarter. We remain confident that this strategy is the most effective path to achieving successful outcomes and preserving value. Roughly half of this legacy multifamily portfolio has already been repaid and our net capital exposure to this cohort, net of recent resolution activity now sits at approximately $1.60 per share. Our post-2023 vintages, largely centered on single-family strategies continue to perform well and reflect the strength of our more recent investment focus. And with that, I will hand the call over to Brooke.

Thank you, Dash. We reported GAAP earnings of $14.4 million or $0.10 per share compared to a loss of $8.4 million or negative $0.07 per share in the fourth quarter. The sequential improvement was driven by strong performance across our operating platforms, supported by improved fair value marks in the investment portfolio compared to the fourth quarter. Book value per share ended the quarter at $8.39, a modest decline from $8.46 in the fourth quarter, translating to a positive economic return of 1.3% for the first quarter. Our shareholder letter published early last week noted that our estimated book value per share for the second quarter is 1% to 1.5% higher than at March 31, supported by our dynamic hedging and strong mortgage banking activity to start the second quarter. Earnings available for distribution, or EAD, for the first quarter was $19.8 million or $0.14 per share, up from $18.4 million or $0.13 per share in the fourth quarter. These results reflect healthy contributions from mortgage banking and a continued focus on operational efficiency. Net income from Sequoia was $25.8 million, representing a 28% ROE for the quarter, up from 23% in the previous quarter. Lock volume increased 73% quarter-over-quarter, reaching $4 billion, the highest level since 2021, driven both by strong daily flow activity and bulk purchases from strategic partners. Capital efficiency drove ROE improvement as the segment utilized less capital, largely given heightened securitization activity on the quarter. Gain on sale margins remained above our historic 75 to 100 basis point range and Aspire's early lock volumes, just over $100 million tracked within the same gain on sale margin range. Aspire's results remain consolidated under Sequoia at this stage but through time, we expect to break out metrics as the platform scales. CoreVest generated net income of $1.3 million or $2.9 million, excluding amortization of acquisition-related intangibles, resulting in a 20% ROE for the quarter. While volumes were down slightly from the fourth quarter, we saw margin expansion in term loan production and continued strength in our smaller balance bridge and DSCR strategies. Despite recent investments in expanding our production capacity, efficiency metrics remain strong and within our target range, underscoring the scalability of our operating infrastructure. Redwood Investments generated $22.9 million of net income in the first quarter, up from $2.8 million in Q4. This reflects solid returns from our retained operating investments in third-party portfolio, offset by the continued pressure in our legacy bridge book which we have broken out separately. Dash reviewed, delinquency rates in the book rose due to credit migration on select vintage multifamily bridge loan exposures that we are actively pursuing resolutions for this group. From a capital and liquidity standpoint, we ended the quarter with unrestricted cash of $260 million, up from $245 million at year-end. Recourse leverage stood at 2.5x compared to 2.4x in the fourth quarter. Following quarter-end, we accessed $50 million of additional capacity under our CPP Investments partnership, bolstering our near-term liquidity as we prepare for continued market volatility. As we noted in our shareholder letter, market conditions have shifted materially in recent weeks. The impact of escalating trade policy and rate volatility has led to a broad risk-off tone. As many economists now pricing in heightened recession risk, we've positioned our balance sheet to benefit modestly from declining rates and increased volatility. At quarter-end, our debt profile remained predominantly linked to non-marginable loan warehouse lines or non-recourse securitization. Only roughly one-third of our $2.9 billion of recourse debt is marginable, mainly tied to our prime jumbo pipeline, where active hedging and fast capital turnover help mitigate exposure. In fact, we've reduced securities repo by 40% since March 31, following accretive sales and non-recourse financing transactions. As it relates to our overall capital structure, we are evaluating alternatives, including the potential for share repurchases, particularly in light of the current discount to book value which we believe meaningfully exceeds downside credit risk under stress scenarios. As mentioned, we've made enhancements to our disclosures this quarter to clearly delineate the contributions from our strategies where we're actively directing new capital deployment, namely our operating businesses, Sequoia, CoreVest and Aspire and the retained investments we create there versus opportunistic third-party investments in legacy portfolios. These disclosures provide increased transparency around the strategic capital allocation decisions we've made and the resulting earnings contributions which we believe will help investors better track our progress. With Q4 earnings, we provided volume and return targets for each of our platforms and have expanded that with additional information in this quarter's Redwood Review. While the second quarter may see short-term volume fluctuations due to market conditions, we continue to expect to achieve our full-year targets. For our year-end 2025 run rate, we are targeting annualized EAD returns on equity in the 9% to 12% range, up from 7% in Q1. We aim to accomplish this by reallocating nearly 20% of capital towards our operating platforms and retained operating investments as we reduce exposure to our legacy bridge investments and other non-strategic third-party securities. To date, in Q2, we have sold approximately $50 million of such investments and anticipate continued activity throughout 2025. And with that, operator, we will now open the line for questions.

Our first question is from Doug Harter with UBS.

Hoping you could walk through kind of the real-life case study of April, how you guys hedge your portfolio and kind of how you made it through that period kind of with book value up?

Sure, Doug. We aren't going to get into the specifics of how we hedged, other than to say we consider the pipeline a moving business and we're constantly trying to turn capital and move risk as quickly as we can. We've been in the markets with numerous Sequoia transactions at this point and we're always looking to sell loans in bulk. So I think it was kind of all of the above. Obviously, TBAs underperformed and volatility was very high. But I think we've learned a lot over the past few years, particularly through the COVID experience and our positioning with respect to our pipeline, our nonmarginal facilities, things of that sort, all of it kind of contributed to being able to manage that period effectively across the book.

Great. And is there any way you could give us any sense as to how Sequoia spreads have kind of fared and whether you think that has any impact on the ability to continue to generate kind of the target revenue margin on those loans?

Yes. The market was obviously extremely volatile in April. I'd say we had somewhat of a risk-off mindset in the first half of the month which was extremely appropriate. Things have calmed down and spreads have come back in. The last deal that we were in the market with spreads a point back of TBAs just kind of right back to more normalized levels. And so I think where Brooke was going in her prepared remarks, we still feel that it's early in the year. And just given the growth in the business and the trajectory, we obviously had a fantastic first quarter. We still feel confident we can generate margins that are at or in excess of our long-term range of 75 basis points to 100 basis points.

Our next question is from Rick Shane with JPMorgan.

It's actually somewhat related to Doug's question. I'm observing the significant growth your team is experiencing alongside the market volatility we are all facing. Dash, you mentioned this briefly, but I'm interested in how you handle the liquidity and execution risk when you lock in $4 billion in volume within a quarter. It's quite intriguing. It appears that the average capital allocation has decreased slightly for the quarter. You mentioned a lot of activity regarding Sequoia execution, and it seems there has been more since the quarter ended. I would like to understand the risks you take on when you lock $4 billion in an environment where the markets might shift drastically the next day.

Sure, Rick. I can take that. Thank you for the question. As Chris referenced, speed is in this industry, the hardest thing to teach. And our ability to turn over the risk efficiently and have risk presold or know where partners are lined up to execute, I think, is a really big deal. Just to put some math around that, the pipeline we are carrying into the end of the quarter, half of that has already been sold or securitized since March 31. That's both whole loan sales, largely to banks, as I talked about, as well as securitization. So just understanding the shock absorbers in the market and where risk can be cleared day in, day out. In April, it was intraday. As you know, at 10:00 a.m., that was a different answer than 3:00 p.m. on a number of days. And just always knowing where that risk can clear is the best mitigant. And I think Q1 was a good example of that. We've probably never felt better about our depth and distribution. As Chris articulated, private-label securitization and this has not always been the case amidst macro volatility has really hung in there. It's been really orderly even amidst huge swings in rates and obviously, equities that, as Chris articulated, we haven't seen in five years. And so I think that's a testament to a number of things, including our platform and being able to get Sequoia deals up and down and being the only phone call that a lot of loan buyers will take amidst bouts of volatility. They're taking our call, they're not taking others. And so I think that's a big part of it. As Brooke said in her remarks, we've been positioned for a while to benefit from lower rates and increased volatility. We obviously saw a fair amount of that certainly on the ball side in April. So I think that continues to serve us well. But a lot of it, Rick, is the same as we've always done which is just speed and knowing where the market is at all times.

Got it. If I could ask a follow-up, this reflects the limits of my understanding of your business and terminology. You mentioned $1.9 billion of bulk purchases, which I believe are seasoned loans from a depository. This is categorized as part of the forward purchases, but I assume these are closed loans. When you take on that $1.9 billion, is it essentially funded in a permanent structure within 24 hours, rather than being flow loans on a lock basis?

I'll take that, Rick. You've been in the industry for a long time, so I know you have more insights than you're sharing. We're including closed-end pools or seasoned pools from banks because they have become a significant market for us now. We're observing these pools more frequently. There was a notable TD pool that made headlines in January, which we were closely monitoring. Following that, we've encountered more pools and have been in contact with our regional bank partners. This activity leads us to see it as a viable market, prompting us to ensure we have the necessary resources, hedging strategies, and distribution channels in place. We're actively selling to banks again. While we've focused on buying from banks, some regional banks still require collateral. The exchanges with banks have been beneficial for us. We've developed competencies in this area. If we identify a pool we plan to purchase, we're focused on the distribution strategy right from the start. This approach has been effective for us this year.

Our next question is from Don Fandetti with Wells Fargo.

Can you clarify regarding the bridge loans? Is the net capital of $1.60 related to all of your bridge loans, both securitized and unsecuritized?

Thanks, Don. It's Dash. I can take that. That $1.60 a share is specific to the 2022 and earlier vintage multifamily bridge which, as we've said, has been the area where we've seen the most density of issues. And so just trying to convey as we've continued to optimize financing against that part of the book, continue resolutions, continue to see paydowns. We just thought it was useful to frame on a per share basis, the unsecuritized portion that's sort of older vintage multifamily.

Got it. And I mean, how should we think about the kind of the manifestation of that risk? Obviously, delinquencies, as you highlighted, were up a good bit this quarter but you're resolving them and your resolutions are probably coming in pretty close to your carrying value, I think. Like how are you thinking about that risk to the book? Is there enough liquidity in multifamily where you can resolve these and it's pretty clean?

Yes, that's a good question. We are continually focused on achieving the highest net present value of resolution, and that approach evolves every quarter and with each loan based on market conditions and the progress of the sponsor with their project. In recent quarters, we've expressed our willingness to provide short-term rate relief to engaged sponsors working on their projects, and we have done that in select cases. The increase in delinquency this quarter was largely due to our decision to pursue alternative resolutions, such as selling the note or directly addressing the real estate to mitigate risk more efficiently. It's crucial to note that this is a short-duration portfolio, with many maturities already happening or upcoming in the next 6 to 12 months. We have the ability to determine our outcomes regarding whether to continue working with the sponsor. We anticipate that these issues will continue to resolve over the year, though some are taking longer than we would like. Our strategy may involve working with borrowers to help them refinance or finding ways to exit the risk ourselves. Overall, the liquidity in the multifamily sector remains stable, although it does vary by market. While multifamily construction starts have significantly decreased, we expect the supply and demand dynamics to realign in the coming quarters as starts decline and demand holds or improves. Ultimately, the most critical aspect is that we are managing our outcomes in relation to our decisions on working with borrowers. The recent spike in delinquency was a reflection of our strategy to move on and handle the real estate ourselves or in collaboration with another capital partner.

Operator, we can take our next question.

Our next question is from Crispin Love with Piper Sandler.

First, can you talk a little bit about your EAD ROE guide for 2025? Brooke, I believe you called out 9% to 12% for the full year. Still early but that assumes a decent ramp from the first quarter. So can you just speak a little bit to the cadence you might expect throughout the year and what that might mean for dividend coverage throughout 2025 from EAD?

Sure. I'm happy to discuss this. As I mentioned in my prepared remarks and in the Redwood Review, we have been consistently shifting our focus away from some non-strategic investments in our portfolio to reinvest capital into our operating businesses, which have shown a 20% and 28% return on equity this quarter. We see strong opportunities for increasing our flow activity with new banking partners through our Sequoia business, as well as large bulk opportunities, although those will be more sporadic. In CoreVest, we're focusing on smaller balance products where we have room to grow in the market, which will require additional working capital to support our growth pipelines. We indicated at the start of the year that we closed about $9 billion in loans last year and projected a 30% increase in some consumer volumes. Given the heavily weighted first quarter due to a few bulk transactions, we believe we could surpass our initial forecasts. This involves a rotation of approximately $200 million to $225 million from underleveraged third-party investments. Our investment portfolio maintains low leverage, allowing for effective redeployment. We also mentioned potential book value growth through share buybacks, which isn't included in the initial guidance of 9% to 12% but could accelerate our progress. The timeline for these opportunities will depend on their emergence in our operating businesses compared to what's available in our capital structure now. You will observe this reallocation throughout the year as we proceed with payoffs, resolution activities, and financing optimization.

Great. And I'm looking at that slide now and I see target year-end '25 run rate of 9% to 12%. So does that mean for the full year, you're expecting 9% to 12% or once you get to the fourth quarter?

That's really like a second half of the year run rate.

Okay, sounds good. And then, can you just expand on your comments on share repurchases? Do you have an authorization in place today? And what would you need to see to become more active there?

Yes, we currently have an authorization exceeding $100 million. We have previously repurchased stock and are actively considering it at this time. As I mentioned, part of our strategy involves ensuring we have the capital needed in today’s volatile markets, which allows us to manage our business effectively and have additional funds to invest back into our own stock. We believe the current levels are quite attractive.

Yes. I'd also add, when we look at our debt maturity ladder, we have a convert maturing later this year. I think it's around $109 million or so which if you look in the past 3, 4, 5 years, that's about the lowest amount of maturities we've had to manage in quite some time by a wide margin. So when we look at organically internally sourced capital and our uses, the stock is definitely something that we're going to pay close attention to in the coming weeks and months, particularly because we have the authorization in place.

Our next question is from Eric Hagen with BTIG.

Okay. So a bone of contention to some degree in the securitization market, as you guys know, has been the high level of credit enhancement, especially in the prime jumbo and the non-QM securitization deals relative to that risk that's embedded in those loans. Do you guys see any catalysts which could maybe alleviate that constraint where the rating agencies get more constructive? And how do you think that conversation potentially evolves as the GSEs potentially exit conservatorship and there's more demand for funding that sort of needs to go into the private label securitization market?

Eric, it's hard to say other than when we engage with the rating agencies, their models and the timing of when they change their models is kind of all over the map. They use a lot of empirical and historical data. So it's not just what we have seen over the past year but what we have seen over the past cycle or a few cycles. As far as what really opens up securitization, as you know, we were just in Washington and we've been readvocating for some of the basic changes such as changes to Reg AB II and some other things that would make public securitization in particular, viable. There's one thing I can tell you is there's a lot of capital out there. One of the boogeyman arguments within the beltway is there's not enough private capital. I mean, go look at how many trillions of dollars have been raised in private credit over the past few years. There's tons of capital but it's not a level playing field. There was a great article op-ed that just dropped today in the Journal about the GSEs. I would encourage everyone to read it. There's definitely a growing need for private sector capital, private sector securitizations, public securitizations. All of these things we'll continue to pursue. And hopefully, with change in Washington, we can get a few of these low-hanging-fruit changes implemented that we think could have a big impact.

Yes, that's helpful. Okay. So for the CoreVest loans that were originated in the quarter, maybe a couple questions there. Any color on how the expected returns have maybe changed from the perspective of the investors themselves? And in this environment where the macro is maybe a little bit more challenging or sensitive, do you think it's more effective to tighten the credit box or your underwriting standards? Or is it more effective to just raise the cost of credit, like the loan coupon?

Eric, it's Dash. Those are great questions. I'll take them. In terms of return expectations, I don't know that those have changed a ton. I think the ways in which these loans are financed continues to evolve. As you're well aware, there's now a fairly robust market for rated securitizations for residential transition loans. We're exploring doing one of those this quarter which I think has helped bring efficiency to the market, particularly for some of those smaller balance single-family bridge products. I would say, however, that a competitive tailwind for us for sure is the market in terms of lenders leaning in or stepping back feels about as fragmented as it has in a while. Maybe some of that is a function of your point around geography which I'll get to in a second. But also, I think a lot of it is just overall corporate posture for some of these shops where that's a huge advantage for us, frankly, where good borrowers we haven't served before are coming to us because of a failure to execute by certain of our competitors. So I say that because not so much that in and of itself is going to cause us to move spreads higher but it certainly is a competitive tailwind and something that we are hoping to take advantage of, particularly in some of these smaller balance products where, as Brooke articulated, we're still not as penetrated as we could be given the depth of our platform and frankly, most importantly, the strength of our distribution. So I think there's a long runway there. But we are pleased, as we talked about earlier in the call about how these markets have hung in there from a securitization perspective and the emergence of these rated deals is certainly one we're following and hope to be a participant in more directly soon. As it relates to geography, I think what we found over the years is that there's not many instances where extra spread can compensate for where lower leverage should have been employed. And so I think when you look at areas, parts of Texas, Florida, obviously, parts of the Southwest, we have probably erred more on the side of reducing leverage. We haven't really gotten a lot of pushback, frankly, when we've tried to do that. And so I think in markets where you're worried about supply-demand challenges, etc., I think our general view is that it's better to adjust for that through credit policy rather than an expectation of return.

Our next question is from Steve Delaney with Citizens JMP.

I want to thank Chris for discussing the details of the current buyback. Given the market volatility, having that option available is crucial for benefiting our shareholders. Regarding volatility, the 10-year bond yield was at 480 in January and is now below 420. I’m curious, Dash, about how this key bond market indicator has affected your prime jumbo 30-year fixed-rate loan product. What has the range been this year for what you’re quoting, and how does it compare to the peak levels in January or February? Any insights you can provide would be helpful.

Sure. And Brooke can supplement here, too. We've probably moved within our 100 bp range on rate for 30-year prime jumbo since January 1. But as you articulated, Steve, the real story there is the relationship of that rate to where benchmark rates are. And as Chris pointed out earlier in the Q&A, I think mortgage spreads are wide right now. We're probably very high-6s, 7 handle, 30-year fixed. To your point, that's versus a sub-420 10-year. That's as wide as we've seen in some time. In these markets, that can be a headwind, obviously, because rates are higher and that rates at this level continue at a macro level to continue to put a lien on overall housing supply. But the other side of that coin is that spreads are wide, mortgages versus benchmarks. And so I think that's been a part of some of the execution efficiency. You often see this when mortgage spreads are wide, notwithstanding the volatility that allows us to price at a tighter spread back of TBAs which, as Chris said, we've consistently done here even through April where we saw a ton of volatility. So mortgages locally here continue to be very, very wide but that has translated on a sort of a total return basis or versus TBAs and versus benchmarks, I think, of continuously attractive levels where we've continued to be able to lock loans and do so profitably.

Thank you. There are no further questions at this time. I'd like to hand the floor back over to Kate Mauritz for any closing comments.

Thank you operator and thank you everyone for joining today. We appreciate the questions and engagement. If you haven't already done so, we also encourage you to check out our shareholder letter and Redwood Review on our website for additional commentary. Thanks and have a good afternoon.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.