EXHIBIT 5.1

                           [TOBIN & TOBIN LETTERHEAD]


                                December 17, 1996





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

                  Re:  Dividend Reinvestment and Stock Purchase Plan
                       Registration Statement on Form S-3; filed
                       December 17, 1996

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 $38,000,000.00 worth of the Company's shares of its common stock,
par value $0.01 per share ("Common Stock") for use with respect to the Company's
Dividend Reinvestment and Stock Purchase Plan (the "Plan"), contained within a
Registration Statement on Form S-3 being filed with the Securities Exchange
Commission (the "Commission") on the date hereof.

                  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 (i) the Registration Statement on Form S-3, relating to the
Common Stock and the Plan, filed with the "Commission") under the Securities Act
on December 17, 1996 (together with all amendments thereof and exhibits thereto,
the "Registration Statement"), (ii) the Articles of Incorporation of the
Company, including all amendments and supplements thereto (collectively, the
"Articles of Incorporation"), (iii) the Bylaws, as amended, of the Company, (iv)
resolutions of the Board of Directors of the Company relating to the filing of
the Registration Statement (the "Resolutions"), and (v) the opinion of Piper &
Marbury L.L.P., related to the Common Stock and the Plan, dated on or about the
date hereof. We have also examined
                                 Tobin & Tobin

The Board of Directors
Redwood Trust, Inc.
December 17, 1996
Page 2



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

                  Members of our firm are admitted to the practice of law in the
State of California and we do not express any opinion as to the laws of any
other jurisdiction, except for those matters of Maryland law for which we have
relied solely upon the legal opinion of Piper & Marbury L.L.P., Baltimore,
Maryland.

                  Based upon and subject to the foregoing, we are of the opinion
and advise you that when appropriate corporate action has been taken by the
Company to authorize the issuance of the Common Stock, and when the Common Stock
has been duly established in accordance with the terms of the Company's Articles
of Incorporation, and applicable law, and, upon issuance, delivery and payment
therefor in the manner contemplated by the Dividend Reinvestment and Stock
Purchase Plan contained within the Registration Statement, the Common Stock will
be validly issued, fully paid and non-assessable.

                  We hereby 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
                                 Tobin & Tobin

The Board of Directors
Redwood Trust, Inc.
December 17, 1996
Page 3


under the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.

                                         Very truly yours,

                                         /S/ TOBIN & TOBIN