These are always "tough" calls to make. However, from a safety and soundness point of view, if you do not feel this person has the capacity to maintain the payments over the life of the loan then I would say you need to decline the request.
Supplement I, Section 202.6: Rules Concerning Evaluation of Applications (01/01/97)
6(a) General rule concerning use of information.
3. Consideration of age in a judgmental system. In a judgmental system, defined in §202.2(t), a creditor may not take age directly into account in any aspect of the credit transaction. For example, the creditor may not reject an application or terminate an account because the applicant is 60 years old. But a creditor that uses a judgmental system may relate the applicant's age to other information about the applicant that the creditor considers in evaluating creditworthiness. For example: •
A creditor may consider the applicant's occupation and length of time to retirement to ascertain whether the applicant's income (including retirement income) will support the extension of credit to its maturity.
The opinions expressed are mine and they are not to be taken as legal advice.