AAMES FINANCIAL CORP/DE
EXHIBIT 10.31
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<FILENAME>ex10_31.htm
<DESCRIPTION>EXHIBIT 10.31
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<TITLE>Exhibit 10.31</TITLE>
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<P ALIGN="Right"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Exhibit 10.31</B></FONT></FONT></P>

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<A NAME="A001"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">SECOND
AMENDED AND RESTATED<BR>MASTER LOAN
AND SECURITY AGREEMENT</FONT></FONT></H1>

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<A NAME="A003"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Dated
as of August 29, 2003</FONT></FONT></H1>

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<A NAME="A004"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">AAMES CAPITAL
CORPORATION<BR>as
a Borrower</FONT></FONT></H1>

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<A NAME="A006"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">AAMES
FUNDING CORPORATION<BR>as
a Borrower</FONT></FONT></H1>

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<A NAME="A008"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">and</FONT></FONT></H1>

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<A NAME="A009"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">MORGAN STANLEY MORTGAGE CAPITAL INC.<BR>
as Lender</FONT></FONT></H1>







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<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">TABLE
  OF CONTENTS</FONT></FONT></H1>

<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td colspan="2">&nbsp;</td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif"><u>Page</u></font></div></td>
  </tr>
  <tr>
    <td width="10%"><div align="right"><font face="Times New Roman, Times, serif"><font size="2"><b>Section
        1.</b>&nbsp;&nbsp;&nbsp;&nbsp;</font></font></div></td>
    <td width="5%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif"><strong>DEFINITIONS
      AND ACCOUNTING MATTERS</strong></font></td>
    <td width="10%"><div align="right"><font size="2" face="Times New Roman, Times, serif">1</font></div></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><u></u></td>
    <td><u></u></td>
    <td><u></u></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2">1.01</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="5%"><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td width="70%"><font size="2" face="Times New Roman, Times, serif">Certain
      Defined Terms</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">1</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2">1.02</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Accounting Terms and
      Determinations</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">13</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2"></font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif"><u><u><u></u></u></u></font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2"><b>Section
        2.</b>&nbsp;&nbsp;&nbsp;&nbsp;</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif"><strong>LOANS,
      NOTE AND PREPAYMENTS</strong></font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">13</font></div></td>
  </tr>
  <tr>
    <td height="20">&nbsp;</td>
    <td>&nbsp;</td>
    <td><u></u></td>
    <td><u></u></td>
    <td><u></u></td>
  </tr>
  <tr>
    <td height="20"> <div align="right"><font face="Times New Roman, Times, serif"><font size="2">2.01</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Loans</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">13</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2">2.02</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Notes</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">14</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2">2.03</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Procedure for Borrowing</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">14</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2">2.04</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Limitation on Types
      of Advance; Illegality</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">15</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2">2.05</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Repayment of Loans;
      Interest</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">15</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">2.06</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Mandatory Prepayments
      or Pledge</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">16</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">2.07</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Voluntary Prepayments</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">16</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">2.08</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Extension of Termination
      Date </font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">17</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2"></font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif"><u><u><u></u></u></u></font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2"><b>Section
        3.</b>&nbsp;&nbsp;&nbsp;&nbsp;</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif"><strong>PAYMENTS;
      COMPUTATIONS; ETC</strong></font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">17</font></div></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><u></u></td>
    <td><u></u></td>
    <td><u></u></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2">3.01</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Payments</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">17</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2">3.02</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Computations</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">17</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2">3.03</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Requirement of Law
      </font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">17</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2">3.04</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Fees</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">18</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2"></font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif"><u><u><u></u></u></u></font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2"><b>Section
        4</b>.&nbsp;&nbsp;&nbsp;&nbsp;</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif"><strong>COLLATERAL
      SECURITY </strong></font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">18</font></div></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><u></u></td>
    <td><u></u></td>
    <td><u></u></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2">4.01</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Collateral; Security
      Interest</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">18</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2">4.02</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Further Documentation</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">20</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2">4.03</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Changes in Locations,
      Name, etc</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">20</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2">4.04</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Lender's Appointment
      as Attorney-in-Fact</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">20</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2">4.05</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Performance by Lender
      of the Borrower's Obligations</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">21</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2">4.06</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Proceeds</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">22</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2">4.07</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Remedies</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">22</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2">4.08</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Limitation on Duties
      Regarding Presentation of Collateral</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">23</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2">4.09</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Powers Coupled with
      an Interest</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">23</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2">4.10</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Release of Security
      Interest</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">23</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2">4.11</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Interest Rate Protection
      Agreements </font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">23</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2"></font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif"><u><u><u></u></u></u></font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2"><b>Section
        5.</b>&nbsp;&nbsp;&nbsp;&nbsp;</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif"><strong>CONDITIONS
      PRECEDENT</strong></font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">23</font></div></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><u></u></td>
    <td><u></u></td>
    <td><u></u></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2"></font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Initial Loan</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">23</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2"></font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif"><u></u></font></div></td>
  </tr>
</table>


<p align=center>
<font size=2>-i-
</font></p>
<br><hr noShade color="black">





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<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">5.02</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Initial and Subsequent
      Loans </font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">25</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif"></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif"></font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif"><strong>Section
        6.&nbsp;&nbsp;&nbsp;&nbsp;</strong></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font><font size="2" face="Times New Roman, Times, serif"><strong>REPRESENTATIONS
      AND WARRANTS </strong></font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">26</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif"></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif"></font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2"><font face="Times New Roman, Times, serif">6.01</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Legal Name</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">27</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2"><font face="Times New Roman, Times, serif">6.02</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Existence</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">27</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2"><font face="Times New Roman, Times, serif">6.03</font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Financial Condition</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">27</font></div></td>
  </tr>
  <tr>
    <td width="10%"><div align="right"><font size="2" face="Times New Roman, Times, serif">6.04</font></div></td>
    <td width="5%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="5%"><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td width="70%"><font size="2" face="Times New Roman, Times, serif">Litigation</font></td>
    <td width="10%"><div align="right"><font size="2" face="Times New Roman, Times, serif">27</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">6.05</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">No Breach</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">27</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">6.06</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Action</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">28</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">6.07</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Approvals</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">28</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">6.08</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Margin Regulations</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">28</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">6.09</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Taxes</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">28</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">6.10</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Investment Company
      Act</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">28</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">6.11</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Collateral; Collateral
      Security</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">29</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">6.12</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Chief Executive Office;
      Chief Operating Office</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">29</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">6.13</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Location of Books
      and Records</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">29</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">6.14</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">True and Complete
      Disclosure</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">29</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">6.15</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Tangible Net Worth;
      Liquidity</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">29</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">6.16</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">ERISA</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">30</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">6.17</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2">Capitalization</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">30</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">6.18</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2">Hedges</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">30</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">6.19</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Regulatory Status</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">30</font></div></td>
  </tr>
  <tr>
    <td height="20"> <div align="right"><font face="Times New Roman, Times, serif"><font size="2"><font size="2"><font size="1"><font size="1"><font size="2"><font face="Times New Roman, Times, serif"></font></font></font></font></font></font></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><div align="right"><font face="Times New Roman, Times, serif"><font size="2"><font size="2"><font size="1"><font size="1"><font size="2"><font face="Times New Roman, Times, serif"><u></u></font></font></font></font></font></font></font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif"><strong>Section
        7.&nbsp;&nbsp;&nbsp;&nbsp;</strong></font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif"><strong>CONVENANTS
      OF THE BORROWERS</strong></font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">30</font></div></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">7.01</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Financial Statements</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">30</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">7.02</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Litigation</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">32</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">7.03</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Existence, Etc</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">32</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">7.04</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Prohibition of Fundamental
      Changes</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">33</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">7.05</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Borrowing Base Deficiency</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">33</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">7.06</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Notices</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">33</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">7.07</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Hedging</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">34</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">7.08
        </font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Reports</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">34</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">7.09</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Underwriting Guidelines</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">34</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">7.10</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Transactions with
      Affiliates</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">35</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">7.11</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Limitation on Liens</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">35</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">7.12
        </font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Limitation on Guarantees</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">35</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">7.13</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Limitation on Distributions</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">35</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">7.14</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Maintenance of Tangible
      Net Worth</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">35</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">7.15</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Maintenance of Total
      Indebtedness to Tangible Net Worth</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">35</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">7.16</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Servicer; Servicing
      Tape</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">35</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">7.17</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Committed Warehouse
      Facilities</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">36</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">7.18</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Required Filings</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">36</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">7.19</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">No Adverse Selection</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">36</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">7.20</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Remittance of Prepayments</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">36</font></div></td>
  </tr>
</table>

<p align=center>
<font size=2>-ii-
</font></p>
<br><hr noShade color="black">





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  <tr>
    <td width="10%"><div align="right"></div></td>
    <td width="5%">&nbsp;</td>
    <td width="5%"><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td width="70%"><u></u></td>
    <td width="10%"><div align="right"><u></u></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif"><b>Section
        8.</b>&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td>&nbsp;</td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">EVENTS
      OF DEFAULT</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">36</font></div></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><div align="right"><font size="2"><font face="Times New Roman, Times, serif"></font></font></div></td>
    <td>&nbsp;</td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><div align="right"><font size="2"><font face="Times New Roman, Times, serif"><u></u></font></font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif"><b>Section
        9.</b>&nbsp;&nbsp;&nbsp;&nbsp; </font></div></td>
    <td>&nbsp;</td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">REMEDIES
      UPON DEFUALT</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">38</font></div></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif"><b>Section
        10.</b>&nbsp;&nbsp;&nbsp;&nbsp; </font></div></td>
    <td>&nbsp;</td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">NO DUTY
      OF LENDER</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">39</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2"><font face="Times New Roman, Times, serif"></font></font></div></td>
    <td>&nbsp;</td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><div align="right"><font size="2"><font face="Times New Roman, Times, serif"><u></u></font></font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif"><b>Section
        11.</b>&nbsp;&nbsp;&nbsp;</font></div></td>
    <td>&nbsp;</td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">MISCELLANEOUS</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">39</font></div></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><u></u></td>
    <td><u></u></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2"><font face="Times New Roman, Times, serif">11.01</font></font></div></td>
    <td>&nbsp;</td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Waiver</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">39</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2"><font face="Times New Roman, Times, serif">11.02</font></font></div></td>
    <td>&nbsp;</td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Notices</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">39</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2"><font face="Times New Roman, Times, serif">11.03</font></font></div></td>
    <td>&nbsp;</td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Indemnification and
      Expenses</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">40</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2"><font face="Times New Roman, Times, serif">11.04</font></font></div></td>
    <td>&nbsp;</td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Amendments</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">41</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2"><font face="Times New Roman, Times, serif">11.05</font></font></div></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>Assignments and Participations</td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">41</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2"><font face="Times New Roman, Times, serif">11.06</font></font></div></td>
    <td>&nbsp;</td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Successors and Assigns</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">42</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2"><font face="Times New Roman, Times, serif">11.07</font></font></div></td>
    <td>&nbsp;</td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Survival</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">42</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2"><font face="Times New Roman, Times, serif">11.08</font></font></div></td>
    <td>&nbsp;</td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Captions</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">42</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2"><font face="Times New Roman, Times, serif">11.09</font></font></div></td>
    <td>&nbsp;</td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Counterparts</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">42</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2"><font face="Times New Roman, Times, serif">11.10</font></font></div></td>
    <td>&nbsp;</td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Loan Agreement Constitutes
      Security Agreement; Governing Law</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">42</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2"><font face="Times New Roman, Times, serif">11.11</font></font></div></td>
    <td>&nbsp;</td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">SUBMISSION TO JURISDICTION;
      WAIVERS</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">42</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2"><font face="Times New Roman, Times, serif">11.12</font></font></div></td>
    <td>&nbsp;</td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">WAIVER OF JURY TRIAL</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">43</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2"><font face="Times New Roman, Times, serif">11.13</font></font></div></td>
    <td>&nbsp;</td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Acknowledgments</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">43</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2"><font face="Times New Roman, Times, serif">11.14</font></font></div></td>
    <td>&nbsp;</td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Hypothecation or Pledge
      of Collateral</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">43</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2"><font face="Times New Roman, Times, serif">11.15</font></font></div></td>
    <td>&nbsp;</td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Assignments; Participations</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">43</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2"><font face="Times New Roman, Times, serif">11.16</font></font></div></td>
    <td>&nbsp;</td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Periodic Due Diligence
      Review</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">45</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">11.17</font></div></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">Set-Off</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">45</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">11.18</font></div></td>
    <td>&nbsp;</td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Intent</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">45</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">11.19</font></div></td>
    <td>&nbsp;</td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Joint and Several
      Liability</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">46</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">11.20</font></div></td>
    <td>&nbsp;</td>
    <td><u><font size="2" face="Times New Roman, Times, serif"></font></u></td>
    <td><font size="2" face="Times New Roman, Times, serif">Treatment of Certain
      Information </font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">46</font></div></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">11.21</font></div></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">Replacement by Repurchase
      Agreement</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">46</font></div></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>



<p align=center>
<font size=2>-iii-
</font></p>
<br><hr noShade color="black">





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<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A012"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>SCHEDULES</B></FONT></FONT></P>

 <table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td colspan="2"> <div align="center"><font size="2" face="Times New Roman, Times, serif">SCHEDULES</font></div></td>
    <td width="5%"><font size="2">&nbsp;</font></td>
    <td width="70%"><font size="2">&nbsp;</font></td>
    <td width="10%"><div align="right"><font size="2"><font face="Times New Roman, Times, serif"><u><font face="Times New Roman, Times, serif"><font size="2"></font></font></u></font></font></div></td>
  </tr>
  <tr>
    <td width="10%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="5%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="3"><font size="2" face="Times New Roman, Times, serif">SCHEDULE
      1 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Representations and Warranties re: Mortgage
      Loans</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="3"><font size="2" face="Times New Roman, Times, serif">SCHEDULE
      2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Filing Jurisdiction and Offices</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="3"><font size="2" face="Times New Roman, Times, serif">SCHEDULE
      3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Capitalization</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="3"><font size="2" face="Times New Roman, Times, serif">SCHEDULE
      4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Servicing Fields</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="3"><font size="2" face="Times New Roman, Times, serif">SCHEDULE
      5 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade Names</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td colspan="2"><div align="center"><font size="2" face="Times New Roman, Times, serif">EXHIBITS</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="3"><font size="2" face="Times New Roman, Times, serif">EXHIBIT
      A &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Form of Promissory Note</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="3"><font size="2" face="Times New Roman, Times, serif">EXHIBIT
      B &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Custodial Agreement</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="3"><font size="2" face="Times New Roman, Times, serif">EXHIBIT
      C &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Form of Opinion of Counsel
      to the Borrower</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="3"><font size="2" face="Times New Roman, Times, serif">EXHIBIT
      D &nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;Form of Request for Borrowing
      </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="3"><font size="2" face="Times New Roman, Times, serif">EXHIBIT
      E-1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Form of Borrower's Release Letter</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="3"><font size="2" face="Times New Roman, Times, serif">EXHIBIT
      E-2 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Form of Warehouse Lender's Release Letter</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="3"><font size="2" face="Times New Roman, Times, serif">EXHIBIT
      F&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Underwriting Guideliens</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="3"><font size="2" face="Times New Roman, Times, serif">EXHIBIT
      G&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Form of Servicer
      Notice</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="3"><font size="2" face="Times New Roman, Times, serif">EXHIBIT
      H&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Form of Assignment
      and Acceptance</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="3"><font size="2" face="Times New Roman, Times, serif">EXHIBIT
      I&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Form of Request
      for Release</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
</table>

<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>


<p align=center>
<font size=2>-iv-
</font></p>
<br><hr noShade color="black">
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<A NAME="A013"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">SECOND
  AMENDED AND RESTATED<br>
  MASTER LOAN AND SECURITY AGREEMENT</FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">SECOND
AMENDED AND RESTATED MASTER LOAN AND SECURITY AGREEMENT, dated as of August 29,
2003, among AAMES CAPITAL CORPORATION, a California corporation (&#147;Aames
Capital&#148;), AAMES FUNDING CORPORATION, a California corporation (&#147;Aames
Funding&#148; and together with Aames Capital, each a &#147;Borrower&#148;,
collectively the &#147;Borrowers&#148;), and MORGAN STANLEY MORTGAGE CAPITAL
INC., formerly known as Morgan Stanley Dean Witter Mortgage Capital Inc. (the
&#147;Lender&#148;).</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A015"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">RECITALS</FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
Borrowers and the Lender are parties to that certain Amended and Restated Master
Loan and Security Agreement, dated as of November 16, 2001 (as amended,
supplemented or otherwise modified prior to the date hereof, the &#147;Existing
Loan Agreement&#148;).</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
Borrowers have requested that the Lender from time to time make or continue to
make, as applicable, revolving credit loans to them to finance certain
residential mortgage loans owned by the Borrowers, and the Lender is prepared to
continue to make such loans upon the terms and conditions hereof. Each Borrower
is engaged in a business that is complimentary to the business of the other
Borrower. Each Borrower will directly benefit from each extension of credit to
the other Borrower, and the proceeds of each loan will inure to the benefit of
each Borrower.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
Borrowers and the Lender hereby agree, in consideration of the mutual premises
and mutual obligations set forth herein, that the Existing Loan Agreement is
hereby amended and restated in its entirety as set forth in the heading and
recitals hereto and as follows.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Section
1.  Definitions and Accounting Matters.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>1.01
Certain Defined Terms</U>. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As used herein, the following
terms shall have the  following meanings (all terms defined in this Section 1.01 or in
other  provisions of this Loan Agreement in the singular to have the same meanings when
used in the plural and vice versa):</FONT></FONT></FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Aames
Capital</U>&#148; shall have the meaning provided in the heading hereto.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Accepted
Servicing Practices</U>&#148; shall mean, with respect to any Mortgage Loan, those
mortgage servicing practices of prudent mortgage lending institutions which
service mortgage loans of the same type as such Mortgage Loans in the
jurisdiction where the related Mortgaged Property is located.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Affiliate</U>&#148;
shall mean with respect to any Person, any &#147;affiliate&#148; of such Person,
as such term is defined in the Bankruptcy Code.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Applicable
Collateral Percentage</U>&#148; shall mean, with respect to each Eligible Mortgage
Loan, the applicable collateral percentage set forth in the chart below opposite
the applicable type of Mortgage Loan:</FONT></FONT> </P>



<p align=center>
<font size=2>1
</font></p>
<br><hr noShade color="black">





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<!-- MARKER PAGE="sheet: 7; page: 7" -->







<TABLE align="center" CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="70%">
  <TR VALIGN="BOTTOM">
    <TH COLSPAN="2"><div align="left"><font size="2" face="Times New Roman, Times, serif">Type
        of Mortgage Loan </font></div></TH>
    <TH COLSPAN="2"><font size="2" face="Times New Roman, Times, serif">Applicable
      Collateral Percentage</font></TH>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="RIGHT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD WIDTH="73%" ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">First
      Lien Loan that is a Performing Loan</font></TD>
    <TD WIDTH="6%" ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="10%" ALIGN="RIGHT"><font size="2" face="Times New Roman, Times, serif">97</font></TD>
    <TD WIDTH="11%" ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">%</font></TD>
  </TR>
  <TR>
    <TD COLSPAN="4"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">Second
      Lien Loan that is a Performing Loan</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="RIGHT"><font size="2" face="Times New Roman, Times, serif">97</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">%</font></TD>
  </TR>
  <TR>
    <TD COLSPAN="4"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">First
      Lien Loan or Second Lien Loan that is a Class A</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="RIGHT"><font size="2" face="Times New Roman, Times, serif">80</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">%</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">Defaulted
      Loan</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD COLSPAN="4"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">First
      Lien Loan or Second Lien Loan that is a Class B</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="RIGHT"><font size="2" face="Times New Roman, Times, serif">75</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">%</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">Defaulted
      Loan</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="RIGHT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">First
      Lien Loan or Second Lien Loan that is a Class C</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="RIGHT"><font size="2" face="Times New Roman, Times, serif">50</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">%</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">Defaulted
      Loan, prior to receipt by the Lender of a BPO for</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">such
      Class C Defaulted Loan</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="RIGHT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">First
      Lien Loan or Second Lien Loan that is a Class C</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="RIGHT"><font size="2" face="Times New Roman, Times, serif">65</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">%</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">Defaulted
      Loan, after receipt by the Lender of a BPO for such</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">Class
      C Defaulted Loan</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="RIGHT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">Kick-Out
      Mortgage Loans</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="RIGHT"><font size="2" face="Times New Roman, Times, serif">90</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">%</font></TD>
  </TR>
  <TR>
    <TD COLSPAN="4"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
</TABLE>






<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Applicable
Margin</U>&#148; shall mean the sum of the weighted average of the applicable rates
per annum for each product type of Eligible Mortgage Loan for each day that
Loans shall be secured by such Eligible Mortgage Loans, determined by
multiplying (a) for each product type set forth in the table below, a fraction
equal to the Collateral Value of all Eligible Mortgage Loans of such product
type divided by the Collateral Value of all Eligible Mortgage Loans, times (b)
for each product type set forth in the following table below, the percentage set
forth below opposite such product type:</FONT></FONT> </P>





<TABLE align="center" CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="70%">
  <TR VALIGN="BOTTOM">
    <TH COLSPAN="2"><div align="left"><font size="2" face="Times New Roman, Times, serif">Product
        Type</font></div></TH>
    <TH COLSPAN="2"><font size="2" face="Times New Roman, Times, serif">Applicable
      Margin</font></TH>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="RIGHT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD WIDTH="89%" ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">First
      Lien Loan that is a Performing Loan</font></TD>
    <TD WIDTH="4%" ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="5%" ALIGN="RIGHT"><font size="2" face="Times New Roman, Times, serif">0</font></TD>
    <TD WIDTH="2%" ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">.85%</font></TD>
  </TR>
  <TR>
    <TD COLSPAN="4"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">Second
      Lien Loan that is a Performing Loan</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="RIGHT"><font size="2" face="Times New Roman, Times, serif">0</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">.85%</font></TD>
  </TR>
  <TR>
    <TD COLSPAN="4"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">First
      Lien Loan or Second Lien Loan that is a Class A</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="RIGHT"><font size="2" face="Times New Roman, Times, serif">1</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">.20%</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">Defaulted
      Loan</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR>
    <TD COLSPAN="4"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">First
      Lien Loan or Second Lien Loan that is a Class B</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="RIGHT"><font size="2" face="Times New Roman, Times, serif">1</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">.20%</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">Defaulted
      Loan</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="RIGHT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>

</TABLE>

<p align=center>
<font size=2>2
</font></p>
<br><hr noShade color="black">






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<TABLE align="center" CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="70%">
  <TR VALIGN="BOTTOM">
    <TD WIDTH="89%" ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="4%" ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="5%" ALIGN="RIGHT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH="2%" ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">First
      Lien Loan or Second Lien Loan that is a Class C</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN="RIGHT"><font size="2" face="Times New Roman, Times, serif">1</font></TD>
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">.50%</font></TD>
  </TR>
  <TR VALIGN="BOTTOM">
    <TD ALIGN="LEFT"><font size="2" face="Times New Roman, Times, serif">Defaulted Loan</font></TD>
    <TD ALIGN="LEFT">&nbsp;</TD>
  </TR>
</TABLE>




<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Assignment
and Acceptance</U>&#148; shall have the meaning set forth in Section&nbsp;11.05(a)  hereof.</FONT></FONT></FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Assignment
of Mortgage</U>&#148; means, with respect to any mortgage, an assignment of the mortgage,
notice oftransfer or equivalent instrument in recordable form, sufficient under the laws of the
jurisdiction wherein the related mortgaged property is located to reflect the
assignment and pledge of the mortgage.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Bankruptcy
Code</U>&#148; shall mean the United States Bankruptcy Code of 1978, as amended from
time to time.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Borrower</U>&#148;
and &#147;Borrowers&#148; shall have the meaning provided in the introductory
paragraph hereof.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Borrowing
Base</U>&#148; shall mean the aggregate Collateral Value of all Eligible Mortgage
Loans; provided, that the following limitations shall apply: </FONT></FONT> </P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(i) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">the
        aggregate Collateral Value included in the Borrowing Base at any time
        of Second Lien Loans that are Performing Loans shall not exceed $50,000,000;</FONT></FONT>
      </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(ii)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;the
        aggregate Collateral Value included in the Borrowing Base at any time
        of First Lien Loans or Second Lien Loans that are Class A Defaulted Loans
        shall not exceed $10,000,000;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(iii)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
        the aggregate Collateral Value included in the Borrowing Base at any time
        of First Lien Loans or Second Lien Loans that are Class B Defaulted Loans
        shall not exceed $10,000,000;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(iv)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
        the aggregate Collateral Value included in the Borrowing Base at any time
        of First Lien Loans or Second Lien Loans that are Class C Defaulted Loans
        shall not exceed $10,000,000;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(v)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
        the aggregate Collateral Value included in the Borrowing Base at any time
        of Non-Owner Occupied Mortgage Loans shall not exceed $20,000,000;</FONT></FONT>
      </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(vi)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
        the aggregate Collateral Value included in the Borrowing Base at any time
        of Mortgage Loans which have an LTV greater than 90% shall not exceed
        10% of the outstanding principal balance of the Loan; and</FONT></FONT>
      </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(vii)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
        the Collateral Value shall be deemed to be zero with respect to each Mortgage
        Loan:</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


<p align=center>
<font size=2>3
</font></p>
<br><hr noShade color="black">





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<!-- MARKER FORMAT-SHEET="Para Hang Roman In 3" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="15%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(1)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="82%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
        in respect of which there is a breach of a representation and warranty
        set forth on Schedule 1 (assuming each representation and warranty is
        made as of the date the Borrowing Base is determined);</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="15%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(2)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="82%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
        except with respect to Kick-Out Mortgage Loans, which remains pledged
        to the Lender hereunder later than 150 days after the date on which it
        is first included in the Collateral;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="15%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(3)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="82%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
        in respect of a Kick-Out Mortgage Loan, which remains pledged to the Lender
        hereunder later than ninety (90) days after the date on which such Mortgage
        Loan is first included in the Collateral (without regard to whether such
        Loan was identified as a Kick-Out Mortgage Loan on the date on which such
        Mortgage Loan was first included in the Collateral);</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="15%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(4)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="82%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
        which has been released from the possession of the Custodian under the
        Custodial Agreement to a Borrower for a period in excess of fourteen (14)
        days;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="15%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(5)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="82%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
        which is a Kick-Out Mortgage Loan that has been rejected for purchase
        by any buyer of mortgage loans more than once or by more than one buyer
        of mortgage loans;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="15%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(6)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="82%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
        which exceed the limitations on Collateral Value set forth in (i) through
        (vi) above; or</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="15%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(7)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="82%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
        which is a Class C Defaulted Loan for which a BPO is unable to be obtained
        following reasonable efforts to obtain the same, determined in the sole
        discretion of the Lender.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Borrowing
Base Deficiency</U>&#148; shall have the meaning provided in Section 2.06 hereof.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>BPO</U>&#148; shall
mean a broker&#146;s price opinion relating to the Mortgaged Property securing
an Eligible Mortgage Loan, in form and substance satisfactory to the Lender in
its sole discretion from a broker chosen by the Lender.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Business
Day</U>&#148; shall mean any day other than (i) a Saturday or Sunday or (ii) a day
on which the New York Stock Exchange, the Federal Reserve Bank of New York or
the Custodian is authorized or obligated by law or executive order to be closed.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Capital
Stock</U>&#148; shall mean any and all shares,  interests,  participations or other
equivalents  (howeverdesignated)  of capital stock of a corporation, any and all similar
ownership interests in a  Person (other than a corporation) and any and all warrants or
options to  purchase any of the foregoing.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Capital
Lease Obligations</U>&#148; shall mean, for any Person, all obligations of such
Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) Property to the extent such obligations are required
to be classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP, and, for purposes of this Loan Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP.</FONT></FONT> </P>



<p align=center>
<font size=2>4
</font></p>
<br><hr noShade color="black">






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<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Cash
Equivalents</U>&#148; shall mean (a) securities with maturities of ninety (90) days
or less from the date of acquisition issued or fully guaranteed or insured by
the United States Government or any agency thereof, (b) certificates of deposit
and eurodollar time deposits with maturities of ninety (90) days or less from
the date of acquisition and overnight bank deposits of any commercial bank
having capital, surplus and retained earnings in excess of $750,000,000, (c)
repurchase obligations of any commercial bank satisfying the requirements of
clause (b) of this definition, having a term of not more than seven days with
respect to securities issued or fully guaranteed or insured by the United States
Government, (d) commercial paper of a domestic issuer rated at least A-1 or the
equivalent thereof by S&amp;P or P-1 or the equivalent thereof by Moody&#146;s
and in either case maturing within ninety (90) days after the day of
acquisition, (e) securities with maturities of ninety (90) days or less from the
date of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States, by any political subdivision or taxing authority
of any such state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political subdivision,
taxing authority or foreign government (as the case may be) are rated at least A
by S&amp;P or A by Moody&#146;s, (f) securities with maturities of ninety (90)
days or less from the date of acquisition backed by standby letters of credit
issued by any commercial bank satisfying the requirements of clause (b) of this
definition, or (g)&nbsp;shares of money market, mutual or similar funds which
invest exclusively in assets satisfying the requirements of clauses (a) through
(f) of this definition or (h) available capacity under committed revolving
facilities, other than the Lender&#146;s revolving facility.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Class</U>&#148;
shall mean, as to any Defaulted Loan, its status as a Class A Defaulted, Loan,
Class B Defaulted Loan or a Class C Defaulted Loan.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Class
A Defaulted Loan</U>&#148; shall mean an Eligible Mortgage Loan for which the
related Mortgagor is thirty (30) to fifty-nine (59) days delinquent in scheduled
payments of principal and interest as at the end of the preceding calendar
month.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Class
B Defaulted Loan</U>&#148; shall mean an Eligible Mortgage Loan for which the
related Mortgagor is sixty (60) to eighty-nine (89) days delinquent in scheduled
payments of principal and interest as at the end of the preceding calendar
month.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Class
C Defaulted Loan</U>&#148; shall mean an Eligible Mortgage Loan for which the
related Mortgagor is ninety (90) days or more delinquent in scheduled payments
of principal and interest or which is subject to foreclosure proceedings as at
the end of the preceding calendar month.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Code</U>&#148;
shall mean the Internal Revenue Code of 1986, as amended from time to time.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Collateral</U>&#148;
shall have the meaning provided in Section 4.01(b) hereof.</FONT></FONT> </P>


<p align=center>
<font size=2>5
</font></p>
<br><hr noShade color="black">





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<!-- MARKER PAGE="sheet: 11; page: 11" -->



<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Collateral
Value</U>&#148; shall mean, with respect to each Eligible Mortgage Loan, the lesser
of (a) the Applicable Collateral Percentage of the Market Value of such Eligible
Mortgage Loan, except in the case of any Class C Defaulted Loan prior to the
receipt by the Lender of a BPO relating thereto, in which case the Applicable
Collateral Percentage of the outstanding principal balance of such Eligible
Mortgage Loan, and (b) 100% of the outstanding principal balance of such
Eligible Mortgage Loan.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Custodial
Agreement</U>&#148; shall mean the Amended and Restated Custodial Agreement, dated
as of August 29, 2003, among the Borrowers, the Custodian and the Lender,
attached as Exhibit B hereto, as the same shall be modified and supplemented and
in effect from time to time.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Custodian</U>&#148;
shall mean Deutsche Bank National Trust Company, formerly known as Bankers Trust
Company, as custodian under the Custodial Agreement, and its successors and
permitted assigns thereunder.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Defaul</U>t&#148;
shall mean an Event of Default or an event that with notice or lapse of time or
both would become an Event of Default.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Defaulted
Loan</U>&#148; shall mean a Class A Defaulted Loan, a Class B Defaulted Loan or a
Class C Defaulted Loan.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Dollars</U>&#148;
and &#147;$&#148; shall mean lawful money of the United States of America.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Due
Diligence Review</U>&#148; shall mean the performance by the Lender of any or all of
the reviews permitted under Section 11.16 hereof with respect to any or all of
the Mortgage Loans, as desired by the Lender from time to time.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Effective
Date</U>&#148; shall mean the date upon which the conditions precedent set forth in
Section 5.01 shall have been satisfied.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Eligible
Mortgage Loan</U>&#148; shall mean a Mortgage Loan secured by a first mortgage lien
or a second mortgage lien on a one-to-four family residential property, as to
which the representations and warranties in Section 6.10 and Part I of Schedule
1 hereof are correct; provided that, in no event shall any Eligible Mortgage
Loan be a security for purposes of any securities or blue-sky laws.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>ERISA</U>&#148;
shall mean the Employee Retirement Income Security Act of 1974, as amended from
time to time.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>ERISA
Affiliate</U>&#148; shall mean any corporation or trade or business that is a member
of any group of organizations (i)&nbsp;described in Section 414(b) or (c) of the
Code of which any Borrower is a member and (ii)&nbsp;solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which any
Borrower is a member.</FONT></FONT> </P>

<p align=center>
<font size=2>6
</font></p>
<br><hr noShade color="black">






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 12; page: 12" -->



<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Eurodollar
Rate</U>&#148; shall mean, with respect to each day a Loan is outstanding, the rate
per annum equal to the rate appearing at page 5 of the Telerate Screen as
one-month LIBOR on such date (and if such date is not a Business Day, the
Eurodollar Rate in effect on the Business Day immediately preceding such date)
and if such rate shall not be so quoted, the rate per annum at which the Lender
is offered Dollar deposits at or about 10:00 A.M., New York City time, on such
date by prime banks in the interbank eurodollar market where the eurodollar and
foreign currency exchange operations in respect of its Loans are then being
conducted for delivery on such day for a period of thirty (30) days and in an
amount comparable to the amount of the Loans to be outstanding on such day.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Event
of Default</U>&#148; shall have the meaning provided in Section 8 hereof.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Federal
Funds Rate</U>&#148; shall mean, for any day, the weighted average of the rates on
overnight federal funds transactions with members of the Federal Reserve System
arranged by federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the average of the quotations for
the day of such transactions received by the Lender from three federal funds
brokers of recognized standing selected by it.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Fee
Letter</U>&#148; shall mean the letter dated the date hereof among the Borrowers and
the Lender.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>First
Lien Loan</U>&#148; shall mean an Eligible Mortgage Loan for which the related
Mortgage constitutes a first priority lien on the related Mortgaged Property.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Funding
Date</U>&#148; shall mean the date on which a Loan is made hereunder.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>GAAP</U>&#148;
shall mean generally accepted accounting principles as in effect from time to
time in the United States.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Governmental
Authority</U>&#148; shall mean any nation or government, any state or other
political subdivision, agency or instrumentality thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any court or arbitrator having jurisdiction over
any Borrower, any of its Subsidiaries or any of its properties.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Guarantee</U>&#148;
shall mean, as to any Person, any obligation of such Person directly or
indirectly guaranteeing any Indebtedness of any other Person or in any manner
providing for the payment of any Indebtedness of any other Person or otherwise
protecting the holder of such Indebtedness against loss (whether by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, or to take-or-pay or otherwise); provided that the term
&#147;Guarantee&#148; shall not include (i) endorsements for collection or
deposit in the ordinary course of business, or (ii) obligations to make
servicing advances for delinquent taxes and insurance or other obligations in
respect of a Mortgaged Property, to the extent required by the Lender. The
amount of any Guarantee of a Person shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Guarantee is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith. The terms &#147;Guarantee&#148; and &#147;Guaranteed&#148; used as verbs
shall have correlative meanings.</FONT></FONT> </P>

<p align=center>
<font size=2>7
</font></p>
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<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Indebtedness</U>&#148;
shall mean, for any Person without duplication: (a)&nbsp;obligations created,
issued or incurred by such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of Property to another Person
subject to an understanding or agreement, contingent or otherwise, to repurchase
such Property from such Person); (b)&nbsp;obligations of such Person to pay the
deferred purchase or acquisition price of Property or services, other than trade
accounts payable (other than for borrowed money) arising, and accrued expenses
incurred, in the ordinary course of business so long as such trade accounts
payable are payable within ninety (90) days from the date the respective goods
are delivered or the respective services are rendered; (c)&nbsp;Indebtedness of
others secured by a Lien on the Property of such Person, whether or not the
respective Indebtedness so secured has been assumed by such Person;
(d)&nbsp;obligations (contingent or otherwise) of such Person in respect of
letters of credit or similar instruments issued or accepted by banks and other
financial institutions for account of such Person; (e)&nbsp;Capital Lease
Obligations of such Person; (f) obligations of such Person under repurchase
agreements, sale/buy-back agreements or like arrangements; (g) Indebtedness of
others Guaranteed by such Person; (h)&nbsp;all obligations of such Person
incurred in connection with the acquisition or carrying of fixed assets by such
Person; and (i) Indebtedness of general partnerships of which such Person is a
general partner.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Interest
Rate Protection Agreement</U>&#148; shall mean, with respect to any or all of the
Mortgage Loans, any short sale of US Treasury Securities, or futures contract,
or mortgage related security, or Eurodollar futures contract, or options related
contract, or interest rate swap, cap or collar agreement or similar arrangement
providing for protection against fluctuations in interest rates or the exchange
of nominal interest obligations, either generally or under specific
contingencies, entered into by any Borrower and an Affiliate of the Lender, and
acceptable to the Lender.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Kick-Out
Mortgage Loans</U>&#148; shall mean any Mortgage Loan which has been rejected from
purchase by a buyer of mortgage loans for any reason.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Lender</U>&#148;
shall have the meaning provided in the introductory paragraph hereof.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Leverage
Ratio</U>&#148; shall mean, at any time, the ratio of (i) the aggregate principal
amount of all Indebtedness of Parent and its respective Subsidiaries at such
time which on a consolidated basis, in accordance with GAAP, would be required
to be reflected on a consolidated balance sheet of Parent and its respective
Subsidiaries as a liability to (ii) the sum of (1) the Tangible Net Worth of
Parent and its respective Subsidiaries plus (2) with respect to Parent and its
Subsidiaries only, accrued but unpaid dividends on preferred stock at such time.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Lien</U>&#148;
shall mean any mortgage, lien, pledge, charge, security interest or similar
encumbrance.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Loan</U>&#148;
shall have the meaning provided in Section 2.01(a) hereof.</FONT></FONT> </P>

<p align=center>
<font size=2>8
</font></p>
<br><hr noShade color="black">





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<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Loan
Agreement</U>&#148; shall mean this Second Amended and Restated Master Loan and
Security Agreement, as the same may be amended, supplemented or otherwise
modified from time to time.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Loan
Documents</U>&#148; shall mean, collectively, this Loan Agreement, the Note, the
Custodial Agreement and the Fee Letter.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Market
Valu</U>e&#148; shall mean, (a) with respect to any Eligible Mortgage Loan other
than a Class C Defaulted Loan, as of any date in respect of such Eligible
Mortgage Loan, the price at which such Eligible Mortgage Loan could readily be
sold, as determined in good faith by the Lender in its sole discretion, which
price may be determined to be zero, and (b) with respect to any Eligible
Mortgage Loan that is a Class C Defaulted Loan, the market value thereof
determined as follows (the Lender&#146;s determination of Market Value shall,
with respect to both clause (a) and (b), in all cases be conclusive upon the
parties absent manifest error on the part of the Lender). Promptly following the
inclusion of an Eligible Mortgage Loan in the Borrowing Base as a Class C
Defaulted Loan, the Lender shall seek to obtain a BPO for the related Mortgaged
Property at the expense of the Borrowers. The Lender shall determine the market
value of such Class C Defaulted Loan based upon the net proceeds that the
Lender, in its sole discretion exercised in good faith, determines are
reasonably likely to be obtained upon a sale of such Mortgaged Property in light
of the results of the most recently obtained related BPO and the Lender&#146;s
determination of all ancillary and related costs to be paid prior to or in
connection with the maintenance and disposition of such Mortgaged Property.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Material
Adverse Effect</U>&#148; shall mean a material adverse effect on (a)&nbsp;the
Property, business, operations, financial condition or prospects of any
Borrower, (b)&nbsp;the ability of any Borrower to perform its obligations under
any of the Loan Documents to which it is a party, (c)&nbsp;the validity or
enforceability of any of the Loan Documents, (d)&nbsp;the rights and remedies of
the Lender under any of the Loan Documents, (e)&nbsp;the timely payment of the
principal of or interest on the Loans or other amounts payable in connection
therewith or (f)&nbsp;the Collateral.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Maximum
Credit</U>&#148; shall mean $200,000,000.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Moody</U>&#146;s&#148; shall
mean Moody&#146;s Investors Service, Inc.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Mortgage</U>&#148;
shall mean the mortgage, deed of trust or other instrument securing a Mortgage
Note, which creates a first or second lien on the fee in real property securing
the Mortgage Note.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Mortgage
File</U>&#148; shall have the meaning assigned thereto in the Custodial Agreement.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Mortgage Loan</U>&#148;
shall mean a mortgage loan which the Custodian has been instructed to hold for
the Lender pursuant to the Custodial Agreement, and which Mortgage Loan
includes, without limitation, a (i) Mortgage Note and related Mortgage and (ii)
all right, title and interest of the Borrower in and to the Mortgaged property
covered by such Mortgage.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Mortgage
Loan Data File</U>&#148; shall mean a computer-readable file containing information
with respect to each Mortgage Loan, to be delivered by the Borrowers to the
Lender pursuant to Section 2.03(a) hereof which fields are identified on Annex I
to the Custodial Agreement.</FONT></FONT> </P>

<p align=center>
<font size=2>9
</font></p>
<br><hr noShade color="black">





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<!-- MARKER PAGE="sheet: 15; page: 15" -->



<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Mortgage
Loan Documents</U>&#148; shall mean, with respect to a Mortgage Loan, the documents
comprising the Mortgage File for such Mortgage Loan.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Mortgage
Loan Schedule</U>&#148; shall have the meaning assigned thereto in the Custodial
Agreement.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Mortgage
Loan Schedule and Exception Report</U>&#148; shall mean the mortgage loan schedule
and exception report prepared by the Custodian pursuant to the Custodial
Agreement.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Mortgage
Note</U>&#148; shall mean the original executed promissory note or other evidence of
the indebtedness of a mortgagor/borrower with respect to a Mortgage Loan.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Mortgaged
Property</U>&#148; shall mean the real property (including all improvements,
buildings, fixtures, building equipment and personal property thereon and all
additions, alterations and replacements made at any time with respect to the
foregoing) and all other collateral securing repayment of the debt evidenced by
a Mortgage Note.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Mortgagor</U>&#148;
shall mean the obligor on a Mortgage Note.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&quot;<U>MS
&amp; Co.&quot; </U> shall mean Morgan Stanley &amp; Co. Incorporated, a registered
broker-dealer.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>MS
Indebtedness</U>&#148; shall mean any indebtedness of the Borrowers hereunder and
under any other arrangement between any Borrower on the one hand and the Lender
or an Affiliate of the Lender on the other hand.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Multiemployer
Plan</U>&#148; shall mean a multiemployer plan defined as such in Section 3(37) of
ERISA to which contributions have been or are required to be made by any
Borrower or any ERISA Affiliate and that is covered by Title IV of ERISA.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Net
Income</U>&#148; shall mean, for any period, the net income of Aames Capital for
such period as determined in accordance with GAAP.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>1934
Act</U>&#148; shall mean the Securities and Exchange Act of 1934, as amended.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Non-Owner
Occupied Mortgage Loan</U>&#148; shall mean a Mortgage Loan with respect to which
the Mortgagor does not occupy the related Mortgaged property, based on the
representation made by the Mortgagor at the time of the related Mortgage Loan
origination.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Note</U>&#148;
shall mean the promissory note provided for in Section 2.02(a) hereof for Loans
and any note delivered in substitution or exchange therefore, in each case as
the same shall be amended, supplemented or otherwise modified and in effect from
time to time.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Parent</U>&#148; shall
mean Aames Financial Corporation.</FONT></FONT> </P>

<p align=center>
<font size=2>10
</font></p>
<br><hr noShade color="black">






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<!-- MARKER PAGE="sheet: 16; page: 16" -->



<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>PBGC</U>&#148;
shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to
any or all of its functions under ERISA.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Performing
Loan</U>&#148; shall mean an Eligible Mortgage Loan for which the related Mortgagor
is current or fewer than thirty (30) days delinquent in scheduled payments of
principal and interest as at the end of the preceding calendar month.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Person</U>&#148;
shall mean any individual, corporation, company, voluntary association,
partnership, joint venture, limited liability company, trust, unincorporated
association or government (or any agency, instrumentality or political
subdivision thereof).</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Plan</U>&#148;
shall mean an employee benefit or other plan established or maintained by any
Borrower or any ERISA Affiliate and covered by Title IV of ERISA, other than a
Multiemployer Plan.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Post-Default
Rate</U>&#148; shall mean, in respect of any principal of any Loan or any other
amount under this Loan Agreement, the Note or any other Loan Document that is
not paid when due to the Lender (whether at stated maturity, by acceleration, by
mandatory prepayment or otherwise, but not including by optional prepayment), a
rate per annum during the period from and including the due date to but
excluding the date on which such amount is paid in full equal to 4% per annum
plus the Prime Rate and in no event shall such rate exceed the maximum rate
permitted by law.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Prescribed
Laws</U>&#148; shall mean, collectively, (a) the Uniting and Strengthening America
by Providing Appropriate Tools to Intercept and Obstruct Terrorism Act of 2001
(Public Law 107-56) (The USA PATRIOT Act, (b) Executive Order No. 13224 on
Terrorist Financing, effective September 24, 2001, relating to Blocking Property
and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or
Support Terrorism, (c) the International Emergency Economic Power Act, 50 U.S.C.
&sect;1701 et. seq. and (d) all other Requirements of Law relating to money
laundering or terrorism.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Prime
Rate</U>&#148; shall mean the prime rate announced to be in effect from time to
time, as published as the average rate in The Wall Street Journal.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Property</U>&#148;
shall mean any right or interest in or to property of any kind whatsoever,
whether real, personal or mixed and whether tangible or intangible.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Regulations
T, U and X</U>&#148; shall mean Regulations T, U and X of the Board of Governors of
the Federal Reserve System (or any successor), as the same may be modified and
supplemented and in effect from time to time.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Remittance
Date</U>&#148; shall have the meaning provided in Section 2.05(b) hereof.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Reportable Event</U>&#148;
shall mean a reportable event as defined in Title IV of ERISA, except actions of
general applicability by the Secretary of Labor under Section 110 of ERISA.</FONT></FONT> </P>


<p align=center>
<font size=2>11
</font></p>
<br><hr noShade color="black">





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<!-- MARKER PAGE="sheet: 17; page: 17" -->



<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Requirement
of Law</U>&#148; shall mean as to any Person, the certificate of incorporation and
by-laws or other organizational or governing documents of such Person, and any
law (including, without limitation, Prescribed Laws), treaty, rule or regulation
or determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Responsible
Officer</U>&#148; shall mean, as to any Person, the chief executive officer, the
chief financial officer or Senior Vice President of such Person.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>S&amp;P</U>&#148;
shall mean Standard &amp; Poor&#146;s Ratings Services, a division of The
McGraw-Hill Companies, Inc.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Second
Lien Loan</U>&#148; shall mean an Eligible Mortgage Loan for which the related
Mortgage constitutes a second priority lien on the related Mortgaged Property.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Secured
Obligations</U>&#148; shall have the meaning provided in Section 4.01(c) hereof.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Servicer</U>&#148;
shall have the meaning provided in Section 11.15(c) hereof.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Servicer
Notice and Agreement</U>&#148; shall have the meaning provided in Section 11.15(c)
hereof.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Servicing
Agreement</U>&#148; shall have the meaning provided in Section 11.15(c) hereof.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Servicing Records</U>&#148;
shall have the meaning provided in Section 11.15(b) hereof.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Subsidiary</U>&#148;
shall mean, with respect to any Person, any corporation, partnership or other
entity of which at least a majority of the securities or other ownership
interests having by the terms thereof ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions of such
corporation, partnership or other entity (irrespective of whether or not at the
time securities or other ownership interests of any other class or classes of
such corporation, partnership or other entity shall have or might have voting
power by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by such Person or one or more Subsidiaries of
such Person or by such Person and one or more Subsidiaries of such Person.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>System</U>&#148;
shall mean all hardware or software, or any system consisting of one or more
thereof, including, without limitation, any and all enhancements, upgrades,
customizations, modifications, maintenance and the like utilized by any Person
for the benefit of such Person to perform its obligations and to administer and
track, store, process, provide, and where appropriate, insert, true and accurate
dates and calculations for dates and spans with respect to the Mortgage Loans.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Tangible
Net Worth</U>&#148; shall mean, with respect to any Person, as of any date of
determination, the amounts which would be included under equity on a
consolidated balance sheet of such Person and its Subsidiaries at such date in
accordance with GAAP, less the consolidated net book value of all assets of such
person and its Subsidiaries (to the extent reflected as an asset in the balance
sheet of such Person or any Subsidiary at such date) which will be treated as
intangibles under GAAP; provided, that residual securities issued by such person
or its Subsidiaries shall not be treated as intangibles for purposes of this
definition.</FONT></FONT> </P>


<p align=center>
<font size=2>12
</font></p>
<br><hr noShade color="black">






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<!-- MARKER PAGE="sheet: 18; page: 18" -->



<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Termination
Date</U>&#148; shall mean August 27, 2004 or such earlier date on which this Loan
Agreement shall terminate in accordance with the provisions hereof or by
operation of law.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Total
Indebtedness</U>&#148; shall mean, for any period, the aggregate Indebtedness of
Aames Capital or the Parent, as applicable, during such period.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Trust
Receipt</U>&#148; shall have the meaning provided in the Custodial Agreement.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Underwriting
Guidelines</U>&#148; shall mean the relevant Borrower&#146;s underwriting guidelines
attached as Exhibit F hereto, as modified from time to time in accordance with
Section 7.09.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Uniform
Commercial Code</U>&#148; shall mean the Uniform Commercial Code as in effect from
time to time in the State of New York; provided that if by reason of mandatory
provisions of law, the perfection or the effect of perfection or non-perfection
of the security interest or the renewal or enforcement thereof in any Collateral
is governed by the Uniform Commercial Code as in effect in a jurisdiction other
than New York, &#147;Uniform Commercial Code&#148; shall mean the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or
non-perfection.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">1.02&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Accounting Terms and Determinations</U>.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Except as otherwise expressly provided  herein, all
accounting terms used herein shall be interpreted, and all financial  statements and
certificates and reports as to financial matters required to be  delivered to the Lender
hereunder shall be prepared, in accordance with GAAP.</FONT></FONT></FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Section
2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loans, Note and Prepayments.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.01&nbsp;&nbsp;&nbsp;&nbsp;<U>Loans</U>.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Subject
to the fulfillment of the conditions precedent set forth in Sections  5.01 and 5.02
hereof, and provided that no Default shall have occurred and be  continuing hereunder,
the Lender agrees to make or continue, as applicable, on  the terms and conditions of
this Loan Agreement, loans (individually, a  &#147;Loan&#148; and, collectively, the
&#147;Loans&#148;) to the Borrowers in  Dollars, from and including the Effective Date to
and including the Termination  Date in an aggregate principal amount at any one time
outstanding up to but not  exceeding the lesser of (i) the Maximum Credit and (ii) the
Borrowing Base as in  effect from time to time.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Subject
to the terms and conditions of this Loan Agreement, during such period  the Borrowers may
(i) borrow, (ii) repay the Loan, in full or in part, without  penalty, and (iii) reborrow
hereunder; provided, that, notwithstanding the  foregoing, the Lender shall have no
obligation to make Loans to the Borrowers in  excess of the Maximum Credit and, in the
event the obligation of the Lender to  make Loans to the Borrowers is terminated as
permitted hereunder, the Lender  shall have no further obligation to make additional
Loans hereunder.</FONT></FONT> </P>


<p align=center>
<font size=2>13
</font></p>
<br><hr noShade color="black">





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<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In
no event shall a Loan be made when any Default or Event of Default has occurred  and is
continuing.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.02&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Notes</U>.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Loans made by the Lender shall be evidenced by a single promissory note of  the Borrowers
substantially in the form of Exhibit A hereto (the  &#147;Note&#148;), dated the date
hereof, payable to the Lender in a principal  amount equal to the amount of the Maximum
Credit as originally in effect and  otherwise duly completed. The Lender shall have the
right to have its Note  subdivided, by exchange for promissory notes of lesser
denominations or  otherwise.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
date, amount and interest rate of each Loan made by the Lender to the  Borrowers, and
each payment made on account of the principal thereof, shall be  recorded by the Lender
on its books and, prior to any transfer of the Note,  endorsed by the Lender on the
schedule attached to the Note or any continuation  thereof; provided, that the failure of
the Lender to make any such recordation  or endorsement shall not affect the obligations
of the Borrowers to make a  payment when due of any amount owing hereunder or under the
Note in respect of  the Loans.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.03&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Procedure
for Borrowing</U>.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Borrowers may request a borrowing hereunder, on any Business Day during the  period from
and including the Effective Date to and including the Termination  Date, by delivering to
the Lender, with a copy to the Custodian, a written  request for borrowing, substantially
in the form of Exhibit D attached hereto,  which request must be received by the Lender
prior to 4:00 p.m., New York City  time, one (l) Business Day prior to the requested
Funding Date. Such request for  borrowing shall (i) attach a schedule identifying the
Eligible Mortgage Loans  that the Borrowers propose to pledge to the Lender and to be
included in the  Borrowing Base in connection with such borrowing, (ii) specify the
requested  Funding Date, (iii) be accompanied by a Mortgage Loan Data File containing
information with respect to the Eligible Mortgage Loans that the Borrowers  propose to
pledge to the Lender and to be included in the Borrowing Base in  connection with such
borrowing, and (iv) attach an officer&#146;s certificate  signed by a Responsible Officer
of each Borrower as required by Section 5.02(b)  hereof.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Borrowers shall release to the Custodian no later than 4:00 p.m., New York  City time,
two (2) Business Days prior to the requested Funding Date, the  Mortgage File pertaining
to each Eligible Mortgage Loan to be pledged to the  Lender and included in the Borrowing
Base on such requested Funding Date, in  accordance with the terms and conditions of the
Custodial Agreement.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pursuant
to the Custodial Agreement, the Custodian shall deliver to the Lender  and the Borrowers,
no later than 12:00 noon, New York City time, on a Funding  Date, a Trust Receipt (as
defined in the Custodial Agreement) in respect of all  Mortgage Loans pledged to the
Lender on such Funding Date, and a Mortgage Loan  Schedule and Exception Report.</FONT></FONT> </P>

<p align=center>
<font size=2>14
</font></p>
<br><hr noShade color="black">





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<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Upon
the Borrowers&#146; request for a borrowing pursuant to Section 2.03(a),  and upon
satisfaction of all conditions precedent set forth in Section 5.01 and  5.02 with respect
thereto, subject to Section 2.03(f) below, the Lender shall  make a Loan to the Borrowers
on the requested Funding Date, in the amount so  requested.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Subject
to Section 5 hereof, such borrowing will then be made available to the  Borrowers by the
Lender transferring, via wire transfer, to the following  account of the Borrowers:
United California Bank, for the A/C of Aames Capital  Corporation, ABA# 122-003-516,
Attn: Aames Capital Corporation, in the aggregate  amount of such borrowing in funds
immediately available to the Borrowers, or  such other account as the Borrowers may
direct in writing to the Lender.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In
the case of any Loan made with respect to any Class C Defaulted Loan for which a  BPO has
not been delivered to the Lender on or prior to the related Funding Date  or with respect
to any Mortgage Loan that at any time becomes a Class C  Defaulted Loan, the Lender shall
transmit an invoice to the Borrowers on a  monthly basis in the amount of $100 for each
such Class C Defaulted Loan to be  applied to the cost of obtaining a BPO for each such
Class C Defaulted Loan (any  excess remaining after payment of the cost of such BPO to be
remitted to the  Borrowers, and any shortfall towards payment of the BPO to be paid by
the  Borrowers to the Lender promptly following demand therefor). Any amounts so
invoiced by the Lender to the Borrowers shall be payable promptly (and in any  event no
later than ten (10) Business Days following receipt thereof).</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.04&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Limitation
on Types of Loans; Illegality</U>. Anything herein to the contrary  notwithstanding, if,
on or prior to the determination of any Eurodollar Rate:</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; the
Lender determines in good faith, which determination shall be conclusive,  that
quotations of interest rates for the relevant deposits referred to in the  definition of
&#147;Eurodollar Rate&#148; in Section 1.01 hereof are not being  provided in the
relevant amounts or for the relevant maturities for purposes of  determining rates of
interest for Loans as provided herein; or</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; the
Lender determines, which determination shall be conclusive, that the  relevant rate of
interest referred to in the definition of &#147;Eurodollar  Rate&#148; in Section 1.01
hereof upon the basis of which the rate of interest  for Loans is to be determined is not
likely adequately to cover the cost to the  Lender of making or maintaining Loans; or</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; it
becomes unlawful for the Lender to honor its obligation to make or maintain  Loans
hereunder using a Eurodollar Rate; then the Lender shall give the  Borrowers prompt
notice thereof and, so long as such condition remains in  effect, the Lender shall be
under no obligation to make additional Loans, and  the Borrowers shall, either prepay all
such Loans as may be outstanding or pay  interest on such Loans at a rate per annum equal
to the Federal Funds Rate plus  0.50% plus the Applicable Margin.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.05&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Repayment
of Loans; Interest</U>.</FONT></FONT> </P>


<p align=center>
<font size=2>15
</font></p>
<br><hr noShade color="black">






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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Borrowers hereby promise, jointly and severally, to repay in full on the  Termination
Date the then aggregate outstanding principal amount of the Loans.</FONT></FONT> </P>



<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Borrowers hereby promise, jointly and severally, to pay to the Lender  interest on the
unpaid principal amount of each Loan for the period from and  including the date of such
Loan to but excluding the date such Loan shall be  paid in full, at a rate per annum
equal to the Eurodollar Rate plus the  Applicable Margin; provided, that in no event
shall such rate per annum exceed  the maximum rate permitted by law. Notwithstanding the
foregoing, the Borrowers  hereby promise, jointly and severally, to pay to the Lender
interest at the  applicable Post-Default Rate on any principal of any Loan and on any
other  amount payable by the Borrowers hereunder or under the Note that shall not be
paid in full when due (whether at stated maturity, by acceleration or by  mandatory
prepayment or otherwise) for the period from and including the due  date thereof to but
excluding the date the same is paid in full. Accrued  interest on each Loan shall be
payable monthly on the fifth (5th) Business Day  of each month and for the last month of
the Loan Agreement on the fifth (5th)  Business Day of such last month and on the
Termination Date (each a  &#147;Remittance Date&#148;); provided, that, the Lender may,
in its sole  discretion, require accrued interest to be paid simultaneously with any
prepayment of principal made by the Borrowers on account of any of the Loans
outstanding. Interest payable at the Post-Default Rate shall accrue daily and  shall be
payable upon such accrual.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; It
is understood and agreed that, unless and until a Default or Event of Default  shall have
occurred and be continuing, the Borrowers shall be entitled to the  proceeds of the
Mortgage Loans pledged to the Lender hereunder. At any time  while a Default has occurred
and is continuing, upon notice from the Lender, the  Borrowers shall promptly deliver all
proceeds of the Mortgage Loans pledged to  the Lender hereunder to the Lender.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.06&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Mandatory
Prepayments or Pledge</U>.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; If
at any time the aggregate outstanding principal amount of Loans exceeds the  Borrowing
Base (a &#147;Borrowing Base Deficiency&#148;), as determined by the  Lender and notified
to the Borrowers on any Business Day, the Borrowers shall no  later than one (1) Business
Day after receipt of such notice, either prepay the  Loans in part or in whole or pledge
additional Eligible Mortgage Loans (which  Collateral shall be in all respects acceptable
to the Lender) to the Lender,  such that after giving effect to such prepayment or pledge
the aggregate  outstanding principal amount of the Loans does not exceed the Borrowing
Base.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Borrowers shall prepay the Loans in the amounts of prepayments remitted to  the Lender in
accordance with Section 7.20 hereof.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; If
at any time MS &amp; Co.&#145;s corporate bond rating has been lowered or  downgraded to
a rating below A- by S&amp;P or A3 by Moody&#146;s and the  Borrowers shall repay all
amounts owing to the Lender under this Agreement, the  Note and the other Loan Documents
within ninety (90) days following such  downgrade.</FONT></FONT> </P>

<p align=center>
<font size=2>16
</font></p>
<br><hr noShade color="black">





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<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.07&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Voluntary
Prepayments</U>. The Borrowers may at any time and from time to time  prepay the Loan, in
whole or in part, without premium or penalty, upon  irrevocable notice to the Lender (in
the form of <U>Exhibit I</U>) prior to 1:00 p.m.,  New York City time, on the requested
date thereof, in the case of the first 500  Mortgage Loans requested to be released by
the Lender on such date, or upon  irrevocable notice delivered to the Lender (in the form
of Exhibit I), prior to  1:00 p.m., New York City time, at least one (1) Business Day
prior thereto, in  the case of any Mortgage Loans in excess of 500 requested to be
released by the  Lender, specifying the date and amount of prepayment and attaching a
schedule of  Mortgage Loans to be released by the Lender in connection with such
prepayment.  If any such notice is given, the amount specified in such notice shall be
due  and payable on the date specified therein, together with any accrued interest to
such date on the amount prepaid.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.08&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Extension
of Termination Date</U>. At the request of the Borrowers made at least  thirty (30) days,
but in no event earlier than ninety (90) days, prior to the  then current Termination
Date, the Lender may in its sole discretion extend the  Termination Date for a period to
be determined by Lender in its sole discretion  by giving written notice of such
extension to the Borrowers no later than twenty  (20) days, but in no event earlier than
thirty (30) days, prior to the then  current Termination Date. Any failure by the Lender
to deliver such notice of  extension shall be deemed to be the Lender&#146;s
determination not to extend  the then current Termination Date.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Section
3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Payments; Computations; Etc</U>.</FONT></FONT> </P>


<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3.01&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Payments</U>.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Except
to the extent otherwise provided herein, all payments of principal,  interest and other
amounts to be made by the Borrowers under this Loan Agreement  and the Note, shall be
made in Dollars, in immediately available funds, without  deduction, set-off or
counterclaim, to the Lender at the following account  maintained by the Lender: Account
No. 40615114, for the account of Lender,  Citibank, N.A., ABA No. 021000089, Attn: Whole
Loan Operations, not later than  5:00 p.m., New York City time, on the date on which such
payment shall become  due (and each such payment made after such time on such due date
shall be deemed  to have been made on the next succeeding Business Day). Each Borrower
acknowledges that it has no rights of withdrawal from the foregoing account.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Except
to the extent otherwise expressly provided herein, if the due date of any  payment under
this Loan Agreement or the Note would otherwise fall on a day that  is not a Business
Day, such date shall be extended to the next succeeding  Business Day, and interest shall
be payable for any principal so extended for  the period of such extension.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3.02&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Computations</U>.
Interest on the Loans shall be computed on the basis of a 360-day  year for the actual
days elapsed (including the first day but excluding the last  day) occurring in the
period for which payable.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3.03&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Requirements
of Law</U>.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If  the introduction or adoption of or any change in any
Requirement of Law (other  than with respect to any amendment made to the Lender&#146;s
certificate of  incorporation and by-laws or other organizational or governing documents)
or any  change in the interpretation or application thereof or compliance by the Lender
with any request or directive (whether or not having the force of law) from any  central
bank or other Governmental Authority made subsequent to the date hereof:</FONT></FONT> </P>


<p align=center>
<font size=2>17
</font></p>
<br><hr noShade color="black">





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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(i)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; shall
subject the Lender to any tax of any kind whatsoever with respect to this  Loan
Agreement, the Note or any Loan made by it (excluding net income or  franchise taxes) or
change the basis of taxation of payments to the Lender in  respect thereof;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman In 2" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(ii)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; shall
impose, modify or hold applicable any reserve, special deposit, compulsory  Loan or
similar requirement against assets held by, deposits or other  liabilities in or for the
account of, advances, Loans or other extensions of  credit by, or any other acquisition
of funds by, any office of the Lender which  is not otherwise included in the
determination of the Eurodollar Rate hereunder;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman In 2" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(iii)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; shall
impose on the Lender any other condition;</font></font></TD></TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">and the result
of any of the  foregoing is to  increase the cost to the Lender, by an amount which the
Lender  deems to be material, of  making, participating in, continuing or maintaining any
Loan or to reduce any amount due  or owing hereunder in respect thereof, then, in  any
such case, the Borrowers shall  promptly pay the Lender such additional  amount or
amounts as will compensate the Lender  for such increased cost or  reduced amount
receivable.</FONT></FONT> </P>


<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; If
the Lender shall have determined that the adoption of or any change in any  Requirement
of Law (other than with respect to any amendment made to the  Lender&#146;s certificate
of incorporation and by-laws or other organizational  or governing documents) regarding
capital adequacy or in the interpretation or  application thereof or compliance by the
Lender or any corporation controlling  the Lender with any request or directive regarding
capital adequacy (whether or  not having the force of law) from any Governmental
Authority made subsequent to  the date hereof shall have the effect of reducing the rate
of return on the  Lender&#146;s or such corporation&#146;s capital as a consequence of
its  obligations hereunder to a level below that which the Lender or such corporation
could have achieved but for such adoption, change or compliance (taking into
consideration the Lender&#146;s or such corporation&#146;s policies with respect  to
capital adequacy) by an amount deemed by the Lender to be material, then from  time to
time, the Borrowers, jointly and severally, shall promptly pay to the  Lender such
additional amount or amounts as will compensate the Lender for such  reduction.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; If
the Lender becomes entitled to claim any additional amounts pursuant to this  Section
3.03, it shall promptly notify the Borrowers of the event by reason of  which it has
become so entitled. A certificate as to any additional amounts  payable pursuant to this
Section submitted by the Lender to the Borrowers shall  be conclusive in the absence of
manifest error.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3.04&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Fees</U>.
The Borrowers agree to pay to the Lender the fees set forth in the Fee  Letter.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Section
4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Collateral Security</U>.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4.01&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Collateral;
Security Interest</U>.</FONT></FONT> </P>

<p align=center>
<font size=2>19
</font></p>
<br><hr noShade color="black">





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<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pursuant
to the Custodial Agreement, the Custodian shall hold the Mortgage Loan  Documents as
exclusive bailee and agent for the benefit of the Lender pursuant  to terms of the
Custodial Agreement and shall deliver to the Lender Trust  Receipts (as defined in the
Custodial Agreement) each to the effect that it has  reviewed such Mortgage Loan
Documents in the manner and to the extent required  by the Custodial Agreement and
identifying any deficiencies in such Mortgage  Loan Documents as so reviewed.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; All
of each Borrower&#146;s right, title and interest in, to and under each of  the following
items of property, whether now owned or hereafter acquired, now  existing or hereafter
created and wherever located, is hereinafter referred to  as the &#147;Collateral&#148;:</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Hang Roman In 2" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(i)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; all
Mortgage Loans;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman In 2" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(ii)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; all
Mortgage Loan Documents, including without limitation all promissory notes,  and all
Servicing Records, servicing agreements and any other collateral pledged  or otherwise
relating to such Mortgage Loans, together with all files,  documents, instruments,
surveys, certificates, correspondence, appraisals,  computer programs, computer storage
media, accounting records and other books  and records relating thereto;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(iii)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; all
mortgage guaranties and insurance (issued by governmental agencies or  otherwise) and any
mortgage insurance certificate or other document evidencing  such mortgage guaranties or
insurance relating to any Mortgage Loan and all  claims and payments thereunder;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(iv)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; all
other insurance policies and insurance proceeds relating to any Mortgage  Loan or the
related Mortgaged Property;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(v)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; all
Interest Rate Protection Agreements, relating to or constituting any and all  of the
foregoing;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(vi)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; all
collateral, however defined, under any other agreement between any Borrower  or any of
its Affiliates on the one hand and the Lender or any of its Affiliates  on the other hand;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(vii)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; all
&#147;general intangibles&#148;, &#147;accounts&#148;,  &#147;instruments&#148;, &#147;investment
property&#148;, &#147;deposit  accounts&#148; and &#147;chattel paper&#148; as defined in
the Uniform  Commercial Code relating to or constituting any and all of the foregoing; and</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(viii)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; any
and all replacements, substitutions, distributions on or proceeds of any and  all of the
foregoing.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Each
Borrower hereby assigns, pledges and grants a security interest in all of  its right,
title and interest in, to and under the Collateral to the Lender to  secure the MS
Indebtedness, including without limitation, the repayment of  principal of and interest
on all Loans and all other amounts owing to the Lender  hereunder, under the Note and
under the other Loan Documents (collectively, the  &#147;<U>Secured Obligations</U>&#148;). Each
Borrower agrees to mark its computer  records and files to evidence the interests granted
to the Lender hereunder.</FONT></FONT> </P>



<p align=center>
<font size=2>19
</font></p>
<br><hr noShade color="black">






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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4.02&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Further
Documentation</U>. At any time and from time to time, upon the written  request of the
Lender, and at the sole expense of the Borrowers, the Borrowers  will promptly and duly
execute and deliver, or will promptly cause to be  executed and delivered, such further
instruments and documents and take such  further action as the Lender may reasonably
request for the purpose of obtaining  or preserving the full benefits of this Loan
Agreement and of the rights and  powers herein granted, including, without limitation,
the filing of any  financing or continuation statements under the Uniform Commercial Code
in effect  in any jurisdiction with respect to the Liens created hereby. The Borrowers
also  hereby authorize the Lender to file any such financing or continuation statement
without the signatures of the Borrowers to the extent permitted by applicable  law.</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4.03&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Changes
in Locations, Name, etc. No Borrower shall (i) change the location of  its chief
executive office/chief place of business from that specified in  Section 6.12 hereof or
(ii) change its name, identity or corporate structure (or  the equivalent) or (iii)
change the location where it maintains its records with  respect to the Collateral or
(iv) reincorporate or reorganize under the laws of  another jurisdiction unless it shall
have given the Lender at least thirty (30)  days prior written notice thereof and shall
have delivered to the Lender all  Uniform Commercial Code financing statements and
amendments thereto as the  Lender shall request and taken all other actions deemed
necessary by the Lender  to continue its perfected status in the Collateral with the same
or better  priority. Each Borrower&#146;s federal tax identification number is as
follows:  Aames Capital, 95-4438859; and Aames Funding, 95-2622032. Each Borrower shall
promptly notify the Lender of any change in such organizational identification  number.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4.04&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Lender&#146;s
Appointment as Attorney-in-Fact.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Each
Borrower hereby irrevocably constitutes and appoints the Lender and any  officer or agent
thereof, with full power of substitution, as its true and  lawful attorney-in-fact with
full irrevocable power and authority in the place  and stead of such Borrower and in the
name of such Borrower or in its own name,  from time to time in the Lender&#146;s
discretion, for the purpose of carrying  out the terms of this Loan Agreement, to take
any and all appropriate action and  to execute any and all documents and instruments
which may be necessary or  desirable to accomplish the purposes of this Loan Agreement,
and, without  limiting the generality of the foregoing, each Borrower hereby gives the
Lender  the power and right, on behalf of such Borrower, without assent by, but with
notice to, such Borrower, if an Event of Default shall have occurred and be  continuing,
to do the following:</FONT></FONT> </P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(i)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; in
the name of each Borrower or its own name, or otherwise, to take possession  of and
endorse and collect any checks, drafts, notes, acceptances or other  instruments for the
payment of moneys due under any mortgage insurance or  payable on or on account of any
other Collateral and to file any claim or to  take any other action or proceeding in any
court of law or equity or otherwise  deemed appropriate by the Lender for the purpose of
collecting any and all such  moneys due under any such mortgage insurance or with respect
to any other  Collateral whenever payable;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(ii)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; to
pay or discharge taxes and Liens levied or placed on or threatened against  the
Collateral; and</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


<p align=center>
<font size=2>20
</font></p>
<br><hr noShade color="black">





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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(iii)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp; (A)
to direct any party liable for any payment under any Collateral to make  payment of any
and all moneys due or to become due thereunder directly to the  Lender or as the Lender
shall direct; (B) to ask or demand for, collect, receive  payment of and receipt for, any
and all moneys, claims and other amounts due or  to become due at any time in respect of
or arising out of any Collateral; (C) to  sign and endorse any invoices, assignments,
verifications, notices and other  documents in connection with any of the Collateral; (D)
to commence and  prosecute any suits, actions or proceedings at law or in equity in any
court of  competent jurisdiction to collect the Collateral or any portion thereof and to
enforce any other right in respect of any Collateral; (E) to defend any suit,  action or
proceeding brought against any Borrower with respect to any  Collateral; (F) to settle,
compromise or adjust any suit, action or proceeding  described in clause (E) above and,
in connection therewith, to give such  discharges or releases as the Lender may deem
appropriate; and (G) generally, to  sell, transfer, pledge and make any agreement with
respect to or otherwise deal  with any of the Collateral as fully and completely as
though the Lender were the  absolute owner thereof for all purposes, and to do, at the
Lender&#146;s option  and the Borrowers&#146; expense, at any time, and from time to
time, all acts  and things which the Lender deems necessary to protect, preserve or
realize upon  the Collateral and the Lender&#146;s Liens thereon and to effect the intent
of  this Loan Agreement, all as fully and effectively as the Borrowers might do.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Each
Borrower hereby ratifies all that said attorneys shall lawfully do or cause to
be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Each
Borrower also authorizes the Lender, at any time and from time to time, to  execute, in
connection with any sale provided for in Section 4.07 hereof, any  endorsements,
assignments or other instruments of conveyance or transfer with  respect to the
Collateral and to file any initial financing statement,  amendments thereto and
continuation statements with or without the signature of  any Borrower as authorized by
applicable law, as applicable to all or any part  of the Collateral.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
powers conferred on the Lender are solely to protect the Lender&#146;s  interests in the
Collateral and shall not impose any duty upon the Lender to  exercise any such powers.
The Lender shall be accountable only for amounts that  it actually receives as a result
of the exercise of such powers, and neither the  Lender nor any of its officers,
directors, or employees shall be responsible to  the Borrowers for any act or failure to
act hereunder, except for its own gross  negligence or willful misconduct.</FONT></FONT> </P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4.05&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Performance by Lender of Borrowers&#146; Obligations</U>. If any Borrower fails to
perform or comply with any of its agreements contained in the Loan Documents and
the Lender itself performs or complies, or otherwise causes performance or
compliance, with such agreement, the expenses of the Lender incurred in
connection with such performance or compliance, together with interest thereon
at a rate per annum equal to the Post-Default Rate, shall be payable by the
Borrowers to the Lender on demand and shall constitute Secured Obligations.</FONT></FONT> </P>


<p align=center>
<font size=2>21
</font></p>
<br><hr noShade color="black">





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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4.06&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Proceeds</U>. If an Event of Default shall occur and be continuing, (a) all proceeds
of Collateral received by the Borrowers consisting of cash, checks and other
near-cash items shall be held by the Borrowers in trust for the Lender,
segregated from other funds of the Borrowers, and shall forthwith upon receipt
by any Borrower be turned over to the Lender in the exact form received by such
Borrower (duly endorsed by such Borrower to the Lender, if required) and (b) any
and all such proceeds received by the Lender (whether from a Borrower or
otherwise) may, in the sole discretion of the Lender, be held by the Lender as
collateral security for, and/or then or at any time thereafter may be applied by
the Lender against, the Secured Obligations (whether matured or unmatured), such
application to be in such order as the Lender shall elect. Any balance of such
proceeds remaining after the Secured Obligations shall have been paid in full
and this Loan Agreement shall have been terminated shall be paid over to the
Borrowers or to whomsoever may be lawfully entitled to receive the same. For
purposes hereof, proceeds shall include, but not be limited to, all principal
and interest payments, all prepayments and payoffs, insurance claims,
condemnation awards, sale proceeds, real estate owned rents and any other income
and all other amounts received with respect to the Collateral.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4.07&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Remedies</U>. If an Event of Default shall occur and be continuing, the Lender may,
at its option, enter into one or more Interest Rate Protection Agreements
covering all or a portion of the Mortgage Loans pledged to the Lender hereunder,
and the Borrowers shall be responsible for all damages, judgments, costs and
expenses of any kind which may be imposed on, incurred by or asserted against
the Lender relating to or arising out of such Interest Rate Protection
Agreements; including without limitation any losses resulting from such Interest
Rate Protection Agreements. If an Event of Default shall occur and be
continuing, the Lender may exercise, in addition to all other rights and
remedies granted to it in this Loan Agreement and in any other instrument or
agreement securing, evidencing or relating to the Secured Obligations, all
rights and remedies of a secured party under the Uniform Commercial Code.
Without limiting the generality of the foregoing, the Lender without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon the
Borrowers or any other Person (each and all of which demands, presentments,
protests, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels or as an entirety at public or private sale or sales, at any
exchange, broker&#146;s board or office of the Lender or elsewhere upon such
terms and conditions as it may deem advisable and at such prices as it may deem
best, for cash or on credit or for future delivery without assumption of any
credit risk. The Lender shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of any right or
equity of redemption in any Borrower, which right or equity is hereby waived or
released. The Borrowers further agree, at the Lender&#146;s request, to assemble
the Collateral and make it available to the Lender at places which the Lender
shall reasonably select, whether at the Borrowers&#146; premises or elsewhere.
The Lender shall apply the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred therein or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the Lender hereunder, including without limitation reasonable
attorneys&#146; fees and disbursements, to the payment in whole or in part of
the Secured Obligations, in such order as the Lender may elect, and only after
such application and after the payment by the Lender of any other amount
required or permitted by any provision of law, including without limitation
Section 9-615(a)(3) of the Uniform Commercial Code, need the Lender account for
the surplus, if any, to the Borrowers. To the extent permitted by applicable
law, each Borrower waives all claims, damages and demands it may acquire against
the Lender arising out of the exercise by the Lender of any of its rights
hereunder, other than those claims, damages and demands arising from the gross
negligence or willful misconduct of the Lender. If any notice of a proposed sale
or other disposition of Collateral shall be required by law, such notice shall
be deemed reasonable and proper if given at least 10 days before such sale or
other disposition. The Borrowers shall remain liable for any deficiency (plus
accrued interest thereon as contemplated pursuant to Section 2.05(b) hereof) if
the proceeds of any sale or other disposition of the Collateral are insufficient
to pay the Secured Obligations and the fees and disbursements of any attorneys
employed by the Lender to collect such deficiency.</FONT></FONT> </P>

<p align=center>
<font size=2>22
</font></p>
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<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4.08&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Limitation
on Duties Regarding Preservation of Collateral</U>. The Lender&#146;s  duty with respect
to the custody, safekeeping and physical preservation of the  Collateral in its
possession, under Section 9-207 of the Uniform Commercial Code  or otherwise, shall be to
deal with it in the same manner as the Lender deals  with similar property for its own
account. Neither the Lender nor any of its  directors, officers or employees shall be
liable for failure to demand, collect  or realize upon all or any part of the Collateral
or for any delay in doing so  or shall be under any obligation to sell or otherwise
dispose of any Collateral  upon the request of the Borrowers or otherwise.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4.09&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Powers
Coupled with an Interest</U>. All authorizations and agencies herein  contained with respect
to the Collateral are irrevocable and powers coupled with  an interest.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4.10&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Release of Security Interest</U>. Upon termination of this Loan Agreement and  repayment to the
Lender of all Secured Obligations and the performance of all  obligations under the Loan
Documents the Lender shall release its security  interest in any remaining Collateral.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4.11&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Interest Rate Protection Agreements</U>. In the event that any Person (other than
the Lender) shall have a Lien on any Interest Rate Protection Agreement that any
Borrower has entered into with respect to both Mortgage Loans pledged to the
Lender hereunder and other loans which are not pledged to the Lender hereunder,
the Lender agrees that in the event that the Lender shall receive any proceeds,
recoveries or other amounts in respect of such Interest Rate Protection
Agreement following the exercise of remedies hereunder after an Event of
Default, the Lender shall remit to any such Person, as to which the Lender has
received notice of such Person&#146;s Lien on such Interest Rate Protection
Agreement, any excess proceeds of such Interest Rate Protection Agreement
following repayment of all obligations owing to the Lender hereunder.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Section
5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Conditions Precedent</U>.</FONT></FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">5.01&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Initial Loan</U>. The obligation of the Lender to make its initial Loan hereunder is
subject to the satisfaction, immediately prior to or concurrently with the
making of such Loan, of the condition precedent that the Lender shall have
received all of the following items, each of which shall be satisfactory to the
Lender and its counsel in form and substance:</FONT></FONT> </P>


<p align=center>
<font size=2>23
</font></p>
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<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Loan Documents</U>.</FONT></FONT> </P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(i)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; <U>Loan
Agreement</U>. The Loan Agreement, duly executed and delivered by the  Borrowers;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(ii)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; <U>Note</U>.
The Note, duly executed and delivered by the Borrowers;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Custodial
Agreement</U>. The Custodial Agreement duly executed and delivered by the  Borrowers and the
Custodian;</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Organizational
Documents</U>. A good standing certificate and certified copies of  the charter and
by-laws (or equivalent documents) of each Borrower and of all  corporate or other
authority for each Borrower with respect to the execution,  delivery and performance of
the Loan Documents and each other document to be  delivered by such Borrower from time to
time in connection herewith (and the  Lender may conclusively rely on such certificate
until it receives notice in  writing from such Borrower to the contrary);</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(d)
<U>Legal Opinion</U>.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; A legal opinion of the in-house
counsel, with respect to  corporate matters, and outside counsel to the Borrowers, with
respect to  enforceability and certain other matters, substantially in the form attached
hereto as Exhibit C;</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Servicing
Agreement(s)</U>. Any Servicing Agreement, certified as a true, correct  and complete
copy of the original, together with a fully executed Servicer  Notice, and, if the
Servicer is a Borrower or an Affiliate of a Borrower, the  letter of the applicable
Servicer consenting to termination of such Servicing  Agreement upon the occurrence of an
Event of Default;</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Filings,
Registrations, Recordings, Lien Searches</U>. (i) Any documents (including,  without
limitation, financing statements) required to be filed, registered or  recorded in order
to create, in favor of the Lender, a perfected, first-priority  security interest in the
Collateral, subject to no Liens other than those  created hereunder, shall have been
properly prepared and executed for filing  (including the applicable county(ies) if the
Lender determines such filings are  necessary in its sole discretion), registration or
recording in each office in  each jurisdiction in which such filings, registrations and
recordations are  required to perfect such first-priority security interest; provided,
that  assignments of the Mortgages securing or related to the Mortgage Loans shall not
be required to be recorded prior to the occurrence of an Event of Default;</FONT></FONT> </P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(ii) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> UCC
lien searches in such jurisdictions as shall be applicable to the Borrowers  and the
Collateral, the results of which shall be satisfactory to the Lender.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(g)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Fees</U>.
The fees as contemplated by Section 3.04;</FONT></FONT> </P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(h) <U>Financial
Statements</U>. The financial statements referenced in Section&nbsp;6.03;</FONT></FONT> </P>

<p align=center>
<font size=2>24
</font></p>
<br><hr noShade color="black">






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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Underwriting
Guidelines</U>. A certified copy of the Underwriting Guidelines related  to each Borrower,
which shall be in form and substance satisfactory to the  Lender;</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
(j)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Consents,
Licenses, Approvals, etc</U>. Copies certified by each Borrower of all  consents, licenses
and approvals, if any, required in connection with the  execution, delivery and
performance by such Borrower of, and the validity and  enforceability of, the Loan
Documents, which consents, licenses and approvals  shall be in full force and effect; and</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(k)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Other
Documents</U>. Such other documents as the Lender may reasonably request.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">5.02&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Initial
and Subsequent Loans</U>. The making of each Loan to the Borrowers  (including the
initial Loan) on any Business Day is subject to the satisfaction  of the following
further conditions precedent, both immediately prior to the  making of such Loan and also
after giving effect thereto and to the intended use  thereof:</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>No  Default</U>. No Default or Event of Default shall
have occurred and be continuing;</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Representations
and Warranties</U>. Both immediately prior to the making of such  Loan and also after giving
effect thereto and to the intended use thereof, the  representations and warranties made
by the Borrowers in Section 6 and Schedule 1  hereof, and elsewhere in each of the Loan
Documents, shall be true, correct and  complete on and as of the date of the making of
such Loan in all material  respects (in the case of the representations and warranties in
Section 6.10 and  Schedule 1, solely with respect to Mortgage Loans included in the
Borrowing  Base) with the same force and effect as if made on and as of such date (or, if
any such representation or warranty is expressly stated to have been made as of  a
specific date, as of such specific date); and the Lender shall have received  an officer&#146;s
certificate signed by a Responsible Officer of each Borrower  certifying as to the truth,
accuracy and completeness of the above, which  certificate shall specifically include a
statement that such Borrower is in  compliance with all governmental licenses and
authorizations, statutory and  regulatory requirements, and is qualified to do business
and in good standing in  all required jurisdictions.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Borrowing
Base</U>. The aggregate outstanding principal amount of the Loans shall  not exceed the
Borrowing Base;</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Due
Diligence</U>. Subject to the Lender&#146;s right to perform one or more Due  Diligence
Reviews pursuant to Section 11.16 hereof, the Lender shall have  completed its due
diligence review of the Mortgage Loan Documents for each Loan  and such other documents,
records, agreements, instruments, mortgaged properties  or information relating to such
Mortgage Loans as the Lender in its sole  discretion deems appropriate to review and such
review shall be satisfactory to  the Lender in its sole discretion;</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Trust
Receipt and Mortgage Loan Schedule and Exception Report</U>. The Lender shall  have
received a Trust Receipt, substantially in the form of Annex 2 to the  Custodial
Agreement, dated the Funding Date, from the Custodian, duly completed,  with a Mortgage
Loan Schedule and Exception Report attached thereto including  only such exceptions as
are acceptable to the Lender in its sole discretion in  respect of Eligible Mortgage
Loans to be pledged hereunder on such Business Day;</FONT></FONT> </P>

<p align=center>
<font size=2>25
</font></p>
<br><hr noShade color="black">






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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Release
Letter. The Lender shall have received from each Borrower a Warehouse  Lender&#146;s
Release Letter substantially in the form of <U>Exhibit E-2</U> hereto (or  such other form
acceptable to the Lender) or a Borrower&#146;s Release Letter  substantially in the form
of <U>Exhibit E-1</U> hereto (or such other form acceptable  to the Lender) covering each
Mortgage Loan to be pledged to the Lender which was  previously pledged to another lender;</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(g)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fees
and Expenses. The Lender shall have received all fees and expenses of  counsel to the
Lender as contemplated by Section 11.03(b), which amount, at the  Lender&#146;s option,
may be netted from any Loan advanced under this Agreement;</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(h)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No
Market Events. None of the following shall have occurred and/or be continuing:</FONT></FONT> </P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(i)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; an
event or events shall have occurred resulting in the effective absence of a  &#147;repo
market&#148; or comparable &#147;lending market&#148; for financing  debt obligations
secured by mortgage loans or securities or an event or events  shall have occurred
resulting in the Lender not being able to finance any  Mortgage Loans through the &#147;repo
market&#148; or &#147;lending market&#148; with traditional counterparties at rates which
would have been reasonable prior  to the occurrence of such event or events;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(ii)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; an
event or events shall have occurred resulting in the effective absence of a  &#147;securities
market&#148; for securities backed by mortgage loans or an  event or events shall have
occurred resulting in the Lender not being able to  sell securities backed by mortgage
loans at prices which would have been  reasonable prior to such event or events; or</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(iii)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; there
shall have occurred a material adverse change in the financial condition  of the Lender
which affects (or can reasonably be expected to affect) materially  and adversely the
ability of the Lender to fund its obligations under this Loan  Agreement; and</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>No Morgan Stanley Downgrade</U>. MS &amp; Co.&#145;s corporate bond rating as  calculated by S&amp;P
or Moody&#146;s has not been lowered or downgraded to a  rating below A- as indicated by S&amp;P
or below A3 as indicated by  Moody&#146;s.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(j)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Maintenance
of Tangible Net Worth</U>. The Tangible Net Worth of the Parent on a  consolidated basis on
any given day, shall not be less than $34,000,000.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Each
request for a borrowing by the Borrowers hereunder shall constitute a
certification by the Borrowers that all the conditions set forth in this Section
5 (other than Section 5.02(h) and (i)) have been satisfied (both as of the date
of such notice, request or confirmation and as of the date of such borrowing).</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Section
6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U> Representations  and Warranties</U>.  Each Borrower
represents and warrants to the Lender that throughout the term of  this Loan Agreement:</FONT></FONT> </P>


<p align=center>
<font size=2>26
</font></p>
<br><hr noShade color="black">





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<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6.01&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Legal
Name</U>. On the Effective Date the exact legal name of each Borrower is and  during the
four months immediately preceding the Effective Date, such name has  been, respectively
Aames Capital Corporation, and Aames Funding Corporation and  no Borrower has used any
previous names, assumed names or trade names except as  set forth on <U>Schedule 5</U> attached
hereto.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6.02&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Existence</U>.
Each Borrower (a) is a corporation duly organized, validly existing  and in good standing
under the laws of the jurisdiction of its organization; (b)  has all requisite corporate
or other power, and has all governmental licenses,  authorizations, consents and
approvals necessary to own its assets and carry on  its business as now being or as
proposed to be conducted, except where the lack  of such licenses, authorizations,
consents and approvals would not be reasonably  likely to have a Material Adverse Effect;
and (c) is qualified to do business  and is in good standing in all other jurisdictions
in which the nature of the  business conducted by it makes such qualification necessary,
except where  failure so to qualify would not be reasonably likely (either individually
or in  the aggregate) to have a Material Adverse Effect.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6.03&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Financial
Condition</U>. Aames Capital has heretofore furnished to the Lender a copy  of its
consolidated balance sheet and the consolidated balance sheets of its  consolidated
Subsidiaries for the fiscal year of Aames Capital ended June 30,  2003 and the related
consolidated statements of income and retained earnings and  of cash flows for Aames
Capital and its consolidated Subsidiaries for such  fiscal year, with the opinion thereon
of Ernst &amp; Young, LLP. All such  financial statements are complete and correct and
fairly present, in all  material respects, the consolidated financial condition of Aames
Capital and its  Subsidiaries and the consolidated results of their operations as at such
dates  and for such fiscal periods, all in accordance with GAAP applied on a consistent
basis. Since June 30, 2003 there has been no material adverse change in the  consolidated
business, operations or financial condition of Aames Capital and  its consolidated
Subsidiaries taken as a whole from that set forth in said  financial statements.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6.04&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Litigation</U>.
There are no actions, suits, arbitrations, investigations  (including, without
limitation, any of the foregoing which are pending or  threatened) or other legal or
arbitrable proceedings affecting any Borrower or  any of its Subsidiaries or affecting
any of the Property of any of them before  any Governmental Authority that (i) questions
or challenges the validity or  enforceability of any of the Loan Documents or any action
to be taken in  connection with the transactions contemplated hereby, or (ii) except as
otherwise disclosed in Aames Financial Corporation&#146;s filings with the  Securities
and Exchange Commission for the fiscal year ended June 30, 2003, (a)  makes a claim or
claims in an aggregate amount greater than $5,000,000, (b)  which, individually or in the
aggregate, if adversely determined, could  reasonably be likely to have a Material
Adverse Effect, or (c) requires filing  with the Securities and Exchange Commission in
accordance with the 1934 Act or  any rules thereunder.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6.05&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>No
Breach</U>. Neither (a) the execution and delivery of the Loan Documents nor  (b)&nbsp;the
consummation of the transactions therein contemplated in compliance  with the terms and
provisions thereof will conflict with or result in a breach  of the charter or by-laws of
any Borrower, or any applicable law (including,  without limitation, the Prescribed
Laws), rule or regulation, or any order,  writ, injunction or decree of any Governmental
Authority, or any Servicing  Agreement or other material agreement or instrument to which
any Borrower or any  of its Subsidiaries is a party or by which any of them or any of
their Property  is bound or to which any of them is subject, or constitute a default
under any  such material agreement or instrument or result in the creation or imposition
of  any Lien (except for the Liens created pursuant to this Loan Agreement) upon any
Property of any Borrower or any of its Subsidiaries pursuant to the terms of any  such
agreement or instrument.</FONT></FONT> </P>

<p align=center>
<font size=2>27
</font></p>
<br><hr noShade color="black">





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<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6.06&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Action</U>.
Each Borrower has all necessary corporate or other power, authority and  legal right to
execute, deliver and perform its obligations under each of the  Loan Documents; the
execution, delivery and performance by each Borrower of each  of the Loan Documents have
been duly authorized by all necessary corporate or  other action on its part; and each
Loan Document has been duly and validly  executed and delivered by each Borrower and
constitutes a legal, valid and  binding obligation of such Borrower, enforceable against
such Borrower in  accordance with its terms.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6.07&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Approvals</U>.
No authorizations, approvals or consents of, and no filings or  registrations with, any
Governmental Authority or any securities exchange are  necessary for the execution,
delivery or performance by each Borrower of the  Loan Documents or for the legality,
validity or enforceability thereof, except  for filings and recordings in respect of the
Liens created pursuant to this Loan  Agreement.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6.08&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Margin
Regulation</U>s. Neither the making of any Loan hereunder, nor the use of the  proceeds
thereof, will violate or be inconsistent with the provisions of  Regulations T, U or X.
6.09 Taxes. Each Borrower and each of its Subsidiaries  has filed all Federal income tax
returns and all other material tax returns that  are required to be filed by them and
have paid all taxes due pursuant to such  returns or pursuant to any assessment received
by any of them, except for any  such taxes as are being appropriately contested in good
faith by appropriate  proceedings diligently conducted and with respect to which adequate
reserves  have been provided. The charges, accruals and reserves on the books of each
Borrower and each of its Subsidiaries in respect of taxes and other governmental  charges
are, in the opinion of such Borrower, adequate.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6.10&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Investment
Company Act</U>. No Borrower nor any of their Subsidiaries is an  &#147;investment company&#148;,
or a company &#147;controlled&#148; by an  &#147;investment company,&#148; within the
meaning of the Investment Company Act  of 1940, as amended.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6.11&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Collateral;
Collateral Security</U>.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No
Borrower has assigned, pledged, or otherwise conveyed or encumbered any Mortgage  Loan or
other Collateral to any other Person, and immediately prior to the  pledge of such
Mortgage Loan or any other Collateral to the Lender, each  Borrower was the sole owner of
the Collateral in which a security interest has  been granted by it and had good and
marketable title thereto, free and clear of  all Liens, in each case except for Liens to
be released simultaneously with the  Liens granted in favor of the Lender hereunder. No
Mortgage Loan or other  Collateral pledged to the Lender hereunder was acquired (by
purchase or  otherwise) by any Borrower from an Affiliate of any Borrower other than
another  Borrower.</FONT></FONT> </P>

<p align=center>
<font size=2>28
</font></p>
<br><hr noShade color="black">





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<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
provisions of this Loan Agreement are effective to create in favor of the  Lender a valid
security interest in all right, title and interest of the  Borrowers in, to and under the
Collateral. (c) Upon receipt by the Custodian of  each Mortgage Note, endorsed in blank
by a duly authorized officer of the  relevant Borrower and (ii) the issuance by the
Custodian of a Trust Receipt  therefor, the Lender shall have a fully perfected first
priority security  interest therein, in the Mortgage Loan evidenced thereby and in the
Borrowers&#146; interest in the related Mortgaged Property.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Upon
the filing of financing statements on Form UCC-1 naming the Lender as  &#147;Secured Party&#148; and
the Borrowers as &#147;Debtors&#148;, and  describing the Collateral, in the
jurisdictions and recording offices listed on  Schedule 2 attached hereto, the security
interests granted hereunder in the  Collateral will constitute fully perfected first
priority security interests  under the Uniform Commercial Code in all right, title and
interest of the  Borrowers in, to and under such Collateral which can be perfected by
filing  under the Uniform Commercial Code.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6.12&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Chief
Executive Office/Jurisdiction of Organization</U>. On the Effective Date, each  Borrower&#146;s
chief executive office is located at 350 South Grand Avenue,  43rd Floor, Los Angeles,
California 90071. On the Effective Date, each  Borrower&#146;s jurisdiction of
organization is California.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6.13&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Location
of Books and Records</U>. The location where each Borrower keeps its books  and records,
including all computer files and records relating to the Collateral  is its chief
executive office.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6.14&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>True
and Complete Disclosure</U>. The information, reports, financial statements,  exhibits
and schedules furnished in writing by or on behalf of the Borrowers to  the Lender in
connection with the negotiation, preparation or delivery of this  Loan Agreement and the
other Loan Documents or included herein or therein or  delivered pursuant hereto or
thereto, when taken as a whole, do not contain any  untrue statement of material fact or
omit to state any material fact necessary  to make the statements herein or therein, in
light of the circumstances under  which they were made, not misleading. All written
information furnished after  the date hereof by or on behalf of the Borrowers to the
Lender in connection  with this Loan Agreement and the other Loan Documents and the
transactions  contemplated hereby and thereby will be true, complete and accurate in
every  material respect, or (in the case of projections) based on reasonable estimates,
on the date as of which such information is stated or certified. There is no  fact known
to a Responsible Officer of any Borrower, after due inquiry, that  could reasonably be
expected to have a Material Adverse Effect that has not been  disclosed herein, in the
other Loan Documents or in a report, financial  statement, exhibit, schedule, disclosure
letter or other writing furnished to  the Lender for use in connection with the
transactions contemplated hereby or  thereby.</FONT></FONT> </P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6.15&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Tangible Net Worth</U>. On the Effective Date, Aames Capital&#146;s Tangible Net
Worth is not less than $160,000,000.</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6.16&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>ERISA</U>.
Each Plan to which any Borrower or its Subsidiaries make direct  contributions, and, to
the knowledge of such Borrower, each other Plan and each  Multiemployer Plan, is in
compliance in all material respects with, and has been  administered in all material
respects in compliance with, the applicable  provisions of ERISA, the Code and any other
Federal or State law. No event or  condition has occurred and is continuing as to which
any Borrower would be under  an obligation to furnish a report to the Lender under
Section 7.01(d) hereof.</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6.17&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Capitalization</U>.
Schedule 3 hereto contains a true, complete and correct list of  all issued and
outstanding shares of capital stock of all Subsidiaries of Aames  Financial Corporation
and the record owner thereof.</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6.18&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Hedges</U>.
As of the Effective Date, the Borrowers have not assigned, pledged,  granted a security
interest in or lien on or otherwise encumbered any of its  rights, title or interest in
and to any Interest Rate Protection Agreement,  other than in favor of the Lender.</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6.19&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Regulatory
Status</U>. No Borrower is a &#147;bank holding company&#148; or a direct  or indirect
subsidiary of a &#147;bank holding company&#148; as defined in the  Bank Holding Company
Act of 1956, as amended, and Regulation Y thereunder of the  Board of Governors of the
Federal Reserve System.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Section
7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Covenants of the Borrowers</U>. Each Borrower
covenants and agrees with the  Lender that, so long as any Loan is outstanding and until
payment in full of all  Secured Obligations:</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7.01&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Financial
Statements</U>. Aames Capital shall deliver to the Lender:</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; as
soon as available and in any event within thirty (30) days after the end of each
calendar month other than the last month of any fiscal quarter, and within  forty-five
(45) days after the end of each of the first three quarterly fiscal  periods of each
fiscal year, the unaudited consolidated balance sheets of the  Aames Capital and its
consolidated Subsidiaries and the Parent and its  consolidated Subsidiaries, as at the
end of such month and the related unaudited  consolidated statements of income and
retained earnings and of cash flows for  the Aames Capital and its consolidated
Subsidiaries and the Parent and its  consolidated Subsidiaries, for such month and the
portion of the fiscal year  through the end of such month, setting forth in each case in
comparative form  the figures for the previous year, accompanied by a certificate of a
Responsible  Officer of each of Aames Capital and the Parent, which certificate shall
state  that said consolidated financial statements fairly present the consolidated
financial condition and results of operations of Aames Capital and its  consolidated
Subsidiaries or the Parent and its consolidated Subsidiaries, as  applicable, in
accordance with GAAP, consistently applied, as at the end of, and  for, such month
(subject to normal year-end audit adjustments);</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; as
soon as available and in any event within ninety (90) days after the end of each  fiscal
year of Aames Capital and the Parent, the consolidated balance sheets of  Aames Capital
and its consolidated Subsidiaries and the Parent and its  consolidated Subsidiaries, as
at the end of such fiscal year and the related  consolidated statements of income and
retained earnings and of cash flows for  Aames Capital and its consolidated Subsidiaries
and the Parent and its  consolidated Subsidiaries, for such year, setting forth in each
case in  comparative form the figures for the previous year, accompanied by an opinion
thereon of independent certified public accountants of recognized national  standing,
which opinion shall not be qualified as to scope of audit or going  concern and shall
state that said consolidated financial statements fairly  present the consolidated
financial condition and results of operations of Aames  Capital and its consolidated
Subsidiaries or the Parent and its consolidated  Subsidiaries, as applicable, as at the
end of, and for, such fiscal year in  accordance with GAAP, and a certificate of such
accountants stating that, in  making the examination necessary for their opinion, they
obtained no knowledge,  except as specifically stated, of any Default or Event of Default;</FONT></FONT> </P>


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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; from
time to time such other information regarding the financial condition,  operations, or
business of the Borrowers or the Parent as the Lender may  reasonably request; and</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; as
soon as reasonably possible, and in any event within thirty (30) days after a
Responsible Officer of any Borrower or the Parent knows, or with respect to any  Plan or
Multiemployer Plan to which any Borrower or any of its Subsidiaries or  the Parent or any
of its Subsidiaries makes direct contributions, has reason to  believe, that any of the
events or conditions specified below with respect to  any Plan or Multiemployer Plan has
occurred or exists, a statement signed by a  senior financial officer of the Borrowers or
the Parent, as applicable, setting  forth details respecting such event or condition and
the action, if any, that  the Borrowers or any ERISA Affiliate or the Parent or its ERISA
Affiliate  proposes to take with respect thereto (and a copy of any report or notice
required to be filed with or given to PBGC by the Borrowers or an ERISA  Affiliate or the
Parent or an ERISA Affiliate with respect to such event or  condition):</FONT></FONT> </P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(i)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; any
reportable event, as defined in Section 4043(c) of ERISA and the regulations  issued
thereunder, with respect to a Plan, as to which PBGC has not by  regulation waived the
requirement of Section 4043(a) of ERISA that it be  notified within thirty (30) days of
the occurrence of such event (provided that  a failure to meet the minimum funding
standard of Section 412 of the Code or  Section 302 of ERISA, including without
limitation the failure to make on or  before its due date a required installment under
Section 412(m) of the Code or  Section 302(e) of ERISA, shall be a reportable event
regardless of the issuance  of any waivers in accordance with Section 412(d) of the
Code); and any request  for a waiver under Section 412(d) of the Code for any Plan;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(ii)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; the
distribution under Section 4041(c) of ERISA of a notice of intent to  terminate any Plan
or any action taken by any Borrower or an ERISA Affiliate or  by the Parent or an ERISA
Affiliate to terminate any Plan;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(iii)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; the
institution by PBGC of proceedings under Section 4042 of ERISA for the  termination of,
or the appointment of a trustee to administer, any Plan, or the  receipt by any Borrower
or any ERISA Affiliate or the Parent or any ERISA  Affiliate of a notice from a
Multiemployer Plan that such action has been taken  by PBGC with respect to such
Multiemployer Plan;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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</font></p>
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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(iv)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; the
complete or partial withdrawal from a Multiemployer Plan by any Borrower or  any ERISA
Affiliate or the Parent or any ERISA Affiliate that results in  liability under Section
4201 or 4204 of ERISA (including the obligation to  satisfy secondary liability as a
result of a purchaser default) or the receipt  by any Borrower or any ERISA Affiliate or
the Parent or any ERISA Affiliate of  notice from a Multiemployer Plan that it is in
reorganization or insolvency  pursuant to Section 4241 or 4245 of ERISA or that it
intends to terminate or has  terminated under Section 4041A of ERISA;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(v)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; the
institution of a proceeding by a fiduciary of any Multiemployer Plan against  any
Borrower or any ERISA Affiliate or the Parent or any ERISA Affiliate to  enforce Section
515 of ERISA, which proceeding is not dismissed within 30 days;  and</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="1%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(vi)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="96%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
the adoption of an amendment to any Plan that would result in the loss of
tax-exempt status of the Plan and trust of which such Plan is a part if any
Borrower or an ERISA Affiliate or the Parent or any ERISA Affiliate fails to
provide timely security to such Plan if and as required by the provisions of
Section 401(a)(29) of the Code or Section 307 of ERISA.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
Borrowers and the Parent will furnish to the Lender, at the time it furnishes
each set of financial statements pursuant to paragraphs (a) and (b) above, a
certificate of a Responsible Officer of each Borrower or the Parent, as
applicable, (i) stating that, to the best of such Responsible Officer&#146;s
knowledge, such Borrower or the Parent, as applicable, during such fiscal period
or year has observed or performed all of its covenants and other agreements, and
satisfied every condition, contained in this Loan Agreement and the other Loan
Documents to be observed, performed or satisfied by it, and that such
Responsible Officer has obtained no knowledge of any Default or Event of Default
except as specified in such certificate (and, if any Default or Event of Default
has occurred and is continuing, describing the same in reasonable detail and
describing the action such Borrower or the Parent, as applicable, has taken or
proposes to take with respect thereto) and (ii) showing in detail the
calculations supporting such Responsible Officer&#146;s certification of such
Borrower&#146;s or the Parent&#146;s, as applicable, compliance with the
requirements of Sections 7.14, 7.15, and 7.17.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7.02&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Litigation</U>.
Each Borrower will promptly, and in any event within 10 days after  service of process on
any of the following, give to the Lender notice of all  litigation, actions, suits,
arbitrations, investigations (including, without  limitation, any of the foregoing which
are pending or threatened) or other legal  or arbitrable proceedings affecting any
Borrowers or any of its Subsidiaries or  affecting any of the Property of any of them
before any Governmental Authority  that (i) questions or challenges the validity or
enforceability of any of the  Loan Documents or any action to be taken in connection with
the transactions  contemplated hereby, (ii) makes a claim or claims in an aggregate
amount greater  than $3,000,000, (iii) which, individually or in the aggregate, if
adversely  determined, could be reasonably likely to have a Material Adverse Effect, or
(iii) requires filing with the Securities and Exchange Commission in accordance  with the
1934 Act and any rules thereunder.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7.03&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Existence,
etc</U>. Each Borrower will:</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; preserve
and maintain its legal existence and all of its material rights,  privileges, licenses
and franchises (provided that nothing in this Section  7.03(a) shall prohibit any
transaction expressly permitted under Section 7.04  hereof);</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; comply
with the requirements of all applicable laws, rules, regulations and  orders of
Governmental Authorities (including, without limitation, all  Prescribed Laws,
environmental laws, all laws with respect to unfair and  deceptive lending practices and
predatory lending practices) if failure to  comply with such requirements would be
reasonably likely (either individually or  in the aggregate) to have a Material Adverse
Effect;</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; keep
adequate records and books of account, in which complete entries will be  made in
accordance with GAAP consistently applied;</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; not
move its chief executive office from the address referred to in Section 6.12  or change
its jurisdiction of organization from the jurisdiction referred to in  Section 6.12
unless it shall have provided the Lender thirty (30) days&#146; prior written notice of
such change;</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; pay
and discharge all taxes, assessments and governmental charges or levies  imposed on it or
on its income or profits or on any of its Property prior to the  date on which penalties
attach thereto, except for any such tax, assessment,  charge or levy the payment of which
is being contested in good faith and by  proper proceedings and against which adequate
reserves are being maintained; and</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; permit
representatives of the Lender, during normal business hours, to examine,  copy and make
extracts from its books and records, to inspect any of its  Properties, and to discuss
its business and affairs with its officers, all to  the extent reasonably requested by
the Lender.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7.04&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Prohibition
of Fundamental Changes</U>. No Borrower shall enter into any transaction  of merger or
consolidation or amalgamation, or liquidate, wind up or dissolve  itself (or suffer any
liquidation, winding up or dissolution) or sell all or  substantially all of its assets;
<U>provided</U>, that a Borrower may merge or  consolidate with (a) any wholly owned subsidiary
of such Borrower, or (b) any  other Person if such Borrower is the surviving corporation;
and <U>provided  further</U>, that if after giving effect thereto, no Default would exist
hereunder.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7.05&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Borrowing
Base Deficiency</U>. If at any time there exists a Borrowing Base  Deficiency the
Borrowers shall cure same in accordance with Section 2.06 hereof.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7.06&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Notices</U>.
The Borrowers shall give notice to the Lender:</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; promptly
upon receipt of notice or knowledge of the occurrence of any Default or  Event of Default;</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; with
respect to any Mortgage Loan pledged to the Lender hereunder, a weekly  report delivered
on each date on which prepayments are to be remitted to the  Lender pursuant to Section
7.20 hereof, with respect to the preceding week,  detailing any principal prepayments in
full of any pledged Mortgage Loans  received during such preceding week;</FONT></FONT> </P>


<p align=center>
<font size=2>33
</font></p>
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<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; with
respect to any Mortgage Loan pledged to the Lender hereunder, promptly upon  receipt of
notice or knowledge that the underlying Mortgaged Property has been  damaged by waste,
fire, earthquake or earth movement, windstorm, flood, tornado  or other casualty, or
otherwise damaged so as to materially and adversely affect  the Collateral Value of such
pledged Mortgage Loan;</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; promptly
upon receipt of notice or knowledge of (i) any default (other than a  payment default)
related to any Collateral, (ii) any Lien or security interest  (other than security
interests created hereby or by the other Loan Documents)  on, or claim asserted against,
any of the Collateral or (iii)&nbsp;any event or  change in circumstances which could
reasonably be expected to have a Material  Adverse Effect;</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; via
Electronic Transmission with respect to any Mortgage Loan pledged to the  Lender
hereunder, within two (2) days upon receipt of notice that such Mortgage  Loan has been
rejected for purchase by a buyer of mortgage loans (the  &#147;Prospective Buyer&#148;)
for any reason, which notice shall include (i)  the reason for rejection by such buyer
and (ii) the LTV based upon an appraisal  obtained by the Prospective Buyer (in the event
that such LTV is greater than  95%);</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; promptly
upon any material and adverse change in the market value of all of the  Borrowers&#146; assets
taken as a whole;</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(g)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; promptly
upon notice or knowledge of the occurrence of any event (other than a  Reportable Event)
described in Section 8(n) hereof without regard to its  materiality; and</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(h)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; promptly
upon notice or knowledge of the occurrence of any material Reportable  Event.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Each
notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer of each Borrower setting forth details of the occurrence
referred to therein and stating what action such Borrower has taken or proposes
to take with respect thereto.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7.07&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Hedging</U>.
Each Borrower shall deliver to the Lender monthly a written summary of  the notional
amount of all outstanding Interest Rate Protection Agreements.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7.08&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Reports</U>.
The Borrowers shall provide the Lender with a quarterly report, which  report shall
include, among other items, a summary of the Borrowers&#146; delinquency and loss
experience with respect to mortgage loans serviced by such  Borrower, any Servicer or any
designee of either, plus any such additional  reports as the Lender may reasonably
request with respect to the Borrowers&#146; or any Servicer&#146;s servicing portfolio or
pending originations of mortgage  loans.</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7.09&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Underwriting
Guidelines</U>. (a) Each Borrower shall provide to the Lender a copy of  any material
changes to the Underwriting Guidelines prior to the effectiveness  of any such change.
The Lender shall use commercially reasonable efforts to  notify the Borrowers within
seven (7) Business Days following the Lender&#146;s  receipt of such changes if such
changes are acceptable. If such changes are not  acceptable to the Lender, in its sole
discretion, any Mortgage Loan which is  originated in accordance with the Underwriting
Guidelines as so changed shall  not constitute an Eligible Mortgage Loan.</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Each
Borrower shall originate Mortgage Loans in a manner which is consistent  with sound
underwriting and appraisal practices, and in compliance with  applicable federal and
state consumer protection laws including, without  limitation, all laws with respect to
unfair or deceptive practices and all laws  relating to predatory lending practices.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7.10&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Transactions
with Affiliates</U>. No Borrower will enter into any transaction,  including without
limitation any purchase, sale, lease or exchange of property  or the rendering of any
service, with any Affiliate unless such transaction is  (a) otherwise permitted under
this Loan Agreement, (b) in the ordinary course of  such Borrower&#146;s business and (c)
upon fair and reasonable terms no less  favorable to such Borrower than it would obtain
in a comparable arm&#146;s  length transaction with a Person which is not an Affiliate,
or make a payment  that is not otherwise permitted by this Section 7.10 to any Affiliate.
In no  event shall any Borrower pledge to the Lender hereunder any Mortgage Loan
acquired by such Borrower from an Affiliate of such Borrower other than a party  to this
Agreement.</FONT></FONT> </P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7.11&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Limitation on Liens</U>. The Borrowers will defend the Collateral against, and will
take such other action as is necessary to remove, any Lien, security interest or
claim on or to the Collateral, other than the security interests created under
this Loan Agreement, and the Borrowers will defend the right, title and interest
of the Lenders in and to any of the Collateral against the claims and demands of
all persons whomsoever.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7.12&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Limitation on Guarantees</U>. No Borrower shall create, incur, assume or suffer to
exist any additional Guarantee at any time when, after giving effect to such
Guarantee, such Borrower shall have defaulted in any of its obligations under
Sections 7.14, 7.15 or 7.17 hereof.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7.13&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Limitation on Distributions</U>. After the occurrence and during the continuation of
any Default, no Borrower shall make any payment on account of, or set apart
assets for, a sinking or other analogous fund for the purchase, redemption,
defeasance, retirement or other acquisition of any equity or partnership
interest of such Borrower, whether now or hereafter outstanding, or make any
other distribution in respect of any of the foregoing or to any shareholder or
equity owner of such Borrower, either directly or indirectly, whether in cash or
property or in obligations of such Borrower or any of such Borrower&#146;s
consolidated Subsidiaries.</FONT></FONT> </P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7.14&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Maintenance of Tangible Net Worth</U>. Aames Capital shall not permit Tangible Net
Worth at any time to be less than $160,000,000.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7.15&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Maintenance of Ratio of Total Indebtedness to Tangible Net Worth</U>. Aames Capital
shall not permit the ratio of Total Indebtedness to Tangible Net Worth at any
time to be greater than 5.50 to 1.00.</FONT></FONT> </P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7.16&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Servicer; Servicing Tape</U>. The Borrowers shall provide to the Lender on the fifth
(5th) Business Day of each month a computer readable file containing servicing
information as of the end of the preceding calendar month, including without
limitation those fields listed on <U>Schedule 4</U> hereto or otherwise specified by
the Lender from time to time, on a loan-by-loan basis and in the aggregate, with
respect to the Mortgage Loans serviced hereunder by the Borrowers or any
Servicer; <U>provided</U>, that in the case of any fields requested by the Lender other
than those listed on Schedule 4 hereto, the Borrowers shall use reasonable
efforts to deliver such data in computer readable form. The Borrowers shall not
cause the Mortgage Loans to be serviced by any servicer other than Aames Funding
Corporation or another servicer expressly approved in writing by the Lender.</FONT></FONT> </P>


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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7.17&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Committed
Warehouse Facilities</U>. Aames Capital shall at all times maintain  committed revolving
facilities, other than Lender&#146;s committed revolving  facility, greater than or equal
to $600,000,000.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7.18&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Required
Filings</U>. Each Borrower shall promptly make available to the Lender  copies of all
documents which such Borrower or any Affiliate of such Borrower is  required to file with
the Securities and Exchange Commission in accordance with  the 1934 Act or any rules
thereunder.</FONT></FONT> </P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7.19&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>No Adverse Selection</U>. No Borrower has selected the Collateral in a manner so as
to adversely affect the Lender&#146;s interests.</FONT></FONT> </P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7.20&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Remittance of Prepayments</U>. The Borrowers shall remit, with sufficient detail to
enable the Lender to appropriately identify the Mortgage Loan to which any
amount remitted applies, to the Lender on each Thursday (or the next Business
Day if such Thursday is not a Business Day) all principal prepayments in full
(but not in part) that the Borrowers have received during the previous week that
are not paid directly to the Lender. All principal amounts so remitted shall be
applied to the prepayment of the Loans pursuant to Section 2.06(b) hereof.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Section
8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U> Events of Default</U>. Each of the  following
events  shall  constitute  an event of default (an &quot;<U>Event of Default</U>&quot;)
hereunder:</FONT></FONT> </P>


<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; the
Borrowers shall default in the payment of any principal of or interest on  any Loan when
due (whether at stated maturity, upon acceleration or at mandatory  prepayment); or</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; the
Borrowers shall default in the payment of any other amount payable by it  hereunder or
under any other Loan Document after notification by the Lender of  such default, and such
default shall have continued unremedied for five (5)  Business Days; or</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; any
representation, warranty or certification made or deemed made herein or in  any other
Loan Document by any Borrower or any certificate furnished to the  Lender pursuant to the
provisions hereof or thereof shall prove to have been  false or misleading in any
material respect as of the time made or furnished  (other than the representations and
warranties set forth in <U>Schedule 1</U>, which  shall be considered solely for the purpose of
determining the Collateral Value  of the Mortgage Loans; unless (i) such Borrower shall
have made any such  representations and warranties with knowledge that they were
materially false or  misleading at the time made or (ii) any such representations and
warranties have  been determined by the Lender in its sole discretion to be materially
false or  misleading on a regular basis); or</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; any
Borrower shall fail to comply with the requirements of Section 7.03(a),  Section 7.04,
Section 7.05, Section 7.06(a), or Sections 7.09 through 7.20  hereof (excluding Section
7.15 hereof); or any Borrower shall otherwise fail to  comply with the requirements of
Section 7.15 hereof and such default shall  continue unremedied for a period of one (1)
Business Day; or any Borrower shall  otherwise fail to comply with the requirements of
Section 7.03 hereof and such  default shall continue unremedied for a period of five (5)
Business Days; or any  Borrower or the Parent shall fail to observe or perform any other
covenant or  agreement contained in this Loan Agreement or any other Loan Document and
such  failure to observe or perform shall continue unremedied for a period of seven  (7)
Business Days; or</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; a
final judgment or judgments for the payment of money in excess of $1,000,000 in  the
aggregate shall be rendered against any Borrower or any of its Affiliates by  one or more
courts, administrative tribunals or other bodies having jurisdiction  and the same shall
not be satisfied, discharged (or provision shall not be made  for such discharge) or
bonded, or a stay of execution thereof shall not be  procured, within thirty (30) days
from the date of entry thereof, and no  Borrower or any such Affiliate shall, within said
period of thirty (30) days, or  such longer period during which execution of the same
shall have been stayed or  bonded, appeal therefrom and cause the execution thereof to be
stayed during  such appeal; or</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; any
Borrower shall admit in writing its inability to pay its debts as such debts  become due;
or</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(g)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; any
Borrower or any of its Affiliates shall (i) apply for or consent to the  appointment of,
or the taking of possession by, a receiver, custodian, trustee,  examiner or liquidator
or the like of itself or of all or a substantial part of  its property, (ii) make a
general assignment for the benefit of its creditors,  (iii) commence a voluntary case
under the Bankruptcy Code, (iv) file a petition  seeking to take advantage of any other
law relating to bankruptcy, insolvency,  reorganization, liquidation, dissolution,
arrangement or winding-up, or  composition or readjustment of debts, (v) fail to
controvert in a timely and  appropriate manner, or acquiesce in writing to, any petition
filed against it in  an involuntary case under the Bankruptcy Code or (vi) take any
corporate or  other action for the purpose of effecting any of the foregoing; or</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(h)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; a
proceeding or case shall be commenced, without the application or consent of any
Borrower or any of its Affiliates, in any court of competent jurisdiction,  seeking (i)
its reorganization, liquidation, dissolution, arrangement or  winding-up, or the
composition or readjustment of its debts, (ii) the  appointment of, or the taking of
possession by, a receiver, custodian, trustee,  examiner, liquidator or the like of any
Borrower or any such Affiliate or of all  or any substantial part of its property, or
(iii) similar relief in respect of  any Borrower or any such Affiliate under any law
relating to bankruptcy,  insolvency, reorganization, liquidation, dissolution,
arrangement or winding-up,  or composition or adjustment of debts, and such proceeding or
case shall  continue undismissed, or an order, judgment or decree approving or ordering
any  of the foregoing shall be entered and continue unstayed and in effect, for a  period
of 30 or more days; or an order for relief against any Borrower or any  such Affiliate
shall be entered in an involuntary case under the Bankruptcy  Code; or</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
Custodial Agreement (without provisions for a replacement custodial  agreement acceptable
to the Lender) or any Loan Document shall for whatever  reason be terminated or cease to
be in full force and effect, or the  enforceability thereof shall be contested by any
Borrower; or</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(j)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; any
Borrower shall grant, or suffer to exist, any Lien on any Collateral except  the Liens
contemplated hereby; or the Liens contemplated hereby shall cease to  be first priority
perfected Liens on the Collateral in favor of the Lender or  shall be Liens in favor of
any Person other than the Lender; or</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(k)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; any
Borrower or any of such Borrower&#146;s Affiliates shall be in default under  any note,
indenture, loan agreement, guaranty, swap agreement or any other  contract to which it is
a party, including, without limitation, any MS  Indebtedness, which has an aggregate face
or principal amount of $1,000,000 or  more, which default (i) involves the failure to pay
a matured obligation, or  (ii) permits the acceleration of the maturity of obligations by
any other party  to or beneficiary of such note, indenture, loan agreement, guaranty,
swap  agreement or other contract; or</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(l)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; any
materially adverse change in the Property, business, financial condition or  prospects of
any Borrower or any of its Affiliates shall occur, in each case as  determined by the
Lender in its sole discretion, or any other condition shall  exist which, in the Lender&#146;s
sole discretion, constitutes a material  impairment of any Borrower&#146;s ability to
perform its obligations under this  Loan Agreement, the Note or any other Loan Document;
or</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(m)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; the
discovery by the Lender of a condition or event which existed at or prior to  the
execution hereof and which the Lender, in its sole discretion, determines  materially and
adversely affects: (i) the condition (financial or otherwise) of  any Borrower, its
Subsidiaries or Affiliates; or (ii) the ability of any  Borrower to fulfill its
respective obligations under this Loan Agreement; or</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(n)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i)
The Parent shall permit Tangible Net Worth on a consolidated basis on any  given day to
be less than $34,000,000, thereafter;</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Hang Roman In 2" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(ii)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; The
Parent shall permit the Leverage Ratio at any time to be greater than 12:00  to 1:00;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(iii)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; The
Parent shall permit Net Income before tax, generated over consecutive six  month period,
measured on the last day of each fiscal quarter, to be less than  $1.00; and</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman In 2" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(iv)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; The
Parent shall, as of the end of any calendar month, have unencumbered Cash  Equivalents,
cash and available borrowing capacity on unencumbered assets that  could be drawn against
(taking into account required haircuts) under committed  warehouse or working capital
facilities, on a consolidated basis in an amount  less than $17,500,000.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Section
9.  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Remedies Upon Default</U>.</FONT></FONT> </P>


<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; An
Event of Default shall be deemed to be continuing unless expressly waived by the  Lender
in writing. Upon the occurrence of one or more Events of Default  hereunder, the Lender&#146;s
obligation to make additional Loans to the  Borrowers shall automatically terminate
without further action by any Person.  Upon the occurrence of one or more Events of
Default other than those referred  to in Section 8(g) or (h), the Lender may immediately
declare the principal  amount of the Loans then outstanding under the Note to be
immediately due and  payable, together with all interest thereon and fees and expenses
accruing under  this Loan Agreement. Upon the occurrence of an Event of Default referred
to in  Sections 8(g) or (h), such amounts shall immediately and automatically become  due
and payable without any further action by any Person. Upon such declaration  or such
automatic acceleration, the balance then outstanding on the Note shall  become
immediately due and payable, without presentment, demand, protest or  other formalities
of any kind, all of which are hereby expressly waived by the  Borrowers. (b) Upon the
occurrence of one or more Events of Default, the Lender  shall have the right to obtain
physical possession of the Servicing Records and  all other files of the Borrower
relating to the Collateral and all documents  relating to the Collateral which are then
or may thereafter come in to the  possession of the Borrowers or any third party acting
for the Borrowers and the  Borrowers shall deliver to the Lender such assignments as the
Lender shall  request. The Lender shall be entitled to specific performance of all
agreements  of the Borrowers contained in this Loan Agreement.</FONT></FONT> </P>

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</font></p>
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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Section
10. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>No Duty of Lender</U>. The powers conferred on the
Lender hereunder are solely  to protect the Lender&#146;s interests in the Collateral and
shall not impose  any duty upon it to exercise any such powers. The Lender shall be
accountable  only for amounts that it actually receives as a result of the exercise of
such  powers, and neither it nor any of its officers, directors, employees or agents
shall be responsible to the Borrowers for any act or failure to act hereunder,  except
for its or their own gross negligence or willful misconduct.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Section
11.  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Miscellaneous</U>.</FONT></FONT> </P>


<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.01&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Waiver</U>.
No failure on the part of the Lender to exercise and no delay in  exercising, and no
course of dealing with respect to, any right, power or  privilege under any Loan Document
shall operate as a waiver thereof, nor shall  any single or partial exercise of any
right, power or privilege under any Loan  Document preclude any other or further exercise
thereof or the exercise of any  other right, power or privilege. The remedies provided
herein are cumulative and  not exclusive of any remedies provided by law.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.02&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Notices</U>.
Except as otherwise expressly permitted by this Loan Agreement, all  notices, requests
and other communications provided for herein and under the  Custodial Agreement
(including without limitation any modifications of, or  waivers, requests or consents
under, this Loan Agreement) shall be given or made  in writing (including without
limitation by telex or telecopy) delivered to the  intended recipient at the &#147;Address
for Notices&#148; specified below its  name on the signature pages hereof or thereof);
or, as to any party, at such  other address as shall be designated by such party in a
written notice to each  other party provided, that a copy of all notices given under
Section 7.01 shall  simultaneously be delivered to Credit Department, Morgan Stanley, 750
7th  Avenue, 11th Floor, New York, New York 10029; Attention: Christine Egan. Except  as
otherwise provided in this Loan Agreement and except for notices given under  Section 2
(which shall be effective only on receipt), all such communications  shall be deemed to
have been duly given when transmitted by telex or telecopy or  personally delivered or,
in the case of a mailed notice, upon receipt, in each  case given or addressed as
aforesaid.</FONT></FONT> </P>


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<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.03&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Indemnification
and Expenses</U>.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Each
Borrower agrees to hold the Lender, and its Affiliates and their officers,  directors,
employees, agents and advisors (each an &#147;Indemnified  Party&#148;) harmless from and
indemnify any Indemnified Party against all  liabilities, losses, damages, judgments,
costs and expenses of any kind which  may be imposed on, incurred by or assessed against
such Indemnified Party  (collectively, the &#147;Costs&#148;) relating to or arising out
of this Loan  Agreement, the Note, any other Loan Document or any transaction
contemplated  hereby or thereby, or any amendment, supplement or modification of, or any
waiver or consent under or in respect of, this Loan Agreement, the Note, any  other Loan
Document or any transaction contemplated hereby or thereby, that, in  each case, results
from anything other than any Indemnified Party&#146;s gross  negligence or willful
misconduct. Without limiting the generality of the  foregoing, the Borrowers agree to
hold any Indemnified Party harmless from and  indemnify such Indemnified Party against
all Costs with respect to all Mortgage  Loans relating to or arising out of any violation
or alleged violation of any  environmental law, rule or regulation or any consumer credit
laws, including  without limitation, laws with respect to unfair or deceptive lending
practices,  and predatory lending practices, the Truth in Lending Act and/or the Real
Estate  Settlement Procedures Act, that, in each case, results from anything other than
such Indemnified Party&#146;s gross negligence or willful misconduct. In any  suit,
proceeding or action brought by an Indemnified Party in connection with  any Mortgage
Loan for any sum owing thereunder, or to enforce any provisions of  any Mortgage Loan,
each Borrower will save, indemnify and hold such Indemnified  Party harmless from and
against all expense, loss or damage suffered by reason  of any defense, set-off,
counterclaim, recoupment or reduction or liability  whatsoever of the account debtor or
obligor thereunder, arising out of a breach  by any Borrower of any obligation thereunder
or arising out of any other  agreement, indebtedness or liability at any time owing to or
in favor of such  account debtor or obligor or its successors from any Borrower. Each
Borrower  also agrees to reimburse an Indemnified Party as and when billed by such
Indemnified Party for all such Indemnified Party&#146;s costs and expenses  incurred in
connection with the enforcement or the preservation of such  Indemnified Party&#146;s
rights under this Loan Agreement, the Note, any other  Loan Document or any transaction
contemplated hereby or thereby, including  without limitation the reasonable fees and
disbursements of its counsel. Each  Borrower hereby acknowledges that, notwithstanding
the fact that the Note is  secured by the Collateral, the obligation of the Borrowers
under the Note is a  recourse obligation of the Borrowers.</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Borrowers agree, jointly and severally, to pay as and when billed by the  Lender all of
the out-of-pocket costs and expenses incurred by the Lender in  connection with the
development, preparation and execution of, and any  amendment, supplement or modification
to, this Loan Agreement, the Note, any  other Loan Document or any other documents
prepared in connection herewith or  therewith. The Borrowers agree, jointly and
severally, to pay as and when billed  by the Lender all of the out-of-pocket costs and
expenses incurred in connection  with the consummation and administration of the
transactions contemplated hereby  and thereby including without limitation (i) all the
reasonable fees,  disbursements and expenses of counsel to the Lender (ii) all the due
diligence,  inspection, testing and review costs and expenses incurred by the Lender with
respect to Collateral under this Loan Agreement, including, but not limited to,  those
costs and expenses incurred by the Lender pursuant to Sections 11.03(a),  11.15 and 11.16
hereof and (iii) all reasonable costs and expenses incurred by  the Lender in connection
with the underwriting or re-underwriting of any  Mortgage Loan from time to time.</FONT></FONT> </P>

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<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.04&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Amendments</U>.
Except as otherwise expressly provided in this Loan Agreement, any  provision of this
Loan Agreement may be modified or supplemented only by an  instrument in writing signed
by the Borrowers and the Lender and any provision  of this Loan Agreement may be waived
by the Lender.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.05&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Assignments
and Participations</U>.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Lender may assign to one or more Affiliates of the Lender all or a portion  of its rights
and obligations under this Loan Agreement; <U>provided</U>, <U>however</U>, that  the parties to each
such assignment shall execute and deliver an Assignment and  Acceptance substantially in
the form of <U>Exhibit&nbsp;H</U>, with appropriate  completions (an &#147;<U>Assignment and
Acceptance</U>&#148;), along with replacement  Notes executed and delivered by the Borrower.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Upon
such execution and delivery, from and after the effective date specified in  such
Assignment and Acceptance, (i) the assignee thereunder shall be a party  hereto and, to
the extent that rights and obligations hereunder have been  assigned to it pursuant to
such Assignment and Acceptance, have the rights and  obligations of the Lender hereunder,
and (ii) the Lender assignor thereunder  shall, to the extent that any rights and
obligations hereunder have been  assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights  and be released from its obligations under this Loan
Agreement.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Lender may sell participations to one or more Persons in or to all or a  portion of its
rights and obligations under this Loan Agreement; provided,  however, that (i) the Lender&#146;s
obligations under this Loan Agreement shall  remain unchanged, (ii) the Lender shall
remain solely responsible to the other  parties hereto for the performance of such
obligations, (iii) the Lender shall  remain the holder of any such Note for all purposes
of this Loan Agreement, and  (iv) the Borrower shall continue to deal solely and directly
with the Lender in  connection with the Lender&#146;s rights and obligations under and in
respect of  this Loan Agreement and the other Loan Documents. Notwithstanding the terms
of  Section 3.03, each participant of the Lender shall be entitled to the additional
compensation and other rights and protections afforded the Lender under Section  3.03 to
the same extent as the Lender would have been entitled to receive them  with respect to
the participation sold to such participant.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Lender may, in connection with any assignment or participation or proposed  assignment or
participation pursuant to this Section 11.05, disclose to the  assignee or participant or
proposed assignee or participant, as the case may be,  any information relating to the
Borrower or any of its Subsidiaries or to any  aspect of the Loans that has been
furnished to the Lender by or on behalf of any  Borrower or any of its Subsidiaries.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Lender may at any time create a security interest in all or any portion of  its rights
under this Loan Agreement (including, without limitation, the Loans  owing to it and the
Note held by it) in favor of any Federal Reserve Bank in  accordance with Regulation A of
the Board of Governors of the Federal Reserve  System and any Operating Circular issued
by such Federal Reserve Bank. No such  assignment shall release the assigning Lender from
its obligations hereunder.</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Notwithstanding
the foregoing, upon the occurrence and during the continuance of  an Event of Default,
the Lender may assign all or any portion of its rights and  obligations hereunder to any
Person, provided that upon the effective date of  such assignment such Person shall
become a party hereto and a Lender hereunder  and shall be (i) entitled to all the
rights, benefits and privileges accorded  Lender under the Loan Documents, and (ii)
subject to all the duties and  obligations of the Lender under the Loan Documents.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.06&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Successors
and Assigns</U>. This Loan Agreement shall be binding upon and inure to  the benefit of
the parties hereto and their respective successors and permitted  assigns.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.07&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Survival</U>.
The obligations of the Borrowers under Sections 3.03 and 11.03 hereof  shall survive the
repayment of the Loans and the termination of this Loan  Agreement. In addition, each
representation and warranty made or deemed to be  made by a request for a borrowing,
herein or pursuant hereto shall survive the  making of such representation and warranty,
and the Lender shall not be deemed  to have waived, by reason of making any Loan, any
Default that may arise because  any such representation or warranty shall have proved to
be false or misleading,  notwithstanding that the Lender may have had notice or knowledge
or reason to  believe that such representation or warranty was false or misleading at the
time  such Loan was made.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.08&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Captions</U>.
The table of contents and captions and section headings appearing  herein are included
solely for convenience of reference and are not intended to  affect the interpretation of
any provision of this Loan Agreement.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.09&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Counterparts</U>.
This Loan Agreement may be executed in any number of counterparts,  all of which taken
together shall constitute one and the same instrument, and  any of the parties hereto may
execute this Loan Agreement by signing any such  counterpart.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.10&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Loan
Agreement Constitutes Security Agreement; Governing Law</U>. This Loan  Agreement shall
be governed by New York law, and shall constitute a security  agreement within the
meaning of the Uniform Commercial Code.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.11&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Submission
To Jurisdiction; Waivers</U>. Each Borrower hereby irrevocably and  unconditionally:</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(A)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SUBMITS
FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING  TO THIS LOAN
AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS, OR FOR  RECOGNITION AND ENFORCEMENT OF
ANY JUDGMENT IN RESPECT THEREOF, TO THE  NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS
OF THE STATE OF NEW YORK, THE  FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW  YORK, AND APPELLATE COURTS FROM ANY THEREOF;</FONT></FONT> </P>


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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(B)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; CONSENTS
THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND,  TO THE EXTENT
PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT MAY NOW OR  HEREAFTER HAVE TO THE VENUE OF
ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT  OR THAT SUCH ACTION OR PROCEEDING WAS
BROUGHT IN AN INCONVENIENT COURT AND  AGREES NOT TO PLEAD OR CLAIM THE SAME;</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(C)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; AGREES
THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED  BY MAILING A
COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY  SIMILAR FORM OF
MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH UNDER ITS  SIGNATURE BELOW OR AT SUCH
OTHER ADDRESS OF WHICH THE LENDER SHALL HAVE BEEN  NOTIFIED; AND</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(D)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; AGREES
THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS  IN ANY OTHER
MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY  OTHER JURISDICTION.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.12&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>WAIVER
OF JURY TRIAL</U>. <b>EACH BORROWER AND THE LENDER HEREBY IRREVOCABLY WAIVE, TO  THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY  JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS LOAN AGREEMENT,  ANY OTHER LOAN DOCUMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.</b></FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.13&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Acknowledgments</U>.
Each Borrower hereby acknowledges that:</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; it
has been advised by counsel in the negotiation, execution and delivery of this  Loan
Agreement, the Note and the other Loan Documents;</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; the
Lender has no fiduciary relationship to any Borrower, and the relationship  between each
Borrower and the Lender is solely that of debtor and creditor; and</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; no
joint venture exists between the Lender and any Borrower.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.14&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Hypothecation
or Pledge of Loans</U>. The Lender shall have free and unrestricted  use of all
Collateral and nothing in this Loan Agreement shall preclude the  Lender from engaging in
repurchase transactions with the Collateral or otherwise  pledging, repledging,
transferring, hypothecating, or rehypothecating the  Collateral, on terms, and subject to
conditions, within the Lender&#146;s  absolute discretion. Nothing contained in this Loan
Agreement shall obligate the  Lender to segregate any Collateral delivered to the Lender
by the Borrowers.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.15&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Servicing</U>.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Each
Borrower covenants to maintain or cause the servicing of the Mortgage Loans  to be
maintained in conformity with Accepted Servicing Practices in the industry  for the same
type of mortgage loans as the Mortgage Loans and in a manner at  least equal in quality
to the servicing each Borrower provides for mortgage  loans which it owns. In the event
that the preceding language is interpreted as  constituting one or more servicing
contracts, each such servicing contract shall  terminate automatically upon the earliest
of (i) an Event of Default, (ii) the  date on which all the Secured Obligations have been
paid in full or (iii) the  transfer of servicing approved by the Borrowers.</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; If
the Mortgage Loans are serviced by a Borrower, (i) such Borrower agrees that the  Lender
is the collateral assignee of all servicing records, including but not  limited to any
and all servicing agreements, files, documents, records, data  bases, computer files,
copies of computer files, proof of insurance coverage,  insurance policies, appraisals,
other closing documentation, payment history  records, and any other records relating to
or evidencing the servicing of  Mortgage Loans (the &#147;<U>Servicing Records</U>&#148;), and
(ii) such Borrower  grants the Lender a security interest in all servicing fees and
rights relating  to the Mortgage Loans and all Servicing Records to secure the obligation
of each  Borrower or its designee to service in conformity with this Section and any
other obligation of the Borrowers to the Lender. The Borrowers covenants to  safeguard
such Servicing Records and to deliver them promptly to the Lender or  its designee
(including the Custodian) at the Lender&#146;s request.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; If
the Mortgage Loans are serviced by a third party servicer other than Aames  Funding
Corporation (such third party servicer, the &#147;<U>Servicer</U>&#148;), the  Borrowers (i)
shall provide a copy of the servicing agreement to the Lender,  which shall be in form
and substance acceptable to the Lender (the  &#147;<U>Servicing Agreement</U>&#148;), and (ii)
shall provide a Servicer Notice and  Agreement to the Servicer substantially in the form
of Exhibit G hereto (a  &#147;<U>Servicer Notice and Agreement</U>&#148;) and shall cause the
Servicer to  acknowledge and agree to the same, and (iii) hereby irrevocably assigns to
the  Lender and the Lender&#146;s successors and assigns all right, title, interest  of
the Borrowers in, to and under, and the benefits of, any Servicing Agreement  with
respect to the Mortgage Loans. Any successor or assignee of a Servicer  shall be approved
in writing by the Lender and shall acknowledge and agree to a  Servicer Notice and
Agreement prior to such successor&#146;s assumption of  servicing obligations with
respect to the Mortgage Loans.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; If
the Servicer of the Mortgage Loans is a Borrower or the Servicer is an Affiliate  of a
Borrower, such Borrower shall provide to the Lender a letter from the  Borrowers or the
Servicer, as the case may be, to the effect that upon the  occurrence of an Event of
Default, the Lender may terminate any Servicing  Agreement and in any event transfer
servicing to the Lender&#146;s designee, at  no cost or expense to the Lender, it being
agreed that the Borrowers will pay  any and all fees required to terminate the Servicing
Agreement and to effectuate  the transfer of servicing to the designee of the Lender.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; After
the Funding Date, until the pledge of any Mortgage Loan is relinquished by  the
Custodian, the Borrowers will have no right to modify or alter the terms of  such
Mortgage Loan and the Borrowers will have no obligation or right to  repossess such
Mortgage Loan or substitute another Mortgage Loan, except as  provided in the Custodial
Agreement.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In
the event a Borrower or its Affiliate is servicing the Mortgage Loans, such  Borrower
shall permit the Lender to inspect such Borrower&#146;s or its  Affiliate&#146;s
servicing facilities, as the case may be, for the purpose of  satisfying the Lender that
such Borrower or its Affiliate, as the case may be,  has the ability to service the
Mortgage Loans as provided in this Loan  Agreement.</FONT></FONT> </P>


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<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.16&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Periodic
Due Diligence Review</U>. Each Borrower acknowledges that the Lender has  the right to
perform continuing due diligence reviews with respect to the  Mortgage Loans and the
manner in which they were originated, for purposes of  verifying compliance with the
representations, warranties and specifications  made hereunder, or otherwise, and each
Borrower agrees that, unless a Default  has occurred (in which case no notice is
required), upon reasonable (but no less  than one (1) Business Day&#146;s) prior notice
to the Borrowers, the Lender or  its authorized representatives will be permitted during
normal business hours to  examine, inspect, and make copies and extracts of, the Mortgage
Files and any  and all documents, records, agreements, instruments or information
relating to  such Mortgage Loans in the possession or under the control of the Borrowers
and/or the Custodian. The Borrowers also shall make available to the Lender a
knowledgeable financial or accounting officer for the purpose of answering  questions
respecting the Mortgage Files and the Mortgage Loans. Without limiting  the generality of
the foregoing, the Borrowers acknowledge that the Lender may  make Loans to the Borrowers
based solely upon the information provided by the  Borrowers to the Lender in the
Mortgage Loan Data File and the representations,  warranties and covenants contained
herein, and that the Lender, at its option,  has the right at any time to conduct a
partial or complete due diligence review  on some or all of the Mortgage Loans securing
such Loan, including without  limitation ordering new credit reports and new appraisals
on the related  Mortgaged Properties and otherwise re-generating the information used to
originate such Mortgage Loan. The Lender may underwrite such Mortgage Loans  itself or
engage a mutually agreed upon third party underwriter to perform such  underwriting. It
is understood that, in the case of Class C Defaulted Loans,  such underwriting is
expected to occur quarterly with respect to 10-20% of the  Class C Defaulted Loans then
included in the Borrowing Base. The Borrowers agree  to cooperate with the Lender and any
third party underwriter in connection with  such underwriting, including, but not limited
to, providing the Lender and any  third party underwriter with access to any and all
documents, records,  agreements, instruments or information relating to such Mortgage
Loans in the  possession, or under the control, of the Borrowers.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.17&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Set-Off</U>.
In addition to any rights and remedies of the Lender provided by this  Loan Agreement and
by law, the Lender shall have the right, without prior notice  to the Borrowers, any such
notice being expressly waived by the Borrowers to the  extent permitted by applicable
law, upon any amount becoming due and payable by  the Borrowers hereunder (whether at the
stated maturity, by acceleration or  otherwise) to set-off and appropriate and apply
against such amount any and all  deposits (general or special, time or demand,
provisional or final), in any  currency, and any other credits, indebtedness or claims,
in any currency, in  each case whether direct or indirect, absolute or contingent,
matured or  unmatured, at any time held or owing by the Lender or any Affiliate thereof
to  or for the credit or the account of the Borrowers. The Lender agrees promptly to
notify the Borrowers after any such set-off and application made by the Lender;
provided, that the failure to give such notice shall not affect the validity of  such
set-off and application.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.18&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Intent</U>.
The parties recognize that (i) each Loan is a &#147;securities  contract&#148; as that
term is defined in Section 741 of Title 11 of the United  States Code, as amended, and
(ii) each payment and transfer of Collateral  hereunder is a &#147;margin Payment&#148; and/or
a &#147;settlement  payment&#148;, as such terms are defined therein.</FONT></FONT> </P>


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</font></p>
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<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.19&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Joint
and Several Liability</U>. Each Borrower hereby acknowledges and agrees that  such
Borrower shall be jointly and severally liable to the Lender to the maximum  extent
permitted by the applicable law for all representations, warranties,  covenants,
obligations and indemnities of the Borrowers hereunder.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.20&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Treatment
of Certain Information</U>. Notwithstanding anything to the contrary  contained herein or
in any other Loan Document, all Persons may disclose to any  and all Persons, without
limitation of any kind, the federal income tax  treatment of the Loans or any of the
transactions contemplated by this Agreement  or any other Loan Document (collectively,
the &#147;Transactions&#148;), any  fact relevant to understanding the federal tax
treatment of the Transactions and  all materials of any kind (including opinions or other
tax analyses) relating to  such federal income tax treatment.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.21&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Replacement
by Repurchase Agreement</U>. The Borrowers hereby acknowledge and agree  that this Loan
Agreement may at any time and without any further cost to the  Borrowers, in the sole
discretion of the Lender, be replaced by a repurchase  facility with substantially
similar terms as those contained in this Loan  Agreement. The Borrowers hereby agree to
take such action and execute such  documents and instruments as is necessary to
effectuate such conversion.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">[SIGNATURE
PAGES FOLLOW]</FONT></FONT> </P>

<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">IN
WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be duly
executed and delivered as of the day and year first above written.</FONT></FONT> </P>

<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="47%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif"><u><strong>BORROWERS</strong></u></font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="51%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><div align="right"></div>
      <font size="2" face="Times New Roman, Times, serif"><strong> AAMES CAPITAL
      CORPORATION</strong></font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">By:</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">___________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name:</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title:</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif"><u>Address for Notices:</u></font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">350 South Grand Ave</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">43rd Floor</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Los Angeles, CA 90071</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Attention: Jon Van
      Deuren</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chief
      Accounting Officer</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Telecopier No: 323-210-5036</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Telephone No: 323-210-4855</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif"><em>With a copy to:</em></font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">General Counsel</font></td>
  </tr>
</table>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="47%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2">&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="51%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><div align="right"></div>
      <font size="2" face="Times New Roman, Times, serif"><strong> AAMES FUNDING
      CORPORATION </strong></font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">By:</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">___________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name:</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title:</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif"><u>Address for Notices:</u></font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">350 South Grand Ave</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">43rd Floor</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Los Angeles, CA 90071</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Attention: Jon Van
      Deuren</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chief
      Accounting Officer</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Telecopier No: 323-210-5036</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Telephone No: 323-210-4855</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif"><em>With a copy to:</em></font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">General Counsel</font></td>
  </tr>
</table>

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</font></p>
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<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="47%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif"><u><strong>LENDER</strong></u></font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="51%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><div align="right"><font size="2" face="Times New Roman, Times, serif"><strong></strong></font></div>
      <strong><font size="2" face="Times New Roman, Times, serif">MORGAN STANLEY
      MORTGAGE CAPITAL INC.</font></strong></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">By:</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">___________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name:</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title:</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif"><u>Address for Notices:</u></font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">1221 Avenue of the
      Americas, 27th Floor</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">New York, New York
      10020 </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Attention: Andy Neuberger</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Telecopier No: 212-762-9495</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Telephone No: 212-762-6401</font></td>
  </tr>
</table>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="47%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="53%">&nbsp;</td>
  </tr>
</table>

<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>

<p align=center>
<font size=2>48
</font></p>
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<A NAME="A036"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Schedule
1</FONT></FONT></H1>

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<A NAME="A037"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">REPRESENTATIONS
AND WARRANTIES RE: MORTGAGE LOANS</FONT></FONT></H1>

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<A NAME="A038"></A>
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Part
1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Eligible Residential Mortgage Loans</U></FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">As
to each residential Mortgage Loan included in the Borrowing Base on a Funding
Date (and the related Mortgage, Mortgage Note, Assignment of Mortgage and
Mortgaged Property), each Borrower shall be deemed to make the following
representations and warranties to the Lender as of such date and as of each date
the Borrowing Base is determined (certain defined terms used herein and not
otherwise defined in the Loan Agreement appearing in Part II to this Schedule
1): </FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Mortgage Loans as Described</U>. The information set
forth in the Mortgage  Loan Schedule with respect to the Mortgage Loan is complete, true
and correct in  all material respects.</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<U>Payments
Current</U>. Except in the case of a Defaulted Loan and to the extent  contemplated by the
definition of the applicable Class of Defaulted Loan, not  more than one payment required
under the Mortgage Loan is delinquent. Except in  the case of a Defaulted Loan, the first
Monthly Payment shall be made, or shall  have been made, with respect to the Mortgage
Loan on its Due Date or within the  grace period, all in accordance with the terms of the
related Mortgage Note. </FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>No
Outstanding Charges</U>. Except in the case of a Defaulted  Loan, there are no  defaults
in complying with the terms of the Mortgage securing the  Mortgage Loan,  and all taxes,
governmental assessments, insurance premiums, water, sewer  and  municipal charges,
leasehold payments or ground rents which previously became  due  and owing have been
paid, or an escrow of funds has been established in an  amount  sufficient to pay for
every such item which remains unpaid and which has  been assessed  but is not yet due and
payable. Neither any Borrower nor the  originator from which such  Borrower acquired the
Mortgage Loan has advanced  funds, or induced, solicited or  knowingly received any
advance of funds by a  party other than the Mortgagor, directly or  indirectly, for the
payment of any  amount required under the Mortgage Loan, except for  interest accruing
from the  date of the Mortgage Note or date of disbursement of the  proceeds of the
Mortgage Loan, whichever is earlier, to the day which precedes by one  month the  Due
Date of the first installment of principal and interest thereunder.</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Original
<U>Terms Unmodified</U>. The terms of the Mortgage Note and Mortgage have not  been impaired,
waived, altered or modified in any respect, from the date of  origination; except by a
written instrument which has been recorded, if  necessary to protect the interests of the
Lender, and which has been delivered  to the Custodian and the terms of which are
reflected in the Mortgage Loan  Schedule. The substance of any such waiver, alteration or
modification has been  approved by the title insurer, to the extent required, and its
terms are  reflected on the Mortgage Loan Schedule. No Mortgagor in respect of the
Mortgage  Loan has been released, in whole or in part, except in connection with an
assumption agreement approved by the title insurer, to the extent required by  such
policy, and which assumption agreement is part of the Mortgage File  delivered to the
Custodian and the terms of which are reflected in the Mortgage  Loan Schedule.</FONT></FONT> </P>

<p align=center>
<font size=2>Schedule 1-1
</font></p>
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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>No
Defenses</U>. The Mortgage Loan is not subject to any right of rescission, set-off,
counterclaim or defense, including without limitation the defense of usury, nor  will the
operation of any of the terms of the Mortgage Note or the Mortgage, or  the exercise of
any right thereunder, render either the Mortgage Note or the  Mortgage unenforceable in
whole or in part and no such right of rescission,  set-off, counterclaim or defense has
been asserted with respect thereto, and,  except as permitted by the Underwriting
Guidelines, no Mortgagor in respect of  the Mortgage Loan was a debtor in any state or
Federal bankruptcy or insolvency  proceeding at the time the Mortgage Loan was
originated. No Borrower has any  knowledge nor has any Borrower received any notice that
any Mortgagor in respect  of the Mortgage Loan is a debtor in any state or federal
bankruptcy or  insolvency proceeding.</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Hazard
Insurance</U>. The Mortgaged Property is insured by a fire and extended  perils insurance
policy, issued by a generally acceptable insurance carrier, and  such other hazards as
are customary in the area where the Mortgaged Property is  located, and to the extent
required by the Borrowers as of the date of  origination consistent with the Underwriting
Guidelines, against earthquake and  other risks insured against by Persons operating like
properties in the locality  of the Mortgaged Property, in an amount not less than the
greatest of  (i)&nbsp;100% of the replacement cost of all improvements to the Mortgaged
Property, (ii)&nbsp;the outstanding principal balance of the Mortgage Loan, or  (iii)&nbsp;the
amount necessary to avoid the operation of any co-insurance  provisions with respect to
the Mortgaged Property, and consistent with the  amount that would have been required as
of the date of origination in accordance  with the Underwriting Guidelines. If any
portion of the Mortgaged Property is in  an area identified by any federal Governmental
Authority as having special flood  hazards, and flood insurance is available, a flood
insurance policy meeting the  current guidelines of the Federal Emergency Management
Agency is in effect with  a generally acceptable insurance carrier, in an amount
representing coverage not  less than the least of (1)&nbsp;the outstanding principal
balance of the  Mortgage Loan, (2)&nbsp;the full insurable value of the Mortgaged
Property, and  (3)&nbsp;the maximum amount of insurance available under the National
Flood  Insurance Act of 1968, as amended by the Flood Disaster Protection Act of 1974.
All such insurance policies (collectively, the &#147;hazard insurance  policy&#148;)
contain a standard mortgagee clause naming the relevant Borrower,  its successors and
assigns (including without limitation, subsequent owners of  the Mortgage Loan), as
mortgagee, and may not be reduced, terminated or canceled  without thirty (30) days&#146; prior
written notice to the mortgagee. No such  notice has been received by any Borrower. All
premiums on such insurance policy  have been paid. The related Mortgage obligates the
Mortgagor to maintain all  such insurance and, at such Mortgagor&#146;s failure to do so,
authorizes the  mortgagee to maintain such insurance at the Mortgagor&#146;s cost and
expense  and to seek reimbursement therefor from such Mortgagor. Where required by state
law or regulation, the Mortgagor has been given an opportunity to choose the  carrier of
the required hazard insurance, provided the policy is not a  &#147;master&#148; or &#147;blanket&#148; hazard
insurance policy covering a  condominium, or any hazard insurance policy covering the
common facilities of a  planned unit development. The hazard insurance policy is the
valid and binding  obligation of the insurer and is in full force and effect. No Borrower
has  engaged in, and no Borrower has any knowledge of the Mortgagor&#146;s having
engaged in, any act or omission which would impair the coverage of any such  policy, the
benefits of the endorsement provided for herein, or the validity and  binding effect of
either including, without limitation, no unlawful fee,  commission, kickback or other
unlawful compensation or value of any kind has  been or will be received, retained or
realized by any attorney, firm or other  Person, and no such unlawful items have been
received, retained or realized by  any Borrower.</FONT></FONT> </P>

<p align=center>
<font size=2>Schedule 1-2
</font></p>
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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(g)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Compliance
with Applicable Laws</U>. Any and all material requirements of any  federal, state or
local law including, without limitation, usury, laws with  respect to unfair and
deceptive lending practices and predatory lending  practices, truth-in-lending, real
estate settlement procedures, consumer credit  protection, equal credit opportunity or
disclosure laws applicable to the  Mortgage Loan have been complied with, the
consummation of the transactions  contemplated hereby will not involve the violation of
any such laws or  regulations, and each Borrower shall maintain or shall cause its agent
to  maintain in its possession, available for the inspection of the Lender, and  shall
deliver to the Lender, upon demand, evidence of compliance with all such  requirements. </FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(h)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>No Satisfaction of Mortgage</U>. The Mortgage has not
been  satisfied, canceled, subordinated or rescinded, in whole or in part, and the
Mortgaged Property has not been released from the lien of the Mortgage, in whole  or in
part, nor has any instrument been executed that would effect any such  release,
cancellation, subordination or rescission. No Borrower has waived the  performance by the
Mortgagor of any action, if the Mortgagor&#146;s failure to  perform such action would
cause the Mortgage Loan to be in default, nor has any  Borrower waived any default
resulting from any action or inaction by the  Mortgagor. </FONT></FONT> </P>


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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(i)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Location and Type of Mortgaged Property</U>. The
Mortgaged Property  is located in an Acceptable State as identified in the Mortgage Loan
Schedule  and consists of a single parcel of real property with a detached single family
residence erected thereon, or a two- to four-family dwelling, or an individual
condominium unit in a condominium project of not more than four stories or such  greater
number of stories as shall be common for condominium projects in the  location of such
Mortgaged Property, or an individual unit in a planned unit  development or a de minimis
planned unit development, provided, however, that  any condominium unit or planned unit
development shall conform with the  applicable Fannie Mae and Freddie Mac requirements
regarding such dwellings.</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(j)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Valid
First or Second Lien</U>. The Mortgage is a valid, subsisting, enforceable and  perfected
first lien, in the case of a First Lien Loan, or second lien, in the  case of a Second
Lien Loan, on the real property included in the Mortgaged  Property, including all
buildings on the Mortgaged Property and all  installations and mechanical, electrical,
plumbing, heating and air conditioning  systems located in or annexed to such buildings,
and all additions, alterations  and replacements made at any time with respect to the
foregoing. The lien of the  Mortgage is subject only to:</FONT></FONT> </P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(1)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; the
lien of current real property taxes and assessments not yet due and payable;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(2)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; covenants,
conditions and restrictions, rights of way, easements and other matters of the  public
record as of the date of recording acceptable to prudent mortgage lending  institutions
generally and specifically referred to in the lender&#146;s title  insurance policy
delivered to the originator of the Mortgage Loan and  (a)&nbsp;referred to or otherwise
considered in the appraisal made for the  originator of the Mortgage Loan or (b)&nbsp;which
do not adversely affect the  Appraised Value of the Mortgaged Property set forth in such
appraisal;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<p align=center>
<font size=2>Schedule 1-3
</font></p>
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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(3)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; other
matters to which like properties are commonly subject which do not  materially interfere
with the benefits of the security intended to be provided  by the Mortgage or the use,
enjoyment, value or marketability of the related  Mortgaged Property; and</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(4)</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; in
the case of any Second Lien Loan, the lien of the related primary mortgage.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Any
security agreement, chattel mortgage or equivalent document related to and  delivered in
connection with the Mortgage Loan establishes and creates a valid,  subsisting and
enforceable first lien and first priority security interest on  the property described
therein and the relevant Borrower has full right to  pledge and assign the same to the
Lender. </FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(k)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Validity of Mortgage Documents</U>.  The Mortgage Note
and the Mortgage and any other agreement executed and  delivered by a Mortgagor or
guarantor, if applicable, in connection with a  Mortgage Loan are genuine, and each is
the legal, valid and binding obligation  of the maker thereof enforceable in accordance
with its terms. All parties to  the Mortgage Note, the Mortgage and any other such
related agreement had legal  capacity to enter into the Mortgage Loan and to execute and
deliver the Mortgage  Note, the Mortgage and any such agreement, and the Mortgage Note,
the Mortgage  and any other such related agreement have been duly and properly executed
by  such related parties. No fraud, error, omission, misrepresentation, negligence  or
similar occurrence with respect to a Mortgage Loan has taken place on the  part of any
Person, including, without limitation, the Mortgagor, any appraiser,  any builder or
developer, or any other party involved in the origination of the  Mortgage Loan. Each
Borrower has reviewed all of the documents constituting the  Servicing File and has made
such inquiries as it deems necessary to make and  confirm the accuracy of the
representations set forth herein.</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(l)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Full
Disbursement of Proceeds</U>. The Mortgage Loan has been closed and the  proceeds of the
Mortgage Loan have been fully disbursed and there is no further  requirement for future
advances thereunder, and any and all requirements as to  completion of any on-site or
off-site improvement and as to disbursements of any  escrow funds therefor have been
complied with. All costs, fees and expenses  incurred in making or closing the Mortgage
Loan and the recording of the  Mortgage were paid, and the Mortgagor is not entitled to
any refund of any  amounts paid or due under the Mortgage Note or Mortgage.</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(m)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Ownership</U>.
The relevant Borrower is the sole owner and holder of the Mortgage  Loan. The Mortgage
Loan is not assigned or pledged, and the relevant Borrower  has good, indefeasible and
marketable title thereto, and has full right to  transfer, pledge and assign the Mortgage
Loan to the Lender free and clear of  any encumbrance, equity, participation interest,
lien, pledge, charge, claim or  security interest, and has full right and authority
subject to no interest or  participation of, or agreement with, any other party, to
assign, transfer and  pledge each Mortgage Loan pursuant to this Loan Agreement and
following the  pledge of each Mortgage Loan, the Lender will hold such Mortgage Loan free
and  clear of any encumbrance, equity, participation interest, lien, pledge, charge,
claim or security interest except any such security interest created pursuant to  the
terms of this Loan Agreement.</FONT></FONT> </P>


<p align=center>
<font size=2>Schedule 1-4
</font></p>
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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(n)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Doing
Business</U>. All parties which have had any interest in the Mortgage Loan,  whether as
Mortgagee, assignee, pledgee or otherwise, are (or, during the period  in which they held
and disposed of such interest, were) (i) in compliance with  any and all applicable
licensing requirements of the laws of the state wherein  the Mortgaged Property is
located, and (ii)&nbsp;either (A)&nbsp;organized under  the laws of such state, (B)&nbsp;qualified
to do business in such state,  (C)&nbsp;a federal savings and loan association, a savings
bank or a national  bank having a principal office in such state, or (D)&nbsp;not doing
business in  such state. (o) LTV; CLTV. No Mortgage Loan which is a First Lien Loan has
an  LTV greater than 100%. No Mortgage Loan which is a Second Lien Loan has a CLTV
greater than 100%.</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(p)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Title
Insurance. The Mortgage Loan is covered by either (i)&nbsp;an  attorney&#146;s opinion of
title and abstract of title, the form and substance  of which is acceptable to prudent
mortgage lending institutions originating the  same or similar types of mortgage loans in
the jurisdiction wherein the  Mortgaged Property is located, or (ii)&nbsp;an ALTA lender&#146;s
title  insurance policy or other generally acceptable form of policy or insurance
acceptable to Fannie Mae or Freddie Mac and each such title insurance policy is  issued
by a title insurer acceptable to Fannie Mae or Freddie Mac and qualified  to do business
in the jurisdiction where the Mortgaged Property is located,  insuring the relevant
Borrower, its successors and assigns, as to the first or  second priority lien of the
Mortgage in the original principal amount of the  Mortgage Loan (or to the extent a
Mortgage Note provides for negative  amortization, the maximum amount of negative
amortization in accordance with the  Mortgage), subject only to the exceptions contained
in clauses (1), (2) and (3)  of paragraph (j) of this Part I of Schedule 1, and in the
case of adjustable  rate Mortgage Loans, against any loss by reason of the invalidity or
unenforceability of the lien resulting from the provisions of the Mortgage  providing for
adjustment to the Mortgage Interest Rate and Monthly Payment.  Where required by state
law or regulation, the Mortgagor has been given the  opportunity to choose the carrier of
the required mortgage title insurance.  Additionally, such lender&#146;s title insurance
policy affirmatively insures  ingress and egress and against encroachments by or upon the
Mortgaged Property  or any interest therein. The title policy does not contain any
special  exceptions (other than the standard exclusions) for zoning and uses and has been
marked to delete the standard survey exception or to replace the standard survey
exception with a specific survey reading. The relevant Borrower, its successors  and
assigns, are the sole insureds of such lender&#146;s title insurance policy,  and such
lender&#146;s title insurance policy is valid and remains in full force  and effect and
will be in force and effect upon the consummation of the  transactions contemplated by
this Loan Agreement. No claims have been made under  such lender&#146;s title insurance
policy, and no prior holder or servicer of  the related Mortgage, including any Borrower,
has done, by act or omission,  anything which would impair the coverage of such lender&#146;s
title insurance  policy, including, without limitation, no unlawful fee, commission,
kickback or  other unlawful compensation or value of any kind has been or will be
received,  retained or realized by any attorney, firm or other Person, and no such
unlawful  items have been received, retained or realized by any Borrower.</FONT></FONT> </P>


<p align=center>
<font size=2>Schedule 1-5
</font></p>
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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(q)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>No
Defaults</U>. Other than payment delinquencies, there is no default, breach,  violation
or event of acceleration existing under the Mortgage or the Mortgage  Note and no event
has occurred which, with the passage of time or with notice  and the expiration of any
grace or cure period, would constitute a default,  breach, violation or event of
acceleration, and no Borrower nor its predecessors  have waived any such default, breach,
violation or event of acceleration. (r) No  Mechanics&#146; Liens. There are no mechanics&#146; or
similar liens or claims  which have been filed for work, labor or material (and no rights
are outstanding  that under the law could give rise to such liens) affecting the
Mortgaged  Property which are or may be liens prior to, or equal or coordinate with, the
lien of the Mortgage.</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(s)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Location
of Improvements; No Encroachments</U>. All improvements which were  considered in
determining the Appraised Value of the Mortgaged Property lie  wholly within the
boundaries and building restriction lines of the Mortgaged  Property, and no improvements
on adjoining properties encroach upon the  Mortgaged Property. No improvement located on
or being part of the Mortgaged  Property is in violation of any applicable zoning and
building law, ordinance or  regulation.  </FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(t)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Origination; Payment Terms</U>. The Mortgage  Interest
Rate is  adjusted, with respect to adjustable rate Mortgage Loans, on each  Interest Rate
Adjustment Date to equal the Index plus the Gross Margin (rounded up or  down to  the
nearest .125%), subject to the Mortgage Interest Rate Cap and Mortgage  Interest Rate
Floor. The Mortgage Note is payable monthly in equal monthly  installments  of principal
and interest (other than in the case of balloon  loans), which installments  of interest,
with respect to adjustable rate Mortgage  Loans, are subject to change due  to the
adjustments to the Mortgage Interest  Rate on each Interest Rate Adjustment Date,  with
interest calculated and payable  in arrears, sufficient to amortize the Mortgage  Loan
fully by the stated  maturity date, over an original term of not more than thirty  (30)
years from  commencement of amortization.</FONT></FONT> </P>

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<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(u)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Customary Provisions</U>. The Mortgage  Note has a
stated maturity. The Mortgage contains customary and enforceable provisions  such  as to
render the rights and remedies of the holder thereof adequate for the  realization
against the Mortgaged Property of the benefits of the security  provided  thereby,
including, (i)&nbsp;in the case of a Mortgage designated as a  deed of trust, by  trustee&#146;s
sale, and (ii)&nbsp;otherwise by judicial  foreclosure. Upon default by a  Mortgagor on a
Mortgage Loan and foreclosure on,  or trustee&#146;s sale of, the  Mortgaged Property
pursuant to the proper  procedures, the holder of the Mortgage Loan  will be able to
deliver good and  merchantable title to the Mortgaged Property. There is  no homestead or
other  exemption available to a Mortgagor which would interfere with the  right to sell
the Mortgaged Property at a trustee&#146;s sale or the right to foreclose  the  Mortgage. </FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(v)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Conformance with Underwriting Guidelines and Agency
Standards</U>. The  Mortgage Loan was underwritten in accordance with the Underwriting
Guidelines.  The  Mortgage Note and Mortgage are on forms similar to those used by
Freddie Mac  or Fannie  Mae, except with respect to prepayment penalties, and no Borrower
has  made any  representations to a Mortgagor that are inconsistent with the mortgage
instruments used. </FONT></FONT> </P>

<p align=center>
<font size=2>Schedule 1-6
</font></p>
<br><hr noShade color="black">





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<!-- MARKER PAGE="sheet: 60; page: 60" -->



<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(w)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Occupancy of the Mortgaged Property</U>. As of the
Funding Date, the  Mortgaged  Property (other than with respect to Second Lien Loans) is
lawfully occupied  under applicable law. All inspections, licenses and certificates
required to be  made or  issued with respect to all occupied portions of the Mortgaged
Property  and, with respect  to the use and occupancy of the same, including but not
limited to certificates of  occupancy and fire underwriting certificates, have  been made
or obtained from the  appropriate authorities. No Borrower has received  notification
from any Governmental  Authority that the Mortgaged Property is in  material
non-compliance with such laws or  regulations, is being used, operated  or occupied
unlawfully or has failed to have or  obtain such inspection, licenses  or certificates,
as the case may be. No Borrower has  received notice of any  violation or failure to
conform with any such law, ordinance,  regulation,  standard, license or certificate.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(x)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U> No  Additional  Collateral</U>.  The  Mortgage  Note is
not and has not been secured by any  collateral  except the lien of the  corresponding
Mortgage and the security  interest of any applicable  security  agreement or chattel
mortgage  referred to in clause  (j) above. </FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(y)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Deeds of Trust</U>. In the event the  Mortgage
constitutes a deed of trust, a  trustee, authorized and duly qualified under  applicable
law to serve as such,  has been properly designated and currently so serves  and is named
in the  Mortgage, and no fees or expenses are or will become payable by the  Custodian or
the Lender to the trustee under the deed of trust, except in connection  with a  trustee&#146;s
sale after default by the Mortgagor.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(z)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Delivery
of Mortgage Documents</U>. The Mortgage Note, the Mortgage, the Assignment  of Mortgage
and any other documents required to be delivered under the Custodial  Agreement for each
Mortgage Loan have been delivered to the Custodian. A  Borrower or its agent is in
possession of a complete, true and accurate Mortgage  File in compliance with the
Custodial Agreement, except for such documents the  originals of which have been
delivered to the Custodian.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(aa)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Transfer
of Mortgage Loans</U>. The Assignment of Mortgage is in recordable form and  is
acceptable for recording under the laws of the jurisdiction in which the  Mortgaged
Property is located. </FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(bb)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Due-On-Sale</U>. The Mortgage contains an  enforceable
provision  for the acceleration of the payment of the unpaid  principal balance of the
Mortgage Loan  in the event that the Mortgaged Property  is sold or transferred without
the prior  written consent of the Mortgagee  thereunder.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(cc)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>No
Buydown Provisions; No Graduated Payments or Contingent Interests</U>. The  Mortgage Loan
does not contain provisions pursuant to which Monthly Payments are  paid or partially
paid with funds deposited in any separate account established  by any Borrower, the
Mortgagor, or anyone on behalf of the Mortgagor, or paid by  any source other than the
Mortgagor nor does it contain any other similar  provisions which may constitute a &#147;buydown&#148; provision.
The Mortgage  Loan is not a graduated payment mortgage loan and the Mortgage Loan does
not  have a shared appreciation or other contingent interest feature. </FONT></FONT> </P>

<p align=center>
<font size=2>Schedule 1-7
</font></p>
<br><hr noShade color="black">





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<!-- MARKER PAGE="sheet: 61; page: 61" -->



<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(dd)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Consolidation
of Future Advances</U>. Any future advances made to the Mortgagor  prior to the Funding
Date have been consolidated with the outstanding principal  amount secured by the
Mortgage, and the secured principal amount, as  consolidated, bears a single interest
rate and single repayment term. The lien  of the Mortgage securing the consolidated
principal amount is expressly insured  as having first lien priority, in the case of a
first Mortgage, or second lien  priority, in the case of a second mortgage, by a title
insurance policy, an  endorsement to the policy insuring the Mortgagee&#146;s
consolidated interest or  by other title evidence acceptable to Fannie Mae and Freddie
Mac. The  consolidated principal amount does not exceed the original principal amount of
the Mortgage Loan.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(ee)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Mortgaged
Property Undamaged</U>. The Mortgaged Property is undamaged by waste,  fire, earthquake
or earth movement, windstorm, flood, tornado or other casualty  so as to affect adversely
the value of the Mortgaged Property as security for  the Mortgage Loan or the use for
which the premises were intended and each  Mortgaged Property is in good repair. There
have not been any condemnation  proceedings with respect to the Mortgaged Property and no
Borrower has any  knowledge of any such proceedings. </FONT></FONT> </P>


<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(ff)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Collection Practices; Escrow  Deposits;  Interest Rate
Adjustments</U>. The origination and collection practices used by  the  originator, each
servicer of the Mortgage Loan and the relevant Borrower with  respect to the Mortgage
Loan have been in all respects in compliance with  Accepted  Servicing Practices,
applicable laws and regulations, and have been in  all respects  legal and proper. With
respect to escrow deposits and Escrow  Payments, all such payments  are in the possession
of, or under the control of,  the Borrowers and there exist no  deficiencies in
connection therewith for which  customary arrangements for repayment  thereof have not
been made. All Escrow  Payments have been collected in material  compliance with state
and federal law.  An escrow of funds is not prohibited by  applicable law and has been
established  in an amount sufficient to pay for every item  that remains unpaid and has
been  assessed but is not yet due and payable. No escrow  deposits or Escrow Payments  or
other charges or payments due the Borrowers have been  capitalized under the  Mortgage or
the Mortgage Note. All Mortgage Interest Rate  adjustments have been  made in compliance
with state and federal law and the terms of the  related  Mortgage Note. Any interest
required to be paid pursuant to state, federal and  local law has been properly paid and
credited.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(gg)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Conversion
to Fixed Interest Rate</U>. With respect to adjustable rate Mortgage  Loans, the Mortgage
Loan is not convertible to a fixed interest rate Mortgage  Loan.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(hh)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Other
Insurance Policies</U>. No action, inaction or event has occurred  and no state of facts
exists or has  existed that has resulted or will result in  the exclusion from, denial
of, or defense to  coverage under any applicable  special hazard insurance policy, PMI
Policy or bankruptcy  bond, irrespective of  the cause of such failure of coverage. In
connection with the  placement of any  such insurance, no commission, fee, or other
compensation has been or  will be  received by any Borrower or by any officer, director,
or employee of any  Borrower or any designee of any Borrower or any corporation in which
any  Borrower or any  officer, director, or employee had a financial interest at the
time of placement of such  insurance.</FONT></FONT> </P>

<p align=center>
<font size=2>Schedule 1-8
</font></p>
<br><hr noShade color="black">





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<!-- MARKER PAGE="sheet: 62; page: 62" -->



<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(ii)&nbsp; &nbsp;&nbsp;
&nbsp;&nbsp;<U>Soldiers&#146; and
Sailors</U>&#146; Civil Relief Act. The Mortgagor has not  notified any Borrower, and no
Borrower has no knowledge, of any relief requested  or allowed to the Mortgagor under the
Soldiers&#146; and Sailors&#146; Civil  Relief Act of 1940. (jj) Appraisal. The Mortgage
File contains an appraisal of  the related Mortgaged Property signed prior to the
approval of the Mortgage Loan  application by a qualified appraiser, duly appointed by
the Borrowers, who had  no interest, direct or indirect in the Mortgaged Property or in
any loan made on  the security thereof, and whose compensation is not affected by the
approval or  disapproval of the Mortgage Loan, and the appraisal and appraiser both
satisfy  the requirements of Fannie Mae or Freddie Mac and Title XI of the Federal
Institutions Reform, Recovery, and Enforcement Act of 1989 as amended and the
regulations promulgated thereunder, all as in effect on the date the Mortgage  Loan was
originated.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(kk)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Disclosure
Materials</U>. The Mortgagor has received all disclosure materials  required by
applicable law with respect to the making of adjustable rate  mortgage loans, and the
relevant Borrower maintains such statement in the  Mortgage File. (ll) Construction or
Rehabilitation of Mortgaged Property. No  Mortgage Loan was made in connection with the
construction or rehabilitation of  a Mortgaged Property or facilitating the trade-in or
exchange of a Mortgaged  Property. (mm) No Defense to Insurance Coverage. No action has
been taken or  failed to be taken, no event has occurred and no state of facts exists or
has  existed on or prior to the Funding Date (whether or not known to any Borrower on  or
prior to such date) which has resulted or will result in an exclusion from,  denial of,
or defense to coverage under any private mortgage insurance  (including, without
limitation, any exclusions, denials or defenses which would  limit or reduce the
availability of the timely payment of the full amount of the  loss otherwise due
thereunder to the insured) whether arising out of actions,  representations, errors,
omissions, negligence, or fraud of any Borrower, the  related Mortgagor or any party
involved in the application for such coverage,  including the appraisal, plans and
specifications and other exhibits or  documents submitted therewith to the insurer under
such insurance policy, or for  any other reason under such coverage, but not including
the failure of such  insurer to pay by reason of such insurer&#146;s breach of such
insurance policy  or such insurer&#146;s financial inability to pay. (nn) Capitalization
of  Interest. The Mortgage Note does not by its terms provide for the capitalization  or
forbearance of interest.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(oo)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No
Equity Participation. No document relating to the Mortgage Loan provides for  any
contingent or additional interest in the form of participation in the cash  flow of the
Mortgaged Property or a sharing in the appreciation of the value of  the Mortgaged
Property. The indebtedness evidenced by the Mortgage Note is not  convertible to an
ownership interest in the Mortgaged Property or the Mortgagor  and no Borrower has
financed nor does it own directly or indirectly, any equity  of any form in the Mortgaged
Property or the Mortgagor.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(pp)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Withdrawn
Mortgage Loans. If the Mortgage Loan has been released to any Borrower  pursuant to a
Request for Release as permitted under Section 5 of the Custodial  Agreement, then the
promissory note relating to the Mortgage Loan was returned  to the Custodian within ten
(10) days (or if such tenth day was not a Business  Day, the next succeeding Business
Day). </FONT></FONT> </P>

<p align=center>
<font size=2>Schedule 1-9
</font></p>
<br><hr noShade color="black">





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<!-- MARKER PAGE="sheet: 63; page: 63" -->



<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(qq)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Origination
Date</U>. The Origination  Date is no earlier than three (3) months  prior to the date
the Mortgage Loan is  first included in the Borrowing Base.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(rr)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No
Exception. The Custodian has not noted any material exceptions on an  Exception Report
(as defined in the Custodial Agreement) with respect to the  Mortgage Loan which would
materially adversely affect the Mortgage Loan or the  Lender&#146;s security interest,
granted by the Borrowers, in the Mortgage Loan.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(ss)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Mortgage  Submitted for  Recordation.  The Mortgage
either has been or will promptly be submitted for  recordation  in the  appropriate
governmental recording office of the jurisdiction where the Mortgaged Property is
located.</FONT></FONT> </P>


<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(tt)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Riegle
Act</U>. The Mortgage  Loans is not  classified  as a &quot;high  cost&quot; loan under
the Home  Ownership  and Equity  Protection  Act of 1994 and is not  subject to the
provisions of Section 226.32 of the Federal Reserve Board Regulation Z.</FONT></FONT> </P>


<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(uu)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Origination</U>.
Each Mortgage Loan was originated by or purchased by a Borrower.</FONT></FONT> </P>


<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(vv)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>FICO
Score</U>.  The Mortgage Loan has a FICO score below 500.  </FONT></FONT> </P>

<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>




<p align=center>
<font size=2>Schedule 1-10
</font></p>
<br><hr noShade color="black">






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<!-- MARKER PAGE="sheet: 64; page: 64" -->






<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Part
2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Defined  Terms</U></FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In
addition to terms defined elsewhere in the Loan Agreement, the following terms
shall have the following meanings when used in this Schedule 1:</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Acceptable
State</U>&#148; shall mean any state notified by the Borrowers to the Lender from
time to time and approved in writing by the Lender, which approval has not been
revoked by the Lender in their sole discretion, any such notice of revocation to
be given no later than ten (10) Business Days prior to its intended effective
date.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Accepted
Servicing Practices</U>&#148; shall mean, with respect to any Mortgage Loan, those
mortgage servicing practices of prudent mortgage lending institutions which
service mortgage loans of the same type as such Mortgage Loans in the
jurisdiction where the related Mortgaged Property is located.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>ALTA</U>&#148; means
the American Land Title Association.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Appraised
Value</U>&#148; shall mean the value set forth in an appraisal made in connection
with the origination of the related Mortgage Loan as the value of the Mortgaged
Property.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Best&#146;s</U>&#148;
means Best&#146;s Key Rating Guide, as the same shall be amended from time to
time.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>CLTV</U>&#148; shall
mean with  respect  to any  Second  Lien  Loan,  the  ratio of the sum of the  outstanding principal
amount of the Second Lien Loan plus the outstanding principal amount of the
first priority mortgage loan secured by the same Mortgaged Property to the
lesser of (a)&nbsp;the Appraised Value of the Mortgaged Property at origination
or (b)&nbsp;if the Mortgaged Property was purchased within six (6) months of the
origination of the Mortgage Loan, the purchase price of the Mortgaged Property,
which CLTV shall be calculated in accordance with the Underwriting Guidelines.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Due
Date</U>&#148; means the day of the month on which the Monthly Payment is due on a
Mortgage Loan, exclusive of any days of grace.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Escrow
Payments</U>&#148; means with respect to any Mortgage Loan, the amounts constituting
ground rents, taxes, assessments, water rates, sewer rents, municipal charges,
mortgage insurance premiums, fire and hazard insurance premiums, condominium
charges, and any other payments required to be escrowed by the Mortgagor with
the mortgagee pursuant to the Mortgage or any other document.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Fannie
Mae</U>&#148; means the Federal National Mortgage Association, or any successor
thereto.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Freddie
Mac</U>&#148; means the Federal Home Loan Mortgage Corporation, or any successor
thereto.</FONT></FONT> </P>

<p align=center>
<font size=2>Schedule 1-11
</font></p>
<br><hr noShade color="black">






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<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Gross
Margin</U>&#148; means with respect to each adjustable rate Mortgage Loan, the fixed
percentage amount set forth in the related Mortgage Note.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Index</U>&#148;
means with respect to each adjustable rate Mortgage Loan, the index set forth in
the related Mortgage Note for the purpose of calculating the interest rate
thereon.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Insurance
Proceeds</U>&#148; means with respect to each Mortgage Loan, proceeds of insurance
policies insuring the Mortgage Loan or the related Mortgaged Property.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Interest
Rate Adjustment Date</U>&#148; means with respect to each adjustable rate Mortgage
Loan, the date, specified in the related Mortgage Note and the Mortgage Loan
Schedule, on which the Mortgage Interest Rate is adjusted.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Loan-to-Value
Ratio</U>&#148; or &#147;<U>LTV</U>&#148; means with respect to any Mortgage Loan, the
ratio of the original outstanding principal amount of the Mortgage Loan to the
lesser of (a)&nbsp;the Appraised Value of the Mortgaged Property at origination
or (b)&nbsp;in the case of a purchase money mortgage loan, the purchase price of
the Mortgaged Property.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Monthly
Payment</U>&#148; means the scheduled monthly payment of principal and interest on a
Mortgage Loan as adjusted in accordance with changes in the Mortgage Interest
Rate pursuant to the provisions of the Mortgage Note for an adjustable rate
Mortgage Loan.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Mortgage
Interest Rate</U>&#148; means the annual rate of interest borne on a Mortgage Note,
which shall be adjusted from time to time with respect to adjustable rate
Mortgage Loans.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Mortgage
Interest Rate Ca</U>p&#148; means with respect to an adjustable rate Mortgage Loan,
the limit on each Mortgage Interest Rate adjustment as set forth in the related
Mortgage Note.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Mortgagee</U>&#148;
means the relevant Borrower or any subsequent holder of a Mortgage Loan.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Origination
Date</U>&#148; shall mean, with respect to each Mortgage Loan, the date of the
Mortgage Note relating to such Mortgage Loan, unless such information is not
provided by the relevant Borrower with respect to such Mortgage Loan, in which
case the Origination Date shall be deemed to be the date that is forty (40) days
prior to the date of the first payment under the Mortgage Note relating to such
Mortgage Loan.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>PMI
Policy</U>&#148; or &#147;<U>Primary Insurance Policy</U>&#148; means a policy of primary
mortgage guaranty insurance issued by a Qualified Insurer.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Qualified
Insurer</U>&#148; means an insurance company duly qualified as such under the laws
of the states in which the Mortgaged Property is located, duly authorized and
licensed in such states to transact the applicable insurance business and to
write the insurance provided, and approved as an insurer by Fannie Mae and
Freddie Mac and whose claims paying ability is rated in the two highest rating
categories by any of the rating agencies with respect to primary mortgage
insurance and in the two highest rating categories by Best&#146;s with respect
to hazard and flood insurance.</FONT></FONT> </P>


<p align=center>
<font size=2>Schedule 1-12
</font></p>
<br><hr noShade color="black">





<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 66; page: 66" -->



<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;<U>Servicing
File</U>&#148; means with respect to each Mortgage Loan, the file retained by the
Borrowers consisting of originals of all documents in the Mortgage File which
are not delivered to a Custodian and copies of the Mortgage Loan Documents set
forth in Section 2 of the Custodial Agreement.</FONT></FONT> </P>


<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>

<p align=center>
<font size=2>Schedule 1-13
</font></p>
<br><hr noShade color="black">





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<!-- MARKER PAGE="sheet: 67; page: 67" -->





<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A042"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Schedule
2<BR>FILING
JURISDICTIONS AND OFFICES</FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A044"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Secretary
of State, California</FONT></FONT></H1>


<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>


<p align=center>
<font size=2>Schedule 2-1
</font></p>
<br><hr noShade color="black">





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<!-- MARKER PAGE="sheet: 68; page: 68" -->





<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A049"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Schedule
3<BR>>CAPITALIZATION</FONT></FONT></H1>

<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>

<p align=center>
<font size=2>Schedule 3-1
</font></p>
<br><hr noShade color="black">





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<!-- MARKER PAGE="sheet: 69; page: 69" -->




<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A053"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Schedule
4</FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A054"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">SERVICING
FIELDS</FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="47%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#149;</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="50%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
Loan ID </FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="47%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#149; </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="50%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Name</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="47%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#149;</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="50%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Paid
To Date</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="47%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#149;</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="50%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
Current Balance</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="47%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#149;</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="50%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> P&amp;I</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="47%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#149;</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="50%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Rate</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>


<p align=center>
<font size=2>Schedule 4-1
</font></p>
<br><hr noShade color="black">





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<!-- MARKER PAGE="sheet: 70; page: 70" -->



<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A057"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Schedule
5</FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A058"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Trade
Names</FONT></FONT></H1>





<TABLE CELLPADDING="0" CELLSPACING="0" Width="60%">
<TR VALIGN="TOP">
     <TD Align="right" Width="40%"><P><FONT FACE="Times New Roman"><FONT SIZE="2"><B>Aames Capital
Corporation:</B></FONT></FONT></P></TD>
     <TD Width="20%"></TD>
     <TD Width="40%"><P><FONT FACE="Times New Roman"><FONT SIZE="2"><B>Aames Home Loan</B></FONT></FONT></P></TD></TR>
<TR VALIGN="TOP">
     <TD></TD>
<TD>&nbsp;</TD>
     <TD></TD></TR>
<TR VALIGN="TOP">
     <TD ALign="right"><P><FONT FACE="Times New Roman"><FONT SIZE="2"><B>Aames Funding Corporation:</B></FONT></FONT> </P></TD>
<TD></TD>
     <TD><P><FONT FACE="Times New Roman"><FONT SIZE="2"><B>The Center for Loan Servicing<BR> Wilshire Reconveyance, Inc.
<BR>Aames Mortgage, Inc.</B></FONT></FONT></P>
</TD></TR>
</TABLE>


<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>



<p align=center>
<font size=2>Schedule 5-1
</font></p>
<br><hr noShade color="black">





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<!-- MARKER PAGE="sheet: 71; page: 71" -->





<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A064"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">EXHIBIT
A</FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A065"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">FORM
OF SECOND AMENDED AND RESTATED PROMISSORY NOTE</FONT></FONT></H1>

<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td><font size="2" face="Times New Roman, Times, serif">$200,000,000 <br>
      </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td> <div align="right"><font size="2" face="Times New Roman, Times, serif">August
        29, 2003<br>
        New York, New York</font></div></td>
  </tr>
  <tr>
    <td><font face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
</table>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">FOR
VALUE RECEIVED, AAMES CAPITAL CORPORATION, a California corporation (&#147;<U>Aames
Capital</U>&#148;) and AAMES FUNDING CORPORATION, a California corporation
(&#147;<U>Aames Funding</U>&#148;, and together with Aames Capital, each a
&#147;<U>Borrower</U>&#148;, collectively the &#147;<U>Borrowers</U>&#148;), hereby promise to
pay, jointly and severally, to the order of MORGAN STANLEY MORTGAGE CAPITAL INC.
(the &#147;<U>Lender</U>&#148;), at the principal office of the Lender at 1221 Avenue
of the Americas, 27th Floor, New York, New York, 10020, in lawful money of the
United States, and in immediately available funds, the principal sum of TWO
HUNDRED MILLION DOLLARS ($200,000,000) (or such lesser amount as shall equal the
aggregate unpaid principal amount of the Loans made by the Lender to the
Borrowers under the Loan Agreement), on the dates and in the principal amounts
provided in the Loan Agreement, and to pay interest on the unpaid principal
amount of each such Loan, at such office, in like money and funds, for the
period commencing on the date of such Loan until such Loan shall be paid in
full, at the rates per annum and on the dates provided in the Loan Agreement.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
date, amount and interest rate of each Loan made by the Lender to the Borrowers,
and each payment made on account of the principal thereof, shall be recorded by
the Lender on its books and, prior to any transfer of this Note, endorsed by the
Lender on the schedule attached hereto or any continuation thereof; provided,
that the failure of the Lender to make any such recordation or endorsement shall
not affect the obligations of the Borrowers to make a payment when due of any
amount owing under the Loan Agreement or hereunder in respect of the Loans made
by the Lender.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">This
Note is the Note referred to in the Second Amended and Restated Master Loan and
Security Agreement, dated as of August 29, 2003 (as amended, supplemented or
otherwise modified and in effect from time to time, the &#147;Loan
Agreement&#148;) among the Borrowers and the Lender, and evidences Loans made by
the Lender thereunder. Terms used but not defined in this Note have the
respective meanings assigned to them in the Loan Agreement.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
Borrowers agree, jointly and severally, to pay all the Lender&#146;s costs of
collection and enforcement (including reasonable attorneys&#146; fees and
disbursements of Lender&#146;s counsel) in respect of this Note when incurred,
including, without limitation, reasonable attorneys&#146; fees through appellate
proceedings.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Notwithstanding
the pledge of the Collateral, each Borrower hereby acknowledges, admits and
agrees that the Borrowers&#146; obligations under this Note are recourse
obligations of the Borrowers to which each Borrower pledges its full faith and
credit.</FONT></FONT> </P>


<p align=center>
<font size=2>A-1
</font></p>
<br><hr noShade color="black">





<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 72; page: 72" -->



<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Each
Borrower, and any endorsers or guarantors hereof, (a) severally waive diligence,
presentment, protest and demand and also notice of protest, demand, dishonor and
nonpayments of this Note, (b) expressly agree that this Note, or any payment
hereunder, may be extended from time to time, and consent to the acceptance of
further Collateral, the release of any Collateral for this Note, the release of
any party primarily or secondarily liable hereon, and (c) expressly agree that
it will not be necessary for the Lender, in order to enforce payment of this
Note, to first institute or exhaust the Lender&#146;s remedies against the
Borrowers or any other party liable hereon or against any Collateral for this
Note. No extension of time for the payment of this Note, or any installment
hereof, made by agreement by the Lender with any person now or hereafter liable
for the payment of this Note, shall affect the liability under this Note of any
Borrower, even if such Borrower is not a party to such agreement; <U>provided</U>,
<U>however</U>, that the Lender and each Borrower, by written agreement between them,
may affect the liability of such Borrower.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">This
Second Amended and Restated Promissory Note amends and restates in its entirety
the Amended and Restated Promissory Note dated December 5, 2002 (the
&#147;<U>Existing Promissory Note</U>&#148;) and is given as a continuation,
rearrangement and extension, and not a novation, release or satisfaction, of the
Existing Promissory Note. Aames Capital hereby acknowledges and agrees that
simultaneously with the Borrowers&#146; execution and delivery of this Second
Amended and Restated Promissory Note to the Lender, the Lender has delivered to
Aames Capital the Existing Promissory Note.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Any
reference herein to the Lender shall be deemed to include and apply to every
subsequent holder of this Note. Reference is made to the Loan Agreement for
provisions concerning optional and mandatory prepayments, Collateral,
acceleration and other material terms affecting this Note.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Each
Borrower hereby acknowledges and agrees that such Borrower shall be jointly and
severally liable to the maximum extent permitted by applicable law for all
representations, warranties, covenants, obligations and indemnities of the
Borrowers under the Loan Documents.</FONT></FONT> </P>


<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>



<p align=center>
<font size=2>A-2
</font></p>
<br><hr noShade color="black">





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<!-- MARKER PAGE="sheet: 73; page: 73" -->






<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><b>This
Note shall be governed by and construed under the laws of the State of New York
whose laws each Borrower expressly elects to apply to this Note. Each Borrower
agrees that any action or proceeding brought to enforce or arising out of this
Note may be commenced in the Supreme Court of the State of New York, Borough of
Manhattan, or in the District Court of the United States for the Southern
District of New York.</b></FONT></FONT> </P>

<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="47%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">AAMES
      CAPITAL CORPORATION</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="51%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">By:</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">___________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name:</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title:</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">AAMES
      FUNDING CORPORATION</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">By:</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">___________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name:</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title:</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="47%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="53%">&nbsp;</td>
  </tr>
</table>


<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>



<p align=center>
<font size=2>A-3
</font></p>
<br><hr noShade color="black">






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 74; page: 74" -->



<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A074"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">SCHEDULE
OF LOANS</FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">This
Note evidences Loans made under the within-described Loan Agreement to the
Borrowers, on the dates, in the principal amounts and bearing interest at the
rates set forth below, and subject to the payments and prepayments of principal
set forth below:</FONT></FONT> </P>


<table width="100%" border="1" cellspacing="0" cellpadding="0">
  <tr valign="bottom">
    <td width="17%"> <div align="center"><strong><font size="2" face="Times New Roman, Times, serif"><u>Date</u>
        <u>Made </u></font></strong></div></td>
    <td width="24%"> <div align="center"><strong><font size="2" face="Times New Roman, Times, serif">Principal
        <br>
        <u>Amount</u> <u>of</u> <u>Loan</u></font></strong></div></td>
    <td width="11%"> <div align="center"><strong>Interest <br>
        Rate </strong></div></td>
    <td width="15%"> <div align="center"><strong><font size="2" face="Times New Roman, Times, serif">Amount
        Paid<br>
        <u>or</u> <u>Prepaid</u></font></strong></div></td>
    <td width="19%"> <div align="center"><strong><font size="2" face="Times New Roman, Times, serif">Unpaid
        Principal <br>
        Principal<br>
        <u>Amount </u></font></strong></div></td>
    <td width="14%"> <div align="center"><strong><font size="2" face="Times New Roman, Times, serif">Notation<br>
        <u>Made</u> <u>by</u></font></strong></div></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr >
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr >
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr >
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr >
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr >
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr >
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr >
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr >
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr >
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr >
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr >
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr >
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr >
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>


<p align=center>
<font size=2>A-4
</font></p>
<br><hr noShade color="black">





<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 75; page: 75" -->





<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A077"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">EXHIBIT
B<BR>CUSTODIAL
AGREEMENT</FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">[STORED AS A
SEPARATE DOCUMENT]</FONT></FONT> </P>

<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>


<p align=center>
<font size=2>B-1
</font></p>
<br><hr noShade color="black">





<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 76; page: 76" -->




<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A083"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">EXHIBIT
C<BR>FORM
OF OPINION OF COUNSEL TO BORROWERS</FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">[STORED AS A
SEPARATE DOCUMENT]</FONT></FONT> </P>


<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>

<p align=center>
<font size=2>C-1
</font></p>
<br><hr noShade color="black">





<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 77; page: 77" -->




<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A087"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">EXHIBIT
D</FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A088"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">FORM
OF REQUEST FOR BORROWING</FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Second
Amended and Restated Master Loan and Security Agreement, dated as of August 29,
2003 (the &#147;Loan and Security Agreement&#148;), by and between the Borrowers
and Morgan Stanley Mortgage Capital Inc. (the &#147;Lender&#148;),</FONT></FONT> </P>

<P><Font Face="Times New Roman" Size="2">Lender:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  Morgan Stanley Mortgage Capital Inc.</font></P>

<P><Font Face="Times New Roman" Size="2">Borrowers:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  Aames Capital Corporation<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aames Funding Corporation</font></P>

<P><Font Face="Times New Roman" Size="2">Requested Funding Date:____</font></P>

<P><Font Face="Times New Roman" Size="2">Transmission Date:_________
</font></P>

<P><Font Face="Times New Roman" Size="2">Transmission Time:</font></P>

<P><Font Face="Times New Roman" Size="2">Mortgage<BR>
Loans to be Pledged:_______See attached.</font></P>

<P><Font Face="Times New Roman" Size="2">UPB:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
$________</font></P>

<P><Font Face="Times New Roman" Size="2">Requested Wire Amount:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$_____</font></P>

<P><Font Face="Times New Roman" Size="2">Wire Instructions:</font></P>

<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>


<p align=center>
<font size=2>D-1
</font></p>
<br><hr noShade color="black">





<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 78; page: 78" -->





<P><Font Face="Times New Roman" Size="2">Requested by:</font></P>
<P><Font Face="Times New Roman" Size="2">AAMES CAPITAL CORPORATION</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>



<P><Font Face="Times New Roman" Size="2">By:______________________________________________<BR>&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Name:<BR>&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    Title:</font></P>



<P><Font Face="Times New Roman" Size="2">AAMES FUNDING CORPORATION</font></P>

<P><Font Face="Times New Roman" Size="2">By:______________________________________________<BR>&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Name:<BR>&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    Title:</font></P>


<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>


<p align=center>
<font size=2>D-2
</font></p>
<br><hr noShade color="black">





<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 79; page: 79" -->













<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
<U>Attachment
1</U></FONT></FONT> </P>



<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A092"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">SCHEDULE
OF MORTGAGE LOANS PROPOSED TO BE PLEDGED</FONT></FONT></H1>

<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>

<p align=center>
<font size=2>D-3
</font></p>
<br><hr noShade color="black">





<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 80; page: 80" -->







<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
<U>Attachment
2</U></FONT></FONT> </P>



<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A093"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">OFFICER&#146;S
CERTIFICATE</FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
undersigned hereby certifies to the Lender on behalf of the Borrower, as of the
requested Funding Date, that:</FONT></FONT> </P>





<!-- MARKER FORMAT-SHEET="Para Hang Roman In 2" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">a) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">no
Default or Event of Default has occurred and  is continuing on the date hereof nor will
occur after giving effect to such Loan  as a result of such Loan;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Hang Roman In 2" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">b) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">each
of the representations and warranties made by  the Borrowers in or pursuant to the Loan
Documents is true and correct in all  material respects on and as of such date (in the
case of the representations and  warranties in respect of Mortgage Loans, solely with
respect to Mortgage Loans  being included the Borrowing Base on such Funding Date) as if
made on and as of  the date hereof (or, if any such representation or warranty is
expressly stated  to have been made as of a specific date, as of such specific date); and </FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Hang Roman In 2" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">c) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">each
Borrower is in compliance with all governmental licenses and authorizations and  is
qualified to do business and in good standing in all required jurisdictions.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

  <table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="47%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif"> Responsible
      Officer Certification:</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="51%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">By:</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">___________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name:</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title:</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>


<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>


<p align=center>
<font size=2>D-4
</font></p>
<br><hr noShade color="black">






<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 81; page: 81" -->




<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A096"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">EXHIBIT
E-1</FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A097"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">FORM
OF BORROWER&#146;S RELEASE LETTER</FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A098"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">[Date]</FONT></FONT></H1>

<P><Font Face="Times New Roman" Size="2">Morgan Stanley Mortgage Capital Inc.<BR>
1221 Avenue of the Americas, 27th Floor<BR>
New York, New York 1002</font></P>0


<!-- MARKER FORMAT-SHEET="Para Hang Roman In 1" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Re:</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
Second Amended and Restated Master Loan and Security Agreement, dated as of
August 29, 2003 (the &#147;<U>Loan Agreement</U>&#148;), by and among Aames Capital
Corporation (&#147;<U>Aames Capital</U>&#148;), Aames Funding Corporation (&#147;<U>Aames
Funding</U>&#148; and together with Aames Capital, each a &#147;<U>Borrower</U>&#148;,
collectively, the &#147;<U>Borrowers</U>&#148;) and Morgan Stanley Mortgage Capital
Inc. (the &#147;<U>Lender</U>&#148;)</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<P><Font Face="Times New Roman" Size="2">Ladies and Gentlemen:</font></P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">With
respect to the mortgage loans described in the attached Schedule A (the
&#147;Mortgage Loans&#148;) we hereby certify to you that the Mortgage Loans are
not subject to a lien of any third party and (b) we hereby release all right,
interest or claim of any kind with respect to such Mortgage Loans, such release
to be effective automatically without further action by any party upon payment
from Morgan Stanley Mortgage Capital Inc., of the amount of the Loan
contemplated under the Loan Agreement (calculated in accordance with the terms
thereof) in accordance with the wiring instructions set forth in the Loan
Agreement.</FONT></FONT> </P>

  <table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">Very Truly Yours,</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2">&nbsp;</td>
  </tr>
  <tr>
    <td width="47%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">AAMES
      CAPITAL CORPORATION</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="51%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">By:</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">___________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name:</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title:</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">AAMES
      FUNDING CORPORATION</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">By:</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">___________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name:</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title:</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="47%">&nbsp;</td>
    <td width="53%">&nbsp;</td>
  </tr>
</table>


<p align=center>
<font size=2>E-1-1
</font></p>
<br><hr noShade color="black">





<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 82; page: 82" -->




<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A103"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">EXHIBIT
E-2</FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A104"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">FORM
OF WAREHOUSE LENDER&#146;S RELEASE LETTER</FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A105"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(Date)</FONT></FONT></H1>

<P><Font Face="Times New Roman" Size="2">Morgan Stanley Mortgage Capital Inc.<BR>
1221 Avenue of the Americas, 27th Floor<BR>
New York, New York  10020</font></P>



<!-- MARKER FORMAT-SHEET="Para Hang Roman In 1" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Re: </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Certain
Mortgage Loans Identified on Schedule A hereto and owned by [Aames Capital  Corporation
[and/or]  Aames Funding Corporation]</U></FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
undersigned hereby releases all right, interest, lien or claim of any kind with
respect to the mortgage loan(s) described in the attached Schedule A, such
release to be effective automatically without any further action by any party
upon payment in one or more installments, in immediately available funds of
$__________________, in accordance with the following wire instructions:</FONT></FONT> </P>

                                                    <table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">Very Truly
      Yours,</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2">&nbsp;</td>
  </tr>
  <tr>
    <td width="47%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">[WAREHOUSE
      LENDER]</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="51%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">By:</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">___________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name:</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title:</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>

<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>

<p align=center>
<font size=2>E-2-1
</font></p>
<br><hr noShade color="black">





<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 83; page: 83" -->



<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A108"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">EXHIBIT
F</FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A109"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">UNDERWRITING
GUIDELINES</FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A110"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">[Borrowers
to Provide]</FONT></FONT></H1>


<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>

<p align=center>
<font size=2>F-1
</font></p>
<br><hr noShade color="black">





<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 84; page: 84" -->





<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A115"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">EXHIBIT
G</FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A116"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>FORM
OF SERVICER NOTICE AND AGREEMENT</U></FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A117"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">__________
__, 200__<BR>[SERVICER],
as Servicer<BR>[ADDRESS]<BR>Attention: ___________</FONT></FONT></P>




<!-- MARKER FORMAT-SHEET="Para Hang Roman In 1" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Re:</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
Second Amended and Restated Master Loan and Security Agreement, dated as of
August 29, 2003 (the &#147;<U>Loan Agreement</U>&#148;), by and among Aames Capital
Corporation (&#147;<U>Aames Capital</U>&#148;), Aames Funding Corporation (&#147;<U>Aames
Funding</U>&#148; and together with Aames Capital, each a &#147;<U>Borrower</U>&#148;,
collectively the &#147;<U>Borrowers</U>&#148;) and Morgan Stanley Mortgage Capital Inc.
(the &#147;<U>Lender</U>&#148;).</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<P><Font Face="Times New Roman" Size="2">Ladies and Gentlemen:</font></P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">[SERVICER]
(the &#147;<U>Servicer</U>&#148;) is servicing certain mortgage loans for the Borrowers
pursuant to certain Servicing Agreements (each a &#147;<U>Servicing
Agreement</U>&#148;) between the Servicer and the Borrowers. Pursuant to the Loan
Agreement between the Lender and the Borrowers, the Servicer is hereby notified
that the Borrowers have granted a security interest to the Lender in certain
mortgage loans which are serviced by Servicer.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Upon
receipt of a Notice of Event of Default from the Lender in which the Lender
shall identify the mortgage loans which are then pledged to the Lender under the
Loan Agreement (the &#147;<U>Pledged Mortgage Loans</U>&#148;), the Servicer shall
segregate all amounts collected on account of such Pledged Mortgage Loans, hold
them in trust for the sole and exclusive benefit of the Lender, and remit such
collections in accordance with the Lender&#146;s written instructions. Following
such Notice of Event of Default, the Servicer shall follow the instructions of
the Lender with respect to the Pledged Mortgage Loans, and shall deliver to the
Lender any information with respect to the Pledged Mortgage Loans reasonably
requested by Lender. The Servicer acknowledges that it is holding the Pledged
Mortgage Loans for the benefit of the Lender.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Notwithstanding
any contrary information or direction which may be delivered to the Servicer by
the Borrowers, the Servicer may conclusively rely on any information, direction
or notice of an Event of Default delivered by the Lender, and the Borrowers
shall indemnify and hold the Servicer harmless for any and all claims asserted
against the Servicer for any actions taken in good faith by the Servicer in
connection with the delivery of such information or Notice of Event of Default.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">No
provision of this letter may be amended, countermanded or modified without the
prior written consent of the Lender. The Lender is an intended third party
beneficiary of this letter.</FONT></FONT> </P>


<p align=center>
<font size=2>G-1
</font></p>
<br><hr noShade color="black">





<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 85; page: 85" -->






<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Please
acknowledge  receipt and your agreement to the terms of this instruction letter by
signing in the signature  block below and  forwarding an executed copy to the Lender
promptly upon receipt.  Any notices to the Lender should be delivered to  the  following
address:  1221 Avenue of the  Americas,  27th Floor,  New York,  New York 10020
Attention:  Mr.  Andrew  Neuberger;  Telephone: (212)762-6401; Facsimile: (212)762-9495,
and to Ms. Su Bai; Telephone:  (212) 762-6789; Facsimile:  (212) 762-8896.</FONT></FONT> </P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">Very Truly Yours,</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2">&nbsp;</td>
  </tr>
  <tr>
    <td width="47%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">AAMES
      CAPITAL CORPORATION</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="51%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">By:</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">___________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name:</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title:</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">AAMES
      FUNDING CORPORATION</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">By:</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">___________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name:</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title:</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td>&nbsp;</td>
  </tr>
</table>


<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif"><u>ACKNOWLEDGED</u>:</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td colspan="2">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">as Servicer</font></td>
    <td width="47%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="51%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">By:</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">___________________________________</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name:</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title:</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>Facsimile:</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
</table>


<p align=center>
<font size=2>G-2</font></p>
<br><hr noShade color="black">





<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 86; page: 86" -->





<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A127"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">EXHIBIT
H</FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A128"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">FORM
OF ASSIGNMENT AND ACCEPTANCE</FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Reference
is made to the Second Amended and Restated Master Loan and Security Agreement
dated as of August 29, 2003 (as amended, supplemented or otherwise modified from
time to time, the &#147;<b>Loan Agreement</b>&#148;), among Aames Capital Corporation
(&#147;<b>Aames Capital</b>&#148;), Aames Funding Corporation (&#147;<b>Aames
Funding</b>&#148; and together with Aames Capital, each a &#147;<b>Borrower</b>&#148; and
collectively the &#147;<b>Borrowers</b>&#148;) and Morgan Stanley Mortgage Capital Inc.
(the &#147;<b>Lender</b>&#148;). Capitalized terms not otherwise defined herein shall
have the same meanings as specified therefor in the Loan Agreement.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Each
&#147;<I>Assignor</I>&#148; referred to on Schedule&nbsp;I hereto (each, an
&#147;<b>Assignor</b>&#148;) and each &#147;<I>Assignee</I>&#148; referred to on
Schedule&nbsp;I hereto (each an &#147;<b>Assignee</b>&#148;) hereby agrees severally
with respect to all information relating to it and its assignment hereunder and
on Schedule&nbsp;I hereto as follows:</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Subject
to the provisions of Section 11.05 of the Loan Agreement, such Assignor hereby
sells and assigns, without recourse except as to the representations and
warranties made by it herein, to such Assignee, and such Assignee hereby
purchases and assumes from such Assignor, an interest in and to such
Assignor&#146;s rights and obligations under the Loan Agreement as of the
Effective Date (as hereinafter defined) equal to the percentage interest
specified on Schedule&nbsp;I hereto of all outstanding rights and obligations
under the Loan Agreement (collectively, the &#147;<b>Assigned Interests</b>&#148;).</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Such
Assignor:</FONT></FONT> </P>


<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; hereby
represents and warrants that its name set forth on Schedule&nbsp;I hereto  is its legal
name, that it is the legal and beneficial owner of the Assigned  Interest and that such
Assigned Interest is free and clear of any adverse claim; </FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; other
than as provided herein, makes no representation or warranty and  assumes no
responsibility with respect to any statements, warranties or  representations made in or
in connection with the Loan Agreement or any of the  other Loan Documents, or the
execution, legality, validity, enforceability,  genuineness, sufficiency or value of, or
the perfection or priority of any lien  or security interest created or purported to be
created under or in connection  with, the Loan Agreement or any of the other Loan
Documents, or any other  instrument or document furnished pursuant thereto; </FONT></FONT> </P>


<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; makes
no representation  or warranty and assumes no responsibility with respect to the
financial  condition of the Borrowers or the Parent or the performance or observance by
the  Borrowers or the Parent of any of their respective Obligations under or in  respect
of any of the Loan Documents, or any other instrument or document  furnished pursuant
thereto; and </FONT></FONT> </P>


<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(d)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;attaches the Note held by such Assignor for  the Assigned
Interests specified on Schedule I hereto and requests that the  Borrowers exchange such
Note for a new Note payable either to the order of such  Assignee or to its registered
assigns in an amount equal to the Assigned  Interests assumed by such Assignee pursuant
hereto and either to the order of  such Assignor or to its registered assigns in an
amount equal to the interests  retained by such Assignor under the Loan Agreement,
respectively, as specified  on Schedule I hereto.</FONT></FONT> </P>

<p align=center>
<font size=2>H-1
</font></p>
<br><hr noShade color="black">





<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 87; page: 87" -->



<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Such
Assignee:</FONT></FONT> </P>




<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; confirms
that it has received a copy of the Loan Agreement, together with copies  of the financial
statements referred to in Section&nbsp;7.01 thereof and such  other documents and
information as it has deemed appropriate to make its own  credit analysis and decision to
enter into this Assignment and Acceptance; </FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; agrees that it will, independently and  without reliance
upon the Lender and  based on such documents and information as it shall  deem
appropriate at the  time, continue to make its own credit decisions in taking or not
taking action  under the Loan Agreement;</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; represents
and warrants that its name set  forth on  Schedule&nbsp;I hereto is its legal name; </FONT></FONT> </P>


<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; agrees
that, from and after the  Effective Date, it will be bound by the provisions of the Loan
Agreement and the  other  Loan Documents and, to the extent of the Assigned Interest, it
will  perform in  accordance with their terms all of the obligations that by the terms
of the Loan  Agreement are required to be performed by it as a Lender; and </FONT></FONT> </P>


<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
effective date for  this Assignment and Acceptance (the &#147;Effective  Date&#148;)
shall be the date  specified on Schedule&nbsp;I hereto.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">As
of the Effective Date, (a)&nbsp;such Assignee shall be a party to the Loan
Agreement and, to the extent that rights and obligations under the Loan
Agreement have been assigned to it pursuant to this Assignment and Acceptance,
have the rights and obligations of a Lender thereunder and (b)&nbsp;such
Assignor shall, to the extent that any rights and obligations under the Loan
Agreement have been assigned by it pursuant to this Assignment and Acceptance,
relinquish its rights (other than provisions of the Loan Documents that are
specified under the terms of such Loan Documents to survive the payment in full
of the Obligations of the Borrowers under or in respect of the Loan Documents)
and be released from its obligations under the Loan Agreement (and, if this
Assignment and Acceptance covers all or the remaining rights and obligations of
such Assignor under the Loan Agreement, such Assignor shall cease to be a party
thereto).</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">From
and after the Effective Date, the Borrowers shall make all payments under the
Loan Agreement and the Note in respect of the Assigned Interest to such
Assignee. Such Assignor and such Assignee shall make all appropriate adjustments
in payments under the Loan Agreement and the Note for periods prior to the
Effective Date directly between themselves.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">This
Assignment and Acceptance shall be governed by, and construed in accordance
with, the laws of the State of New York.</FONT></FONT> </P>

<p align=center>
<font size=2>H-2
</font></p>
<br><hr noShade color="black">





<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 88; page: 88" -->



<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">This
Assignment and Acceptance shall be binding upon, and inure to the benefit of,
the parties hereto and their respective successors and assigns. This Assignment
and Acceptance may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement. Delivery of an executed counterpart of Schedule&nbsp;I
hereto by telecopier shall be effective as delivery of an originally executed
counterpart of this Assignment and Acceptance.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><b>IN
WITNESS WHEREOF</b>, each Assignor and each Assignee have caused Schedule&nbsp;I
hereto to be executed by their respective officers thereunto duly authorized, as
of the date specified thereon.</FONT></FONT> </P>

<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>


<p align=center>
<font size=2>H-3
</font></p>
<br><hr noShade color="black">





<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 89; page: 89" -->






<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A129"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Schedule
I<BR>to<BR>ASSIGNMENT
AND ACCEPTANCE</FONT></FONT></H1>



<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="100%">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"></TH>
     <TH COLSPAN="2"></TH>
     <TH COLSPAN="2"></TH>
     <TH COLSPAN="2"></TH>
     <TH COLSPAN="2"></TH>
     <TH COLSPAN="2"></TH></TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="68%" ALIGN="LEFT">Percentage interest assigned</TD>
     <TD WIDTH="4%" ALIGN="LEFT">&nbsp;</TD>
     <TD WIDTH="2%" ALIGN="LEFT">%</TD>
     <TD WIDTH="4%" ALIGN="LEFT">&nbsp;</TD>
     <TD WIDTH="2%" ALIGN="LEFT">%</TD>
     <TD WIDTH="4%" ALIGN="LEFT">&nbsp;</TD>
     <TD WIDTH="2%" ALIGN="LEFT">%</TD>
     <TD WIDTH="4%" ALIGN="LEFT">&nbsp;</TD>
     <TD WIDTH="2%" ALIGN="LEFT">%</TD>
     <TD WIDTH="4%" ALIGN="LEFT">&nbsp;</TD>
     <TD WIDTH="2%" ALIGN="LEFT">%</TD>
     <TD WIDTH="2%" ALIGN="LEFT">&nbsp;</TD></TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT">Amount of Maximum Credit assigned</TD><TD ALIGN="LEFT">&nbsp;</TD>
     <TD ALIGN="LEFT">$</TD><TD ALIGN="LEFT">&nbsp;</TD>
     <TD ALIGN="LEFT">$</TD><TD ALIGN="LEFT">&nbsp;</TD>
     <TD ALIGN="LEFT">$</TD><TD ALIGN="LEFT">&nbsp;</TD>
     <TD ALIGN="LEFT">$</TD><TD ALIGN="LEFT">&nbsp;</TD>
     <TD ALIGN="LEFT">$</TD><TD ALIGN="LEFT">&nbsp;</TD></TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT">Aggregate outstanding principal amount of Loans</TD><TD ALIGN="LEFT">&nbsp;</TD></TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT">assigned</TD><TD ALIGN="LEFT">&nbsp;</TD>
     <TD ALIGN="LEFT">$</TD><TD ALIGN="LEFT">&nbsp;</TD>
     <TD ALIGN="LEFT">$</TD><TD ALIGN="LEFT">&nbsp;</TD>
     <TD ALIGN="LEFT">$</TD><TD ALIGN="LEFT">&nbsp;</TD>
     <TD ALIGN="LEFT">$</TD><TD ALIGN="LEFT">&nbsp;</TD>
     <TD ALIGN="LEFT">$</TD><TD ALIGN="LEFT">&nbsp;</TD></TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT">Principal amount of Note payable to Assignor</TD><TD ALIGN="LEFT">&nbsp;</TD>
     <TD ALIGN="LEFT">$</TD><TD ALIGN="LEFT">&nbsp;</TD>
     <TD ALIGN="LEFT">$</TD><TD ALIGN="LEFT">&nbsp;</TD>
     <TD ALIGN="LEFT">$</TD><TD ALIGN="LEFT">&nbsp;</TD>
     <TD ALIGN="LEFT">$</TD><TD ALIGN="LEFT">&nbsp;</TD>
     <TD ALIGN="LEFT">$</TD><TD ALIGN="LEFT">&nbsp;</TD></TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT">Principal amount of Note payable to Assignee</TD><TD ALIGN="LEFT">&nbsp;</TD>
     <TD ALIGN="LEFT">$</TD><TD ALIGN="LEFT">&nbsp;</TD>
     <TD ALIGN="LEFT">$</TD><TD ALIGN="LEFT">&nbsp;</TD>
     <TD ALIGN="LEFT">$</TD><TD ALIGN="LEFT">&nbsp;</TD>
     <TD ALIGN="LEFT">$</TD><TD ALIGN="LEFT">&nbsp;</TD>
     <TD ALIGN="LEFT">$</TD><TD ALIGN="LEFT">&nbsp;</TD></TR>
</TABLE>


<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">Assignor</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2">&nbsp;</td>
  </tr>
  <tr>
    <td width="47%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif"><em>[Type
      or print legal name of Assignor]</em></font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="51%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">By:</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">___________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name:</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title:</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">Dated: _________ _____,_______</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2">&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">Assignee</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif"><em>[Type
      or print legal name of Assignee]</em></font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">By:</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">___________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name:</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title:</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Dated: _________ _____,_______</font></td>
  </tr>
</table>



<p align=center>
<font size=2>H-4
</font></p>
<br><hr noShade color="black">





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<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A140"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">EXHIBIT
I</FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A141"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">FORM
OF NOTICE OF PREPAYMENT</FONT></FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">[Date]</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<A NAME="A142"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Morgan
Stanley Mortgage Capital Inc.1221 Avenue of the Americas 27th FloorNew York, New York
10020</B></FONT></FONT> </P>



<P><Font Face="Times New Roman" Size="2">Attention:  ___________________</font></P>


<!-- MARKER FORMAT-SHEET="Para Hang Roman In 1" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Re: </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U> Aames
Capital Corporation and Aames Funding Corporation</U></FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<P><Font Face="Times New Roman" Size="2">Ladies and Gentlemen:</font></P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">This
Notice of Prepayment is delivered to you pursuant to Section 2.07 of the Second
Amended and Restated Master Loan and Security Agreement, dated as of August 29,
2003 (as amended, supplemented, restated, or otherwise modified from time to
time, the &#147;<U>Loan Agreement</U>&#148;) among Aames Capital Corporation
(&#147;<U>Aames Capital</U>&#148;), Aames Funding Corporation (&#147;<U>Aames
Funding</U>&#148; and together with Aames Capital, each a &#147;Borrower&#148; and
collectively, the &#147;<U>Borrowers</U>&#148;) and Morgan Stanley Mortgage Capital
Inc. (the &#147;<U>Lender</U>&#148;). Unless otherwise defined herein or the context
otherwise requires, terms used herein have the meanings provided in the Loan
Agreement.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
Borrowers hereby irrevocably notify the Lender that the Borrowers shall prepay
the Loans, on ______________, 20__, in aggregate principal amount of
$[____________] and requests the release by the Lender of all right, interest,
lien or claim of any kind with respect to the Mortgage Loans described in the
attached Schedule A.</FONT></FONT> </P>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A144"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">[Signature
page follows]</FONT></FONT></H1>


<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>

<p align=center>
<font size=2>I-2
</font></p>
<br><hr noShade color="black">





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<!-- MARKER PAGE="sheet: 91; page: 91" -->





<!-- MARKER FORMAT-SHEET="Para" -->
<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Each
Borrower has caused this Notice of Prepayment to be executed and delivered, and
the certification and warranties contained herein to be made, by its duly
authorized officer this __th day of ___________________, 20__.]</FONT></FONT> </P>



<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td>&nbsp;</td>
    <td colspan="2">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2">&nbsp;</td>
  </tr>
  <tr>
    <td width="47%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">AAMES
      CAPITAL CORPORATION</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="51%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">By:</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">___________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name:</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title:</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">AAMES
      FUNDING CORPORATION</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><div align="right"><font size="2" face="Times New Roman, Times, serif">By:</font></div></td>
    <td><font size="2" face="Times New Roman, Times, serif">___________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name:</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title:</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="47%">&nbsp;</td>
    <td width="53%">&nbsp;</td>
  </tr>
</table>


<p align=center>
<font size=2>I-2
</font></p>
<br><hr noShade color="black">





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<!-- MARKER FORMAT-SHEET="Head Sub 1" -->
<A NAME="A149"></A>
<P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Schedule
A</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A150"></A>
<H1 ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">SCHEDULE
OF MORTGAGE LOANS PROPOSED TO BE RELEASED</FONT></FONT></H1>



<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>

<PAGE>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>
<P><font face="Times New Roman"  Size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></P>



<p align=center>
<font size=2>I-3
</font></p>
<br><hr noShade color="black">




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