Redwood Trust predicted that its mortgage activity would recover in the second half of the year as the second quarter results were released.
The Real Estate Investment Trust saw a turnaround in the second quarter with a net profit of $ 165 million compared to a net loss of $ 943 million in the first quarter and a net profit of $ 31 million in the second quarter of 2019.
"We are extremely pleased with the progress we have made in response to the liquidity collapse of the non-government mortgage sector in March," said CEO Chris Abate at the Redwood conference call.
During the quarter, the Mill Valley, Calif., Company repositioned its secured debt structure by reducing total debt as of June 30 from $ 4.6 billion as of March 31 to $ 1.8 billion and marginal debt of 3 $ 5 billion reduced to $ 375 million.
Redwood Trust's unqualified mortgage business, like other lenders in the area, was impacted by the secondary market shift following the Federal Reserve's purchase of mortgage-backed securities at the start of the pandemic.
But the pendulum starts to swing the other way.
"With our recent exposure to loan sellers and the narrowing of the spread between agency and jumbo mortgage rates, we have started to see an increase in lock activity and expect it to increase significantly in the fall," said Abate.
"Despite this narrowing, we continue to see significant relative value in home loans shared by our current and future loan buying partners," he added.
Redwood's home loan segment generated a net profit of $ 33 million compared to a loss of $ 199 million in the first quarter, while the business purpose loan – loans to single-family home owners and bridging loans – generated a net profit of $ 46 million in Compared to a net profit, the loss was $ 228 million.
After a brief pause in residential real estate lending, Redwood bought $ 56 million in the second quarter. As of June 30, the company had jumbo loans of $ 20 million on its balance sheet and identified loans of $ 57 million for forward purchase.
In addition, single-family rental loans of USD 176 million and bridge loans of USD 58 million were granted.