Identify the two (2) ethical principles that arise in each of the three (3) scenarios from the case study and list them and the issues identified

Case study Changed circumstances pre-settlement Koen and Maali Yarran are a professional couple who came to see you for credit assistance for a home loan to assist with the purchase of their first home. After years of hard work and saving for a deposit, they were very excited to have their conditional offer for the house purchase accepted once they received the news of an unconditional approval by the lender. The loan process is well underway with loan contracts signed and returned to the lender with settlement due in 15 days. Koen came in to see you to advise that he had suddenly lost his job. He was concerned that this may interfere with their ability to get their loan and for settlement to go ahead. The loan had been approved based on their capacity to repay, taking into account their employment and their income. By advising the lender that he lost his job, it was possible that the settlement could be called off, the loan approval withdrawn, and the client would possibly lose their deposit and may incur settlement delays and fees. If they were to lose their deposit, they may not have another chance to purchase a home of their own. None of these outcomes would be beneficial to the client, who the broker was representing under the broking agreement.

Scenario A The broker took the view that the lender had the opportunity to verify his client's income when they applied for the loan and had accepted the risk that their circumstances might change over time, including the possibility that they may experience periods of unemployment. Satisfied that the lender could rely on remedies for any loan default, the broker advised his clients that there was no need to worry about the situation saying that: 'unless you feel that you can no longer afford to service the repayments, you do not have to tell the lender about your job loss'.

Outcome: The clients agreed to say nothing to the lender and proceeded with the settlement on their home purchase, hoping that everything would work out just fine

Scenario B Worried about regulatory obligations and the risk of having the broker fee clawed-back by the lender, the broker contacted the lender on the client's behalf and cancelled the loan. The broker warned the clients that: 'There may be some loan break-costs that would have to be paid but that's better than potentially defaulting on your home loan'.

Outcome: The clients were surprised to hear that this had happened and were disappointed that settlement on their home purchase would not proceed worrying that they would lose their deposit and also have to pay legal costs. The vendor partially refunded the deposit in accordance with the sale agreement. While the lender did not apply any break-costs, legal fees had to be paid by the clients. Both the lender and the broker are now responding to a complaint lodged with the Australian Financial Complaints Authority (AFCA).

Scenario C Unsure of whether the lender should be informed, the broker contacted the aggregator to find out what the right thing to do was.

Outcome: The broker was advised: 'When you become aware of information that affects the lender, you're under an obligation to tell them', which meant that the only right thing was to inform the lender. The lender determined that although the funds had not yet been drawn down by the borrower, they were entitled to rely on the terms of the loan agreement and settlement proceeded. The broker reflected on this process and at the next internal sales meeting, told his colleagues that: 'The lender might seek an excuse not to proceed or they may allow the loan to go through. However, the choice is up to the lender and as the broker, we must remember that we are a servant to two masters'.