A couple of weeks ago a prospective client called me re: refinancing his home for debt consolidation. We spoke for a while about his needs until his wife picked up on another phone -suddenly he became very quiet and asked his wife to hang up and he would explain everything to her when we were done. She asked what he was doing and he again asked her to hang up. After she complied, he went on to say that his wife wanted to move to Florida, but he loved his large house here in Columbia, SC and wanted to stay - even though they could not afford to keep it. 

I asked him if his wife would need to be on the loan and he explained that the home was in her name only and she would need to be on the new loan as well  - at this point all the red lights  were flashing inside my head  and I explained to him that she would need to be involved in the aplication process from the beginning. He then requested that I speak to his Financial Planner(FP) to get all of their information and if the FP thought it was a good idea, then they would present it to his wife. This man was very nice, so I agreed to call the FP and left a message for him. 

The next day, the FP called me back with a little bit of an attitude asking why I was trying to take advantage of an elderly person and how did I contact his client. I explained that his client called me from one of my ads and that I was performing what I was required to do by South Carolina Law when someone applies for a mortgage loan - take a complete application and pull the credit in order to make a educated decision if this mortgage loan would be a benefit for the client or not - since we are not in the habit of making loans that do not pass the South Carolina Benefit Test. He thanked me for my professionalism and apoligized. He actually had been helping the client through a number of life issues, had become very frustrated with the progress, and had them place their large home on the market since they only lived in about 1500sqft of thier 4600sqft home. While taking the application, it became clear that due to situations beyond their control, their income could no longer support their current home and any refinance consolidation scenario would actually cost them more per month.

I called the client with the results of the application and explained the reasons why keeping his current home would not be a good financial idea due to his current situation . I did not realize that his wife was on the other phone and was a little startled when she said, "Thank you for doing the right thing. You were one of three Loan Officers my husband contacted and the other two are trying to sell us on bad loans."

Yes, I could have manipulated the Benefit test by just saying they were refinancing from an ARM to a Fixed Rate and just closed them as Stated or No Documentation. Even though the Commision would have been great on this loan - I'm glad I did the right thing. Now I know the client will not be regreting their decision and will more than likely even refer business to me.

Sometimes it is hard, especially on a purchase transaction, to put a damper on someone's idea of the American Dream when they are so emotionally attached to the outcome; however, it is our responsibility as Real Estate Professionals to  make sure we are not  placing our clients in financial harms way.