Redwood Trust, Inc. Q2 2026 Earnings Call

Greetings, and welcome to the Redwood Trust, Inc. second quarter 2026 financial results conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Natasha Fodrey, SP&A leader. Thank you. You may begin.

Thank you, operator. Hello, everyone, and thank you for joining us today for Redwood's second quarter 2026 earnings conference call. With me on today's call are Chris Abate, Chief Executive Officer, Dash Robinson, President, Brooke Carillo, Chief Financial Officer, and Abhinav Asthana, our Chief Technology Officer. Before we begin today, 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, which 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 and quarterly report on Form 10-Q, which provide 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. Reconciliation between GAAP and non-GAAP financial measures are provided in our second quarter Redwood 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 accurate only 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. It will be available on our website later today. With that, I'll turn the call over to Chris for opening remarks.

Thank you, and good morning, everyone. Redwood exceeded $8 billion of mortgage banking volume for the second straight quarter. We did over 20 securitizations for the first half of the year. We ended the quarter pricing three securitizations in a single week, one for each of our operating platforms. A first for Redwood in our 32-year history. That makes us happy and a little nostalgic at how productive the company operates these days relative to the past, when two to four securitizations a year was deemed just fine by market standards. Broadly speaking, it's no secret the housing finance business has been a lot less forgiving for this current generation of mortgage practitioners. First in over 40 years not to benefit from a long-term bull market in interest rates, which served as an invisible tailwind for both the lucky and the smart.

Home affordability and supply headwinds, both closely linked to high interest rates and regulation, have impacted the addressable mortgage market and how mortgage businesses fundamentally operate. Today's environment requires higher operating efficiency and capital turnover and a deep strategic mode that can drive growth despite home sales activity still coming in at multi-decade lows. As investors seek to align with the long-term winners of this extended rate cycle, we're prioritizing a few key differentiators that are worth mentioning. Let's start with technology. We are rebuilding Redwood as an AI-native housing finance platform with proprietary systems developed by our own engineers and embedded directly into our workflows. Our multi-agent AI systems help teams retrieve answers quickly and apply the same intelligence to complex tasks, including seller financial reviews, guideline comparisons, and contract analysis.

Result has been faster expert reviews, greater consistency, and greater scale. There are people in the loop on every key decision. This is still early innings, but the capabilities we are deploying are proprietary, compounding, and changing how we operate. Early indications of the operating leverage from technology are already visible. Direct expenses were 64 basis points as a percentage of volume for the first half of 2026. Already a 28% improvement from full year 2025. Annualized time savings from our 2026 AI-enabled automation initiatives increased to approximately 23,600 hours, up more than 50% from the first quarter of 2026 baseline, with meaningful impacts on due diligence costs, rate sheet pricing, and guideline analysis. We also extended our unified technology platform supporting Sequoia and Aspire to enable HELOCs as a new Sequoia product.

The bottom line is this: If you're wondering who the AI winners and losers are going to be in housing finance, we'll put 90% annual volume growth with consistent margins up against anyone operating in the housing market today. A market that has been operating at overall volumes down 50% from 2021 levels. As many of you know, our RWT Horizons venture fund complemented, in certain ways, significantly accelerated our growth in mortgage banking in recent years. Representing less than 2% of our capital, Horizons gives us access to more than 25 early-stage companies across the mortgage and AI ecosystem. During the quarter, we invested in Prometheus, an artificial intelligence company developing an artificial general engineer, while another AI company in our portfolio priced a financing round that values our initial seed investment at approximately 27 times our cost.

Our dual approach of adopting AI inside Redwood and investing directly at the frontier of technology remains a long-term strategic initiative. Product depth and distribution are another important part of the story. At Sequoia, newly launched products now represent more than 30% of our quarterly lock volume. Aspire also grew more than 30% sequentially in the non-QM space, while CoreVest is building momentum in its smaller balance offerings for experienced housing investors. Taken together, Redwood today is materially less dependent on any one product or on any mortgage re-fi cycle. It also differentiates our earnings model in comparison to monoline operators with revenues more tied to MSR values and associated customer retention. Our model, conversely, is built around efficiently aggregating loans from across our broad network and distributing them to long-term investors through securitizations, whole loan sales, and strategic partnerships. Our bank relationships further strengthen that position.

Large depositories leaned into mortgage volume during the second quarter, even at the expense of margins, underscoring that bank behavior is already evolving as the Basel III Endgame is finalized. Lower capital charges and high-quality mortgages may have been a necessary regulatory impediment for banks to reengage, but they are certainly not the only constraint. The ultimate decision by banks to boost origination activity remains risk-based, and to repeat ourselves, the mortgage risk that bank C-suites most consistently cite to us as top of mind is convexity, not credit. Redwood enables our bank partners to generate fee income and retain their clients while transferring their interest rate exposure to us while they retain and continue to grow the customer relationship. At June 30th, Redwood acted as a dedicated capital partner to 70% of the top 50 banks in the U.S.

Our ability to help banks manage ongoing mortgage exposures differentiates Redwood and reinforces our essential role throughout the banking system. In summary, the business we operate today is fundamentally different than it was 20, 10, or even two years ago. Advanced technology and operating efficiency, more comprehensive products, diversified distribution, premier institutional capital partnerships, and a shrinking legacy portfolio position us to grow going forward through a wide range of market environments to create long-term value for shareholders. Not just when all boats are rising, as they do when interest rates fall, but through challenging rate cycles where hard work and innovation make the difference. With that, I'll turn the call over to Dash to discuss our operating results.

Thank you, Chris. Our second quarter operating performance reflected the combined benefits of product diversification, capital-efficient distribution channels, and an operating framework that's fully integrated with core AI initiatives at the center of our strategic blueprint. The result was an eighth consecutive quarter of mortgage banking returns north of 20%, increasingly fertile ground for continued capital redeployment away from our non-core portfolio holdings. At Sequoia, second quarter lock volume totaled $5.6 billion alongside several noteworthy product and distribution benchmarks. Gain-on-sale margins were 92 basis points overall, in line with the first quarter's 96 basis points, despite substantial macro headwinds in April and May and broader indications of pronounced margin compression across the industry. Distribution remained well-aligned with production, most notably with a Castlelake joint venture coming online in late June, nine Sequoia securitizations, and $1.2 billion of whole loan sales, almost all to banks.

Sequoia's production mix included over 65% purchase money loans. The strategic positioning Chris referenced has emerged as an important buffer against profitability headwinds for non-bank operators that are often coupled with reduced housing activity and renewed vigor for bank portfolios. This is in large part attributable to how our platform as a non-bank has positioned itself within the depository ecosystem. When business drivers, including those influenced by capital rules, need a bank to buy or sell mortgage loans, we are most often the first call. That deep bank relationship drove the launch of our Medical Professionals loan program, now offered broadly to our seller network with great early success, including a second Med Pro securitization earlier in July that priced well inside of our inaugural issuance.

The recent launch of our HELOC program builds on our optimism that deeper product offerings will continue to drive resilience during periods of upward pressure on rates and volatility through stable margins, increased relevance to our deep seller network, and our ability to support two-way flow between bank portfolios. Also key to this positioning is Aspire, whose establishment 18 short months ago was designed to leverage existing strengths by offering a well-underwritten, flexible suite of expanded products to a broader network of originators. Aspire delivered over $2 billion of lock volume during the second quarter, another record for the platform, up 31% from Q1. Market observers expect non-QM originations to reach $150 billion in 2026, up 20% from last year and reflective of a growing cohort of high-quality borrowers that access credit differently than the traditional W2 employee.

This implies a run rate market share for Aspire of approximately 5%-6% that we seek to grow to 10% by year-end 2026 through a relentless commitment to product innovation, accretive distribution, and technology, including recently announced progress with AI-powered pricing and guideline analysis tools. Institutional investor demand continues to support the non-QM sector's growth in general and Aspire's in specific. The business completed its second and third securitizations issued under the Aspire shelf during the second quarter, with the risk retention and support in the tranches once again syndicated profitably to third-party investors. At June 30th, 60-plus day delinquencies within Aspire's securitized population were less than 10 basis points. Subsequent to quarter end, we executed definitive documentation for an Aspire-dedicated joint venture with Crayhill Capital Management, a leading structured credit investor.

Through time, the vehicle has the potential purchasing power of up to $8 billion of loans, underscoring demand for Aspire's products and an important early validation for the business. Similar to our other joint ventures, it provides a source of recurring revenues with added performance fees upon reaching stated return thresholds. Each of our platforms now operates with a dedicated joint venture with key benefits to our operating leverage and revenue durability going forward. CoreVest, our direct originator focused on lending to housing investors, funded $410 million of loans during the second quarter, down approximately 5% from Q1 as higher rates weighed on portions of the pipeline and legislative uncertainty, now largely settled, impacted certain key pockets of market activity. We remain disciplined while borrowers and developers assess the evolving regulatory and legislative landscape.

With the landmark housing bill now passed and build-for-rent carved out from institutional ownership limitations, activity is beginning to reopen in areas that had largely paused. CoreVest remains well-positioned, supported by its longstanding focus on experienced sponsors below the largest institutional segment. A key milestone for CoreVest during the quarter was its first term loan securitization since 2023, since which time our term loan production has largely been sold in whole loan form. The $268 million transaction priced accretively to loan sale economics and was placed with close to two dozen discrete investors, a market response that underscores the deep demand for the platform's origination activities. The team also entered into a new servicing arrangement later in the second quarter designed to reduce administrative demands and lower servicing costs over time and launched a targeted business development initiative to expand lead generation.

As immediately realizable returns in mortgage banking continue to sit well above 20%, the value of continued reallocation away from our legacy investment segment remains significant. At quarter end, allocation to this portfolio totaled 12% of overall capital, down from 15% on March 31st and 63% lower than one year ago, when we announced the accelerated wind down of this position. Early in the third quarter, we commenced formal marketing of a substantial portion of our remaining legacy bridge loans and continued to progress individual line items through to resolutions, unlocking capital and reducing associated secured debt. Thus far in the third quarter, we also priced a new financing arrangement for the remainder of our home equity investment portfolio that pro forma we expect to reduce segment capital to below 10%.

90-day-plus delinquencies in the unsecuritized legacy bridge portfolio were roughly flat versus March 31st. The priority remains fully moving on from this position as quickly and efficiently as possible to support further growth of our core activities. I will now turn the call over to Brooke to discuss our financial results.

Thank you, Dash. Turning to our second quarter results, we reported a GAAP net loss of $3 million, or $0.03 per share, compared with a $0.07 per share loss in the first quarter. Book value per common share was $6.90 at June 30th. The 3% decline from $7.12 at March 31st was primarily driven by marked-to-market changes and ongoing carry costs within our legacy investments portfolio, as well as the $0.18 dividend paid to common shareholders. On a non-GAAP basis, consolidated earnings available for distribution, or EAD, was $20 million or $0.15 per share, compared to $0.21 per share in the first quarter. The quarter again reflected two distinct trends. Our core segments remained highly profitable, generating $34 million of earnings available for distribution, representing an 18.5% annualized ROE, while legacy investments generated a $14 million EAD loss.

Turning to our segment results, aggregate mortgage banking net revenue remained essentially flat despite a roughly 6% decline in production, reflecting stable to improving margins across the platforms while direct expenses declined. The result was a 33% annualized return on average capital for our operating platforms, with capital efficiency continuing to improve. Average capital required per dollar of production fell to roughly 2.6% in the first half of 2026 from about 3% a year ago, underscoring the scalability of our mortgage banking platforms as volumes grow. Prior to corporate allocations, Sequoia generated $32 million of GAAP net income compared with $38 million in the first quarter. The sequential decline was primarily volume driven as purchase commitments declined 9%, while the 92 basis point gain on sale margin remained near the high end of our historical target range.

Cost per loan improved to 17 basis points from 18 basis points, demonstrating that we maintained operating discipline as volumes moderated. Therefore, we expect the partnership to begin affecting capital velocity and fee economics more visibly in the second half of the year. Aspire generated $7 million of GAAP net income, up $5 million sequentially. Lock volume increased 31% to a record $2.1 billion, while gain on sale margins increased to 101 basis points from 73 basis points as securitization spreads normalized and hedge performance improved relative to the first quarter. Importantly, this growth was achieved with improving capital efficiency, resulting in a 33% annualized return on capital for the segment. CoreVest generated $1 million of GAAP net income, compared with a $3 million loss in the first quarter, which had included approximately $5 million of restructuring charges.

Excluding acquisition-related expenses, EAD contribution for the segment increased to $3 million. Net revenue rose 8%, reflecting improved term loan execution, while direct operating expense declined meaningfully following the actions taken earlier this year. Net cost to originate was 96 basis points in the second quarter, up from 79 basis points in the first quarter, reflecting modestly lower fee and income relative to expenses, along with 5% lower quarter-over-quarter volume. Redwood Investments generated approximately $1 million of GAAP net income, compared with an $8 million loss in the first quarter. The improvement reflected a more constructive valuation backdrop across portions of the retained portfolio and lower expenses. Although the segment continued to experience fair value pressure in selected bridge and SFR investments. We deployed $72 million of capital into investments sourced from second quarter securitizations.

Because much of that deployment occurred late in the quarter, its earnings contribution should be more impactful in the third quarter. During the second quarter, we refinanced a portfolio of retained securities at an all-in cost of funds approximately 150 basis points below the prior financing. With approximately $1.5 billion of secured portfolio debt callable over the next 12 months, we retain a meaningful optionality to reduce funding costs as opportunities arise. Legacy investments generated a $23 million GAAP loss, which included $12 million of negative fair value changes, primarily on legacy bridge loans inclusive of realized resolution activity. The financing, marketing and structured sale initiatives Dash discussed are intended to release capital for higher returning uses and reduce the negative carry still embedded in consolidated EAD.

Based on the current return differential between Legacy and our core segments, we estimate that each $100 million of capital successfully redeployed could improve consolidated EAD ROE by approximately 200-400 basis points through reinvestment in our operating platforms or potentially share repurchases at appropriate levels. Total operating expenses were down 21% on the quarter, with G&A declining to $38 million from $49 million. Approximately $7 million of the reduction reflected restructuring charges recorded in the first quarter, with the remainder primarily attributable to lower compensation and variable expenses. Importantly, first half adjusted expenses represented 64 basis points of production, compared with 88 basis points for the full year 2025 as volume growth continues to outpace expense growth. We expect some natural variability in quarterly expenses, the structural efficiency gains reflect in cost per loan trends and expenses relative to volume remain intact.

Recourse debt declined by approximately $150 million to $4.5 billion, while recourse leverage declined modestly to five times. More than half of recourse debt supports mortgage banking inventory that turns rapidly through securitizations or loan sales and joint ventures, with loans held for an average of approximately 26 days in June. We ended the quarter with $192 million of unrestricted cash, approximately $100 million of unencumbered assets, and $3.7 billion of excess warehouse capacity. In the last year, we have renewed or added approximately $4.4 billion of capacity, the senior notes issued in the quarter further extended our unsecured maturity profile. With that, I'll turn the call back to the operator for questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press *2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Rick Shane with J.P. Morgan. Please proceed with your question.

Good morning, guys. Can you hear me?

Yep. Yes. Excellent. Sorry, I couldn't help but fun with me.

We have a new system over here. It's 5:00 in the morning. Look, you guys are making progress in terms of reallocating capital. There's $195 million left. You talk about getting down to 10% by the end of this quarter. Realistically, how much of that $195 million do you expect to be able to realize? Obviously, I think there's some friction as we saw this quarter, and as the business descales, there may be further just operating losses associated with it. How much of that sort of $195 million melting actually will go into the remainder of the business over the next couple of years?

Hey, Rick, it's Dash. I can start. A couple of pieces in your question. We expect to continue trending towards the capital in the legacy investment segment to below 5% by the end of the year. That's how we've been guiding the market for a few quarters now. As we said in our prepared remarks, we actually did price a transaction this week, which we think pro forma will bring allocated capital to below 10% to that segment. That's definitely progress. As I also mentioned in the prepared remarks, we're currently working on a disposition plan for a large portion of the remaining unsecuritized bridge loans which we'll hopefully have more to talk about for Q3 earnings. We believe we're still on track to have that segment below 5% of capital by the end of the year.

As we said a lot, we're trying to be balanced between disposition speed and execution, also recognizing just the significant accretion of redeployment of that capital. As we can elaborate on, we're highly confident that as that capital continues to come out of that segment, that we will have a place to go with it immediately. We're still doing $8 billion plus volumes in mortgage banking. We're bringing on new joint ventures. All of which speak to the fact that those are all tailwinds for us to continue to grow market share in mortgage banking.

As Brooke articulated, the decisions around continuing to unlock that capital, we have to weigh the right execution, also the fact that there's $0.14 to $0.15 a quarter of negative carry and opportunity cost within that segment that we think is immediately realizable through the retirement of secured debt, like I mentioned, also the immediate redeployment. We feel like the opportunities are there to redeploy very efficiently as we continue to wind that book down.

Got it. Look, you guys executed a transaction at the beginning of the third quarter, as you've talked about. Presumably when you were valuing the portfolio at the end of the second, you were probably pretty close to that execution, so you had a good sense of value. How much of the second quarter mark was informed by the execution of the third quarter deal? Because again, I'm trying to understand. We saw capital allocation decline during the quarter, partially a portion of reallocation, but also partially a function of a decline of capital. That's what I'm trying to understand here, sort of that $195, how do we think about what flows into the rest of the business going forward?

Rick, I would say, every asset in our legacy book at this point, we're down to a couple handfuls of loans here. These are really distinct. The execution, I think, that we had in the third quarter of last year is helpful. We definitely were looking at what our resolution strategy was for each of the assets at 6/30, and that definitely informed our mark.

Yeah. The transaction you're, I think, referring to, Rick, was for the remainder of our HEI position. Certainly the mark at June 30 was informed by that execution, which we've since completed. That's very much in line. As it relates to the legacy bridge portfolio, Brooke is right. Obviously, as we say every quarter, that book is fair valued. It's marked where we feel like we could execute it. We're going to be obviously responsive to what the market tells us in terms of disposing of the rest, again, with an eye towards where we can redeploy that capital quickly and a reduction of the secured debt that's influencing some of the carry costs that Brooke articulated.

Terrific. I've taken a lot of your guys' time. Thank you guys very much.

Our next question comes from Doug Harter with BTIG. Please proceed with your question.

Hi. Good morning. This is actually Will Nast on for Doug this morning. I know you mentioned in the release talking about having a more cautious operating posture early in the quarter. Given the move higher in rates early this quarter, I was hoping you could talk about how you're thinking about banking volume sensitivity to rates and kind of with volatility versus higher rates, how you guys are thinking about that right now.

Yeah. We definitely were more cautious in the second quarter. Certainly earlier in the quarter, rates were very, very volatile and there was a lot of geopolitical uncertainty, as everybody well knows. June, things felt more stable and we leaned back in. I think we said 40% of our Q2 volume was in the month of June alone. To me, that's pretty good validation that we've got recurring revenue streams from these businesses, really durable volume opportunities, obviously we're going to be risk-minded as we pursue them. We saw things pick back up when we decided to lean back in in June, I think we saw more of the same in July. In the past week or two, rates have backed up. Obviously, we're looking at a 463-ish 10-year, and mortgage rates are close to their one-year high, I suppose.

All of that we need to factor in. I think by and large, we feel pretty good with our risk position today, our ability to continue to grow volumes. We can't control what's going on in the macro environment, we need to continue to be responsive to what we're seeing on the ground. I would say July's been a fairly strong month from a mortgage banking perspective, and we're hoping that we can maintain that momentum in August and September.

Got it. Thanks. Then just one more. I know you talked about your technology investment and how that's helped to improve expense efficiency down to, I think, 64 basis points you guys had mentioned. I was just hoping that you could talk about kind of where you see that number trending, if you see more potential upside there or progress you can make on that side, or if there's a particular level that you guys are comfortable with on that.

This might be a good opportunity for Abhinav to chime in on a few of the efficiencies we've been focused on, then perhaps Brooke could follow up with some of the numbers.

Thank you, Chris. Thank you, Doug, for the question. I think the important part to recognize is that Redwood has been very thoughtfully investing in technology and especially AI over the last 18 months, I would say. We've started to see some of that result in compounding value proposition for the company. We've been investing in foundational AI platforms, as Chris mentioned in his prepared remarks. We're not bolting on AI, where we look at incremental or small, minor changes in how we do our business. We are rather looking at how we rethink the operating model in itself. So as we built our platforms, we've kind of re-engineered how our operating platforms and business platforms conduct business.

To that effect, we've not only added efficiencies in terms of where we see waste in the process, but we also have now eliminated parts of the function that no longer make sense to our business. In doing so, we've been able to provide value as we grow our businesses. The more important part to think about is as we scale our business, these platforms are designed to handle volume as we grow and operate at efficiencies that are going to be significantly much larger than where we are today. Brooke? Yeah. The only thing I would add is that the improvement thus far from 2025, they have been driven first by just the scalability of our platforms and the amount of market share we've gained.

And so volume has certainly helped that. Secondly, our variable expense structure has provided a large benefit here, and we're really starting to see technology start to carry some of its weight here on the improvement. I think the next 10 to 15 basis points improvement will probably be driven more by tech and continued scalability of our platform. But we imagine this ratio will continue to decline as we efficiently fund our loans via some of these technological enhancements that Chris and Abhinav Das all mentioned today in their prepared remarks.

Great. Thanks for taking my questions.

Our next question comes from Marissa Lobo with UBS. Please proceed with your question.

Good morning. Thanks for taking my questions. Just thinking about gain on sale margins. You flagged that banks were competing aggressively in Q2, but Sequoia margins were better than we expected. So how much of that resilience was mix versus pricing discipline? And as banks lean in further, how should we think about how the gain on sale margins evolve?

Yeah, we observed. Certainly, we're still kind of midway through earnings season here. We definitely observed the large money center banks leaning back in whether that was front running, the anticipated capital rule changes. We're not certain, but certainly, 20%, 30% sequential gains in volume at meaningfully lower margins, at least from what was disclosed, sort of indicate to us that you saw some leaning back in. It'll be interesting to see what overall industry volumes do for the quarter. We did a pretty good job of maintaining our volumes or demonstrating consistency even while staying risk-minded. Part of staying risk-minded is preserving margins and not chasing volume. I thought we did a good job of that during the quarter. Our business has really been built to be a holistic partner to banks.

In July, we actually locked a very large bulk sale to a regional bank. We've been mostly buying loans from banks over the past few years, but there could be two-way flows. The real essence of the franchise is the relationship itself and the technology implementations, the LO training, all of those things that go into a partnership. If the banks want to lean in, particularly the regional banks, and they want a capital partner to help them do that we're very much focused on serving our clients. That said we don't necessarily see housing activity meaningfully higher and certainly refi activity had trended down over the past quarter. These do look to be kind of market share battles between perhaps the banks and the non-banks from an originator standpoint.

We'll look when the smoke clears on Q2 earnings season to kind of see where overall volumes landed.

Got it. Thanks for that. Can you provide any color on book value performance quarter to date?

Yeah. We're up about approximately 1%. We've recovered part of Q2's decline.

Yeah, that 1% is certainly a function of strong mortgage banking results in supply.

Okay, great. Thank you for taking my questions.

Our next question comes from Crispin Love with Piper Sandler. Please proceed with your question.

Hi, good morning. This is Ben Graham in for Crispin Love. Thanks so much for taking the question. I'm wondering what your views are on the administration really focusing on housing, specifically housing affordability through GSE purchases, the single family executive order, et cetera. Just broadly, what do you think would be some of the best ways to address the affordability issues in the U.S.? Thank you. Well, I think, the Road to Housing Act, the legislation is very focused on housing supply, which is the right long-term answer.

We need more homes built. We need permits to be easier to obtain. We need builders to be profitable. There's a lot in the bill. We were very happy that build-to-rent wasn't adversely impacted at the end of the day. We're excited about the future of our CoreVest business. All of those supply initiatives, I think are going to take those are long-run initiatives. In the short run, it's really the demand side is probably all that the administration can hope to affect certainly between now and the midterms. The MBS buying of the GSEs has been pretty evident in the market. There's not as many kind of natural buyers of those bonds.

Certainly since the Fed stopped buying a few years ago, to have the GSE step up, I think has certainly helped the TBA market through this very volatile rate period since the conflict with Iran began, certainly. We've seen some offsetting pressures there, which we suspect are coming from GSE purchases. Overall that makes its way into the non-agency space. We're seeing pretty stable jumbo executions for instance which is very good. In the near term, I'm not sure what else can be done to really rein in mortgage rates. We got a long way to go before we're back into a five handle, if you will, rate, and we see meaningful pickups in refi volume. I think home equity is a big initiative for many in the industry, ways to continue to serve the client without new mortgages.

All of those things we're focused on as well. Overall, I think between now and certainly the end of the year, we're sort of range bound absent any big catalyst.

One thing too on the Road to Housing legislation. We've seen our CoreVest production a bit softer over the last two quarters. A lot of that was largely tied to the legislation. Now that there's clarity, we have seen a pickup in transaction volume from middle market investors, allowing them to really start to reallocate capital. There was a lot of frozen capital on the sidelines, particularly in parts of the bridge market where we've been really under-penetrated, particularly in build-to-rent, which was about 2% of our volume on the quarter. We might see a mix shift here from some of that pent-up demand. I think our term sheets issued are up about 40% since the trough in the spring when this was really an overhang on the sector.

CoreVest had a quarter where income picked up, and we should see more of that as some of these deals get done.

Awesome. That's it for me. Thank you guys both so much for the color there.

As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question comes from Mikhail Goblin with Citizens JMP. Please proceed with your question.

Hey, good morning, everybody. Hope everyone's doing well. If I could maybe dig in and get some more color on your general thoughts on the non-QM space, what you guys are seeing in that Aspire segment of yours. Your thoughts on the progression of lock volume going forward, which has been obviously very excellent, and also your expectations for margins going forward. Thank you. Thanks, Mikhail. It's Dash.

I can start there. We are still very much of the view that the non-QM market is going to continue to grow. As I think we said in the prepared remarks, there's 20% or so expected growth this year. We think with Aspire, we're leaning in at the right time to what's definitely a growing market. I think some of that, as always with these consumer products, is just consumer awareness, and I think the market's come a long way over the past couple of years in making consumers that qualify for these loans aware that they can qualify, the folks that aren't traditional W2 employees. I think that's been a big development for the sector.

In terms of how we're approaching it, one of the value propositions for Aspire from the beginning has always been just the incredibly strong foundation from our Sequoia business and the years-long relationships we've had with sellers, more of whom we've seen insource these sorts of expanded credit products. As rates have stayed high, as you know, a lot of our longtime relationships that we've bought jumbo loans from for a very long time have begun to insource these loans over the past couple of years.

To diversify their product offerings, retain and attract LOs, et cetera. I think that competitive advantage has been empirical in Aspire's growth. At this point, two-thirds or so of our Aspire production is with existing Sequoia relationships, which is pretty close to how we expected it to happen. We're also growing with new sellers, and we have a lot of existing sellers that aren't online yet. When you think about the growth to $2 billion a quarter, some of that runway is what underpins our goal that Aspire speaks for closer to a 10% market share by the end of this year or early next year, up from what we estimate to be 5%-6% currently. As it relates to margins, we're still expecting to be very much in our long-term range of 75 to 100.

We're excited to get this new joint venture up and running as sort of a fast follow from the Castlelake joint venture and the Sequoia business. Those JVs in general, just to speak to that for a second, just the pricing power that they give us in the market and the ability that we have to leverage our internal capital 10 to 20 times with these partnerships. Our dollar goes a lot further and at higher ROEs when you combine the certainty of those economics, the fees we earn, and obviously, the fact that we're partnered with ParaPursuit Capital next to us, that's 80%-90% plus of the equity of those vehicles. It's become a really virtuous cycle with how we've brought some of this outside capital in to drive growth. We certainly expect Aspire to continue to grow.

I would say that the market in general, Mikhail, continues to be very responsive to these sorts of cash flows. If you think about the ability to access mortgage credit, the GSEs haven't issued deals in a while. It's uncertain when they'll do that again. The non-QM market continues to be a pretty efficient vehicle for investors to put capital to work in U.S. housing credit. I think you've seen that in how well the markets absorb volumes and obviously with the overall growth.

Thanks, Dash. That's much appreciated. If I could squeeze in one more, just your guys' general thoughts on borrower credit quality at the mid-year point. Thanks. In our experience, Mikhail, it's been quite stable.

We track obviously our delinquencies and certainly our underwriting guides, and we've been pretty fortunate with the performance of the book up to this point. More broadly, obviously there's some warning signs out there, but I think for us, we're focused on working down our legacy book and in Aspire and Sequoia is a pretty consistent credit performance.

Thanks again. Appreciate it. Our next question comes from Bose George with KBW.

Please proceed with your question.

Hey, everyone. Good morning. Just wanted to go back to the expenses discussion. The comp expense was down quite a bit quarter-over-quarter. Was there some structural stuff, or was it just like Q1, I guess, had some of the year-end? Anything to just call out there?

Yeah. Thanks for asking. Part of our prepared remarks were just really calling out that we did have about $5 million-$7 million of kind of restructuring related expenses in that Q1 number. We expected that to come out of our run rate. We had originally guided, I think, last quarter that we should be inside our fixed comp from Q4, which we saw in G&A by $2 million. We had about $7 million or $8 million that was attributable to just the one-timers that were in last quarter. We did have lower acquisition costs just based on slightly a smaller volume. We did have slightly lower portfolio management costs relative to the first quarter, and then just generally fixed comp expense and some variable costs were the remainder of the delta.

We've really tried to ensure that we're putting out enough metrics on the expenses of the business, particularly given how much we've increased volume since the fourth quarter for that comparison point where we're down on an annualized basis, probably $10 million-$12 million of G&A, which we had guided, and volume's up a couple billion relative to that quarter. Again, back to the point around technology and our scale. We're proud of those efficiency metrics.

Okay, great. Makes sense. Thanks. Actually, I didn't know if you mentioned this, but on the allocation of capital, those capital looks like reallocated from mortgage banking to the investment segment. Was that just sort of reflecting the economics of that, or just curious what happened there?

Yeah. We have several servicing or other IO-related assets that hedge our pipeline. At a certain point, if those lose some of their pure hedging value for mortgage banking based on our pipeline, we will move them into the portfolio as we like those profiles as long-term hold assets as well. That was really the mix shift between the capital allocation between the portfolio and mortgage banking.

Okay. Was the decline in servicing income because of the reallocation or?

No, we just saw a slight pickup in speeds relative to our Q1 results. That was just a small mark-to-market impact from legacy MSR.

Okay, great. Thanks. We have reached the end of our question and answer session, which now concludes today's teleconference.

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