Purchasing Nonperforming Loans.

These days, most people in the mortgage industry are more interested in selling nonperforming and subperforming assets than in buying them. Yet an industrywide fire sale may be setting the stage for a comeback in the subprime mortgage arena.

Already, numerous hedge and private equity funds have been formed to buy the mortgage assets that nobody else seems to want. And some private equity groups are even raising funds to originate subprime mortgage loans, betting that this segment of the industry will eventually make a comeback.

Most people you talk to think that someday, some of the smart bottom fishers are going to make the rest of us look like fools. They'll buy the loans and mortgage securities that everyone else is shunning, and then sell them once the industry has regained its footing and subprime credit quality borrowers don't look so toxic anymore. Or they'll just keep the assets and reap profits from the continuing cash flow. Either way, people on the sidelines will be left wondering, "Why didn't I think of that?"

Of course, being a successful buyer in today's market ...