Fitch Assigns Redwood Trust, Inc. a 'CAM2' CDO Asset Manager Rating

Business Wire, June 29, 2004

NEW YORK -- Fitch Ratings assigns Redwood Trust, Inc. (Redwood) a 'CAM2' structured finance CDO asset manager rating. The rating is based on the company's specialized focus in real estate related investments, the depth and experience of senior management and staff, and the quality of the company's credit underwriting and asset surveillance processes. In addition, the rating reflects Redwood's strong track record of credit results and the scalability of its business operations. The rating also reflects the quality of the match between the company's organizational competencies; real estate related investing, and the assets in its CDO portfolios. Redwood's CDO portfolio performance is on par with similar transactions of similar vintage.

The 'CAM2' rating is derived from Redwood's composite score of 2.25, the weighted average score based on each of the following category scores:

Rating Category/Score

Company and Management Experience/2.00;

Financial Condition/2.25;

Staffing/1.75;

Procedures and Controls/2.25;

Credit Underwriting/Asset Selection/1.75;

Portfolio Management/2.00;

CDO Administration/2.00;

Technology/2.50;

Portfolio Performance/3.00.

Redwood's 'CAM2' rating will be used to establish a systematically applied quantitative link between Redwood's CDO asset manager rating and CDO rating criteria. On all future CDOs managed by Redwood, Fitch will use the composite rating to calibrate the maximum allowable adjustment to its modeled rating default rate at each rating level with a Fitch rating. The adjustment will be made in accordance with the approach outlined in Fitch Research on 'Rating CDO Asset Managers,' dated February 13, 2004, available on Fitch's web site at 'www.fitchratings.com'.

Redwood Trust, Inc., with its principal executive offices in Mill Valley, California, is a real estate finance company that is primarily engaged in the business of owning, financing and credit enhancing real estate related assets, primarily high-quality jumbo residential mortgage loans. Since its incorporation in Maryland on April 11, 1994, Redwood has been structured as a real estate investment trust (REIT). Redwood sources its loan acquisitions primarily from large, well established mortgage originators, larger banks and thrifts. Through its Acacia CDO program, Redwood has continued its strategy of issuing long term debt to match-fund a diverse pool of its residential and commercial mortgage securities and REIT debt securities. To date, the company has issued four CDOs, Acacia 1-4, all of which are collateralized by a relatively consistent mix of residential and commercial mortgage securities, REIT bonds, and real estate CDOs. Redwood is expected to be a regular issuer of similarly collateralized transactions.

Fitch rates CDO asset managers, by asset class, on a scale of 1 to 5, with CAM1 being the highest rating. These ratings are based on a standardized scorecard methodology that includes factors in each of the nine groups noted above.