Greek gov't official says initial deal reached with lenders over foreclosures

By Renee Maltezou

ATHENS (Reuters) - Greece reached a preliminary deal with its international lenders on home foreclosures reform late on Monday, removing a major obstacle holding up fresh bailout loans for the cash-starved country.

Athens needs a positive progress report to qualify for a sub-tranche of 2 billion euros (US$2.14 billion) in new financial aid to pay off state arrears, and 10 billion euros in funds to help recapitalize its banks.

A successful completion of its first bailout review would also open the way for discussions on debt relief.

"We have a preliminary agreement on housing loans ... I believe there will be a preliminary agreement today on all issues," a government official said. Discussions were ongoing on how to regulate non-performing business loans, the official said.

"This will give a very positive signal to the Euro Working Group on Tuesday," the official added, referring to deputy euro zone finance ministers scheduled to assess Athens' compliance with reforms under an 86 billion euro bailout programme.

Talks had previously stalled on disagreement over the level of protection of primary residences of homeowners unable to pay their mortgages, the repayment of tax and pension fund arrears and revenues from value-added tax.

The official said the deal provided foreclosure protection for primary residences for about 60 percent of mortgages among an estimated 400,000 homeowners whose loans had soured.

About 25 percent of that group, who were families with incomes below the poverty line, were accorded protection from foreclosure, and the remaining were given foreclosure protection for a three-year period provided they restructured their debts with their banks.

"This is the first time a social safety net has been created to protect the poor and the unemployed," the official said.

(Reporting by Renee Maltezou; Writing by Michele Kambas; Editing by Toni Reinhold)