The Government has announced an effective removal of the veto wielded by the banks over any proposed insolvency arrangements as part of its new package to deal with mortgage arrears.

Courts will be able to override the objections of the banks to impose arrangements put forward by advisers to those in mortgage distress if it is felt the proposals are “fair and reasonable”.

Speaking at a press conference, Minister for Finance Michael Noonan said the "the principal new initiative is to remove what was known as the bank veto over insolvency arrangements".

Minister for the Environment Alan Kelly said the removal was a critical component of the package, and Minister for Justice Frances Fitzgerald said it would be "along the lines of the examinership model" for businesses.

“The key change would be that we would introduce a power for the courts to consider a review where settlements had been turned down,” Ms Fitzgerald said. “There would now be an opportunity and an option for the court to review the settlement.”

The Mortgage to Rent scheme has been expanded, making it possible for more homeowners in the greater Dublin area to enter the scheme.

The scheme, launched three years ago, was aimed at assisting up to 3,500 mortgage holders who face losing their homes - but only 88 householders have benefited from it.

The initiative allows mortgage holders to surrender their homes to a not-for-profit housing association, which then rents it to the original owners.

Previously, the property must have a current market value of less than €220,000 in the greater Dublin area and €180,000 in the rest of the country.

The greater Dublin area cap has been lifted to rise to nearer €350,000, and changes for homes outside the capital will be announced in future.

The Money Advice and Budgeting Service (MABS) will also take on a more enhanced role, but the proposal to reduce the bankruptcy term from three years to one has been referred to a Dáil committee and is not included in the package.

On the issue of mortgage interest rates, Mr Noonan said increasing the bank levy “is an option for any Minister for Finance” to impose on lenders who do not reduce their rates.

However, he said would not put it in the context of the mortgage arrears package.

“The question of a levy is an open question but it is not particularly tied to mortgage arrears,” he said.