Exhibit 10.3

THIRD AMENDMENT TO
AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS THIRD AMENDMENT TO EMPLOYMENT AGREEMENT (this “Agreement”), is entered into as of the 17th day of May 2012 (the “Effective Date”) by and between MARTIN S. HUGHES (the “Executive”) and   REDWOOD TRUST, INC., a Maryland Corporation (the “Company”).

WHEREAS, the Executive and the Company have entered into an Amended and Restated Employment Agreement dated as of March 31, 2009 (as subsequently amended as of March 17, 2010 and as of February 24, 2011, the “Employment Agreement”); and

WHEREAS, the Executive and the Company desire to enter into this Agreement for purposes of amending the Employment Agreement as set forth herein;

NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy which is hereby acknowledged, the Executive and the Company hereby agree that the Employment Agreement is hereby amended as follows effective upon the Effective Date:  

“Employment as Chief Executive Officer of the Company.  The Company does hereby employ the Executive as Chief Executive Officer of the Company.  The Executive does hereby accept and agree to such employment.  The Executive’s duties shall be such executive and managerial duties as the Board of Directors of the Company shall from time to time prescribe and as provided in the By-Laws of the Company.  The Executive shall devote such time, energy and skill to the performance of his duties for the Company and for the benefit of the Company as may be necessary or required for the effective conduct and operation of the Company’s business. Furthermore, the Executive shall act only in good faith and exercise due diligence and care in the performance of his duties to the Company under this Agreement.”

Except as hereby specifically amended or modified, the terms of the Employment Agreement, as amended by this Agreement, shall remain in full force and effect.  This Agreement may be executed by the parties hereto in two counterparts, each of which shall be an original and all of which together shall constitute one and the same agreement.  This Agreement shall be governed in all respects by the laws of the State of California (without regard to conflict of law principles).

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Executive has executed this Agreement, as of the date first above written.