Paulson became a billionaire in 2007 by betting against subprime mortgages, a trade that was documented in Michael Lewis's "The Big Short." He started buying residential and commercial mortgage securities in late 2008 and 2009. Paulson & Co.'s Credit Opportunities Ltd. fund gained 3.5 percent last month after losing 18 percent in 2011, according to an investor letter.

Lippmann, also featured in Lewis's 2010 book after betting against mortgages while at Deutsche Bank, says residential mortgage-backed securities are priced the best for a souring economy compared with other investments. He made $1.5 billion in 2007 and 2008 for the Frankfurt-based lender, according to a U.S. Senate report.

"The product is as cheap to broader markets as it has been in a long time," Lippmann wrote in a Feb. 10 letter to clients of his hedge fund LibreMax Capital LLC. "Perhaps more importantly, we believe RMBS has potentially less downside to adverse economic scenarios."

Global Risks

LibreMax, which he co-founded after leaving Deutsche Bank in 2010, has been reducing the hedges used to balance the risks of the residential debt that accounts for about two-thirds of his holdings, he said.

While Lippmann wrote he was "heartened by the recent string of largely positive U.S. economic data," he's "wary of a second-half slowdown amid continuing global risks." His New York-based firm, which oversees $1.1 billion, is forecasting a 6 percent decline in home prices from January through April 2013.

Bonds backed by so-called Alt-A mortgages, which fall between prime and subprime in terms of projected defaults, offer yields of more than 7 percent "to stressed scenarios," according to JPMorgan analysts led by John Sim.

Losses on the underlying loans total 10.3 percent of the original balances so far, with 30 percent of remaining borrowers delinquent, the bank's data show. In a "severely negative" outcome, where home prices decline 10.7 percent, 55.3 percent of the existing borrowers will default, leaving investors with cumulative losses of 21.8 percent, the analysts forecast.

The S&P/Case-Shiller index of property values in 20 cities declined 3.7 percent in November from a year earlier, compared with the 3.3 percent drop projected by economists. Values are down almost 33 percent from a July 2006 peak.

Other firms that have started funds include CQS U.K. LLP, the $11.2 billion money-management firm run by Michael Hintze in London. Its CQS ABS Alpha Fund, run by Alistair Lumsden, started this month with $140 million, according to a Feb. 2 letter sent to clients. Cerberus Capital Management LP raised $800 million for an RMBS Opportunities Fund, according to a person familiar with the matter.

'Lottery Ticket'