Redwood Trust Inc Q1 FY2026 Earnings Call

Good afternoon, and welcome to the Redwood Trust, Inc. First Quarter 2026 Financial Results Conference Call. Today's conference is being recorded. I will now turn the call over to Natasha Spaduri, Senior Vice President of Finance. Please go ahead, ma'am.

Thank you, operator. Hello, everyone, and thank you for joining us today for Redwood's First Quarter 2026 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, which 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. Reconciliation between GAAP and non-GAAP financial measures are provided in our first quarter Redwood review, which is available on our website, redwoodtrust.com. Also note that the contents of today's conference call contain 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. It will be available on our website later today. With that, I'll turn the call over to Chris for opening remarks.

Thank you, and good afternoon, everyone. Before I turn the call over to Dash and Brooke, I want to share a few thoughts on our first quarter performance and what it says about Redwood's position as we move forward in 2026. As you all saw by now, Redwood generated a third consecutive record operating quarter with mortgage banking volume surpassing $8.5 billion for the first time and earnings available for distribution coming in a bit above last quarter at $0.21 per share, once again covering our dividend. Operating progress should garner some attention as our results came amid a broader mortgage market that has been stuck in neutral with mortgage applications running close to 40% below pre-pandemic levels and jumbo mortgage rates having risen from the recent February lows in large part due to the conflict in the Middle East. To zoom out and offer some context, our $8.5 billion of first quarter volume exceeded residential mortgage production at 3 of the top money center banks during the quarter. Our volume also clocked in at 10x our March 31 reported GAAP book value, a very high capital turnover ratio. This means the loans we hold in short-term warehouse facilities are moving quickly and getting replaced with fresh production. All told, we completed 11 securitizations in the first quarter, another in-house record for Redwood. High turnover also indicates the tremendous operational efficiencies we've implemented in recent quarters, in part due to our strong adoption of AI across the enterprise. In the first quarter alone, we executed over 2,500 agentic workflows, spanning technology platform expansion to support both Sequoia and Aspire in a single unified platform, as well as automated QC and the elimination of significant work previously performed by outside vendors. In the quarters ahead, we aim to continue unlocking addressable market share by leveraging the many network relationships we've spent years cultivating, something that is neither easy nor cheap to replicate. Our longer-term objective of 20% market share or more for our primary products will require both capital efficiency and significant growth capital. We believe there is a compelling opportunity for common shareholders to participate in that growth alongside us in advance of the next monetary regime and mortgage rate cycle. In the meantime, we continue to see tremendous demand from alternative asset investors who are eager to partner with us and speak for the high-quality assets we source. Just this morning, we announced a major Sequoia capital partnership with Castlelake, a blue-chip global investment firm specializing in asset-backed credit. This partnership brings approximately $8 billion of incremental purchasing power to Sequoia as it scales and reflects growing institutional demand to access our platform and the assets we create. We view this as an important step in a broader strategy to pair our origination capabilities with third-party capital at scale. To that end, we've also been hard at work on an Aspire-focused joint venture and hope to announce a similar JV in short order. Such capital partnerships are timely as we're growing more optimistic about macro trends that could positively impact the housing sector with the obvious caveat that the conflict in the Middle East seems far from resolved. As we like to say, mortgage was among the first sectors to be impacted by the Fed's historic tightening cycle to combat inflation in 2022, and we think mortgage could be among the first to benefit now with the prospect of a more accommodative and housing-focused Fed. Based on recent publications and testimony, the presumptive new Fed Chair, Kevin Warsh, seems to prefer the policy combination of lower rates and a smaller Fed balance sheet. While the reduction of QE had certainly removed the demand stimulus from the mortgage market, the prospect of a smaller Fed balance sheet should help reduce long-term inflation expectations and hopefully support lower long-term rates. The wildcard for mortgages continues to be spreads, which are still meaningfully above pre-COVID levels and still trying to find equilibrium. We expect any monetary policy tailwinds to be further supported by evolving regulatory dynamics, most notably the recently reproposed bank regulatory capital rules, also known as the Basel III Endgame. The proposed rules would ease the cost for banks to hold higher quality mortgages and mortgage servicing assets, a necessary step for banks to consider allocating more capital to their go-forward consumer mortgage operations. But lowering the capital rules is just one precursor for banks to reenter the mortgage space. The ultimate decision, we believe, remains risk-based and not profit-based. We consistently hear from bank C-suites that having a partner like Redwood to assist in the management of their interest rate and asset liability risks is a huge differentiator, especially because our support does not undermine their customer retention goals. Having the option to transact with Redwood when rates change quickly or priorities shift is the value differentiator we've now established throughout the banking system and another example of the moat we've built around our franchise. Finally, before handing the call over to Dash, I want to remark on recent headlines stemming from the private credit sector. As we all have seen, pockets of weakness in underlying fundamentals are emerging for certain aspects of private credit and constraints on liquidity and asset price visibility are, in some cases, impacting broader market sentiment. It's a timely moment for us to humbly champion Redwood's public credit model, where you can gain exposure to innovative mortgage banking and credit strategies, coupled with the liquidity that a publicly traded stock offers. We also strive to provide great transparency through the utilization of annual external audits, quarterly 10-Q filings, proxy statements and perhaps most importantly, mark-to-market accounting through our income statement. It's times like these that we take pride in our shareholders knowing not only what they own, but also knowing what they don't. With that, I'll turn the call over to Dash to discuss our operating results.

Thank you, Chris. Our first quarter operating performance reflects continued momentum across our mortgage banking platforms, supported by record Sequoia volume, ongoing growth at Aspire and strategic progress at CoreVest, including evolution of our production mix. Even against a more volatile backdrop beginning in March, our full quarter results demonstrated the scalability of our model and the additional operating leverage still to be unlocked. Sequoia once again headlined our results, logging another record quarter with $6.5 billion of locks, up 22% from the fourth quarter. That volume was generated in a housing environment that remains well below historical norms, underscoring the market share gains we continue to make across our originator network, now enhanced by several new products to complement our core jumbo offering. Cost per loan improved 30% from the fourth quarter to below 20 basis points, aided by automation initiatives that we estimate will free up close to 6,000 hours per year that our team members can utilize more productively. Capital turnover also improved quarter-over-quarter with continued efficiencies expected from the new joint venture dedicated to Sequoia's jumbo production that Chris described. Gain on sale margins in the first quarter were 96 basis points, at the high end of our historical target range despite substantial TBA underperformance into quarter end, much of which has retraced thus far in April. Margin resilience was driven in part by strong execution on $5.5 billion of dispositions, including $4.6 billion across 9 securitizations. As Chris articulated, the recently reproposed Basel Endgame rules represent a potentially meaningful tailwind for the business. While flow volume represented the majority of first quarter production, we are currently evaluating on an exclusive basis close to $5 billion of seasoned bulk pools from banks, underscoring our view that more benign capital charges against high-quality mortgages will promote more two-way flow of bulk pools, a positive for Redwood given our market positioning as banks continue to prioritize prudent asset liability management. Away from bulk opportunities, our sourcing channels remain well diversified overall with average flow lock concentration by seller of less than 1%. Product expansion also continues to support growth. During the quarter, we launched a new loan program focused on medical professionals, locking nearly $300 million of such loans on a flow basis during the quarter and later in the quarter, successfully securitizing a bulk pool of MedPro loans we acquired from a bank, a first-of-its-kind transaction. In all, our expanded offerings represented 14% of total lock volume in the quarter with over 100 of our sellers now actively selling us at least one new product. Aspire continued its growth trajectory in the first quarter, adding several new origination partners while further deepening our value with existing sellers. Aspire lock volume increased to $1.6 billion with April lock volume ahead of that pace. Approximately 70% of Aspire's first quarter volume came from sellers already active with Sequoia, a significant competitive advantage for the platform that also is indicative of its growth potential. More originators are now recognizing the strategic benefit of non-QM products that serve a growing cohort of borrowers outside the traditional W-2 profile, including self-employed consumers and smaller scale housing investors. We estimate Aspire's first quarter market share to be approximately 4%, which we expect to at least double by the second half of this year. As Aspire remains a relatively early-stage platform, an ongoing priority remains scaling operations ratably with volume growth and maintaining the cost discipline that supports long-term profitability. Aspire's gross margins were 73 basis points in the first quarter, impacted by spread widening in the pipeline at quarter end that has since largely reversed. The platform's inaugural securitization in March was an important milestone for the business, broadening distribution, improving capital efficiency, including through accretive distribution of the risk retention and subordinate tranches to a third party and establishing Aspire as a programmatic issuer alongside Redwood's other leading securitization shelves. At CoreVest, first quarter volume totaled $432 million, down modestly from the fourth quarter, but with continued progress in our smaller balance residential transition loan, or RTL and DSCR products. In partnership with our borrowers, we managed the pipeline carefully in March as volatility increased, which reduced monthly volume but positioned customers to lock loans in April at more favorable all-in rates. CoreVest's origination and distribution strategies are improving capital efficiency, reducing market risk and aligning the platform with areas of demand well supported by our capital partners. Most notably, this includes our joint venture with CPP Investments, to which we have now distributed over $2 billion of CoreVest production life to date, generating upfront fee income and building a recurring income stream as the joint venture grows. The broader housing investor market remains focused on a pending piece of legislation that may impact institutional ownership of rented single-family homes over the medium to long term. While the final outcome remains uncertain, we believe parts of the eventual framework could create longer-term opportunities for the platform, both within our smaller balance loan programs and if the new rulemaking ultimately impacts the GSE footprint for single-family housing investors. Alongside record mortgage banking activity, we continue to pace with our reallocation of capital away from legacy investments, which stood at 15% of total capital at March 31, down from 19% at year-end. While segment returns were once again impacted primarily by net interest expense, resolution activity during the first quarter, combined with an accretive securitization, reduced legacy bridge loans to approximately half of the legacy segment and 8% of our total capital overall. 90-day plus delinquencies were roughly flat versus year-end in the legacy portfolio as we prioritize efficiently winding down the segment through outright dispositions or other structured sales that we believe will lead to the best outcomes through time. I will now turn the call over to Brooke to discuss our financial results.

Thank you, Dash. Turning to our first quarter results. We reported a GAAP net loss of $7 million or $0.07 per share compared to GAAP net income of $18 million or $0.13 per share in the fourth quarter. Book value per share was $7.12 at March 31. The 3% decline from Q4 was driven by noncash market-related valuation changes and certain nonrecurring expense items rather than underlying operating performance. Book value also reflected the $0.18 dividend paid to common shareholders. On a non-GAAP basis, consolidated earnings available for distribution, or EAD, was $27 million or $0.21 per share, up from $0.20 per share in the fourth quarter. Core segments EAD was $37 million or $0.28 per share, representing a 19% return on equity. This performance was driven by strong mortgage banking volumes, efficient loan distribution and capital turnover, particularly during the more volatile period in March, and disciplined capital deployment into attractive, income-generating investments, which supported net interest income and margins. The difference between core segment's EAD of $0.28 and consolidated EAD of $0.21 primarily reflects the legacy portfolio, which reduced consolidated EAD by approximately $0.08 per share in the first quarter. As capital allocated to legacy continues to decline, we expect that drag to further moderate. Our mortgage banking platforms generated $37 million of GAAP net income in the quarter, representing a 38% annualized return on capital. Capital efficiency improved with capital required per dollar of volume declining by approximately 10% quarter-over-quarter to 1.1%. Just to note, this quarter, our segment returns reflect a full allocation of unsecured interest expense based on average capital deployed with capital reduced by the corresponding allocation of corporate debt. The Redwood review presents segment results on both this basis and our prior methodology, which reflected these items within corporate. Sequoia generated $38 million of GAAP net income in the first quarter. Heightened flow activity represented 61% of production with a growing contribution from newer products such as ARMs, closed-end seconds and medical professional loans. As volumes scale, we continue to see strong earnings conversion and benefits of scale with cost per loan declining to 18 basis points, a highly efficient milestone. We also see a deep and growing pipeline of attractive opportunities with demand exceeding available capital. The joint venture announced today is designed to capture more of that opportunity in a capital-efficient manner by incorporating third-party capital alongside our own. Based on current expectations, the structure has the potential to contribute approximately $0.12 to $0.15 per share of incremental annual earnings as it scales with additional upside through structured economics. Aspire generated $2 million of GAAP net income in the first quarter. As the platform scales and expands distribution, we are beginning to see improvements in capital efficiency. Margins were impacted by late quarter volatility but have largely recovered post quarter end. CoreVest generated a GAAP net loss of $3 million in the first quarter, including approximately $5 million of one-time restructuring charges related to organizational changes that position the business for profitability in 2026. Excluding these items, our net cost to originate declined from 95 basis points last quarter to 79 basis points in Q1, reflecting improved operating efficiency. Redwood Investments generated GAAP net loss of $8 million. Portfolio-related marks were primarily driven by widening in the TBA basis and credit spreads, combined with the impact of higher interest rates late in the quarter. The cost of funds for our investment portfolio improved as we refinanced higher cost debt and optimized our financing mix, supporting net interest margin. Legacy investments recorded a GAAP net loss of $13 million, improving from a $23 million loss in the fourth quarter. The improvement was driven by lower net interest expense on legacy bridge loans, reflecting improved financing terms and lower balances as well as higher HEI income as capital markets conditions for the asset class improved. Total G&A was $49 million in the first quarter, up from $41 million in Q4, reflecting one-time costs associated with the previously discussed organizational streamlining initiatives as well as typical seasonal expense patterns. Excluding these items, run rate G&A was approximately $40 million, essentially flat to slightly below the fourth quarter. We continue to scale with discipline as first quarter volume growth exceeded expense growth by nearly 2x, driving our expense to volume ratio down to 66 basis points. With a largely fixed cost structure tied to production, we see meaningful upside in incremental volume converting into earnings, reinforcing our confidence in ROE expansion as the business scales. Liquidity remains strong with $202 million of unrestricted cash and approximately $3.9 billion of excess warehouse capacity as of March 31. Recourse debt increased modestly to $4.7 billion at quarter end, driven by higher warehouse utilization supporting record mortgage banking activity. Our ability to efficiently turn loans and inventory was evident in the first quarter with 11 securitizations completed across $5.2 billion of collateral alongside improved financing efficiency through tighter spreads and better advance rates, driving an approximate 50 basis point reduction in our cost of funds over the past 12 months. Over that same period, we increased warehouse capacity by 30% to $7.1 billion and renewed $5.7 billion of facilities, reflecting continued support from our lending partners. And finally, there are no corporate unsecured debt maturities over the next 5 quarters, and we maintain meaningful flexibility within our unsecured debt structure. With that, I'll turn the call back to the operator for Q&A.

Operator provided instructions. Our first question is from Mikhail Goberman with JMP.

Congrats on another record quarter of banking volume. If I could ask, start with the new joint venture announcement this morning. I see in your slide deck, you mentioned you're expecting a meaningful annual EPS accretion for yourselves. Is there a target range that you guys are thinking about in terms of a number?

Yes, we are anticipating that it has a potential for roughly $0.12 to $0.15 of incremental earnings. This joint venture will really, as Chris noted in his prepared remarks, allow us to grow volume by another incremental one-third, or about 30%, and add double-digit ROEs without raising other capital to source that. So given our incremental margin significantly outweighs our incremental cost to source, we're really excited about the partnership and its dedicated distribution channel that aligns with our high capital turnover model that we've evolved into.

As far as your comments on the call about a potential Aspire JV being announced in the near future, is there a size that you guys are thinking about there? I see the Castlelake deal is about $8 billion. What are you guys thinking about in terms of size of a JV for Aspire?

It's Dash. We'll have more to say when the details get finalized, but I think we are expecting a joint venture of this type to probably support 25% to 30% of Aspire's annualized production. That's probably the best way to quote it for now just in terms of all the other initiatives we have with distribution, including securitizations and whole loan sales. Obviously, we need to finalize what we're working on, but that's the context I would give you as a percentage of Aspire's overall production mix.

Mikhail, I'd also add, obviously, we've had joint ventures with CoreVest up to this point. And so I think the in-house knowledge is high. Our ability to continue to add these to the platform is getting progressively more streamlined. So we want to continue to find partners to the extent we need capital and it's available. And hopefully, again, we'll have more to say on Aspire, as Dash mentioned this quarter.

Next, we'll hear from Crispin Love with Piper Sandler.

So you had another record quarter for mortgage bank production. Can you just discuss some of the momentum there and what you're seeing in April? Mortgage rates peaked around quarter end, a little bit better now. So curious what you're seeing in April and what you might expect throughout the year?

Well, I think on the one hand, volatility came down earlier in the month as we kind of settled into where we're at with the conflict in the Middle East and energy prices. So mortgage rates came in a bit. Obviously, the 30-year ticked to around 5% today, and the 10-year is back up to about 4.40%, so that's not a positive for mortgage rates. I think that we're going to continue to expect some volatility in rates. But the initial shock that occurred in March with this conflict, the market has somewhat processed that. We've been much more business as usual as a sector these past few weeks. From that standpoint, we've obviously made inroads to take market share. We've demonstrated that the last few quarters; late in the first quarter and early in the second quarter we've added a few more regional banks from a flow perspective. We continue to unlock market share for the platform. And I think we're quite excited about the prospect of the Basel III Endgame and being more or less an exclusive partner to a number of banks who work with us today. It's ironic that with the Basel III Endgame, some of the capital changes pertain to credit, but many banks would tell you that the largest risk they're focused on with respect to mortgage is convexity, and that's what we help manage—asset liability and interest rate risk. That's the big need right now. So that doesn't go away. In fact, if the capital charges go down, having a partner like Redwood to manage that makes our business case stronger. So we feel good about the momentum. The only thing we don't feel good about is the volatility in the macro economy, and we're doing our best to manage through that.

Great. And then just for Sequoia, you called out the cost per loan improving to 18 basis points a couple of times during the call. Can you discuss some of the drivers there? Is part of it volume-related technology and AI? I believe you mentioned the automation initiatives. Curious on a little bit of detail there. And then are there additional efficiencies that you think you can drive that even lower in the coming quarters?

Yes. We feel really good about the combination of hustle and hard work with adoption of technology and AI. Our volume growth is outpacing our expense growth by 2x, which demonstrates the scale of the platform. We're operating very efficiently. During the quarter, we mentioned 2,500 agentic workflows. We're eliminating vendors who previously did a lot of QC or document intelligence for us. We're smarter on due diligence reviews. We're able to create efficiencies between Sequoia and Aspire using AI for our consumer platforms. Across the board, it's been an all-out effort to find efficiencies in the platform and ensure each dollar is used wisely, leveraging our team and the technology we're building.

Next, we'll move to Ameeta Lobo Nelson with UBS.

Just looking at the slide, it noted that bank sourced volume at Sequoia was about 30%. I believe this is lower than 4Q. Could you just comment on your outlook for that contribution going forward? And the Castlelake JV, does this reactivate any recurring Sequoia program in the second half of 2026?

Yes. I think the bank percentage ticked down maybe on a percentage basis but continues to rise in absolute terms. We had another record quarter of volume and a lot of that can be influenced by bulk one way or the other. In the first quarter, we had some large bulk transactions with certain independents. We have added some additional regional bank partners on flow, as I mentioned. So we continue to expect that volume mix to evolve. We have durable partnerships on the bank side—about half our network today, more or less. While bulk can impact the quarterly percentage, we expect bank-sourced volume to continue to grow.

Some of your peers have noted institutional capital entering the non-QM market and the broader residential credit market. Are you seeing that competition manifest in your whole loan acquisitions or through tighter spreads on the AAAs? How is that impacting the ROE and securitization?

It's Dash. I think that's largely been to an advantage for us as we continue to deepen our distribution channels. A big milestone for Aspire in the first quarter was completing the platform's first securitization. We're actually in the market today with its second, which is important because it shows institutional investors the platform will be in the market regularly, helping primary and secondary liquidity. We've sold whole loans out of the Aspire platform to close to 10 different counterparties, including a couple of banks, which is significant. From a supply-demand perspective, the amount of institutional capital coming into the space is a net advantage for us. Aspire leverages not only the new sellers we're bringing in but also the foundation of sellers we've worked with for years in Sequoia. We said about 70% of Aspire's production came from sellers we've already done business with in Sequoia. That's good news for a couple of reasons. One, we're leveraging our existing seller base and becoming an even more relevant partner with these added products in addition to Sequoia's offerings. Two, it reflects upside potential for Aspire because there are many sellers we haven't yet onboarded. We estimate our market share in Aspire at about 4% in Q1, and we want to double that in the second half of the year to a run rate close to $1 billion a month of locks. The momentum is there; the business is still building, but the market is bringing capital that relies on us to deploy and manage the risk, which is a net tailwind for Redwood.

We'll move on to Jason Weaver with Jones Trading.

I was wanting to ask about the legacy wind down within CoreVest. You took capital allocation down to 15% in one quarter. What do you think about the realistic finish line here to get below 10%? Is that end of year? And what sort of residual assets are stickier on that resolution timeline?

We have stated we want that percentage to be well below 10% by the end of the year. One thing to unpack on that, Jason, is the legacy portfolio is about 50-50 legacy bridge loans and HEI. Legacy HEI we purchased a number of years ago, some of which we've disposed of over the past year or so. We're optimistic we can recycle a fair amount of that HEI capital later this year. As Brooke articulated, capital markets execution for that asset class has continued to improve. On the bridge side, we are down to a few focused line items which will move the needle; we are very focused on resolving those in Q2, if not early to mid-Q3. That combination will get us below 10%, and then we will continue to wind the position down with the goal of getting it below 5% by the end of the year.

If I could add on the financial impact of the wind down as well. The legacy book was around $240 million of capital at the end of March. That 5% or so translates to being below $100 million of capital by the end of the year. Every $50 million or so of capital that we free up, given the drag from the legacy book, is expected to be about a $0.05 quarterly improvement in EAD as it's redeployed into mortgage banking. We've also seen the legacy contribution improve by about $10 million versus the fourth quarter. So that is starting to translate into continued EAD trajectory.

That's great color. And then I wonder if you could talk about the comparative economics between the Castlelake JV and the CPP fee structure, risk retention, retained margin per loan.

They're very different asset classes, obviously, jumbo versus BPL, but conceptually very similar. Much like CPP, we're the minority of the capital in the Castlelake JV. The economics to Redwood include certainty of upfront economics at time of transfer into the JV, as well as a running asset management or loan administration strip. So the economics are conceptually similar. They do differ numerically because the underlying assets are different, but the structures are similar—both are living ecosystems where we would securitize out of the JV or sell loans as appropriate. There are nuances due to the underlying asset class differences, but the high-level economic framework is comparable.

Bose George with KBW will have our next question.

Just wanted to ask about trends at CoreVest in April. And then can you just talk about the pipeline discipline in March, the volatility there, what drove that? And is the sort of backdrop a lot better now in April?

CoreVest has the most credit sensitivity of our strategies. As things got volatile in March, it was prudent to avoid spreading locks too far in advance of macro outcomes. Much of that distribution is effectively spoken for with CPP and others, and we have somewhat baked economics in some respects. We decided to be more cautious, and I think that was the right call. Coming out of quarter end, similar to the consumer business, things have picked back up, and it's very much business as usual. CoreVest is different from Sequoia, which is more rate sensitive and less credit-sensitive, and from Aspire, which is a bit of both.

Then actually, on the marks on the Redwood Investments, since quarter end, have you seen reversals of some of those?

Yes. We've seen some reversals. Our business is different from many others in the mortgage REIT sector, but book is probably up about 1% to 1.5% based on how the portfolio has evolved. It's still early in the quarter, and the last month of the quarter can have a big impact. We're early in the second quarter, and hopefully things continue to stabilize. We're pretty happy with the credit profile of the book.

We'll move on to Doug Harter with BTIG.

Brooke, you mentioned that pipeline adjustments negatively impacted the gain on sale that you were able to achieve in the quarter. Just wondering if you could size that. And I think I just want to make sure I heard that you said that has largely reversed in April.

Yes. We saw a decent amount of TBA widening throughout March. They were about an eighth wider and our execution widened a bit relative to where we were at the beginning of the quarter. A lot of that has since reversed in April to date. So it was a portion of the delta between where we were in the fourth quarter on gain on sale. We quantified at the time that we had about 25 basis points of margin outperformance in the fourth quarter due to TBA tightening, and we probably saw at least half of that impact from TBA widening on jumbo margins in March.

Great. And obviously, with Dash's prior comments in mind that it's still early in the quarter, but all else being equal, you would see some outperformance from TBA tightening. What you've seen so far?

Yes. I think we still guide to the high end of our historical range in terms of expected margins for Sequoia in the quarter.

Yes, Doug, I would say similar for Aspire. The Aspire pipeline was definitely impacted at March 31 by spreads in the securitization market. Those are probably 20 to 30 basis points tighter today than they were at March 31, which specifically to Aspire is probably worth about $0.02 to $0.03 of EAD in terms of where that pipeline was marked at 3/31 versus where we ultimately expect to potentially execute at current market conditions. So that would be the Aspire part of the answer as well.

We'll move on to Don Fandetti with Wells Fargo.

Can you talk a little bit about the sort of ramp-up of the Castlelake JV, how quickly you could get to that sort of incremental earnings contribution that you talked about? And then is there any offset, meaning like cannibalization or less of your core mortgage banking business, or should we think of this as additive?

I'll start. The answer is definitively additive. Chris mentioned the amount of opportunities we're seeing out of both regional banks on a flow basis as new partners and also seasoned opportunities. We are excited to have this up and running. The joint venture will use warehouse lines and other operational elements that need to be set up in the second quarter. This is fully expected to be incremental volume for Sequoia.

We'll move on to Rick Shane with JPMorgan.

I actually don't think I heard the answer to Don's question, which was one of mine. Given that this is a— the constraint seems to be capital, and it sounds like you have the pipes in place, should we expect a very quick ramp to that $0.12 to $0.15 per year accretion, or how many quarters should we be thinking about here?

Yes. I think you can think of that somewhat linearly over the next four quarters as we fully ramp.

I want to understand a little bit better the G&A expense allocations this quarter. We saw Sequoia go down. There was a pretty significant increase at CoreVest on a relative basis and an increase at the corporate level. I just want to understand what's driving that and how we think about that going forward so we can model the different business lines efficiently.

No problem. At a high level, G&A was $49 million in the first quarter versus $40 million in the fourth quarter. Predominantly most of that was about $8 million associated with the reorganization costs and about $1.5 million associated with seasonally higher benefits we typically see in the first quarter. The run rate from here should be closer to fourth quarter levels. Most of the increase was within corporate and CoreVest, which is why you saw CoreVest's contribution impacted; we disclosed both GAAP contribution and EAD for CoreVest so you can see the run rate excluding one-time costs. The other change this quarter was an allocation of our $777 million of corporate debt by segment rather than having it sit in a corporate segment, so you can see the proportional impact of that interest expense for each segment. If you look at the segment returns, our mortgage banking ROE under the prior presentation would have been 23%; it's 38% on the current allocation given the impact of that capital being allocated to the segments.

There are no further questions at this time, and this does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines at this time.