AMENDMENT NO. 2 TO THE
MASTER LOAN AND SECURITY AGREEMENT

AMENDMENT NO. 2, dated as of November 22, 2002 (this Amendment), to the Master Loan and Security Agreement, dated
as of November 16, 2001 (as previously amended, supplemented or otherwise modified, the Existing Loan Agreement, and as amended
hereby and as further amended, supplemented or otherwise modified from time to time, the Loan Agreement), among AAMES CAPITAL
CORPORATION (Aames Capital), AAMES FUNDING CORPORATION (Aames Funding and together with Aames Capital, each a Borrower and
collectively, the Borrowers) and MORGAN STANLEY DEAN WITTER MORTGAGE CAPITAL INC. (the Lender).

RECITALS

The  Borrowers and the Lender are parties to the Existing Loan  Agreement.  Capitalized  terms used but not otherwise
defined herein shall have the meanings given to them in the Existing Loan Agreement.

The Borrower and the Lender have agreed,  subject to the terms and  conditions of this  Amendment,  that the Existing
Loan Agreement be amended to revise certain provisions including, but not limited to, extending the Termination Date.

Accordingly,  the  Borrower  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 as follows:

Section 1.  Amendments.

(a)  Section 1.01 of the  Existing  Loan  Agreement  is hereby  amended by deleting the  definition  of  Termination  Date in its
entirety and substituting in lieu thereof the following new definition:

Termination Date shall mean May 15, 2003 or such earlier  date on which this Loan  Agreement  shall  terminate in
         accordance with the provisions hereof or by operation of law.

(b)  The Existing Loan Agreement is hereby amended by deleting  Section 7.17 in its entirety and  substituting  in lieu thereof the
following new Section 7.17:

7.17  Committed
  Warehouse Facilities. Aames Capital shall at all times maintain committed
  revolving facilities, other than Lender's committed revolving facility, greater
  than or equal to $600,000,000.

Section 2.  Facility Fee. The Borrowers agree to pay, jointly and severally, to the Lender on or prior to the Amendment
Effective Date (defined below) a facility fee equal to 50 basis points (0.50%) of the Maximum Credit (the Facility Fee) for the
period from the Amendment Effective Date to the Termination Date, such payment to be made in Dollars, in immediately available funds,
without deduction, set-off or counterclaim, to the Lender at the account set forth in Section 3.01(a) of the Loan Agreement.

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Section 3.  Conditions Precedent.
This Amendment shall become effective on the date (the Amendment Effective Date) on which
the following conditions precedent shall have been satisfied:

3.1  Delivered Documents. On the Amendment Effective Date, the Lender shall have received the following
documents, each of which shall be satisfactory to the Lender in form and substance:

(a)  Amendment. This Amendment, executed and delivered by a duly authorized officer of each Borrower and the Lender;

(b)  Legal Opinion. A legal opinion of counsel to the Borrowers, in form and substance satisfactory to the Lender;

(c)  Organizational
  Documents. 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 this Amendment (and the Lender may conclusively rely on such
  certificate until it receives notice in writing from the Borrower to the
  contrary); and

(d)  Other Documents. Such other documents as the Lender or counsel to the Lender may reasonably request.

3.2  Facility Fee. The Lender shall have received the Facility Fee.

3.3  No Default. On the Amendment Effective Date, (i) each Borrower shall be in compliance with all the terms
and provisions set forth in the Existing Loan Agreement on its part to be observed or performed, (ii) the representations and
warranties made and restated by the Borrowers pursuant to Section 4 of this Amendment shall be true and complete on and as of such
date with the same force and effect as if made on and as of such date, and (iii) no Default shall have occurred and be continuing on
such date.

Section 4.  Representations and Warranties. Each Borrower hereby represents and warrants to the Lender that it is in compliance
with all the terms and provisions set forth in the Loan Documents on its part to be observed or performed, and that no Default has
occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Section 6 of the Loan
Agreement.

Section 5.  Limited Effect. Except as expressly amended and modified by this Amendment, the Existing Loan Agreement shall
continue to be, and shall remain, in full force and effect in accordance with its terms; provided, however, that reference therein
and herein to the Loan Documents shall be deemed to include, in any event, (i) the Existing Loan Agreement, (ii) Amendment No. 1 to
the Master Loan and Security Agreement, dated as of November 14, 2002, (iii) this Amendment, (iv) the Note, (v) the Custodial
Agreement and (vi) the Custodial Joinder Agreement. Each reference to the Loan Agreement in any of the Loan Documents shall be
deemed to be a reference to the Loan Agreement as amended hereby. The execution of this Amendment by the Lender shall not operate as
a waiver of any of its rights, powers or privileges under the Loan Agreement or under any of the other Loan Documents except as
expressly set forth herein.

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Section 6.  Counterparts. This Amendment may be executed by each of the parties hereto on any number of separate counterparts,
each of which shall be an original and all of which taken together shall constitute one and the same instrument.

Section 7.  GOVERNING  LAW. THIS  AMENDMENT  SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE  WITH, THE LAW OF THE STATE OF NEW
YORK WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF.

IN WITNESS  WHEREOF,  the parties  hereto have caused this  Amendment to be duly executed and delivered as of the day
and year first above written.



|                                                          |                              
|--------------------------------------------------------- | -----------------------------
|BORROWER                                                  |                              
|                                                          |                              
|**AAMES
      CAPITAL CORPORATION**                       |                              
|                                                          |                              
|                                                          |                              
|By                                                        | _____________________________
|Name:                                                     |                              
|Title:                                                    |                              
|                                                          |                              
|**AAMES
      FUNDING CORPORATION**                       |                              
|                                                          |                              
|                                                          |                              
|By                                                        | _____________________________
|Name:                                                     |                              
|Title:                                                    |                              
|                                                          |                              
|LENDER                                                    |                              
|                                                          |                              
|**MORGAN
      STANLEY DEAN WITTER MORTGAGE CAPITAL INC** |                              
|                                                          |                              
|                                                          |                              
|By                                                        | __________________________   
|Name:
      Andrew B. Neuberger                           |                              
|Title:
      Vice President                               |                              



























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