Fitch Downgrades Redwood Trust's Asset Manager Rating to 'CAM2+'

Business Wire, June 4, 2008

CHICAGO -- Fitch has downgraded Redwood Trust Inc.'s (NYSE:RWT) structured finance collateralized debt obligation (CDO) asset manager rating to 'CAM2 ' from 'CAM1-'.

Overall, the downgrade is driven by deterioration of the residential real estate market and the impact it has had on RWT's operating results. In response to market conditions, RWT has incurred sizable writedowns during 2007, contributing toward a net loss of $1.1 billion in 2007 compared to net income of $127.5 million in 2006. This trend has carried over to the first quarter of 2008 as RWT has shown further writedowns of $194 million. The rating action also reflects uncertainties regarding continued deterioration of the market and any further writedowns as the market may require. The limited severity of this downgrade is tempered by Fitch's acknowledgement of RWT's mostly higher quality assets, positive net interest margins, steady interest coverage before the effects on market valuation adjustments, modest unencumbered asset pool, and strong corporate governance scores.

RWT's rating continues to reflect the company's experienced portfolio management team, the quality of its proven prime residential real estate underwriting process, as well as the enhancements made to its technology platform that improve the firm's CDO administration capabilities and increase scalability.

Redwood's 'CAM2 ' rating is based on the firm's composite score which represents a weighted average based on the scores assigned for each group of criteria factors summarized below. This composite score is used to establish a systematically applied quantitative link between its asset manager rating and Fitch's CDO rating criteria, in accordance with the approach outlined in the Fitch report 'Global Criteria for Reviewing and Rating CDO Asset Managers' dated Jan. 2, 2008, available on the Fitch Ratings web site at www.fitchratings.com.

-- Company and Management Experience '2 '(Previously '1-');

-- Staffing '1-'(Unchanged);

-- Procedures and Controls '1-'(Unchanged);

-- Portfolio Management '1-'(Unchanged);

-- CDO Administration '1-'(Unchanged);

-- Technology '1-'(Unchanged);

-- CDO Portfolio Performance '2 '(Unchanged).

Redwood, with its principal executive offices in Mill Valley, CA, is a real estate finance company that is 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 in April 1994, Redwood has been structured as a real estate investment trust. Redwood sources its loan acquisitions primarily from large, well-established mortgage originators, larger banks, and thrifts.

An updated profile report and full CAM rating report on Redwood will be available on the Fitch Ratings web site.

Fitch rates CDO asset managers by asset class, on a scale of 1 to 5, with 1 being the highest rating. The rating scale includes plus (' ') and minus ('-') designations, along with flat ratings. These ratings are based on a standardized scorecard methodology that includes factors in each of the seven groups as noted above.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.