Hungary's government on Monday unveiled an agreement with banks on measures to help Hungarians who are having trouble making repayments on their foreign currency-denominated home loans.
Under the five-point assistance package, the exchange rate for repayments on Swiss franc-denominated loans are to be fixed at 180 forints to the franc until the end of 2014, Prime Minister Viktor Orbán said. The fixed exchange rate will be voluntary for borrowers, he added.
The rate will be set at 250 forints to the euro euro-based loans and at 200 forints to 100 yen for yen-based loans, said National Economy Minister György Matolcsy.
The agreement establishes quotas on auctions of repossessed homes, limiting initial sales to the biggest and most expensive homes. Quotas, as a percentage of bad mortgages in the portfolio, will depend on geographical area. A quota will be set for Budapest too.
Answering a question, Matolcsy said the quota would be set at 2% between October 1 and December 31. The quarterly quotas will rise to 3% in 2012, 4% in 2013 and 5% in 2014, he added.
Between July 1, when the moratorium on foreclosures ends, and October 1, only homes worth more than HUF 30 million on which more than HUF 20 million is outstanding may be put up for foreclosure, Matolcsy said.
A National Asset Manager (NET) will be established to assist borrowers who have defaulted on their loans and lost their homes. The asset manager will buy the homes of borrowers who have defaulted on their loans and allow them to continue living there as renters. NET will buy the properties at 55% of market value in big cities, at 50% in other cities and at 30% in smaller communities. It will work closely with local councils.
The asset manager will also launch a new home construction program as a greenfield state investment, Orbán said.
Matolcsy said "a few thousand" homes could be taken over by NET in 2012. The government will review the state of the property market every quarter, he added.
Foreign currency-based home loans will be relaunched, but only for borrowers whose income is in the same currency and whose income is 15 times the minimum wage.
Orbán noted that European Union rules make it difficult for Hungary's current ban on foreign currency-based mortgages to remain in place.
Interest subsidies will be introduced for borrowers who move into smaller homes. The subsidy will be capped at five years and 3.5% annually.
Orbán said legislation on implementing the assistance package would be submitted to Parliament after the close of social consultations.
Hungarian Banking Association chief Mihály Patai said the government and banks had reached an agreement on five points of the package but they were still negotiating a further three points. The agreement reached between the sides is fair and will improve the situations of hundreds of thousands of borrowers, he added.
Patai noted that the 180 HUF/CHF fixed exchange rate was 17-18% under the exchange rate at present. Borrowers will start making repayments on the accumulated difference between the fixed rate and the actual exchange rate from the start of 2015, paying a rate pegged to BUBOR. The state will provide a guarantee on the difference, which will be a forint loan, until January 1, 2015, charging banks a guarantee fee that is expected to be 1.5%. The guarantee will depend on an agreement with the European Union.
Matolcsy said agreements had not been reached with banks on the scale of the bank levy after 2013-2014, on allowing borrowers release from their mortgages if the value of their loan exceeds that of their property, and on incentives to boost lending activity.
The government and banks have been hammering out the agreement on the support for months.