According to data gathered and analyzed by the St. Louis Federal Reserve bank, homeownership, having peaked at 70% in 2004, has hit a low after the global financial crisis, reaching 60% in 2016.
While the reasons behind the decline are numerous and complicated, one point of friction is the extreme homogeneity of mortgage products available to consumers, which mostly revolves around the government-backed 30-year-fixed mortgage.
Divvy has ambitious hopes to offer consumers an alternative that is more tailored to middle-class Americans who might not have sterling credit, perfectly reliable incomes, or single jobs that are often key aspects of traditional mortgage underwriting.
The company’s product offers a path for homebuyers to transition from renting to ownership over three years. Each month, a part of the rental payment made to Divvy (generally around 25%) is added to a future down payment to buy the home outright. After three years and assuming all payments are made, Divvy’s customers are able to migrate to other mortgage products such as the 30-year-fixed.
Divvy’s model has already attracted the attention of Andreessen Horowitz, where partner Alex Rampell led the $10 million series A round into the company.
Now, the company announced that it has raised a $43 million series B round of venture capital from Singapore’s sovereign wealth fund GIC, which has about 10% of its more than $100 billion in assets in real estate, along with Lennar, the $13 billion revenue home construction company. Divvy is a spinout of HVF, the startup studio founded by Max Levchin.
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