Spain's banking association announced on Monday it would freeze eviction orders for the next two years in cases of "extreme hardship", following widespread alarm and protests after a woman killed herself on Friday moments before she was due to be evicted, the second such death in less than a month.

"This cannot be allowed to go on," said Juan Carlos Mediavilla, a judge who attended the scene after Amaia Egaña, 53, leapt from her fourth-floor flat in the northern city of Bilbao.

"It's a problem which has been talked about for some time. The time for talk is over and steps must be taken for something to happen."

Within hours of Egaña's death noisy protesters had gathered on the streets of Bilbao. Stickers saying "murderers" were fixed to cash machines, while the governing People's party and opposition Socialists pledged to hold an emergency meeting on Monday to agree on reforming mortgage laws.

Maria Cumbicus, who has fallen behind on her mortgage payments since she lost her job as a cleaner three months ago, is in danger of joining the list of 400,000 who have been evicted in Spain since a property boom ended in 2008 and the country sank into economic crisis.

"It is just terrible never knowing if you'll be able to get back into your home every time you go out," said Cumbicus, 50, who is originally from Ecuador, one of many who moved to Spain when its economy boomed but have since fallen on hard times in a country where one in four are on the dole. Her husband was forced to return to Ecuador because he was self-employed and not entitled to unemployment benefit after losing his job.

Cumbicus's flat on the outskirts of Pamplona, a city famous for its annual bull-running festival, was put up for auction in court on Mondaymorning, but no bids were accepted, so she now has 20 days in which to negotiate with the bank and see if she can transfer the property in lieu of payment. Under Spanish law, mortgage holders are still liable for outstanding debts even if they are evicted.

"All these years I've been paying and now I'm going to be on the street," she said. "Halting evictions is all very well after these suicides, but there is very little you can do on your own unless someone comes to your aid."

Spain's banks have come under fire from protesters and opposition politicians for continuing to carry out evictions even after some received part of a European bailout negotiated by Madrid which could amount to €100bn (£80bn).

Details of the cross-party deal to reform the mortgage law by decree remain under discussion, but the minister for the economy, Luis de Guindos, said: "No family of good faith should become homeless because of the crisis."

The Platform of those Affected by Mortgages (PAH) grassroots group, which has been campaigning to change the law for nearly three years, says a moratorium on evictions would not be enough.

"This measure would not affect foreclosures under way and so leave out hundreds of thousands of families still swamped by proceedings. We demand an immediate halt to all foreclosures, as long as they affect first homes and debtors in good faith," a PAH statement said.

The United Police Union said it would back any of its members who conscientiously objected to enforcing eviction orders.

"We're not robots, we're human beings and this is like the soldier in a firing squad who refuses to shoot, even knowing he will take the place of the one to be shot," said Jose Manuel Sanchez, the union's secretary general.