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Investments

Redwood Trust enters conforming mortgage space

Gets Fannie and Freddie servicer/seller approval

graduation money
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Real Estate Investment Trust Redwood Trust (RWT) reported net income for the fourth quarter of 2013 of $25 million, or 29 cents per fully diluted share.

This compares to net income of $22 million, or 25 cents per fully diluted share, for the third quarter of 2013, and net income of $42 million, or 50 cents per fully diluted share, for the fourth quarter of 2012.

Shareholders received a 21.4% total return for 2013.

"All in all, it was a good year for Redwood and its shareholders," said Martin Hughes, the Chief Executive Officer of Redwood Trust.

They expect 2014 to be even better.

"Having recently obtained approval as a Fannie Mae and Freddie Mac seller/servicer, however, we now have the ability to acquire and distribute conforming loans to these government-sponsored enterprises, thus significantly expanding our market opportunities," Hughes found.

Redwood purchased $43 million on the loans and continues to ramp up, but the REIT is not yet revealing guidance on the underwriting standards, just yet.

The company cites the four years of work, building infrastructure and expertise to get to this point. The company said that trying to source investments through bid-in-competition is becoming more and more an unproductive exercise.

And so they expanded their views elsewhere in 2013, and expanded their operations.

Redwood entered the conforming mortgage sector in the fourth quarter of 2013, executed its strategy to invest in mortgage servicing rights, and established a new residential mortgage processing center in Denver.

More growth is expected.

"The outlook for investing in newly originated prime mortgage credit risk looks promising," the report states. "While we continue to create and retain credit securities through our Sequoia securitization program, our entry into the much larger conforming market positions us to pursue investments in conforming credit through potential risk-sharing arrangements (recourse and other types) with the GSEs."

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