A scheme to allow people with unsustainable mortgages give up ownership of their homes and rent them instead has seen less than 2% of applications approved.

Under the Government-backed initiative, a property is bought at a market price from a bank by a voluntary housing agency, which then lets the home to the occupants.

Since the mortgage-to-rent scheme was rolled out nationally almost two years ago, 38 properties have transferred ownership.

However, banks had proposed 2,337 cases for approval.

Dublin properties must be bought for less than €220,000 and homes outside the capital for less than €180,000.

The details have been disclosed in a Dáil reply by Housing Minister Jan O'Sullivan to Fianna Fáil's finance spokesman Michael McGrath.

"With thousands of repossession proceedings in the system, it is deeply concerning that the Government's mortgage-to-rent scheme is failing miserably to provide a safety net for those in arrears facing the prospect of losing their home," Mr McGrath said.

"The Government needs to urgently review the scheme, remove the unnecessary bureaucracy and complexity inherent in it, and make it workable."

To be eligible a mortgage must be unsustainable, the owners must agree to surrender their home, the property must be in negative equity and the home owners must be eligible for social housing.

The two biggest banks - AIB and Bank of Ireland - have only completed one mortgage-to-rent scheme each.

Pepper, which manages mortgages originally issued by GE Money, has had 24 mortgage-to-rent schemes approved.

In her reply, Minister O'Sullivan said 464 cases "have been advanced and are under negotiation, with 988 cases in the initial stages of the process". She said that 847 cases are not progressing.