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Noah founder Sahil Gupta (Credit: Noah)

Startup That Hands out Home Loans in Exchange for Ownership Stake Raises $150m

San Francisco-based firm Noah claims demand is up 600% because of pandemic

A startup that issues cash loans to homeowners in exchange for an ownership stake has raised $150 million to meet increased demand from cash-strapped owners.

Noah, based in San Francisco, said the money came from unnamed institutional investors, including pension funds.

The funding comes on the heels of the company’s $5 million Series A from Union Square Ventures in September 2019. Other investors include Breega Capital and Techstars Ventures.

In a statement, Noah said it would use the cash infusion to increase its lending power and continue to scale nationwide.

Founded in 2016 as Patch Homes, Noah is one of several alternative-finance startups to pop up in recent years. The company pre-qualifies loans by having homeowners supply their address, credit score and debt balance on the home. It charges $2,000 or 3 percent of the loan amount, whichever is higher, and shares in the home’s future value — whether up or down.

Conceived of as a way to help homeowners access home equity in expensive housing markets, the company said it has seen an uptick during the pandemic from homeowners in need of liquidity.

Major banks including JPMorgan Chase, Wells Fargo and U.S. Bank have been ratcheting up borrowing standards on home loans.

In recent weeks, Noah said interest in its product spiked, with a 600 percent increase in inquiries through its website. Its data show that 7 percent of homeowners have delayed or paused mortgage payments while they wait for stimulus checks or other financial relief.

Currently, Noah operates in California, Utah, Washington and Colorado. It is targeting Washington, D.C., Virginia, New York and Massachusetts during the second half of the year.

“We’ve had homeowners come to us when they had nowhere else to turn,” co-founder Sahil Gupta said in a statement. “Amid this state of financial uncertainty, we’re encouraged by our latest capital investment as it strengthens our ability to continue to partner with homeowners and help them access immediate funds.”

Noah also gives investors a foothold in the residential market.

In 2018, investors such as Starwood Capital and Blackstone Group-led Invitation Homes purchased one-fifth of all single-family starter homes, according to CoreLogic. In hot markets, investors purchased nearly 50 percent of starters homes.

That’s fueled investments in companies like Noah and competitors like Unison and Hometap, which raised a $100 million Series B in December. Last year, Point, another home-equity loan startup, raised $122 million.

[The Real Deal]

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