The Scotland international joined Sunderland last year but struggled to make much of an impact and no extension was sorted out when his initial deal came to an end in January.
The former Everton star, 29, went to discuss a move to Nottingham Forest last month but, following Alex McLeish's exit as boss at the City Ground, the transfer stalled and now he is a free agent again, so he can move back to Sunderland outside the transfer window.
That has alerted Black Cats boss O'Neill, who says he will look into the possibility of luring the experienced attacking midfielder back to the north east.
He told the Sunderland Echo: "We let James' situation run past the transfer deadline and I think he went down to Nottingham Forest before McLeish departed.
"But obviously events have changed that situation and I don't know what's happened since then. I'll speak to the agent though and see where we stand."