07/15/2008 - New arbitration process allows for fast settlement in conflicts about distressed loans
Borrowers and members of the Federal Association Loan Purchase and Servicing (BKS) will be able to settle conflicts with regard to distressed loans out of court in the future. For this purpose, the code of procedure for arbitration proceedings was passed by the general meeting of BKS on May 26, 2008. The code of procedure is an initiative of BKS founded in July 2007, of which Servicing Advisors Deutschland is one of the founding members.
BKS set itself the target to further improve the reputation of loan portfolio management and to establish a system of efficient self-regulation for the market. In this context, BKS would like to help borrowers to settle disagreements in a fast and easy way. “A cooperative solution is always the better way. Therefore, we would like to create the opportunity for an out-of-court settlement where conflicts arise”, Markus Bolder, CEO of Servicing Advisors, says.
Arbitration proceedings are to be carried out by an independent ombudsman who is practicing attorney in Germany or who is qualified to exercise the functions of a judge. He will be appointed by the chair of BKS. Borrowers as well as guarantors may call upon him. Precondition: The appellant himself or first-degree relatives live in the property that must not be used for commercial purposes.
Once the ombudsman receives a complaint, he reviews the admissibility of proceedings on the basis of the following criteria: The case must not be time-barred nor have been subject-matter of court proceedings. Furthermore, the arbitration must not have impact on the clarification of a general legal question in court.
If all preconditions are met, the ombudsman tries to find a solution in the next step that does justice to all the parties involved. In order to clarify on the status of the conflict, the parties get the opportunity to give a statement and to present their point of view. As a matter of principle, all proceedings and decisions will be in writing. After the ombudsman has reviewed all information, his arbitration is made in form of a recommendation. Afterwards, the parties have six weeks to accept it. It is not legally binding.
