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Home Equity Investments (HEI)
 9 Months Ended
Sep. 30, 2024
Equity Method Investments and Joint Ventures [Abstract]  
Home Equity Investments (HEI) Home Equity Investments (HEI)
We invest in HEI contracts from third party originators and in the third quarter of 2023, we began to originate HEI directly. Each HEI provides the owner of such HEI the right to purchase a percentage ownership interest in an associated residential property, and the homeowner's obligations under the HEI are secured by a lien (primarily second liens) on the property created by recording a security instrument (e.g., deed of trust) with respect to the property. Our investments in HEI expose us to both home price appreciation and depreciation of the associated property.
We co-sponsored two HEI securitization entities that we consolidated in accordance with GAAP, and have elected to account for them under the CFE election. As such, market valuation changes for the securitized HEI are based on the estimated fair value of the associated ABS issued by the entity, including the interest we own, and are reported in HEI income, net on our Consolidated statements of income.
The following table presents our HEI at September 30, 2024 and December 31, 2023.
Table 10.1 – Home Equity Investments
(In Thousands)September 30, 2024December 31, 2023
HEI at Redwood$255,521 $244,719 
HEI held at consolidated HEI securitization entities334,559 305,717 
Total Home Equity Investments$590,080 $550,436 
The following table details our HEI activity during the three and nine months ended September 30, 2024 and 2023.
Table 10.2 – Activity of HEI
Three Months Ended September 30, 2024Three Months Ended September 30, 2023
(In Thousands)HEI at RedwoodSecuritized HEIHEI at RedwoodSecuritized HEI
Fair value of HEI purchased and originated$460 $— $113 $— 
Net market valuation gains (losses) recorded 5,812 19,408 9,290 4,212 
Nine Months Ended September 30, 2024Nine Months Ended September 30, 2023
(In Thousands)HEI at RedwoodSecuritized HEIHEI at RedwoodSecuritized HEI
Fair value of HEI purchased and originated$1,066 $— $25,626 $— 
Net market valuation gains (losses) recorded 23,618 51,861 21,598 8,418 
The following table provides the components of HEI income, net for the three and nine months ended September 30, 2024 and 2023, and reflect net market valuation gains (losses) recorded on HEI at Redwood and on securitized HEI, net of the third party and non-controlling interests in the HEI securitizations that are not owned by Redwood.
Table 10.3 – Components of HEI Income, net
(In Thousands)Three Months Ended September 30, 2024Three Months Ended September 30, 2023
Net market valuation gains recorded on HEI at Redwood$5,812 $9,291 
Net market valuation gains recorded on Securitized HEI19,407 4,212 
Net market valuation (losses) recorded on ABS Issued from HEI securitizations(1)
(5,964)(1,512)
Net market valuation (losses) recorded on non-controlling interests in HEI securitizations(8,604)(1,732)
Total HEI income, net$10,651 $10,259 
(In Thousands)Nine Months Ended September 30, 2024Nine Months Ended September 30, 2023
Net market valuation gains recorded on HEI at Redwood$23,618 $21,599 
Net market valuation gains recorded on Securitized HEI51,859 8,418 
Net market valuation (losses) recorded on ABS Issued from HEI securitizations(1)
(18,845)(3,274)
Net market valuation (losses) recorded on non-controlling interests in HEI securitizations(21,111)(3,298)
Total HEI income, net$35,521 $23,445 
(1)Amount includes interest expense associated with ABS issued, which totaled $3 million and $9 million for the three and nine months ended September 30, 2024, respectively. For the three and nine months ended September 30, 2023 amount includes interest expense associated with ABS issued, which totaled $1 million and $3 million, respectively.