The proposals emerged after Finance Minister Michael Noonan was accused of not acting with enough urgency as thousands more households slip into arrears.
Other options being looked at by a body of banking figures and civil servants set up by the Government include enabling people already in negative equity to trade up to a new home. This would be if they can sustain the overall debt after selling their old residence at a loss and carrying the previous mortgage “hangover” with them.
With the number of households in arrears of three months or more expected to top 60,000 by the end of September, pressure has been building on the Government to do more.
The Labour chairman of the influential Dáil housing and environment committee, Ciarán Lynch, demanded the immediate creation of an agency with legal powers to review each problem mortgage on a case by case basis and impose solutions on the banks such as a debt for equity swaps.
The growing crisis was thrown into sharper relief by figures from Permanent TSB showing a 24% surge in mortgage arrears in the first six months, with home loans in arrears of over 90 days rising from 6.8% to 8.8%.
Mr Noonan insisted the situation “was not as bad as suggested” as banks had been given sufficient capital to write off some mortgage debt.
Mr Noonan said he would wait for the Government-appointed group to report at the end of the month before deciding what action to take on the mortgage debt situation.
Fianna Fáil warned his remarks added to the sense of confusion surrounding Government policy on the matter, and independent Wicklow TD Stephen Donnelly called for ministers to put the interests of debt-ridden families ahead of those of the bailed out banks when considering what to do.
Under the proposals being looked at repossessed homes could be taken over by the state and rented back to the previous owners, while householders trapped in negative equity would be able to obtain a second mortgage to move, but would take “hangovers” from their previous mortgage with them.