He's made a fortune picking through the bones of failed steelmakers, textile mills and coal miners.

Now billionaire investor Wilbur Ross is taking aim at another beleaguered industry: subprime mortgage lenders. He took his first step on Monday by providing $50 million in debtor-in-possession financing for American Home Mortgage Corp, which filed for bankruptcy earlier in the day.

It's a tiny step, but Ross told Reuters there are many more to come.

We've been looking at subprime for quite a while. This is the first affirmative commitment we've made. It's not a very large step, but it's our initial foray into subprime, he said in a phone interview.

More than a half-dozen subprime lenders, those specializing in borrowers with poor credit, have filed for bankruptcy over the past year, including New Century Financial Corp.

Worries about slumping home prices and rising loan losses led to shrinking values for mortgages and asset-backed securities. Soon investment banks turned off the credit spigot for mortgage firms, forcing some to file for Chapter 11 or else find buyers.

And with housing markets still expected to head south, the suffering looks set to continue.

There's a good chance it will get worse, Ross said. We think there is going to be a lot more trouble to come in the way of defaults.

There's $170 billion of subprime mortgages expected to re-price between July 1 and December 31, plus about $400 billion that will re-price next year, Ross said. That's expected to fuel an increase in loan defaults and push more lenders over the brink.

For investors like Ross, that's good news. For more than 20 years Ross bought distressed assets at steep discounts, slashed costs, merged them with rivals and then sold on the combined packages at higher prices.

That formula worked in steel, where Ross rolled LTV and Bethlehem Steel into what in 2002 became International Steel Group. Ross then sold ISG to Mittal Steel for $4.5 billion in 2005.

Likewise he consolidated coal miners into International Coal Group, which currently has a market value of $605 million. In the past year he's been acquiring auto parts businesses, taking advantage of turmoil in that sector.

Last August, International Textile Group Inc. and Safety Components International Inc., both majority owned by Ross, agreed to merge. The deal was part of Ross's goal to build several competitive auto parts companies from businesses acquired through bankruptcy courts.

Ross, which last year sold his own firm to money-management giant Amvescap for as much as $375 million, added that he is comfortable that American Home is a good, safe place to get started on his latest venture.

What we're doing here is we feel there's quite adequate collateral, he said. In any event we're happy to play a role in stabilizing American Home Mortgage. It's a small foray into what we regard as a safe basis in the subprime space.

Mortgage Investment