Redwood Trust to Drop REIT Status, Cut Dividend After Q3 Loss
Redwood Trust lost $47.3 million in Q3 and plans to become a C-corporation in 2027, cutting its quarterly dividend to $0.02 a share from $0.18.
Why it matters
- Redwood Trust lost $47.3 million, or $0.39 a share, in the third quarter, against a $2.9 million loss in the second quarter, and book value fell 4.9% to $6.56 a share.
- The board approved a plan to give up REIT status and become a taxable C-corporation from Jan. 1, 2027, with a new quarterly dividend policy of $0.02 a share starting with the fourth-quarter dividend.
- CoreVest, Redwood's business-purpose lender to housing investors, funded $406 million of loans, 74% of them bridge loans, and Redwood upsized a secured revolving facility to $500 million.
Redwood Trust lost $47.3 million, or $0.39 a share, in the third quarter and said it will give up its real estate investment trust status to become a taxable C-corporation in 2027, the housing credit company said in filings with the SEC after the market close on Tuesday, Nov. 3. As part of the plan, its board is resetting the quarterly common dividend to $0.02 a share from $0.18.
Redwood (NYSE: RWT) buys and securitizes jumbo and non-QM home loans through its Sequoia and Aspire platforms. Its CoreVest platform makes bridge and term loans to residential real estate investors. GAAP book value fell 4.9% in the quarter to $6.56 a share from $6.90.
"The third quarter of 2026 was among the most challenging for our industry since the onset of the COVID-19 pandemic. We prioritized liquidity while maintaining strong returns in mortgage banking," Chief Executive Christopher Abate said in the results release.
Why is Redwood Trust giving up REIT status?
To keep more of its earnings. Redwood said REIT distribution requirements limit its ability to reinvest earnings in its lending platforms. As a C-corporation it expects to use about $304 million of federal net operating losses to offset taxes on its mortgage banking profits. It estimates the move will add $0.73 to $0.77 a share to book value in the fourth quarter.
The 8-K filing says Redwood will stay a REIT for 2026 and expects to file to revoke its REIT election by March 31, 2027, effective Jan. 1, 2027. The board also approved:
- An exchange offer, planned for the week of Nov. 9, to swap about $50 million of common stock for a new 11.00% Series B preferred stock.
- A tax benefits preservation rights plan that is triggered at 4.9% ownership, to protect the tax losses.
- A one-for-five reverse stock split, with split-adjusted trading expected to start Monday, Jan. 4, 2027.
How did CoreVest's business-purpose lending do?
CoreVest funded $406 million of loans in the quarter, 74% bridge and 26% term, roughly flat with the second quarter. Higher rates slowed the term loan pipeline, but bridge fundings rose 35%, Redwood said. It sold or placed $427 million of new loans: $244 million to joint ventures, $113 million into bridge-loan securitizations and $70 million in whole loan sales. For how term loans to investors are sized, see our guide to how DSCR loans are sized.
| Measure | Q3 2026 | Q2 2026 |
|---|---|---|
| Net loss to common stockholders | $47.3 million | $2.9 million |
| Book value per share | $6.56 | $6.90 |
| Mortgage banking production | $6.6 billion | $8.0 billion |
| CoreVest segment net income | $0.1 million | $1.2 million |
| Recourse debt | $4.2 billion | $4.5 billion |
| Recourse leverage ratio | 5.2x | 5.0x |
Source: Redwood Trust third-quarter 2026 results release.
How is Redwood funding its loans?
Redwood ended September with $201 million of cash. It used 37% of its warehouse line capacity and had $6.5 billion of unused warehouse capacity, including $2.4 billion at its joint ventures. Our warehouse line of credit guide explains how those facilities work.
On Nov. 3, Redwood expanded its partnership with CPP Investments. The 8-K says the secured revolving financing facility was upsized to $500 million from $400 million and extended to March 2030. Redwood says it will use retained capital first to cut corporate debt, then to reinvest in its platforms. For the benchmarks behind lenders' funding costs, see hard money and private lending rates today. The results follow Angel Oak Mortgage REIT's book value drop on Nov. 3. Redwood plans to file its 10-Q by Monday, Nov. 9.
Sources
- Redwood Trust, Inc., Third-quarter 2026 results release, Exhibit 99.1 to Form 8-K (Nov. 3, 2026)
- Redwood Trust, Inc., Third-quarter 2026 shareholder letter (Nov. 3, 2026)
- Redwood Trust, Inc., The Redwood Review, third quarter 2026 (Nov. 3, 2026)
- Redwood Trust, Inc., Form 8-K on the C-corporation plan, rights plan, reverse split and CPP Investments facility (Nov. 3, 2026)
- Redwood Trust, Inc., Press release on the C-corporation conversion and exchange offer, Exhibit 99.1 (Nov. 3, 2026)
