Redwood gains ground with jumbos, defends GSE privatization efforts

“This is very much market share,” CEO Chris Abate told HousingWire in an interview. 

Following the regional banking turmoil in 2023, when institutions like First Republic, Signature Bank and Silicon Valley Bank collapsed, depository lenders began pulling back from holding mortgages on their balance sheets. In turn, Redwood is working to activate the previously “dormant” jumbo market. 

Redwood now estimates its share of the jumbo space at 6% to 7%, up from 5% in 2024 and a long-term average of about 2%.

“The housing market remains tough; we think 6% [mortgage rates] as the fulcrum where you start to see demand pick up a lot in housing. Mortgage rates have been closer to 7%, so there’s been limited new production activity,” Abate said. “But there’s over a trillion dollars of seasoned jumbo mortgages on bank balance sheets.”  

To capture this opportunity, Redwood has partnered with regional banks, many of which lack broker-dealer capabilities or capital markets infrastructure. Unlike larger banks and broker-dealers — often viewed as competitors — Redwood positions itself as a collaborative partner to these institutions.

Redwood’s business model is similar in structure, although smaller in scale, to that of Fannie Mae and Freddie Mac. The company doesn’t originate or service loans but acts as a liquidity provider, purchasing loans and selling them into the secondary market through securitizations. Over its 30-year history, Redwood has completed 140 securitization deals.

Despite market volatility, investor appetite for jumbo assets has been “surprisingly robust,” Abate said. But he pointed to regulatory hurdles that could be eased to attract more international capital — particularly from Europe and Asia. These include risk retention rules and restrictions around public securitization platforms.

Meanwhile, private capital could increase participation in the mortgage market with a retreat from the government-sponsored enterprises.

“We’ve gotten tremendous inquiries from private credit institutions who are underinvested in residential mortgages because of the government’s dominant share — there’s more capital today to crowd into the private sector than there ever has been in my experience,” Abate said. 

He sees the Trump administration as willing to “just, philosophically, level the playing field” between the private sector and the GSEs. Realistically speaking, however, he believes that releasing the enterprises from conservatorship won’t happen before 2027 or 2028 due to several reasons. These include the 2026 midterm elections, a potential recession and the need to build capital. 

In addition, the government has to convert the Department of the Treasury’s senior preferred shares into common equity and obtain credit ratings for the GSEs’ securitizations. There will also be some political opposition, Abate said.

“There’s going to be a lot of battles,” he added. “You wouldn’t want to see a big shock to mortgage rates or big impediments to home access, with respect to things like loan limits or guarantee fees. Gradual changes make sense.” 

On the macroeconomic front, Abate said the economy is clearly slowing, which will make the credit market more challenging in the second half of the year. He also pointed to the historically wide spread between the 10-year Treasury yield — approaching 4% — and mortgage rates, which remain in the high 6% to low 7% range.

“That [gap] could close if spreads tighten,” Abate said. “But ultimately, the drivers of mortgage rates are going to be a function of the broader economy and the impact of tariffs, tax legislation and government borrowing.” 

Redwood is preparing accordingly, ensuring it doesn’t hold excessive risk on its balance sheet while maintaining a consistent presence in the securitization market. The company posted net income of $14.4 million in Q1 2025, compared to an $8.4 million loss in the prior quarter.