Earnings Call Transcript - RWT Q3 2025

Operator, Operator

Good afternoon, and welcome to the Redwood Trust Third 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.

Kaitlyn Mauritz, Head of Investor Relations

Thank you, operator. Hello, everyone, and thank you for joining us today for Redwood's Third 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 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 is provided in our third 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 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 and will be available on our website later today. And with that, I'll turn the call over to Chris for opening remarks.

Christopher Abate, CEO

Thanks, Kate, and thank you, everyone, for joining us today. On our last earnings call, we announced the acceleration of our strategic transition to a more scalable, simplified operating model, one designed to capitalize on the transformative opportunities we see emerging for our business. We committed to proactively repositioning our balance sheet, freeing up capital from legacy assets and redeploying it into our highly profitable operating platforms. We set a target of reducing our legacy exposure from 33% of our capital at July 30 to 20% by year-end and in support of this transition, repurchased common shares. We can look back now in the third quarter as one of our most productive to date. Across our businesses, we locked or originated nearly $7 billion of loans, a new quarterly record for Redwood. This was despite an otherwise subdued housing market where industry volumes are roughly flat quarter-over-quarter. Our production included a record $5.1 billion of loans locked at Sequoia, $1.2 billion of loans locked at Aspire, which has rapidly ascended to become a market-leading non-QM loan aggregator and $521 million of loans funded at CoreVest across residential investor products. Volume drivers for the quarter included record contributions from bank sellers and a host of new distribution partners that have enabled us to turn our capital quickly and speak for more production. In step with the growing opportunity across our mortgage banking platforms, we've continued to scale them profitably, generating a core segment's EAD of $0.20 per share for the third quarter. We've now maintained mortgage banking segment ROEs above 20% for five consecutive quarters while boosting capital allocated to these businesses by 80% over that time. Importantly, this growth hasn't come at the expense of efficiency. We continue to build out an AI infrastructure and core in-house capabilities, owning our data, models, and workflows while leveraging AI-driven document intelligence to extract data at scale and accelerate turn times. We're also partnering with leading Silicon Valley tech firms to stay ahead of the curve. Our AI tools aren't just operational upgrades. We expect them to become strategic assets that will help us drive scale and manage risk as volumes reach new heights, just as they did this past quarter. On the heels of such a productive period and in recognition of the ongoing success of our existing partnership, we announced today that we have expanded our relationship with CPP Investments by extending the investment period of our joint venture and significantly increasing our corporate secured borrowing facility to $400 million from $250 million. We look forward to building on this foundational momentum with CPP Investments, and we'll now turn our attention to fundraising for our flagship Sequoia platform, where growth prospects underscore the opportunity for additional institutional capital. Turning to our legacy portfolio. We significantly reduced our capital allocated to this segment in the third quarter with it now representing 25% of our total capital. The noise of the legacy transition continues to play a part in our consolidated results, which Dash and Brooke will cover, contributing to a small decline in GAAP book value to $7.34 per share at September 30. Book value also included the effect of our $0.18 per share dividend paid to stockholders and 5 million shares of stock repurchased during the quarter. Zooming out on the broader markets, we are closely watching developments across the credit landscape and U.S. economy. Recent bankruptcies affecting clients of several large banks underscore growing pressure in certain consumer asset-backed sectors. These events may appear isolated, they echo earlier chapters of the credit cycle, reminiscent of conditions that preceded the mortgage reforms implemented after the global financial crisis. By contrast, today's residential mortgage market benefits from more rigorous underwriting standards, enhanced transparency, and stronger data integrity, principles deeply embedded in Redwood's credit culture and capital markets practices. And as we continue to see strong growth in the private label securitization market, our advocacy in Washington to make capital flows into securitization more efficient is bearing fruit. Amidst a very ambitious agenda, SEC Chair Atkins launched a concept release in late September on how to streamline non-Agency RMBS disclosures, which we think has the potential to crowd significant new capital into the sector and deepen demand for the assets we create. As we progress through the final quarter of the year, we continue to capture market share in what has been a very subdued housing market. However, with mortgage rates on the decline and with the prospect of further monetary easing ahead, we're optimistic that the housing finance sector will once again resume strong growth in the year ahead. With that, I'll turn the call over to Dash to discuss our operating results in more detail.

Dashiell Robinson, President

Thank you, Chris. The third quarter witnessed our strongest operating performance in the Company's history with ample progress in further reallocating capital to continue profitably scaling our core activities. To start, Sequoia launched $5.1 billion of loans in the third quarter, a 53% increase from Q2 and a record for the platform. Against a more muted market backdrop in which many other large players reported minimal to no production growth, our volumes with both bank and nonbank sellers grew by over 50%. We estimate that our seller network now covers approximately 80% of market share for jumbo production, up from 20% to 30% as recently as 2023. In step, our estimated jumbo market share is now 7%, up from 1% to 2% over the same time period. This deeper access must be complemented by crisp execution, a continued strength of our platform across a deepening set of products. Sequoia's third quarter activity was split between traditional 30-year fixed, hybrid ARMs, closed-end second liens, and a number of other products, underscoring our role as a one-stop provider of timely and flexible liquidity for our loan origination partners. Of note, 48% of our third quarter volumes were bank collateral and 25% was tied to seasoned loans, reflective of trends we have anticipated for some time, namely a resurgence in bank M&A activity and increased rigor within bank C-suites in evaluating the true return profile of funding long-duration mortgages with deposits, irrespective of where the final Basel endgame rules land. By design, our operating progress has been coupled with continued momentum in distribution. Year-to-date, we have distributed nearly $9 billion of collateral tops in the market across 13 securitizations and whole loan sales to a variety of partners, including $2.6 billion in the third quarter. This already eclipses full year 2024 activity and with demand for securitization still elevated, notwithstanding a modest recent backup in overall execution. We expect activity to continue at pace heading into year-end. Complementing Sequoia's growth is our emergent Aspire platform, whose expanded loan program we launched in January of this year. This business primarily focuses on loans for prime-quality borrowers who require an alternative underwriting approach, including a valuation of personal bank statements or rental income tied to the property. Aspire's $1.2 billion of third quarter locks were nearly 4x second quarter volume. The business closed the quarter with a record month, $550 million in September alone, profitably establishing a run rate we expect to build upon in the quarters ahead. The pipeline continues to reflect a focus on well-underwritten loans to high-quality borrowers with third quarter production carrying an average credit score of 749 and average LTV of 71%. Aspire's emergence as a top 5 aggregator of non-QM loans underscores both the institutional strength of our platform and sellers' growing preference to consolidate relationships as they expand their own product offerings. A key element of Aspire's business plan has already played out. Existing sellers are meaningfully broadening the range of products they deliver through the platform. As recently as 18 to 24 months ago, many of our core seller relationships were brokering out or otherwise not directly addressing the expanded credit market, which market observers estimate could be up 40% from a year ago and top $125 billion in size in 2025. The shift has been noticeable and bodes well for the expanded credit market overall and Aspire's growth prospects in particular. Sellers seeking seamless and one-stop solutions for their products can now come to Redwood for their entire suite of non-agency offerings. Concurrently, Aspire continues to make important inroads with relationships new to our platform, critical progress to grow the platform responsibly, diversifying our seller base and thereby driving reliable margins. The platform grew its loan originator partner base by nearly 50% in the third quarter with plans to continue growing further, including with several top originators in the coming quarters. While Aspire's distribution thus far has been focused on whole loan sales, we are in process to expand our distribution efforts further through securitization and joint ventures, outlets where we have had success in other channels of our business. Our residential investor loan platform, CoreVest, continued to evolve its production mix while achieving its highest quarterly volume since mid-2022. Notably, originations within CoreVest are increasingly driven by smaller balance products. Originations of residential transition loans or RTLs and DSCR comprised 40% of Q3 volume and are up 45% versus the same period last year. The smaller balance market remains a significant opportunity for CoreVest, given we have been relatively underpenetrated in a space that continues to grow and remains in demand with our capital partners. The broader origination landscape for investor loans remains robust but uneven as many platforms competitive posture, as always, ebbs and flows in step with their access to capital. Depth of distribution remains a competitive advantage for CoreVest, which has distributed nearly $1.5 billion of loans year-to-date via joint ventures and whole loan sales. Concurrent with our operating progress, we significantly reduced our exposure to legacy investments since the end of the second quarter. We sold our full reperforming loan portfolio, SLST, and approximately half of our third-party HEI investments at accretive levels versus our June 30, 2025 marks, while also resolving or transferring a significant portion of our legacy bridge loans, including selling over half the portfolio into a partnership structure capitalized with multi-year nonrecourse borrowings with preferred and residual co-investments by a third party. Pro forma for these activities, legacy investments now represent approximately 25% of total capital, down from 33% at June 30, 2025, with further reductions expected through year-end, primarily through additional resolutions in the legacy bridge portfolio. I'll now turn the call over to Brooke to discuss our financial results.

Brooke Carillo, CFO

Thank you, Dash. For the third quarter, we reported a GAAP net loss of $9.5 million or $0.08 per share compared to a loss of $100 million or $0.76 per share in the second quarter. The GAAP loss primarily reflected transaction-related expenses associated with the resolution or transfer of approximately $600 million of legacy bridge assets and an ongoing net interest income drag from our legacy investment portfolio. Book value per common share was $7.35 at September 30 compared to $7.49 at June 30, and our economic return on book value was 0.5%, including $0.06 per share of accretion from share repurchases. Total repurchase activity since June was 6.5 million shares or 5% of our outstanding common shares. On a non-GAAP basis, core segment's earnings available for distribution or core segment's EAD was $27 million or $0.20 per share, representing a 17% return on equity. This compares to $0.18 per share in the second quarter and underscores the continued earnings strength of our three core segments: the Sequoia Coya Mortgage Banking, which currently includes our Aspire platform, CoreVest Mortgage Banking and Redwood Investments. Across our operating platforms, we've increased capital allocation by more than 80% since mid-2024, including a $160 million increase since the end of the second quarter. Combined GAAP return on equity for mortgage banking segments reached 28% in Q3, marking the fifth consecutive quarter returns exceeded 20%. At Sequoia Mortgage Banking, segment net income rose to $34 million, producing a 29% ROE compared to $22 million and a 19% ROE in the prior quarter. Total locked volume reached $6.3 billion, including $5.1 billion from Sequoia and $1.2 billion from Aspire. Gain on sale margins averaged 93 basis points at the high end of our long-term target range. CoreVest Mortgage Banking generated $3.5 million of segment net income and a 30% EAD return on equity. Funding volume of $521 million, the highest since 2022, was up 14% year-over-year, supported by strong loan distribution and a shift in production mix towards term, DSCR, and smaller balance bridge products. Redwood Investments delivered segment net income of $10 million and a 10% EAD ROE. The modest decline in net income relative to the second quarter was attributable to paydowns and sales of third-party securities, partially offset by gains on retained investments as rates declined and spreads tightened. We deployed approximately $30 million of capital into assets sourced from our operating businesses and completed our fourth nonrecourse financing trade of retained investments, reducing total securities repo balances to just $28 million, which is down 85% from Q3 2024. The investment portfolio saw steady to declining delinquencies across products, including 90-plus day delinquencies on securitized bridge loans that now sit below 3% and where we continue to see healthy repayment velocity. Turning to legacy investments. The segment reported a $22 million net loss driven by the transaction costs and continued net interest margin pressure. On the $1 billion of assets sold or transferred this quarter, we recorded an approximate $0.05 EAD loss equating to negative 15% return versus returns exceeding 20% across our operating businesses, where the $150 million of capital generated from resolution activity will be redeployed. Total operating expenses decreased 3% or $1.7 million from the second quarter, driven by lower portfolio management costs. This was partially offset by higher G&A related to personnel and other expenses supporting the growth of our newer platforms. Across all operating segments, we saw continued gains in operating efficiency with notable improvements in cost per loan, reflecting the benefits of record quarter origination volumes this quarter. Turning to our balance sheet and capital structure. Our overall recourse leverage increased from 3.2x to 4x, driven by warehouse utilization tied to record mortgage banking activity. Excluding recourse leverage from our mortgage banking businesses, our combined corporate and portfolio leverage ratio declined from 1.9x to 1.6x, consistent with the ongoing repositioning of the balance sheet towards our operating platform. The 2.3x of recourse leverage associated with the warehouse lines remain well supported by highly liquid jumbo loans where we turn capital quickly. Recourse debt balances increased by $771 million from the second quarter, reflecting record funding volume of $5.1 billion and $2 billion of which has already been sold or securitized month-to-date. Subsequent to quarter end, we retired our 2025 convertible notes and as announced today, expanded our revolving credit facility by $150 million to $400 million in total capacity, extending the maturity to September of 2028. These actions strengthen our liquidity, simplify our debt profile and increase flexibility to support continued growth in our core platforms. In addition, our company-wide cost of funds declined approximately 40 basis points from the prior quarter, driven both by lower SOFR rates and narrow net spreads across our aggregate facilities. To close, Redwood is executing with focus and consistency. We are simplifying our business, scaling our core platforms and redeploying capital into higher return opportunities. The progress this quarter underscores the strength of our operating model and the earnings potential of our core segments, repositioning Redwood to deliver sustainable profitability and long-term value for our shareholders. And with that, I'll turn the call back over to the operator for questions.

Operator, Operator

Our first question comes from Bose George from KBW.

Bose George, Analyst

First, I wanted to ask about the longer-term earnings potential. You mentioned that you expect the legacy assets to be mostly rolled off by 2026. When considering the earnings potential after that, should we look at the non-GAAP core number from this quarter, which was $0.20, along with the capital that will be redeployed from the legacy piece? Is that the way to understand the earnings power moving forward?

Christopher Abate, CEO

Yes, I can address that. As the legacy segment concludes, our consolidated earnings will become much more aligned with what we are currently producing in core EAD. The $0.20 figure you mentioned exceeds the dividend. The speed of redeployment will depend on how swiftly we can wrap up the legacy segment. In the third quarter, we made significant progress, as Brooke noted, freeing up $150 million in capital for reinvestment. This capital was previously yielding a negative return on a consolidated basis, but now it can be redirected towards the mortgage banking segments, which have consistently delivered over 20% returns on equity for the past four to five quarters.

Bose George, Analyst

Okay. The $0.20 essentially removes the legacy component. However, as you reinvest that, there will be around a 20% return on that portion, correct? So that is additional to the $0.20. Is that accurate?

Brooke Carillo, CFO

Yes, that's right. We still have $400 million of capital associated with our legacy segment. So as that capital is freed up, absolutely, that will be redeployed into mortgage banking.

Bose George, Analyst

Okay. Great. And then just one other quick question. The ROE on the Redwood investments appeared to be 16% last quarter and looked like it was 10% this quarter. Is that correct? Can you discuss what drove that?

Brooke Carillo, CFO

Yes, I'm happy to. So a lot of it came from just lower net interest income from our investment portfolio. We actually saw our net interest income up about $1 million overall, and you're really starting to see kind of the benefit of our mix shift here where our capital is being redeployed from the portfolio into mortgage banking. So I think our mortgage banking net interest income was about $5 million. This was really from sales primarily in payoffs. We had about almost $450 million of payoffs in our bridge and term loans across our consolidated assets. So that was the reason for that.

Operator, Operator

Our next question comes from Rick Shane from JPMorgan.

Richard Shane, Analyst

I need to move quickly because Bose covered most of my points. Essentially, looking at the timeline for releasing capital from the legacy investment portfolio, we're expecting about $100 million per quarter to be phased out over the next four or five quarters. Regarding the three remaining core businesses, I'm interested in which of these will actually produce additional net income with more capital. For instance, is the mortgage banking sector currently limited by capital, or is it a matter of market share? Will growth depend primarily on increasing market share rather than on capital? Additionally, how should we approach the allocation of that capital among the three different businesses?

Christopher Abate, CEO

Rick, I'll start with this one. We've indicated that we've increased capital to that sector by about 80% over the past 4 or 5 quarters. This means that for every dollar we've managed to free up, we've put it to use. I believe this trend will continue in the near future. As we free up more capital, we will have efficient ways to use it in mortgage banking across all three platforms. We've had a record quarter in Sequoia, and Aspire has grown four times compared to the previous quarter. Given these growth rates, the demand for capital will persist. This is a significant reason why we have extended our relationship with CPP Investments, which has been a valuable partnership for us. Overall, we are quite optimistic about our capacity to deploy capital in our core businesses over the next year.

Richard Shane, Analyst

Got it. Okay. That's helpful, Chris. And when we think about it and over the last 2 quarters, the math, the ROE math for Sequoia is bookended 19% to 28% ROE. Even on the low end, that's obviously very attractive and supports the dividend. I am curious when you think about what drove the expansion and how we think about that going forward, is that ROE expansion a function of scale? Or is it more a function of shape of the curve and a particularly favorable environment in terms of margin in that business?

Dashiell Robinson, President

It's a great question. It's likely a combination of factors. We've always aimed to be as capital efficient as possible in that business. On average, loans are coming on and off the balance sheet within a month, and we could improve that efficiency even further. We've completed 13 securitizations so far this year, which is more than one per month, providing significant assistance. Capital efficiency plays a role, and our operating efficiency, in terms of expenses relative to revenues, is also improving and has shown notable quarter-to-quarter progress, helping our overall expense ratio. Another significant aspect is the synergies between Aspire and Sequoia. We're only starting to tap into the market share potential within Aspire, which has an annualized implied market share of about 3% in Q3, based on our volumes compared to full-year volumes. Regarding market share, both Sequoia and Aspire are positioned to increase their wallet share for different reasons. Aspire, in particular, is focused on onboarding new sellers and expanding within existing Sequoia sellers. Adding their product suite is a substantial advantage. Additionally, we discussed bank posture, noting that nearly 50% of Sequoia's collateral in the third quarter came from banks, which is significant, especially in light of current bank leadership decisions and their approaches to return on equity (ROE). This provides a long runway for growing market share, regardless of the overall market size and interest rates. When you consider all these factors together, they should continue to enhance ROEs, ideally towards the higher end of your mentioned range.

Operator, Operator

Our next question comes from Doug Harter with UBS.

Douglas Harter, Analyst

I guess sticking with returns, just how do you think about the total size of the corporate expense as you look to maximize kind of the overall ROE? And then also, how do you think about what the third-party investment ROE can be as you look to kind of allow the high mortgage banking ROE to fall to the bottom line as much as possible?

Brooke Carillo, CFO

Yes, Doug, I'm happy to address that. We believe it's crucial not to assess our expenses solely in relation to our capital base. We've discussed our three scaled yet rapidly growing operating businesses today. Considering our competition and what we offer, we find ourselves in a close race with the largest bank dealer desks as leading issuers of prime jumbo loans, all while operating with a relatively lean expense base. As Dash mentioned, Aspire has swiftly positioned itself among the top five non-QM aggregators. CoreVest continues to excel in investor and small business lending. Additionally, for several years, we've opted not to seek dilutive capital, instead prioritizing returning capital to shareholders through buybacks. While our operating expenses may appear high as a percentage of equity, we believe it's more critical to evaluate our operating leverage and productivity. We manage $20 billion in assets with approximately 300 employees. We remain very focused on our expense structure, but we also feel the real opportunity for earnings growth lies in scaling our model and addressing our legacy capital instead of downsizing our infrastructure. Therefore, our focus on third-party investments will be quite limited. We have discussed our strategic shift last quarter to concentrate on our core operating businesses. Within third-party assets, we're targeting those that align with our current cost of capital, and given our valuation, we've been able to move assets that we deemed suboptimal in that regard.

Operator, Operator

Our next question comes from Don Fandetti with Wells Fargo.

Donald Fandetti, Analyst

Yes. On the Aspire non-QM, can you talk a little bit about how you see the growth of that underlying market and whether or not the GSE footprint shrinking could potentially increase that?

Dashiell Robinson, President

Thanks, Don, for the question. I think setting aside the GSEs for just a second, I think that we see that market just organically having significant growth runway. If you look at just the employment mix in this country, there's more and more consumers who earn nontraditional income away from W-2. I think that's a very big deal. The other piece is awareness. I think particularly with more originators, particularly larger IMBs involved in non-QM originations. I think more of the eligible consumer population that can take out some of these loans is being reached, frankly, now that more originators are involved in this space. Technology, particularly AI, that's a very, very big deal in terms of managing cost to produce in the space. If you think back to when like bank statement loans really emerged 10 or 12 years ago, very manual, took quite a while for an underwriter to responsibly get through underwriting one of those loans. That's significantly shorter now. And I think we're probably just at the tip of the iceberg in a good way in terms of how those efficiencies can come to bear. There's a lot to be careful about in terms of how those underwriting processes evolve. That's something we're very focused on, but that's also a big deal. And then on DSCR, just for context, about 40% of Aspire's volume was DSCR, which is sort of smaller balance rental loans. Rentership in this country continues to grow. I think rentership was up 2%, 3% annualized last quarter when you think about just continued challenges with housing affordability, etc. And so I just think organically, Aspire's TAM is going to continue to grow for good reasons. As it relates to the GSE footprint, these are not products that they really do right now. Far be it for me to fully prognosticate around how they think about the footprint going forward. We need to be ready for anything. Obviously, an overall footprint reduction with the GSEs on loan limits would be a huge boon for all of our businesses, probably most notably Sequoia. But even away from what's going on in D.C., we just think the Aspire TAM is growing for good reasons.

Operator, Operator

Our next question comes from Steve Delaney with JMP Securities.

Steven Delaney, Analyst

I would like to ask about interest rates, which might be risky after Chairman Powell's earlier speech wasn't very effective. It's uncertain where rates are headed. Specifically, I'm interested in your securitized prime jumbo portfolio and the weighted average cost of capital of the coupons on those seasoned loans compared to the rates you're currently offering on new prime jumbo loans. Can you provide insight into that dynamic? Do you anticipate your portfolio will extend, or might there be an acceleration in terms of the conditional prepayment rate? I'm also interested in how you'll address this situation, and I have a follow-up question regarding your stance on coupon risk.

Christopher Abate, CEO

Sure, Steve, it's great to hear from you. I’ll share my thoughts. About one-third of our volume this quarter was related to refinancing. Many homeowners are not in a beneficial financial position, which is evident in our portfolio. I don’t anticipate much impact from Powell's comments today, even though the market may experience a short-term decline. Overall, we are expanding our portfolio at a pace that aligns with current interest rates. If this trend continues, and we are maintaining over one deal a month while retaining subscribers and likely interest-only loans, we are in a solid position to gradually increase our coupon. Additionally, the balance of interest-only loans in our portfolio is favorable. Therefore, I don't believe recent developments will significantly affect us because our focus is primarily on the moving business and mortgage banking, with a diminishing emphasis on portfolio investing.

Steven Delaney, Analyst

Curious, what is the current range for prime jumbo, 30-year fixed prime jumbo loans?

Christopher Abate, CEO

We were around 6.25% this week. Again, we'll see what happens on the back of Powell's remarks. Aspire is maybe 100 basis points higher than that. So the market has come down meaningfully. And again, we're starting to see more refi business in our pipeline, but that's been largely absent for the last 3 years or so. So to the extent we do see more easing, QT is officially done. So heading into 2026, if that could become a more meaningful component of our business, that just adds to the opportunity.

Steven Delaney, Analyst

And the refi pick up that you're hearing here recently, is that kind of HPA driven where people have built up some nice equity and they're looking at that. I know that's probably an aspect of the Aspire program, but do you see that even in Sequoia where the people are really coming in and they want to do a little bit of a cash out, whether it's education or whatever the issues are?

Christopher Abate, CEO

Yes. We're certainly seeing some of that. We have those products. I'd also say that just given the capacity in the origination system, people are getting calls sooner. So the old adage that you had to be 50, 75, 100 basis points in the money to refi I think the combination of capacity and technology has really shortened that up where we are seeing some homeowners refinancing perhaps 25, 35 basis points in the money. So I think that presents an opportunity for us. And again, technology is a big part of that. We talked about AI and just processing loans faster, getting approvals faster. Those are real upside opportunities for us as we build out the infrastructure.

Operator, Operator

This now concludes our question-and-answer session. I would like to turn the floor back over to Kaitlyn Mauritz for closing comments.

Kaitlyn Mauritz, Head of Investor Relations

Thank you, everyone, for joining today. We appreciate the ongoing engagement and sponsorship. If you haven't already, we encourage you to also check out our earnings materials, including the Redwood review and shareholder letter on our website. We're always here to answer questions if you have any. And thank you, and have a good rest of your evening.

Operator, Operator

Ladies and gentlemen, thank you for your participation. This concludes today's teleconference. Please disconnect your lines, and have a wonderful day.