08/14/2008 - Binding values when dealing with loans: Code of Conduct establishes quality standards
The Federal Association Loan Purchase and Servicing (BKS) of which Servicing Advisors is one of the founding members sets up standards for handling non-performing loans: A specially created code of conduct will contribute to bringing the good reputation of the market around distressed debt to Germany as well. At the same time, it strengthens the interests of the borrowers.
The BKS Code of Conduct is binding for all participating members of the association. They commit themselves to adhering to standards that exceed legal requirements when selling loans. Markus Bolder, CEO of Servicing Advisors, comments on that as follows: “Behind it stand the values which are BKS’ basis for the workout of distressed debt: understanding, respect and directness when interacting with each other.”
Important to the borrower: Foreclosure is only an option when all other promising and timely opportunities for a redemption of the loan are exhausted. Furthermore, the borrower is involved in all decisions. This includes a written information in case of a sale and the naming of a concrete contact person on the side of the loan purchaser. Furthermore, he or she will be informed in time before the fixed interest rate expires whether it will be prolonged – and at which conditions.
Furthermore, the Code of Conduct of BKS provides for keeping the interest rates according to the existing agreement on conditions when a loan is taken on. After expiry of conditions the following holds true: If refinancing gets more expensive and if the securitization for the loan is reduced in value at the same time, the interest and amortization rate conforms with comparable conditions usual in the market.
BKS’ commitment on the market of distressed debt that is still young in Germany follows two aspects: On the one hand, binding quality standards are to be created which serve as orientation for purchasers as well as for sellers and third parties. On the other hand, BKS wants to represent this comparably new industry by representing the interests of the investors and service providers as regards the treatment of distressed debt towards the public, politics and society.
