Written by Alain Valles, CRMP, as originally published in The Reverse Review.

For a loan officer, a closing is always the goal. But do you know when saying “no” to taking an application is appropriate? Assuming a senior is educated about reverses and desires a reverse mortgage, there are two scenarios where a loan won’t or shouldn’t close. The first occurs when a reverse mortgage is the optimum solution to meet a senior’s housing or financial goals but they obviously won’t qualify for the reverse. Reasons may include a low appraisal, title issues, condition or type of property, occupancy status, or even a temporary protected status visa (a recent experience).

I’ll never forget my second reverse mortgage referral. I was so excited that I spouted off every reverse benefit, which caused the senior to get excited to the point where he wanted to meet immediately so I could save the day! I finally asked what he thought his home was worth. Sadly, based on his current mortgage, there was no hope he had sufficient equity to qualify. I felt terrible because I caused him pain. I vowed I would do my best to never cause that type of stress again.

My introductory dialogue with all new clients now includes a version of, “Before I explain the benefits of a reverse mortgage, the worst thing I could do is to get you excited only to find out later that you don’t qualify. So if it’s OK with you, I’d like to ask a few questions to see if you qualify…” I never have a referral refuse my questions about home value, current mortgage balance, property ownership, their goals, etc.

Having a more thorough knowledge of underwriting guidelines will also help reduce the emotional and financial cost to a senior and can help avoid starting an application that will not pass muster. Invest the time to read lending guidelines and run loan particulars by your account executive or underwriter.

The difficult part is when the person does not qualify and they ask for guidance on what to do next. Always have a resource guide for your area to give seniors direction to other support services to help them sort out a plan of action. I offer to speak with their family members about the senior’s predicament, but I’m conscious that I’m just the “loan officer” and not a marriage, family, grief, tax, estate, appraisal or debt counselor. Be prepared with other trusted resources to help seniors with difficult life decisions.

The second “no” is when the senior wants a reverse and qualifies but circumstances lead the loan officer to believe that the senior should not obtain a reverse. This is more problematic for the loan officer. Examples I’ve personally experienced include perceived cognitive issues (a senior asking my name a dozen times); pressure from a family member (an adult child with visible drug/alcohol issues or who wants money for their business); a trusted advisor’s conflict of interest (financial planners focused on a lump sum distribution for them to invest); a senior with a gambling issue; reverse funds not lasting long; or using proceeds for dubious purposes that go against the best interests of the senior.

These situations fall into a gray area where there are no specific guidelines. But saying “yes” when we should say “no” may lead our industry toward even more onerous regulations. I always use the newspaper test: Would my mother be proud to read an article about the way in which I helped the senior?

I have yet to encounter a circumstance in which I feel compelled to contact the authorities or a protective service agency. However, when I’m uncomfortable I will share my concern with the senior to gain a better understanding. I’ll also ask their permission to speak with the referral source and family members. In the end, I’ll just plainly say, “You do qualify but I’m not comfortable moving forward because a reverse mortgage should be a long-term solution and the last thing I want is for you, a family member, or a regulator questioning down the road why I provided you a reverse mortgage.”

I am a for-profit company but will not risk my livelihood or reputation because I don’t know when to say “no.”