The main Opposition parties claimed the mortgage plan left too much power with the banks but the Government insisted that lenders which did not cooperate would face punitive action.
Fianna Fail finance spokesman Michael McGrath dismssed the initiative as a "banker's charter", saying it left lenders in control of the process and gave them additional powers to set aside the code of conduct on contacts with borrowers in distress.
"The message today is that the banks are coming to get you and the Government is supporting them in that process," Mr McGrath said.
Sinn Fein's spokesman Pearse Doherty said the measures would offer little comfort to borrowers and left power with the same banks on whose watch the crisis had escalated.
"The banks have shown themselves incapable and unwilling to deal with this issue, and giving them more powers to come down hard on those in real, genuine distress, is not a solution," Mr Dohertysaid.
Similarly, People Before Profit TD Richard Boyd-Barrett said the new initiative gave the banks a licence to harass homeowners in difficulty with their loans.
However, a spokesman for Minister for Finance Michael Noonan said the Central Bank will impose targets in July for the actual number of settlement agreements to be reached by each bank.
"If they don't reach them, it has a very negative impact on the bank's provisioning and capital," the spokesman said.
Responding to reporters’ questions, Mr Noonan said the banks were now under new leadership. "There is no reason for the public to mistrust the new boards or the new management of the banks," he said.
"We have to have sanctions but I don't think the sanctions will have to be applied because the Central Bank is going to monitor this very very carefully and push it hard."
Asked whether he accepted the principle that there would have to be an increase in repossessions, Mr McGrath said in many cases it would be in peoples' interest to voluntarily surrender the property in order to negotiate a write-off of the debt overhang.
"I believe the result of what has been announced today and the reversal of the Dunne judgment will inevitably mean there will be a significant increase in family home repossessions," Mr McGrath said.
"Our view on this is very clear. Some mortgages are unsustainable. The focus should be on the buy-to-let sector initially. There is no differentiation drawn whatsoever today between the family home and an investment mortgage. The focus initially as the banks ramp up their capacity to deal with this problem belatedly should be on the buy to buy let sector, that's where they should be starting. There will be family homes that are not going to be retained in some circumstances."
