FINANCE Minister Michael has warned the mortgage system would collapse without the threat of repossession.
Mr Noonan is standing by his under-fire official John Moran following his harsh warning on repossessions last week.
The minister has insisted the banks will do more to accommodate people in severe difficulties with their mortgages now that they have trained staff with a "menu of solutions" available.
However, the finance minister also warned the mortgage system would collapse without the threat of repossession.
Mr Noonan said while there is no intention of the practice becoming widespread, repossession was a "back stop" for the banks to protect their collateral.
"If they [the banks] can never acquire the value of the deeds then in theory the whole mortgage thing collapses," he added.
The minister said Ireland has a very low level of repossession by international standards and believes the real emphasis should be on the rental sector.
"The place to really place the emphasis is in the buy-to-let sector because people are in there, they made commercial investments, they are collecting rent. They should pay the interest on their mortgages and if they can't, the investments should be sold," he said.
"You get a loan and the deeds of the house are taken by the bank and if the deeds are no use and they can never get possessions of the property sure why would you pay?" he added.
Cabinet ministers were angered by Department of Finance secretary general John Moran speaking of an "unnaturally low level of repossessions" and felt he was not articulating Government policy.
Mr Moran also said homeowners could not expect the taxpayer to subsidise them to remain in a house "that is beyond their means".
But Mr Noonan said Mr Moran is legally obliged to "tell it as it is".
"John was in the Public Accounts Committee as accounting officer and he is legally obliged under the law and under the Constitution to tell it as it is.
"He did that and he made it quite clear that he didn't see on the personal mortgage side a lot of repossessions, very few. But he said we have very low levels of repossessions at the moment if you make international comparisons," he said.
Mr Noonan said he was "absolutely" insisting the banks would do more to accommodate people in difficulty.
"We are disappointed it didn't happen earlier. This has to be dealt with in the interest of the people who are in debt because they can't manage their full mortgage repayments, but also in the interest of the country."