Ms Davies said that action was being taken as a response to the growing number of homeowners who now face difficulties as result of the ‘credit crunch’.
Under the Mortgage Rescue scheme, grants can be used by housing associations to buy a share of the mortgage or buy properties outright and then rent them back to the former owner.
The funding is intended as a last resort measure and will deal with the most urgent cases which would otherwise result in homelessness, giving rise to additional pressures on social housing waiting lists and use of temporary accommodation.
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Ms Davies said: "We have had indications from Councils that there will be an influx of applications in the New Year and it is as result of this that more money is being put into the Mortgage Rescue Scheme.
"The position that a growing number of home owners are finding themselves in is one where they unable to meet the payments on their mortgage and facing repossession proceedings, this is of great concern to me."
The Deputy Minister added that the scheme was in line with the Assembly Government's 'One Wales’ commitments to develop a 10 Year Homelessness Strategy - which is currently out for consultation – and to cut child poverty in Wales.
"This demonstrates the ability of the Welsh Assembly Government to be responsive to changes in the market. The homelessness prevention agenda is an important one and this intervention will alleviate pressure on local authorities and provide a safety net to those facing the unfortunate reality of eviction and becoming homeless."
In May this year, the Deputy Minister established a task group to produce a plan to address repossessions in Wales. The Mortgage Rescue Action Plan is due to be launched in the new year.
