Can a Loan Officer Continue to Act for a Homebuilder Friend?
Question
Martin Taylor, a loan officer at First National Bank, is a long-time friend of Bill Evans, a local homebuilder. Bill would like a line of credit at the bank and discusses the potential loan with Martin. During the discussion, Martin expresses his desire to build a house one day and Bill offers to build him one "at cost plus 5 percent."
If Martin accepts Bill's offer, can he continue to act as his loan officer?
Answers
Explanations
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A. B. C. D.A
The correct answer is C. Yes, if Martin does not let the discount on the house affect his decision making process.
Explanation: The scenario presented in the question raises the issue of conflict of interest. A conflict of interest occurs when a person has competing interests or loyalties that could influence their ability to make impartial decisions.
In this case, Martin Taylor is a loan officer at First National Bank, and Bill Evans is a local homebuilder who is seeking a line of credit from the bank. Martin and Bill are also long-time friends, and Bill has offered to build a house for Martin "at cost plus 5 percent."
If Martin were to accept Bill's offer and proceed with the construction of the house, there could be a conflict of interest if Martin's decision-making process in his role as a loan officer were to be influenced by his relationship with Bill.
Option A is incorrect because the value of the gift is not necessarily too great. Whether or not a gift creates a conflict of interest depends on the circumstances of the situation.
Option B is partially correct because if Martin were to disclose the fact that he is having a house built by Bill at cost plus 5 percent, it could help to mitigate any perceived conflict of interest. However, disclosure alone is not sufficient to eliminate the conflict of interest.
Option D is incorrect because the bank's code of conduct is not sufficient to determine whether Martin can continue to act as Bill's loan officer. The code of conduct may provide guidance on how to handle conflicts of interest, but ultimately it is up to Martin to ensure that his actions do not create a conflict of interest.
Option C is the correct answer because it recognizes that Martin can continue to act as Bill's loan officer if he does not let the discount on the house affect his decision-making process. This means that Martin must remain impartial and make loan decisions based solely on the merits of each loan application, rather than being influenced by his relationship with Bill or the discount on the house.
