Initial Mortgage Loan Conveyance Agreement

INITIAL MORTGAGE LOAN CONVEYANCE AGREEMENT


BETWEEN


AAMES CAPITAL CORPORATION
AS SELLER


AND


AAMES CAPITAL ACCEPTANCE CORP.
AS PURCHASER


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Dated as of March 1, 1997


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Initial Mortgage Loan Conveyance Agreement


This Initial Mortgage Loan Conveyance Agreement (this "Agreement"), dated as of March 1, 1997, is between Aames Capital Corporation (the "Seller") and Aames Capital Acceptance Corp. (the "Purchaser").


The Seller intends to convey and the Purchaser intends to acquire certain adjustable rate home equity mortgage loans (the "Mortgage Loans") as provided in this Agreement. The Purchaser intends to convey the Mortgage Loans to Aames Capital Owner Trust 1997-1 (the "Issuer"). The Issuer will in turn pledge the Mortgage Loans to Bankers Trust Company of California, N.A., as trustee (the "Indenture Trustee"), under an indenture, to be dated as of March 1, 1997 (the "Indenture"), by and between the Issuer and the Indenture Trustee, pursuant to which the Issuer's Adjustable Rate Asset-Backed Bonds, Series 1997-1 (the "Bonds") will be issued.


Now, therefore, in consideration of the premises and the mutual agreements set forth herein, the parties agree as follows:


SECTION 1. Definitions. Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the meanings specified in this Section.


Adjustment Date: With respect to any Mortgage Loan, the date on which a change to the Mortgage Loan Rate becomes effective.


Affiliate: With respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings corresponding to the foregoing.


Agreement: This Initial Mortgage Loan Conveyance Agreement and all amendments hereof and supplements hereto.


Appraised Value: The appraised value of any Mortgaged Property based upon the lesser of (i) the appraisal or valuation made either at the time of the origination of the related Mortgage Loan or, in certain cases with respect to Mortgage Loans acquired directly or indirectly by the Seller from an originator not affiliated with the Seller, at or immediately prior to the date of acquisition of the related Mortgage Loan, and (ii) in the case of a Mortgage Loan that is a purchase money mortgage loan, the sales price of the related Mortgage Property at the time of the origination of the related Mortgage Loan.


Bond Account: As defined in Article I of the Servicing Agreement.


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Bond Insurer: Financial Security Assurance Inc., a stock insurance company organized and created under the laws of the State of New York, and any successors thereto, as issuer of a financial guaranty insurance policy for the benefit of the Bondholders.


Bondholders: The beneficial owners of the Bonds.


Bonds: The Issuer's Adjustable Rate Asset-Backed Bonds, Series 1997-1.


Bulk Purchase Mortgage Loans: Each Mortgage Loan that has a Cut-off Date other than March 1, 1997.


Certificateholders: The holders of beneficial interests in the Issuer, which beneficial interests are issued pursuant to the Trust Agreement.


Closing: The closing of the conveyance of the Mortgage Loans pursuant to this Agreement.


Closing Date: March 26, 1997 or such other date as shall be mutually acceptable to the parties hereto.


Closing Documents: All documents specified in Section 6 of this Agreement.


Cut-off Date: As to each Mortgage Loan, the date specified as the "Cut-off Date" in the Mortgage Loan Schedule.


Defective Mortgage Loan: Any Mortgage Loan that is required to be repurchased or substituted by the Seller pursuant to Section 3(g) or Section 5.


Deleted Mortgage Loan: Any Mortgage Loan replaced or to be replaced by a Qualified Replacement Mortgage Loan.


FEMA: The Federal Emergency Management Agency and its successors in interest.


Gross Margin: With respect to a Mortgage Loan, the fixed percentage amount set forth in the related Mortgage Note, which amount is added to the Index in accordance with the terms of the related Mortgage Note to determine the Mortgage Loan Rate.


Indenture: That certain Indenture, to be dated as of March 1, 1997, by and between the Issuer and the Indenture Trustee, pursuant to which the Bonds will be issued, and all amendments thereof and supplements thereto.


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Indenture Trustee: Bankers Trust Company of California, N.A., a national banking association, and its successors in interest or any successor trustee appointed as provided pursuant to the Indenture.


Index: With respect to any Mortgage Loan, the applicable index for computing the Mortgage Loan Rate as specified in the Mortgage Note.


Initial Pool Balance: $335,635,754.48, which is the aggregate of the principal balances of the Mortgage Loans pursuant to this Agreement as of the close of business on the applicable Cut-off Dates, after application of all payments of principal received in respect of such Mortgage Loans before the applicable Cut-off Dates.


Issuer: Aames Capital Owner Trust 1997-1, a Delaware business trust, as Issuer of the Bonds pursuant to the Indenture.


Lien: As applied to the property or assets (or the income or profits therefrom) of any Person, in each case whether the same is consensual or nonconsensual or arises by contract, operation of law, legal process or otherwise: (a) any mortgage, lien, pledge, attachment, charge, lease, conditional sale or other title retention agreement, or other security interest or encumbrance of any kind or (b) any arrangement, express or implied, under which such property or assets are transferred, sequestered or otherwise identified for the purpose of subjecting or making available the same for the payment of debt or performance of any other obligation in priority to the payment of the general, unsecured creditors of such Person.


Loan-to-Value Ratio: The original principal amount of a Mortgage Loan as a percentage of the Appraised Value of the related Mortgaged Property determined by the Seller at the time of origination or acquisition of such Mortgage Loan.


Maximum Rate: With respect to any Mortgage Loan, any absolute maximum Mortgage Loan Rate, set by provisions in the related Mortgage Note.


Minimum Rate: With respect to any Mortgage Loan, any absolute minimum Mortgage Loan Rate, set by provisions in the related Mortgage Note, subject to the initial Mortgage Loan Rate first adjusting to a level in excess of such minimum Mortgage Loan Rate in accordance with the terms of the Mortgage Note.


Monthly Payment: With respect to any Mortgage Note, the amount of each monthly payment payable under such Mortgage Note in accordance with its terms, including one month's accrued interest on the related principal balance at the then applicable Mortgage Loan Rate, but net of any portion of such monthly payment that represents late payment charges, prepayment or extension fees or collection allocable to payments made by mortgagors for payment of insurance premiums or similar items.


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Mortgage: The mortgage, deed of trust or other instrument creating a first lien on an estate in fee simple in real property securing a Mortgage Loan.


Mortgage File: The file for each Mortgage Loan containing the items specified on Exhibit C annexed hereto.


Mortgage Loan: Each of the adjustable rate home equity mortgage loans listed on the Mortgage Loan Schedule that are the subject of this Agreement.


Mortgage Loan Contribution Agreement: That certain agreement, to be dated as of March 1, 1997, between the Purchaser and the Issuer pursuant to which the Purchaser will convey the Mortgage Loans and assign its rights under this Agreement to the Issuer.


Mortgage Loan Rate: With respect to any Mortgage Loan, the per annum rate of interest computed in accordance with the provisions of the related Mortgage Note as the sum of the Index and the Gross Margin, subject to any Minimum Rate, the Maximum Rate or periodic limitation on adjustments to such rate applicable from time to time to the calculation of interest thereon.


Mortgage Loan Schedule: The schedule of Mortgage Loans annexed hereto as Exhibit A setting forth as to each such Mortgage Loan, among other things, (a) its identifying number and the name of the related Mortgagor; (b) the street address of the related Mortgaged Property including the state, county and zip code; (c) its date of origination; (d) the original number of months to stated maturity; (e) its original stated maturity; (f) its original principal balance; (g) its principal balance as of the applicable Cut-off Date; (h) the related Mortgage Loan Rate as of the applicable Cut-off Date and the related Index, Gross Margin, Minimum Rate, Maximum Rate and any periodic limitations on adjustment; (i) the scheduled monthly payment of principal and interest; (j) the date in each month on which the related Monthly Payments are due; (k) its Loan-to-Value Ratio or the ratio, expressed as a percentage, of the original principal balance of such Mortgage Loan to the Appraised Value of the related Mortgaged Property; (l) the lien status of the related Mortgage; (m) whether the related Mortgaged Property is owner-occupied or non-owner-occupied; (n) whether the related Mortgaged Property is a single-family residence, a two-to four-family residence, a manufactured home or a unit in a condominium or planned unit development; (o) whether the Mortgage Loan has been originated by an Affiliate of the Seller; and (p) whether the Mortgage Loan is being serviced by a sub-servicer and, if so, the identity of such sub-servicer. The Mortgage Loan Schedule shall be amended from time to time to reflect the repurchase or substitution of Mortgage Loans pursuant to this Agreement.


Mortgage Note: The note or other instrument evidencing the indebtedness of a Mortgagor under the related Mortgage Loan.


Mortgaged Property: The underlying property securing a Mortgage Loan.


Mortgager: The obligor under a Mortgage Note.


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Owner Trustee: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, or any successor Owner Trustee under the Trust Agreement.


Person: Any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.


Purchaser: Aames Capital Acceptance Corp., a Delaware corporation.


Qualified Replacement Mortgage Loan: Any Mortgage Loan that is substituted for a Deleted Mortgage Loan pursuant to Section 3(g) or Section 5 that must, at the end of the calendar month preceding the date of such substitution, (i) have an outstanding principal balance (when taken together with any other Qualified Replacement Mortgage Loan being substituted for such Deleted Mortgage Loan), not in excess of and not substantially less than the unpaid principal balance of the Deleted Mortgage Loan at the end of the calendar month preceding the date of substitution, (ii) have the Mortgage Loan Rate computed on substantially the same basis as the Mortgage Loan Rate on the related Mortgage Loan, utilizing the same Index and having a Gross Margin or Minimum Rate not less than (and not more than one percentage point in excess of) the Gross Margin and Minimum Rate applicable to the Deleted Mortgage Loan, (iii) have a remaining term to maturity not greater than (and not more than one year less than) that of the Deleted Mortgage Loan, (iv) have a Loan-to-Value Ratio equal to or lower than the Loan-to-Value Ratio of the Deleted Mortgage Loan, (v) have the same lien priority as the Deleted Mortgage Loan, (vi) comply as of the date of substitution with each representation and warranty set forth in Section 4, (vii) have the same or better property type as the Deleted Mortgage Loan and (viii) have the same or better occupancy status. In the event that one or more mortgage loans are proposed to be substituted for one or more Deleted Mortgage Loans, the foregoing tests may be met on a weighted average basis or other aggregate basis acceptable to the Bond Insurer, except that the requirements of clauses (v), (vi), (vii) and (viii) hereof must be satisfied as to each Qualified Replacement Mortgage Loan.


Release Price: With respect to any Defective Mortgage Loan, an amount equal to (i) the sum of (A) the principal balance of such Defective Mortgage Loan as of the beginning of the calendar month next preceding the Remittance Date on which such repurchase is required to occur, (B) interest computed at the applicable Mortgage Loan Rate on such principal balance from the date to which interest was last paid by the Mortgagor to the last day of the calendar month immediately preceding the Remittance Date on which such repurchase occurs and (C) any previously unreimbursed Servicing Advances made on or in respect of such Defective Mortgage Loan, less (ii) any payments of principal and interest in respect of such Defective Mortgage Loan made by or on behalf of the related Mortgagor during such calendar month.


Remittance Date: As defined in Article I of the Servicing Agreement.


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Seller: Aames Capital Corporation, a California corporation.


Servicer: Aames Capital Corporation or any successor servicer appointed as provided pursuant to the Servicing Agreement.


Servicing Advances: As defined in Article I of the Servicing Agreement.


Servicing Agreement: That certain Servicing Agreement, to be dated as of March 1, 1997, by and among the Issuer, the Servicer and the Indenture Trustee relating to the servicing of mortgage loans, including the Mortgage Loans, owned by the Issuer from time to time.


Trust Agreement: That certain Trust Agreement, dated as of March 1, 1997, by and between the Owner Trustee and the Purchaser, in its capacity as depositor, relating to the Issuer.


SECTION 2. Agreement to Acquire. The Seller agrees to convey, and the Purchaser agrees to acquire, the Mortgage Loans identified on Mortgage Loan Schedule, as such Mortgage Loan Schedule may be amended to reflect the actual Mortgage Loans accepted by the Purchaser pursuant to the terms hereof. The conveyance of the Mortgage Loans shall take place on the Closing Date. The consideration for the Mortgage Loans conveyed pursuant to this Agreement shall be specified on Exhibit B annexed hereto, which consideration shall be exchanged on or prior to the Closing Date.


SECTION 3. Conveyance of Mortgage Loans.


(a) Effective as of the Closing Date, subject only to receipt of the consideration referred to in Section 2, the Seller does hereby transfer, assign, set over and otherwise convey to the Purchaser, without recourse, all the right, title and interest of the Seller in and to the Mortgage Loans identified on the Mortgage Loan Schedule as of such date.


(b) The Purchaser or its assignee shall be entitled to receive all payments of principal and interest received or deemed to be received by the Seller on or with respect to the Mortgage Loans on or after the applicable Cut-off Dates, and all other recoveries of principal and interest collected on or after the applicable Cut-off Dates (other than in respect of interest that accrued on such Mortgage Loans during periods prior to the applicable Cut-off Dates). All payments of interest due before the applicable Cut-off Dates but collected after the applicable Cut-off Dates, and recoveries of principal and interest collected before the applicable Cut-off Dates (other than amounts representing interest that accrued on the Mortgage Loans during any period on or after the applicable Cut-off Dates), shall belong to, and be promptly remitted to, the Seller.


(c) In connection with its conveyance of the Mortgage Loans pursuant to subsection (a) above, the Seller shall deliver to and deposit with, or cause to be delivered to and deposited with, the Purchaser or its designee, on or before the Closing Date, the Mortgage Files. In addition, the Seller shall bear all recording and/or filing costs related to the Mortgage Loans, and


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if any document or instrument indicated on Exhibit C as being required to be recorded or filed, as the case may be, is lost or returned unrecorded or unfiled, as the case may be, because of a defect therein, the Seller shall promptly prepare or cause to be prepared a substitute therefor or cure such defect, as the case may be.


If the Seller cannot deliver the original Mortgage or any intervening mortgage assignment with evidence of recording thereon concurrently with the execution and delivery of this Agreement solely because of a delay caused by the public recording office where such original Mortgage or mortgage assignment has been delivered for recordation, the Seller shall deliver to the Purchaser or its designee an Officer's Certificate, with a photocopy of such Mortgage or mortgage assignment, as the case may be, attached thereto, stating that such original Mortgage or mortgage assignment has been delivered to the appropriate public recording official for recordation. The Seller shall promptly deliver to the Purchaser or its designee such original Mortgage or intervening mortgage assignment with evidence of recording indicated thereon upon receipt thereof from the public recording official. If the Purchaser within six months from the Closing Date shall not have received such original Mortgage or intervening mortgage assignment from the public recording official, it shall obtain, and deliver to the Trustee within eight months from the Closing Date, a copy of such original Mortgage or mortgage assignment certified by such public recording official to be a true and complete copy of such original Mortgage or mortgage assignment as recorded by such public recording office.


(d) All documents and records relating to the Mortgage Loans that are held by or on behalf of the Seller, but not specified on Exhibit C as required to be a part of a Mortgage File, shall be delivered to the Purchaser or its designee on or before the Closing Date.


(e) In connection with its conveyance of the Mortgage Loans pursuant to subsection (a) above, the Seller shall deliver to the Purchaser or its designee in respect of the Mortgage Loans, on or before the Closing Date, all amounts, if any, received on each Mortgage Loan on or after the applicable Cut-off Date (other than amounts representing interest that accrued during any period prior to the applicable Cut-off Date) and held by or on behalf of the Seller.


(f) The Seller confirms to the Purchaser that it has caused its computer records relating to the Mortgage Loans to indicate by a code that the Mortgage Loans have been sold to the Purchaser and that the Seller will treat the transaction contemplated by such sale and assignment as a sale in accordance with generally accepted accounting principles and will reflect such sale on its primary accounting records.


(g) The Purchaser or its assignees will cause the Indenture Trustee, for the benefit of the Bondholders, to review each Mortgage File within 45 days after the Closing Date to determine whether the documents described in items (a)-(c), (e) and (f) on Exhibit C have been executed and received, and whether such documents relate to the Mortgage Loans identified in the Mortgage Loan Schedule and in so doing the Indenture Trustee may rely on the purported due execution and genuineness of any such document and on the purported genuineness of any


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signature thereon. If within such 45-day period the Indenture Trustee finds any document constituting a part of a Mortgage File not to have been executed or received or to be unrelated to the Mortgage Loans identified in the Mortgage Loan Schedule, the Purchaser or its assignees shall promptly notify the Seller of such findings and shall provide a copy of such notice to the Bond Insurer. The Seller shall have a period of 60 days from the date of such notice to correct or cure any such defect.


If the Seller has been notified of a defect in a Mortgage File that materially and adversely affects the value of the related Mortgage Loan, and such defect remains uncured after such 60-day period, the Seller shall, (i) in the case of a defect consisting solely of the failure of the Seller to deliver the original Mortgage or any intervening mortgage assignment with evidence of recording thereon for reasons set forth in Section 3(c), on the first Remittance Date occurring after the expiration of eight months from the Closing Date, and (ii) in the case of all other defects, on the Remittance Date occurring not later than 60 days after receipt of notice of such defect, as the case may be, either (I) repurchase the related Mortgage Loan (including any property acquired in respect thereof and any insurance policy or current or future insurance proceeds with respect thereto) from the holder of such Mortgage Loan at such time at a price equal to the Release Price, which shall be accomplished by deposit of monies by the Seller in the Bond Account on such Remittance Date, or (II) substitute one or more Qualified Replacement Mortgage Loans for the related Mortgage Loan.


Upon receipt by the Purchaser or its assignees of an Officer's Certificate of the Seller to the effect that the Release Price for a Defective Mortgage Loan (other than a Defective Mortgage Loan that is a Deleted Mortgage Loan) has been deposited in the Bond Account, and upon confirmation by the Indenture Trustee that such Release Price has been received by it, the Purchaser shall cause the execution and delivery of such instrument of transfer or assignment presented to it by the Seller, in each case without recourse, as shall be necessary to vest in the Seller legal and beneficial ownership of such repurchased Defective Mortgage Loan (including any property acquired in respect thereof or insurance policy or current or future insurance proceeds with respect thereto).


Payments received with respect to Qualified Replacement Mortgage Loans in the calendar month prior to the Remittance Date on which such substitution occurs will be retained by the Seller. No amounts will be remitted to Seller in respect of the payments received on such Deleted Mortgage Loan in the calendar month prior to the related Remittance Date representing amounts due or accrued thereon prior to such Remittance Date, but the Seller shall thereafter be entitled to retain all amounts received subsequent to such Remittance Date in respect of such Deleted Mortgage Loan. In the case of a Qualified Replacement Mortgage Loan, the Mortgage File relating thereto shall be delivered to the Purchaser or its designee and the amount, if any, by which the principal balance of the related Deleted Mortgage Loan as of the related Remittance Date exceeds the principal balance of the Qualified Replacement Mortgage Loan as of the first day of the calendar month in which such Remittance Date occurs shall be remitted by the Seller for deposit in the Bond Account on the Remittance Date on which the substitution occurs. Upon


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receipt by the Purchaser or its assignee of an Officer's Certificate certifying that the Qualified Replacement Mortgage Loan conforms to the requirements of this Agreement and (a) written notification of such deposit by the Indenture Trustee and (b) the new Mortgage File (containing all of the documents referred to in clauses (a), (c), (e) and (f) of Exhibit C), the Purchaser shall cause to be released to the Seller the Mortgage File related to the Deleted Mortgage Loan or property and shall cause the execution and delivery of such instrument of transfer or assignment presented to it by the Seller, without recourse, as shall be necessary to vest in the Seller all of the legal and beneficial ownership of such Deleted Mortgage Loan or property and the Purchaser and its assignees shall have no further responsibility with respect to said Mortgage File. It is understood and agreed that the obligation of the Seller to substitute a Qualified Replacement Mortgage Loan for or repurchase any Defective Mortgage Loan (or any property acquired in respect thereof or insurance policy or current or future insurance proceeds with respect thereto) shall constitute the sole remedy against it respecting such defect available to the Purchaser and its assignees.


(h) The Seller shall, at any time upon the request of the Purchaser or its assignees, without limiting the obligations of the Seller under this Agreement, execute, acknowledge and deliver all such additional documents and instruments and all such further assurances and will do or cause to be done all such further acts and things as may be proper or reasonably necessary to carry out the intent of this Agreement.


SECTION 4. Representations, Warranties and Covenants of Seller.


(a) The Seller hereby represents and warrants to and covenants with the Purchaser, as of the date hereof, and shall be deemed to have represented and warranted to and covenanted with the Purchaser, as of the Closing Date, that:


(i) The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of
California. The Seller has the power and authority to execute and
deliver this Agreement and to perform its obligations in accordance
herewith; the execution, delivery and performance of this Agreement
(including all instruments of transfer to be delivered pursuant to this
Agreement) by the Seller and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all
necessary corporate action; this Agreement evidences the valid and
binding obligation of the Seller enforceable against the Seller in
accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating
to or affecting creditors' rights generally or the application of
equitable principles in any proceeding, whether at law or in equity;
and the consummation of the transactions contemplated hereby will not
result in the breach of any terms or provisions of the articles of
incorporation or bylaws of the Seller or result in the breach of any
term or provision of, or conflict with or constitute a default under or
result in the acceleration of any obligation under, any material
agreement, indenture or loan or credit agreement or other material
instrument to which the Seller or its property is


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subject, or result in the violation of any law, rule, regulation,
order, judgment or decree to which the Seller or its property is
subject;
...