Redwood Trust puts red ink in the rearview mirror  

The housing-finance company records big profit for 2021, after posting a major loss the prior year

Mill Valley, California-based Redwood Trust Inc. (NYSE: RWT) on Wednesday reported fourth-quarter 2021 net income of $44 million, or $0.34 per diluted share, matching the Zacks consensus EPS estimate for the quarter.

The earnings were off the company’s fourth-quarter 2020 mark of $54.3 million and down from third-quarter 2021 earnings of $88.3 million. Still, the Mill Valley-California real estate investment trust reported net income for the full year of $319.6 million, a major boost compared to a net loss of $582 million recorded in the pandemic-onset year of 2020. The REIT recorded a profit of $169 million in 2019.

“The fourth quarter of 2021 rounded out a transformative year for our Company where we grew our operating businesses, built out our product and technology offerings, and expanded our strategic investments, while delivering 25% full-year return on equity,” said Chris Abate, CEO of Redwood. “… As we look ahead in 2022, we expect the diversity and composition of our revenue streams to provide us with a notable advantage in a rising rate environment.”

Among the results highlighted in the Redwood’s earnings release for its fourth quarter ended December 31, 2021, are the following:

  • The REIT funded $733 million in business-purpose mortgage loans, including bridge loans and single-family rental (SFR) property loans, up 15% from the prior quarter. 
  • For the full year, Redwood funded $2.3 billion in business-purpose loans, up 60% from year over year.
  • In the fourth quarter, the company sold $202 million of SFR loans to a large institutional investor and completed one SFR-loan securitization valued at $304 million.
  • On the residential mortgage side for the fourth quarter of 2021, Redwood purchased $3.2 billion worth of jumbo loans and distributed $2.8 billion in jumbo — $1.5 billion through whole-loan sales and $1.3 billion through three securitization deals.

In a letter to shareholders, Redwood indicated it had distributed four regular quarterly dividends in 2021 —Q1, $0.16; Q2, $0.18; Q3, $0.21 and Q4, $0.23 — “for a total of $0.78 per share of common stock dividend distributions.”

Freddie Mac updates risk mitigation requirements for the industry due to elevated cybersecurity threats

According to a Q4 analysis by MISMO-certified wire and prevention fintech FundingShield, 42% of loans reviewed by the fintech firm had at least one risk finding, and of those loans, an average of 2.1 risk findings existed per transaction.

Presented by: FundingShield

“Our focus remains on delivering for our shareholders and executing the long-term strategic growth plans we outlined at our September 2021 Investor Day,” Abated said. 

Among those growth plans is a focus on technology investments.

“Since inception, [Redwood has] completed 15 technology venture investments, including five in the fourth quarter of 2021, that reflect the diversity of our operations and include firms that align with opportunities across our businesses,” the company’s Q4 earnings release notes.

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