Mortgage lending and the entrepreneur

Abstract

While existing literature assumes that financial institutions penalize entrepreneurs because of this group's perceived higher income risk, this paper contends the opposite, owing to, for example, potentially profitable customer relationships that financial institutions might have with entrepreneurs and the stylized fact that these institutions provide more flexible guidelines to the home mortgage applications of entrepreneurs. The 1995 National Microdata file of the American Housing Survey is employed to empirically address and provide support for this contention.