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#39552 - 10/30/02 03:20 PM Elderly loan qualification conundrum
Anonymous
Unregistered

What do you do when you have an 82 year old applicant for a 15 year home equity loan?

The single applicant is dependant on monthly income currently received from employment. We don't expect that she'll work until age 97 and she won't cash flow without it. She wants to refi her existing first lien and get $6K which will pay down, not off, one credit card debt. She has $33K in revolving now. Her monthly cash out will decrease by $300 which is the motivation here. She does qualify except that we would reasonably anticipate a decrease in income that would make the loan impossible to repay. She is in good health, but 15 years is a long time when you start at 82 and we don't want a house. She is not a current customer.

While I will not discriminate based on age, income during the life of the loan is questionable.

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#39553 - 10/30/02 03:42 PM Re: Elderly loan qualification conundrum
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,016
Bloomington, IN
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.

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#39554 - 10/30/02 05:19 PM Re: Elderly loan qualification conundrum
Don_Narup Offline

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Joined: Jul 2001
Posts: 3,708
Las Vegas Nevada
Try asking for a co-borrower, maybe there is a son/daugter that will help mom out.
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#39555 - 10/30/02 06:06 PM Re: Elderly loan qualification conundrum
SouthoftheBorder Offline
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Joined: Feb 2002
Posts: 335
The South
Lots of questions.......Is there no other income?....like Social Security? ...Retirement income from previous jobs?......$33K in credit card debt would also be my concern......Why so high? Home improvements? or Home Shopping Network? And why is she not asking for enough $$'s to payoff the credit cards?
She is not your current customer....did she state why she was coming to you for a loan?

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#39556 - 10/30/02 07:41 PM Re: Elderly loan qualification conundrum
Anonymous
Unregistered

Is there no other income?....like Social Security? ...Retirement income from previous jobs?......
Minimal and not enough without working as she does now.

$33K in credit card debt would also be my concern......Why so high? Home improvements? or Home Shopping Network?
Unknown, only that it exists and has for some time.

And why is she not asking for enough $$'s to payoff the credit cards?
Not enough equity.

She is not your current customer....did she state why she was coming to you for a loan?
BD brought her in.

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#39557 - 10/30/02 08:01 PM Re: Elderly loan qualification conundrum
JulieB Offline
Junior Member
JulieB
Joined: Apr 2002
Posts: 38
SC
This is so sad. It reminds me of an elderly lady that came to the bank about 10 years ago and wanted to borrow a couple hundred dollars for firewood to heat her house for the winter. She was crying, I was crying, and all I could do was refer her to a non-profit agency. I always remember people like this when I make financial decisions. It also reminds me to give generously when I can.

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#39558 - 10/30/02 08:09 PM Re: Elderly loan qualification conundrum
HRH Dawnie Offline
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HRH Dawnie
Joined: Aug 2002
Posts: 7,353
Anchorage Alaska
I'd be awfully careful declining this one. She does work, and obviously she's passed up any ordinary "retirement" date. I'm not sure how you would document that you feel she will become frail and knock of at....88? 92? etc.

While it's not the norm, my grandfather worked until the day he died...99 years old. (Of course you'd loan to him in a heart beat cuz he had more money than god but just loved to be out in the public instead of sitting at home). I believe there is a Walmart back east with a guy working who is over 100...

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#39559 - 11/01/02 01:18 PM Re: Elderly loan qualification conundrum
Peeps Offline
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Peeps
Joined: Sep 2002
Posts: 145
I agree with Don that perhaps a coborrower or guarantor will help out here. If you don't think the cash flow will exist for the loan term you can deny and not worry about the age discrim issue. This is tricky, but if it does not flow right, it won't work, and it can't be forced. Hopefully someone else will come forward and sign with her.

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#39560 - 11/01/02 07:03 PM Re: Elderly loan qualification conundrum
Anonymous
Unregistered

How about suggesting a reverse mortgage to this customer. It's specifically designed for folks 62 or over. They don't have to make payments. Instead, they can receive monthly payments or a lump sum. Contact The National Reverse Mortgage Lenders Association, NRMLA Seattle Mortgage or Financial Freedom.

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#39561 - 11/01/02 08:04 PM Re: Elderly loan qualification conundrum
Peeps Offline
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Peeps
Joined: Sep 2002
Posts: 145
I'd watch out on the reverse mortgage scenario. No bank wants to appear like it engages in predatory lending and moving the elderly to a product just to try and make some deal. I'd check with your regulators on their stance on reverse mortgages first. Sounds like this could just be a deal to walk away from unless another borrower shows up.

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#39562 - 11/01/02 09:07 PM Re: Elderly loan qualification conundrum
Elaine K. Sheehan Offline
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Elaine  K. Sheehan
Joined: Jul 2002
Posts: 157
Grand Rapids, MI
Reverse Mortgages inherently predatory? Check out AARP on Reverse Mortgages AARP

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