REDWOOD TRUST INC Management’s Discussion and Analysis of Financial Condition and

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 six main sections:
•    Overview
•    Results of Operations
-  Consolidated Results of Operations
-  Results of Operations by Segment
-  Investments Detail
-  Income     Taxes
•    Liquidity and Capital Resources
•    Off-Balance Sheet Arrangements and Contractual Obligations
•    Critical Accounting Policies and Estimates
•    New Accounting Standards
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 "Management's Discussion and Analysis of Financial Condition and Results
of Operations," 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 information 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.

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Our Business
Redwood Trust, Inc., together with its subsidiaries, is a specialty finance
company focused on several distinct areas of housing credit. Our operating
platforms occupy a unique position in the housing finance value chain, providing
liquidity to growing segments of the U.S. housing market not 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 and our publicly-traded shares. Our
consolidated investment portfolio has evolved to incorporate a diverse mix of
residential, business purpose and multifamily investments. 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 our
business in three segments: Residential Lending, Business Purpose Lending, and
Third-Party Investments. 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, 2020.
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, 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, 2020, 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, our ability to pay dividends in
the future, and the prospects for federal housing finance reform); (ii)
statements related to our financial outlook and expectations for 2021 and future
years; (iii) statements related to our opportunities for growth, including by
continuing to creatively expand distribution channels for our loans products;
(iv) statements related to our investment portfolio, including that there
remains potential upside in our portfolio through a combination of accretable
market discount and call rights that we control, and that we reinitiated our
flow purchase arrangement with Point, providing us with continuing HEI
acquisition and securitization opportunities; (v) statements related to our
residential and business purpose lending platforms, including that we expect
CoreVest to continue to consider issuing bridge loan securitizations in
conjunction with our traditional SFR loan securitizations; (vi) statements
relating to our estimate of our available capital (including that we estimate
our available capital at September 30, 2021 was approximately $350...