EXHIBIT 5.1

                           [TOBIN & TOBIN LETTERHEAD]


                                  March 5, 1998




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

         Re:      Post-Effective Amendment No. 1 to the Dividend Reinvestment
                  and Stock Purchase Plan Registration Statement on Form S-3

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 shares (the
"Shares") of the Company's common stock, par value $0.01 per share ("Common
Stock"), with an aggregate value of $38,000,000 pursuant to the Company's
Dividend Reinvestment and Stock Purchase Plan (the "Plan"). The Plan as amended
to date is described in Post-Effective Amendment No. 1 to the 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 original 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 (Registration No. 333- 18061)(together with all amendments
thereof and exhibits thereto, the "Registration Statement"); (ii) Post-Effective
Amendment No. 1 to the Registration Statement, being filed with the Commission
under the Securities Act of even date herewith (together with all amendments
thereof and exhibits thereto, "Amendment No. 1"); (iii) the Articles of
Incorporation of the Company, including all amendments and supplements thereto
(collectively, the "Articles of Incorporation"); (iv) the Bylaws, as amended, of
the Company; and (v) resolutions of the Board of Directors of the Company
relating to the filing of the


The Board of Directors
Redwood Trust Inc.
March 5, 1998
Page 2


Registration Statement and the issuance of the Shares pursuant to the Plan. 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 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 with respect to certain matters of Maryland law.

         Based upon and subject to the foregoing, we are of the opinion and
advise you that appropriate corporate action has been taken by the Company to
authorize the issuance of the Common Stock, that 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 Plan, the Shares will be validly
issued, fully paid and non-assessable.

         We hereby consent to the reliance on this opinion by Giancarlo &
Gnazzo, A Professional Corporation, tax counsel to the Company, in rendering
their opinion to the Company in connection with the Registration Statement. We
also 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 under the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.


                                       Very truly yours,


                                       /s/ Tobin & Tobin