Late Friday Bloomberg reported that SoFi was cutting 7% of its staff, or around 100 jobs, in the company’s mortgage department. This is due to a change in strategy as to how they underwrite mortgage loans. Rather than underwrite loans themselves, as they have done since launching their mortgage business back in 2014, they will outsource the underwriting to a partner.
From the Bloomberg piece:
Under its new structure for its mortgage division, SoFi employees will still get the customer to the pre-approval stage, but will no longer underwrite the loans, though the underwriters will be given SoFi criteria to adhere to. Borrowers will continue to deal with the fintech startup throughout the process, although the title, appraisal and closing will be done by a partner. The strategy will help the company reduce the risk on its books, the person said.
I reached out to SoFi for comment on these changes and they responded with this emailed statement:
Buying a home is a key ambition of our members, and we want to be there to help them. Fifty percent of our mortgages to date have been with existing members. These changes put us in a better position to help even more members by offering competitive rates and a smoother digital experience. In fact, we believe these decisions will allow us to double our mortgage business in 2019 when others will likely be contracting.
There is obviously a lot of cost involved in keeping a full mortgage underwriting division on staff and SoFi has decided this cost is not worth it. The mortgage business is notoriously competitive and with rising interest rates overall demand for mortgages is expected to decline. Maybe with a lower cost structure SoFi will be positioned better to compete and it will allow them to grow the business overall. They are still going to own the customer and will control the user experience without having to do the underwriting themselves.
This is the second round of layoffs for SoFi this year with the first round coming in late January that affected 5% of the workforce. That was also in the mortgage division. Despite that the company has grown overall headcount this year.