The legislation establishes schemes involving exchange rate limits as well as the conversion of loans, as outlined in an agreement signed by the government and the Hungarian Banking Association last December.
Under the exchange rate limit scheme, borrowers may opt to cap their repayments based on the limit. The difference between the rate of repayment and market rates is to be placed on a separate account for later repayment. Banks and the government will share in equal part the interest costs on the separate account.
Borrowers who took out loans up to HUF 20 million may participate in the scheme, a threshold contained in the original agreement with banks but not finalized in the legislation until shortly before it was passed.
Under the conversion scheme, banks have until the end of August to convert non-performing FX loans into forint loans and write off a quarter of the value of the loans. Borrowers must have been more than 90 days behind on repayment of at least HUF 78,000 since September 30, 2011 to be eligible for the scheme. Their properties must be free of liens and they must declare their reasons for non-payment by May 15.
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