Negotiations between the Greek government and the four creditors from the European Commission, European Central Bank, European Stability Mechanism and International Monetary Fund appear to moving towards a deadlock as far as decisions for non-performing loans are concerned. The so-called “quartet” of creditors want to see non-performing “red” loans go to foreign funds, even if they are mortgage loans.

At stake are the bad loans and the protection of first residence from foreclosures.

No deal on Saturday during 14-hour discussions that ran through to 2 a.m. on Sunday, heralded a new round of negotiations that began at noon on Sunday.

The Euro Working Group meeting that needs to conclude on Sunday (before foreign stockmarkets in Asia and Europe open) is mandatory so that a deal on the 10-bln-euro tranche for Greek banks is reached, averting any disappointments regarding the recapitalization of Greek banks. After 12 hours of wrangling on Saturday, there was no agreement though a government source does point to progress. Despite “progress”, the same source could not confirm whether there would be a EWG meeting on Sunday.

The same government source points to the Quartet’s calls for stricter terms for the protection of primary homes from foreclosures, but are pushing for mass sales of non-performing loans.

1. The value of non-performing loans to be sold is up for debate. The Greek side has proposed the selling off problematic loans belonging to large businesses, as was the case in Cyprus. Lenders – especially the IMF, say sources – are pushing for the bar to be lowered so that private mortgages valued at hundreds of thousands of euros could also be got rid of.

2. Would institutions (investment groups with banks) buying the ‘toxic’ loans have the power to activate their yield? It is uncertain as to the power that the institutions that buy the non-performing loans would have to “force” their collection.

3. The Greek side wants to save primary homes that are protected under the old Katseli law so that there are restrictions as to which homes can be sold off so that mortgages can be collected. The government wants income restrictions that would cover 58-60% of the people in debt (instead of the 74% that had initially been hoped for). This means that four-membered families earning less than 30,000 euros would be protected, however creditors want protection only for those at poverty level (just 15% of mortgage holders).