'Solving A Catch 22': Noah Lets Struggling Homeowners Tap Into Home Equity, Access Discretionary Funds

The COVID-19 coronavirus crisis forced upon society unemployment and business closures, shocking the U.S. real estate market as millions requested forbearance, home sales declined, and foreclosure risks rose.

In light of the events, Sahil Gupta, founder at Noah, a fintech enabling homeowners access to upfront financing, spoke with Benzinga regarding his firm’s mission to help struggling homeowners weather the financial turmoil brought on by COVID-19.

Solving The ‘Catch 22’

The pandemic, coupled with stagnant income growth and rising expenses, created an environment in which homeowners encountered immense difficulty in paying for fixed expenses, like mortgages.

“You ended up in this unique position -- a catch 22 -- which we call asset rich and cash flow-sensitive,” said Gupta. “Historically, most consumers go to a bank and take a home equity loan or second mortgage, but in today’s environment, that’s not possible.”

Many large financial institutions, such as Wells Fargo & Co WFC, JPMorgan Chase & Co JPM, and Citigroup Inc C, according to the founder, stopped originating home equity lines of credit (HELOCs).

“They are telling the average consumer that we are not going to give you the money that is so badly desired and needed,” he said. “At Noah, we believe you should have access to funds at all points in time in the economy.”

In short, Noah offers a HELOC-alternative home equity sharing product that allows homeowners access up to $350,000 of home equity funds, without any monthly payments or interest for 10 years. In return, Noah shares in a portion of the future upside, and downside, of the home value.

“We aligned our incentives with that of the consumer, creating a win-win model. If home values go up, the majority of the wealth creation still happens for the consumer, and Noah shares in a minority portion of that.”

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Scaling Capabilities

“We’ve seen a rise in demand for our solution over the past couple of months,” the founder said. “Since March, we’ve seen a 50% increase in demand for funding requests on our platform as compared to the prior period and there’s a 4x increase in engagement on our platform from current Noah customers, as we help them pay their mortgages for up to 6 months with additional financial assistance through our Homeowner Protection Program. Many people are worried about where the economy is headed.”

To access the funds, homeowners with over a 625 credit score must own at least 25% equity in a California, Washington, Oregon, Utah or Colorado-based home.

“We’ve built in-house native legacy investing models and data analytics that enable us to identify the regions which have the highest growth potential,” Gupta said in a discussion regarding nationwide expansion.

Perspectives On Growth

Gupta told Benzinga today’s home lending standards and supply-demand dynamics are improved.

“I think housing is going to come out stronger,” he said. “People will be spending more time at home and so I think the demand for single-family housing will actually increase.”

“To that extent, we want to stay true to our model of long-term alignment; a future where Noah is a ubiquitous partner to consumers for anything and everything they need under one roof.”

Photo by Kenneth Carpina from Pexels.