Aames Financial is launching what it hopes will be a comeback with a 95% loan-to-value mortgage.

The Los Angeles specialty lender has had some tough times-a liquidity crisis and two quarters of losses-but Neil Notkin, an executive vice president, said the company is "reenergized."

"The marketing plan is to go out there and aggressively expand our share," Mr. Notkin said.

Aames said its new 95% loan-to-value mortgage is unique in that it can be used for a purchase or for debt consolidation. The company's retail operation will originate loans, and its wholesale division will act as a conduit for other lenders that have suitable customers.

"This allows traditional lenders who don't know much about the (subprime) market to make a modified left turn and get their toes wet in the subprime pond," Mr. Notkin said. "When we gain their confidence, we'll take them further down the food chain."

Mr. Notkin said borrowers can expect a 9.99% interest rate on 30-year, fixed-rate mortgages in a market where borrowers frequently pay 12% to 16%.

Candidates for the loans must have A-minus or B credit ratings and a minimum credit score of 601 from Fair, Isaac & Co.; prime-quality borrowers generally get Fair, Isaac scores above 620.

The loans require a 5% down payment, but two percentage points can be from gifts. A borrower can be 30 days late on a payment 12 times before a penalty is charged.

"We now rely on Fico scores," Mr. Notkin said, referring to the Fair, Isaac credit standard, "whereas before, we had our own internal ways to score a borrower. That is a definite shift for Aames because we needed to get acceptance from the market."

Analysts said that when brokers decided last year that the 125% loan-to- value product was not going to work as the market tumbled, many players had to change their business models to stay alive.

A 95% loan-to-value mortgage poses more risk for lenders than lower loan-to-value ratios, but such loans are becoming more commonplace. Even the secondary agencies have introduced 95% LTV products for first-time buyers with excellent credit ratings.

Industry watchers said they feel that this product is Aames' way of distinguishing itself upon returning to a floundering market and of recapturing business from its broker clients.

For the quarter that ended Dec. 31, Aames' loan writedowns caused a $195.7 million loss. It also reported a $36 million loss for the succeeding quarter. But it has joined forces with New York-based Capital Z Partners, which has pledged $100 million of much-needed cash.

The deal offered Capital Z a potential majority on Aames' board of directors and options to buy up to 76% of its shares at a fraction of their December trading value, for an aggregate investment of $76.5 million. In mid-July, Capital Z said it would invest an additional $25 million.

The deal, in which control of the company changed hands, amounted to an out-of-court bankruptcy reorganization.

But analysts said the second Capital Z investment indicates that Aames' turnaround is not going as planned. And they noted that a larger investment dilutes the potential rate of return on Capital Z's investment.

Some analysts said that Capital Z realized Aames no longer has a franchise value and that the new product would be a way to build a new niche.

Arthur Bender, an analyst at Sutro & Co., an equities research firm in San Francisco, agreed that the second investment suggests Aames' recovery is behind schedule.

But he added: "My gut feeling is that Aames is going to survive. At least when they needed the money they had a parent willing to step in, which shows they want to protect their investment. The question is, Can they reduce their expense base and still do enough originations to be profitable?"

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