If as a banker you make a loan to an individual and they in turn loan you the money is that illegal or just an ethics issue?
Country relating to Question: United States
State (if USA): Georgia
That's not illegal - but a serious ethical issue.The borrower can do with the money pursuant to whatever, if any, limitations placed by the lender.However, it could be thought that the banker lent the money to a person who otherwise would not have qualified BUT FOR they loaning them the money.It's a serious conflict of interest and ethical violation certainly - but not illegal.If you would like any additional information or have more questions please don’t hesitate to ask!Please remember to only rate my answer when you are satisfied with my response. IF you feel the need to click either of the two starts on the left, please STOP and reply to me via the "CONTINUE CONVERSATION" button. Let me know the issue you have and I will be happy to continue further and do everything I can to provide you with the service you seek.If you give any rating below 3 stars then I will not be compensated in any way for helping you today.The "helped a little" is considered a negative.Thank you,Law Pro
The customers spouse did not know she did the loan and so when the bank called and talked to him he said he had never seen the collateral. Now the borrower has a bank investigator calling them for a statement and to possibly file charges. The collateral is valid and is in a storage unit. What should she tell the bank investigator? The loan is now in default and they have entered suit against her.
This banker and borrower were/are husband and wife?
no were friends. borrowers spouse did not know about loan
I did not know what would be considered self dealing. The banker helped locate the collateral for the borrower at a reasonable price. No rules of the bank were voilated as the bank relied on tax value of properties as a valuation method for collateral. The loan was made in 2006
But the banker got the monies from the borrower - correct?What did the banker put up for collateral - they got the monies?
Banker got the monies from borrower and gave the borrower real estate that was used as collateral. The loan was a line of credit.
So the banker themself didn't get the proceeds of the loan - the borrower just lent the monies to some other 3rd person - correct?
The banker got the draws from the bank line of credit with advance knowledge of the borrower. This was the loan. She couldnt come to the bank each time.
What did the banker do with the monies?
There was never a check from the bank to the banker from the line of credit.
the monies were used in a real estate foreclosure business. The borrower loan was going to be repaid when houses sold and then the market crashed.
The borrower is not saying that the money was stolen from the line of credit without them knowing or anything. The banker knew the bank frowned on borrowing from clients so I guess how does the line of credit being made for benefit of the banker as a loan from the client play into this?
So was the money ever repaid?
Not all of it. The line of credit has a balance and the borrower has been sued by the bank. The bank called and her husband said he had never seen the collateral and I am not sure if the bank investigator is calling the borrower due to this and thinking the banker falsified the information and lied and said the loan had collateral and did not. The collateral is all there. how would this loan be a criminal offense. Nothing was falsified and the borrowers financials were provided by the borrower.
This could be fraud - a loan where the banker knew the reality of the loan but stated otherwise.It's "substance over form" in law.That although the "form" was done - the loan correctly obtained and collateral given - the banker KNEW that was not the "substance" of the loan and that it was going to be done differently.That's fraud. So, given the additional statements and facts you presented after the original question - I have to state that it's an illegal act by the banker not just an ethical violation.If you would like any additional information or have more questions please don’t hesitate to ask!Please remember to only rate my answer when you are satisfied with my response. IF you feel the need to click either of the two starts on the left, please STOP and reply to me via the "CONTINUE CONVERSATION" button. Let me know the issue you have and I will be happy to continue further and do everything I can to provide you with the service you seek.If you give any rating below 3 stars then I will not be compensated in any way for helping you today.The "helped a little" is considered a negative.Thank you,Law Pro
20 years legal practitioner: real estate, collections, estate, civil, business, and criminal law
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