They believe their scheme will work where others have failed because supply will be matched to demand rather than flooding the market with cheap properties.
Beneficiaries of the scheme will be prospective tenants, the lenders themselves and, perhaps most of all, the people whose properties have been repossessed.
National & Provincial says that on average repossessed properties are taking between six and 10 months to resell. During that time the debt that the original owner owes to the building society grows with each missed mortgage payment. But under the new scheme the societies expect 5 per cent of repossessed properties to be sold within four months.
The Bankruptcy Association believes that this time-saving could be crucial for many people who are in financial difficulty.
The association believes that a new breed of bankrupt has emerged over the past six months - the person who is being sent over the edge purely because his or her home has been repossessed and has been sold at a significant shortfall on the mortgage.
John McQueen, chief executive of the association, welcomes the scheme. 'It is bound to help,' he said. 'But there is a tidal wave catastrophe waiting to happen.'
Under the scheme the two societies have joined forces to establish Community Housing Ltd, into which they are each injecting repossessed properties to the value of about pounds 5m. Community Housing, run by the managing agents Johnson Fry Property, will then lease out those properties to local authorities and housing associations.
The debt for the original borrower is crystallised at the moment the property is passed to the portfolio of Community Housing.
To reduce the potential for a conflict of interest by the two societies, repossessed houses will be eligible for the scheme only once they have been on the open market for three months and after they have been valued by two independent surveyors. The property will be transferred to Community Housing at the higher of the two valuations.
The societies hope other lenders will join the scheme. They are already in negotiations.Reuse content