Fianna Fail wants to introduce a bill creating a “Nama for mortgage holders” before the Dail’s summer recess in July.

The Family Home Retention Agency Bill would allow the state to buy distressed mortgages on owner-occupied homes, at discounted prices from lending institutions.

The state would then rent the properties back to the occupants or negotiate more lenient mortgage terms.

A draft bill proposes the establishment of a state agency, described as “a friendly vulture fund”, which would buy the properties. Fianna Fail is suggesting that not-for-profit housing organisations, such as Cluid and Tuath, would manage the properties, possibly under the aegis of the state’s Housing Agency.

About €10bn worth of family-home mortgages would come within the scope of the proposal.

Fianna Fail TDs John McGuinness and Darragh O’Brien say they have been working on the bill for several months with Right2Homes, a voluntary campaign group.

Edmund Honohan, the master of the High Court, has given legal advice on the bill to the organisation. Honohan has previously urged the state to nationalise repossessed homes. In January, he claimed the government had failed to protect people facing repossession, and said it was allowing the courts to “pump people into homelessness”.

O’Brien, who is Fianna Fail’s foreign affairs spokesman, said: “We’re very advanced on this but we’ll need the government to support it. It’s nearly 10 years since the economic crash and there are over 30,000 mortgage-owners in distress for more than two years. It reflects very badly on our society.

“Our idea is that the bill would let people stay in their own homes while also helping the banks to clear their books.”

In February, McGuinness, who chairs the Oireachtas finance committee, asked finance minister Michael Noonan at a committee meeting about a possible state vulture fund for mortgages.

“It’s a good idea that is being explored actively but not in the Department of Finance,” Noonan replied. “My officials have had a conversation with the officials of the minister for housing [Simon Coveney] . . . and the matter is being explored.”

O’Brien said some finer details still have to be agreed, including whether to extend the bill’s remit to cover buy-to-let properties.

“My own view is it should just be the principal home,” he said. “For buy to let, tenants’ rights would have to be protected. We’re also well aware of moral hazards such as strategic defaulting, which I actually don’t think would happen.”

Last week AIB, a state-owned bank, sold 1,200
buy-to-let mortgages with a loan-book value of nearly €400m to Goldman Sachs for about €200m.

More than 12,000 family-home mortgages with a total value of €2.4bn are owned and managed by unregulated vulture funds.