There are many advantages to having a Silicon Valley competitive vibe in the mortgage market. For one, the start-ups help keep us on our toes. Another interesting aspect is the use of fintech to disrupt our mortgage lending industry.

I’ve sat on panels that discuss all the benefits the aforementioned Silicon Valley approach brings to housing. Having SoFi around isn’t one of them, if their underwriting standards are as bad as some claim.

If this article at Fast Company proves true, this explosive headline is correct: At SoFi, The Problems Go Way Beyond Its Toxic Workplace.

The article comes on the heels of SoFi's CEO and co-founder, Mike Cagney, stepping down earlier this week as the company is dealing with claims that the company fired a former employee for reporting sexual harassment allegations to his superiors. 

Note: A toxic workplace doesn’t necessarily translate as bad for business, though it can be an indicator.

Instead, cut to the buried news in the article where Ainsley Harris writes: “In the first round of SoFi mortgages, some homes lacked appraisals.”


Why on earth would a lender not get the value of the collateral it was lending to? Did SoFi think in-depth valuations where unnecessary? Do investors know that SoFi doesn't know how much these homes are worth in the event of an REO?

And it's not the first time some claim that the underwriting at Sofi is not where it should be. In this unauthored blog post, the company defends its income-verification in response to a New York Times piece:

"The story cites unnamed sources saying there was some period where we were “not doing enough” to validate income for mortgage borrowers. This is an incredibly vague claim, and we have no idea what this means. We underwrite our mortgage loans consistent with market standards, which includes rigorous income verification, and consistent with the ability to repay requirements put in place by Dodd-Frank."

Let me say this, whatever the reason to potentially forego appraisals, SoFi’s investors will disagree with that decision. The Fast Company revelation is so baffling that SoFi’s plan for an IPO will be delayed, perhaps indefinitely.

Let’s hope so. A company that plays fast and loose with its own people is shameful. A company that plays fast and loose with prudent lending practices is downright dangerous.

It appears that SoFi needed fast growth to get the attention necessary to secure its investments, and it worked. Earlier this year, SoFi raised $500 million in Series F financing led by Silver Lake. That capital raise came roughly 18 months after SoFi raised $1 billion in its Series E funding, which was led by SoftBank. At the time, the capital raise was the largest single financing round in the fintech space to date.  

Including those two funding rounds, SoFi raised $1.9 billion in equity funding so far.

But did it work too well?

SoFi was then, and continues to be, eager to please.

The Fast Company article makes a passing mention: "Meanwhile, SoFi continues to grow. It funded $3.1 billion in loans last quarter, and posted an adjusted EBITDA of $61.6 million."

However, once word gets out about sidestepping the rules of the game, if true, SoFi will soon find that no matter how disruptive its business model is, money will start to look elsewhere.

[Editors's Note: HousingWire is working to independently verify the Fast Company claims and will follow-up as necessary.