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Banks reject second gov’t proposal on troubled debtors, says Népszabadság

Hungarian banks have rejected a new draft agreement prepared by the government which aims to help Hungarians who can't pay their foreign currency-denominated mortgages, daily Népszabadság said on Wednesday, without citing a source.

The government sent an extended and reworked draft of the agreement to banks on Friday but the board of the Hungarian Bank Association and banking heads sent it back saying they favored the earlier draft, the paper said.

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 suspend foreclosures and evictions by lenders. The freeze has been extended a number of times, last time around 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 the National Bank of Hungary (MNB).

Hungary's government has been in talks with banks for months on helping debtors and fixing exchange rates was proposed as part of the support in an update to the government's structural reform program, the Széll Kálmán Plan, published in April.

Under both drafts of the agreement, the period during which the bank levy is in place is to be extended from the end of 2012 to both 2013 and 2014. In the earlier draft, banks were to be allowed to deduct a tiny fraction of new lending from the tax. In the fresh draft, the deduction was to come from the base for the levy, which would have meant banks saved practically nothing, the paper said.

In the fresh draft, the government set the maximum HUF/CHF exchange rate for troubled borrowers at just 160, compared to 190 in the earlier draft. Both rates are well under the current rate of around 210 forints to the franc.

In the earlier draft, banks were to be limited to auctioning 5% of their foreclosed properties portfolios per quarter after a moratorium on evictions and auctions is lifted. In the fresh draft, the per-quarter limit was to be set at 1% in 2011, 2% in 2012, 3% in 2013, 4% in 2014 and 5% in 2015.