* Banks close to deal with govt on bad loans - Bank Assoc
* Agreement expected by late April at the latest - Banks
* Solution could include freezing fx loan conversion rates
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BUDAPEST, March 30 (Reuters) - Hungary's banks are very close to an agreement with the government on how to handle the country's large stock of non-performing loans, Bank Association Chariman Tamas Erdei said on Wednesday.
"Negotiations are very advanced," Erdei told reporters. "I think it's very likely that we'll reach a deal by the middle of April, or the second half of April at the latest."
Hungary's households took out trillions of forints worth of loans that were denominated mainly in Swiss francs at a time when the franc was much weaker than it is now, which has lead to a spike in payments and non-paying customers.
At the end of 2010, 11 percent of household loan holders were not able to pay their loans, according to the central bank. The government last year imposed a moratorium on evictions to avoid masses of people being forced out of their homes.
A deadline on lifting the moratorium was recently extended to July 1 from April 15.
Erdei said banks were open to a range of solutions that include temporarily freezing conversion rates on foreign currency mortgage payments, but he insisted that the moratorium be lifted by July 1.
"It is very important that an agreement is sealed and the accompanying legislation is passed by July 1 because the moratorium must be lifted - with some conditions, so as to avoid big market swings," he said.
Hungary's government is planning to offer all household Swiss franc loan holders the option of fixing monthly repayments below 200 forints per franc to make debt servicing more predictable, a government lawmaker said on Tuesday.
The option is part of a package of solutions formed by the government and the banking sector, which the prime minister said he expected to be wrapped up in May. (Reporting by Marton Dunai; Editing by Jon Loades-Carter)