COUNCILS are being forced to bail out homeowners who cannot afford to repay their mortgages.
One in four loans taken out to buy a local authority house is now in arrears, which is costing city and county councils up to €30m a year.
And the problem is getting worse as the downturn maintains its grip on household finances.
New figures from the Department of the Environment show that 6,280 housing loans – 28pc of the total – is in arrears of more than 90 days, up from 24pc last year.
This compares with 10.9pc of mortgages in the private sector.
The councils are being forced to repay the money because they drew down the mortgage on behalf of the homeowner.
Some 22,428 loans have been issued, and when they are not repaid the local authority must make up the shortfall.
This has resulted in a hefty bill at a time when budgets are being slashed and services cut.
The high rate of arrears is not unexpected as local authorities are considered lenders of last resort, only providing mortgages when banks have refused to lend.
However, collection rates have steadily declined in recent years, falling from 88.3pc in 2008 to 78.3pc in 2010.
Audit reports commissioned by the Local Government Audit Service show that collection rates are as low as 50pc in some counties. They show:
• In Westmeath, the amount owed stood at €2.2m at the end of 2011, and 50pc of the 554 loans approved by the council were over three months in arrears.
• Just 57pc of loans are being repaid in Kildare, which is up from 54pc.
• Galway city has a 72pc collection rate, down 5pc, and the council is owed €575,000.
• In North Tipperary, just 73pc of housing loans were repaid in 2011 – a drop from 77pc – leaving the council with a €200,000 shortfall.
• Longford County Council is owed €305,000.
• In Clare, the collection rate fell by almost 10pc last year.
"The collection yield (in Clare) declined by 9pc to 67pc in 2011 and is reflected in the increased arrears of €543,000 at the year end," the report says.
"A review of 14 arrears cases showed that the closing arrears of €170,000 on these sample accounts had increased by €65,000 (38pc) during 2011. The collection of housing loan arrears must be prioritised by the council."
The council said it was working to collect the outstanding amounts, and had secured repayment agreements.
The Department of the Environment has drawn up guidelines for local authorities to help tackle the crisis.
The Mortgage Arrears Resolution Process (MARP) allows for loans to be extended to a maximum of 30 years, with other measures including restructuring loans to allow interest-only repayments, paying the interest and part of the capital and, in exceptional circumstances, granting a payment holiday.
Almost 6pc of mortgages have been restructured and are performing. Sources said the annual shortfall stood at about €30m and that the situation was getting worse.
"Loan arrears stood at €24m at the end of 2011, but that had increased from €18m the previous year," one said.
"About 24pc of housing loans were in arrears for 2011, and data from the second quarter of 2012 puts it at 28pc."