Since 2009, Irish courts have granted repossession orders on just 2,722 private dwellings, or 0.4 percent of residential mortgages. Another 5,473 were surrendered voluntarily.

The issue has become highly political in Ireland, with some opposition politicians warning of mass repossessions if loans are sold to so-called "vulture funds."

In a research note published on Tuesday, the central bank said more than half the 28,946 mortgages on principal dwellings over 90 days in arrears could end in repossession, either enforced or voluntary.

"Over half of the cases progressing to long-term arrears are classified as involving the potential for loss of ownership outcomes," the research paper said.

The research also showed that over 12,700 mortgages are now more than five years past their due date, up from 34 percent a year previously.

Around 120,000 home loans - one in six - have been restructured in line with a government directive to use long-term forbearance to manage mortgage arrears, with 87 percent of those arrangements proving durable, the central bank said.

But the process is slowing down, partly because the remaining mortgages are in long-term arrears, which are the hardest to deal with.

"Whilst the amount of late-stage arrears cases is decreasing, a significant number of cases remain, and appear to be getting worse," Central Bank Deputy Governor Sharon Donnery said in an interview with state broadcaster RTE.

A planned 3.7 billion-euro portfolio sale by majority state-owned permanent tsb, including some 14,000 home loans, rekindled the debate and forced the government to seek to tighten regulations around distressed loan sales.

(Editing by Larry King)

By Graham Fahy