Fintech Innovator Generates Impressive Returns
Carnegie Mellon University grad’s disruptive solution to home ownership financing
After nearly a decade of working in the financial service space, Sahil Gupta, MSCF ’07, could no longer ignore a recurring theme. Despite advancements in technology and growth of the fintech industry, there had been limited innovation in the tool kit available to consumers - who continue to struggle with access to credit and cash flow. Gupta says “We’re still originating 30-year mortgages in a time when consumers’ stay in their homes for less than a third of that time. That needs to change”.
Gupta worked through the 2008 Global Financial Crisis (GFC) and saw Wall Street emerge – slightly changed, but ultimately unscathed – while the average American consumer never fully recovered. He decided to trade Wall Street for Main Street – leveraging his passion for developing new financial products to help the 55% of American homeowners who have hundreds of thousands of dollars in equity in their homes but still struggle with cash flow. Gupta calls this the “Asset Rich, Cash Poor problem of the American dream.”
“It was a problem I knew was worth solving,” said Gupta. “My desire to build products that help Main Street consumers – by aligning interests with Wall Street – and create equal partnerships where both sides thrive and succeed over the long term.”
In 2016, Gupta launched Noah (previously Patch Homes), a modern finance company that helps homeowners tap into their home equity without selling or refinancing their house. The goal of the company is to make homeownership more affordable and accessible for millions of Americans by providing consumers with access to long-term capital, while helping institutional investors access high quality single family residence (SFR) investments in an asset light manner.
The company’s home equity funding process provides up-front financing to consumers, in exchange for a portion of their home's future appreciation. In exchange for funding, consumers allow Noah to share in a portion of the future value of their home. Noah makes money if the home increases in value during the ten-year term. If the home doesn’t increase in value, Noah shares in the losses with the homeowner. Whether individuals decide to sell, refinance, or pay Noah back, they repay their principal amount plus Noah’s share of appreciation, or minus Noah’s share of depreciation.
The idea for Noah dates back to 1982, when Gupta’s father built their first home in India.
As a young father, he didn't want to take on debt, and so he asked his younger brother for help in the form of an investment in their family home. Gupta’s uncle fronted the money and in exchange, shared in the value of the home – right up until the family sold it last year. Decades later, Gupta’s friend mentioned his own difficulties with home equity financing, due to the lack of flexibility working with a bank - that sparked an idea. More stories of everyday Americans’ dealing with cash-flow constraints, inspired Gupta to create a better option for homeowners to cash out their home equity and unlock their accumulated wealth. Gupta’s idea was supported by many – with funding from Union Square Ventures (USV), Nathan Blecharczyk (co-founder of Airbnb), Brian Thomas (co-founder of Clutter) and many others.
“Consumer finance – especially housing – lacks innovation in terms of new financial products,” said Gupta. “At Noah, we are disrupting the home equity space, and over time, plan to build Noah into a housing platform.”
As the founder of Noah, Gupta spends most of his time working with homeowners and capital partners across the country and around the world. His passion for product development and commitment to solving problems for consumers makes his time spent with the Noah engineering and data science teams feel more like a hobby than actual work. His internship during the Master of Science in Computational Finance (MSCF) program at Carnegie Mellon University and experience on the buy-side of firms shifted his mindset to long-term alignment, and with each new product, Gupta is constantly thinking about scalability, distribution and long-term strategy.
“We are working to develop a suite of financial products and services to help consumers through their homeownership journey,” said Gupta. “With each innovation, we are constantly asking how we can leverage technology and data to better price these products to benefit both consumers and investors.”
To date, the company has served hundreds of homeowners and funded homes worth hundreds of millions of dollars across multiple cities. Gupta credits the evolution of Fintech in allowing the company to onboard and service its customers so efficiently and effectively. From the underlying payments infrastructure, accounts to money management, Fintech has perpetrated nearly every aspect of financial services and technology has become an integral part of companies. And Gupta anticipates the space will only continue to evolve and offer more data driven choices, complex systems and more opportunities to develop transparent, high-value products for everyone involved.
From the first transaction at Noah, Gupta knew society was ready for a change. Each Noah customer recognizes the impact of the company's innovative financing product and by adopting the program, is becoming part of the growing disruption that Noah is bringing to housing finance
The customer endorsement encourages Gupta and his team to continue building new types of solutions that will help Main Street consumers by aligning their interests alongside investors and creating an equal partnership where both sides thrive and succeed for years to come.
“I think the future of Fintech is extremely bright and will become a word synonymous with technology and scale,” said Gupta. He believes that building a trust brand is paramount for Fintech companies as he says, “In order to achieve that vision, we need to build trust between all players of the ecosystem - consumers, investors and platforms like Noah.”
