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INTRODUCTION Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in five main sections: • Overview • Results of Operations –Consolidated Results of Operations –Results of Operations by Segment –Income Taxes • Liquidity and Capital Resources • Critical Accounting Estimates • Market and Other Risks Our MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and in Part II, Item 8, Financial Statements and Supplementary Data in our most recent Annual Report on Form 10-K, as well as the sections entitled “Risk Factors” in Part I, Item 1A of our most recent Annual Report on Form 10-K and Part II, Item 1A of this Quarterly Report on Form 10-Q, as well as other cautionary statements and risks described elsewhere in this report and our most recent Annual Report on Form 10-K. The discussion in this MD&A contains forward-looking statements that involve substantial risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, such as those discussed in the Cautionary Statement below. References herein to “Redwood,” the “company,” “we,” “us,” and “our” include Redwood Trust, Inc. and its consolidated subsidiaries, unless the context otherwise requires. Financial information concerning our business is set forth in this MD&A and our consolidated financial statements and notes thereto, which are included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Our website can be found at www.redwoodtrust.com. We make available, free of charge through the investor relations section of our website, access to our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934, as well as proxy statements, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange Commission (“SEC”). We also make available, free of charge, access to our charters for our Audit Committee, Compensation Committee, and Governance and Nominating Committee, our Corporate Governance Standards, and our Code of Ethics governing our directors, officers, and employees. Within the time period required by the SEC and the New York Stock Exchange, we will post on our website any amendment to the Code of Ethics and any waiver applicable to any executive officer or director of Redwood. In addition, our website includes information concerning purchases and sales of our equity securities by our executive officers and directors, and may include disclosure relating to certain non-GAAP financial measures (as defined in the SEC’s Regulation G) that we may make public orally, telephonically, by webcast, by broadcast, or by similar means from time to time. The information on our website is not part of this Quarterly Report on Form 10-Q. Our Investor Relations Department can be contacted at One Belvedere Place, Suite 300, Mill Valley, CA 94941, Attn: Investor Relations, telephone (866) 269-4976. 54 Our Business Redwood Trust, Inc., together with its subsidiaries, is a specialty finance company focused on several distinct areas of housing credit where we provide liquidity to growing segments of the U.S. housing market not well served by government programs. We deliver customized housing credit investments to a diverse mix of investors, through our best-in-class securitization platforms, whole-loan distribution activities, joint ventures and our publicly traded shares. Our goal is to provide attractive returns to shareholders through a stable and growing stream of earnings and dividends, capital appreciation, and a commitment to technological innovation that facilitates risk-minded scale. We operate through three core residential housing-focused operating platforms — Sequoia, Aspire, and CoreVest — alongside our complementary Redwood Investments portfolio which is primarily composed of assets we source through these platforms. Redwood Investments also includes RWT Horizons®, our unified technology platform spanning internal AI innovation and strategic investments across the ecosystem, which supports our efforts to develop an AI-first operating model that enables compounding operational leverage and scalable growth. These platforms reflect how we manage and organize our business and may differ from the manner in which our reportable segments are presented for financial reporting purposes. We report our results through the following reportable segments: Sequoia Mortgage Banking, Aspire Mortgage Banking, CoreVest Mortgage Banking, Redwood Investments and Legacy Investments. In the first quarter of 2026, we identified and began reporting a new reportable segment, Aspire Mortgage Banking, which was previously included within the Sequoia Mortgage Banking segment and consists of our expanded-credit residential mortgage conduit focused on acquiring and distributing residential consumer loans under expanded underwriting criteria, commonly referred to as “Expanded” or non-QM loans. These loan programs, primarily bank statement and DSCR loans, are designed for prime quality borrowers seeking alternative underwriting solutions, a segment that continues to grow within the U.S housing finance market. Since its launch in the first quarter of 2025, Aspire has scaled rapidly, including completing $914 million of loan sales to institutional buyers during 2025 and executing its first non-QM securitization in the first quarter of 2026. These activities supported improved capital turnover and reflect Aspire’s increasing contribution and distinct operating characteristics relative to our Sequoia Mortgage Banking segment. Our Aspire Mortgage Banking segment is expected to continue to grow over time as we expand our presence in this market. For a full description of our segments, see Part 1, Item 1—Business in our Annual Report on Form 10-K for the year ended December 31, 2025. For further information on our reportable segments, see Note 4 in Part 1, Item 1 - Financial Statements and Results of Operations by Segment in Part 1, Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations in this Quarterly Report on Form 10-Q. 55 Cautionary Statement This Quarterly Report on Form 10-Q and the documents incorporated by reference herein contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve numerous risks and uncertainties. Our actual results may differ from our beliefs, expectations, estimates, and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Forward-looking statements are not historical in nature and can be identified by words such as “anticipate,” “estimate,” “will,” “should,” “expect,” “believe,” “intend,” “seek,” “plan” and similar expressions or their negative forms, or by references to strategy, plans, opportunities, or intentions. These forward-looking statements are subject to risks and uncertainties, including, among other things, those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, under the caption “Risk Factors.” Other risks, uncertainties, and factors that could cause actual results to differ materially from those projected may be described from time to time in reports we file with the SEC, including reports on Forms 10-Q and 8-K. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Statements regarding the following subjects, among others, are forward-looking by their nature: (i) statements we make regarding Redwood's business strategy and strategic focus, including statements relating to our overall market position, strategy and long-term prospects (including trends driving the flow of capital in the housing finance market, our strategic initiatives designed to capitalize on those trends, our ability to attract capital to finance those initiatives, our approach to raising capital, and our ability to pay dividends in the future); (ii) statements related to our financial outlook and expectations for 2026 and future years; (iii) statements related to opportunities we see for our residential consumer and residential investor platforms, and our positioning to capture market share; (iv) statements related to our investment portfolio, including our intention to reduce our capital allocation to the Legacy Investments segment to $100 million by the end of 2026; (v) statements relating to acquiring residential mortgage loans in the future that we have identified for purchase or plan to purchase, including the amount of such loans that we locked in anticipation of purchase during the second quarter of 2026 and at June 30, 2026, expected fallout and the corresponding volume of residential mortgage loans expected to be available for purchase, total net jumbo loan exposure, and residential mortgage loans subject to forward sale commitments; (vi) statements we make regarding future dividends, including with respect to our regular quarterly dividends in 2026; and (vii) statements regarding our expectations and estimates relating to the characterization for income tax purposes of our dividend distributions, our expectations and estimates relating to tax accounting, tax liabilities and tax savings, and GAAP tax provisions, and our estimates of REIT taxable income and TRS taxable income. 56 Important factors, among others, that may affect our actual results include: •adverse economic and market conditions—including in housing, real estate, mortgage finance, and broader financial markets; •changing benchmark interest rates—and the Federal Reserve’s actions and statements; •federal, state, and local legislative and regulatory developments, and actions by governmental authorities and entities; •our ability to compete successfully; •our ability to adapt our business model and strategies; •strategic business and capital deployment decisions we make; •our use of financial leverage; •our exposure to a breach of our cybersecurity or data security; •the impact of public health events such as pandemics; •our exposure to credit risk and the timing of credit losses within our portfolio; •the concentration of the credit risks we are exposed to, including due to the structure of assets we hold and the geographical concentration of real estate underlying assets we own, and our exposure to environmental and climate-related risks; •the efficacy and expense of our efforts to manage or hedge credit risk, interest rate risk, and other financial and operational risks; •changes in credit ratings on assets we own and changes in the rating agencies’ credit rating methodologies; •changes in interest rates or mortgage prepayment rates; •investment and reinvestment risk; •asset performance, interest rate volatility, changes in credit spreads, and changes in liquidity in the market for real estate securities and loans; •our ability to finance the acquisition of real estate-related assets with short-term debt; •the ability of counterparties to satisfy their obligations to us; •we may enter into new lines of business, acquire other companies, or engage in other new strategic initiatives; •changes in the demand from investors for residential consumer and residential investor mortgages and investments, and our ability to distribute residential consumer and residential investor loans through our whole-loan distribution channels; •our involvement in loan origination and securitization transactions, the profitability of those transactions, and the risks we are exposed to in engaging in loan origination or securitization transactions; •foreclosure activity may expose us to risks associated with real estate ownership and operation; •exposure to claims and litigation, including litigation arising from loan origination and securitization transactions; •acquisitions or new business initiatives may fail to improve our business and could expose us to new or increased risks; •whether we have sufficient liquid assets to meet short-term needs; •changes in our investment, financing, and hedging strategies and new risks we may be exposed to if we expand or reorganize; •our ability to successfully retain or attract key personnel; •we are dependent on third-party information systems and third-party service providers; •our exposure to a disruption of our or a third party’s technology infrastructure and systems; •our failure to maintain appropriate internal controls over financial reporting and disclosure controls and procedures; •our risk management efforts may not be effective; •we could be harmed by misconduct or fraud; •inadvertent errors, system failures or cybersecurity incidents could disrupt our business; •the impact on our reputation that could result from our actions or omissions or from those of others; •accounting rules related to certain of our transactions and asset valuations are highly complex and involve significant judgment and assumptions; •the future realization of our deferred tax assets is uncertain, and the amount of valuation allowance we may apply against our deferred tax assets may change materially in future periods; •the impact of changes to U.S. federal income tax laws on the U.S. housing market, mortgage finance markets, and our business; •regulatory risk related to HEI, including recharacterization or regulation as mortgage loans; •our failure to comply with applicable laws and regulation, including our ability to obtain or maintain required governmental licenses; •our ability to maintain our status as a REIT for tax purposes; •our ability to raise, manage, and deploy capital; •limitations imposed on our business due to our REIT status and our status as exempt from registration under the Investment Company Act of 1940; •provisions in our charter and bylaws and provisions of Maryland law may limit a change in control or deter a takeover; •the ability to take action against our directors and officers is limited by our charter and bylaws and provisions of Maryland law and we may indemnify them against certain losses; •our stock may experience losses, volatility, and poor liquidity, and we may reduce our dividends; •a limited number of institutional shareholders own a significant percentage of our common stock; •future sales of our stock or other securities by us or our officers and directors may have adverse consequences for investors; •the change-in-control-related conversion rights of our preferred stock may be detrimental to holders of our common stock; •dividend distributions and the timing and character of such dividends may change; •payment of dividends in common stock could place downward pressure on market price; and 57 •other factors not yet identified, including broad market fluctuations. This Quarterly Report on Form 10-Q may contain statistics and other data that in some cases have been obtained from or compiled from information made available by servicers and other third-party service providers. 58 OVERVIEW Business Update Our second quarter 2026 results reflect continued execution against Redwood’s strategy to scale our capital-efficient mortgage banking platforms supported by diversified products, distribution channels, and our joint venture partnerships. During the quarter, combined production across Sequoia, Aspire, and CoreVest reached $8.0 billion for the second consecutive quarter, representing the second-highest quarterly production level in our Company’s history and nearly double the volume generated in the second quarter of 2025. The operating environment remained characterized by constrained housing affordability, limited housing supply, elevated mortgage rates, and continued market volatility. We adopted a more measured operating posture during April and May before activity accelerated as conditions stabilized in June, when more than 40% of quarterly production was generated. Despite this backdrop, our mortgage banking platforms continued to gain market share while maintaining margins within targeted ranges. Our financial results reflected continued strength across our operating platforms, partially offset by the performance of our Legacy Investments portfolio. Redwood reported a GAAP net loss of $(0.03) per share, compared to a GAAP net loss of $(0.07) per share in the first quarter of 2026, while our mortgage banking platforms generated $40 million of combined GAAP net income. GAAP book value per share declined to $6.90 at June 30, 2026 from $7.12 at March 31, 2026, driven principally by loan resolutions, mark-to-market changes, and ongoing carrying costs within Legacy Investments. Our Sequoia platform locked $5.6 billion of loans during the second quarter, compared to $6.5 billion in the first quarter and $3.3 billion in the second quarter of 2025, representing the second-highest quarterly lock volume in Sequoia’s history. New products represented 30% of quarterly lock volume, including hybrid adjustable-rate loans, medical professional loans and closed-end second lien loans. We also began rolling out our HELOC program during the quarter. Sequoia distributed approximately $6.5 billion1 of loans through securitizations and whole loan sales while cost per loan declined to 17 basis points from 18 basis points in the first quarter. Aspire generated record lock volume of approximately $2.1 billion during the second quarter, increasing 31% from $1.6 billion in the first quarter. Aspire’s active seller network expanded to more than 150 loan sellers at June 30, 2026. Aspire distributed approximately $1.3 billion of loans through securitizations and whole loan sales, including two transactions issued through its SPIRE securitization platform, completed with a third-party co-sponsor that retained the requisite risk retention securities and subordinate securities. CoreVest funded $410 million of loans during the quarter, compared to $432 million in the first quarter, as elevated interest rates impacted demand within the term loan pipeline and housing legislation uncertainty slowed activity in the sector. CoreVest distributed approximately $375 million of newly originated loans through securitizations, whole loan sales, and joint venture transfers. During the quarter, CoreVest completed a $268 million CAFL term loan securitization through its joint venture, our first broadly syndicated term loan securitization since 2022, with over 20 discrete investors participating. Across our platforms, distribution remained a key driver of capital efficiency and liquidity. Total mortgage banking distributions were approximately $8.2 billion during the quarter. Late in the period, we priced three securitizations during a single week - one for each of Sequoia, Aspire, and CoreVest - for the first time in Redwood’s history, bringing total securitizations during the first half of 2026 to more than 20 across our platforms. We continued to advance our capital-efficient strategy through institutional partnerships. In the second quarter, we began distributing loans to our Sequoia joint venture and, early in the third quarter, executed definitive documentation for a strategic joint venture to support Aspire's continued growth. Together with our relationship with our CoreVest joint venture, these partnerships provide more than $1.2 billion of dedicated strategic capital across our enterprise. Capital allocated to our Legacy Investments portfolio continued to decline as we advanced the accelerated wind-down of our non-core exposures. At June 30, 2026, capital allocated to Legacy Investments represented less than 12% of total capital, down from 15% at March 31, 2026. The reduction of capital allocated to our Legacy Investments is intended to improve balance sheet flexibility, and redeploy capital toward our core operating businesses and other accretive uses. We also continued to invest in technology and operational infrastructure through RWT Horizons. At June 30, 2026, AI-enabled automation initiatives were generating an increasing amount of time savings, as compared to the first quarter of 2026. These initiatives supported improvements in due diligence, loan-level pricing, underwriting support, and guideline analysis. Looking ahead, housing market activity continues to be influenced by affordability constraints, elevated interest rates, geopolitical developments, and evolving housing and bank regulatory policy. These dynamics reinforce the importance of flexible, capital-efficient platforms with broad products, seller relationships, and distribution capabilities. 1 Includes securitizations of previously retained investments from Sequoia securitizations as well as securitizations that were issued and called within the reporting period 59 RESULTS OF OPERATIONS Within this Results of Operations section, in accordance with Item 303(c)(2)(ii) of Regulation S-K, we have elected to discuss any material changes in our results of operations by comparing our quarter ended June 30, 2026 to the immediate preceding quarter ended March 31, 2026. We believe that providing a sequential discussion of our results of operations offers highly relevant information for investors and stakeholders to understand and analyze our business activities. Additionally, we generally continue to address material changes in our results of operations for the most recent fiscal year-to-date period, compared to the corresponding year-to-date period of the preceding fiscal year, pursuant to Item 303(c)(2)(i) of Regulation S-K. Unless otherwise specified, references in this section to increases or decreases during the "three month periods" refer to the change in results for the second quarter of 2026, compared to the first quarter of 2026. 60 Consolidated Results of Operations The following table presents the components of our net (loss) income for the three and six months ended June 30, 2026, the immediate preceding quarter ended March 31, 2026, and year-to-date period ended June 30, 2025. Table 1 – Net (Loss) Income Three Months Ended Six Months Ended (In Thousands, except per Share Data) June 30, 2026 March 31, 2026 Change June 30, 2026 June 30, 2025 Change Net Interest Income From: Sequoia Mortgage Banking $ 27,274 $ 24,969 $ 2,305 $ 52,243 $ 25,209 $ 27,034 Aspire Mortgage Banking 3,561 3,642 (81) 7,203 (252) 7,455 CoreVest Mortgage Banking 1,282 2,109 (827) 3,391 2,280 1,111 Redwood Investments 10,170 12,442 (2,272) 22,612 33,988 (11,376) Legacy Investments (10,403) (8,710) (1,693) (19,113) (20,130) 1,017 Corporate/other 187 265 (78) 452 681 (229) Net Interest Income 32,071 34,717 (2,646) 66,788 41,776 25,012 Non-Interest Income Sequoia mortgage banking activities, net 12,944 22,051 (9,107) 34,995 46,232 (11,237) Aspire mortgage banking activities, net 9,199 2,684 6,515 11,883 315 11,568 CoreVest mortgage banking activities, net 9,928 7,229 2,699 17,157 27,363 (10,206) Total Mortgage Banking activities, net 32,071 31,964 107 64,035 73,910 (9,875) Redwood Investments Investment fair value changes, net (10,171) (15,443) 5,272 (25,614) (5,375) (20,239) Legacy Investments Investment fair value changes, net (12,314) (7,491) (4,823) (19,805) (84,305) 64,500 Mortgage Banking, Corporate/Other Investment fair value changes, net (38) (265) 227 (303) (212) (91) Total Investment fair value changes, net (22,523) (23,199) 676 (45,722) (89,892) 44,170 HEI income (loss), net 2,798 7,109 (4,311) 9,907 (2,733) 12,640 Servicing income 2,648 8,021 (5,373) 10,669 5,015 5,654 Fee income 2,960 2,886 74 5,846 4,560 1,286 Other income, net 5,985 2,437 3,548 8,422 1,902 6,520 Realized gains, net — — — — 1,207 (1,207) Total non-interest income (loss), net 23,939 29,218 (5,279) 53,157 (6,031) 59,188 General and administrative expenses (38,198) (49,358) 11,160 (87,556) (74,454) (13,102) Portfolio management costs (7,030) (8,729) 1,699 (15,759) (16,519) 760 Loan acquisition costs (5,990) (6,729) 739 (12,719) (8,349) (4,370) Other expenses (4,747) (7,125) 2,378 (11,872) (7,944) (3,928) Total Operating expenses (55,965) (71,941) 15,976 (127,906) (107,266) (20,640) Net (Loss) Income Before Income Taxes 45 (8,006) 8,051 (7,961) (71,521) 63,560 (Provision) benefit for income taxes (1,145) 2,503 (3,648) 1,358 (10,824) 12,182 Net (Loss) (1,100) (5,503) 4,403 (6,603) (82,345) 75,742 Dividends on preferred stock (1,758) (1,750) (8) (3,508) (3,507) (1) Net (Loss) Income (Related) Available to Common Stockholders $ (2,858) $ (7,253) $ 4,395 $ (10,111) $ (85,852) $ 75,741 61 Three Months Ended June 30, 2026 Compared to Three Months Ended March 31, 2026 Net loss for the three months ended June 30, 2026 totaled $3 million, compared with a net loss of $7 million for the three months ended March 31, 2026. The improvement was primarily driven by lower operating expenses, including the non-recurrence of severance and organizational restructuring costs recognized in the first quarter of 2026, and stronger results from Aspire Mortgage Banking, CoreVest Mortgage Banking and Redwood Investments in the current quarter. These impacts were partially offset by higher losses within our Legacy Investments segment, as well as lower net interest income, HEI income, net and servicing income, net. Net interest income decreased by $3 million to $32 million during the second quarter. Sequoia contributed an increase of approximately $2 million, due to capital deployment in the first quarter. These increases were offset by an increase in net interest expense for Legacy Investments of $2 million, driven by lower interest income resulting from paydowns and interest accrual reversals on resolved loans. CoreVest net interest income declined by approximately $1 million, reflecting modestly lower funding volumes. Mortgage banking activities remained strong and were relatively consistent at $32 million, as increased revenues from Aspire and CoreVest offset lower revenues from Sequoia due to lower volume. Total mortgage banking production declined modestly to $8.0 billion from the record $8.5 billion in the prior quarter, representing the second-highest quarterly production in the Company’s history and the second consecutive quarter of $8 billion or more in volume. Production reflected a more cautious operating posture during April and May amid heightened market volatility, followed by stronger momentum in June, when more than 40% of quarterly volume was locked. At Sequoia, mortgage banking activities, net decreased by $9 million as lock volumes declined by 15% to $5.6 billion and gain on sale margins modestly declined to 92 basis points from 96 basis points in the prior quarter. These impacts were partially offset by continued strong distribution activity and a reduction in cost per loan from 18 to 17 basis points. Aspire mortgage banking activities, net increased by $7 million, driven by a 31% increase in lock volumes to a record $2.1 billion and an increase in gain on sale margins to 101 basis points from 73 basis points in the prior quarter, together with continued securitization and whole loan sale activity. CoreVest mortgage banking activities, net increased by $3 million, reflecting improved mortgage banking margins and execution economics, including the completion of a term loan securitization through our CoreVest joint venture, despite a 5% decline in funding volumes to $410 million. Investment fair value changes, net remained relatively consistent, reflecting $23 million of negative fair value changes in both the first and second quarters of 2026. Within Redwood Investments, negative fair value changes improved by approximately $5 million, primarily reflecting valuation improvements on retained investments as market conditions partially recovered late in the quarter. Together with strong performance from RWT Horizons and lower expenses, these changes contributed to Redwood Investments generating net income of approximately $1 million, compared with a net loss of $8 million in the prior quarter. This improvement was offset by an approximately $5 million increase in negative fair value changes within Legacy Investments, primarily associated with legacy bridge loan resolutions and mark-to-market changes. Legacy Investments net loss increased to $23 million from $13 million in the prior quarter, also reflecting lower HEI income, market to market changes primarily on REO and ongoing carry costs on the remaining portfolio. Notwithstanding these results, capital allocated to Legacy Investments declined by $47 million to $195 million, or 12% of total invested capital, as the Company continued to execute dispositions and resolutions, including the resolution of $16 million of bridge loans that were 90 or more days delinquent. Operating expenses decreased to $56 million for the second quarter of 2026, compared with $72 million for the first quarter of 2026. The decrease was primarily driven by an $11 million decline in general and administrative expenses, reflecting the non-recurrence of approximately $7 million of severance and organizational restructuring costs recognized in the prior quarter. Portfolio management costs, loan acquisition costs and other expenses decreased by approximately $5 million in aggregate, primarily reflecting lower mortgage banking production and distribution volumes during the second quarter, which resulted in lower due diligence, custody, valuation and other transaction-related costs. Overall, second quarter results reflect resilient performance across our core Mortgage Banking platforms, with improved results from Aspire and CoreVest offsetting lower Sequoia activity. Results also reflect improved performance within Redwood Investments and lower operating expenses, partially offset by continued negative fair value changes and carry-related losses within Legacy Investments. The continued reduction of capital allocated to Legacy Investments and expansion of our joint venture and distribution channels further support our strategic repositioning toward scalable, capital-efficient operating platforms. See further discussion of these results in the Segment Results section in Part I, Item 2 of this Quarterly Report on Form 10-Q. 62 Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025 Net loss for the six months ended June 30, 2026 totaled $10 million, compared with net loss of $86 million for the six months ended June 30, 2025. The improvement was primarily driven by a $44 million improvement in investment fair value changes, net, a $25 million increase in net interest income, higher HEI, servicing and other income, and a lower provision for income taxes. These impacts were partially offset by $21 million of higher operating expenses and a $10 million decline in mortgage banking activities, net. Net interest income increased by $25 million to $67 million during the six months ended June 30, 2026, driven by a combined increase of approximately $36 million across our Mortgage Banking platforms. Sequoia contributed $27 million of the increase, primarily reflecting significantly higher loan purchase volumes, increased average inventory balances and continued capital deployment into residential securities used to hedge the pipeline. Aspire net interest income increased by approximately $7 million as the platform continued to scale. These increases were partially offset by an $11 million decline in net interest income from Redwood Investments, reflecting portfolio repositioning and paydowns. Mortgage banking production nearly doubled to $16.5 billion during the six months ended June 30, 2026 from $8.6 billion in the prior-year period, while total distributions increased to $16.8 billion from $6.8 billion. Despite this growth, mortgage banking activities, net decreased by $10 million to $64 million, as lower gain-on-sale margins at Sequoia and lower margins and funding volumes at CoreVest offset the benefit of higher production and the increased contribution from Aspire. Investment fair value changes, net improved by $44 million, resulting in a $46 million net loss during the six months ended June 30, 2026, compared with a $90 million net loss in the prior-year period. The improvement primarily reflected a $64 million reduction in negative fair value changes within Legacy Investments, as the first half of 2025 included significant adverse fair value adjustments on legacy unsecuritized bridge and term loans associated with anticipated resolutions and credit deterioration. This improvement was partially offset by higher negative fair value changes within Redwood Investments during 2026, reflecting market-driven valuation changes and portfolio seasoning, while underlying asset performance remained generally stable across most of the portfolio. HEI income, net improved by $13 million, from a $3 million loss in the prior-year period to $10 million of income during the six months ended June 30, 2026. The prior-year period included fair value losses associated with the sale of a portfolio of third-party-originated HEI (which was completed during the third quarter of 2025), while the current-period results reflected positive income from the remaining HEI portfolios. Servicing income and other income increased by approximately $12 million in aggregate, reflecting higher servicing-related earnings and positive contributions from RWT Horizons and other portfolio activity. Operating expenses increased by $21 million to $128 million during the six months ended June 30, 2026. General and administrative expenses increased by $13 million, primarily reflecting approximately $7 million of severance and organizational restructuring costs recognized in the first quarter of 2026, as well as higher fixed and variable compensation tied to volume growth across our Mortgage Banking platforms. Loan acquisition costs and other expenses increased by approximately $8 million in aggregate, reflecting higher mortgage banking production and investment activity. Overall, results for the first half of 2026 reflect substantially higher production and net interest income across our Mortgage Banking platforms, particularly Sequoia and Aspire, together with a significant reduction in negative fair value changes within Legacy Investments. These improvements were partially offset by lower margins within Sequoia and CoreVest and higher operating expenses associated with increased production and the organizational restructuring completed in the first quarter. Results also reflect continued execution on our strategic repositioning. See further discussion of these results in the Segment Results section in Part I, Item 2 of this Quarterly Report on Form 10-Q 63 Consolidated Market Valuation Gains and Losses, Net The following table presents the net market valuation gains and losses recorded in each line item of our consolidated statements of income for the three and six months ended June 30, 2026, the immediate preceding quarter ended March 31, 2026 and year-to-date period ended June 30, 2025. Table 2 – Consolidated Market Valuation Gains and Losses, Net Three Months Ended Six Months Ended (In Thousands) June 30, 2026 March 31, 2026 June 30, 2026 June 30, 2025 Mortgage Banking Activities, Net Residential consumer loans held-for-sale $ (894) $ 16,289 $ 15,395 $ 6,920 Residential consumer LPCs 42,042 1,997 44,039 38,774 Residential investor term loans held-for-sale 2,657 (1,575) 1,082 10,375 Residential investor term loan IRLCs (30) (91) (121) 1,115 Residential investor bridge loans 836 364 1,200 4,605 Trading securities (1) 8,027 37,195 45,222 (67,972) Risk management derivatives, net (30,533) (31,382) (61,915) 65,977 Total mortgage banking activities, net (2) 22,105 22,797 44,902 59,794 Investment Fair Value Changes, Net Residential investor term loans held-for-sale (1,371) 113 (1,258) (9,531) Residential investor bridge loans held-for-investment (1,234) 3,338 2,104 (80,837) Real estate securities (10,640) 10,601 (39) (5,224) Servicer advance investments (1,625) 6,903 5,278 (3,178) Excess MSRs 281 2,020 2,301 (2,334) Net investments in Sequoia entities (3) 39,450 10,892 50,342 (30,664) Net investments in SLST (re-performing loans) entities (3) — — — 28,946 Net investments in CAFL entities (3) (5,262) (14,540) (19,802) (3,161) Other investments (4) (5,798) (4,253) (10,051) (21,531) Risk management derivatives, net (36,324) (38,274) (74,598) 37,615 Total investment fair value changes, net (22,523) (23,200) (45,723) (89,899) HEI income, Net Unsecuritized HEI 3,325 5,109 8,434 (7,170) Net investments in HEI securitization entities (3) (548) 1,893 1,345 4,160 Total HEI income, net 2,777 7,002 9,779 (3,010) Servicing income, net MSRs (863) 5,057 4,194 250 Total Servicing income, net (5) (863) 5,057 4,194 250 Total Market Valuation Gains, Net $ 1,496 $ 11,656 $ 13,152 $ (32,865) (1)Represents fair value changes on trading securities that are being used along with risk management derivatives to manage the market risks associated with our Sequoia Mortgage Banking platform. (2)Mortgage banking activities, net presented above does not include fee income from loan originations or acquisitions, provisions for repurchases, or other expenses that are components of Mortgage banking activities, net presented on our consolidated statements of (loss) income, as these amounts do not represent market valuation changes. (3)Includes changes in fair value of the securitized loans held-for-investment, securitized HEI, REO and the ABS issued at the entities, which, netted together, represent the change in value of our investments at the consolidated VIEs accounted for under the CFE election. (4)Other investments includes changes in the fair value of REO assets. (5)Servicing income, net excludes net MSR fee income or provision for repurchases, as these amounts do not represent market valuation adjustments. 64 Results of Operations by Segment We operate our business across five reportable segments: Sequoia Mortgage Banking, Aspire Mortgage Banking, CoreVest Mortgage Banking, Redwood Investments and Legacy Investments. For additional information on our segments, refer to Note 4 of our Notes to Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. During the first quarter ended March 31, 2026, we began discussing our Mortgage Banking platforms ("Mortgage Banking") on a combined basis to reflect the manner in which management evaluates the performance of its mortgage origination and distribution activities. Our Mortgage Banking platforms consist of the Sequoia Mortgage Banking, Aspire Mortgage Banking and CoreVest Mortgage Banking segments. Revenue for these platforms are primarily driven by loan production volumes, gain-on-sale margins, and execution across distribution channels. While each segment is reported separately, a combined discussion provides useful context for understanding the key drivers of changes in results of operations, with additional segment-level detail provided in the sections following. During the quarter ended March 31, 2026, we also began allocating corporate financing costs, comprised of interest expense on our promissory notes, trust preferred securities, convertible debt, and senior unsecured notes, as well as our preferred stock dividend expense and corporate capital to our operating or reportable segments for informational purposes. Corporate and other activities that are not directly allocated to the Company’s operating segments are included in Corporate/Other. For comparability purposes, prior period segment information has been adjusted to reflect this allocation. The following table presents the segment contribution from our operations, reconciled to our consolidated net income for the three and six months ended June 30, 2026, the immediate preceding quarter March 31, 2026, and year-to-date period June 30, 2025. For comparability purposes, prior period segment information has been adjusted to reflect the changes discussed above. Table 3 – Segment Results Summary Three Months Ended Six Months Ended (In Thousands) June 30, 2026 March 31, 2026 Change June 30, 2026 June 30, 2025 Change Segment Contribution from: Sequoia $ 31,601 $ 37,831 $ (6,230) $ 69,432 $ 40,279 $ 29,153 Aspire 7,308 2,268 5,040 9,576 (2,149) 11,725 CoreVest 1,167 (3,377) 4,544 (2,210) 7,429 (9,639) Total Mortgage Banking 40,076 36,722 3,354 76,798 45,559 31,239 Redwood Investments 743 (8,000) 8,743 (7,257) 26,084 (33,341) Legacy Investments (23,320) (13,060) (10,260) (36,380) (119,961) 83,581 Corporate/Other (20,357) (22,915) 2,558 (43,272) (37,534) (5,738) Net (Loss) Income $ (2,858) $ (7,253) $ 4,395 $ (10,111) $ (85,852) $ 75,741 The sections that follow provide further detail on our business segments and their results of operations for the three and six months ended June 30, 2026, the immediate preceding quarter ended March 31, 2026, and year-to-date period ended June 30, 2025. Corporate/Other Net expenses from Corporate/Other decreased by $3 million to $20 million for the three months ended June 30, 2026 compared to the three months ended March 31, 2026. The decrease primarily reflected lower compensation and corporate costs. Net expenses from Corporate/Other increased by $6 million to $43 million, compared to the six months ended June 30, 2025. The increase primarily reflects higher compensation and related operating costs associated with increased headcount supporting growth of the Mortgage Banking platforms. 65 Mortgage Banking Platforms Our Mortgage Banking platforms, consisting of the Sequoia Mortgage Banking, Aspire Mortgage Banking and CoreVest Mortgage Banking segments, generate income from the origination or acquisition of loans and the subsequent sale or securitization of those loans. Sequoia Mortgage Banking consists of a mortgage loan conduit that acquires residential consumer loans from third-party originators for subsequent sale to whole loan buyers, securitization through our SEMT® (Sequoia) private-label securitization program, or transfer into our Redwood Investments portfolio or into joint ventures. We recently launched a strategic joint venture to acquire prime jumbo residential mortgage loans sourced through our Sequoia platform and provide additional capital to support loan acquisition and securitization activities. Subordinate securities that we retain from our Sequoia securitizations (many of which we consolidate for GAAP purposes) are transferred to and held in our Redwood Investments segment. We typically acquire residential consumer mortgages and the related mortgage servicing rights on a flow or bulk basis from our extensive network of loan sellers. Refer to the Sequoia Mortgage Banking Segment below for further discussion and additional details. In the first quarter of 2025, we launched an additional mortgage loan conduit under our Aspire brand that acquires mortgage loans under expanded underwriting criteria, which we also refer to as “Expanded” or “non-QM.” These loan programs, primarily bank statement and DSCR loans, are designed for prime-quality borrowers seeking alternative underwriting solutions, a segment that continues to grow within the U.S. housing market. In the first quarter of 2026, due to the continued scaling and distinct operating characteristics of this platform, we began reporting Aspire as a separate reportable segment, Aspire Mortgage Banking. Refer to the Aspire Mortgage Banking Segment below for further discussion and additional details. CoreVest Mortgage Banking consists of a platform that originates residential investor loans, including term and bridge loans, for subsequent securitization, whole loan sale, transfer into our Redwood Investments portfolio, or contribution to joint ventures. Term loans are secured by stabilized residential rental properties and include larger-balance loans and smaller-balance DSCR loans, which are underwritten primarily based on the property’s debt service coverage ratio. Bridge loans generally finance transitional properties or value-add strategies. CoreVest loans are typically distributed through our CAFL® private-label securitization program or through whole loan sales. CoreVest also administers two joint ventures that invest in residential investor loans originated by the platform, for which we earn ongoing fees and may earn performance-based fees. Our inventory of loans is managed with a combination of our capital and loan warehouse facilities. All of these facilities are non-marginable (i.e., not subject to margin calls based solely on the lender's determination, in its discretion, of the market value of the underlying collateral that is non-delinquent). The main sources of mortgage banking income across our segments are net interest income from our inventory of loans held-for-sale (including interest expense on secured financings and allocated corporate financing costs), securities utilized for interest rate hedging purposes, as well as mortgage banking activities, net which includes origination and other fees on loans, mark-to-market adjustments on loans from the time loans are originated or purchased to when they are sold, securitized or transferred into our Redwood Investments portfolio, as well as loan purchase commitments, interest rate lock commitments and the hedges used to manage risks associated with these activities. See Note 5 of our Notes to Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further detail on the composition of mortgage banking activities. Fee income associated with our administration of joint ventures and other loan-related administrative functions is also included in this segment. Direct operating expenses and tax expenses associated with these activities are also included in each mortgage banking segment. 66 The following table presents key earnings for our Mortgage Banking platforms during the three and six months ended June 30, 2026, the immediate preceding quarter March 31, 2026, and year-to-date period through June 30, 2025. Table 4 – Mortgage Banking Platforms Earnings Summary Three Months Ended Six Months Ended (In Thousands) June 30, 2026 March 31, 2026 Change June 30, 2026 June 30, 2025 Change Mortgage banking income $ 66,494 $ 65,835 $ 659 132,329 $ 109,405 $ 22,924 Operating expenses (24,640) (31,242) 6,602 (55,882) (47,120) (8,762) Benefit from (provision for) income taxes (1,000) 2,964 (3,964) 1,964 (15,624) 17,588 Dividends on preferred stock (778) (835) 57 (1,613) (1,102) (511) Mortgage Banking Contribution $ 40,076 $ 36,722 $ 3,354 $ 76,798 $ 45,559 $ 31,239 Operating expenses presented in the table above include general and administrative expenses and loan acquisition costs. Activity for the Mortgage Banking platforms performed within our taxable REIT subsidiary is subject to federal and state income taxes. The provision for income taxes or income tax benefit for the periods presented above reflects GAAP income or loss from these operations at our TRS during the respective periods. Three Months Ended June 30, 2026 Compared to Three Months Ended March 31, 2026 The $3 million increase in Mortgage Banking contribution during the three months ended June 30, 2026, as compared to the three months ended March 31, 2026, was primarily driven by a $7 million decrease in operating expenses and a $1 million increase in mortgage banking income. These improvements were partially offset by a $4 million change in income taxes, reflecting a shift from an income tax benefit in the prior quarter to an income tax provision in the current quarter. Mortgage Banking production volumes decreased to $8.0 billion during the second quarter of 2026, compared to $8.5 billion in the first quarter of 2026, but remained the second-highest level of quarterly production in the Company’s history. The decrease primarily reflected a more cautious operating posture during April and May in response to heightened market volatility and elevated interest rates. Production momentum improved meaningfully as market conditions stabilized in June, when more than 40% of quarterly production occurred. Lower Sequoia lock volume and CoreVest funding volume were partially offset by continued growth at Aspire, where lock volume increased 31% to a record $2.1 billion. Despite the decrease in production volumes, mortgage banking income increased modestly compared to the prior quarter, as contributions from Aspire (volume and margin) offset the impact of lower production of Sequoia. Gain-on-sale margins remained within targeted ranges across the Mortgage Banking platforms despite elevated market volatility. In particular, Aspire benefited from improved gain-on-sale margins and higher production, while Sequoia margins remained at the higher end of the Company’s historical targeted range of 75 to 100 basis points. Distribution activity remained strong during the quarter, supported by continued execution across securitization, whole loan sale and joint venture channels. Mortgage Banking securitization distributions totaled approximately $6.5 billion1 2 during the second quarter, slightly lower than the $6.7 billion2 in the first quarter, and included securitizations across each of the Sequoia, Aspire and CoreVest platforms. In the second quarter, the Company also began distributing Sequoia loans into its joint venture following its launch in April, further diversifying distribution capacity and supporting capital-efficient growth. Operating expenses decreased to $25 million during the second quarter of 2026 from $31 million in the first quarter of 2026. The decrease primarily reflected severance and organizational restructuring costs incurred in the first quarter within the CoreVest segment of approximately $5 million, as well as lower loan acquisition costs. The change from a tax benefit to a tax provision from the prior quarter was primarily the result of TRS GAAP income earned during three months ended June 30, 2026, as compared to a TRS GAAP loss during the three months ended March 31, 2026. Overall, Mortgage Banking results for the current quarter reflect resilient mortgage banking income and strong distribution activity despite lower production volumes and a volatile market environment. Results also benefited from lower operating expenses and continued platform diversification, including growth at Aspire and expanded joint venture distribution. 1 Includes $268 million of UPB of joint venture securitizations. 2 Includes securitizations of previously retained investments from Sequoia securitizations as well as securitizations that were issued and called within the reporting period 67 Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025 The $31 million increase in Mortgage Banking contribution during the six months ended June 30, 2026, as compared to the six months ended June 30, 2025, was primarily driven by a $23 million increase in mortgage banking income and an $18 million change in income taxes, partially offset by a $9 million increase in operating expenses. Mortgage Banking contribution increased to $77 million during the current-year period from $46 million during the prior-year period. Mortgage Banking production volumes increased 92% to $16.5 billion during the six months ended June 30, 2026, compared to approximately $8.6 billion during the prior-year period. The increase was primarily driven by continued growth at Sequoia, where loan locks increased 68% to $12.1 billion, and the continued scaling of Aspire, where loan locks increased to $3.6 billion from $441 million during its initial ramp-up period in 2025. Growth across these platforms reflected expansion of the Company’s loan seller network, increased activity from bank and independent mortgage bank counterparties, broader product offerings, and increasing demand for expanded credit products. These increases were partially offset by lower CoreVest funding volume, reflecting a more cautious approach to loan production in response to market volatility, and evolving demand from real estate investors, amid persistently higher interest rates. Mortgage banking income increased to $132 million during the six months ended June 30, 2026, compared to $109 million during the prior-year period. The increase was primarily attributable to higher production volumes and strong capital markets execution at Sequoia and Aspire, partially offset by lower funding volumes at CoreVest and normalization in Sequoia gain-on-sale margins from elevated prior-year levels. Sequoia’s gain-on-sale margin decreased to 94 basis points from 128 basis points in the prior-year period, but remained within or near the Company’s long-term targeted range during much of the current-year period. Distribution activity also increased significantly, with $16.8 billion1 of loans distributed through securitizations, whole loan sales and joint ventures during the six months ended June 30, 2026, compared to $6.8 billion during the prior-year period. The increase was primarily driven by higher Sequoia distributions and the continued development of Aspire’s distribution capabilities. CoreVest distributions remained relatively consistent at approximately $1.1 billion. Increased distribution activity supported capital recycling and enabled the platforms to accommodate higher production volumes while maintaining diversified access to capital markets. Operating expenses increased to $56 million during the six months ended June 30, 2026, compared to $47 million during the prior-year period, primarily reflecting higher variable and production-related expenses and continued investment in personnel, infrastructure and capital markets capabilities as Sequoia and Aspire scaled. The six-month period also included severance and organizational restructuring costs of approximately $5 million within the CoreVest segment. Operating efficiency improved across the platforms, with Sequoia cost per loan declining to 17 basis points from 20 basis points and CoreVest net cost to originate declining to 87 basis points from 107 basis points. The change from a tax provision to a tax benefit for the six-month periods ended June 30, 2026 and 2025, respectively, was primarily the result of TRS GAAP income earned at this segment in 2025 compared to a TRS GAAP loss in 2026. The favorable change in income taxes reflected a $2 million benefit during the current-year period compared to a $16 million provision during the prior-year period, primarily attributable to changes in taxable income generated within the Company’s taxable REIT subsidiaries in the prior period. Overall, the current-year results reflect substantially higher production and distribution activity, continued platform diversification and improved operating efficiency, partially offset by normalization in gain-on-sale margins and lower CoreVest funding activity. 1 Includes securitizations of previously retained investments from Sequoia securitizations as well as securitizations that were issued and called within the reporting period 68 Sequoia Mortgage Banking Segment The following table presents key earnings and operating metrics for our Sequoia Mortgage Banking segment during the three and six months ended June 30, 2026, the immediate preceding quarter ended March 31, 2026, and year-to-date period through June 30, 2025. Table 5 – Sequoia Mortgage Banking Earnings Summary Three Months Ended Six Months Ended (In Thousands) June 30, 2026 March 31, 2026 Change June 30, 2026 June 30, 2025 Change Mortgage banking income $ 40,218 $ 47,020 $ (6,802) 87,238 $ 71,441 $ 15,797 Operating expenses (8,232) (9,890) 1,658 (18,122) (13,771) (4,351) Benefit from (provision for) income taxes 134 1,245 (1,111) 1,379 (16,502) 17,881 Dividends on preferred stock (519) (544) 25 (1,063) (889) (174) Segment Contribution $ 31,601 $ 37,831 $ (6,230) $ 69,432 $ 40,279 $ 29,153 The following table summarizes certain operating metrics related to our portfolio of loans included in the Sequoia Mortgage Banking segment during the three and six months ended June 30, 2026, the immediate preceding quarter ended March 31, 2026, and year-to-date period through June 30, 2025. Table 6 – Sequoia Mortgage Banking Operating Metrics Three Months Ended Six Months Ended (In Thousands) June 30, 2026 March 31, 2026 June 30, 2026 June 30, 2025 Loan locks $ 5,560,628 $ 6,518,133 $ 12,078,761 $ 7,171,313 LPCs entered into (loan locks, adjusted for expected fallout) 4,977,718 5,498,214 10,475,931 6,511,786 Acquisitions 4,932,316 5,651,030 10,583,346 5,047,065 Number of loans acquired(1) 4,991 6,658 11,649 5,537 Weighted average contractual interest rate 6.29% 6.39% 6.34% 5.99% Distributions(2) $ 6,524,635 $ 6,879,827 $ 13,404,462 $ 5,706,062 Sales (UPB) 1,190,706 914,884 2,105,590 1,218,762 Securitizations (UPB)(2) 5,333,929 5,964,943 11,298,872 4,487,300 Cost per loan(3) 17 bps 18 bps 17 bps 20 bps Gain-on-sale margin(4) 92 bps 96 bps 94 bps 128 bps (1)Number of loans presented in units. (2)Includes securitizations of previously retained investments from Sequoia securitizations as well as securitizations that were issued and called within the reporting period. (3)Cost per loan for the Sequoia Mortgage Banking segment is calculated as operating expenses of this segment divided by loan purchase commitments of this segment. (4)Gain on Sale margins reflect net revenue divided by loan purchase commitments. 69 Three Months Ended June 30, 2026 Compared to Three Months Ended March 31, 2026 Sequoia Mortgage Banking segment contribution was $32 million for the three months ended June 30, 2026, compared to $38 million for the three months ended March 31, 2026. The decrease primarily reflected lower production volumes and a modest decline in gain-on-sale margins, partially offset by continued operating efficiency improvements. Loan lock volumes totaled $5.6 billion, a 15% decrease from $6.5 billion during the prior quarter, reflecting a deliberately more measured operating posture during April and May amid heightened market volatility and elevated interest rates. Market conditions improved during June, with more than 40% of quarterly lock volume generated during the final month of the quarter. Newer products represented 30% of quarterly lock volume, which includes hybrid adjustable-rate loans, medical professional loans and closed-end second lien loans, and demonstrated continued product diversification despite a subdued refinancing environment. Mortgage banking income decreased to $40 million from $47 million during the prior quarter, primarily reflecting lower loan purchase commitments and a modest decline in gain-on-sale margins to 92 basis points from 96 basis points. Despite the sequential decline, margins remained near the upper end of the Company's long-term target range of 75 to 100 basis points, notwithstanding elevated market volatility. Operating efficiency modestly improved, with cost per loan declining to 17 basis points from 18 basis points, reflecting lower operating expenses, including reduced variable compensation, together with continued operating leverage. Distribution activity remained strong, with $6.5 billion1 of loans distributed during the quarter, including $5.3 billion1 through securitizations and $1.2 billion through whole loan sales. During the quarter, our Sequoia loan securitizations included transactions backed by a diversified mix of fixed-rate, hybrid adjustable-rate, investor, and medical professional loans. Sequoia also began distributing loans through its joint venture, further expanding its distribution channels and supporting continued capital-efficient loan distribution and balance sheet management. The tax benefit decreased compared to the prior quarter, primarily due to lower GAAP losses at our TRS during the second quarter of 2026, compared to the first quarter of 2026. Capital allocated to this segment decreased to $300 million at June 30, 2026, compared to $500 million at March 31, 2026, primarily reflecting the reallocation of capital to retained investments generated from Sequoia securitization activity during the quarter, as well as continued improvements in capital efficiency driven by active loan sales and expanded distribution channels. Loan inventory continues to be financed through a combination of corporate capital and consumer loan warehouse facilities. Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025 Sequoia Mortgage Banking segment contribution increased by $29 million to $69 million during the six months ended June 30, 2026, compared to $40 million in the same period of 2025. The increase was primarily driven by higher mortgage banking income, reflecting increased loan lock, purchase and distribution volumes and improved capital markets execution. Total loan locks increased 68% to $12.1 billion during the six months ended June 30, 2026, compared to $7.2 billion during the prior-year period. Loan purchase commitments increased to $10.6 billion from $6.5 billion, reflecting growth across flow and bulk production channels and increased adoption of newer loan products. Distribution activity also increased significantly, with $13.4 billion of loans distributed during the six-month period compared to $5.7 billion during the same period of 2025, supported by continued investor demand across the Company’s securitization and whole loan distribution channels. These improvements were partially offset by the normalization of gain-on-sale margins from elevated prior-year levels. Segment contribution also benefited from a shift from an income tax provision in the prior-year period to an income tax benefit in the current-year period and was primarily the result of TRS GAAP income earned at this segment in 2025 compared to a TRS GAAP loss in this segment in 2026. 1 Includes securitizations of previously retained investments from Sequoia securitizations as well as securitizations that were issued and called within the reporting period 70 Aspire Mortgage Banking Segment The following table presents key earnings for our Aspire Mortgage Banking segment during the three and six months ended June 30, 2026, the immediate preceding quarter ended March 31, 2026, and year-to-date period through June 30, 2025. Table 7 – Aspire Mortgage Banking Earnings Summary Three Months Ended Six Months Ended (In Thousands) June 30, 2026 March 31, 2026 Change June 30, 2026 June 30, 2025 Change Mortgage banking income $ 12,790 $ 6,326 $ 6,464 $ 19,116 $ 63 $ 19,053 Operating expenses (3,893) (3,512) (381) (7,405) (2,118) (5,287) (Provision for) income taxes (1,419) (342) (1,077) (1,761) (49) (1,712) Preferred dividends (170) (204) 34 (374) (45) (329) Segment Contribution (Loss) $ 7,308 $ 2,268 $ 5,040 $ 9,576 $ (2,149) $ 11,725 The following table summarizes certain operating metrics related to our portfolio of loans included in the Aspire Mortgage Banking segment during the three and six months ended June 30, 2026, the immediate preceding quarter ended March 31, 2026, and year-to-date period through June 30, 2025. Table 8 – Aspire Mortgage Banking Operating Metrics Three Months Ended Six Months Ended (In Thousands) June 30, 2026 March 31, 2026 June 30, 2026 June 30, 2025 Loan locks $ 2,052,576 $ 1,562,381 $ 3,614,958 $ 441,205 LPCs entered into (loan locks, adjusted for expected fallout) 1,450,086 1,156,679 2,606,765 396,938 Acquisitions 1,297,960 1,069,615 2,367,575 180,829 Number of loans acquired(1) 2,417 1,769 4,186 270 Weighted average contractual interest rate 6.79% 6.87% 6.83% 7.49% Distributions $ 1,312,258 $ 1,046,941 $ 2,359,199 $ 42,989 Sales (UPB) 392,753 655,664 1,048,417 42,989 Securitizations (UPB) 919,505 391,277 1,310,782 — Cost per loan(2) 27 bps 30 bps 28 bps N/A Gain-on-sale margin(3) 101 bps 73 bps 88 bps N/A (1)Number of loans presented in units. (2)Cost per loan for the Aspire Mortgage Banking segment is calculated as operating expenses of this segment divided by loan purchase commitments of this segment. (3)Gain on Sale margins reflect net revenue divided by loan purchase commitments. Three Months Ended June 30, 2026 Compared to Three Months Ended March 31, 2026 Aspire Mortgage Banking is presented as a separate reportable segment beginning in the first quarter of 2026, reflecting the continued growth and distinct operating characteristics of our expanded-credit residential platform. This change had no impact on the consolidated financial statements and all prior period amounts were conformed to the current presentation. During the three months ended June 30, 2026, Aspire generated segment contribution of $7 million compared to $2 million during the prior quarter, driven primarily by continued production growth and improved mortgage banking margins. Loan locks increased 31% quarter over quarter to a record $2.1 billion, reflecting continued expansion of our correspondent platform and strong demand for our expanded credit products. Existing loan sellers continued to account for a significant portion of production during the quarter, demonstrating increasing engagement across the platform while the active seller network expanded to over 150 loan sellers. Mortgage banking income increased to $13 million from $6 million in the prior quarter, reflecting record lock volumes together with higher gain-on-sale margins, which improved to 101 basis points from 73 basis points. Margin expansion reflected improved 71 securitization execution, tighter credit spreads and favorable hedge performance during the quarter. Operating expenses increased modestly as the platform continued investing in growth; however, operating efficiency improved, as cost per loan declined to 27 basis points from 30 basis points, reflecting higher production volumes and operating leverage. Distribution activity increased to $1.3 billion during the second quarter of 2026, consisting of $920 million of securitizations and $393 million of whole loan sales, as the platform continued to scale alongside production growth. During the quarter, Aspire completed two non-QM securitizations under its SPIRE shelf, demonstrating continued capital markets execution and providing an efficient distribution channel for loan production. Subsequent to quarter-end, Aspire executed definitive documentation for its strategic joint venture, providing an additional long-term distribution channel to support the platform's continued growth. Capital allocated to this segment was $200 million at June 30, 2026, consistent with March 31, 2026, reflecting the platform's continued focus on scaling production while maintaining disciplined capital deployment. Loan inventory is financed through consumer loan warehouse facilities and corporate capital. Subsequent to June 30, 2026, we executed definitive documentation for a strategic joint venture with an institutional investment manager, which joint venture will acquire expanded credit loans sourced through the Aspire Mortgage Banking platform. Redwood will administer the assets held by the joint venture and earn loan administration and other related fees pursuant to the terms of the joint venture agreements. Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025 Aspire was launched in January 2025 and, as a result, activity during the six months ended June 30, 2025 reflects the platform's initial ramp-up period, including limited production volumes, early onboarding of loan sellers and the initial development of its capital markets distribution capabilities. Accordingly, results for the six months ended June 30, 2025 are not directly comparable to the current year-to-date period. During the six months ended June 30, 2026, Aspire generated segment contribution of $10 million compared to a segment loss of $2 million during the prior-year period. Mortgage banking income increased to $19 million from less than $1 million in the prior-year period, driven by continued growth in production volumes and improved mortgage banking execution. Loan locks increased to $3.6 billion during the six months ended June 30, 2026 compared to $441 million during the prior-year period, reflecting continued expansion of the platform's correspondent network, increased participation from existing loan sellers and growing investor demand for non-QM products. During the first half of 2026, Aspire also expanded its distribution capabilities through three securitizations under its SPIRE shelf and continued development of additional long-term capital partnerships to support future growth. 72 CoreVest Mortgage Banking Segment The following table presents an earnings summary for our CoreVest Mortgage Banking segment for the three and six months ended June 30, 2026, the immediate preceding quarter March 31, 2026, and year-to-date period June 30, 2025. Table 9 – CoreVest Mortgage Banking Earnings Summary Three Months Ended Six Months Ended (In Thousands) June 30, 2026 March 31, 2026 Change June 30, 2026 June 30, 2025 Change Mortgage banking income $ 13,486 $ 12,489 $ 997 $ 25,975 $ 37,901 $ (11,926) Operating expenses (12,515) (17,840) 5,325 (30,355) (31,231) 876 Benefit from income taxes 285 2,061 (1,776) 2,346 927 1,419 Preferred Dividends (89) (87) (2) (176) (168) (8) Segment Contribution (Loss) $ 1,167 $ (3,377) $ 4,544 $ (2,210) $ 7,429 $ (9,639) The following table summarizes certain operating metrics related to our portfolio of loans included in the CoreVest Mortgage Banking segment during the three and six months ended June 30, 2026, to the immediate preceding quarter March 31, 2026, and year-to-date period through June 30, 2025. Table 10 – CoreVest Mortgage Banking Operating Metrics Three Months Ended Six Months Ended (In Thousands) June 30, 2026 March 31, 2026 June 30, 2026 June 30, 2025 Term loan fundings $ 186,557 $ 167,590 $ 354,146 $ 416,762 Bridge loan fundings 223,660 264,832 488,492 573,819 Total loan fundings 410,217 432,422 842,638 990,581 Term loan sales 60,806 129,299 190,106 185,372 Bridge loan sales 51,062 104,272 155,334 111,200 Transfer to joint ventures 253,135 387,030 640,165 581,641 Transfer to securitizations 9,865 73,489 83,354 126,613 Total Loan distributions 374,868 694,090 1,068,959 1,004,826 Securitizations (UPB) (1) 268,162 230,241 498,403 433,034 Net cost to originate (2) 96 bps 79 bps 87 bps 107 bps (1) For the three and six months ended June 30, 2026 includes joint venture securitizations of $268 million of UPB (2)Net Cost to Originate is calculated as operating expenses, adjusted for organizational restructuring charges associated with employee severance and related transition expenses, less origination fees and other fees attributable to this segment, divided by this segment’s funding volume. 73 Three Months Ended June 30, 2026 Compared to Three Months Ended March 31, 2026 CoreVest Mortgage Banking segment contribution increased by $5 million in the three months ended June 30, 2026 compared to the three months ended March 31, 2026, with segment income of $1 million in the current quarter compared with segment net loss of $3 million in the prior quarter. The increase in segment contribution was primarily attributable to lower operating expenses, reflecting the nonrecurrence of $5 million of severance and organizational restructuring costs incurred in the prior-quarter period. This improvement was partially offset by a $2 million decrease in income tax benefit in the current quarter. CoreVest funded $410 million of loans during the second quarter of 2026, compared to $432 million in the first quarter of 2026. The modest decline in funding volume reflected a more measured operating posture amid elevated interest rates and market volatility, which primarily affected demand for term loans. Despite the softer funding environment, the platform maintained pipeline quality and a diversified funding mix, with bridge loans representing approximately 55% of quarterly fundings and term loans representing approximately 45% of quarterly fundings. Activity also continued across smaller-balance lending products, RTL loans and DSCR loans. Distribution activity during the second quarter of 2026 totaled $375 million, with loans distributed through a combination of whole loan sales, securitizations and transfers to joint ventures, compared to $694 million in the first quarter of 2026. The sequential decline primarily reflected the timing of distribution activity, as the first quarter included a CAFL securitization backed by a mix of seasoned performing and non-performing loans and real estate owned. During the second quarter of 2026, one of our joint ventures completed a $268 million term loan securitization, representing the platform's first broadly syndicated term loan securitization since 2022 and supporting continued capital recycling and distribution execution. Investor demand for the transaction was strong, reflecting continued access to diversified distribution channels. Capital allocated to this segment was $128 million at June 30, 2026, compared to $142 million at March 31, 2026. The platform continues to utilize joint venture structures and non-recourse financing arrangements to support loan inventory and facilitate capital-efficient growth. Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025 CoreVest Mortgage Banking segment contribution decreased by $10 million during the six months ended June 30, 2026, as compared to the six months ended June 30, 2025, with a segment loss of $2 million in the current year to date period compared to segment net income of $7 million in the prior year period. The decrease in segment contribution was primarily attributable a $12 million decline in mortgage banking income, reflecting lower funding volumes in the first half of 2026. CoreVest funded $843 million of loans during the six months ended June 30, 2026, compared to $991 million during the six months ended June 30, 2025. The decline in funding volume reflected a more cautious approach to loan production amid elevated interest rates and market volatility, which reduced demand from residential real estate investors, particularly for term loan products. Despite lower origination volumes, the platform continued to maintain a diversified funding mix across bridge and term loans while utilizing multiple distribution channels, including whole loan sales, joint venture transfers and securitizations, to efficiently recycle capital. 74 Redwood Investments Segment This segment consists of investments comprising retained operating investments sourced through our Mortgage Banking securitizations and third-party securities, some of which we consolidate for GAAP purposes. We directly finance our holdings of real estate securities with a combination of recourse, non-marginable term debt financing; non-recourse, non-marginable re-securitization debt; and recourse, marginable securities repurchase financing. In the second quarter of 2025, as a part of the Company's accelerated shift towards a scalable and simplified operating model, the non-core legacy assets historically held in this segment were formally reclassified to the newly established Legacy Investments segment. This reclassification did not impact our consolidated financial results but served to better align Redwood’s disclosure with its strategic focus. All relevant prior period amounts and disclosures have been conformed to reflect the current segment structure. We primarily target investments with sensitivity to housing credit risk, sourced through our operating platforms where we control the underwriting and collateral review. The Redwood Investments portfolio is increasingly focused on retained interests from the Company’s own securitizations and other internally sourced investment vehicles, as we continue to scale our mortgage banking platforms and allocate capital to investments generated through those activities. This shift has resulted in a portfolio increasingly concentrated in investments sourced through our Mortgage Banking platforms and is consistent with our strategy to enhance capital efficiency and align our investment portfolio with our core operating businesses. This segment’s main sources of income are net interest income (including interest expense on secured financings and allocated corporate financing costs) and other income from investments, changes in fair value of investments and associated hedges, and realized gains and losses upon the sale of securities. Direct operating expenses and tax provisions associated with these activities are also included in this segment. The following table presents an earnings summary for our Redwood Investments segment for the three and six months ended June 30, 2026, the immediate preceding quarter ended March 31, 2026, and the year-to-date period ended June 30, 2025. Table 11 – Redwood Investments Earnings Summary Three Months Ended Six Months Ended (In Thousands) June 30, 2026 March 31, 2026 Change June 30, 2026 June 30, 2025 Change Net interest income $ 10,170 $ 12,442 $ (2,272) $ 22,612 $ 33,988 $ (11,376) Investment fair value changes, net (10,171) (15,443) 5,272 (25,614) (5,375) (20,239) HEI income, net (1) 493 575 (82) 1,068 181 887 Servicing income 2,618 8,021 (5,403) 10,639 5,015 5,624 Fee income, net 453 192 261 645 554 91 Other income, net 5,193 898 4,295 6,091 764 5,327 Realized gains, net — — — — 1,207 (1,207) Operating expenses (6,632) (12,654) 6,022 (19,286) (11,070) (8,216) (Provision for) Benefit from income taxes (623) (1,373) 750 (1,996) 1,871 (3,867) Preferred Dividends (758) (658) (100) (1,416) (1,051) (365) Segment (Loss) Contribution $ 743 $ (8,000) $ 8,743 $ (7,257) $ 26,084 $ (33,341) (1) Income from HEI that were originated through our Aspire HEI platform. Third-party originated HEI are included in our Legacy Investments segment. Investment fair value changes, net is primarily comprised of the change in fair value (both realized and unrealized) of our portfolio investments accounted for under the fair value option and interest rate hedges associated with these investments. See Table 2 in the Consolidated Results of Operations in Part I, Item 2 of this Quarterly Report on Form 10-Q for further detail on the composition of investment fair value changes (the difference in amounts in the table above and in Table 2 relates to fair value changes for investments held at corporate/other). We hold certain of our investments, primarily our MSRs, at our TRS. Activity at this segment performed within our TRS is subject to federal and state income taxes. The benefit from income taxes was primarily due to GAAP losses generated by this segment’s operations at our TRS and our provision for income taxes at this segment is primarily driven by the amount of income earned from portfolio assets at our TRS. 75 Three Months Ended June 30, 2026 Compared to Three Months Ended March 31, 2026 The $9 million increase in segment contribution for the three months ended June 30, 2026, compared to the three months ended March 31, 2026, was primarily driven by lower investment fair value losses, an increase in Other income, net as a result of increased earnings from equity method investments, and lower Operating expenses. Operating expenses during the first quarter of 2026 included $2 million of nonrecurring organizational restructuring charges as well as $3 million of higher Other expenses related to income allocated to our seasoned servicing investment co-investor, as compared to the three-month period ending June 30, 2026. These increases to segment contribution for the three months ended June 30, 2026 were offset by $6 million lower market valuation gains on our MSRs, as compared to the first quarter of 2026. Net interest income decreased modestly by $2 million, primarily due to increased paydowns in our portfolio of securitized residential investor bridge loans during the three months ended June 30, 2026, as compared to the three months ended March 31, 2026. Overall, results for the quarter were primarily impacted by market-driven valuation changes and portfolio seasoning, while underlying asset performance improved across most of the portfolio. Delinquencies in CAFL Bridge Securities decreased, with 90 day+ delinquency rates decreasing to 6.3% at June 30, 2026, compared to 8.1% at March 31, 2026. The decrease in 90+ day delinquencies for CAFL Bridge Securities was primarily driven by resolutions on seasoned delinquent loans originated in 2021 and 2022. Sequoia Securities and CAFL Term Securities 90+ day delinquency balances were 0.2% and 8.7% of total unpaid principal balances at June 30, 2026, respectively, compared to 0.2% and 9.8% at March 31, 2026. As we continue to expand our focus on our operating platforms, we intend to allocate capital accordingly. In line with this strategy, during the second quarter, apart from capital contributions to our joint ventures, most of our investment capital was deployed to support our Mortgage Banking platforms, primarily through securities retained from Sequoia securitizations. For Aspire and CoreVest, we also allocated capital to securities retained from securitizations sponsored by the related joint ventures. We continue to optimize financing through non-recourse structures to enhance capital efficiency and align our investment portfolio with our Mortgage Banking platforms. Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025 The $33 million decrease in segment contribution for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025 is primarily due to the decline in Investment fair value changes, net of $20 million driven by market-related valuation changes on portfolio investments and associated hedges resulting from interest rate volatility and spread movements during the six-month periods. Additionally, Operating expenses for the six-month period ending June 30, 2026 were $8 million higher compared to the same period in 2025 due to $2 million of severance and organizational realignment charges incurred during the first quarter of 2026, as well as higher portfolio management costs and $3 million of higher Other expenses related to income allocated to seasoned servicing investment co-investor due to improved investment performance in 2026. 76 Redwood Investments Detail The following table presents a balance sheet summary for our Redwood Investments segment as of June 30, 2026 and March 31, 2026. Table 12 – Redwood Investments Balance Sheet Summary (In Thousands) June 30, 2026 March 31, 2026 Change Retained Operating Investments Residential consumer Sequoia securities $ 276,745 $ 177,546 $ 99,199 Residential consumer securities at consolidated Sequoia entities (1) 1,054,169 660,861 393,308 Residential investor securities at consolidated Securitization Term entities (2) 313,826 315,654 (1,828) Consolidated securitized residential investor CAFL bridge loans, restricted cash, REO and other CAFL bridge assets and liabilities 1,043,806 1,057,220 (13,414) HEI (3) 19,193 18,706 487 Other Investments (4) 42,368 55,243 (12,875) Total Retained Operating Investments 2,750,107 2,285,230 464,877 Third-Party Securities Portfolio Residential securities 4,780 4,920 (140) Servicing investments (5) 105,556 112,277 (6,721) Other strategic and servicing investments 59,317 52,994 6,323 Total Third-Party Securities Portfolio 169,653 170,191 (538) Total Redwood Investments Segment Economic Assets $ 2,919,760 $ 2,455,421 $ 464,339 Impact of consolidation and other assets 21,402,263 19,448,064 1,954,199 Total Redwood Investments Segment Assets - GAAP $ 24,322,023 $ 21,903,485 $ 2,418,538 (1) Represents our retained economic investment in securities issued by consolidated Sequoia securitization VIEs. For GAAP purposes, we consolidated $20.70 billion of loans and $19.48 billion of ABS issued associated with these investments at June 30, 2026. We consolidated $18.24 billion of loans and $17.24 billion of ABS issued associated with these investments at March 31, 2026. At June 30, 2026 and March 31, 2026, excludes $173 million and $343 million, respectively, of retained Sequoia securities that were used as hedges for our Sequoia Mortgage Banking segment. (2) Represents our retained economic investments in securities issued by consolidated CAFL Term securitization VIEs. For GAAP purposes, we consolidated $1.70 billion of loans and $1.42 billion of ABS issued associated with these investments at June 30, 2026. We consolidated $1.82 billion of loans and $1.53 billion of ABS issued associated with these investments at March 31, 2026. (3) At June 30, 2026 and March 31, 2026 represents HEI originated and owned by Redwood. (4) Other investments at both June 30, 2026 and March 31, 2026 includes net risk share investments of $0.6 million, representing $1.1 million of restricted cash and other assets, net of other liabilities of $0.6 million. Also includes mortgage servicing rights of $42 million and $40 million at June 30, 2026 and March 31, 2026, respectively. (5) Represents our economic investment in consolidated Servicing Investment variable interest entities. At June 30, 2026, for GAAP purposes, we consolidated $244 million of servicing investments and $128 million of non-recourse short-term securitization debt, as well as other assets and liabilities for these entities. At March 31, 2026, for GAAP purposes, we consolidated $257 million of servicing investments and $135 million of non-recourse securitization debt, as well as other assets and liabilities for these entities. The size of our Redwood Investments portfolio on an economic basis increased during the three months ended June 30, 2026 primarily due to the retention of residential consumer securities from our Sequoia securitizations, as well as the transfer of Sequoia securities that had been used as hedges from our Sequoia Mortgage Banking segment to our Redwood Investments portfolio. 77 The following table summarizes the credit characteristics of Sequoia securities and CAFL term securities at June 30, 2026 and March 31, 2026. This table includes both our securities held on balance sheet and our economic interest in securities we own in securitizations we consolidate in accordance with GAAP. Table 13 – Credit Statistics (1) June 30, 2026 Sequoia Securities (2) CAFL Term Securities (Dollars in Thousands) Market value $ 1,330,914 $ 313,826 Notional value $ 23,156,315 $ 1,833,383 Average FICO (at origination) 773 NA Gross weighted average coupon 5.5 % 5.3 % Current 3-month prepayment rate 18 % 8 % 90+ days delinquency (as a % of UPB) (3)(4) 0.2 % 8.7 % March 31, 2026 Sequoia Securities (2) CAFL Term Securities (Dollars in Thousands) Market value $ 838,407 $ 315,654 Notional value $ 21,235,883 $ 1,945,306 Average FICO (at origination) 772 NA Gross weighted average coupon 5.4 % 5.3 % 3-month prepayment rate 16 % 8 % 90+ days delinquency (as a % of UPB) (3)(4) 0.2 % 9.8 % (1)Underlying loan performance information provided in this table is generally reported on a one-month lag. Accordingly, data as of June 30, 2026 reflects June 2026 reports with a loan performance date of May 2026, and data as of March 31, 2026 reflects March 2026 reports with a loan performance date of February 2026. The methodology for calculating weighted average values for securities investments presented in the tables above, including delinquency rates, is based on notional balances of loans collateralizing each of our securities investments. (2)Sequoia Securities presented in this table include subordinate and interest only or certificated servicing securities. (3)Delinquency percentages at underlying securitizations are calculated using unpaid principal balance ("UPB"). Aggregate delinquency amounts by security type are weighted using the notional value of the loans collateralizing each of our securities investments. (4)Includes loans over 90 days delinquent and all loans in foreclosure (regardless of delinquency status). 78 Legacy Investments Segment The Legacy Investments segment primarily consists of assets no longer aligned with our core strategic objectives, including legacy unsecuritized bridge and term loans and other non-core legacy assets, that are in the active process of sale, runoff, or other disposition as part of an accelerated strategic repositioning of our business model. These assets were previously included within the Redwood Investments segment. We finance our assets in this segment with a combination of recourse and non-recourse, non-marginable warehouse facilities, and a portion of a secured, revolving financing facility. All relevant prior period amounts and disclosures have been conformed to reflect the current segment structure. At June 30, 2026, 54% of capital in this portfolio was related to legacy bridge loans (inclusive of certain unsecuritized term loans) and 46% was related to legacy HEI. During the first quarter of 2026, we continued to execute on our plan to accelerate the wind down of the Legacy Investments portfolio to support capital redeployment and a reduction in portfolio exposure. Adjusted for activity to date in the third quarter, Legacy Investments is now estimated to represent less than 10% of total capital, down from 15% at March 31, 2026. The continued wind-down of our Legacy Investments portfolio is expected to continue to free up investment capital as we progress with further disposition activity. Asset sales and other accretive financings have enabled the repayment of higher cost secured debt and more efficient utilization of flexible funding sources, including our secured revolving financing facility with one of our joint venture partners. We remain focused on further reducing the legacy portfolio in 2026 while prioritizing capital recovery through both outright sales and partnership structures that recycle capital while preserving upside where we believe it makes economic sense. This segment’s earnings are primarily driven by net interest income (including interest expense on secured financings and allocated corporate financing costs) and other income from investments, changes in the fair value of investments and associated hedges, and realized gains and losses upon the sale or disposition of assets. Direct operating expenses and tax provisions associated with these activities are also included in this segment. The following table presents an earnings summary for our Legacy Investments segment for the three and six months ended June 30, 2026, the immediate preceding quarter ended March 31, 2026, and the year-to-date period ended June 30, 2025. Table 14 – Legacy Investments Earnings Summary Three Months Ended Six Months Ended (In Thousands) June 30, 2026 March 31, 2026 Change June 30, 2026 June 30, 2025 Change Net interest (expense) income $ (10,403) $ (8,710) $ (1,693) $ (19,113) $ (20,130) $ 1,017 Investment fair value changes, net (12,314) (7,491) (4,823) (19,805) (84,305) 64,500 HEI income (loss), net 2,305 6,534 (4,229) 8,839 (2,914) 11,753 Fee (loss) income, net 11 (133) 144 (122) (1,855) 1,733 Other income (loss), net 974 950 24 1,924 — 1,924 Operating expenses (3,999) (4,563) 564 (8,562) (11,938) 3,376 Benefit from (provision for) income taxes 328 610 (282) 938 2,535 (1,597) Dividends on preferred stock (222) (257) 35 (479) (1,354) 875 Segment (Loss) Contribution $ (23,320) $ (13,060) $ (10,260) $ (36,380) $ (119,961) $ 83,581 Investment fair value changes, net is primarily comprised of the change in fair value (both realized and unrealized) of our loans and portfolio investments accounted for under the fair value option and related interest rate hedges. See Table 2 in the Consolidated Results of Operations in Part I, Item 2 of this Quarterly Report on Form 10-Q for further detail on the composition of investment fair value changes (the difference in amounts in the table above and in Table 2 relates to fair value changes for investments held at corporate/other). We hold certain of our investments at our TRS. Activity of this segment that is performed within our TRS is subject to federal and state income taxes. The benefit from income taxes was primarily due to GAAP losses generated by this segment’s operations at our TRS and our provision for income taxes at this segment is primarily driven by the amount of income earned from portfolio assets at our TRS. 79 Three Months Ended June 30, 2026 Compared to Three Months Ended March 31, 2026 Legacy Investments reported a segment loss of $23 million for the second quarter of 2026, compared to a loss of $13 million in the first quarter of 2026. The decline in segment contribution was primarily driven by increased net interest expense, increased investment fair value losses (including realized losses related to asset dispositions), and lower HEI income, net. The increase in net interest loss primarily reflected higher interest expense in the current quarter as we further optimized capital within the segment via non-marginable and non-recourse financing. Investment fair value changes, net declined by $5 million compared to the prior quarter. The decrease was primarily driven by changes in the estimated fair value of our AFS real estate security, reflecting the impact of realized resolution outcomes during the second quarter of 2026 and updated discounted cash flow expectations for loans within the Legacy Trust. The decrease also reflected higher REO impairments compared to the prior quarter. Results for the quarter continue to reflect the active wind-down of the Legacy Investments portfolio, including asset sales, structured transactions, and financing optimization. Capital allocated to Legacy Investments declined by $47 million or 19%, reflecting continued execution on our strategy to reduce legacy exposure and redeploy capital to Mortgage Banking platforms to simplify the balance sheet and enhance returns. While subject to market conditions and execution timing, we are targeting reducing the capital allocated to Legacy Investments segment down to below $100 million by the end of 2026. As we execute on this reallocation strategy, we believe there is an opportunity for consolidated returns to improve. Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025 Legacy Investments reported a segment loss of $36 million for the six months ended June 30, 2026, compared to a loss of $120 million for the six months ended June 30, 2025, primarily reflecting our progress in resolving legacy bridge exposures and other non-core legacy assets during the six month periods. Legacy Investments Detail and Activity The following table presents a balance sheet summary for our Legacy Investments segment as of June 30, 2026 and March 31, 2026. Table 15 – Legacy Investments Balance Sheet Summary (In Thousands) June 30, 2026 March 31, 2026 Change Legacy Unsecuritized Bridge Loans $ 175,391 $ 190,058 $ (14,667) Legacy Unsecuritized Term Loans 31,853 31,899 (46) Legacy Securitized Bridge Loans 56,808 53,848 2,960 Legacy Securitized Term Loans 9,416 12,832 (3,416) Home Equity Investments (1) 153,085 153,715 (630) AFS Real Estate Security (2) 181,990 188,636 (6,646) Strategic Investments 14,626 15,138 (512) REO 77,859 69,952 7,907 Other Assets 47,087 60,265 (13,178) Economic Value of Legacy Investments 748,115 776,343 (28,228) Impact of Consolidation, net 167,456 168,678 (1,222) Total Assets $ 915,571 $ 945,021 $ (29,450) (1)At June 30, 2026 and March 31, 2026, represents third-party originated HEI, as well as our net investment in a HEI securitization entity. (2)During the year ended December 31, 2025 we sold a portfolio totaling $484 million in fair value of legacy unsecuritized bridge loans and REO assets to the Legacy Trust and retained a $182 million subordinate beneficial interest in the Legacy Trust. The beneficial interest represents our right to residual cash flows from the Legacy Trust after payment of senior financing and preferred interests and is recorded as an AFS security, measured at fair value and classified as a Level 3 asset. As of June 30, 2026, we funded $20 million of our total $35 million capital support commitment related to maintaining specified loan-to-value ratio thresholds of the Legacy Trust. 80 During the first quarter of 2026, we completed a $225 million CAFL securitization backed by a mix of performing, re-performing and non-performing bridge loans and REO. The collateral included $223 million of loans and $38 million of REO, primarily sourced from our called CAFL securitizations issued between 2021 and 2023. The securitization also included $66 million of loans and $19 million of REO from our Legacy Investments portfolio. This transaction contributed to the financing efficiency of legacy assets, facilitated the redeployment of capital into our core operating platforms and, through its securitization structure, provides the flexibility to sell loans and further reduce legacy exposures over time. See further discussion of this securitization in Note 17 in Part 1, Item 1 - Financial Statements. Subsequent to June 30, 2026, we completed a secured financing transaction relating to substantially all of our unsecuritized HEI contracts. In connection with the transaction, Redwood guaranteed approximately $90 million of obligations secured by this HEI portfolio. With the completion of this transaction, capital previously held against the HEI portfolio became available for other investment and corporate purposes. We continued to make progress in resolving legacy bridge exposures, including the resolution of approximately $16 million of 90+ day delinquent loans during the three months ending June 30, 2026. Loan Composition The following table provides the composition of legacy term and bridge loans by product type at June 30, 2026. Table 16 – Legacy Loans By Product Type at Legacy Investments at Fair Value June 30, 2026 (In Thousands) Legacy Term Legacy Bridge Term Term Loans: Single-Family Rental $ 1,034 $ — Multifamily (1) 40,235 — Bridge Bridge Loans: BFR (2) — 71,161 Single Asset Bridge — 20 Multifamily (1) — 145,025 Other (3) — 15,993 Total Legacy Loans $ 41,269 $ 232,199 (1)Includes loans for predominantly light to moderate rehabilitation projects on multifamily properties. (2)Includes loans to finance acquisition and/or stabilization of existing housing stock for light to moderate renovation or to finance new construction of residential properties for rent. (3)Includes $14 million of loans recorded at the lower of cost or market value for which the carrying value approximates the fair value. At June 30, 2026, the fair value of our legacy bridge and term loans and associated REO represented 88% of the combined unpaid principal balance of these loans and the unpaid principal balance of the loans at the time the REO were foreclosed. As part of our plans to accelerate the wind-down of the Legacy Investments portfolio, we have revised our underwriting practices to discontinue the active origination of large multifamily loans. Consequently, we expect our exposure to multifamily loans and REO to decline over time as we proactively reduce long-term exposure to the legacy bridge loan portfolio. 81 Income Taxes REIT Status and Dividend Characterization While the exact amount is uncertain at this time, a portion of our 2026 common and preferred stock dividend distributions may be taxable as ordinary income for federal income tax purposes. Any remaining amount is expected to be characterized as a return of capital, which in general is nontaxable (provided it does not exceed a shareholder's tax basis in Redwood shares) and reduces a shareholder's basis in Redwood shares (but not below zero). To the extent such distributions exceed a shareholder's basis in Redwood shares, such excess amount would be taxable as capital gains. Under the federal income tax rules applicable to REITs, none of Redwood’s 2026 dividend distributions are currently expected to be characterized as long-term capital gain dividends. The income or loss generated at our TRS will not directly affect the tax characterization of our 2026 dividends; however, any dividends paid from our TRS to our REIT would allow a portion of our REIT’s dividends to be classified as qualified dividends. As previously disclosed, we regularly evaluate Redwood’s corporate structure in light of our business activities, opportunities, and strategic growth plans. Following our mid-2025 announcement of the accelerated shift of our business model towards our mortgage banking operations and away from non-core portfolio investments, we have continued to evaluate Redwood’s corporate structure, including its status as a REIT under the Internal Revenue Code, as our business model continues to evolve. For example, growth in our mortgage banking businesses, which generally are required to be conducted through taxable REIT subsidiaries, may reach a level that makes it necessary or advisable for Redwood to alter or reorganize its corporate structure to fully realize their growth potential and maximize shareholder value. In conducting these evaluations, we generally compare our existing structure with alternative structures, including, without limitation, structures in which Redwood terminates its REIT status, structures in which Redwood enters into partnerships or joint ventures relating to its business units (or implements structural changes involving the separation or external management of one or more of its business units), or structures in which Redwood otherwise separates its REIT-eligible activities from the mortgage banking and other businesses it currently conducts through taxable REIT subsidiaries. While we currently intend to maintain our REIT status, our evaluation remains ongoing. Any changes to our corporate structure (including our REIT status) could be complex, time-consuming, and costly, and may expose us to new risks or potential liabilities, including risks related to conflicts of interest, regulatory compliance and tax liabilities. Additional information on Redwood's capital, REIT and organizational structure is described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 under the heading “Risk Factors”. Tax Provision under GAAP For the three and six months ended June 30, 2026, we recorded a tax provision of $1 million and a tax benefit of $1 million, respectively. For the three and six months ended June 30, 2025, we recorded a tax provision of $5 million and $11 million, respectively. Our tax provision is primarily derived from the activities at our TRS, as we do not book a material tax provision associated with income generated at our REIT. The change from a tax provision to a tax benefit year-over-year was primarily the result of GAAP income earned at our TRS in 2025 compared to a GAAP loss at our TRS in 2026. Refer to Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025 under the caption Income Taxes for additional information regarding our tax provision and deferred tax assets. LIQUIDITY AND CAPITAL RESOURCES Summary In addition to the proceeds from equity and debt capital-raising transactions, our principal sources of cash and liquidity consist of borrowings under warehouse facilities financing mortgage loans, MSRs, interest-only securities, and HEI, secured term financing facilities, securities repurchase agreements, a corporate secured revolving financing facility, payments of principal and interest we receive from our investment portfolio assets, proceeds from the sale of investment portfolio assets, and cash generated from our mortgage banking operating activities, such as the sale and securitization of mortgage loans. Our most significant uses of cash are to purchase and originate mortgage loans for our mortgage banking platforms, including financing loans held for sale and managing hedges associated with those activities; to purchase investment securities and make other investments; to repay principal and interest on our debt, including warehouse and other recourse borrowings as loans are sold or securitized; to meet margin calls associated with our debt, interest rate hedges and other obligations; to make dividend payments on our capital stock; to fund draws on our bridge loan portfolio and other commitments when requested; to fund our operations; and from time to time, to repurchase shares of our common stock, outstanding debt securities, and convertible debt. At June 30, 2026, our total capital was $1.84 billion, consisting of (i) $934 million of equity capital, (ii) $894 million of convertible notes and other corporate debt on our consolidated balance sheets ($297 million of convertible debt due in June 2027, $143 million of senior unsecured notes due in 2029, $189 million of senior unsecured notes due in 2030, $125 million of senior unsecured notes due in 2031, $140 million of trust-preferred securities due in 2037), and (iii) $8 million of promissory notes. 82 Our capital structure continues to reflect the strategic shift toward mortgage banking, which is characterized by faster capital turnover and an originate-to-distribute model. Approximately 56% of our recourse debt is concentrated within our mortgage banking platforms, where loans typically remain on balance sheet for a short duration and related borrowings are repaid as loans are sold or securitized, supporting rapid recycling of our capital for subsequent reinvestment. At June 30, 2026, our unrestricted cash and cash equivalents were $192 million. While we believe our available cash is sufficient to fund our operations, we may raise equity or debt capital from time to time to increase our unrestricted cash and liquidity, to repay existing debt, to make long-term portfolio investments, to fund strategic acquisitions and investments, or for other purposes. In particular, we continue to focus on additional joint ventures with strategic investors who seek to acquire the assets our operations originate and source and/or seek to provide capital to support the growth potential of our operating platforms. To the extent we seek to raise additional capital, our approach will continue to be based on what we believe to be in the best interests of the Company. In the discussion that follows and throughout this document, we distinguish between marginable and non-marginable debt and recourse and non-recourse debt. Refer to the section set forth below under the heading "Risks Relating to Debt Incurred under Borrowing Facilities" for additional information regarding these terms on our debt. At June 30, 2026, in aggregate, we had $3.62 billion of secured recourse debt outstanding, financing our mortgage banking platforms and investment portfolio, of which $2.68 billion was marginable and $945 million was non-marginable. The majority of this debt relates to short-term warehouse financing supporting our Sequoia and Aspire mortgage banking platforms, where capital turns rapidly, with loans remaining on balance sheet for an average of approximately 26 days before being sold or securitized during the first half of 2026, down from 36 days for the year ended December 31, 2025. We are subject to risks relating to our liquidity and capital resources, including risks relating to incurring debt under loan warehouse facilities, securities repurchase facilities, other short- and long-term debt facilities and other risks relating to our corporate debt and use of derivatives, predominately those that hedge our mortgage banking activities. A further discussion of these risks is set forth below under the heading “Risks Relating to Debt Incurred under Borrowing Facilities." Cash Flows and Liquidity for the Six Months Ended June 30, 2026 Cash flows from our mortgage banking activities and our investments can be volatile from quarter to quarter depending on many factors, including the timing and amount of loan originations, acquisitions, sales and profitability within our mortgage banking platforms, the timing and amount of securities acquisitions, sales and repayments, as well as changes in interest rates, prepayments, and credit losses. Therefore, cash flows generated in the current period are not necessarily reflective of the long-term cash flows we will receive from these operating or investment activities. Cash Flows from Operating Activities Cash flows used in operating activities increased by $4.19 billion from negative $4.07 billion in the six months ended June 30, 2025 to negative $8.25 billion in the six months ended June 30, 2026, primarily due to the increase in residential consumer loan purchases associated with our mortgage banking activities. Excluding cash flows from the purchase, origination, sale and principal payments of loans classified as held-for-sale, and the settlement of associated derivatives (which cumulatively totaled $8.21 billion of net cash outflows for the six month 2026 period, compared to $4.11 billion of net cash outflows for the six month 2025 period), cash flows from operating activities were negative $45 million during the first six months of 2026 and positive $43 million for the first six months of 2025. Cash Flows from Investing Activities During the six months ended June 30, 2026, our net cash provided by investing activities was $2.70 billion and primarily resulted from proceeds from principal payments on loans held-for-investment and other investments, in excess of cash deployed into these investments. Because many of our investment securities, loans and HEI are financed through various borrowing agreements, a significant portion of the proceeds from any sales or principal payments of these assets are generally used to repay balances under these financing sources. Similarly, all or a significant portion of cash flows from principal payments of loans and HEI at consolidated securitization entities would generally be used to repay ABS issued by those entities. 83 Cash Flows from Financing Activities During the six months ended June 30, 2026, our net cash provided by financing activities was $5.40 billion. This primarily resulted from $5.30 billion of net borrowings under ABS issued (resulting from the issuance of fourteen Sequoia securitizations as well as the issuance of ABS through two Sequoia re-securitizations of certain consolidated and unconsolidated Sequoia securities during the six months ended June 30, 2026, net of related issuance costs), and $156 million of net borrowings on debt obligations. Material Cash Requirements In the normal course of business, we enter into transactions that may require future cash payments. As required by GAAP, some of these obligations are recorded on the balance sheet, while others are off-balance sheet or recorded on our balance sheet in amounts different from the full contractual or notional amount of the transaction. Our material cash requirements from known contractual and other obligations during the twelve months following June 30, 2026, include maturing debt obligations, interest payments on debt obligations and ABS issued, funding commitments for residential investor and consumer loans, strategic investments, potential repurchases of previously sold or securitized loans, meeting margin calls associated with our debt, interest rate hedges and other obligations, and other current payables. Our material cash requirements from known contractual and other obligations beyond the twelve months following June 30, 2026, include maturing long-term debt, interest payments on long-term debt, payments on operating leases and funding commitments for residential consumer loans, residential investor bridge loan, strategic investments (including our joint ventures), meeting margin calls associated with our debt, interest rate hedges and other obligations, and principal and interest payments under ABS issued (as described further below under Liquidity Needs for our Redwood Investment Portfolio). At June 30, 2026, we had commitments to fund up to $204 million of additional advances on existing residential investor bridge loans, of which $81 million related to loans currently in securitizations co-sponsored by one of our joint ventures. These commitments are generally subject to loan agreements with covenants regarding the financial performance of the borrower and other terms regarding advances that must be met before we fund the commitment (for example, funding is dependent on actual progress on a project and we retain the right to conduct due diligence with respect to each draw request to confirm conditions have been met). A majority of the commitments are for longer-term renovate/build-for-rent loans (which generally have funding caps below their full commitment amount) and are expected to fund over the next several quarters. Additionally, at June 30, 2026, we had $1.56 billion of available warehouse capacity for residential investor loans and scheduled bridge loan maturities are expected to provide an additional source of cash that can be used to fund our commitments. During the six months ending June 30, 2026, we received $595 million of principal paydowns on residential investor bridge loans. Scheduled bridge loan maturities and future principal paydowns are expected to provide additional sources of cash that can be used, together with our available liquidity, to fund these commitments. During 2025, in connection with the sale of legacy unsecuritized bridge loans to the Legacy Trust, we entered into an agreement to provide up to $35 million of capital support if the Legacy Trust’s portfolio loan-to-value ratios exceed specified thresholds. As of June 30, 2026, we had funded $20 million of this commitment, with $15 million in remaining funding commitments if certain triggers are met. For additional information regarding our material cash requirements, see Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025 under the caption Contractual Obligations. For additional information on commitments and contingencies as of June 30, 2026 that could impact our liquidity and capital resources, see Note 19 of our Notes to Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, which supplements the disclosures included in Note 18 to the Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2025. Most of our loan warehouse facilities and our servicer advance financing were established with initial one-year terms and are regularly amended on an annual basis to extend the terms for an additional year ahead of their maturity. We renewed several of these facilities during the six months ended June 30, 2026. While there is no assurance of our ability to renew our other facilities maturing in the next year, given current market conditions we expect to extend these in the normal course of business. We expect to meet our obligations coming due in less than one year from June 30, 2026 most likely from borrowings under existing, new or amended financing arrangements, or through other previously mentioned sources of capital including cash on hand. See Note 18 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information on our debt obligations. 84 Liquidity Needs for our Mortgage Banking Activities We generally use loan warehouse facilities to finance the loans we acquire and originate in our mortgage banking platforms while we aggregate the loans for sale or securitization. At June 30, 2026, we had residential consumer warehouse facilities outstanding with $4.70 billion of total capacity and $1.98 billion of available capacity. These included non-marginable facilities with $400 million of total capacity and marginable facilities with $4.30 billion of total capacity. At June 30, 2026, we had non-marginable, residential investor warehouse facilities outstanding available to finance our unsecuritized residential investor loans in our Redwood Investments, CoreVest Mortgage Banking and Legacy Investments segments with $1.78 billion of total capacity and $1.56 billion of available capacity. Borrowing under these facilities used to finance our CoreVest Mortgage Banking loan inventory at June 30, 2026 totaled $101 million. Several of the facilities used to finance our CoreVest Mortgage Banking loan inventory are also used to finance bridge loans held in our Legacy Investments portfolio at June 30, 2026. Most of our loan warehouse facilities were established with initial one-year terms and are regularly amended on an annual basis to extend the terms for an additional year ahead of their maturity. We renewed several of these facilities during the six months ended June 30, 2026, and have other such facilities with scheduled maturities during the next twelve months. See Note 18 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information on the loan warehouse facilities used for our Mortgage Banking platforms. As described above, our material cash requirements include meeting margin calls associated with loan warehouse facilities and interest rate hedges. During periods when there is higher volatility in benchmark interest rate levels, we may experience increased margin calls related to interest rate hedges, which may be material and present increased liquidity risk. In particular, interest rate hedges associated with our mortgage banking activities are typically intended to fully or partially offset interest rate-driven changes in the fair value of mortgage loans we own or have identified for purchase. When benchmark interest rates rise or decline, there may be liquidity risk due to the fact that any corresponding change in value to such mortgage loans or other financial instruments we own may not be an immediate source of liquidity to offset margin call amounts related to our interest rate hedges. Additional information regarding risks related to the debt we use to finance our mortgage banking platforms can be found under the heading "Risks Relating to Debt Incurred under Borrowing Facilities" that follows within this section. Liquidity Needs for our Redwood Investments At June 30, 2026, in addition to our ABS issued, our investment portfolio was financed with $684 million of secured recourse debt, of which $255 million was marginable and $429 million was non-marginable, and $450 million of secured non-recourse debt that was non-marginable. At June 30, 2026, we have also allocated $93 million of outstanding borrowings from our secured revolving financing facility to finance our Redwood Investments segment. Our secured revolving financing facility may be used to finance both our Redwood Investments, Sequoia and CoreVest mortgage banking platforms, as well as Legacy Investments. We use various forms of secured recourse and non-recourse debt to finance assets in our investment portfolio. Refer to Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025 under the caption Liquidity and Capital Resources for additional information regarding our forms of financing assets in our investment portfolio, as well as for our descriptions of what constitutes non-recourse and non-marginable debt. See Note 17 and Note 18 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information on our asset-backed securities issued and debt obligations, respectively. Liquidity Needs for our Legacy Investments At June 30, 2026, we financed our Legacy Investments with a combination of recourse and non-recourse, non-marginable residential investor loan warehouse facilities, a recourse non-marginable HEI facility, and non-recourse securitization debt (ABS issued). Certain residential investor warehouse facilities may impose advance rate step-downs or repurchase requirements if underlying loan performance or property valuations deteriorate, which could require the use of additional liquidity. At June 30, 2026, we have also allocated $278 million of outstanding borrowings from our secured revolving financing facility to finance our Legacy Investments segment. Refer to Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025 under the caption Liquidity and Capital Resources for additional information regarding our forms of financing for our investments, as well as for our descriptions of what constitutes non-recourse and non-marginable debt. See Note 17 and Note 18 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information on our asset-backed securities issued and debt obligations, respectively. 85 Corporate Capital We also use unsecured recourse debt to finance our operations, including convertible and non-convertible senior debt securities issued in the public markets, as well as trust preferred securities and promissory notes. These financing arrangements support the capital needs of our operating segments. Accordingly, the associated financing costs, including interest expense, are allocated to our operating segments based on their respective use of capital, consistent with how management evaluates segment performance. See Note 18 in Part I, Item 1 of this Quarterly Report on Form 10-Q and Note 18 in Part II, Item 8 of our Annual Report on Form 10-K, for additional information on our unsecured debt obligations, net. At June 30, 2026, our $297 million convertible senior notes became due within the next twelve months, maturing in June 2027. We believe we have a number of potential options to address this maturity in whole or in part, including capital freed up from financial optimization within our Redwood Investments portfolio, sales and paydowns of our Legacy Investments portfolio which we are actively working through, and capital recycled from our joint venture partnerships which allow us to grow volume with lower capital utilization. We may also consider issuing additional senior notes such as our recent $125 million senior debt issuance during the three months ending June 30, 2026, or potentially through an additional convertible senior note issuance, subject in each case to market conditions. 86 Risks Relating to Debt Incurred under Borrowing Facilities As described above under the heading “Results of Operations,” in the ordinary course of our business, we use debt financing obtained through several different types of borrowing facilities to, among other things, finance the acquisition and/or origination of residential consumer mortgage loans, residential investor mortgage loans, and HEI (including those we acquire or originate in anticipation of sale or securitization), and finance investments in securities and other investments. We may also use borrowings to fund other aspects of our business and operations, including the repurchase of shares of our capital stock. Recourse debt incurred under these facilities is generally either the direct obligation of Redwood Trust, Inc., or the direct obligation of subsidiaries of Redwood Trust, Inc. and guaranteed by Redwood Trust, Inc. Risks relating to debt incurred under these facilities are described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025, under the caption(s) “Risks Relating to Debt Incurred under Borrowing Facilities,” and “Our use of financial leverage exposes us to heightened liquidity risks, including margin calls and acceleration of repayment from defaults and cross-defaults.” Aggregate borrowing limits are stated under certain of these facilities, and certain other facilities have no stated borrowing limit, but many of the facilities are uncommitted, which means that any request we make to borrow funds under these uncommitted facilities may be declined by the lender for any reason, even if at the time of the borrowing request we have then-outstanding borrowings that are less than the borrowing limits under these facilities. In general, financing under these facilities is obtained by transferring or pledging mortgage loans, securities or other assets to the counterparty in exchange for cash proceeds (in an amount less than 100% of the principal amount of the transferred or pledged assets). Given that we may not be able to obtain additional financing under uncommitted lines when we need it, we are exposed to, among other things, liquidity risks of the types described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 under the heading “Risk Factors,” and in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2025 under the heading “Market Risks.” In addition, with respect to mortgage loans, securities or other assets that at any given time are already being financed through these warehouse facilities, we are exposed to market, credit, liquidity, and other risks of the types described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 under the heading “Risk Factors,” and in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2025 under the heading “Market Risks,” if and when those loans, securities or other assets become ineligible to be financed, decline in value, or have been financed for the maximum term permitted under the applicable facility. Under many of our mortgage loan and HEI warehouse facilities, our securities repurchase facilities, and our secured revolving financing facility, while transferred or pledged mortgage loans, HEI, or securities are financed under the facility, to the extent the value of the loans, HEI, or securities, or the collateral underlying those loans, HEI, or securities, declines, we are generally required to either immediately reacquire the loans or securities or meet a margin requirement to transfer or pledge additional loans, securities or cash in an amount at least equal to the decline in value. Of our active financing arrangements with outstanding balances at June 30, 2026, only our securities repurchase facilities (with $130 million of borrowings outstanding at June 30, 2026), eight of our residential consumer mortgage loan warehouse facilities (with a combined $2.4 billion of borrowings outstanding at June 30, 2026), and a certificated MSR facility (with $125 million of borrowings outstanding at June 30, 2026) retain market-value based margin call provisions based solely on the lender's determination of market value and, as such, are considered marginable. Margin call provisions under these facilities are further described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 under the caption “Risks Relating to Debt Incurred under Borrowing Facilities - Margin Call Provisions Associated With Debt Facilities and Other Debt Financing.” Financial covenants included in these facilities are further described Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 under the caption “Risks Relating to Debt Incurred under Borrowing Facilities - Financial Covenants Associated With Debt Facilities and Other Debt Financing.” At June 30, 2026, and through the date of this Quarterly Report on Form 10-Q, we were in compliance with the financial covenants associated with our debt financing facilities. Our financial covenants require us to maintain a minimum dollar amount of stockholders’ equity or tangible net worth and minimum liquidity, as well as financial covenants that require us to maintain recourse indebtedness below a specified ratio. In particular, with respect to: (i) financial covenants that require us to maintain a minimum dollar amount of stockholders’ equity or tangible net worth at Redwood, at June 30, 2026, our level of stockholders’ equity and tangible net worth resulted in our being in compliance with these covenants by more than $200 million; and (ii) financial covenants that require us to maintain recourse indebtedness below a specified ratio at Redwood, at June 30, 2026, our level of recourse indebtedness resulted in our being in compliance with these covenants at a level such that we could incur at least $2 billion in additional recourse indebtedness. 87 CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates. A discussion of critical accounting policies and the possible effects of changes in estimates on our consolidated financial statements is included in Note 2 — Basis of Presentation and Note 3 — Summary of Significant Accounting Policies included in Part I, Item 1 of this Quarterly Report on Form 10-Q. We have elected the fair value option of accounting for a significant portion of the assets and some of the liabilities on our balance sheet, and the majority of these assets and liabilities utilize Level 3 valuation inputs, which require a significant level of estimation uncertainty. See Note 6 in Part I, Item 1 of this Quarterly Report on Form 10-Q, for additional information on our assets and liabilities accounted for at fair value at June 30, 2026, including the significant inputs used to estimate their fair values and the impact the changes in their fair values had to our financial condition and results of operations. See Note 6 in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2025, incorporated herein by reference, for the same information on these assets and liabilities as of December 31, 2025. Periodic fluctuations in the values of these assets and liabilities are inherently volatile and thus can lead to significant period-to-period GAAP earnings volatility. Additional detail on our critical accounting estimates is included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025, under the heading "Critical Accounting Estimates." MARKET AND OTHER RISKS We seek to manage risks inherent in our business — including but not limited to credit risk, interest rate risk, prepayment risk, liquidity risk, and fair value risk — in a prudent manner designed to enhance our earnings and dividends and preserve our capital. In general, we seek to assume risks that can be quantified from historical experience, to actively manage such risks, and to maintain capital levels consistent with these risks. Information concerning the risks we are managing, how these risks are changing over time, and potential GAAP earnings and taxable income volatility we may experience as a result of these risks is discussed in Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. In addition to the market and other risks described above, our business and results of operations are subject to a variety of types of risks and uncertainties, including, among other things, those described under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.