EXHIBIT 5.1

                           [TOBIN & TOBIN LETTERHEAD]

                               September 19, 2002

The Board of Directors
Redwood Trust, Inc.
591 Redwood Highway
Suite 3100
Mill Valley, CA  94941

        Re:    Registration Statement on Form S-3, Amendment No. 1
               Redwood Trust, Inc.
               Direct Stock Purchase and Dividend Reinvestment Plan

Dear Ladies and Gentlemen:

        We have acted as your counsel in connection with the public offering by
Redwood Trust, Inc., a Maryland corporation (the "Company"), of an aggregate of
up to $100,000,000 worth of the Company's common stock, par value $0.01 per
share ("Common Stock") that the Company may, from time to time, issue and sell
pursuant to its Direct Stock Purchase and Dividend Reinvestment Plan (the
"Plan").

        This opinion is delivered in accordance with the requirements of Item
601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended (the
"Securities Act").

        In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
(a) the Registration Statement on Form S-3, relating to the Securities, to be
filed with the Securities and Exchange Commission (the "Commission") under the
Securities Act, (the "Registration Statement"), (b) the Articles of
Incorporation of the Company, including all amendments and supplements thereto
(collectively, the Articles of Incorporation"); (c) the Bylaws of the Company;
and (d) resolutions of the Board of Directors of the Company relating to the
filing of the Registration Statement and the authorization for issuance of
shares of Common Stock under the Plan (the "Shares"). We have also examined such
other documents, certificates and records as we have deemed necessary or
appropriate as a basis for the opinion set forth below.

In our examination, we have assumed the legal capacity of all natural persons,
the genuineness of all signatures, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified, conformed or photostatic copies, and the
authenticity of the originals of such copies. As to any facts material to this
opinion which we did not independently establish or verify, we have relied upon
oral or


Redwood Trust, Inc.
September 19, 2002
Page 2


written statements and representations of the officers and other representatives
of the Company and others.

        Members of our firm are admitted to the practice of law in the States of
California and New York, and we do not express any opinion as to the laws of any
other jurisdictions other than the corporate laws of the State of Maryland and
the laws of the United States to the extent specifically addressed herein.

        Based upon the foregoing, in our opinion:

        1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Maryland.

        2. All Shares offered and sold in accordance with the Plan will be
validly issued and outstanding and will be fully paid and nonassessable.

        We consent to the filing of this opinion with the Commission as Exhibit
5.1 to the Registration Statement and to the reference to our firm under the
heading "Legal Matters" in the Registration Statement. In giving such consent,
we do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act or under the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.


                                             Very truly yours,

                                             TOBIN & TOBIN


                                             /s/ Phillip R. Pollock
                                             ------------------------
                                                 Phillip R. Pollock



cc: Mr. George E. Bull III, Redwood Trust, Inc.