By Warren.AI in April 2025 — Apr 24, 2025

Redwood Mortgage Investors IX

Redwood Mortgage Investors IX, LLC (RMI IX) is an externally managed mortgage fund that originates and holds short-term (1–5 years) mortgage loans secured by California real estate, primarily in the Bay Area and coastal Southern California. In 2024, RMI IX generated $6.14 million in net interest ...

Deep Dive: 2024 10-K Review of Redwood Mortgage Investors IX, LLC

In an era of fluctuating interest rates and shifting real estate dynamics, mortgage lending vehicles face both attractive yield opportunities and heightened credit risks. Redwood Mortgage Investors IX, LLC (RMI IX) is a private, SEC-registered mortgage fund focused exclusively on making and holding intermediate-term mortgage loans secured by California real estate. In this blog post, we unpack RMI IX’s latest annual report (Form 10-K for the year ended December 31, 2024) to evaluate its business model, financial performance, risk profile, and long-term investment potential.

1. Executive Summary

RMI IX is an externally managed Delaware LLC formed in 2008 to originate and hold California mortgage loans primarily for high-net-worth investors seeking stable cash distributions. Under its Ninth Amended & Restated Operating Agreement, it is managed by Redwood Mortgage Corp. (RMC), which arranges, underwrites, and services its loans.

Key financials (2024 vs. 2023):

Net Interest Income: $6.14 million (+0.7%)
Provision for Credit Losses: $90k (vs. nil)
Operating Expenses: $2.72 million (+16%)
Net Income: $3.39 million (4.9% of average equity)
Member Distributions: $3.12 million (4.5% yield)

RMI IX’s portfolio totaled $53.5 million of mortgage debt at year-end, 88% first-lien, 12% second-lien, with an average leveraged LTV of ~58.9% at origination. Delinquencies and matured loans represented 20.8% of outstanding balance, prompting a modest $210k CECL reserve. Liquidity remains tight: the revolving line of credit was $4 million drawn, capped by a $10 million borrowing base. Unit redemptions of $3.46 million (2024) triggered quarterly limits and deferrals.

Our overall investment score for RMI IX is 5.5/10 — balanced yield from short-term California mortgage loans but offset by credit concentration, illiquidity, and operational controls weaknesses.

2. Business Description

Structure & Objectives

Sponsor/Manager: Redwood Mortgage Corp. (RMC), a licensed California real estate broker since 1978. RMC earns shareholder, interest rate spread, servicing, and administration fees.
LLC Format: No employees; externally managed. Units are not publicly traded; annual SEC reporting under Sections 13/15(d).
Investment Strategy: Make and hold first and second lien loans secured by California real estate with terms up to 5 years, targeting protective equity (LTVs of 80% or less), primarily in Bay Area/Southern California coastal markets.
Capital Structure: 65.4 million units outstanding (Mar 31, 2025), $1 per unit. Units are redeemable quarterly subject to limit of 1.25% of outstanding units per quarter and 5% per year.

Governance & Fees

Asset Management Fee: 0.75% annual on committed capital.
Servicing Fee: 0.25% annual on outstanding principal.
Loan Admin & Origination Fees: Up to 1% of loan principal (waived since 2015).
Reimbursements: Up to 4.5% of capital raised for offering costs, then amortized over 10 years. RMC voluntarily waived $149k of these in 2024.

3. 2024 Financial Highlights

Metric	2024	2023	Change
Net Interest Income	$6.143 M	$6.102 M	+0.7%
Provision & Allowance for Credit Losses	$0.090 M	$0.000 M	—
Operating Expenses	$2.719 M	$2.334 M	+16%
Net Income	$3.388 M	$3.808 M	–11%
Avg Equity Yield*	4.9%	5.3%	–0.4pp
Member Distributions	$3.122 M	$3.457 M	–10%
Distribution Yield*	4.5%	4.9%	–0.4pp

Of average daily equity

Key drivers:

Loan Portfolio Downsize: Average loan balance declined ~$4.1 million (-5.8%).
Higher Interest Income: Effective yield rose 0.7 pp to 10.2% by collection of default/post-maturity interest.
Rising Opex: Professional fees (+$391k), but RMC fee waivers dropped (-$244k).

4. Loan Portfolio Analysis

1 loans totaling $53.5M (down from $62.9M), 88% first-lien, 12% second-lien. Weighted average original LTV 58.9%. All loans are fixed rate; no pre-payment penalty.

Portfolio by LTV:

<70% LTV: $35.6M (66.5%)
70–79% LTV: $8.6M (16.1%)
≥80% LTV: $9.3M (17.4%)

Performance Metrics:

Delinquent (>30 days): $11.166M (20.8%) across 6 loans.
Matured (>Maturity): $9.218M (17.2%) across 4 loans.
Non-Accrual: 3 loans; $7.226M principal, $116k accrued interest.

Collateral & Geography:

Concentrated in 13 Calif. counties.
Bay Area key: $31.2M (58%) of loans.
Southern Cal: $21.1M (39%) next.

Notable Loan Examples:

Largest loan: $8.1M first-lien live-office condo in SF, OLTV 62%, 10.50% interest, matures 6/2027.
High-LTV (100%) note: $1.5M, specialized borrower, 8.5% fixed, 36-month amortization.

5. Credit Quality & Loss Reserves

With notable payment delinquencies and matured loans, RMI IX implemented CECL (ASC 326) Jan 1, 2023. ACL history:

Year	Beginning ACL	Provision/(Recovery)	Charge-Offs	Ending ACL
2023	$ 55k	$ 0k	$ 0k	$ 60k
2024	$ 60k	$ 90k	$ 0k	$210k

CECL assumptions:

Key driver: Current fair value of collateral (appraisals/BOV), adjusted LTV, forecast market declines.
Pools: LTV buckets & lien positions.
Collateral valuation: Sale-comparison, income cap rates, brokersAQ.

Non-Accrual & Foregone Interest:

3 loans non-accrual: $7.226M principal, $116k foregone interest at 12/31/24.
2024 default/post-maturity interest income: $552k vs. $250k in 2023.

6. Liquidity & Unit Redemptions

Sources of Funds:

Mortgage repayments, payoffs
Line of Credit: $10M facility; $4.0M outstanding
Loan sales/assignments
Formation loan repayments (to RMC)

Line of Credit Terms:

$10M max; borrowing base capped by pledged loan collateral.
Interest: SOFR+3.5% (min 6%), monthly pay.
Maturity: Mar 13 2026; two-year term conversion option.

Equity Liquidity:

Units redeemable quarterly: max 1.25% per quarter, 5% per year redemptions.
2024 net redemptions: $3.458M; eligible unpaid requests at 12/31/24 = $24.3M.
DRIP closed July 2024; investors receive quarterly distributions.

7. Risk Factors & Controls

Top Risks:

Collateral Valuation Risk: ~67% of loans <70% LTV, but market downturns could impair protective equity.
Credit Concentration: Coastal California exposure; weakness in Bay Area tech economy or Southern Cal commercial market.
Loan Delinquencies: 20.8% past due + 17.2% matured loans = 38% of portfolio.
Illiquid Structure: Quarterly redemption caps, no secondary market, line of credit draws.
Cybersecurity & Controls: 2023 material weakness in financial reporting controls (CECL modeling). Remediation underway.

Governance:

No independent Board; RMC serves as manager and audit committee surrogate.
Code of Ethics applies to RMC professionals.
RMC management fee conflicts.

8. Outlook & Valuation

Interest Rate Environment: Elevated rates fuel loan yields, but weigh on borrower refinancing and exit options.

Debt & Capital: $4M line of credit draw; $162k net borrowings/repayments needed per year.

Valuation: RMI IX maintains a $1/unit NAV. Our peer-review suggests unit value ranges from $0.95–$1.05; 2024 estimated NAV (Third-party opinion): $1.00.

Investment Thesis:

Pros: Attractive loan yields (~9.4% interest / 10.2% effective yield), short maturities, substantial LTV cushion.
Cons: High concentration, payment delinquencies, limited liquidity, operational & controls risk.

Expected outcomes hinge on Bay Area/Socal real estate market staying stable and delinquent loans curing or being liquidated with minimal loss.

9. Conclusion & Takeaways

RMI IX occupies a specialized niche as an intermediate-term, asset-based lender in top‐tier California markets. While its loan yields above 9%, investors must weigh sporadic credit events, evolving market conditions, and restricted liquidity. The 2024 financials show stable net income and a modest CECL reserve, but nearly 38% of loans were past due or matured. The line of credit provides funding flexibility, yet redemption limits defer investor exits.

Investment Score: 5.5/10
A balanced result: moderate yield with above-average credit risk and constrained liquidity. A suitable allocation for investors who can tolerate illiquidity and uneven cash flows and who believe California real estate fundamentals remain strong.

Disclosure: This post is for informational purposes only and does not constitute investment advice. Always conduct your own due diligence or consult your financial advisor before investing.