New York Codes, Rules and Regulations
Title 3 - BANKING
Legal Interpretations
LI 4 - Savings Banks and Savings and Loan Associations
Section LI 4.7 - Conflict of interest-mortgage loans by savings bank on real estate sold by trustee of the savings bank

The department was presented with the following facts: A trustee of a savings bank is the owner of a real estate business (hereinafter the company). Since his election to the board of trustees over two years ago, one-third of all the mortgage loans made by the savings bank were made to purchasers of properties sold by the company. The purchasers made their mortgage applications to the savings bank at the suggestion of the trustee. Neither the trustee nor the company received any commission or fee for the placement of the mortgage.

On the above facts, it was asked whether a conflict of interest problem existed because of the trustee's interest in the realty firm. The department responded that for many years it had taken the position that activity of the sort described above would be inconsistent with section 247(2)(a) of the Banking Law and article 10, section 3 of the New York State Constitution. It stated that the essential rationale for its position was that the only practical way for the department to keep a savings bank trustee to the highest standard in this area is by assuring that he does not place himself in a position where he might have to explain away his acts. Continuing to believe that the above reasoning was sound, the department concluded that, on the facts presented, a conflict of interest existed.

DATED: August 1, 1969