Good afternoon, and welcome to the Redwood Trust Fourth Quarter 2024 Financial Results Conference Call. Today's conference is being recorded. I will now turn the call over to Kaitlyn Mauritz, Redwood's Head of Investor Relations. Please go ahead, ma'am.

Thank you, operator. Hello, everyone, and thank you for joining us today for Redwood's fourth quarter 2024 earnings conference call. With me on today's call are Chris Abate, Chief Executive Officer; Dash Robinson, President; and Brooke Carillo, Chief Financial Officer. Before we begin, I want to remind you that certain statements made during management's presentation today with respect to future financial and business performance may constitute forward-looking statements. Forward-looking statements are based on current expectations, forecasts and assumptions and include risks and uncertainties that could cause actual results to differ materially. We encourage you to read the company's annual report on Form 10-K, which provides a description of some of the factors that could have a material impact on the company's performance and cause actual results to differ from those that may be expressed in forward-looking statements. On this call, we may also refer to both GAAP and non-GAAP financial measures. The non-GAAP financial measures provided should not be utilized in isolation or considered as a substitute for measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial measures are provided in our fourth quarter review, which is available on our website, redwoodtrust.com. Also note that the contents of today's conference call contain time-sensitive information that are only accurate as of today. We do not intend and undertake no obligation to update this information to reflect subsequent events or circumstances. Finally, today's call is being recorded and will be available on our website later today. And with that, I'll turn the call over to Chris.

Thank you, Kate. Welcome, everyone, to Redwood's earnings call. We look forward to reviewing our fourth quarter performance today as well as sharing some perspectives on the direction of both Redwood and our industry in 2025. On the back of the November elections, the last few months have borne witness to an unprecedented dynamic in interest rates, the start of a Fed easing cycle that has coincided with a nearly 100 basis point rise in the 10-year treasury yield. Inflationary rhetoric from the new administration and the prospect of significant government borrowing has acted as a catalyst to keep mortgage rates elevated well into the new year. Brooke will spend more time on our financial performance, but it's worth highlighting that our full year results demonstrated significant progress, returning our operating businesses to strong profitability and delivering a 5.7% total economic return amidst 3 separate 100 basis point swings in treasury yields. We also significantly improved our operating efficiency and raised our common stock dividend in each of the final 2 quarters of the year. As we approach 2025, we like to remind our shareholders of our long-held view that most challenges and opportunities in our markets get their start in Washington, D.C. With such a significant shift in governing philosophy from the new administration, much is likely to change in the arenas of housing policy and regulation. The vast majority of this, we expect to benefit Redwood. Though mortgage rates remain elevated and overall housing activity will likely remain flat in 2025, we see several strategic opportunities that could drive sizable market share gains for our platform, supporting greater earnings power. Our top strategic priority remains capitalizing on the downsizing of mortgage activity within the banking sector, something that has significantly accelerated in recent weeks. Three large regional banks…

Thank you, Chris. I'll cover our operating results before handing the call over to Brooke to conclude with our financial highlights. Fourth quarter closed out a year of meaningful strategic progress for our recently rebranded Sequoia platform. While mortgage rates rose 50 basis points during what's typically a period of seasonal slowdown, lock volume increased 4% from the third quarter to $2.3 billion. This growth was on the strength of our highest flow lock volume since early 2022 and increased activity with independent mortgage bankers or IMBs, which rose 23% quarter-over-quarter. Notably, with mortgage rates still hovering at around 7%, this momentum has continued into the new year. January locks totaled just over $1 billion, 35% ahead of Q4's pace and almost 2.5x January 2024 levels. The quarter's results rounded out the strongest year for the platform since 2021, $9 billion of total lock volume with close to 40% sourced in bulk form and activity with 175 total sellers. Notably, no flow partner represented more than 7% of full year production volume. We expect this granularity to drive further volume growth in 2025 as the dynamics Chris described may draw more sellers to seek to transact in more significant size, particularly amongst the 120 depositories now in our network. In all during the fourth quarter, we distributed $2.5 billion of Sequoia loans, more than half in whole loan form to 10 different counterparties and the remainder through 3 securitizations. This was our most active quarter for loan sale activity since the first quarter of 2022 and included several large sales to banks, a good reminder that while on balance, the depository footprint in mortgage lending continues to ebb, broader loan growth needs are compelling certain banks to add to their mortgage portfolios, leveraging their relationship with Redwood to do so.…

Thank you, Dash. To build on our earlier discussion around branding, I want to highlight an important update to our segment naming that you will see reflected in our earnings materials. We've aligned our business units with their branded identities to better reflect their market positioning and strategic focus. Our Residential Consumer segment is now Sequoia, Residential Investor is now CoreVest and our investment portfolio is now Redwood Investments. Turning on to our financial results. We reported GAAP earnings of negative $8.4 million for the fourth quarter or negative $0.07 per share compared to positive $13.1 million or $0.09 per share in the third quarter, reflecting fourth quarter GAAP ROE of negative 3%. Specific to the fourth quarter, fair value changes primarily reflected the mark-to-market on our larger balance multifamily bridge loans and the impact from higher benchmark interest rates on our reperforming loan securities. For the full year 2024, we reported GAAP earnings of positive $47 million or $0.32 per share, equating to a GAAP return on equity of 4.1%. With the decline in GAAP earnings, Q4 book value per share decreased to $8.46. For the full year 2024, we delivered a total economic return of 5.7%, inclusive of our common dividend, which we increased twice in 2024. Earnings available for distribution, or EAD, for the fourth quarter was $18.4 million or $0.13 per share compared to $25.2 million or $0.18 per share in the third quarter. The sequential decline primarily reflects the absence of nonrecurring other loan income and the normalization of HEI contributions, the latter of which have benefited from higher than modeled home price appreciation in the third quarter. Excluding these factors, the core earnings drivers of our business remained stable quarter-over-quarter with consistent performance across net interest income, mortgage banking and other income and G&A…

[Operator Instructions] Our first question is from Bose George with KBW.

I wanted to ask about the current run rate EAD relative to the dividend. You obviously hit it last quarter, but now it's back down again. How do you think about just the run rate, the cadence, the drivers of the EAD getting to the dividend and just the time line that you're expecting now?

Sure, Bose. I'll start. This is Brooke, and then I'll hand it over to Chris. Some of this was in my prepared remarks. But in terms of the kind of quality of EAD, I think sometimes the headline doesn't tell the full story. We mentioned in our prepared materials that our home equity investment option income was actually down a couple of pennies below what we would expect from just what we see in terms of kind of our baseline assumptions for that portfolio and market drivers. So if we had normalized for what we expect from baseline inflation, EAD would have been roughly $0.15. And we had mentioned actually in Q3 that EAD was a little bit ahead of schedule given some one-timers that I mentioned in the quarter 2. We had elevated margins on certain of our products within CoreVest and then also kind of a onetime nonrecurring fee. But just in terms of drivers that we see of EAD from here, we feel really confident about progress. Net interest income has been a really positive story, and we see drivers of that to continue to increase. The bridge yield compression that we've seen recently has slowed. SOFR will be a continued story into the first quarter that will be positive. We saw a 50 basis point decline on our cost of funds in the quarter, and that will really have a full quarter impact in the first quarter. And then you recently saw our $90 million senior unsecured offering, deploying that capital will continue to drive net interest income. We mentioned really positive early volume drivers for our operating businesses at those more normalized margins will also continue to support EAD. And there's a decent amount of capital optimization to continue, especially as we continue our bridge resolution activity within CoreVest, which will support our EAD further as we redeploy that capital into our operating businesses.

Yes. I'd just also quickly add, Bose. It's very important to the Board that we pay an attractive dividend from a current income perspective. And obviously, you can see in our financials that we've got a significant amount of liquidity, so we're tracking towards that dividend on an EAD basis. But I'd also say that I think with EAD and adjusted earnings metrics, there's a lot of apples and oranges comparisons across the industry. When I look at our book performance over the past few years versus some others in the industry, I think we've significantly outperformed. On an economic basis, sort of neutralizing some of the adjustments, we feel really good about tracking.

Okay. That's helpful. But just in terms of the time line to, I mean, do you guys think about whatever, 1, 2, 3 quarters of like a time line to the EAD sort of equaling the dividend? Is that something we should...

Yes. We feel like we've got good line of sight this year to those converging. But again, as far as the level of the dividend goes, part of that is feedback from shareholders, current income. We've got really strong liquidity. But when we look at NIM growth, and then I think Brooke included some guidance in her remarks around volume growth. We've seen even in January across the business lines, really strong volume growth. We've already done 2 Sequoia deals priced. So we feel like all of the sort of forward-looking metrics are there for us. And I'd say over the next few quarters, we would expect those to converge.

Our next question is from Crispin Love with Piper Sandler.

This is Brad Capuzzi on for Crispin Love. Just a quick one for me. In terms of the BPL, can you just discuss the competitive environment and how it's shifted at all as rates have backed up?

Sure. Brad, it's Dash. I can take that. I would say it's evolving. I would say it's more of a tailwind at this point for us just based on the depth of our products and also the depth of our capital. I think when you combine all the products we're doing across term and bridge, SAB, DSCR and combine that with our distribution, I think that's frankly a very rare combination in this market. We're looking to add talent. We're able to add talent from competitors at this point. based on how the market has evolved. I would say BPL in general, it tends to be a bit more rate agnostic on an overall industry basis. So there's still good volume out there. SAB and DSCR, as I mentioned, and Brooke too, are areas where we have a lot of room to the ceiling, frankly, in terms of grabbing market share without having to compromise on credit standards or pricing. So we view all those as tailwinds. BPL has always had a lot of different lenders in the space, different shapes and sizes, but we feel really, really good about our combination of product mix, reliable execution and probably most importantly, distribution.

And then I know the team touched on this a little bit in the prepared remarks. But if you could just give an insight as to where you expect leverage to trend into 2025 and how comfortable you are with the current liquidity position, that would be helpful.

Yes, absolutely. Our residential pipeline will be the largest driver of the band of leverage that we have around kind of 2 to 2.5. It could even go up to 3 or beyond just depending on where we are in quarter end timing with disposition activity of some of these larger portfolio activities. I think in our prepared remarks that we mentioned we're seeing $1 billion-plus trade. So that could provide some just very near-term dynamics around leverage at quarter end as we finance those and then distribute. But we feel really good about our liquidity position. We ended the quarter with $245 million of cash. Subsequent to that, we did the nearly $100 million bond offering. We have $325 million of financeable yet unencumbered assets. And so we have significant dry powder from our perspective to continue to fund the business. We've also done some very accretive nonrecourse financing activities that have refied away from some of our recourse debt and actually brought in capital. So I feel really good about our liquidity to take advantage of the operating environment right now.

Our next question is from Eric Hagen with BTIG.

Question on the jumbo. Do you guys feel like there's still room for the credit box to expand? Or just like based on your thresholds for risk, do you feel like you're already maybe operating at the upper end of that risk spectrum? And then when you guys target bulk packages of loans from third parties, is the risk profile similar to what you originate yourselves?

Eric, this is Dash, good questions. I'll take them sequentially. I think in the core jumbo business, there's probably some room, but I would probably point to Aspire, the launch we did about a month ago is probably the best answer to your question in terms of our view that there is a very large existing addressable market for alternative types of loan products that we feel we can purchase and underwrite very, very well. Non-QM was probably an $80-plus billion market for total originations last year. It was the largest non-agency securitization market last year as well. As Brooke articulated, we expect that TAM to grow to probably $100 billion this year. And when you think about where rates are, some of the dynamics with housing accessibility, we think those products when underwritten well, could be game-changing for our footprint in the space, which is exactly why we've expanded the Aspire mandate. So for sure, I mean, I think within our core jumbo business, we've always had pristine products, DQs remain about 20 basis points or so. But I think the launch of Aspire is probably the best evidence we feel like there's a huge TAM out there that we can access well. In terms of your question on bulk, obviously, it depends on the seller. It depends on the seasoning. I think with more of those seasoned pools, you tend to get lower mark-to-market LTVs, generally out-of-the-money coupons, lower GWACs versus on the run production, probably to state the obvious there.

Yes. Good color, Dash. When you guys highlight the fact that the unsecured debt has come down to, I think you said 30% of the capital stack, how does that maybe change your philosophy about capital allocation, just call it, this year? I mean, do you feel like it gives you more flexibility to capitalize the bridge portfolio a little further? Or more generally, I mean, is there ways to optimize the leverage in the bridge portfolio any further from here?

There definitely is. And that will continue to be a priority for us this year, not only in terms of loan level resolutions, but also how we finance that portfolio. We definitely improved that in 2024. There's more room to go, which is a huge focus for us, particularly on the bridge portfolio. As it relates to the broader capital structure, I think, yes, as you know, a lot of what we've done is optimize our secured leverage, which has helped us reduce our unsecured financing, particularly our converts. Obviously, the $90 million offering that Brooke referenced was also unsecured. But what that allows us to do, Eric, I referenced this a little bit at the end of my remarks is since those are secured, as those delever, there's room to relever those. We've done that a fair amount over the past few quarters. And just the nature of that debt allows us to access more capital more quickly in terms of how that's structured. And that capital is going right into the operating businesses. As it relates to the unsecured that we've been sort of legging into, one difference I'd call out is some of the optionality. Like as you know, with converts, they tend not to be callable or maybe callable in a very short period of time before their maturity. The unsecured debt we've legged into here over these past 3 issuances has been 5-year non-call 2, which was really, really good prepayment optionality for us and allows us to optimize that part of our capital structure much sooner than we otherwise would have with doing more convertibles.

Our next question is from Steve Delaney with Citizens JMP.

I guess, Brooke, just for starters, I think when you guys first started talking about the segments and you had a lot of moving pieces. I just want to applaud the decision to kind of with Sequoia, CoreVest and Redwood, just to have all the consumer mortgage products in Sequoia, the investor products in CoreVest, that really will help us, I think, as we set up our models and just explain the company to tie the products, to kind of brand the products, I guess, is what I'm saying and connect your segments to the products like that. My question is, rates really matter today. I mean, I can't remember a time in my career where people spend as much time talking about rates and what the Fed is going to do and what the 10-year is going to do. And it just seems like the whole stock market is trading off rates. So, as an analyst, it's kind of frustrating, but rates really do matter. And I guess to that point, Dash, could you give us an idea of where you're pricing 30-year prime jumbos, owner-occupied. I assume you probably have these rates on a website somewhere. I'm just curious where that rate is, owner-occupied prime jumbo, 30-year fixed. Where are we today? What's the range of the coupons on those mortgages?

Sure, Steve. It moves around day-to-day, obviously, but I would contextualize it as probably high 6s. Depending on credit overlay, it may touch a 7 handle right now. That's where we sit today.

Okay. 6.5, [ 6. 47 ] probably in that ballpark. Yes. And just thinking back, Dash, like over the last 6 to 12 months, where has the low been? And I'm trying to get a sense for where we are today versus the bottom and how many people are sitting around waiting for rates to go back down 50 basis points.

The recent lows over the past 18 months, there was probably a very short period of time when it was back to a 5 handle, very, very high 5s, but it's largely bounced around in the 6s when the 10-year was up sort of closer to 5%, our rates were probably very low 7, 725, or thereabouts. That's the range. And to your point, Steve, that range over a 5- to 6-quarter period of time, I think, underscores just all the movements in rates that the market is grappling with to your point.

No question. We had that huge bond rally in September. I think the lows in the 10-year were in September, and now we're 100 or so above 100 basis points above that. That's helpful just to kind of get a sense of, it's kind of what I expected, but I wasn't really sure where jumbo was pricing versus conventional and that type of thing. So all right. That's helpful. I don't think I have anything else right now. we can pray for some rate relief, but I think it sounds like you guys have a business that's working with where rates are today. And I think that's the most important thing is you're not depending on 50 to 100 basis points and lower to run your business.

No. Actually, Steve, I would accent that by saying as rates have held out higher for longer, we're seeing great opportunities from banks, some of which have announced exits from various facets of the mortgage business. I think we've proven to be really effective at pipeline risk management. And our deals, our Sequoia deals continue to price at the tightest levels in the sector. There's been 5 or 6 issuers so far this year. Both of our deals have priced tightest, at least according to my records. And that gives us an advantage in not just gain on sale margins, but how we can bid some of these big pools, $1 billion-plus pools that we're now starting to see. So actually, the rate environment has created opportunities that we wouldn't see with a rally. But obviously, I think the sector and certainly the housing market would be well served by some rate relief. I don't see the catalyst in the near term.

Afraid you're right.

Our next question is from Doug Harter with UBS.

Chris, I know you touched on this during your prepared remarks, but if we could just get into a little bit more around your comfort that the banks are going to continue to look to kind of offload mortgage if there is kind of regulatory relief and how much of that opportunity is kind of truly more interest rate and risk management versus regulatory capital relief?

Yes. Doug, Powell, I think, actually spoke to a conviction on getting the Basel III rules sort of back reproposed. So that actually may happen sooner than later. But certainly, it will be more capital neutral. I think the real driver right now is the rate environment. And as I mentioned, just the lack of a catalyst for rates to come down. I think these banks are just looking out. They're not seeing much production growth in mortgage as an asset class. The moving resources, moving capital, the M&A picture has changed overnight for banks. We could see a lot more M&A starting this year. And for all those reasons, I think mortgage is up for grabs. We saw, which has been in the news, a $9 billion pool that came to market a few weeks ago, which we bid on behalf of Redwood. We've seen others come up, and we're working on a few right now. So behind the scenes, there's actually a lot happening that gives me a lot of optimism that in addition to our flow run rates, which Brooke spoke to, we'll be able to supplement that with some pretty sizable bank portfolio trades. And I think for us, the most interesting part is that we're live already with a number of these regional banks, which means the technology, the purchase agreements, all of the vetting, all of the safeguards, all of that is in place. So when we bid, we can stipulate a close time frame that's very, very accelerated. So I think we expect to be very competitive in the coming months on that front. And there are some banks that are buying loans from us. So everyone has different needs and different buckets to fill. I think the real franchise value is in the relationships and just having all of that plumbing in place and having the trust back still.

Our next question is from Don Fandetti with Wells Fargo.

Yes. A question. If I look at all the different areas of potential new investment originations portfolios, it just seems like there's like [indiscernible] perspective so that we don't get in a scenario where you bring out a big portfolio and the securitization markets widen out. How are you thinking about that?

Yes. Across the business, to start with BPL, we've established these joint ventures. We could potentially establish more. That's always a focus area. And so for some of those larger loans, which you would see in BPL, having established capital partners to risk share and to support that business has been huge. And that's really freed up our capital to increase our mortgage banking velocities across the franchise. In the resi business, we are seeing these big portfolio trades, which we think these are franchise accretive opportunities for us. So we want to be able to bid consistently in the market. And as Brooke mentioned, we've got an excess of financing right now. I think a lot of banks are aware of the opportunities that we're seeing through some of these regional partnerships and are very willing and able to bank them. But the securitization markets are a big part of the story and the distribution. We'll continue to supplement that with insurance partnerships or other joint ventures, pension funds we may look at. But right now, the capital picture, I think, here is as good as it's been in quite some time, our cash position, our recourse leverage and then sort of the off-balance sheet capital that we can speak for through partnerships makes me feel really good about going on offense and being aggressive in 2025.

Got it. And then on the Aspire home equity, can you talk a little bit about, I assume that's similar where you're either selling and securitizing. Can you talk about the margins in that business as they might, you talked about the $2 billion plus potential new investments?

Yes. Doug, it's Dash. I would contextualize those target gross margins in the same vein that we've historically targeted for Sequoia, sort of that 75 to 100 basis point range on the expanded product loans that we're buying from our seller network and soon-to-be expanded seller network with new partners. We'll likely start with whole loan sales. There's a very robust and deep demand for those sorts of products. There's also a very vibrant securitization market. as we mentioned earlier, a joint venture partnership or similar capital partnership is very much in the cards for that business, as Chris articulated. But that's how I would think about gross margin targets for Aspire.

Our next question is from Rick Shane with JPMorgan.

I have a couple actually this afternoon. When we look at the mortgage banking results for the fourth quarter, income was down slightly from the third. But what's interesting is that the mix really shifted more net interest income this quarter than last, less banking revenue. When we look at the locks and commitments, they were roughly the same. So it doesn't really explain it. Is this a function of holding the loans through the fourth quarter given the volatility in year-end stuff and then that's driving the pickup in Sequoia securitization volume in Q1?

I'm happy to address that. We've talked a little bit about the last few quarters, just how we've evolved our financing and hedging strategy for the business. And I think that's really what you see in terms of an overall stability in kind of the net contribution of Sequoia, but different aspects of how that's coming through the bottom line. Last quarter, we said our gain on sale was really half of it or so was attributable to the kind of large rally we had at the end of the quarter in rates. And so that's some of the difference, but it was really hedge outperformance and some of our positive carrying hedges that were showing up through NII that are the result of a composition shift.

Got it. And the reason I ask the question is the capital efficiency slide disclosure is a little bit different this quarter than it was last. And my conclusion from sort of comparing them is it does look like perhaps you held the loans a little bit longer in the fourth. We're just trying to think about how to sort of plot this out going forward.

I think one dynamic you saw in the fourth quarter is that we sold a large portion of our loans in the form of whole loan sale. That tends to be a slightly longer settlement time frame than our inside monthly securitization cadence and a lot of those settled right in the beginning of the year. So you are right to point that out. I think going forward, we certainly hope it's a solid blend of the 2 distribution channels. We'll look to whatever is the most accretive, but that could extend our days on balance sheet slightly. I think in general, you have seen a large pickup in our capital efficiency for the business over the last couple of quarters, we've really driven down our cost per loan. And we see a lot of the dynamics that drove NII and at least mortgage banking NII for Sequoia to persist through the first quarter as well.

Got it. Okay. That's very helpful. Second question, when we look at the delinquencies, they were flat for 3 of the 4 categories. CAFL was up noticeably after being up in the third quarter as well. Is this seasonal? Is this concentrated in any particular regions? How should we interpret the increase in 90-day DQs in that product?

Rick, it's Dash. I can take that. I don't think it's necessarily seasonal, but I would emphasize that with those sorts of portfolios because they're stabilized, a lot of the times, this is just borrowers sort of dealing with short-term collection issues or short-term OpEx increases and getting back on sides, which is what we largely expect with this uptick. That book actually prepaid reasonably quickly during the fourth quarter. So about 30 or 40 basis points of that increase is also just a smaller pool size. We haven't securitized those loans in about 1.5 years. We've been largely selling them either into joint ventures or frankly, to insurance companies. And so part of the uptick is also the fact that it's a smaller pool size quarter-on-quarter.

Got it. Okay. That makes sense. Last question, and since I'm sort of, I think, at the tail end of this, I hope you guys will indulge me one last one. When we think about the Aspire product and we compare it to the traditional Sequoia product, the traditional Sequoia product had extremely low losses and more importantly, I think a very, very low beta to the mortgage credit cycle. That is really the inherent strength of that product. I'm curious when you think about Aspire, and it sounds like it's largely home equity, but it also sounds like it may be some high LTV and maybe some lower FICO scores. Can you give us some context on that? Is the potential here that it is a higher returning product for you, but also has a higher standard deviation of returns over the cycle?

Yes, Rick, I'll start, and we can see where it goes. But Aspire, just taking a step back, it's become a big initiative of ours because the institutional seller base that we operate has started to onboard more of these products. So as we've been in this higher for longer environment, I think the prospects of a refi wave that many large originators, top 10 originators were hoping for or waiting for, I think they're not waiting for anymore. And as a result of that, they're refocusing on more specialty products, non-QM products, DSCR, bank statement, second liens, as you noted. So really an expansion from the traditional 30-year fixed jumbo, et cetera. So I think because of that, it's interesting, the non-QM space has really been a focus of bespoke originators, specialty originators. And what we're seeing is sort of the blue bloods of the industry get really focused on these products, which is great for us because we're completely plugged in there, and in many cases, a top 1 or top 2 buyer of their mortgages. And so it was really an expansion that started with originators that we plan to sort of pick up that business. But we ran Redwood Choice. We had branded our expanded program in past years. This isn't wildly different. We expect credit performance to be very, very strong. Since these could be higher LTV or they could be alternative underwrites, certainly, we would expect the performance not to meet sort of the super prime jumbo experience, which I think Dash mentioned was around 20 basis points. We still are very early innings, and we don't have a lot of performance history with these products at Redwood. So it's going to take some time to see how things shake out. But I wouldn't think of this as a huge deviation credit-wise from what you've seen from us. We expect these to be really good credits. And I think the real shift is just seeing these product classes being onboarded by the really large institutional originators as opposed to some of the smaller originators that have been leading the charge here in the past.

Our last question is from Jason Weaver with JonesTrading.

First, I was hoping you might be able to characterize a bit of what your conversations are going like. I know that GSE reform is probably a long-dated prospect, but how are you thinking about expanding either the seller network within Sequoia or expanding wallet share and how your negotiations with those partners are going right now?

Our network, we already do business with the vast majority of the industry. Our originators are originating agency mortgages, non-agency mortgages. And so we feel very plugged in across the board. I do think that GSE reform or privatization is a long ways away. We commented in our prepared remarks that our advocacy in Washington will be focused on sort of the DOGE approach to GSEs, which is mission creep and loan limits. We think it's crazy that the government is subsidizing $1.2 million mortgages. Those are the types of things that I think could change in the near term that have been enabled by regulators over the past few years. That's business that we've spoken for, for years and years and have done a great job serving that market. So for me, it's more what can we do to refocus the GSEs on core mission activities, let the private sector fill in the gaps. And if the GSEs do move towards privatization, that would level the playing field for us. So we've been operating in the private sector with no subsidies of any kind. And if that playing field gets leveled, we feel extremely good about our capacity to compete, our securitization infrastructure, all of those things. But I'm not sure that our seller base will change significantly, through the Aspire initiative, in addition to our current sellers, we'll probably add a host of special originators as well that we'll buy loans from.

Got it. And one other just slight modeling question. saw some overhead relief in the run rate in G&A from last quarter. Aside from volume issues and seasonal patterns, are you seeing any efficiency efforts there that you expect to persist?

Yes. The decline that we saw in the fourth quarter was really driven by lower compensation expense. A lot of our variable compensation and equity compensation is very closely aligned with performance. So the performance in the fourth quarter translated to lower OpEx there. I think as we go forward, we've pointed to several markers for how we're engaging the kind of KPIs of our business across our operating platforms and Redwood as a whole on how we've been driving efficiency over the last year. A lot of that was as our operating businesses were subscale and we were pulling back volumes and cutting costs accordingly. I think as you see expense as we move forward, a lot of it will be very tied to profitable growth of our operating businesses and variable compensation that follows performance.

There are no further questions at this time. I'd like to hand the floor back over to Kaitlyn Mauritz for any closing comments.

Great. Thank you, everyone, for joining our call today. We appreciate you taking the time to hear our view on the quarter and outlook for 2025. As we mentioned, there's a handful of materials on our website in the form of the Redwood Review in the shareholder letter that we encourage you to take a look at. And thank you again, and have a good evening.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.