FIRSTAMENDMENT TO AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT

GOVERNINGPURCHASES AND SALES OF MORTGAGE LOANS

        ThisAmendment, dated as of November 19, 2003 (the “Amendment”), tothe Amended and Restated Master Repurchase Agreement Governing Purchases andSales of Mortgage Loans, dated as of July 30, 2003 (the “Agreement”),is made by and between LEHMAN BROTHERS BANK, FSB (“Buyer”) andAAMES CAPITAL CORPORATION (“Seller” and, together with theBuyer, the “Parties”).

RECITALS

        WHEREAS,the Seller and the Buyer are parties to the Agreement, pursuant to which theBuyer has agreed, subject to the terms and conditions set forth in theAgreement, to purchase certain Mortgage Loans owned by the Seller, including,without limitation, all rights of Seller to service and administer such MortgageLoans. Terms used but not defined herein shall have the respective meaningsascribed to such terms in the Agreement, as amended hereby.

        WHEREAS,the Parties wish to amend the Agreement to modify certain of the terms andconditions governing the purchase and sale of the Mortgage Loans.

        NOW,THEREFORE, for good and valuable consideration, the receipt and sufficiency ofwhich are hereby acknowledged, the Parties hereto agree as follows:

   **Section1. Amendment.**

        1.1     As  of January 1, 2004, Section 13(a)(xii) is hereby deleted in its entirety andreplaced with the following:

   "(xii)Tangible Net Worth of the Guarantor shall at any time be less than $60,000,000;"

        1.2     As  of the date hereof, Section 13(a)(xxii) is hereby deleted in its entirety andreplaced with the following:

   “(xxii)Guarantor shall pay any dividends under its preferred stock at any time (itbeing understood and agreed that such dividends may accrue), other thandividends accumulated through and including December 31, 2003 (payable in one ormore installments on or prior to December 31, 2003) to holders of theGuarantor’s Series B Convertible Preferred Stock, Series C ConvertiblePreferred Stock and Series D Convertible Preferred Stock.”

   **Section2. Covenants, Representations and Warranties of the Parties.**

        2.1     Except as expressly amended by Section 1 hereof, the Agreement remains  unalteredand in full force and effect. Each of the Parties hereby reaffirms all  terms andcovenants made in the Agreement as amended hereby.

        2.2     Each of the Parties hereby represents and warrants to the other that (a) this  Amendmentconstitutes the legal, valid and binding obligation of such Party,  enforceable againstsuch Party in accordance with its terms, and (b) the  execution and delivery by suchParty of this Amendment has been duly authorized  by all requisite corporate action onthe part of such Party and will not violate  any provision of the organizationaldocuments of such Party.

1

----

   **Section3. Effect upon the Agreement.**

        3.1     Except as specifically set forth herein, the Agreement shall remain in full  force andeffect and is hereby ratified and confirmed. All references to the  “Agreement” inthe Amended and Restated Master Repurchase Agreement  Governing Purchases and Sales ofMortgage Loans shall mean and refer to the  Amended and Restated Master RepurchaseAgreement Governing Purchases and Sales  of Mortgage Loans as modified and amended hereby.

        3.2     The execution, delivery and effectiveness of this Amendment shall not operate as  awaiver of any right, power or remedy of any Party under the Agreement, or any  otherdocument, instrument or agreement executed and/or delivered in connection  therewith.

   **Section4. Governing Law.**

        THISAMENDMENT SHALL BE CONSTRUED, INTERPRETED AND GOVERNED BY THE LAW OF THE STATEOF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.

   **Section5. Counterparts.**

   ThisAmendment may be executed in any number of counterparts, and all suchcounterparts shall together constitute the same agreement.

[Remainderof Page Intentionally Left Blank]

        

        

        

        

        

2

----

        INWITNESS WHEREOF, the Parties hereto have caused this Amendment to be executed asof the day and year first above written.

|   |   | **SELLER:**      AAMES CAPITAL CORPORATION, as Seller |
|--------|--------|-------------------------------------------------------|
|   |   |                                                  |
|   |   |                                                  |
|   |   | By:_____________________________________              |
|   |   | Name:      Title:                                     |
|   |   |                                                  |
|   |   |                                                  |
|   |   | **BUYER:**      LEHMAN BROTHERS BANK, FSB, as Buyer   |
|   |   |                                                  |
|   |   |                                                  |
|   |   | By:______________________________________             |
|   |   | Name:      Title:                                     |

3

----