Redwood Trust, Inc. · NYSE:RWT
Redwood Trust — Investor Presentation (March 2024)
27 slides from Redwood Trust's investor presentation, March 2024
Slide 1: Introduction to Home Equity Investments ("HEI")
Introduction to Home Equity Investments (“HEI”) March 2024
Slide 2: Cautionary Statement
Cautionary Statement This presentation (the “Presentation”) is provided for general informational purposes. The Presentation is not an offer to sell, or a solicitation of an offer to buy, securities or HEI, nor is it an offer to originate, or a solicitation of an offer to originate, HEI. By acceptin
Slide 3: Introduction
Introduction Since inception, Redwood Trust has focused on providing liquidity to parts of the U.S. residential housing market that are not well-served by government programs. After years of supporting the housing market through our Residential and Business Purpose Lending platforms, we began invest
Slide 4: What is an HEI?
What is an HEI? 4
Slide 5: What is an HEI?
What is an HEI? Home Equity Investments (HEI): HEI enable homeowners to access existing home equity without a sale, refinance, or home equity loan An HEI is not a loan – with an HEI, the customer makes no monthly principal or interest payments Instead, the homeowner shares a portion of their home’s
Slide 6: How an HEI Works
How an HEI Works Qualified homeowner receives an upfront lump-sum of cash in exchange for return of accessed equity plus or minus a share of the future change in value of their home Homeowner has discretion over use of the cash – e.g., pay off debt, renovate, help fund retirement, etc. Attractive te
Slide 7: Market Opportunity
Market Opportunity 7
Slide 8: U.S. Home Equity: The Addressable Market is Enormous
U.S. Home Equity: The Addressable Market is Enormous Homeowners' equity has almost tripled since 2013 Residential Real Estate Market(1) $45,000 $40,000 $44T $35,000 Market Cap: U.S. Housing Stock $30,000 $25,000 $20,000 31% $15,000 Loan to Value $10,000 $5,000 $0 3/31/2014 6/30/2014 9/30/2014 3/31/2
Slide 9: Homeowners Have Built a Considerable Amount of Equity in Their Homes
Homeowners Have Built a Considerable Amount of Equity in Their Homes Illustrative Example of Home Equity Growth $400,000 $77,260 $172,529 $15,270 $80,000 $320,000 Home Purchase Mortgage Amount Initial Equity Principal Payments Home Price Equity in Home Price (07/01/21) Appreciation (09/01/23) Source
Slide 10: HEI: Target Use Cases
HEI: Target Use Cases In today’s market, there are a variety of consumer-types that could have interest in accessing the equity in their homes Target Use Cases Suggest Sizable Total Addressable Market Home Equity Use Cases Debt Reduction Fund Retirement Renovation Home Purchase ✓ Pay off debt ✓ Risi
Slide 11: HEI Proof Point: California Dream for All Program
HEI Proof Point: California Dream for All Program The state of California is providing up to 20% down payment in partnership with first-time homebuyers California Dream There Has Been Widespread Success and Demand for for All Program California’s Dream for All Program … • The Dream for All Shared Ap
Slide 12: Investing in HEI
Investing in HEI 12
Slide 13: Why Invest in HEI
Why Invest in HEI • HEI can act as a long-term inflation hedge, with low correlation to other major asset classes Long Term Inflation Hedge • Housing-related expenses comprise between 30-40% of CPI Large Total Addressable • Large total addressable HEI market, particularly as it supports homeowners’
Slide 14: Benefits of HEI for the Homeowner and Investor
Benefits of HEI for the Homeowner and Investor Homeowner Benefits Investor Benefits Homeowners can access their existing home equity with no monthly HEI have structural benefits for the investor, while maintaining principal or interest payments alignment with the homeowner Qualified homeowner receiv
Slide 15: Comparison of Products for Accessing Home Equity
Comparison of Products for Accessing Home Equity HEI provide an attractive way to access one’s home equity with differentiated features relative to existing options HEI vs. HELOC or Closed-End Second (“CES”)* Feature HEI HELOC CES Credit Score 600+ 660+ 660+ Cash Available $35 – $500k $50 - $500k $5
Slide 16: HEI Financing & Securitization Market
HEI Financing & Securitization Market 16
Slide 17: HEI Financing Overview
HEI Financing Overview While financing for HEI is still in its early stages, there has been significant growth over the last few years in available financing How to Finance HEI Direct Investment in Capital Markets Warehouse Joint Venture HEI (Securitization) Financing Lines HEI Financing Timeline 20
Slide 18: HEI Securitization Update
HEI Securitization Update In 2023, the first rated HEI securitization priced (rated by DBRS Morningstar). Additional rating agencies looking to rate this asset class in the future. HEI Securitization Summary DBRS Rating Rationale for PNT 2023-1 Securitization • Securitization activity for HEI has pi
Slide 19: Redwood's Experience with HEI
Redwood’s Experience with HEI 19
Slide 20: Overview of Redwood's Investment in HEI
Overview of Redwood’s Investment in HEI Redwood Trust has been a leading provider of capital to the residential housing market since 1994 U.S. home equity is near an all-time high ($30 trillion+) and homeowner demand is robust for products that provide access to the equity in their homes Since 2019,
Slide 21: Redwood's History of HEI Leadership
Redwood’s History of HEI Leadership Multi-year experience in rapidly growing asset class 2019 2020 2021 2022 2023 2023Today First Investment Platform HEI HEI Financing & Operating Scale & in HEI Investments in Securitization Operations Capabilities Standardization HEI Closed a first-of-its- Official
Slide 22: Introduction to Aspire
Introduction to Aspire In 2023, Redwood launched its own in-house HEI origination platform, Aspire The Aspire product is offered to prime credit Aspire, Redwood’s proprietary HEI platform is actively homeowners and positioned as an alternative to a accepting applications in multiple states, with pla
Slide 23: Redwood's Customer Access Channels Drive Unique Ability to Scale
Redwood’s Customer Access Channels Drive Unique Ability to Scale Multiple channels to reach customers in an efficient manner Differentiated Sourcing Channels for HEI Organic (Aspire) Third-Party Direct to Consumer Correspondent Lenders Marketing Partnerships Forward-Flow Partners Aspire direct origi
Slide 24: Securitization Case Study: PNT 2023-1
Securitization Case Study: PNT 2023-1 In October 2023, we co-sponsored our second securitization backed entirely by HEI Redwood’s HEI Securitization Track Record • Redwood Trust and Point have co-sponsored two securitizations (PNT 2021-1 (unrated) and PNT 2023-1 (rated)) – PNT 2021-1 was the first e
Slide 25: Appendix
Appendix 25
Slide 26: HEI: Key Concepts
HEI: Key Concepts* Homeowner / Optionor Owner(s) of the property subject to an HEI agreement Investor / Optionee HEI originator or its successor Appraised Value (at origination) Property value at origination determined by third-party valuation Risk Adjustment / “Discount” A % reduction applied to Ap
Slide 27: One Belvedere Place, Suite 300 Mill Valley, CA 94941
One Belvedere Place, Suite 300 Mill Valley, CA 94941 REDWOODTRUST.COM