* Talks may finish in time to end eviction moratorium by July
* State asset management firm discussed - bank association
* New instrument would make monthly fx repayments predictable
By Sandor Peto
BUDAPEST, March 23 (Reuters) - Hungarian banks may reach an agreement with the government within a month on measures to help borrowers who defaulted on mortgage loans or are close to default, the Hungarian Banking Association said on Wednesday.
Parliament recently extended a moratorium on the eviction of defaulted mortgage loan holders to July 1 from April 15.
Bad loans, coupled with the eviction moratorium weigh on the books of Hungarian banks who also have to pay a big crisis tax imposed by the government last year.
"I hope very much that we can agree with the government within a month and then the July 1 date to introduce the measures look realistic," Daniel Gyuris, member of the banking group's presidency told Reuters.
"We have to find a solution to this complex set of problems soon as only that could cause a real improvement in banks' portfolio quality," he said. "Every month of further delay would push 4,000 to 5,000 further families off the edge."
The weakening of the forint and a surge of the Swiss franc
since mid-2008 have boosted the loan instalments of hundreds of
thousands of households who took out foreign currency loans,
mainly in Swiss franc
Both the government and banks are interested in finding a solution to the problem of non-performing loans as mass evictions would hit the real estate market, while provisioning for bad loans curbs banks ability to lend to the economy. Gyuris said the state could take over the homes of about 10,000 borrowers who are in the worst situation, and who owe about 20 billion forints ($104.9 million) to banks. These families would then rent their homes from the state.
"The state would take a role in that via a state asset manager (company)," he said. "That's the circle in which clients will realize the biggest loss and also banks will have to take the biggest sacrifice here."
The loan repayment difficulties of a further 70,000-100,000 families can be solved if they move to cheaper homes, he said.
The third issue discussed is an instrument to smooth out the monthly repayment burden which heavily fluctuates due to exchange rate swings, Gyuris said.
"It's not about fixing the exchange rate or (banks) realizing the exchange rate losses (on the loans)," he said.
He said the government could guarantee the repayment of additional debts caused by the exchange rate fluctuation for a certain guarantee fee. Banks would not need to create provisions to cover these debts.
Gyuris said certain proposals discussed during the talks looked acceptable to banks.
"Banks can accept if the government's proposal creates predictability in repayment burdens, brings back those who are off the edge, and helps rebuild the market," he added.
(Reporting by Sandor Peto; Editing by Ron Askew)