In a move that analysts are applauding, Aames Financial Corp. arranged this week to buy One Stop Mortgage Inc.

Purchase of the Costa Mesa, Calif.-based home equity lender would let Aames substantially increase volume by bringing in loans from brokers. This wholesale business would be a new resource for Los Angeles-based Aames, which originates loans through 48 retail offices and buys bulk portfolios.

"We wanted to flesh out our entire spectrum of loan acquisition," said Gary Judis, Aames' chief executive officer. "This allows us to enjoy a 360- degree position."

Aames will issue 2.3 million shares of common stock, valued at about $110 million, for the purchase.

One Stop, which originates loans through 25 offices in 21 states, reported second-quarter volume of $126 million. Aames originated $300 million of loans during the quarter.

"It's really a perfect marriage," said Neil B. Kornswiet, president and chief executive of One Stop. "They had retail and servicing, which we were looking to get into; we had wholesale. Our product mix will improve their delinquencies, and we will be able to use their resources."

Mr. Kornswiet will retain his title after the acquisition under a five- year employment contract and join Aames' board of directors. One Stop branches will retain their names.

One Stop was founded by Mr. Kornswiet last August after he left Orange, Calif.-based Quality Mortgage, a subprime lender that has been saddled with poorly performing loan securitizations in recent months.

The acquisition reduces Aames' vulnerability to rising production costs, said a report from Natwest Securities Corp. Aames' move signals that its management team is focused on building a strong business, the report added.

The deal is expected to close by September. After the closing, Aames will drop One Stop's credit facilities with Lehman Brothers, which will produce a one-time, after-tax expense for that quarter.

Aames has seen its stock price increase more than 150% since Jan. 1, to $46 at Wednesday's close.

Piper Jaffray Inc., the Minneapolis-based investment firm, raised its earnings per share estimates for Aames after the deal's announcement.

Natwest Securities reduced its investment rating this week on Aames' shares, from "buy" to "accumulate," despite its approval of the One Stop purchase. Aames' stock is no longer undervalued, the firm said.

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