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Draft agreement between banks, govt sets HUF-CHF rate at 190 for troubled borrowers

A draft agreement between the government and banks would set the exchange rate on repayments for troubled borrowers with Swiss franc-based mortgages at HUF 190 to the franc, daily Magyar Hírlap said on Saturday, citing a copy of the document it obtained.

The rate is about 8% under the National Bank of Hungary's 211.2 fixing for the currency on Friday.

Retail borrowers with Swiss franc-based mortgages – more popular than forint mortgages before they were banned – saw their repayments rise as the forint weakened during the crisis, prompting Hungary's previous government to introduce moratoriums on foreclosures and evictions by lenders. The moratoriums have been extended several times, most recently until July 1, 2011.

Overdue payments on Swiss franc-based loans affected more than 90,000 homes at the end of last year, about a quarter more than the number of homes that were bought and sold during the year, according to NBH experts.

Hungary's government has been in talks with banks on assistance for these borrowers for months, and fixing exchange rates was mentioned as part of the support in an update to the government's structural reform program, the Szell Kalman Plan, published in April.

Magyar Hírlap said on Saturday the rate on repayments for troubled borrowers with euro-based loans would be set at HUF 265 to the euro and the rate would be set at HUF 199 to the yen for loans based on the Japanese currency.

The draft agreement sets limits on the percentage of foreclosed homes banks may auction from their portfolios.

The Hungarian Bank Association promises in the draft agreement to accelerate lending for SMEs; those with annual revenue up to EUR 50 million and headcount up to 250.

With the aim of giving banks more incentive to lend to SMEs and to home buyers, they would be allowed to deduct a part of these loans from the extraordinary levy on financial sector companies that they pay, Magyar Hírlap said.

Antal Rogan, who chairs Parliament's Economy Committee, said earlier that the assistance package for households struggling to pay back their foreign currency-denominated home loans was likely to cost the central budget HUF 15 billion-20 billion a year.

Magyar Hírlap on Monday said that an appendix to the draft agreement shows the state would offer subsidized loan constructions to the troubled borrowers to help them move into smaller homes.