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, and 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 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 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 is 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. It will be available on our website later today. And with that, I'll turn the call over to Chris for opening remarks.

Thank you, Kate, and 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. In 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 rollouts, 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, 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 in more accommodative times has represented 50% or more of total originations. The 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 hovering 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. In 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 drawn a renewed focus with proposals intended to limit the ownership of single-family homes by large institutional investors. We remind listeners that large investors continue to only own a small share of the country's single-family housing stock and that with respect to CoreVest, our business-purpose lending platform, the vast majority of our lending footprint remains focused on smaller and midsized 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 and an evolving rate regime under a new Fed chair. As we look to grow earnings and market share in 2026, we are leveraging AI to enhance risk management, accelerate capital deployment and extract further gains in operating leverage. Based on the progress we have made to date, we expect core operating performance to drive consolidated earnings above our common dividend in 2026, enabling earnings retention and reinvestment to help fund organic growth. And with that, I will turn the call over to Dash to discuss our operating businesses and investments.

Thank you, Chris. We exited 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% from 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 a 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 pickup in closed-end second and adjustable rate loan volumes. Sequoia's competitive position continues to strengthen. Our network now spans over 210 originators across banks and independent mortgage bankers, or IMBs, and we estimate our full year 2025 jumbo market share at approximately 7%, up materially from prior years. Importantly, these gains are driven by market trends we have now observed for some time. We continue to actively engage with banks that are increasingly choosing distribution over balance sheet retention, a dynamic that continues to expand our addressable opportunity. While IMBs represented roughly two-thirds of fourth quarter production, we expect the mix to evolve further in 2026 as additional large bank relationships come online. Distribution also remains a core differentiator, driving fourth quarter margins up nearly 40% sequentially from Q3. During the quarter, Sequoia distributed approximately $3 billion through securitizations and over $1 billion through whole loan sales, supporting strong capital turnover and attractive returns. By design, we are running the platform to turn capital faster, and the breadth of our distribution options has become a durable operating advantage. In 2026, opportunities to profitably scale volume without a robust refinance market remain compelling on a stand-alone basis. As a reminder, in 2025, we generated more volume than in 2021 when overall mortgage market was roughly three times larger, driven by growth in our purchase money loan volume. But as Chris noted, the refinance market is once again contributing to Sequoia's volumes, representing approximately 35% of 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 prepayment speeds is mitigated by the nature of the premium we carry on the balance sheet, whose value is used largely to hedge a growing pipeline and is not contingent on significant recapture economics. 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 channels, 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, we 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 towards smaller balance products, including residential transition loans, or RTL, and DSCR loans. RTL represented nearly 40% of fourth quarter production, the first time the product has headlined our quarterly funding mix and hit another high watermark for production. DSCR volumes increased 43% versus the third quarter, highlighted by momentum in cross-collateralized portfolio loans, a critical complement to our traditional term loan product. This shift in origination mix is improving the platform's overall efficiency and aligns well with continued institutional demand for CoreVest 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%, completing multiple asset sales and executing loan resolutions and modifications, including a number of complex legacy bridge workouts and positioning of REO 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 accretive capital to redeploy into 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 borrower organizational structures, covenant tracking and due diligence standardization. Importantly, this technology enablement is a meaningful contributor to the operating leverage Brooke will discuss, including our 44% year-over-year reduction in operating cost per loan. 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 volume. 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, and 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 six times faster than our total operating expenses, reducing total operating expense to approximately 0.9% of production volume from 1.6% in the prior year. This improvement reflects both structural cost efficiencies and disciplined execution. And because the majority of our cost base is variable or tied to production, we are increasingly focused on how effectively incremental volume converts into earnings once fixed costs are covered, supporting margin expansion as the model continues to scale. This operating leverage reflects our transition to a capital-efficient originate-to-distribute model, where earnings power is driven by margin and capital velocity rather than balance sheet size. As production scales, operating expenses naturally rise with volume even as returns improve, which can make traditional mortgage REIT efficiency metrics anchored to assets or equity appear less indicative of performance when production is growing faster than common equity. In practice, this reflects the efficiency of pushing more production through our equity base without increasing our balance sheet risk. We have industry-leading capital velocity as our loans typically are on our balance sheet for approximately 35 days, meaning that incremental production continues to translate directly into earnings. 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, where 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. And with that, I'll turn the call back to the operator for questions.

Our first question comes from Crispin Love with 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. So we were $7 billion and change total for Q4. So obviously, the run rate has just continued to accelerate. So from our standpoint, the rally has helped, although our business has largely been about taking market share across non-agencies. So 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 points behind conforming. And a lot of that rally has since leveled off as well. So obviously, we had today's job sprint. So 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, and 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 address that. Regarding the near-term opportunity, a significant part of it is about continuing our current execution. The business has demonstrated impressive momentum in the latter half of the year, with nearly $3 billion in locks in just Q3 and Q4. This success stems from a few factors. Firstly, our established Sequoia network, which we have been collaborating with for years, gives us a substantial competitive advantage. Recently, these partners have been focusing more on non-QM products, primarily due to persistently high rates and their desire to diversify their offerings. Additionally, there is growing recognition that the non-QM market is expanding and that it includes many high-quality borrowers who are not adequately served. We have highlighted this in our review this quarter, estimating the non-QM market for 2025 to reach $130 billion, reflecting a significant increase from 2024. Many market observers anticipate a further 10% to 15% growth this year, presenting ample opportunities for us in this sector. As you know, banks have a limited presence in non-QM. We successfully sold a non-QM pool to a bank last quarter, which was a significant milestone. However, the main competition remains non-bank entities, where we can differentiate ourselves through our service quality and relationships. This is a major advantage. The ability to securitize our offerings will be crucial for the business, and we expect to see developments in the coming weeks. Overall, everything is proceeding as planned, and we have a long growth trajectory ahead. We believe our market share last year was around 2% of the volumes mentioned, and we expect it to be higher in 2026. On GSE reform related to Aspire, the situation is unpredictable. There have been notable changes in messaging from DC. However, we believe the types of consumers served by non-QM products, like bank statement borrowers, are generally outside the GSE's focus and they lack the necessary technology capabilities. Therefore, we expect some level of insulation from potential impacts. Another important factor, which remains to be seen, is the administration's recent directive preventing GSEs from supporting single-family investments. While this affects smaller investors, it is something to consider regarding the likelihood of GSEs entering the DSCR market as it currently stands with non-QM. Our expectation is that private capital will continue to effectively address these products, and we plan to increasingly engage with these opportunities this year.

Our next question comes from the line of Don Fandetti with 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 sold to multiple handfuls of insurance companies and asset managers. The demand is just really strong for our production. And increasingly so, on the Sequoia side, especially given some of our success with seizing these seasoned 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. So we are catching the eye of several third-party capital providers. We are in evolved discussions for both a capital partner for Aspire and Sequoia, which will really help launch the growth that Chris was mentioning to continue to scale these platforms this year and doing it outside of our corporate balance sheet is helpful given where capital options lie today. So that'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, and we expect it to continue to fuel growth in '26.

Our next question comes from the line of Bose George with KBW.

So what are the margins like in the non-QM channel, the gain on sale margins currently? And how does that compare to margins currently in the jumbo channel?

Bose, it's Dash. I can take that. We're targeting pretty much in line with the Sequoia 75 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. So the market is growing quite a bit, but there's different companies entering the space as well. Can you just talk broadly about that?

The market is indeed competitive, driven by growing demand from large capital investors for the asset class. Currently, the securitization market is very strong with significant interest from whole loan buyers. Loan spreads are at their tightest levels in years, indicating that the asset class has performed well. Many investors are seeing positive outcomes from the convexity story. We've heard anecdotally that there's increasing capital being allocated to this segment, possibly moving away from other private credit sectors that face more challenges. All these factors create favorable conditions for the market, although they do increase competition. At Sequoia, we've observed new entrants over the years, and running a non-QM business has similar operational challenges as managing jumbo loans. Nonetheless, we believe there are many opportunities for growth, and we remain very optimistic about what lies ahead.

Our next question comes from the line of Rick Shane with JPMorgan.

I'm looking at Slide 15, and I find it really interesting. I have two questions. First, when we compare the Sequoia volume from 2021 to 2025, it seems that historically, you operated more as a purchase shop compared to the market, but now your mix aligns much more with the market. I'm wondering if the increase in your number of partners is contributing to this alignment with the market, or if it's primarily due to the currently small refi market. The second question is regarding your margins, specifically in terms of gain on sale and expenses. Should we anticipate any changes as the market potentially shifts back more towards refis or balances out between purchases and refis?

I'll take that 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, was substantially without significant refi business. And in '21, thanks to the Fed, mortgage rates were in 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. And if we add refi business, it won't be at the expense of purchase; it will be in addition to purchase. And from a margin standpoint, that should continue to leverage the platform. So as we push more business through the same amount of capital or thereabouts and a similar work structure, we should continue to see more of that revenue make it to the bottom line. And that's why we really rolled out some new operating metrics this quarter. I think we sometimes get mixed in with more traditional REIT business models, which look at expenses to capital and other metrics. And for us, it'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. So 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 meaningfully below 6%. So there's a lot of that ahead of us, and we think that just scales the platform further.

I understand. Chris, the main point here is that as you reach normalized volumes with market changes in purchase and refinancing, do you see any difference in profitability between an additional $1 million in originations on the purchase side compared to refinancing, or are they essentially the same?

Well, generally, refis are a little bit quicker. So from that standpoint, 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. And 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 large originators, particularly the IMBs, top 5, top 10 originators in the country have entered the space. And 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 kind of introduce themselves to a new counterparty. So really, we're just going to continue to leverage our network. And I hope that the refi business picks up; it would be great for us and for the industry. But as we saw today, rates are kind of still pretty volatile, and a 4.17% or 4.20% 10-year isn't giving us a lot of indication on which way things are going to go.

Fair enough. I mean, 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.

Our next question comes from the line of Eric Hagen with BTIG.

All right. So how do you think the focus on affordability and this overwhelming support for home ownership and lower mortgage rates has an impact on the resi transition lending business? And 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 provide a high-level overview, and then Dash can share specific insights on RTL and our affordability initiatives. CoreVest represents our strongest joint venture partnerships, and our approach to this business is centered on profitability for our shareholders. Our focus is shifting from increasing volume quickly to scaling operations and ensuring high margins for our shareholders. Most of CoreVest's volume is already allocated to CPP and others, which allows us to earn asset management fees. Additionally, we are co-investing, but our main goal with CoreVest is to refine the product offerings. While we do anticipate volume growth this year, our priority remains on delivering margins back to our shareholders. Dash, would you like to address the next point?

Yes. Thanks, Eric. I think it's a great question, and 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. And 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. And 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 issues that there's significant bipartisan support on. The issues that we see in large part are really at the local and municipal level in terms of actually allowing some of these developers to get to work. And so to the extent that actually loosens up a bit, it could be a huge opportunity for our client base to serve more ultimate homebuyers by cheapening the cost and the time it currently takes to get through some of these project approvals. So I mean there are 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, I believe it’s highly concentrated, primarily in the back office as well as across our corporate and CoreVest segments. Out of approximately $200 million in operating expenses for the year, around 45% was fixed. In terms of overall guidance on operating expenses, much of what Chris mentioned about our efficiency stems from improvements in our process technology and our ability to scale volumes and capture market share. We are indicating some marginal costs related to loans this year, as outside of our fixed costs, the variable operating expenses are linked to the increased volumes. For context, our operating expenses rose by about $30 million this year, almost entirely tied to the growth in Sequoia and Aspire, which saw significant profitable volume. We generated an additional $12 billion in volume with that $30 million in expenses, translating to a marginal cost per loan of approximately 25 basis points. We believe we can reduce this further through added efficiencies from the initiatives we are currently focusing on, which could assist in modeling the incremental general and administrative costs associated with additional volume.

Our next question comes from the line of Mikhail Goberman with Citizens JMP.

Just to follow up on Eric's question regarding CoreVest, what do the originations look like? Can you provide any information on first quarter volumes and how margins are performing?

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 and pretty consistent margins. Again, with CoreVest, it's a little bit different because much of our production goes to our JV partners or the capital partners that are focused on that segment. So the volume 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. And one of the reasons is because of capital efficiency. And we did take some further expense out of the business, as Brooke mentioned. So that's going to improve. That should improve margins, all things equal, in 2026. So high level, I think we're expecting higher volume in the first quarter. But as far as the makeup of the products, which has evolved over the past year, I'll let Dash answer that.

Yes, 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. So as I mentioned in the prepared remarks, RTL is our largest product type in the fourth quarter for the first time. And so I think it reflects some significant strategic progress in that business, which we expect to continue. 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. So I would say those are tracking very consistently for a few reasons, including that one. The other point I would make, and Eric touched on this a little bit, but with the affordability piece is 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. And a tailwind there, depending on how some of these housing initiatives at DC play out, is that smaller investors and more sort of 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. And as Chris articulated, the ability to turn capital quickly and reliably into these joint ventures is very important.

Just one last point on mix, we continue to see our term and portfolio DSCR product as an increasing mix of originations for CoreVest. Those are our two higher-margin products as well. You saw in the fourth quarter that despite volume being down, our gain on sale activity for CoreVest was up. So those are contributions to that dynamic.

Just one more question from me. Looking ahead, are there any additional real estate loan products that might catch your interest, or are you focused on growing your current offerings throughout this year? Considering your history with the FHLB, could there be any potential benefit in acquiring a bank to re-enter that funding system?

I usually don't rule anything out, but it's not part of our current strategy. We're actively partnering with banks, and these capital partnerships bring additional opportunities, including warehouse partnerships. We're still deriving significant value from many of our bank collaborations, especially with the regional banks that we've recently integrated. From a product standpoint, we plan to stay focused on our core offerings. There has been a lot of debate in Washington regarding alternative products, like 50-year terms, but for various reasons, these options will be difficult and not necessarily eligible for delivery. Therefore, Redwood will continue to emphasize non-QM products, which we have discussed extensively today. We have a solid business in the BPL sector through CoreVest, and with Sequoia, we see potential for more involvement in second lien mortgages. There are certainly additional interesting avenues to leverage our seller base, and while all of these options will be considered this year, our primary products will remain the main focus.

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

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