Redwood Trust's mortgage origination businesses reported lower aggregate volume versus the first quarter, although one unit showed remarkable strength.
The Aspire non-qualified mortgage segment had $2.1 billion of lock volume,
"Our mortgage banking businesses continued their momentum in the second quarter, with aggregate volumes of over $8 billion despite continued geopolitical and interest rate volatility, and subdued overall housing market activity," Abate said in a press release.
This compared with $8.5 billion of volume across all three of its segments in the first quarter, the other two being Sequoia and business purpose lender CoreVest.
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What the analysts say about the results
The total is about 10% below BTIG's estimate of $8.8 billion for the whole operation, Douglas Harter wrote in a comment note. But Aspire came in 15% above his prediction, while jumbo volume which he estimated to be between $5 billion and $6 billion was lower than the $6.5 billion forecast.
Aspire began reporting as a separate segment in the first quarter.
"This marks two consecutive record quarters for the platform and the update suggests trends at the platform remain strong despite a weaker macro backdrop," wrote Bose George, an analyst at Keefe, Bruyette & Woods, in a flash note. "This is consistent with management's commentary on Aspire capturing increased market share within non-QM."
In the flash note, George pointed to management's comments about GAAP book value being down between 1% and 3% during the quarter, inclusive of legacy investments.
"This implies a 2Q26 GAAP book of $6.91-$7.05 down from $7.12 in 1Q26," he wrote. "This suggests continued drag from its legacy investments and modest decline from interest rate and credit volatility in 2Q."
It was also a miss for BTIG, with Harter noting "This is below our estimate of relatively flat (+0.2%) 2Q book value and positive (+2.8%) economic return."
Aspire to enter into a joint venture
In the preliminary earnings report, Abate announced a joint venture for Aspire with an unnamed partner. This follows the April announcement of
Aspire has launched a proprietary artificial intelligence
"These new tools deliver unified loan-level pricing and underwriting functions across bulk and flow channels, and are innovations that will support a dedicated Aspire joint venture," Abate said.
"Key terms and documentation for this new joint venture have been fully negotiated with an institutional capital partner, and we expect to begin contributing loans to the JV during the third quarter."
Is Redwood Trust's stock undervalued
Redwood Trust's common stock remains cheap, George said. On March 31, it closed at $5.41 per share. Since then, the shares are down 14%, and are currently trading at 70% of trailing first quarter tangible book value, he pointed out.
While the stock did close above $6 per share on April 14 and 15, it has been mostly trending lower since, to $4.74 on June 30.
On July 2 S&P Dow Jones Indices announced it was removing Redwood Trust from the S&P SmallCap 600 before the market opens on July 8, because the real estate investment trust "is no longer representative of the small cap market space," the announcement said.
George, who rates the stock market perform, said the weakness is for technical reasons due to the removal from the SmallCap 600.
In a July 5 note, George estimated that because of the change, passive S&P index funds would need to sell 20.3 million shares of Redwood Trust stock, based on 12 days of its average volume.
