While SoFi’s mortgage business posted its best quarter ever, the company is opting to scale back several other business initiatives, as it continues to recover from the alleged sexual harassments claims about the fintech’s former CEO.
The company’s bottom line benefited significantly from the strength of the company’s mortgage department, along with its other lending products, such as student loans and personal loans, giving it another record quarter.
But the future of some of the areas that SoFi was trying to grow in before news got out on its alleged toxic work environment aren’t as certain.
In an investor letter obtained by HousingWire from Executive Chairman and Interim CEO Tom Hutton, he said: “In the past, SoFi discussed international expansion (specifically into Australia and Canada) and a more aggressive push into asset management (focused on both institutional partners and members). For now, we are pulling back from these initiatives.”
“We will instead focus on further improving our core lending products and developing strategic initiatives like banking and wealth management to broaden relationships with our clients positioning SoFi to realize significant lifetime value. Along the same lines, we plan to sell Cabezon Investment Group, a hedge fund founded by Mike Cagney which we acquired last year.”
The letter also provided more information on the company’s decision to pull its application for an industrial loan company charter with the Federal Deposit Insurance Corp.
SoFi chose to pull its application shortly after the news came out about the company’s alleged toxic work environment, but its chances of getting approved were already pretty low since there hasn’t been any new industrial loan company charters approved in about a decade.
“Earlier this month, we decided to withdraw our ILC application with the FDIC, pending the arrival of a new Chief Executive Officer and Chief Financial Officer at SoFi. Throughout our ILC application process, we have been preparing on a parallel track a partner-based approach for our banking products that is no less valuable for members and still offers us attractive economics,” said Hutton.
SoFi, which got its start in student lending in 2011, has since moved into mortgages, wealth management, personal loans and more.
It’s these lines of business that are performing well.
For starters, the letter stated that while mortgages are a smaller share of its lending business, they are a strategic part of its product portfolio.
In the third quarter, SoFi underwrote 765 mortgages, marking its best quarter ever.
The company’s student loans department also saw increased volume this quarter, while it personal loans department experienced significant Q3 growth, driven by improvements to its partner APIs, used by companies like Credit Karma and Lending Tree.
Meanwhile, the company chose not to comment on the alleged sexual harassment claims that forced out Mike Cagney, SoFi's former CEO. They did, however, say they retained the search firm Heidrick & Struggles to help find a new CEO.
“The company (as you know) has been the target of several lawsuits alleging misconduct by people who worked here, and we were the subject of some difficult press coverage. We are not going to address the litigation in this letter – we will do that through the courts – but what I will say is that we are taking strong steps to make clear that we will resolutely enforce our policies against sexual harassment and other inappropriate behavior,” said Hutton. “If someone at SoFi acts improperly, we want to know about it. And we will act swiftly and severely to address any issues.”