Unidentified Analyst: Hi. Thanks for taking my question. This is [indiscernible] on for Kevin Barker. Just trying to size up the opportunity potentially partnering with homebuilders given housing dynamics, I know you mentioned last quarter you’re seeing homebuilders pivot from a force out of for rent strategies. Is this a dynamic you’re still seeing play out? And is this something you would look to do partnering with the homebuilders going forward?
Dash Robinson: Yeah, this is Dash. That’s a great question on. We look to do that through each of our mortgage banking channels. And one of the reasons we’re trying to do that as I think some of the trends we saw three to six months ago are probably reversing again, candidly if you think about just the strength of the bid from owner occupants with continued buoyancy in HPA on I think some of those trends have probably reverse but that’s a big opportunity for resi mortgage banking. And it’s still one we see in BPL. But I think the dynamics between just where cap rates are going broadly and then, the owner occupied bed those — those can invert depending on the quarter. And so we still actively look to do that deal in both channels for that exact reason which is those dynamics it tends to shift quarter-to-quarter.
Unidentified Analyst: Thanks Dash. And then a last one for me, I know you guys mentioned it but can you just talk a little bit more in detail on the traction on the jumbo side, now given the large opportunity with the banks facing a high degree of uncertainty.
Dash Robinson: Yeah. I mean some other thoughts there just given the traction we have with so many banks at this point, it’s really become less relevant. The some of the regulatory changes that that you know people banter about. I mean obviously on the common response or the baseline game proposed changes that’s going to take a long time to play out. But in the immediate term, when you’ve got 4.5% to 5% deposit rates. The area at the era of zero cost capital of banks is over and it’s not nearly as profitable to portfolio loans. And in fact there’s quite a bit more risk just given how much thinner than NIM opportunity is. And so what we’re hearing from banks as a capital partner makes a lot of sense irrespective of what the risk capital rules might — might say in the future.
And so that’s — that’s given us that that’s embolden us and makes a lot of sense when you think about it because Redwood is he’s not an originator, as we like to say and some banks can keep their customer relationships. We can buy servicing. We can let them keep servicing. And one of the one of the ways we’ve added a lot of value, I would say the past year is helping banks get you’re acclimated to the capital markets from loan file completeness on readiness just a lot of things that you can do parking loans and portfolio. You can’t do selling — selling loan files and loans into the capital markets. And so, helping banks work through that has been a big part of the, value add that we present. And I think that’s been appreciated. So what we’re hoping is that the durability of that opportunity is there.
And I do think that as we invest the time and the resources to get banks plugged in and online, I think that’s a lot of effort on both sides. And as I said, as rates start to stabilize and come down, we’re really excited about what that means for our business.
Unidentified Analyst: Awesome. Thank you.
Operator: Our next question comes from the line of Doug Harter with UBS. Please proceed with your question.
Doug Harter: Thanks. Can you talk about either from an environment perspective or from a cost perspective, what you need to see happen for the investor mortgage banking to deliver sustainable, attractive ROEs?
Dash Robinson: Sure, Doug, it’s Dash. I can take a swing at that. Great question. Obviously, a huge area of focus. I think there’s a few things going on in that space right now. As you know, we have a very diverse product set, which I think is helpful to us. We’ve seen really, really good progress particularly in our single asset bridge effort, just for context there, we did about $200 million of that product last year and $40 million in January. So the volume trends there are heading in the right direction. We talked about growth in DSCR, things of that nature. We were very pleased with the 10% quarter-on-quarter growth in our term book. But I think the reality of it is we’re being very selective there. I think we’re trying to be respectful of what the market is telling us in terms of just demand drivers and where capital is flowing.
There’s a reality of that business, particularly on the term side and to an extent bridge where uncertainty around rates, where rates are sort of re-elevated as they are today, but there’s a lack of overall conviction around where they’re headed. It just is a reality we have to continue to work through in that business because unlike in residential, these loans, as you know, are not freely pre-payable. So borrowers are making — I call on interest rates for lack of a better term, when they lock in these loans. And when there’s so much uncertainty, you’ve had a 40 bps, 50 bps backup. In the 10-year, you can make as good a case to 10 years going higher as lower in the next quarter or two. And that sort of uncertainty is a bit of a headwind. But I think in general, we’re trying to pick our spots.
So I think lower rates and some conviction that they’ll stay lower is helpful. But I also think in terms of where capital is flowing, we’re just being choosy around opportunities. We see a lot of deals come across our desk every day that frankly may fit other people’s risk profiles better than ours. We talked about the de-emphasis of multifamily over the last five or six quarters. I think that’s a decision we’re very pleased with. If you look at how things have evolved in that space. So we’re going to continue to pick our spots and really leverage the depth of our products. We do think our existing bridge book continues to be a great source of opportunity for term refinance. That’s a huge focus area for our sales team. And our sales team is busy.
Maybe the average loan balances are going to be a little bit smaller than they were a couple of years ago. But we feel very good about how we’re positioned, particularly when you bring in the opportunity for the banks as another funnel. We haven’t talked as much about that in residential investors we have in jumbo, but that’s a big opportunity. It’s one we’re well positioned for, but we don’t want to rush back in safer areas like SAB where we’re really leaning in. We’re going to continue to be, I think, selective because I think we’re going to be paid to be more selective through time here in 2024.
Doug Harter: Great. And then I believe, Chris, you mentioned that you had — do you kind of view that you had $285 million of excess capital today. Is that kind of factoring in the remaining 24 convertible maturity? Or just — I just wanted to make sure I heard that number right?
Chris Abate: No, I’m not fully. I think we said, we had $396 million of cash as of last week. We have $318 million of unencumbered assets. So we kind of need to factor all of that into the convert maturities. But I think I think the headline is, we feel very well capitalized right now. We, as we mentioned, we completed five securitizations in the fourth quarter, so we feel like we are in a position to get significantly more aggressive at a time when I think a number of our competitors are facing pretty substantial headwinds. I do think that having the benefit of taking months with fair value accounting I think about where the stock is trading versus book and the quality of book. That’s something that I think differentiates this business to a certain degree.
So I think we’re feeling very good about, certainly very good about the converts, but also very excited to be deploying capital opportunistically and we very much see a path towards covering the dividend. We’ve got a lot of ways to get there. We haven’t spoken much about the JV opportunities that we foresee, but those are those are things that behind the scenes are in later innings. So we’re excited about things that we can get done in the first half of the year if not sooner. So that’s a high level where capital is.
Doug Harter: Great. Thank you.
Chris Abate: Thanks.
Operator: Our next question comes from the line of Kyle Joseph with Jefferies. Please proceed with your question.
Kyle Joseph: Hey good afternoon. Thanks for taking my question. I just wanted to pick your brain on. I know it’s early but on the closed end second lien product, just how you’re thinking about the size of that market margins versus the existing book and whether that’s a bigger opportunity for you and how you see that versus Healon [ph]?
Chris Abate: What close-in seconds is a product we’ve rolled out very recently in early 2024. The way we’re attacking that market is a combination of traditional product like a closed-end second along with HEI which is something we’re still very bullish on. As I mentioned in my remarks, home equity is absolutely the biggest untapped market and housing finance. We’re all over that internally. And I do think to a certain degree, the path of rates will be a big factor. But you’re seeing it’s very tough to move on. Mobility is extremely constrained with most the vast majority of the country having termed out if you will, their homes at 3% 4% or 5% rates. So I think we we’re not as focused on the block as we are on closedowns. But I think, we’re very focused on that sector and Aspire which is our HEI start-up, homegrown start-up.
We expect originations there to go up hopefully precipitously, as we as we get licensed in more states and get the business scale through origination network.
Kyle Joseph: Yes that’s it for me. Thanks for taking my questions.
Chris Abate: Thanks.
Operator: Our next question comes from the line of Stephen Laws with Raymond James. Please proceed with your question
Stephen Laws: Hi, good afternoon. A couple of follow-ups. First, talking about the delinquency metrics kind of ticking up some on the multiyear the core vest side. Can you talk about the outlook, say over the next two to three quarters as you continue to work through that, where do you think those peak ends and talk a little bit about resolution timelines that you expect to take losses as you resolve these? Do you feel like the collateral there supports your attachment point and maybe touch on the build-to-rent that went into REO that I believe the footnote said is under contract for sale this quarter? Maybe it’s already happened, but can you give us an update there and whether you expect to take a loss on that?
Chris Abate: Sure. I think broadly Steven we’ll probably stop short of predicting where DTs are going. But I think we continue as I mentioned I feel very good about the real estate, that’s underpinning us. The resolutions that we’ve had and generally have had either no severity or severities in the single-digits where we’ve had them. Speed and honestly creativity of resolution and just the discipline around that process is important. The properties that we took REO over the past couple of quarters, we did so cooperatively. Our loans are structured with a lot of different hooks that can incentive borrower to ease the resolution more quickly rather than waiting the customary year or two for foreclosure depending in the state that you’re in.
So, I think we’re pleased with that. Importantly, we have a lot of demand for the real estate, because like I mentioned earlier, in general, there’s a lot of meat on the bone from these properties. There’s a lot of capital on the sidelines that I think centers and opportunities beginning to deploy. We haven’t closed that built-for-rent project, we expect to do that soon. We don’t expect much if any loss on that. We have two other built-for-rent projects that are actually leasing up where we got you know actually some reverse inquiry interest this morning through a broker that’s interested in purchasing those particular projects. So, the good thing is for our book, particularly, with the demand drivers for leasing and the fact that in many of these cases, it really is just down to lease up as opposed to a significant amount of operational risk with renovation, I think we feel good about the general outsized demand to step in and recapitalize projects.
