The Central Bank Governor Patrick Honohan said today that the scale of the mortgage arrears crisis in Ireland is overwhelming the banks.
Honohan said that he "not comfortable" with the issue, which the Central Bank says is one of the biggest remaining challenges from the financial crisis.
He said that discussions with the lenders have been "ramped up" over the last six months to ensure there is effective management of the problem.
Financial Regulator Matthew Elderfield said that banks need to segment their loan books and to get better resourced to tackle the arrears crisis.
Honohan, speaking at the launch of the Central Bank's 2011 annual report, said that the issue would be eased if the unemployment problems here are addressed.
"Some of our analysis suggests that if unemployment could be got under control and could come down, even part way, towards where it was before the crisis that this would have a very, very substantial effect on curing those mortgage arrears - a surprisingly large effect, " he said.
Meanwhile legal rights organisation FLAC (Free Legal Advice Centres) said the continued rise in households behind on their mortgage payments is another red flag for Government to speed its reform of what it called our "hopelessly inadequate" debt laws.
It follows a report in yesterday's Sunday Business Post which said that that figures from the Central Bank for the first quarter of 2012, due to be published this week, would show that households in mortgage arrears of more than 90 days had risen to 10.5% of all residential mortgages arrears.
FLAC Director General Noeline Blackwell said it was "almost unbelievable" that the country's legal infrastructure still has not evolved to keep pace, despite repeated promises from the responsible government departments.
"This figure translates to more than 80,000 households which are in deep trouble," Ms Blackwell said.
"It doesn't include the people who are arrears of less than 90 days, or the people who have already done deals with banks and are paying less than their full mortgages, or indeed the people in local authority housing who are in arrears.
"This government and its predecessor have been talking about sorting out personal debt for years now," she added.
"How much longer will we have to tell people that they can do nothing to sort out their debts, that they have to throw themselves on the mercy of their creditors?"
Ms Blackwell said FLAC was keenly awaiting the publication of the long-awaited Personal Insolvency Bill, now scheduled for the end of June.
"This is the 15th straight quarter that we have seen a rise in arrears since we started to track the mortgage situation in 2008," she said.
"We don’t want to sound like a broken record, but the fact remains that mortgage arrears continue to cause extreme stress in homes all over Ireland with huge legal, financial and health repercussions - we just need a clear and transparent strategy now."