Debt-ridden homeowners may only secure a year-long delay on repossession if they co-operate reasonably and honestly with their banks, has been warned.
Financial Regulator Matthew Elderfield suggested court action should be put off for 12 months if struggling borrowers agree and adhere to a revised repayment scheme.
The new rules on repossession moratoriums are part of proposed reform of a code of conduct for lenders dealing with more than 30,000 homeowners in arrears.
"Where borrowers are co-operating reasonably and honestly with lenders, lenders must wait at least 12 months before applying to the courts to commence enforcement of any legal action on repossession of a primary residence," Mr Elderfield's proposal stated.
Under the old regime, introduced last February, debt-hit mortgage holders were granted an automatic year-long moratorium on repossession after falling into arrears.
The new system would guarantee no moves to repossess if borrowers stick to agreements on repayments struck with their lender.
Mr Elderfield's plan would see borrowers given 12-months grace from when arrears first arise if a revised repayment arrangement has not been agreed.
The moratorium would also come into effect when the borrower ceases to adhere to the terms of a revised repayment arrangement and no further arrangements are being entered into.
Lenders must also wait for a new appeal process to be completed before applying to the courts for a repossession.
Other proposals to ease the burden of debt include lenders setting up a resolution process to help borrowers in difficulty repaying debts to handle arrears and pre-arrears cases; providing borrowers who are in trouble with customer friendly information and banks should look at all repayment options with staff trained to deal with debt-ridden customers.