Toxic assets aren't difficult to sell if the price is right.

Hedge funds and private-equity firms are buying bonds based on risky home loans at prices as low as five cents on the dollar as banks, insurance companies and pension funds are forced to unload these securities that continue to lose value.

This is happening at a time when the government is still trying to work out how best to value these assets and entice investors to buy mortgage assets that are clogging up banks' books.

Meantime, investors with an appetite for risk are swooping in to help those desperate to find buyers for unwanted debt. "The forced selling of residential mortgage-backed securities and the lack of willing buyers is creating opportunity in this sector," said Pete Nolan, principal at Smith Breeden Associates in Durham, N.C.

The selling is forced primarily because conservative investors want to get rid of nonperforming assets, especially those that are facing ratings downgrades. There are few willing buyers because there is less money to spend, Mr. Nolan said.