Exhibit 10.1

AMENDMENT NO. 2
TO SALE AND SERVICING AGREEMENT

Amendment No. 2 to the Sale and Servicing Agreement, dated as of June 25, 2004 (this "Amendment"), by and among ABFS Balapointe, Inc, as depositor (the "Depositor"), American Business Credit, Inc., as an originator and servicer (the "Servicer"), HomeAmerican Credit, Inc., d/b/a Upland Mortgage, as an originator ("Upland"), American Business Mortgage Services, Inc., as an originator ("ABMS" and, together with the Servicer and Upland, the "Originators"), ABFS Mortgage Loan Warehouse Trust 2003-1, as trust (the "Trust"), American Business Financial Services, Inc., as sponsor (the "Sponsor"), JPMorgan Chase Bank, as indenture trustee (the "Indenture Trustee"), JPMorgan Chase Bank, as collateral agent (the "Collateral Agent") and JPMorgan Chase Bank, as note purchaser (the "Note Purchaser").

RECITALS

The Depositor, the Originators, the Servicer, the Trust, the Sponsor, the Indenture Trustee and the Collateral Agent are parties to that certain Sale and Servicing Agreement, dated as of September 22, 2003, (as amended by Amendment No. 1 to Sale and Servicing Agreement, dated as of May 12, 2004, the "Existing Sale Agreement"; as amended by this Amendment, the "Sale Agreement"). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in Appendix I to the Sale Agreement.

The Depositor, the Originators, the Servicer, the Trust, the Sponsor, the Indenture Trustee and the Collateral Agent have agreed, subject to the terms and conditions of this Amendment, that the Existing Sale Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Sale Agreement.

Accordingly, the Depositor, the Originators, the Servicer, the Trust, the Sponsor, the Indenture Trustee and the Collateral Agent hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing Sale Agreement is hereby amended, as follows:

SECTION 1. Definitions.

(a) The following definitions are hereby added to Appendix I of the Existing Sale Agreement:

"MERS": Mortgage Electronic Registration System, Inc. a corporation organized and existing under the laws of the State of Delaware or any successor thereto.

"MERS Mortgage Loan": Any Mortgage Loan registered with MERS on the MERS(R) System.

"MERS Procedures Manual": The MERS Procedures Manual, as it may be amended, supplemented or otherwise modified from time to time.

"MERS(R) System": MERS mortgage electronic registry system, as more particularly described in the MERS Procedures Manual.

"MIN": The mortgage identification number for any MERS Mortgage Loan.

"MOM Loan": Any Mortgage Loan as to which MERS is acting as original mortgagee, solely as nominee for the originator of such Mortgage Loan and its successors and assigns.

(b) The following definition is hereby amended and restated in its entirety to read as follows:

"Mortgage Loan Schedule": The schedule of Mortgage Loans as of the related Cut-Off Date attached as Schedule I to the related Assignment, which will be deemed to be modified automatically to reflect any replacement, sale, substitution, liquidation, transfer or addition of any Mortgage Loan, including the addition of a Mortgage Loan, pursuant to the terms hereof. The Mortgage Loan Schedule shall be transmitted either electronically or in hard copy, and shall set forth the following information with respect to each Mortgage Loan so pledged:

(i) the Originator's Mortgage Loan identifying number and the MIN in the case of MERS Mortgage Loans;

(ii) the Mortgagor's name and social security number;

(iii) the street address of the Mortgaged Property, including the state and zip code;

(iv) a code indicating whether the Mortgaged Property was represented by the Mortgagor as being owner-occupied on the date of origination;

(v) the type of Residential Dwelling constituting the Mortgaged Property;

(vi) the months to maturity at origination, based on the original amortization schedule;

(vii) the loan-to-value ratio at origination;

(viii) the rate of interest in effect on the Transfer Date;

(ix) the day of the month on which the first monthly payment was due, and, if different, the day of the month on which monthly payments are due as of the Transfer Date;

(x) the stated maturity date;

(xi) the amount of the monthly payment due at origination;

(xii) the amount of the monthly payment due on the first due date after the Transfer Date;

(xiii) the interest paid-through date;

(xiv) the last monthly payment date on which any portion of the monthly payment was applied to the reduction of principal;

(xv) the original principal amount;

(xvi) the Principal Balance as of the close of business on the Transfer Date;

(xvii) if the Mortgage Loan is an adjustable-rate loan, the initial adjustment date thereunder, including the look- back period;

(xviii) if the Mortgage Loan is an adjustable-rate loan, the gross margin over the applicable interest rate index;

(xix) a code indicating the purpose of the Mortgage Loan, as indicated by the Mortgagor (i.e., purchase financing, rate/term refinancing or cash-out refinancing);

(xx) if the Mortgage Loan is an adjustable-rate loan, the maximum interest rate;

(xxi) if the Mortgage Loan is an adjustable-rate loan, the minimum interest rate;

(xxii) the interest rate at origination;

(xxiii) if the Mortgage Loan is an adjustable-rate loan, the periodic rate cap and the maximum adjustment in the interest rate that may be made on the first adjustment date immediately following the Transfer Date;

(xxiv) a code indicating the documentation program (i.e., full documentation, limited documentation or stated income);

(xxv) if the Mortgage Loan is an adjustable-rate loan, the applicable interest rate index to which the gross margin is added, including the source of such index;

(xxvi) if the Mortgage Loan is an adjustable-rate loan, the first adjustment date thereunder to occur after the Transfer Date;

(xxvii) the risk grade;

(xxviii) any risk upgrade;

(xxix) the appraised value of the Mortgaged Property at origination;

(xxx) if different from the appraised value, the dollar value of the review appraisal of the Mortgaged Property at origination;

(xxxi) the sale price of the Mortgaged Property, if applicable;

(xxxii) the product type code (e.g., 3/27, 2/28, balloon, etc.);

(xxxiii) a code indicating whether the Mortgage Loan is a first-lien loan or a second-lien loan;

(xxxiv) if the Mortgage Loan is a second-lien loan, the outstanding principal balance of the first lien on the date of origination of such Mortgage Loan;

(xxxv) if the Mortgage Loan is a second-lien loan, the combined loan-to-value ratio of such Mortgage Loan and the first lien to which it is subject, as of the origination date of such Mortgage Loan;

(xxxvi) the prepayment penalty code;

(xxxvii) the prepayment penalty term;

(xxxviii) the late charge;

(xxxix) the rounding code (next highest or nearest 0.125%); and

(xl) the Mortgagor's FICO score, if any;

(xli) if there is mortgage insurance with respect to the Mortgage Loan, a code so indicating;

(xlii) the date the Mortgage Loan was originated;

(xliii) if the Mortgage Loan is negatively amortizing, a code so indicating;

(xliv) if the Mortgage Loan is a Section 32 Loan, a code so indicating;

(xlv) the Mortgagor's debt to income ratio;

(xlvi) the number of units included in the Mortgaged Property;

(xlvii) the remaining term of the Mortgage Loan, stated in months;

(xlviii) the age of the Mortgage Loan, in months;

(xlix) the first monthly payment date under the Mortgage Loan;

(l) if the Mortgage Loan is an adjustable-rate loan, the frequency at which the interest rate is adjusted;

(li) if the Mortgage Loan is an adjustable-rate loan, the frequency at which the monthly payment amount is adjusted;

(lii) if the Mortgage Loan is an adjustable-rate loan, the next reset date to occur after the Transfer Date;

(liii) if the Mortgage Loan is an adjustable-rate loan, the maximum change that may be made in the interest rate on any adjustment date;

(liv) if the Mortgage Loan is a business purpose loan, a code so indicating; and

(lv) if the Mortgage Loan is a Wet-Ink Mortgage Loan, a code so indicating.

SECTION 2. Amendment to Section 2.06. Section 2.06 of the Existing Sale Agreement is hereby amended in its entirety to read as follows:

Section 2.06. Delivery of Mortgage Loan Documents.
(a) In connection with the transfer and assignment of the Mortgage Loans, the Originators shall, no less than one (1)

Business Day prior to the related Transfer Date, deliver to the Collateral Agent, on behalf of the Indenture Trustee (as Collateral Agent and secured party on behalf of and for the benefit of the Noteholders), a Mortgage Loan Schedule and each of the following documents or instruments with respect to each Mortgage Loan (other than any Wet-Ink Mortgage Loan covered by
Section 2.06(b) hereof) so transferred or assigned:

(i) the original Mortgage Note and related power of attorney, if any, endorsed without recourse from the Originators in blank; including all intervening endorsements showing a complete chain of endorsement;

(ii) the related original Mortgage with evidence of recording indicated thereon or a copy thereof certified by the applicable recording office;

(iii) if the original Mortgage does not show the related Originator (or MERS with respect to any MERS Mortage Loans) as the mortgagee thereon, the recorded mortgage assignment, or copy thereof certified by the applicable recording office, showing a complete chain of assignment from the originator of the related Mortgage Loan to the related Originator (or MERS with respect to any MERS Mortgage Loan) (which assignment may, at such Originator's option, be combined with the assignment referred to in subpart (iv) hereof, in which case it must be in recordable form, but need not have been previously recorded);

(iv) an Assignment of Mortgage in recordable form of each Mortgage endorsed from the related Originator to "JPMorgan Chase Bank, as collateral agent for the holder of the related mortgage note from time to time" (except with respect to any MERS Mortgage Loan);

(v) originals of all assumption, modification and substitution agreements in those instances where the terms or provisions of a Mortgage or Mortgage Note have been modified or such Mortgage or Mortgage Note has been assumed; and

(vi) an original title insurance policy (or (A) a copy of the title insurance policy, or (B) a binder thereof or copy of such binder together with a certificate from the related Originator that the original Mortgage has been delivered to the title insurance company that issued such binder for recordation).

In instances where the original recorded Mortgage and a completed assignment thereof in recordable form cannot be delivered by the related Originator to the Collateral Agent, on behalf of the Indenture Trustee on or prior to such Business Day prior to the related Transfer Date (or, with respect to Wet-Ink Mortgage Loans, within five (5) Business Days following such Transfer Date), due to a delay in connection with recording, the related Originator may:

1) in lieu of delivering such original recorded Mortgage, deliver to the Collateral Agent, on behalf of the Indenture Trustee, a copy thereof; provided, that the related Originator certifies that the original Mortgage has been delivered to a title insurance company for recordation after receipt of its policy of title insurance or binder therefor; and

2) in lieu of delivering the completed Assignment of Mortgage in recordable form, deliver to the Collateral Agent, on behalf of the Indenture Trustee, the Assignment of Mortgage in recordable form, otherwise complete except for recording information.

The Collateral Agent, on behalf of the Indenture Trustee, shall promptly upon receipt thereof, with respect to each Mortgage Note described in Section 2.06(a)(i) hereof and each Assignment of Mortgage described in Section 2.06(a)(iv) hereof, if requested by the Note Purchaser, fill in the name of the Collateral Agent.

(b) With respect to each Wet-Ink Mortgage Loan, within five (5) Business Days following the related Transfer Date, the related Originator shall have delivered or caused to be delivered to the Collateral Agent, on behalf of the Indenture Trustee, the Custodial Loan File documents.

(c) Notwithstanding anything contrary in Section 2.06(a), all documents sent out for correction will be returned to the Collateral Agent within ten (10) calendar days.

(d) As promptly as practicable, but in any event within thirty (30) days from the request of the Note Purchaser, the related Originator shall promptly submit for recording in the appropriate public office for real property records, each Assignment of Mortgage referred to in Section 2.06(a)(iv); provided, however, that, for administrative convenience and facilitation of servicing and to reduce costs, Assignments of Mortgage shall not be required to be submitted for recording with respect to any MERS Mortgage Loan or any Mortgage Loan with respect to which the Collateral Agent, the Indenture Trustee and the Note Purchaser has received an

Opinion of Counsel, satisfactory in form and substance to each of them, to the effect that the recordation of such Assignments of Mortgage in any specific jurisdiction is not necessary to protect the Indenture Trustee's interest in the related Mortgage. The Collateral Agent, while serving as such, on behalf of the Indenture Trustee, shall retain a copy, after receipt thereof, of each Assignment of Mortgage submitted for recording. In the event that any such Assignment of Mortgage is lost or returned unrecorded because of a defect therein, such Originator shall promptly prepare a substitute Assignment of Mortgage or cure such defect, as the case may be, and thereafter such Originator shall submit each such Assignment of Mortgage for recording. The costs relating to the delivery and recordation of the documents in connection with the Mortgage Loans as specified in this Article II shall be borne by the related Originator.

(e) The related Originator shall, within five (5) Business Days after the receipt thereof, deliver, or cause to be delivered, to the Collateral Agent, on behalf of the Indenture Trustee: (i) the original recorded Mortgage and related power of attorney, if any, in those instances where a copy thereof certified by the related Originator was delivered to the Collateral Agent, on behalf of the Indenture Trustee;
(ii) if applicable, the original recorded Assignment of Mortgage from the related Originator to the Collateral Agent, which, together with any intervening assignments of Mortgage, evidences a complete chain of assignment from the originator of the Mortgage Loan to the Collateral Agent, in those instances where copies of such assignments certified by the applicable recording office were delivered to the Collateral Agent, on behalf of the Indenture Trustee; and (iii) the title insurance policy or title opinion required in Section 2.06(a)(vi) in those instances where a copy thereof certified by the related Originator was delivered to the Collateral Agent, on behalf of the Indenture Trustee.

Notwithstanding anything to the contrary contained in this Section 2.06, in those instances where the public recording office retains the original Mortgage, power of attorney, if any, assignment or Assignment of Mortgage after it has been recorded or such original has been lost, the related Originator shall be deemed to have satisfied its obligations hereunder upon delivery to the Collateral Agent, on behalf of the Indenture Trustee, of a copy of such Mortgage, power of attorney, if any, assignment or Assignment of Mortgage certified by the public recording office to be a true copy of the recorded original thereof.

From time to time the related Originator may forward, or cause to be forwarded, to the Collateral Agent, on behalf of the Indenture Trustee, additional original documents evidencing any assumption or modification of a Mortgage Loan.

(f) All original documents relating to the Mortgage Loans that are not delivered to the Collateral Agent, on behalf of the Indenture Trustee, as permitted by Section 2.06(a) hereof are, and shall be, held by the Servicer or the related Originator, as the case may be, in trust for the benefit of the Indenture Trustee, on behalf of the Noteholders. In the event that any such original document is required pursuant to the terms of this Section 2.06 to be a part of a Custodial Loan File, such document shall be delivered promptly to the Collateral Agent, on behalf of the Indenture Trustee. From and after the sale of the Mortgage Loans to the Trust pursuant hereto, to the extent that the related Originator retains legal title of record to any Mortgage Loans prior to the vesting of legal title in the Trust, such title shall be retained in trust for the Trust as the owner of the Mortgage Loans, and the Indenture Trustee, as the pledgee of the Trust under the Indenture. In acting as custodian of any original document which is part of the Custodial Loan Files, the Servicer agrees further that it does not and will not have or assert any beneficial ownership interest in the related Mortgage Loans or the Servicer's Loan Files. Promptly upon the Servicer's receipt of any such original document, the Servicer, on behalf of the Trust, shall mark conspicuously each such original document, and its master data processing records with a legend evidencing that the Trust has purchased the related Mortgage Loan and all right and title thereto and interest therein, and pledged such Mortgage Loan and all right and title thereto and interest therein to the Indenture Trustee, on behalf of the Noteholders.

SECTION 3. Amendment to Section 3.01. Section 3.01 of the Existing Sale Agreement is hereby amended by adding the following paragraph immediately after paragraph (w) to read as follows:

(x) On each Transfer Date when MERS Mortgage Loans are sold, the applicable originator of the Mortgage Loan was registered as a member of MERS in good standing, doing business under the organization name "Mortgage Servicing Center," and was in compliance in all material respects with the MERS Procedures Manual in connection with the origination and servicing of the MERS Mortgage Loans sold by such originator.

SECTION 4. Amendment to Section 6.01(b). Sections 6.01(b)(vii) and (viii) are hereby amended in their entirety to read as follows:

(vii) subject to Section 6.01(c) below, each related Originator and the Depositor shall, at its own expense, within one Business Day following the Transfer Date, indicate in its computer files that the Mortgage Loans identified in the related Assignment have been sold to the Trust pursuant to this Agreement and such Assignment;

(viii) subject to Section 6.01(c) below, the Depositor shall have taken any action requested by the Indenture Trustee, the Trust or the Noteholders required to maintain the ownership interest of the Trust in the Mortgage Loan and the Trust Estate;

SECTION 5. Addition of Section 6.01(c). The following Section 6.01(c) is hereby added to the Existing Sale Agreement immediately after Section 6.01(b):

(c) If any Mortgage has been recorded in the name of MERS, no Assignment of Mortgage in favor of the Indenture Trustee will be required to be prepared or delivered and instead, the Servicer shall take all reasonable actions as are necessary to cause the interest of the Collateral Agent (on behalf of the Indenture Trustee) to be shown with respect to such Mortgage Loan on the records of MERS for the purpose of the MERS System.

SECTION 6. Representations and Warranties. Each of the Depositor, Originators, the Trust, the Servicer, the Sponsor and the Indenture Trustee hereby represents and warrants to the Collateral Agent that it is in compliance with all the terms and provisions set forth in the Existing Sale Agreement on its part to be observed or performed, and that no Event of Default has occurred or is continuing, and hereby confirms and reaffirms each of their respective representations and warranties contained in Article III of the Existing Sale Agreement.

SECTION 7. Limited Effect. Except as expressly amended and modified by this Amendment, the Existing Sale Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.

SECTION 8. 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 9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Servicer, the Trust, the Indenture Trustee, the Collateral Agent, the Originators, the Subservicers and the Depositor have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the day and year first above written.

ABFS BALAPOINTE, INC., as Depositor

By:  /s/ Jeffrey M. Ruben
    --------------------------------
    Name:  Jeffrey M. Ruben
    Title: Executive Vice President

AMERICAN BUSINESS FINANCIAL
SERVICES, INC., as the Sponsor

By:  /s/ Anthony J. Santilli
    --------------------------------
    Name:  Anthony J. Santilli
    Title: Chairman, CEO & President

HOMEAMERICAN CREDIT, INC. D/B/A
UPLAND MORTGAGE, as an
Originator and a Subservicer

By:  /s/ Jeffrey M. Ruben
    --------------------------------
    Name:  Jeffrey M. Ruben
    Title: Executive Vice President

ABFS MORTGAGE LOAN WAREHOUSE
TRUST 2003-1

By: WILMINGTON TRUST COMPANY, not
in its individual capacity but
solely as Owner Trustee

By:  /s/ Linda C. Mack
    ----------------------------------
    Name:  Linda C. Mack
    Title: Financial Services Officer

AMERICAN BUSINESS CREDIT, INC., as an
Originator and the Servicer

By:  /s/ Beverly Santilli
    ----------------------------------
    Name:  Beverly Santilli
    Title: President

AMERICAN BUSINESS MORTGAGE
SERVICES, INC., as an Originator
and a Subservicer

By:  /s/ Jeffrey M. Ruben
    ----------------------------------
    Name:  Jeffrey M. Ruben
    Title: Executive Vice President

JPMORGAN CHASE BANK, not in its individual capacity but solely as Indenture Trustee

By:  /s/ Joseph Costantino
    ----------------------------------
    Name:  Joseph Costantino
    Title: Assistant Vice President

JPMORGAN CHASE BANK, not in its individual capacity but solely as Collateral Agent

By:  /s/ Michael W. Nicholson
    ----------------------------------
    Name:  Michael W. Nicholson
    Title: Senior Vice President

JPMORGAN CHASE BANK, as Note
Purchaser, 100% Noteholder and
Lender

By:  /s/ Michael W. Nicholson
    ----------------------------------
    Name:  Michael W. Nicholson
    Title: Senior Vice President

Exhibit 10.2

EXECUTION VERSION

AMENDMENT NO. 3
TO SALE AND SERVICING AGREEMENT

Amendment No. 3 to the Sale and Servicing Agreement, dated as of June 30, 2004 (this "Amendment"), among ABFS Balapointe, Inc, as depositor (the "Depositor"), HomeAmerican Credit, Inc., d/b/a Upland Mortgage ("Upland"), American Business Mortgage Services, Inc. ("ABMS" together with Upland, the "Originators"), and American Business Credit, Inc. (the "Servicer"), ABFS Mortgage Loan Warehouse Trust 2003-1, as trust (the "Trust"), American Business Financial Services, Inc., as sponsor (the "Sponsor"), JPMorgan Chase Bank, as indenture trustee (the "Indenture Trustee"), JPMorgan Chase Bank, as collateral agent (the "Collateral Agent") and JPMorgan Chase Bank, as note purchaser (the "Note Purchaser").

RECITALS

The Depositor, the Originators, the Servicer, the Trust, the Sponsor, the Indenture Trustee and the Collateral Agent are parties to that certain Sale and Servicing Agreement, dated as of September 22, 2003 as amended by Amendment No. 1 to the Sale and Servicing Agreement, dated as of May 12, 2004 and Amendment No. 2 to the Sale and Servicing Agreement, dated as of June 24, 2004 (the "Existing Sale Agreement"; as amended by this Amendment, the "Sale Agreement"). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in Appendix I to the Sale Agreement.

The Depositor, the Originators, the Servicer, the Trust, the Sponsor, the Indenture Trustee and the Collateral Agent have agreed, subject to the terms and conditions of this Amendment, that the Existing Sale Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Sale Agreement.

Accordingly, the Depositor, the Originators, the Servicer, the Trust, the Sponsor, the Indenture Trustee and the Collateral Agent hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing Sale Agreement is hereby amended, as follows:

SECTION 1. Definitions. Appendix I of the Existing Sale Agreement is hereby amended by deleting clause (v) of the definition of "Amortization Event" in its entirety and replacing it with the following language:

"(v) the Sponsor, together with its consolidated Subsidiaries, shall fail to maintain, at all times the sum of (A) cash or Cash Equivalents and (B) unfunded eligible collateral under a committed warehouse facility whereby funds may be drawn within one (1) Business Day of request therefor and pursuant to which no event or circumstance shall have occurred thereunder which would, by the terms of the applicable agreement, prohibit the Sponsor from borrowing or drawing money thereunder, in an amount equal to at least $25,000,000;"

SECTION 2. Conditions Precedent. This Amendment shall become effective on June 30, 2004 (the "Amendment Effective Date"), subject to the satisfaction of the following conditions precedent:

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

(a) this Amendment, executed and delivered by duly authorized officers of the parties hereto; and

(b) such other documents as the Collateral Agent or counsel to the Collateral Agent may reasonably request.

SECTION 3. Representations and Warranties. Each of the Depositor, Originators, the Trust, the Servicer, the Sponsor and the Indenture Trustee hereby represents and warrants to the Collateral Agent that it is in compliance with all the terms and provisions set forth in the Existing Sale Agreement on its part to be observed or performed, and that no Event of Default has occurred or is continuing, and hereby confirms and reaffirms each of their respective representations and warranties contained in Article III of the Existing Sale Agreement.

SECTION 4. Limited Effect. Except as expressly amended and modified by this Amendment, the Existing Sale Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.

SECTION 5. 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 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Servicer, the Trust, the Indenture Trustee, the Collateral Agent, the Originators, the Subservicers and the Depositor have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the day and year first above written.

ABFS BALAPOINTE, INC., as Depositor

By:  /s/ Jeffrey M. Ruben
   -----------------------------------
    Name:  Jeffrey M. Ruben
    Title: Executive Vice President

AMERICAN BUSINESS FINANCIAL
SERVICES, INC., as the Sponsor

By:  /s/ Anthony J. Santilli
    ----------------------------------
    Name:  Anthony J. Santilli
    Title: Chairman, CEO & President

HOMEAMERICAN CREDIT, INC. D/B/A
UPLAND MORTGAGE, as an Originator
and a Subservicer

By:  /s/ Jeffrey M. Ruben
    ----------------------------------
    Name:  Jeffrey M. Ruben
    Title: Executive Vice President

ABFS MORTGAGE LOAN WAREHOUSE
TRUST 2003-1

By: WILMINGTON TRUST COMPANY, not
in its individual capacity but
solely as Owner Trustee

By: /s/ Roseline K. Maney
    ----------------------------------
    Name:  Roseline K. Maney
    Title: Vice President

AMERICAN BUSINESS CREDIT, INC., as an
Originator and the Servicer

By:  /s/ Beverly Santilli
    ----------------------------------
    Name:  Beverly Santilli
    Title: President

AMERICAN BUSINESS MORTGAGE
SERVICES, INC., as an Originator
and a Subservicer

By:  /s/ Jeffrey M. Ruben
    ----------------------------------
    Name:  Jeffrey M. Ruben
    Title: Executive Vice President

JPMORGAN CHASE BANK, not in its individual capacity but solely as Indenture Trustee

By:  /s/ Joseph Costantino
    ----------------------------------
    Name:  Joseph Costantino
    Title: Assistant Vice President

JPMORGAN CHASE BANK, not in its individual capacity but solely as Collateral Agent

By:  /s/ Michael W. Nicholson
    ----------------------------------
    Name:  Michael W. Nicholson
    Title: Senior Vice President

JPMORGAN CHASE BANK, as Note
Purchaser, 100% Noteholder and
Lender

By:  /s/ Michael W. Nicholson
   -----------------------------------
    Name:  Michael W. Nicholson
    Title: Senior Vice President

                                                          As of October 31, 2004

ABFS Balapointe, Inc.                                American Business Financial
                                                     Services, Inc.

American Business Credit, Inc.                       HomeAmerican Credit, Inc.,
                                                     d/b/a Upland Mortgage

American Business Mortgage Services, Inc.            JPMorgan Chase Bank, as
                                                     Indenture Trustee

ABFS Mortgage Loan Warehouse Trust 2003-1
c/o Wilmington Trust Company

Reference is made to (i) that certain Sale and Servicing Agreement, dated as of September 22, 2003, as it may have subsequently been amended and supplemented from time to time (the "Sale and Servicing Agreement"), among ABFS Balapointe, Inc, as depositor (the "Depositor"), HomeAmerican Credit, Inc., d/b/a Upland Mortgage ("Upland"), American Business Mortgage Services, Inc. ("ABMS"), and American Business Credit, Inc. ("ABC"), ABFS Mortgage Loan Warehouse Trust 2003-1, as trust (the "Trust"), American Business Financial Services, Inc., as sponsor (the "Sponsor"), JPMorgan Chase Bank, as indenture trustee (the "Indenture Trustee") and JPMorgan Chase Bank, as collateral agent (the "Collateral Agent"); (ii) that certain Indenture, dated as of September 22, 2003 (the "Indenture"), between the Trust and the Indenture Trustee; (iii) that certain Waiver Letter, dated as of October 8, 2003 (the "First Waiver Letter"), by JPMorgan Chase Bank, as note purchaser (the "Note Purchaser"); (iv) that certain Second Waiver Letter, dated as of October 31, 2003 (the "Second Waiver Letter"), by the Note Purchaser; (v) that certain Third Waiver Letter, dated as of December 31, 2003 (the "Third Waiver Letter"); (vi) that certain Fourth Waiver Letter, dated as of March 31, 2004 (the "Fourth Waiver Letter"); (vii) that certain Fifth Waiver Letter, dated as of June 30, 2004 (the "Fifth Waiver Letter") and that certain Sixth Waiver Letter, dated as of September 30, 2004 (the "Sixth Waiver Letter"). Capitalized terms used herein but not defined herein shall have the meanings given in Appendix I to the Sale and Servicing Agreement and the Indenture ("Appendix I").

The undersigned, as Note Purchaser and 100% Noteholder under the Sale and Servicing Agreement and the Indenture, as applicable, hereby confirms its waiver, as of October 31, 2004, the failure by the Sponsor and its Subsidiaries and Affiliates, as applicable, to comply on October 31, 2004 with (I) the terms of clause (iii) of the definition of Amortization Event in Appendix I to the Sale and Servicing Agreement and Indenture regarding the maintenance of an Adjusted Tangible Net Worth of $300,000,000; (II) the terms of clause (iv) of the definition of Amortization Event in Appendix I to the Sale and Servicing Agreement and Indenture regarding the maintenance of a ratio of Debt to Adjusted Tangible Net Worth of not less than 4:1 and (III) the terms of clause (v) of the definition of Amortization Event in Appendix I to the Sale and Servicing Agreement and Indenture regarding the maintenance of Cash Equivalents in an amount of at least $25,000,000.

This waiver letter (the "Seventh Waiver Letter"), contains the entire agreement relating to the subject matter hereof between the parties and supersedes any prior oral or written agreement between the parties and shall not be deemed to constitute a waiver as to any other transaction or occurrence.

Except as expressly provided herein, all provisions, terms and conditions, covenants and representations and warranties of the Sale and Servicing Agreement, the Indenture and the Credit Agreement remain in full force and effect.

IN WITNESS WHEREOF, the Note Purchaser has signed this Seventh Waiver Letter as of the date set forth above.

JPMORGAN CHASE BANK, as Note
Purchaser, 100% Noteholder and
Lender

By: /s/ Michael W. Nicholson
   -----------------------------------
        Name:  Michael W. Nicholson
        Title: Senior Vice President

Exhibit 10.4

EXECUTION VERSION

AMENDMENT NO. 6
TO SALE AND SERVICING AGREEMENT

Amendment No. 6 to the Sale and Servicing Agreement, dated as of November 5, 2004 (this "Amendment"), among ABFS Balapointe, Inc, as depositor (the "Depositor"), HomeAmerican Credit, Inc., d/b/a Upland Mortgage ("Upland"), American Business Mortgage Services, Inc. ("ABMS" together with Upland, the "Originators"), and American Business Credit, Inc. (the "Servicer"), ABFS Mortgage Loan Warehouse Trust 2003-1, as trust (the "Trust"), American Business Financial Services, Inc., as sponsor (the "Sponsor"), JPMorgan Chase Bank, as indenture trustee (the "Indenture Trustee"), JPMorgan Chase Bank, as collateral agent (the "Collateral Agent") and JPMorgan Chase Bank, as note purchaser (the "Note Purchaser").

RECITALS

The Depositor, the Originators, the Servicer, the Trust, the Sponsor, the Indenture Trustee and the Collateral Agent are parties to that certain Sale and Servicing Agreement, dated as of September 22, 2003 as amended by Amendment No. 1 to the Sale and Servicing Agreement, dated as of May 12, 2004, Amendment No. 2 to the Sale and Servicing Agreement, dated as of June 24, 2004, Amendment No. 3 to the Sale and Servicing Agreement, dated as of June 30, 2004, Amendment No. 4 to the Sale and Servicing Agreement, dated as of September 16, 2004 and Amendment No. 5 to the Sale and Servicing Agreement, dated as of September 30, 2004 (the "Existing Sale Agreement"; as amended by this Amendment, the "Sale Agreement"). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in Appendix I to the Sale Agreement.

The Depositor, the Originators, the Servicer, the Trust, the Sponsor, the Indenture Trustee and the Collateral Agent have agreed, subject to the terms and conditions of this Amendment, that the Existing Sale Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Sale Agreement.

Accordingly, the Depositor, the Originators, the Servicer, the Trust, the Sponsor, the Indenture Trustee and the Collateral Agent hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing Sale Agreement is hereby amended, as follows:

SECTION 1. Definitions. Appendix I of the Existing Sale Agreement is hereby amended by deleting the definitions of "Aged Loan" "Commitment Term", "Maximum Note Balance", "Mortgage Loan Base" and "Portfolio Composition Criteria" in their entirety and replacing them with the following language:

"Aged Loan": A Mortgage Loan secured by a first lien that is pledged under the Indenture more than 30 days from the Transfer Date.

"Commitment Term": That period of time commencing on the date hereof and continuing until the earlier of (i) December 3, 2004, and (ii) the date upon which the Obligations are declared to be, or become, due and payable in full in accordance with Article X or Section 5.02 of the Indenture.

"Maximum Note Balance": That period of time (i) commencing on November 5, 2004 until and including November 11, 2004, $90,000,000; (ii) commencing on November 12, 2004 until and including November 18, 2004, $80,000,000; (iii) commencing on November 19, 2004 until and including November 25, 2004, $70,000,000; and (iv) commencing on November 26, 2004 until and including December 3, 2004, $60,000,000.

"Mortgage Loan Base": Shall mean:

(a) with respect to fixed-rate Eligible Mortgage Loans, other than Second Lien Mortgage Loans, 90% of the least of: (1) the net cash amount paid for the Eligible Mortgage Loan, (2) the Principal Balance of the Mortgage Loan or (3) the Market Value for such Mortgage Loan.

(b) with respect to adjustable-rate Eligible Mortgage Loans, other than Second Lien Mortgage Loans, 88% of the least of: (1) the net cash amount paid for the Eligible Mortgage Loan, (2) the Principal Balance of the Mortgage Loan, or (3) the Market Value of such Mortgage Loan.

(c) with respect to Second Lien Mortgage Loans, 75% of the least of: (1) the net cash amount paid for the Second Lien Mortgage Loan, (2) the Principal Balance of the Mortgage Loan, or (3) the Market Value of such Mortgage Loan.

"Portfolio Composition Criteria": As of any date of determination with respect to any subcategory of Mortgage Loans, the maximum percentage (as measured by the Principal Balance as of such date) of the category set forth opposite such subcategory in the table set forth below that, as of such determination, have been pledged to the Indenture Trustee on behalf of the Note Purchaser under the Indenture and not released pursuant to the provisions thereof, that may be represented by such product category, as set forth below:

-------------------------------------------------------------- -------------------------------------------------------

PRODUCT                                                        MAXIMUM PERCENTAGE, CATEGORY
-------------------------------------------------------------- -------------------------------------------------------
Mortgage Loans with an LTV in excess of 80%                    50% of the Outstanding Note Principal Balance
-------------------------------------------------------------- -------------------------------------------------------
Mortgage Loans with a credit grade of C                        15% of the Outstanding Note Principal Balance
-------------------------------------------------------------- -------------------------------------------------------
Mortgage Loans with a CLTV in excess of 90%                    10% of the Outstanding Note Principal Balance
-------------------------------------------------------------- -------------------------------------------------------
Mortgage Loans Delinquent in payment more than                 5% of the Outstanding Note Principal Balance
30 days and less than 60 days
-------------------------------------------------------------- -------------------------------------------------------
Mortgage Loans that are Manufactured Housing                   3% of the Outstanding Note Principal Balance
Loans with a Principal Balance up to $150,000
-------------------------------------------------------------- -------------------------------------------------------
Jumbo Mortgage Loans                                           30% of the Outstanding Note Principal Balance
-------------------------------------------------------------- -------------------------------------------------------
Super Jumbo Mortgage Loans other than on the last              5% of the Outstanding Note Principal Balance
three (3) Business Days and first five (5) Business
Days of each month
-------------------------------------------------------------- -------------------------------------------------------

-------------------------------------------------------------- -------------------------------------------------------

PRODUCT                                                        MAXIMUM PERCENTAGE, CATEGORY
-------------------------------------------------------------- -------------------------------------------------------
Super Jumbo Mortgage Loans for the last three (3)              10% of the Outstanding Note Principal Balance
Business  Days and first five (5) Business Days of
each month
-------------------------------------------------------------- -------------------------------------------------------
Jumbo Mortgage Loans and Super Jumbo Mortgage                  30% of the Outstanding Note Principal Balance
-------------------------------------------------------------- -------------------------------------------------------
Second Lien Mortgage Loans                                     10% of the Outstanding Note Principal Balance
-------------------------------------------------------------- -------------------------------------------------------
Wet-Ink Mortgage Loans                                         $60,000,000 of the Outstanding Note Principal Balance
-------------------------------------------------------------- -------------------------------------------------------
Aged Loans                                                     0% of the Outstanding Note Principal Balance
-------------------------------------------------------------- -------------------------------------------------------
Mortgage Loans secured by non Owner-Occupied Mortgage          8% of the Outstanding Note Principal Balance
Property
-------------------------------------------------------------- -------------------------------------------------------

In addition to the foregoing: (a) the maximum weighted average LTV for all adjustable rate Mortgage Loans shall be 85%; (b) the maximum weighted average LTV for all fixed rate Mortgage Loans shall be 83%; and (c) the minimum weighted FICO score of all Mortgage Loans shall be 610.

SECTION 2. Conditions Precedent. This Amendment shall become effective on November 5, 2004 (the "Amendment Effective Date"), subject to the satisfaction of the following conditions precedent:

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

(a) this Amendment, executed and delivered by duly authorized officers of the parties hereto;

(b) that certain warehouse facility in favor of any Originator or any Affiliate thereof with Fortress Investment Group LLC in an amount of at least $100,000,000 and for a term of at least one year, executed and delivered by duly authorized officers of the parties thereto, and

(c) such other documents as the Collateral Agent or counsel to the Collateral Agent may reasonably request.

2.2 Payment of Fees. On the Amendment Effective Date, (i) attorneys' fees shall have been paid to Buyer's counsel either by payment or by authorized debit in connection with this Amendment in an amount equal to $2,500 and (ii) fees shall have been paid to Buyer either by payment or by authorized debit in connection with this Amendment in an amount equal to $50,000.

SECTION 3. Representations and Warranties. Each of the Depositor, Originators, the Trust, the Servicer, the Sponsor and the Indenture Trustee hereby represents and warrants to the Collateral Agent that it is in compliance with all the terms and provisions set forth in the Existing Sale Agreement on its part to be observed or performed, and that no Event of Default has occurred or is continuing, and hereby confirms and reaffirms each of their respective representations and warranties contained in Article III of the Existing Sale Agreement.

SECTION 4. Limited Effect. Except as expressly amended and modified by this Amendment, the Existing Sale Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.

SECTION 5. 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 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Servicer, the Trust, the Indenture Trustee, the Collateral Agent, the Originators, the Subservicers and the Depositor have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the day and year first above written.

ABFS BALAPOINTE, INC., as Depositor

By:  /s/ Jeffrey M. Ruben
   ---------------------------------
   Name:  Jeffrey M. Ruben
   Title: Executive Vice President

AMERICAN BUSINESS FINANCIAL
SERVICES, INC., as the Sponsor

By:  /s/ Anthony J. Santilli
   ---------------------------------
    Name:  Anthony J. Santilli
    Title: Chairman, CEO & President

HOMEAMERICAN CREDIT, INC. D/B/A
UPLAND MORTGAGE, as an Originator
and a Subservicer

By:  /s/ Jeffrey M. Ruben
   ---------------------------------
    Name:  Jeffrey M. Ruben
    Title: Executive Vice President

ABFS MORTGAGE LOAN WAREHOUSE
TRUST 2003-1

By: WILMINGTON TRUST COMPANY, not
in its individual capacity but
solely as Owner Trustee

By: /s/ Roseline K. Maney
   ---------------------------------
   Name:  Roseline K. Maney
   Title: Vice President

AMERICAN BUSINESS CREDIT, INC., as
an Originator and the Servicer

By:  /s/ Beverly Santilli
   ---------------------------------
   Name:  Beverly Santilli
   Title: President

AMERICAN BUSINESS MORTGAGE
SERVICES, INC., as an Originator
and a Subservicer

By:  /s/ Jeffrey M. Ruben
   ---------------------------------
   Name:  Jeffrey M. Ruben
   Title: Executive Vice President

JPMORGAN CHASE BANK, not in its individual capacity but solely as Indenture Trustee

By:  /s/ Melissa Wilman
   ---------------------------------
   Name:  Melissa Wilman
   Title: Vice President

JPMORGAN CHASE BANK, not in its individual capacity but solely as Collateral Agent

By:  /s/ Michael W. Nicholson
   ---------------------------------
   Name:  Michael W. Nicholson
   Title: Senior Vice President

JPMORGAN CHASE BANK, as Note
Purchaser, 100% Noteholder and
Lender

By:  /s/ Michael W. Nicholson
   ---------------------------------
   Name:  Michael W. Nicholson
   Title: Senior Vice President

Exhibit 10.5

MASTER LOAN AND SECURITY AGREEMENT

DATED AS OF NOVEMBER 4, 2004

PENN SQUARE EAST FUNDING, LLC,
AS BORROWER

AND

FORTRESS CREDIT CORP.,
AS LENDER

Section 1.        Definitions and Accounting Matters..............................................................1

         1.01     Certain Defined Terms...........................................................................1

         1.02     Accounting Terms and Determinations............................................................23

         1.03     Uniform Commercial Code........................................................................23

         1.04     Construction...................................................................................23

Section 2.        Advances, Evidence of Debt and Prepayments.....................................................24

         2.01     Advances.......................................................................................24

         2.02     Evidence of Debt...............................................................................25

         2.03     Procedure for Borrowing........................................................................25

         2.04     Limitation on Types of Advances; Illegality....................................................26

         2.05     Repayment of Advances; Interest................................................................27

         2.06     Mandatory Prepayment or Pledge.................................................................27

         2.07     Optional Prepayments...........................................................................27

         2.08     Expense Reserve Account........................................................................28

         2.09     Requirements of Law............................................................................29

         2.10     Purpose of Advances............................................................................30

Section 3.        Payments; Computations; Taxes..................................................................30

         3.01     Payments.......................................................................................30

         3.02     Computations...................................................................................31

         3.03     U.S. Taxes.....................................................................................31

         3.04     Fees...........................................................................................31

Section 4.        Collateral Security............................................................................32

         4.01     Collateral; Security Interest..................................................................32

         4.02     Further Documentation..........................................................................34

         4.03     Changes in Locations, Name, etc................................................................34

         4.04     Lender's Appointment as Attorney-in-Fact.......................................................34

         4.05     Performance by Lender of Borrower's Obligations................................................36

         4.06     Proceeds.......................................................................................36

         4.07     Remedies.......................................................................................36

         4.08     Limitation on Duties Regarding Preservation of Collateral......................................37

         4.09     Powers Coupled with an Interest................................................................37

         4.10     Release of Security Interest...................................................................38

Section 5.        Conditions Precedent and Subsequent............................................................38

         5.01     Conditions Precedent to Initial Advance........................................................38

         5.02     Conditions Precedent to Initial and Subsequent Advances........................................41

Section 6.        Representations and Warranties.................................................................43

         6.01     Existence......................................................................................43

         6.02     Financial Condition............................................................................44

         6.03     Litigation.....................................................................................44

         6.04     No Breach......................................................................................44

         6.05     Action.........................................................................................44

         6.06     Approvals......................................................................................45

         6.07     Margin Regulations.............................................................................45

         6.08     Taxes..........................................................................................45

         6.09     Investment Company Act.........................................................................45

         6.10     Organizational Documents.......................................................................45

         6.11     No Legal Bar...................................................................................45

         6.12     No Default.....................................................................................46

         6.13     Collateral; Collateral Security................................................................46

         6.14     Chief Executive/Operating Offices..............................................................46

         6.15     Location of Books and Records..................................................................46

         6.16     True and Complete Disclosure...................................................................46

         6.17     [reserved.]....................................................................................47

         6.18     ERISA..........................................................................................47

         6.19     No Lender Licenses.............................................................................47

         6.20     Approved Mortgage Originators Licenses.........................................................48

         6.21     True Sales.....................................................................................48

         6.22     No Burdensome Restrictions.....................................................................48

         6.23     Subsidiaries...................................................................................48

         6.24     Origination and Acquisition of Mortgage Loans..................................................48

         6.25     No Adverse Selection...........................................................................48

         6.26     No Broker......................................................................................48

         6.27     Representations and Warranties Regarding Mortgage Loans; Delivery of Mortgage Loan File........48

         6.28     Borrower Solvent; Fraudulent Conveyance........................................................49

Section 7.        Covenants of the Borrower......................................................................49

         7.01     Financial Statements...........................................................................49

         7.02     Litigation.....................................................................................51

         7.03     Existence, Etc.................................................................................51

         7.04     Prohibition of Fundamental Changes.............................................................52

         7.05     Borrowing Base Deficiency......................................................................52

         7.06     Notices........................................................................................52

         7.07     Servicing......................................................................................53

         7.08     Public Disclosure..............................................................................53

         7.09     Underwriting Guidelines........................................................................53

         7.10     Lines of Business..............................................................................53

         7.11     Transactions with Affiliates...................................................................53

         7.12     Use of Proceeds................................................................................54

         7.13     Limitation on Liens............................................................................54

         7.14     Limitation on Sale of Assets...................................................................54

         7.15     Limitation on Distributions....................................................................54

         7.16     Restricted Payments............................................................................54

         7.17     Information from Approved Mortgage Originators and Servicing Transmission......................54

         7.18     No Amendment or Waiver.........................................................................55

         7.19     Maintenance of Property; Insurance.............................................................55

         7.20     Further Identification of Collateral...........................................................55

         7.21     Mortgage Loan Determined to be Defective.......................................................55

         7.22     Interest Rate Protection Agreements............................................................56

         7.23     Certificate of a Responsible Officer of the Borrower...........................................56

         7.24     Maintenance of Separateness....................................................................56

         7.25     ERISA..........................................................................................56

         7.26     [reserved].....................................................................................56

         7.27     Hedging........................................................................................56

         7.28     Other Indebtedness.............................................................................57

         7.29     Opinions.......................................................................................57

Section 8.        Events of Default..............................................................................57

Section 9.        Remedies Upon Default..........................................................................60

Section 10.       No Duty on Lender's Part.......................................................................61

Section 11.       Miscellaneous..................................................................................61
         11.01    Waiver.........................................................................................61

         11.02    Notices........................................................................................61

         11.03    Indemnification and Expenses...................................................................61

         11.04    Amendments.....................................................................................62

         11.05    Successors and Assigns.........................................................................63

         11.06    Survival.......................................................................................63

         11.07    Captions.......................................................................................63

         11.08    Counterparts; Telefacsimile Execution..........................................................63

         11.09    LOAN AGREEMENT CONSTITUTES SECURITY AGREEMENT; GOVERNING LAW...................................63

         11.10    SUBMISSION TO JURISDICTION; WAIVERS............................................................63

         11.11    WAIVER OF JURY TRIAL...........................................................................64

         11.12    Acknowledgments................................................................................64

         11.13    Hypothecation or Pledge of Collateral..........................................................64

         11.14    Assignments; Participations....................................................................65

         11.15    Servicing......................................................................................66

         11.16    Periodic Due Diligence Review..................................................................68

         11.17    Set-Off........................................................................................68

         11.18    Replacement by Repurchase Agreement............................................................69

         11.19    Entire Agreement...............................................................................69

         11.20    Confidentiality................................................................................69

         11.21    Public Announcements...........................................................................70

SCHEDULES

Schedule A-1                     Approved Mortgage Originators

Schedule A-2                     Approved Mortgage Purchasers

Schedule A-3                     Approved Underwriting Guidelines

Schedule R-1                     Representations and Warranties re: Mortgage Loans

Schedule I                       Notice of Borrowing and Pledge

Schedule 6.03                    Litigation

Schedule 6.13(d)                 Collateral; Collateral Security

Schedule 6.14                    Chief Operating Office

Schedule 6.19                    Relevant States

Schedule 6.23                    Subsidiaries

EXHIBITS

Exhibit B                        Notice of Borrowing and Pledge (and Schedule I to Notice of Borrowing and Pledge)

Exhibit M                        Required Fields for Mortgage Loan Data Transmission

Exhibit S                        Required Fields for Servicing Transmission

Exhibit T                        Escrow Letter

Exhibit 11.14(c)                 Form of Confidentiality Agreement

MASTER LOAN AND SECURITY AGREEMENT

THIS MASTER LOAN AND SECURITY AGREEMENT (this "Loan Agreement"), is dated as of November 4, 2004, and is entered into by and between PENN SQUARE EAST FUNDING, LLC, a Delaware limited liability company (the "Borrower"), and FORTRESS CREDIT CORP., a Delaware corporation (the "Lender").

RECITALS

The Borrower wishes to obtain financing from the Lender from time to time to provide funding for the Borrower's acquisition of Mortgage Loans (as hereinafter defined) from one or more Approved Mortgage Originators or Approved Mortgage Purchasers (each as hereinafter defined).

The Lender has agreed, subject to the terms and conditions of this Loan Agreement, to provide such financing to the Borrower, with a portion of the payments on the Mortgage Loans, and a portion of the proceeds of any permitted whole loan sales thereof, together with other funds of the Borrower, if necessary, being used to repay any Advances made hereunder as more particularly described herein.

Accordingly, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

SECTION 1. DEFINITIONS AND ACCOUNTING MATTERS.

1.01 Certain Defined Terms. As used herein, the following terms shall have the following meanings:

"ABMS" means American Business Mortgage Services, Inc., a New Jersey corporation.

"Accepted Servicing Practices" means, with respect to any Mortgage Loan, accepted and prudent mortgage servicing practices (including practices regarding reconciliation of bank accounts, processing of mortgage payments, processing of disbursements for tax and insurance payments, maintenance of mortgage loan records, performance of collection efforts including disposition of delinquent loans, foreclosure activities and disposition of real estate owned and performance of investor accounting and reporting processes) of prudent mortgage lending institutions which service mortgage loans of the same type as such Mortgage Loan in the jurisdiction where the related Mortgaged Property is located and in a manner at least equal in quality to the servicing that the Initial Servicer provided during the period from January 1, 2004 through July 31, 2004 with respect to mortgage loans which it owned in its own servicing portfolio during such period.

"Advance" shall have the meaning set forth in Section 2.01(a).

"Affiliate" means, with respect to any Person, any other Person which (i) directly or indirectly, controls, is controlled by, or is under common control with, such Person, or (ii) is a depositor or indemnitor of such Person (if such Person is a trust). For purposes of this definition, "control" (together with the correlative meanings of "controlled by" and "under common control with") means possession, directly or indirectly, of the power (a) to vote 10% or more of the securities (on a fully diluted basis) having ordinary voting power for the directors or managing general partners (or their equivalent) of such Person or (b) to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract, or otherwise.

"ALTA" means the American Land Title Association.

"APA Assignment" means the APA Assignment executed by the applicable parties in substantially the form attached to the Asset Purchase Agreement as Exhibit A thereto.

"Applicable Collateral Percentage" means, with respect to an Eligible Mortgage Loan,

(i) for the first 90 days following the date such Eligible Mortgage Loan first becomes subject to the terms of this Loan Agreement, the following percentages of the unpaid principal balance thereof, in each case reduced by any applicable Delinquency Adjustment:

(a) if the loan has a FICO score of 640 or greater, 92%;

(b) if the loan has a FICO score greater than 599 but less than 640, 90%;

(c) if the loan has a FICO score greater than 549 but less than 600, 87%;

(d) if the loan has a FICO score greater than 519 but less than 550, 84%; and

(e) if the loan has a FICO score less than 520 or no FICO score, 0%; and

(ii) for the period from the 91st through the 120th day following the date such Eligible Mortgage Loan first becomes subject to the terms of this Loan Agreement, the percentage derived in (a) through (e) above (as reduced by any applicable Delinquency Adjustment) reduced by 500 basis points (5.0%);

(iii) for the period from the 121st through the 150th day following the date such Eligible Mortgage Loan first becomes subject to the terms of this Loan Agreement, the percentage derived in (i) and (ii) above (as reduced by any applicable Delinquency Adjustment) reduced by an additional 1,000 basis points (10.0%); and

(iv) for the period commencing on the 151st day following the date such Eligible Mortgage Loan first becomes subject to the terms of this Loan Agreement and thereafter, 0% (zero percent) of the unpaid principal balance thereof.

For purposes of illustrating the application of this definition, the Applicable Collateral Percentage for a Mortgage Loan (1) with a FICO score of 550, (2) that is 60 days delinquent (i.e., is delinquent with respect to a Monthly Payment on the date of the second scheduled related Monthly Payment becoming due) and therefore subject to a Delinquency Adjustment, and (3) that has been subject to this Loan Agreement for 130 days, shall be 37% (and such Mortgage Loan shall cease to be an Eligible Mortgage Loan if it remains delinquent for another two months).

"Applicable Margin" means (i) 4.25% per annum with respect to any Dry Funding Advance and (ii) 7.50% per annum with respect to any Wet Funding Advance; provided that, at such time as any Wet Mortgage Loan becomes a Dry Mortgage Loan, that portion of the outstanding principal balance of the related Wet Funding Advance that is allocated to such Mortgage Loan shall cease to bear interest based on the Applicable Margin with respect to Wet Funding Advances and shall thereafter bear interest based on the Applicable Margin with respect to Dry Funding Advances.

"Appraised Value" means, with respect to any Mortgaged Property, the value set forth in an appraisal made in connection with the origination of the related Mortgage Loan as the value of such Mortgaged Property.

"Approved Closing Attorney" means, with respect to any Wet Mortgage Loan being originated in a jurisdiction in which, pursuant to local custom and practice, settlements of real estate mortgage loans are conducted by attorneys rather than by title insurance companies or their agents, an attorney admitted to practice and in good standing in such jurisdiction whom the Lender has not, pursuant to its reasonable judgement, designated as an unapproved settlement agent in a written notice to the Borrower.

"Approved Escrow Company" means, with respect to any Wet Mortgage Loan being originated in a jurisdiction in which, pursuant to local custom and practice, settlements of real estate mortgage loans are conducted by title insurance companies or their agents (including escrow companies), an escrow company licensed to do business in the jurisdiction where the related Wet Mortgage Loan is being originated and which the Lender has not, pursuant to its reasonable judgement, designated as an unapproved settlement agent in a written notice to the Borrower.

"Approved Mortgage Originators" means third-party mortgage loan origination companies that are approved by the Lender in writing from time to time. The initial Approved Mortgage Originators are the Persons listed on Schedule A-1. In the event that an Insolvency Proceeding is commenced by or against any such Approved Mortgage Originator, such Person shall no longer be an Approved Mortgage Originator from and after the date that such Insolvency Proceeding is commenced.

"Approved Mortgage Purchasers" means third-party purchasers of mortgage loans that are approved by the Lender in writing from time to time. The initial Approved Mortgage Purchasers are the Persons listed on Schedule A-2. In the event that an Insolvency Proceeding is commenced by or against any such Approved Mortgage Purchaser, such Person shall no longer be an Approved Mortgage Purchaser from and after the date that such Insolvency Proceeding is commenced.

"Approved Purchase Agreements" means those agreements approved in writing by Lender as an "Approved Purchase Agreement" hereunder including the Asset Purchase Agreement.

"Approved Purchase Program" means such programs as may hereafter be approved in writing by Lender as an "Approved Purchase Program" hereunder including the Bank Alliance Program.

"Approved Title Insurance Company" means a nationally recognized title insurance company or any other title insurance company approved by the Lender in its sole discretion. The initial Approved Title Insurance Companies are the Persons listed on Schedule A-3.

"Approved Underwriting Guidelines" means the underwriting guidelines of (a) any Approved Mortgage Purchaser or (b) any Approved Mortgage Originator, in each case as approved in writing by the Lender. The underwriting guidelines attached as Schedule A-3 hereto have been approved by the Lender.

"Asset Purchase Agreement" means that certain Asset Purchase Agreement, dated as of November 4, 2004, by and among HAC and ABMS, as sellers, and the Borrower, as purchaser.

"Asset Sale Agreement" means that certain Mortgage Loan Purchase Agreement to be entered into by the Borrower, as seller, and a Related Party, as buyer, in connection with any sale of the Mortgage Loans pursuant to
Section 2.07(z).

"Assignment of Mortgage" means, with respect to any Mortgage, an assignment of such Mortgage, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction in which the related Mortgaged Property is located to reflect the assignment and pledge of such Mortgage.

"Attorney Bailee Letter" shall have the meaning assigned to such term in the Custodial Agreement.

"Availability" means, as of any date of determination, the amount that the Borrower is entitled to borrow as Advances hereunder (after giving effect to all then outstanding Advances, interest thereon, fees and expenses, and all sublimits and reserves then applicable hereunder).

"Back-up Servicer" means Countrywide Home Loans Servicing LP, as back-up servicer under the Servicing Agreement.

"Bank Alliance Program" means the Company's "Bank Alliance Program" so long as the loans subject to such program (a) meet the Approved Underwriting Guidelines, (b) are processed and underwritten by an Approved Mortgage Originator which is acting as agent on behalf of a Participating Bank,
(c) are funded by a Participating Bank in anticipation of a post-closing sale to an Approved Mortgage Originator, and (d) are purchased from a Participating Bank within 2 weeks of closing such loan.

"Bankruptcy Code" means Title 11 of the United States Code entitled "Bankruptcy", as now and hereafter in effect, or any successor statute.

"Best's" means Best's Key Rating Guide, as the same shall be amended from time to time.

"Borrower" shall have the meaning set forth in the preamble hereto.

"Borrower's Equity Pledge Agreement" means that certain Pledge Agreement, dated as of November 4, 2004, by and between HomeAmerican Credit Inc., American Business Mortgage Services, Inc. and the Lender.

"Borrowing Base" means the aggregate Collateral Value of all Eligible Mortgage Loans that have been, and remain, pledged to the Lender hereunder.

"Borrowing Base Deficiency" shall have the meaning set forth in Section 2.06.

"Business Day" means any day other than (i) a Saturday or Sunday, (ii) a day on which the New York Stock Exchange, the Federal Reserve Bank of New York, the Custodian or banking and savings and loan institutions in the State of New York or the City of New York or the city or state in which the Custodian's offices are located are closed, or (iii) a day on which trading in securities on the New York Stock Exchange or any other major securities exchange in the United States is not conducted.

"Capital Lease Obligations" means, for any Person, all obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) Property to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP, and, for purposes of this Loan Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP.

"Cash Equivalents" means (a) securities with maturities of 90 days or less from the date of acquisition thereof that are issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and eurodollar time deposits with maturities of 90 days or less from the date of acquisition thereof and overnight bank deposits, in each case of or with any commercial bank having capital and surplus in excess of $500,000,000, (c) repurchase obligations of any commercial bank satisfying the requirements of clause (b) of this definition and having a term of not more than seven days with respect to securities issued or fully guaranteed or insured by the United States Government, (d) commercial paper of a domestic issuer rated at least A-1 or the equivalent thereof by Standard and Poor's Ratings Group ("S&P") or P-1 or the equivalent thereof by Moody's Investors Service, Inc. ("Moody's") and in either case maturing within 90 days after the date of acquisition thereof, (e) securities with maturities of 90 days or less from the date of acquisition thereof that are backed by standby letters of credit issued by any commercial bank satisfying the requirements of clause (b) of this definition, or
(f) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (e) of this definition.

"Change of Control" means any one or more of the following:
(a) the Borrower ceases to be 100% owned by the Company or any of its Subsidiaries, (b) any "person" or "group" (within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934), other than Permitted Holder, becomes the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of 10% or more of the outstanding shares of the Company having the right to vote for the election of members of its board of directors, or (c) the Permitted Holder fails to own at least 20% of the outstanding shares of the Company; provided, however, that a Change of Control shall not be deemed to have occurred if a "person" or "group" becomes the holder of 10% or more of such shares, or the Permitted Holder fails to own at least 20% of such shares, in either case, as a result of the conversion of the Company's Series A Convertible Preferred Stock.

"Closing Date" means the date on which the Lender sends the Borrower a written notice that each of the conditions precedent set forth in
Section 5.01 either has been satisfied or has been waived.

"Code" means the Internal Revenue Code of 1986, as amended from time to time.

"Collateral" shall have the meaning assigned to such term in
Section 4.01(b).

"Collateral Value" means, with respect to any Eligible Mortgage Loan, the lesser of (i) the Market Value thereof less 6% of the unpaid principal balance thereof (but in any event not to exceed 92% of the unpaid principal balance thereof) and (ii) the Applicable Collateral Percentage multiplied by the unpaid principal balance thereof; provided, that, the Collateral Value shall be deemed to be zero with respect to each Mortgage Loan that either is not an Eligible Mortgage Loan or:

(1) that has been released from the possession of the Custodian under Section 5(a) of the Custodial Agreement to the Borrower or its bailee for a period in excess of ten (10) calendar days (or if such tenth day is not a Business Day, the next succeeding Business Day);

(2) that has been released from the possession of the Custodian (i) under Section 5(b) of the Custodial Agreement under any Transmittal Letter in excess of the time period stated in such Transmittal Letter for release, or (ii) under Section 5(c) of the Custodial Agreement under an Attorney Bailee Letter, from and after the date such Attorney's Bailee Letter is terminated or ceases to be in full force and effect;

(3) in respect of which the related Mortgagor is the subject of a bankruptcy proceeding;

(4) in respect of which the Mortgagor has not made its first Monthly Payment prior to the second Monthly Payment coming due;

(5) that is an REO Property;

(6) that is greater than 120 days delinquent;

(7) that was not originated by an Approved Mortgage Originator in accordance with the Approved Underwriting Guidelines or acquired by an Approved Mortgage Purchaser pursuant to an Approved Purchase Program; or

(8) that remains a Wet Mortgage Loan for more than six Business Days following the date such Mortgage Loan first becomes subject to the terms of this Loan Agreement (until such time as such Mortgage Loan ceases to be a Wet Mortgage Loan).

"Collection Account" means the Collection Account defined in the Servicing Agreement.

"Collection Accounts" means, collectively, the Collection Account and the Escrow Account.

"Collection Account Control Agreement" shall mean that certain control agreement with respect to the Collection Accounts, in form and substance satisfactory to Lender, executed and delivered by Borrower, Lender, Initial Servicer and JP Morgan.

"Combined LTV or CLTV" means, with respect to any Mortgage Loan, the ratio of (i) the original outstanding principal amount of such Mortgage Loan and any other mortgage loan which is secured by a lien on the related Mortgaged Property to (ii) the lesser of (a) the Appraised Value of such Mortgaged Property at origination or (b) if such Mortgaged Property was purchased within 12 months of the origination of such Mortgage Loan, the purchase price of such Mortgaged Property.

"Commitment Letter" shall mean that certain letter dated September 16, 2004 between the Lender and the Company, as modified to the date hereof.

"Company" means American Business Financial Services, Inc., a Delaware corporation, or any successor thereto.

"Contractual Obligation" means, with respect to any Person, any material provision of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound or any material provision of any security issued by such Person.

"Control Agreements" means, as applicable, the Collection Account Control Agreement, the Disbursement Account Control Agreement, the Escrow Account Control Agreement, the Expense Reserve Account Control Agreement and any other control agreement, in form and substance satisfactory to the Lender, executed and delivered by the Borrower, the Lender and the applicable securities intermediary (with respect to a securities account) or bank (with respect to a deposit account) and any other party having an interest in the securities account or deposit account in question or that may otherwise be required by the Lender to execute such control agreement.

"Custodial Agreement" means that certain Custodial Agreement, dated as of the date hereof, among the Borrower, the Custodian, the Initial Servicer and the Lender, in form and substance satisfactory to the Lender.

"Custodian" means JPMorgan and its successors and permitted assigns.

"Custodian Loan Transmission" shall have the meaning set forth in the Custodial Agreement.

"Cut-off Date" means, with respect to each Mortgage Loan, the date designated as such in the related APA Assignment.

"Default" means an Event of Default or an event that with notice or lapse of time or both would become an Event of Default.

"Delinquency Adjustment" means,

(i) for a Mortgage Loan that is 30 or more, but less than 60, days delinquent, 10% (ten percentage points);

(ii) for a Mortgage Loan that is 60 or more, but less than 90, days delinquent, 20% (twenty percentage points); and

(iii) for a Mortgage Loan that is 90 or more, but less than 120, days delinquent, 25% (twenty-five percentage points).

"Depository" shall mean JPMorgan, or any successor Depository appointed by Lender with the prior written consent of Borrower (which consent shall not be unreasonably withheld or delayed).

"Disbursement Account" means that certain account to be established and maintained pursuant to the Wet Funding Side Letter.

"Disbursement Account Control Agreement" means that certain control agreement with respect to the Disbursement Account, in form and substance satisfactory to the Lender, to be executed and delivered in connection with the Wet Funding Side Letter.

"Dollars" and "$" means lawful money of the United States of America.

"Dry Funding Advance" means an Advance that is used to fund the purchase of one or more Dry Mortgage Loans by the Borrower.

"Dry Mortgage Loan" means a Mortgage Loan in respect of which the related Mortgage File contains all of the required Mortgage Loan Documents.

"Due Date" means the day of the month on which the Monthly Payment is due on a Mortgage Loan, exclusive of any days of grace.

"Eligible Mortgage Loan" means a Mortgage Loan that is (i) owned by the Borrower, (ii) either originated by an Approved Mortgage Originator in accordance with Approved Underwriting Guidelines or acquired by an Approved Mortgage Purchaser pursuant to an Approved Purchase Program, and (iii) deemed eligible for inclusion by the Lender in the calculation of the Borrowing Base after the satisfactory completion (in the judgment of the Lender) of due diligence with respect to such Mortgage Loan by the Lender or its agent(s). Without limiting the foregoing, no Mortgage Loan shall be an Eligible Mortgage Loan unless it meets each of the criteria set forth in the immediately preceding sentence and, in addition, each of the following criteria:

(i) such Mortgage Loan is secured by a first or second mortgage lien (as reflected on the related Mortgage Loan Data Transmission) on a one- to four-family residential property;

(ii) such Mortgage Loan, when combined with all other Eligible Mortgage Loans, is not a Sublimit Excess Loan;

(iii) the Mortgage Loan complies with each of the representations and warranties respecting Mortgage Loans made in
Section 6.13, Section 6.24, Schedule R-1 or any other section, schedule, or exhibit of this Loan Agreement or in the other Loan Documents, as determined by the Lender in its sole discretion;

(iv) such Mortgage Loan was originated or acquired by an Approved Mortgage Originator or acquired under an Approved Purchase Program on or after the Closing Date in accordance with Approved Underwriting Guidelines and not more than thirty (30) days prior to the date such Mortgage Loan first becomes subject to the terms of this Loan Agreement (other than the Pre-Closing Date Loans in an aggregate principal amount not to exceed $75,000,000),

(v) except in the case of any Wet Mortgage Loan (but only for a period of up to six (6) Business Days), it is a Mortgage Loan for which the Custodian is in possession of all required Mortgage Loan Documents without any Exceptions unless such Exceptions are otherwise waived in writing by the Lender,

(vi) such Mortgage Loan is (a) less than 30 days delinquent at the time of the acquisition of such Mortgage Loan by the Borrower and (b) less than 120 days delinquent as of any date of determination,

(vii) such Mortgage Loan is not subject to a forbearance agreement or other modification of the original terms thereof unless approved by the Lender in writing in its sole discretion;

(viii) such Mortgage Loan is not a "high cost," "covered," or "business purpose" loan, except as specifically approved by the Lender from time to time;

(ix) such Mortgage Loan has not been selected for conveyance to the Borrower in a manner adverse to the Borrower or the Lender;

(x) such Mortgage Loan is eligible for sale by an Approved Mortgage Originator to an unaffiliated third party pursuant to an established whole loan purchase agreement;

(xi) such Mortgage Loan is not delinquent at the time such Mortgage Loan first becomes subject to this Loan Agreement; and

(xii) the Borrower owns such Mortgage Loan and has the authority to pledge such Mortgage Loan to the Lender;

provided, further, that no Mortgage Loan that is a Wet Mortgage Loan shall be an Eligible Mortgage Loan unless it meets each of the criteria set forth above in this definition and, in addition, each of the following criteria:

(i) the proceeds thereof have been funded (or, on the date of the related Advance supported by a Notice of Borrowing and Pledge is being funded) by wire transfer or cashier's check, cleared check or draft or other form of immediately available funds to the Settlement Agent for such Wet Mortgage Loan;

(ii) the Borrower expects such Wet Mortgage Loan to close on the Funding Date (or the next succeeding Business Day if required by the Settlement Agent) and become a valid lien securing actual indebtedness by funding to the order of the Mortgagor thereunder;

(iii) the proceeds thereof have not been returned to the Lender or its agent from the Settlement Agent for such Wet Mortgage Loan;

(iv) neither the Borrower nor the Lender has learned that such Wet Mortgage Loan will not be closed and funded to the order of the Mortgagor;

(v) upon recordation of the related Mortgages such Wet Mortgage Loan will constitute a first or second lien on the Mortgaged Property described therein; and

(vi) the Borrower shall have obtained an Insured Closing Letter and Escrow Letter with respect to such Wet Mortgage Loan.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time.

"ERISA Affiliate" means any corporation or trade or business that is a member of any group of organizations (i) described in Section 414(b) or (c) of the Code of which the Company or the Borrower is a member and (ii) solely for purposes of potential liability under Section 302(c)(11) of ERISA and
Section 412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which the Company or the Borrower is a member.

"Escrow Account" means the "Escrow Account" as that term is defined in the Servicing Agreement.

"Escrow Account Control Agreement" shall have the meaning set forth in the Servicing Agreement.

"Escrow Letter" means a letter substantially in the form of Exhibit T hereto.

"Event of Default" shall have the meaning set forth in Section 8.

"Exception" shall have the meaning assigned to such term in the Custodial Agreement.

"Exception Report" means the exception report prepared by the Custodian pursuant to the Custodial Agreement.

"Expense Reserve Account" shall have the meaning set forth in
Section 2.08(a).

"Expense Reserve Account Control Agreement" shall mean that certain control agreement with respect to the Expense Reserve Account, in form and substance satisfactory to Lender, executed and delivered by Borrower, Lender, Initial Servicer and the Depository.

"Family Member" means, with respect to any individual, any other individual having a relationship by blood (to the second degree of consanguinity), marriage, or adoption to such individual.

"Fannie Mae" means Fannie Mae, or any successor thereto.

"Federal Funds Rate" means, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Lender from three primary dealers (other than an affiliate of the Lender).

"Fee" means each fee payable to the Lender pursuant the Fee Letter and/or Section 3.04, and "Fees" means all such fees, collectively.

"Fee Letter" means that certain fee letter, dated as of even date herewith, by and between the Borrower and the Lender.

"FICO Score" means a statistical credit score published by Fair Isaac Corporation (or any comparable company that is acceptable to the Lender) obtained by a mortgage lender in connection with a loan application to help assess a prospective borrower's creditworthiness as of the time the score is obtained.

"FirstTrust" means FirstTrust Bank, a Pennsylvania state-chartered bank.

"Freddie Mac" means Freddie Mac, or any successor thereto.

"Funding Date" means each date on which an Advance is made hereunder.

"GAAP" means generally accepted accounting principles as in effect from time to time in the United States of America.

"Governmental Authority" means any nation or government, any state or other political subdivision, agency or instrumentality thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any court or arbitrator having jurisdiction over the Borrower, the Company or any of its Subsidiaries, or any of their respective properties.

"Guarantee" means, as to any Person, any obligation of such Person directly or indirectly guaranteeing any Indebtedness of any other Person or in any manner providing for the payment of any Indebtedness of any other Person or otherwise protecting the holder of such Indebtedness against loss (whether by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, or to take-or-pay or otherwise), provided that the term "Guarantee" shall not include (i) endorsements for collection or deposit in the ordinary course of business or (ii) obligations to make servicing advances for delinquent taxes and insurance, or other obligations in respect of a Mortgaged Property, to the extent required by the Lender. The amount of any Guarantee of a Person shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith. The terms "Guarantee" and "Guaranteed" used as verbs shall have correlative meanings.

"HAC" means HomeAmerican Credit, Inc. dba Upland Mortgage, a Pennsylvania corporation.

"Haircut" means, with respect to any Mortgage Loan subject to this Loan Agreement as of any date of determination, an amount in United States dollars equal to (a) the outstanding principal balance of such Mortgage Loan as of such date minus (b) the Collateral Value of such Mortgage Loan as of such date.

"Indebtedness" means, for any Person: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of Property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such Property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of Property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within 90 days of the date the respective goods are delivered or the respective services are rendered; (c) indebtedness of others secured by a Lien on the Property of such Person, whether or not the respective indebtedness so secured has been assumed by such Person; (d) obligations (contingent or otherwise) of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for account of such Person; (e) Capital Lease Obligations of such Person; (f) obligations of such Person under repurchase agreements or like arrangements; (g) indebtedness of others Guaranteed by such Person; (h) all obligations of such Person incurred in connection with the acquisition or carrying of fixed assets by such Person; (i) indebtedness of general partnerships of which such Person is a general partner; and (j) any other indebtedness of such Person evidenced by a note, bond, debenture or similar instrument.

"Indemnified Liabilities" shall have the meaning set forth in
Section 11.03.

"Indemnified Party" shall have the meaning set forth in
Section 11.03.

"Information" shall have the meaning set forth in Section 11.14(a)(ii).

"Insolvency Proceeding" means (a) any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any similar bankruptcy or insolvency law of any jurisdiction, (b) any assignment for the benefit of creditors, (c) any formal or informal moratorium, composition or extension generally with creditors, (d) any proceeding seeking reorganization, arrangement or other similar relief, and (e) any proceeding seeking the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of any Person or any of its assets.

"Initial Servicer" means HAC and ABMS with respect to Mortgage Loans originated or purchased by such entity, each in its capacity as initial servicer under the Servicing Agreement.

"Insurance Proceeds" means, with respect to any Mortgage Loan, proceeds of insurance policies insuring such Mortgage Loan or the related Mortgaged Property.

"Insured Closing Letter" means, with respect to any Wet Mortgage Loan, a letter of indemnification from an Approved Title Insurance Company, Approved Escrow Company or Approved Closing Attorney, addressed to the Approved Mortgage Originator with respect to such Wet Mortgage Loan, with coverage that is customarily acceptable to Persons engaged in the origination of mortgage loans, identifying the Settlement Agent covered thereby.

"Interest Accrual Period" means, with respect to any Advance,
(i) initially, the period commencing on the Funding Date with respect to such Advance and ending on the calendar day prior to the next succeeding Payment Date, and (ii) thereafter, each period commencing on the Payment Date of a month and ending on the calendar day prior to the Payment Date of the next succeeding month. Notwithstanding the foregoing, no Interest Accrual Period may end after the Termination Date.

"Interest Rate Protection Agreement" means, with respect to any or all of the Mortgage Loans or Advances, any interest rate swap, cap or collar agreement or any other applicable hedging arrangements providing for protection against fluctuations in interest rates or the exchange of nominal interest obligations, either generally or under specific contingencies relating to the Mortgage Loans or the Advances.

"Interest Rate Protection Strategy" means, with respect to any Person, such Person's strategy for entering into Interest Rate Protection Agreements, which strategy and the financial institutions party to the Interest Rate Protection Agreements are acceptable to the Lender.

"Irrevocable Payment Instruction Letter" means that certain Irrevocable Payment Instruction Letter, dated as of even date herewith, executed by the Borrower in favor of the Lender and any written amendment thereto, provided such amendment is approved in writing by the Lender.

"JPMorgan" means JPMorgan Chase Bank.

"Lender" shall have the meaning set forth in the preamble hereto.

"Lender Expenses" means all (a) costs or expenses (including taxes, and insurance premiums) required to be paid by the Borrower or any Related Party under any of the Loan Documents that are paid, advanced, or incurred by the Lender or any Lender-Related Party, (b) fees or charges paid or incurred by any Lender-Related Party in connection with the Lender's transactions with the Borrower under the Loan Documents, including, fees or charges for photocopying, notarization, couriers and messengers, telecommunication, public record searches (including tax lien, litigation, and Uniform Commercial Code searches and including searches with the patent and trademark office, the copyright office, or the department of motor vehicles), filing, recording, publication, appraisal (including periodic collateral appraisals or business valuations to the extent of the fees and charges (and up to the amount of any limitation) contained in this Loan Agreement), real estate surveys, real estate title policies and endorsements, and environmental audits,
(c) out-of-pocket costs and expenses incurred by the Lender in the disbursement of funds to the Borrower (by wire transfer or otherwise), (d) out-of-pocket charges paid or incurred by any Lender-Related Party resulting from the dishonor of checks payable by or to the Borrower or any Related Party, (e) out-of-pocket costs and expenses paid or incurred by any Lender-Related Party to correct any default or enforce any provision of the Loan Documents, or in gaining possession of, maintaining, handling, preserving, storing, shipping, selling, preparing for sale, or advertising to sell the Collateral, or any portion thereof, irrespective of whether a sale is consummated, (f) audit fees and expenses of Lender-Related Parties related to audit examinations of the Collateral, (g) out-of-pocket costs and expenses related to any third party claim or any other suit paid or incurred by any Lender-Related Party in enforcing or defending the Loan Documents or in connection with the transactions contemplated by the Loan Documents or the Lender's relationship with the Borrower or any Related Party,
(h) out-of-pocket costs and expenses (including reasonable attorneys fees) incurred by any Lender-Related Party in advising, structuring, drafting, reviewing, administering, syndicating, or amending the Loan Documents, and (i) costs and expenses (including the fees and expenses of attorneys, accountants, consultants and other advisors) incurred in terminating, enforcing (including attorneys, accountants, consultants, and other advisors fees and expenses incurred in connection with a "workout," a "restructuring," or an Insolvency Proceeding concerning the Borrower or any Related Party or in exercising rights or remedies under the Loan Documents), or defending the Loan Documents, irrespective of whether suit is brought, or in taking any exercising any remedies concerning the Collateral.

"Lender-Related Party" means the Lender and each of the Lender's members, Affiliates, sponsors, managing directors, directors, together with its lenders, officers, employees, agents, advisors, attorneys, and other representatives.

"LIBO Base Rate" means, with respect to each day an Advance is outstanding (or, if such day is not a Business Day, the next succeeding Business Day), the rate per annum equal to the rate published by Bloomberg (or if such rate is not available, the rate appearing at page 3750 of the Telerate Screen) as one-month LIBOR on such date, and if such rate shall not be so quoted, the rate per annum at which the Lender is offered Dollar deposits at or about 11:00
A.M., eastern time, on such date by prime banks in the interbank eurodollar market where the eurodollar and foreign currency and exchange operations in respect of its Advances are then being conducted for delivery on such day for a period of one month and in an amount comparable to the amount of the Advances to be outstanding on such day.

"LIBO Rate" means, with respect to each day during any Interest Accrual Period pertaining to an Advance, a rate per annum (reset on a daily basis) determined by the Lender in its sole discretion in accordance with the following formula (rounded upwards to the nearest l/100th of one percent), which rate as determined by the Lender shall be conclusive absent manifest error by the Lender:

The LIBO Rate shall be calculated for each day on which any Advance is outstanding.

"LIBO Reserve Requirements" means, for each day during any Interest Accrual Period for any Advance, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of any reserve requirements applicable to the Lender or any Lender-Related Party in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or any other Governmental Authority having jurisdiction with respect thereto), dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a member bank of such Governmental Authority. As of the Closing Date, the LIBO Reserve Requirements shall be deemed to be zero.

"Lien" means any mortgage, lien, pledge, charge, security interest or similar encumbrance.

"LLC Agreement" means that certain Limited Liability Company Agreement, dated as of November __, 2004, among HAC, ABMS and Orlando Figueroa, as special member, whereby the Borrower was created.

"Loan Account" means the account on the Lender's books in the name of the Borrower.

"Loan Documents" means, collectively, the LLC Agreement, the Control Agreements, the APA Assignment, the Asset Purchase Agreement, the Custodial Agreement, the Fee Letter, the Irrevocable Payment Instruction Letter, this Loan Agreement, the Servicing Agreement, the UCC Authorization Letter, any note or notes executed by the Borrower in connection with this Loan Agreement and payable to the Lender or any of its assignees, and any other agreement entered into, now or in the future, by the Borrower and the Lender in connection with this Agreement.

"Loan-to-Value Ratio" or "LTV" means, with respect to any Mortgage Loan, the ratio of the original principal amount of such Mortgage Loan to the lesser of (a) the Appraised Value of the related Mortgaged Property at origination and (b) if such Mortgaged Property was purchased within 12 months of the origination of such Mortgage Loan, the purchase price of such Mortgaged Property.

"Lockbox" means that certain lockbox maintained on behalf of the Company by FirstTrust and located at P.O. Box #41415 at 30th Street Post Office, Philadelphia Pennsylvania, from which payments made by Mortgagors on Mortgage Loans shall be made to an account at FirstTrust (routing #236073801, account #701905176) for remittance to the Collection Accounts.

"Market Value" means, with respect to any Eligible Mortgage Loan, the whole loan resale market price thereof (determined, in the Lender's sole discretion, based upon recent sales to third parties of comparable Mortgage Loans under market conditions reasonably equivalent to prevailing market conditions at the time of such determination).

"Material Adverse Change" means an event, fact or circumstance, or a change in or effect on the business of the Borrower, any Related Party or the Initial Servicer, which individually or in the aggregate, or on a cumulative basis with any other such events, facts, circumstances, changes or effects, could reasonably be expected to have a Material Adverse Effect; provided that the following shall not constitute a "Material Adverse Change": (a) losses of up to $30,000,000 during the Company's fiscal quarter ending September 30, 2004; and (b) any information regarding an event, fact, circumstance, change in, or effect on the business of the Borrower, any Related Party, or any Servicer which was publicly filed with the Securities Exchange Commission in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2004.

"Material Adverse Effect" means a material adverse effect on
(a) the property, business, operations, financial condition or prospects of the Related Parties, taken as a whole, or the Borrower or the Initial Servicer, (b) the ability of any of the Related Parties or the Borrower to perform in all material respects its respective obligations under any of the Loan Documents to which it is a party, (c) the validity or enforceability in all material respects of any of the Loan Documents, (d) the rights and remedies of the Lender under any of the Loan Documents, (e) the Collateral, or (f) financial, banking or capital market conditions.

"Material Contract" means all agreements and contracts evidencing the Mortgage Loans.

"Maximum Credit" means $100,000,000; provided, that at any time during the period from the 121st day through the 300th day from the Closing Date, Lender may, in its sole discretion, increase the Maximum Credit up to $175,000,000 by giving written notice of such election to the Borrower.

"MERS" means Mortgage Electronic Registration System, or its successor in interest.

"MERS Agreement" means that certain Electronic Tracking Agreement, dated as of the Closing Date, by and among the Lender, the Borrower, the Custodian, MERS, MERSCORP, Inc. and the Initial Servicer.

"Monthly Payment" means the scheduled monthly payment of principal and interest on a Mortgage Loan as adjusted in accordance with changes in the Mortgage Interest Rate pursuant to the provisions of the Mortgage Note for an adjustable rate Mortgage Loan.

"Monthly Statement" means the monthly statement furnished by the Borrower to the Lender as set forth in Section 7.20 hereto.

"Mortgage" means, with respect to any Mortgage Loan, the mortgage, deed of trust or other instrument which creates a valid and perfected first priority or valid and perfected second priority (as indicated on the related Mortgage Loan Data Transmission) Lien on the fee simple or a leasehold estate in such real property.

"Mortgage File" shall have the meaning set forth in the Custodial Agreement.

"Mortgage Interest Rate" means the annual rate of interest borne on a Mortgage Note, which shall be adjusted from time to time with respect to adjustable rate Mortgage Loans.

"Mortgage Loan" means a mortgage loan which the Custodian has been or will be instructed to hold for the Lender pursuant to the Custodial Agreement, and which Mortgage Loan includes, without limitation, (i) a Mortgage Note, the related Mortgage and all other Mortgage Loan Documents and (ii) all right, title and interest in and to the Mortgaged Property covered by such Mortgage.

"Mortgage Loan Data Transmission" means a computer-readable magnetic or other electronic format incorporating the fields identified on Exhibit M.

"Mortgage Loan Documents" means, with respect to a Mortgage Loan, the documents comprising the Mortgage File for such Mortgage Loan.

"Mortgage Loan List" means the hard copy report provided by or on behalf of the Borrower which shall include with respect to each Mortgage Loan to be included as Collateral: (i) the Mortgage Loan number, (ii) the Mortgagor's name, (iii) the original principal amount of such Mortgage Loan and (iv) the current principal balance of such Mortgage Loan.

"Mortgage Loan Schedule" means Schedule I to the Notice of Borrowing and Pledge.

"Mortgage Note" means the original executed promissory note or other evidence of the indebtedness of a mortgagor/borrower with respect to a Mortgage Loan.

"Mortgaged Property" means the real property (including all improvements, buildings, fixtures, building equipment and personal property thereon and all additions, alterations and replacements made at any time with respect to the foregoing) and all other collateral securing repayment of the debt evidenced by a Mortgage Note.

"Mortgagor" means the obligor on a Mortgage Note.

"Multiemployer Plan" means a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been or are required to be made by the Borrower or any ERISA Affiliate and that is covered by Title IV of ERISA.

"Net Worth" means, with respect to any Person, the amount which would be included under stockholders' equity on a consolidated balance sheet of such Person determined on a consolidated basis in accordance with GAAP.

"Non-Usage Fee" shall have the meaning given to it in Section 3.04(b).

"Notice of Borrowing and Pledge" means the certificate prepared by the Borrower substantially in the form of Exhibit B attached hereto.

"Obligations" means all loans, Advances, debts, principal, interest (including any interest that, but for the commencement of an Insolvency Proceeding, would have accrued), contingent reimbursement obligations with respect to any of the Loan Documents, premiums, liabilities (including all amounts charged to the Loan Account pursuant hereto), obligations (including indemnification obligations), fees (including the fees provided for in the Fee Letter), charges, costs, Lender Expenses (including any fees or expenses that, but for the commencement of an Insolvency Proceeding, would have accrued), guaranties, covenants, and duties of any kind and description owing by the Borrower or any Related Party to the Lender or any Lender-Related Party pursuant to or evidenced by the Loan Documents and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising. Any reference in this Agreement or in the Loan Documents to the Obligations shall include all extensions, modifications, renewals or alterations thereof, both prior and subsequent to any Insolvency Proceeding of any Related Party.

"Participant" shall have the meaning set forth in Section 11.14(b).

"Participating Bank" means (a) the participating banks listed on the Participating Bank Letter Agreement, and (b) any other commercial bank with consumer lending operations which is approved in writing by Lender, such approval not to be unreasonably withheld.

"Participating Bank Letter Agreement" means that certain letter agreement, dated as of the date hereof, executed by the Borrower in favor of the Lender.

"Payment Date" shall be the fifteenth (15th) day of each month or, if such day is not a Business Day, the succeeding Business Day.

"PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.

"Permitted Holder" means Anthony J. Santilli and his Family Members.

"Permitted Liens" means, with respect to any Mortgaged Property, (i) the lien of current real property taxes and assessments which are not delinquent, (ii) if the related Mortgage Loan is identified on the Mortgage Loan Schedule as secured by a second lien, the related first mortgage loan,
(iii) covenants, conditions and restrictions, rights of way, easements and other matters of public record as of the date of recording of the related Mortgage, such exceptions appearing of record being acceptable to mortgage lending institutions generally in the area wherein the property subject to such Mortgage is located or specifically reflected in the appraisal obtained in connection with the origination of the related Mortgage Loan, and (iv) other matters to which like properties are commonly subject which do not materially interfere with the benefits of the security intended to be provided by such Mortgage, or materially impact the value or utility of such Mortgaged Property.

"Person" means any individual, corporation, company, voluntary association, partnership, joint venture, limited liability company, trust, unincorporated association or government (or any agency, instrumentality or political subdivision thereof).

"Plan" means an employee benefit or other plan established or maintained by either the Borrower, the Company or any ERISA Affiliate and that is covered by Title IV of ERISA, other than a Multiemployer Plan.

"PMI Policy" or "Primary Insurance Policy" means a policy of primary mortgage guaranty insurance issued by a Qualified Insurer.

"Post-Default Rate" means, in respect of any principal of any Advance or any other amount under this Loan Agreement or any other Loan Document that is not paid when due to the Lender (whether at stated maturity, by acceleration or mandatory prepayment or otherwise), a rate per annum during the period from and including the due date for such amount to but excluding the date on which such amount is paid in full equal to 6% per annum plus (a)(i) the interest rate otherwise applicable to such amount or (ii) if no interest rate is otherwise applicable to such amount, the LIBO Rate plus (b) the Applicable Margin (which, if no interest rate is otherwise applicable to such amount, shall be the Applicable Margin with respect to Mortgage Loans that are not Wet Mortgage Loans).

"Pre-Closing Date Loan" means any Mortgage Loan originated by an Approved Mortgage Originator or purchased by an Approved Mortgage Purchaser during the period from the date that is 30 days prior to the Closing Date up to and including the Closing Date.

"Projections" shall have the meaning set forth in Section 11.14(a)(ii).

"Promissory Notes" means, collectively, (a) that certain promissory note executed by the Borrower in favor of the Lender on the Closing Date in an aggregate principal amount equal to the Maximum Credit and (b) each additional promissory note executed by the Borrower in favor of the Lender or any assignees in connection with any assignments effected pursuant to Section 11.14(a).

"Property" means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.

"Qualified Cash" means, as of any date of determination, the amount of unrestricted cash and Cash Equivalents of a Person maintained by a branch office of a bank located within the United States and that, with respect to the Borrower, are in deposit accounts which are subject to an appropriate Control Agreement.

"Qualified Insurer" means, with respect to any Mortgaged Property, an insurance company (a) duly qualified as such under the laws of the state in which such Mortgaged Property is located, (b) duly authorized and licensed in such state to transact the applicable insurance business and to write the insurance provided in accordance with the Approved Underwriting Guidelines, (c) approved as an insurer by Fannie Mae and Freddie Mac or by the Lender, and (d) whose claims-paying ability is rated in the two highest rating categories by any of the rating agencies with respect to primary mortgage insurance and in the two highest rating categories by Best's with respect to hazard and flood insurance.

"Regulations T, U and X" means Regulations T, U and X of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time.

"Related Party" means any of the Company, ABMS or HAC, or any of their respective Subsidiaries or Affiliates.

"Renewal Fee" shall have the meaning set forth in Section 3.04(a).

"REO Property" means mortgaged property acquired by the Servicer pursuant to the related Servicing Agreement as a result of the liquidation of a Mortgage Loan.

"Requirement of Law" means, as to any Person, (a) the certificate of incorporation and by-laws or other organizational or governing documents of such Person, (b) all laws (including consumer regulatory laws), treaties, rules or regulations, and (c) all determinations of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

"Required Documents" means those documents identified in
Section 2(I) of the Custodial Agreement.

"Responsible Officer" means, as to any Person, the chief executive officer or, with respect to financial matters, the chief financial officer of such Person; provided that, in the event any such officer is unavailable at any time he or she is required to take any action hereunder, "Responsible Officer" means any officer authorized to act on such officer's behalf as demonstrated by a certificate or corporate resolution.

"Restricted Payments" means, with respect to any Person, collectively, all dividends or other distributions of any nature (cash, securities, assets or otherwise), and all payments, by virtue of redemption or otherwise, on any class of equity securities (including, without limitation, warrants, options or rights therefor) issued by such Person, whether such securities are now or may hereafter be authorized or outstanding and any distribution in respect of any of the foregoing, whether directly or indirectly.

"Scheduled Termination Date" means (i) the first anniversary of the Closing Date or (ii) such later date as may result from an extension of the Scheduled Termination Date if agreed upon by the Borrower and Lender in writing at any time before the first anniversary of the Closing Date.

"Second Lien" means, with respect to any Mortgaged Property, the lien of the mortgage, deed of trust or other instrument securing a mortgage note which creates a second lien on such Mortgaged Property.

"Second Lien Mortgage Loan" means an Eligible Mortgage Loan secured by a lien on the related Mortgaged Property, subject to one prior lien on such Mortgaged Property securing financing obtained by the related Mortgagor.

"Servicer" means the Initial Servicer and/or the Back-up Servicer, as applicable.

"Servicing Agreement" means the servicing agreement executed by and between the Borrower, the Lender, the Initial Servicer and the Back-up Servicer the form and substance of which is reasonably satisfactory to the Lender.

"Servicing File" means, with respect to any Mortgage Loan, the file retained by the Servicer consisting of originals of all material documents in the Mortgage File which are not delivered to the Custodian and copies of the Mortgage Loan Documents set forth in Section 2 of the Custodial Agreement.

"Servicing Records" shall have the meaning set forth in
Section 11.15(b).

"Servicing Transmission" means a computer-readable magnetic or other electronic format acceptable to the parties containing the information identified on Exhibit S.

"Settlement Agent" shall mean, with respect to any Wet Mortgage Loan, the Approved Title Insurance Company, Approved Escrow Company or Approved Closing Attorney to which (in accordance with local law and practice in the jurisdiction where the related Wet Mortgage Loan is being originated) the proceeds of the related Advance are to be distributed by the Wet Funding Agent in accordance with the instructions of the Borrower provided in the applicable Mortgage Loan Transmission, in each case (i) who has issued an Insured Closing Letter and (ii) whom the Lender has not designated as an unapproved settlement agent in a written notice to the Borrower.

"Sublimit Excess Loan" means, as of any date of determination, a Mortgage Loan contained in any one or more of the categories set forth below which (a) when added to all other Eligible Mortgage Loans which are pledged to the Lender under this Loan Agreement, results in any of the percentages (each of which is expressed as a percentage of the Maximum Credit as of such date) or dollar amounts indicated below being exceeded and (b) is identified as such by the Lender (which selection may be arbitrary) in order that the aggregate unpaid principal balances of the Eligible Mortgage Loans in each such category as of such date do not exceed such percentages or dollar amounts.

                                                                                           Maximum Sublimit
Mortgage Loan Category                                                                       Percentage
---------------------                                                                     ------------------
FICO Score 540-580                                                                               45%
FICO Score 520-539                                                                               25%
Combined: FICO Scores less than 580                                                              65%
Greater than 30 days delinquent                                                                  10%
Greater than 60 days delinquent                                                  5% (exclusive of 30 day delinquency
                                                                                              sublimit)
Originated  or  purchased  by an  Approved  Mortgage  Originator  30  or  more                   10%
seasoned days prior to the purchase thereof by the Borrower
Second Lien Mortgage Loan                                                                        10%
CLTV greater than 80%                                                             65%, inclusive of all other CLTV
                                                                                           sublimits below
CLTV greater than 85%                                                              30%, inclusive of CLTV sublimit
                                                                                    greater than or equal to 90%
CLTV greater than 90%                                                                            10%
Wet Mortgage Loans                                                                 30% (but in no event more than
                                                                                            $40,000,000)
Originated or purchased by an Approved Mortgage Originator                                       0%
30 or more days delinquent at the date of determination

"Subsidiary" means, with respect to any Person, (a) any corporation, partnership, limited liability company or other entity of which at least a majority of the securities, partnership interests, membership interests, limited liability company or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors, managers or other persons performing similar functions of such corporation, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person, and
(b) any trust in respect of which such Person is the depositor.

"Termination Date" means the Scheduled Termination Date or such earlier date on which this Loan Agreement shall terminate in accordance with the provisions of this Loan Agreement, any other Loan Document, or by operation of law.

"Transmittal Letter" shall have the meaning assigned thereto in the Custodial Agreement.

"Trust Receipt" shall have the meaning assigned thereto in the Custodial Agreement.

"UCC Authorization Letter" means a letter duly executed by the Borrower and certain of the Related Parties authorizing the Lender to file appropriate financing statements on Form UCC-1 in such office or offices as may be necessary or, in the opinion of the Lender, desirable to perfect the security interests created by the Loan Documents.

"Uniform Commercial Code" means the Uniform Commercial Code as in effect on the date hereof in the State of New York; provided that if, by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, "Uniform Commercial Code" means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection.

"Wet Funding Advance" means an Advance that is used to fund the purchase of one or more Wet Mortgage Loans by the Borrower.

"Wet Funding Agency Agreement" means that certain agreement to be entered into after the Closing Date by and among the Borrower, the Lender, the Custodian and the Wet Funding Agent.

"Wet Funding Agent" means Structured Assets Funding Enterprise LLC or another Person approved by Lender in its sole discretion.

"Wet Mortgage Loan" means a Mortgage Loan in respect of which the related Mortgage File does not contain all of the required Mortgage Loan Documents.

"Wet Funding Side Letter" means that certain side letter to be entered into between the Borrower and the Lender after the Closing Date, in form and substance satisfactory to the Lender and setting forth the procedures and the Lender's other requirements relating to the making of any Wet Funding Advances.

1.02 Accounting Terms and Determinations. Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lender hereunder shall be prepared, in accordance with GAAP.

1.03 Uniform Commercial Code. Any terms used in this Agreement that are defined in the Uniform Commercial Code shall be construed and defined as set forth in the Uniform Commercial Code unless otherwise defined herein.

1.04 Construction. Unless the context of this Agreement or any other Loan Document clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the term "including" is not limiting, and the term "or" has, except where otherwise indicated, the inclusive meaning represented by the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Loan Document, as the case may be. Section, subsection, clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified. Any reference in this Agreement or in the other Loan Documents to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein). Any reference herein to any Person shall be construed to include such Person's successors and permitted assigns. Any requirement of a writing contained herein or in the other Loan Documents shall be satisfied by the transmission of a record and any record transmitted shall constitute a representation and warranty as to the accuracy and completeness of the information contained therein.

SECTION 2 ADVANCES, EVIDENCE OF DEBT AND PREPAYMENTS.

2.01 Advances.

(a) Subject to fulfillment of the conditions precedent set forth in Sections 5.01 and 5.02, and provided that no Default or Event of Default shall have occurred and be continuing hereunder, the Lender hereby agrees, from time to time, on the terms and conditions of this Loan Agreement and the other Loan Documents, to make loans (individually, an "Advance"; collectively, the "Advances") to the Borrower in Dollars, on any Business Day during the period from and including the Closing Date to but excluding the fifth
(5th) Business Day before the Termination Date, in an aggregate principal amount at any one time outstanding up to but not exceeding the lesser of (i) the Maximum Credit (which shall be further subject to the limitations set forth in the definition of Collateral Value) and (ii) the Borrowing Base as in effect from time to time; provided, that the Lender shall not (a) make any Wet Funding Advances more often than once per day or for an amount less than $2,000,000 per Wet Funding Advance or (b) make any Dry Funding Advances more often than once per week (solely on any Tuesday, Wednesday or Thursday that is a Business Day) or for an amount less than $5,000,000 Dollars per Dry Funding Advance; provided, that the Lender shall be under no obligation to make any Wet Funding Advance unless and until the Borrower and the Lender have agreed to and effectuated all requirements requested by the Lender, in its sole discretion, for the making of Wet Funding Advances, including but not limited to the engagement of the Wet Funding Agent, the establishment of Dollar sublimits with respect to Wet Funding Advances involving any particular Settlement Agent, the execution of the Wet Funding Side Letter, and the implementation of any amendments to the Loan Documents necessary to reflect any of the foregoing requirements. Upon satisfaction of the conditions set forth in this Loan Agreement, the Lender shall wire an amount in immediately available funds equal to the amount of such Advance minus (i) any Fees that are then due and payable to Lender pursuant to the Loan Documents that have not previously been paid by the Borrower and (ii) any deposits to the Expense Reserve Account that are required to be funded from the Advance proceeds pursuant to Section 2.08.

(b) Subject to the terms and conditions of this Loan Agreement, during such period the Borrower may borrow, repay and reborrow hereunder.

(c) In no event shall the Lender be obligated to make an Advance when any Default or Event of Default has occurred and is continuing.

2.02 Evidence of Debt.

(a) The Lender shall maintain an account or accounts evidencing the indebtedness of the Borrower to the Lender resulting from each Advance made by the Lender, including the amounts of principal and interest payable and paid to the Lender from time to time hereunder.

(b) The entries made in the accounts maintained pursuant to paragraph (a) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of the Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Advances in accordance with the terms of this Loan Agreement.

(c) The Lender may request that the Advances be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to the Lender a promissory note payable to the order of the Lender (or, if requested by the Lender, to the Lender and its assigns) and in a form approved by the Lender. Thereafter, the Advances evidenced by such promissory note and interest thereon shall at all times be represented by one or more promissory notes in such form payable to the order of the payee named therein.

2.03 Procedure for Borrowing.

(a) Subject to the proviso set forth in Section 2.01(a), the Borrower may request a borrowing to be secured by any Mortgage Loans hereunder, on any Business Day during the period from and including the Closing Date to but excluding the fifth (5th) Business Day before the Termination Date, by delivering to the Lender, with a copy to the Custodian, as set forth in the
Section 2 of the Custodial Agreement, a Mortgage Loan Data Transmission and an irrevocable Notice of Borrowing and Pledge substantially in the form of Exhibit B hereto (a "Notice of Borrowing and Pledge") before 5:00 P.M. two (2) Business Days prior to the Funding Date with respect to a Dry Funding Advance and before 5:00 P.M. one (1) Business Day prior to the Funding Date with respect to a Wet Funding Advance. Such Notice of Borrowing and Pledge shall include a Mortgage Loan List in respect of the Eligible Mortgage Loans that the Borrower proposes to pledge to the Lender and to be included in the Borrowing Base in connection with such borrowing.

(b) In connection with each Notice of Borrowing and Pledge delivered to the Lender by the Borrower, the Borrower shall deliver to the Lender a certificate executed by an officer of the Borrower which sets forth the Borrower's calculation of the Borrowing Base deterimined as of the date thereof. The Borrower shall also provide to the Lender, on a monthly basis, the Borrower's calculation of the Borrowing Base for the previous month, calculated in accordance with the Lender's direction. From time to time, the Lender shall calculate the Borrowing Base with reference to all Mortgage Loans that are then held by the Custodian (and any Wet Mortgage Loans, if any) and shall forward to the Borrower, by facsimile or electronic mail transmission, such calculation of the Borrowing Base.

(c) Upon the Borrower's request for a borrowing pursuant to
Section 2.03(a), the Lender shall, not later than 4:00 p.m. (eastern time) on the first Business Day following receipt by the Lender of the related Notice of Borrowing and Pledge, confirm the Advance to be made in connection with such notice (or note any deficiency in such notice); provided, that with respect to any Wet Mortgage Loans, the Lender shall, not later than that time on the Funding Date which is specified in the Wet Funding Side Letter, confirm the Advance to be made in connection with such notice (or note any deficiency in such notice). Provided that all conditions precedent set forth in this Section 2.03, Sections 5.01 and Section 5.02, in addition to the procedures set forth in
Section 2 and Section 3 of the Custodial Agreement have been met, and provided no Default shall have occurred and be continuing (in accordance with Section 2.01), make an Advance not later than 4:00 p.m. (eastern time) on the requested Funding Date in the amount requested by the Borrower so long as, after giving effect to such Advance (as determined by the Lender), the aggregate amount of Advances then outstanding would not exceed the lesser of (x) the Maximum Credit or (y) the Borrowing Base as shown on the latest calculation of the Borrowing Base provided by the Lender. Subject to the foregoing, such Advance will be made available to the Borrower by the Lender transferring, via wire transfer to the account set forth in the Irrevocable Payment Instruction Letter, the aggregate amount of such Advance in funds immediately available to the Borrower; provided that, with respect to any Advance that shall be used to purchase a Wet Mortgage Loan pursuant to this Loan Agreement, (1) the amount of the applicable Advance shall be disbursed to the Settlement Agent by the Wet Funding Agent and (2) the Borrower shall be required to deposit in the Disbursement Account, prior to the closing of such Wet Mortgage Loan, any amount equal to the excess of (A) the amount required to be remitted in connection with the closing of such Wet Mortgage Loan over (B) the amount to be advanced by the Lender hereunder with respect to such Wet Mortgage Loan.

2.04 Limitation on Types of Advances; Illegality. Anything contained herein to the contrary notwithstanding, if, on or prior to the determination of any LIBO Base Rate:

(a) the Lender determines, which determination shall be conclusive, that quotations of interest rates for the relevant deposits referred to in the definition of "LIBO Base Rate" in Section 1.01 are not being provided in the relevant amounts or for the relevant maturities for purposes of determining rates of interest for Advances as provided herein; or

(b) the Lender determines, which determination shall be conclusive, that the Applicable Margin plus the relevant rate of interest referred to in the definition of "LIBO Base Rate" in Section 1.01 upon the basis of which the rate of interest for Advances is to be determined is not likely adequately to cover the cost to the Lender of making or maintaining Advances; or

(c) it becomes unlawful for the Lender to make or maintain Advances hereunder using a LIBO Rate;

then the Lender shall give the Borrower prompt notice thereof and, so long as such condition remains in effect, the Lender shall not make additional Advances, and the Borrower shall, at its option, either prepay such Advances or pay interest on such Advances at a rate per annum as determined by the Lender taking into account the increased cost to the Lender of making and maintaining the Advances.

2.05 Repayment of Advances; Interest.

(a) The Borrower hereby unconditionally promises to pay in full on the Termination Date the then aggregate outstanding principal amount of the Advances and all other Obligations due under this Loan Agreement and the other Loan Documents.

(b) The Borrower shall pay to the Lender interest on the unpaid principal amount of each Advance for the period from and including the date of such Advance to but excluding the date such Advance shall be paid in full, at a rate per annum equal to the LIBO Rate plus the Applicable Margin. Notwithstanding the foregoing, the Borrower shall pay to the Lender interest at the applicable Post-Default Rate on any principal of or interest on any Advance and on any other amount payable by the Borrower hereunder, in each case to the extent the same shall not be paid in full when due (whether at stated maturity, by acceleration or by mandatory prepayment or otherwise), for the period from and including the due date thereof to but excluding the date the same is paid in full. Accrued interest on each Advance shall be payable monthly on each Payment Date and on the Termination Date, except that interest payable at the Post-Default Rate shall accrue daily and shall be payable promptly upon receipt of invoice. Promptly after the determination of any interest rate provided for herein or any change therein, the Lender shall give written notice thereof to the Borrower.

2.06 Mandatory Prepayment or Pledge.

On each Funding Date or other date on which there is a change in the Mortgage Loans held by the Custodian, the Custodian shall deliver to the Lender and the Borrower the Custodian Loan Transmission. The Lender shall, on the Business Day prior to each Payment Date (and may on any other Business Day), deliver to the Borrower a calculation of the Borrowing Base, such calculation to be based on the delinquency status and principal balance of the Eligible Mortgage Loans as of the later of the date to which principal was applied to such balance or the last calendar day of the prior month). Such information shall be ascertained from the Servicing Transmission which shall be delivered or caused to be delivered by the Borrower in accordance with Section 7.17 and shall include all Mortgage Loans which were funded on or prior to the last calendar day of the previous month. In the event that such Borrowing Base calculation indicates that, or if at any other time the aggregate outstanding principal amount of all Advances exceeds the Borrowing Base (a "Borrowing Base Deficiency"), as determined by the Lender and notified to the Borrower on any Business Day, the Borrower shall no later than two (2) Business Days after receipt of such written notice, either prepay the Advances in part or in whole or pledge additional Eligible Mortgage Loans (which Collateral shall be in all respects acceptable to the Lender) to the Lender, such that after giving effect to such prepayment or pledge the aggregate outstanding principal amount of all Advances does not exceed the Borrowing Base.

2.07 Optional Prepayments.

(a) The Advances are not prepayable, in whole or in part, except (x) on a Payment Date in connection with an unscheduled payment of the principal balance of a Mortgage Loan held by the Custodian or (y) on any Business Day in connection with a sale by the Borrower of such a Mortgage Loan in the ordinary course of its business consistent with the past practices of the Company and its Subsidiaries or (z) on any Business Day in connection with a sale by the Borrower of such a Mortgage Loan to a Related Party; provided, that with respect to a prepayment as set forth in clause (z) above, the Borrower shall not be permitted to sell any Mortgage Loan to a Related Party unless (i) such Mortgage Loan is a Dry Mortgage Loan, (ii) such sale is on a "first-in-first-out" basis in terms of the length of time that such Mortgage Loan (as compared to any other Mortgage Loan) has been subject to this Agreement, in each case measured from the respective times that the Mortgage Loans being compared became Dry Mortgage Loans, and (iii) the Lender shall have approved the price at which such Mortgage Loan is to be sold. Amounts repaid may be reborrowed in accordance with the terms of this Loan Agreement. If the Borrower intends to prepay an Advance in whole or in part from any source, the Borrower shall give one (1) Business Day's prior written notice thereof to the Lender. If such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to such date on the amount prepaid. Partial prepayments shall be in an aggregate principal amount of at least $1,000,000.

(b) If the Borrower makes a prepayment of the Advances on any day which is not a Payment Date, the Borrower shall indemnify the Lender and hold the Lender harmless from any actual loss or expense which the Lender may sustain or incur arising from (a) the re-employment of funds obtained by the Lender to maintain the Advances hereunder or (b) fees payable to terminate the deposits from which such funds were obtained, in either case, which actual loss or expense shall be equal to an amount equal to the excess, as reasonably determined by the Lender, of (i) its cost of obtaining funds for such Advances for the period from the date of such payment through the following Payment Date over (ii) the amount of interest likely to be realized by the Lender in redeploying the funds not utilized by reason of such payment for such period. This Section 2.07 shall survive termination of this Loan Agreement and payment of the Advances.

(c) This Loan Agreement may be terminated by the Borrower at any time after the six-month anniversary of the Closing Date upon payment in full, in cash, of all Obligations, including all payments required to be made under Sections 2.05 and 3.04.

2.08 Expense Reserve Account.

On or before the initial Funding Date, the Borrower shall establish with the Depository an Expense Reserve Account (the "Expense Reserve Account"), designated as "[servicer] for the benefit of Penn Square East Funding, LLC and Fortress Credit Corp.", which shall be maintained for the benefit of the Lender until all Obligations due to the Lender pursuant to the Loan Documents are paid in full and this Loan Agreement is terminated. As of the initial Funding Date, the Borrower shall have deposited $125,000 into the Expense Reserve Account. On any Payment Date or Funding Date for which the balance of the Expense Reserve Account is below $300,000, an amount necessary to increase the Expense Reserve Account balance to $300,000 shall be deposited into the Expense Reserve Account out of the Collection Account pursuant to Section 3.01(c) or out of proceeds of the related Advance pursuant to Section 2.01, as applicable. The Borrower shall be permitted to use any amounts in the Expense Reserve Account solely to meet its fee and expense obligations under the Loan Documents, including those fee and expense obligations of the Borrower to the independent director of the Borrower, the Custodian, the Servicer and the Wet Funding Agent, on any Payment Date for which the amounts in the Collection Account are insufficient to remit such fees and expenses due and payable at such time. The Lender shall have sole dominion and control over the Expense Reserve Account. The Borrower shall have no rights of any kind with respect to the Expense Reserve Account (including, without limitation, any right of withdrawal therefrom).

2.09 Requirements of Law.

(a) If any Requirement of Law (other than with respect to any amendment made to the Lender's certificate of incorporation and by-laws or other organizational or governing documents) or any change in the interpretation or application thereof, or compliance by the Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof:

(i) shall subject the Lender or any Lender-Related Party to any tax of any kind whatsoever with respect to this Loan Agreement or any Advance made by it (excluding net income taxes) or change the basis of taxation of payments to the Lender or any Lender-Related Party in respect thereof;

(ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory advance or similar requirement against assets held by, deposits or other liabilities in or for the account of Advances or other extensions of credit by, or any other acquisition of funds by any office of the Lender or any Lender-Related Party which is not otherwise included in the determination of the LIBO Base Rate hereunder; or

(iii) shall impose on the Lender or any Lender-Related Party any other condition;

and the result of any of the foregoing is to increase the cost to the Lender, by an amount which the Lender deems to be material, of making, continuing or maintaining any Advance or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay the Lender such additional amount or amounts as will compensate the Lender for such increased cost or reduced amount receivable thereafter incurred.

(b) If the Lender shall have determined that the adoption of or any change in any Requirement of Law (other than with respect to any amendment made to the Lender's certificate of incorporation and by-laws or other organizational or governing documents) regarding capital adequacy or in the interpretation or application thereof, or compliance by the Lender or any Lender-Related Party or any corporation controlling the Lender or any Lender-Related Party with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof, shall have the effect of reducing the rate of return on the Lender's or such corporation's or any Lender-Related Party's capital as a consequence of any obligations hereunder to a level below that which the Lender or such corporation or any Lender-Related Party (taking into consideration the Lender's or such corporation's or any Lender-Related Party's policies with respect to capital adequacy) by an amount deemed by the Lender to be material, then from time to time, the Borrower shall promptly pay to the Lender such additional amount or amounts as will thereafter compensate the Lender for such reduction.

(c) If the Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify the Borrower of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this subsection submitted by the Lender to the Borrower shall be conclusive in the absence of manifest error.

2.10 Purpose of Advances.

Each Advance shall be used to finance Borrower's acquisition of Eligible Mortgage Loans originated by an Approved Mortgage Originator or purchased by an Approved Mortgage Purchaser and identified to the Lender in writing on a Mortgage Loan Data Transmission as such Mortgage Loan Data Transmission may amended from time to time.

SECTION 3. PAYMENTS; COMPUTATIONS; TAXES.

3.01 Payments.

(a) Except to the extent otherwise provided herein, all payments of principal, interest and other amounts to be made by the Borrower under this Loan Agreement shall be made in Dollars, in immediately available funds, without deduction, set-off or counterclaim, to the Collection Account, not later than 12:00 noon (eastern time) on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). The Lender shall have sole dominion and control over the Collection Account. The Borrower shall have no rights of any kind with respect to the Collection Account (including, without limitation, any right of withdrawal therefrom).

(b) With respect to each Mortgage Loan, the Borrower shall, or shall cause the Servicer to, deliver to each Mortgagor an irrevocable direction letter instructing the Mortgagor to pay all amounts payable under the related Mortgage Loan to the Lockbox and shall provide to Lender proof of such delivery. If a Mortgagor forwards any payments, including without limitation any payments of principal and/or interest, with respect to a Mortgage Loan to the Borrower rather than directly to the Lockbox, the Borrower shall (i) deliver an additional irrevocable direction letter to the applicable Mortgagor and make other commercially reasonable efforts to cause such Mortgagor to forward all future amounts directly to the Lockbox and (ii) immediately deposit in the Collection Accounts any such amounts. Anything contained herein or in any of the other Loan Documents to the contrary notwithstanding, all payments, including without limitation all payments of principal and interest, in respect of the Mortgage Loans, any payments in respect of any Interest Rate Protection Agreements or other hedging transactions and any other amounts deposited into the Lockbox with respect to the Mortgage Loans shall be deposited directly into the Collection Accounts.

(c) So long as no Event of Default has occurred and is continuing, all amounts deposited into the Collection Account during each Interest Accrual Period shall be applied on the related Payment Date as set forth in Section 5.01 of the Servicing Agreement.

3.02 Computations. Interest on the Advances shall be computed on the basis of a 360-day year for the actual number of days elapsed (including the first day but excluding the last day) occurring in the period for which payable.

3.03 U.S. Taxes.

(a) The Borrower agrees to pay to the Lender such additional amounts as are necessary in order that the net payment of any amount due to the Lender hereunder after deduction for or withholding in respect of any U.S. Tax (as defined below) imposed with respect to such payment (or in lieu thereof, payment of such U.S. Tax by the Lender), will not be less than the amount stated herein to be then due and payable; provided, that the foregoing obligation to pay such additional amounts shall not apply:

(i) to any payment to the Lender hereunder unless the Lender is entitled to submit a Form W8-BEN or W8-ECI, as appropriate, or

(ii) to any U.S. Tax imposed solely by reason of the failure by the Lender to comply with applicable certification, information, documentation or other reporting requirements concerning the nationality, residence, identity or connections with the United States of America of the Lender if such compliance is required by statute or regulation of the United States of America as a precondition to relief or exemption from such U.S. Tax.

For the purposes of this Section 3.03(a), (w) "Form W8-BEN" means Form W8-BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding) of the Department of the Treasury of the United States of America, (x) "Form W8-ECI" means Form W8-ECI (Certificate of Foreign Person's Claim for Exemption From Withholding on Income Effectively Connected With the Conduct of a Trade or Business in the United States) of the Department of the Treasury of the United States of America (or, in relation to either such Form, such successor and related forms as may from time to time be adopted by the relevant taxing authorities of the United States of America to document a claim to which such Form relates), and (y) "U.S. Taxes" means any present or future tax, assessment or other charge or levy imposed by or on behalf of the United States of America or any taxing authority thereof or therein other than taxes on the Lender's income.

(b) Within 30 days after paying any such amount to the Lender, and within 30 days after it is required by law to remit such deduction or withholding to any relevant taxing or other authority, the Borrower shall deliver to the Lender evidence satisfactory to the Lender of such deduction, withholding or payment (as the case may be).

(c) The Lender represents and warrants to the Borrower that on the date hereof the Lender is either incorporated under the laws of the United States or a State thereof or is entitled to submit a Form W8-BEN or Form W8-ECI. The Lender agrees not to change such exemption during the term of this Agreement.

3.04 Fees. The Borrower shall pay to the Lender the following fees and charges, which fees and charges shall be non-refundable when paid (irrespective of whether this Agreement is terminated thereafter):

(a) Renewal Fee. In the event of any extension of the Scheduled Termination Date as set forth in the definition thereof, the Borrower shall pay to the Lender a renewal fee (the "Renewal Fee") equal to 2.25% of the amount of the Maximum Credit on the Scheduled Termination Date as in effect prior to such extension. The Lender may, in its sole discretion, net such Renewal Fee from the proceeds of any Advance made to the Borrower hereunder if not previously paid by the Borrower and shall reflect any such netting in a notice to the Borrower;

(b) Non-Usage Fee. On each Payment Date and on the Termination Date, the Lender shall determine the average daily utilization by the Borrower during the preceding calendar month period (or, with respect to the Termination Date, during the period from the date through which the last non-usage fee calculation has been made to the Termination Date) by dividing (a) the sum of the Advances outstanding as of the close of business on each day during such period by (b) the number of days in such period. If such average amount determined for any period as a percentage of the Maximum Credit (the "Utilization Percentage") is less than 100%, the Borrower shall pay to the Lender, on such Payment Date or the Termination Date, as applicable, a non-usage fee (the "Non-Usage Fee") equal to the product of (i) 0.50% per annum multiplied by (ii) the Maximum Credit multiplied by (iii) an amount equal to 1 minus the Utilization Percentage; provided, that if the Borrower prepays in full all Advances prior to the six-month anniversay of the Closing Date pursuant to
Section 2.07, then the Borrower shall pay the Non-Usage Fee as if the Termination Date were the six-month anniversary of the Closing Date. All such payments shall be made to the Lender in Dollars, in immediately available funds, without deduction, setoff or counterclaim. The Lender may, in its sole discretion, net such Non-Usage Fee from the proceeds of any Advance made to the Borrower hereunder if not previously paid by the Borrower and shall reflect any such netting in a notice to the Borrower;

(c) Fee Letter. The Borrower shall pay to the Lender, as and when due and payable under the terms of the Fee Letter, the fees and charges set forth in the Fee Letter unless such fees and charges are otherwise paid in a timely manner by any Related Party that is a party to the Fee Letter. The Lender may, if Borrower has not otherwise paid any fees and charges due and payable, net such fees and charges set forth in the Fee Letter from the Proceeds of any Advance made to the Borrower hereunder if not previously paid by the Borrower and shall reflect any netting in a notice to the Borrower; and

(d) Audit, Appraisal, and Valuation Charges. Audit, appraisal, and valuation fees and charges for each financial audit of the Borrower or the Collateral, expenses incurred by any Lender-Related Party for the establishment of electronic collateral reporting systems, to appraise the Collateral, or any portion thereof, or to monitor or assess the performance of the Borrower or any Related Party under any of the Loan Documents.

SECTION 4. COLLATERAL SECURITY.

4.01 Collateral; Security Interest.

(a) The Borrower and Lender shall require that, pursuant to the Custodial Agreement, the Custodian shall hold each Mortgage File and all related Mortgage Loan Documents as exclusive bailee and agent for the Lender pursuant to the terms of the Custodial Agreement and shall deliver to the Lender Trust Receipts with Exception Reports (as such terms are defined in the Custodial Agreement) to the effect that it has reviewed such Mortgage File and Mortgage Loan Documents in the manner required by the Custodial Agreement and identifying any deficiencies in such Mortgage Loan Documents as so reviewed.

(b) "Collateral" means all of the Borrower's now owned or hereafter acquired right, title and interest in and to each of the following:

(i) all Mortgage Loans identified on each Notice of Borrowing and Pledge delivered by the Borrower to the Lender and the Custodian from time to time;

(ii) all amounts deposited in the Collection Accounts and the Expense Reserve Account from time to time;

(iii) all Mortgage Loan Documents, including without limitation all promissory notes, and all Servicing Records (as defined in Section 11.15(b)), and any other collateral pledged or otherwise relating to any Mortgage Loans constituting Collateral, together with all files, material documents, instruments, surveys (if available), certificates, correspondence, appraisals, computer records, computer storage media, Mortgage Loan accounting records and other books and records relating thereto;

(iv) all mortgage guaranties and insurance (issued by governmental agencies or otherwise) and any mortgage insurance certificate or other document evidencing such mortgage guaranties or insurance relating to any Mortgage Loans constituting Collateral and all claims and payments thereunder;

(v) all other insurance policies and Insurance Proceeds relating to any Mortgage Loans constituting Collateral or the related Mortgaged Properties;

(vi) all Interest Rate Protection Agreements;

(vii) any purchase agreements or other agreements or contracts to the extent relating to or constituting any or all of the foregoing, including without limitation the Asset Purchase Agreement;

(viii) all purchase or take-out commitments relating to or constituting any or all of the foregoing;

(ix) all "accounts", "chattel paper", "commercial tort claims", "deposit accounts", "documents", "equipment", "general intangibles", "goods", "instruments", "inventory", "investment property", "letter-of-credit rights", and "securities accounts", as each of those terms is defined in the Uniform Commercial Code, and all cash and Cash Equivalents and all products and proceeds relating to or constituting any or all of the foregoing;

(x) all interests in real property owned by the Borrower or collateralizing any Mortgage Loan constituting Collateral;

(xi) all rights of the Borrower under the Servicing Agreement, the Custodial Agreement or any other document; and

(xii) any and all replacements, substitutions, distributions on or proceeds of any or all of the foregoing.

(c) The Borrower hereby assigns, pledges and grants a first priority security interest to the Lender in all of its right, title and interest in, to and under all the Collateral, whether now owned or hereafter acquired, now existing or hereafter created and wherever located, to secure the payment of the Obligations. The Borrower agrees to mark its computer records and tapes to evidence the security interests granted to the Lender hereunder. To the extent that any of the Collection Accounts or the Expense Reserve Account are in the name of the Initial Servicer, the Borrower shall cause the Initial Servicer to assign, pledge and grant a first priority security interest to the Lender in all of the Initial Servicer's right, title and interest in, to and under all the Collection Accounts and the Expense Reserve Account, whether now owned or hereafter acquired now existing or hereafter created and wherever located, to secure the payment of the Obligations.

4.02 Further Documentation. At any time and from time to time, upon the written request of the Lender and at the sole expense of the Borrower, the Borrower will promptly and duly execute and deliver, or will promptly cause to be executed and delivered, such further instruments and documents and take such further action as the Lender may reasonably request for the purpose of obtaining or preserving the full benefits of this Loan Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any jurisdiction with respect to the Liens created hereby. The Borrower also hereby authorizes the Lender to file any such financing or continuation statement without further action by the Borrower.

4.03 Changes in Locations, Name, etc. The Borrower shall not
(i) change the location of its chief executive office from that specified in
Section 6, (ii) change its name, identity or corporate structure (or the equivalent) or the location where it maintains its records with respect to the Collateral, or (iii) reincorporate or reorganize under the laws of another jurisdiction unless it shall have given the Lender at least 15 Business Days' prior written notice thereof and shall have delivered to the Lender within 10 Business Days thereafter all Uniform Commercial Code financing statements and amendments thereto as the Lender shall request and taken all other actions deemed reasonably necessary by the Lender to obtain or continue a perfected first priority interest in the Collateral.

4.04 Lender's Appointment as Attorney-in-Fact.

(a) The Borrower hereby irrevocably constitutes and appoints the Lender and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Borrower and in the name of the Borrower or in its own name, from time to time in the Lender's discretion, for the purpose of carrying out the terms of this Loan Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Loan Agreement. Without limiting the generality of the foregoing, the Borrower hereby gives the Lender the power and right, on behalf of the Borrower, without assent by, but with notice to, the Borrower, if and only if an Event of Default shall have occurred and be continuing, to do the following:

(i) in the name of the Borrower or its own name, or otherwise, to take possession of and endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any mortgage insurance or with respect to any other Collateral and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Lender for the purpose of collecting any and all such moneys due under any such mortgage insurance or with respect to any other Collateral whenever payable;

(ii) to pay or discharge taxes and Liens levied or placed on or threatened against the Collateral; and

(iii) (A) to direct any party liable for any payment under any Collateral to make payment of any and all moneys due or to become due thereunder directly to the Lender or as the Lender shall direct; (B) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (C) to sign and endorse any invoices, assignments, verifications, notices and other documents in connection with any of the Collateral; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any part thereof and to enforce any other right in respect of any Collateral; (E) to defend any suit, action or proceeding brought against the Borrower with respect to any Collateral; (F) to settle, compromise or adjust any suit, action or proceeding described in clause (E) above and, in connection therewith, to give such discharges or releases as the Lender may deem appropriate; and (G) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Lender were the absolute owner thereof for all purposes, and to do, at the Lender's option and the Borrower's expense, at any time or from time to time, all acts and things which the Lender deems necessary to protect, preserve or realize upon the Collateral and the Lender's Liens thereon and to effect the intent of this Loan Agreement, all as fully and effectively as the Borrower might do.

The Borrower hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable.

(b) The Borrower also authorizes the Lender, at any time and from time to time, to execute, in connection with any sale provided for in
Section 4.07, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral.

(c) The powers conferred on the Lender are solely to protect the Lender's interests in the Collateral and shall not impose any duty upon the Lender to exercise any such powers. The Lender shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither the Lender nor any of its officers, directors, or employees shall be responsible to the Borrower for any act or failure to act hereunder, except for its own gross negligence or willful misconduct.

4.05 Performance by Lender of Borrower's Obligations. If the Borrower fails to perform or comply with any of its material agreements contained in the Loan Documents within the required time periods, the Lender may itself perform or comply, or otherwise cause performance or compliance, with such agreement, and any out-of-pocket expenses of the Lender incurred in connection with such performance or compliance, together with interest thereon at a rate per annum equal to the Post-Default Rate, shall be payable by the Borrower to the Lender on demand and shall constitute Obligations.

4.06 Proceeds. If an Event of Default shall occur and be continuing, (a) all proceeds of Collateral received by the Borrower shall be held by the Borrower in trust for the Lender, segregated from other funds of the Borrower, and shall forthwith upon receipt by the Borrower be turned over to the Lender in the exact form received by the Borrower (duly endorsed by the Borrower to the Lender, if required) and (b) any and all such proceeds received by the Lender will be applied by the Lender against the Obligations (whether matured or unmatured), such application to be in such order as the Lender shall elect. Any balance of such proceeds remaining after the Obligations shall have been paid in full and this Loan Agreement shall have been terminated shall be promptly paid over to the Borrower or to whomsoever may be lawfully entitled to receive the same. For purposes hereof, proceeds shall include, but not be limited to, all principal and interest payments, all prepayments and payoffs, all insurance claims, condemnation awards, sale proceeds and real estate owned rents and any other income and all other amounts received with respect to the Collateral.

4.07 Remedies. If an Event of Default shall occur and be continuing, the Lender may, at its option, enter into one or more Interest Rate Protection Agreements (which are not inconsistent with interest rate protection agreements entered into by the Lender or any of its Affiliates regarding mortgage loans held for its own account) covering all or a portion of the Mortgage Loans pledged to the Lender hereunder, and the Borrower shall be responsible for all damages, judgments, costs and expenses of any kind which may be imposed on, incurred by or asserted against the Lender relating to or arising out of such Interest Rate Protection Agreements; including without limitation any losses resulting from such Interest Rate Protection Agreements. If an Event of Default shall occur and be continuing, the Lender may exercise, in addition to all other rights and remedies granted to it in this Loan Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the Uniform Commercial Code, at law and in equity. Without limiting the generality of the foregoing, the Lender, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon the Borrower or any other Person (all and each of which demands, defenses, presentments, protests, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels or as an entirety at public or private sale or sales, at any exchange, broker's board or office of the Lender or elsewhere upon such terms and conditions and at prices that are consistent with a recognized market for similar collateral as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in the Borrower, which right or equity is to the greatest extent permitted hereby waived or released. The Borrower further agrees, at the Lender's request, to assemble the Collateral and make it available to the Lender at places which the Lender shall reasonably select, whether at the Borrower's premises or elsewhere. The Lender shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all costs and expenses of

every kind incurred therein or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Lender hereunder, including, without limitation, attorneys' fees and disbursements, to the payment in whole or in part of the Obligations, in such order as the Lender may elect, and only after such application and after the payment by the Lender of any other amount required or permitted by any provision of law, including, without limitation, Section 9-615(a)(3) of the Uniform Commercial Code, need the Lender account for the surplus, if any, to the Borrower. To the extent permitted by applicable law, the Borrower waives all claims, damages and demands it may acquire against the Lender arising out of the exercise by the Lender of any of its rights hereunder, other than those claims, damages and demands arising from the gross negligence or willful misconduct of the Lender. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition. The Borrower shall remain liable for any deficiency (plus accrued interest thereon as contemplated pursuant to Section 2.05(b)) if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the Obligations and the fees and disbursements incurred by the Lender to collect such deficiency. Because the Borrower recognizes that it may not be possible to purchase or sell all of the Collateral on a particular Business Day, or in a transaction with the same purchaser, or in the same manner because the market for such Collateral may not be liquid, the Borrower agrees that liquidation of the Collateral does not require a public purchase or sale and that a good faith private purchase or sale shall be deemed to have been made in a commercially reasonable manner. Accordingly, the Lender may elect, in its sole discretion, the time and manner of liquidating any Collateral and nothing contained herein shall (A) obligate the Lender to liquidate any Collateral on the occurrence of an Event of Default or to liquidate all Collateral in the same manner or on the same Business Day or (B) constitute a waiver of any of the Lender's rights or remedies.

4.08 Limitation on Duties Regarding Preservation of Collateral. The Lender's duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, whether arising under
Section 9-207 of the Uniform Commercial Code or otherwise, shall be to deal with it in the same manner as the Lender deals with similar property for its own account. Neither the Lender nor any of its directors, officers or employees shall be liable for failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Borrower or otherwise.

4.09 Powers Coupled with an Interest. All authorizations and agencies herein contained with respect to the Collateral are irrevocable and powers coupled with an interest.

4.10 Release of Security Interest. Upon termination of this Loan Agreement and payment to the Lender of all Obligations in full, in cash, including without limitation all amounts required to be paid pursuant to Sections 2.05 and 3.04, and the performance of all Obligations under the Loan Documents, the Lender shall release its security interest in any remaining Collateral. In accordance with the terms and conditions set forth in the Custodial Agreement and the Servicing Agreement, Lender shall release Mortgage Loans that have been sold or securitized. Notwithstanding anything in this Loan Agreement to the contrary, if any payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any Related Party, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or a trustee or similar officer for the Borrower, any Related Party or any substantial part of their respective Property, or otherwise, this Loan Agreement, all rights hereunder and the Liens created hereby shall continue to be effective, or be reinstated, until such payments have been made.

SECTION 5. CONDITIONS PRECEDENT AND SUBSEQUENT.

5.01 Conditions Precedent to Initial Advance. The obligation of the Lender to make the initial Advance (or otherwise to extend any credit provided for hereunder) is subject to the fulfillment, to the satisfaction of the Lender, of each of the conditions precedent set forth below:

(a) Loan Agreement. The Lender shall have received this Loan Agreement, executed and delivered by a duly authorized officer of the Borrower;

(b) Loan Documents. The Lender shall have received the following documents, each of which shall be satisfactory to the Lender in form and substance:

(i) the LLC Agreement,

(ii) the Control Agreements,

(iii) the Custodial Agreement,

(iv) the Borrower's Equity Pledge Agreement,

(v) the Fee Letter,

(vi) the Irrevocable Payment Instruction Letter,

(vii) the Asset Purchase Agreement,

(viii) the Asset Sale Agreement, if any

(ix) the Wet Funding Agency Agreement, if any

(x) the Promissory Note, if any,

(xi) the Servicing Agreement,

(xii) the UCC Authorization Letter;

(xiii) the MERS Agreement; and

(xiv) any other related document requested by the Lender.

(c) Good Standing Certificates/Organization Documents. The Lender shall have received certified copies of good standing certificates and organizational documents for each of the Borrower, the Company, ABMS and HAC;

(d) Resolutions. The Lender shall have received certified copies of resolutions authorizing the Borrower, the Company and each other Related Party to execute, deliver and perform each of the Loan Documents to which such Person is a signatory and each other document to be delivered by such Person from time to time in connection herewith (and the Lender may conclusively rely on such certificate until it receives notice in writing from such Person to the contrary);

(e) Incumbency Certificates. The Lender shall have received signature and incumbency certificates with respect to the officers of the Borrower, the Company and each other Related Party executing each of the Loan Documents to which such Person is a signatory;

(f) Capital and Ownership Structure. The organizational structure, capital structure and ownership of the Borrower, the Company and each other Related Party shall be satisfactory to the Lender. Without limiting the generality of the foregoing, the Lender shall be satisfied (i) with respect to the organization of the Borrower as a "single purpose, bankruptcy remote, special purpose entity" which (x) has at least one independent member, (y) is not permitted to engage in any business or activity other than purchasing Mortgage Loans and financing such purchases with the proceeds of the Advances and (z) otherwise conducts its affairs in compliance with Section 7.24 and (ii) that the relationship between the Borrower and each Related Party has otherwise been structured in such a manner so as to prevent the assets of the Borrower from being consolidated with the assets of any Related Party in the event of an Insolvency Proceeding involving any Related Party;

(g) Background Investigations. The Lender shall have received and reviewed and shall be satisfied with the results of background investigations of such members of the management of the Borrower, the Company and each other Related Party as the Lender may reasonably request;

(h) Legal Opinions. The Lender shall have received the following legal opinions for the benefit of the Lender from counsel to the Borrower, the Company and the Company's Subsidiaries, in each case in form and substance satisfactory to the Lender: (i) a "true sale" opinion with respect to the transfer of the Mortgage Loans from the applicable Related Parties to the Borrower, (ii) a "nonconsolidation" opinion with respect to the relationship among each of the Related Parties, (iii) (an) opinion(s) with respect to the Servicing Agreement, (iv) an opinion that this Loan Agreement and the other Loan Documents are enforceable in accordance with their terms, (v) an opinion that this Loan Agreement and the other Loan Documents create valid security interests on behalf of the Lender in all of the Collateral, (vi) an opinion that possession by the Custodian of the Mortgage Notes creates a perfected first priority security interest in the Mortgage Loans for the benefit of the Lender,
(vii) opinions regarding Mortgage Loans that are secured by Mortgaged Property located in California, New York, New Jersey and Pennsylvania; provided that, to the extent any of such opinions referred to in this clause (vii) are not delivered to the Lender on the Closing Date, the Borrower shall have ten (10) Business Days after the Closing Date in which to deliver such opinions to the Lender, and (viii) such other legal opinions as the Lender may reasonably request;

(i) Filings, Registrations, Recordings. (i) The Borrower shall have filed or caused to be filed all Uniform Commercial Code and related filings and performed under the Custodial Agreement and taken such other action as the Lender shall have requested in order to perfect the Borrower's ownership interest in the Mortgage Loans, and the first priority security interests in favor of the Lender created pursuant to this Loan Agreement; and (ii) the Borrower shall have properly prepared and executed (if necessary) for filing any documents (including, without limitation, financing statements) required to be filed, registered or recorded in order to create, in favor of the Lender, a perfected, first-priority security interest in the Collateral, subject to no Liens other than those created in favor of the Lender hereunder (including filings in any applicable county(ies) if the Lender determines such filings are necessary in its reasonable discretion);

(j) Lien Searches. The Lender shall have received Uniform Commercial Code lien searches in such jurisdictions as shall be applicable to the Borrower and the Collateral, the results of which shall be satisfactory to the Lender;

(k) Fees and Expenses. The Lender shall have received all fees and expenses required to be paid by the Borrower on or prior to the Closing Date under this Loan Agreement or any other Loan Document (and such fees and expenses may be netted out of the initial Advance made by the Lender hereunder);

(l) Financial Statements. The Lender shall have received the audited consolidated financial statement of the Company and its Subsidiaries for the period ended June 30, 2004, and the financial statements referenced in
Section 7.01(a);

(m) Underwriting Guidelines. The Lender and the Company shall have agreed to the Approved Underwriting Guidelines and the Lender shall have received a copy thereof;

(n) Consents, Licenses, Approvals, etc. The Lender shall have received copies, certified by the Borrower and any applicable Related Parties, of all consents, licenses and approvals, if any, required in connection with the execution, delivery and performance by the Borrower of, and the validity and enforceability of, the Loan Documents, which consents, licenses and approvals shall be in full force and effect;

(o) Insurance. The Lender shall have received a certificate of insurance, together with the endorsements thereto, the form and substance of which shall be satisfactory to the Lender, and shall have received evidence in form and substance satisfactory to the Lender showing compliance by the Borrower as of such initial Funding Date with Section 7.19;

(p) Cash Management System. The Lender shall have reviewed and shall be satisfied with the cash management system of the Borrower (including, without limitation, any related lockbox arrangements, deposit account control arrangements and any other arrangements relating to the processing, collection and disbursement of payments received under or in connection with any Mortgage Loans from time to time included in the Collateral);

(q) Material Contracts. The Lender (or, in the case of the Mortgage Loans, the Custodian) shall have received copies of each Material Contract, together with a certificate of the Secretary of the Borrower certifying each such document as being a true, correct, and complete copy thereof;

(r) Audit Opinion. Lender shall have received a satisfactory audit opinion from auditors acceptable to the Lender relating to the Approved Mortgage Originators for the fiscal year ending June 30, 2004;

(s) LLC Agreement. The Lender shall have received evidence satisfactory to the Lender that the Borrower has been incorporated under the laws of the State of Delaware, together with all requisite authorizations and consents;

(t) Accounts Payable. Accounts payable and unpaid expenses of the Company and its Subsidiaries must be at a level consistent with historical practices;

(u) No Material Adverse Change. No Material Adverse Change shall have occurred;

(v) No Misrepresentation. None of the Borrower, any of the Related Parties or the Lender shall have become aware prior to the Closing Date of any information or other matter affecting (i) the Company, the Borrower or any of their Affiliates, (ii) the assumptions relating to projected financial performance of the Mortgage Loans, or (iii) the transactions contemplated hereby, any of which in the Lender's judgment is inconsistent in a material and adverse manner with any information (including any matter relating to financial models and underlying assumptions relating to the projected financial performance of the Mortgage Loans) or other matter disclosed to the Lender prior to the Closing Date; and

(w) Other Documents. The Lender shall have received such other documents as the Lender or its counsel may reasonably request.

5.02 Conditions Precedent to Initial and Subsequent Advances. The obligation of the Lender to make any Advance hereunder at any time (or to extend any other credit hereunder) shall be subject to the following conditions precedent:

(a) both immediately prior to the making of such Advance and also after giving effect thereto, no Default or Event of Default shall have occurred and be continuing;

(b) both immediately prior to the making of such Advance and also after giving effect thereto and to the intended use thereof, the representations and warranties made by the Borrower in Section 6, and in each of the other Loan Documents, shall be true, correct and complete in all material respects on and as of the date of the making of such Advance (in the case of the representations and warranties in Section 6.24 and Schedule R-1, solely with respect to Mortgage Loans included in the Borrowing Base) with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date). At the request of the Lender, the Lender shall have received an officer's certificate signed by a Responsible Officer of the Borrower or any Related Party, as applicable, certifying as to the truth and accuracy of the above, which certificate shall specifically include a statement that the Borrower or such Related Party, as the case may be, is in compliance with all governmental licenses and authorizations and is qualified to do business and in good standing in all required jurisdictions except where the noncompliance or failure to be so qualified would not affect the validity or enforceability of any Mortgage Loan and otherwise would not have a Material Adverse Effect;

(c) both immediately prior to the making of such Advance and also after giving effect thereto, the aggregate outstanding principal amount of the Advances shall not exceed the Borrowing Base or the then-applicable Maximum Credit;

(d) the Lender shall have received a Notice of Borrowing and Pledge, Mortgage Loan List and Mortgage Loan Data Transmission and all other documents required under Section 2.03 in connection with such Advance;

(e) the Lender shall have received from the Custodian a Custodian Loan Transmission and one or more Trust Receipts in respect of all Mortgage Loans (other than Wet Mortgage Loans) to be pledged hereunder in connection with such Advance, together with an Exception Report, in each case dated the date of such Advance and duly completed;

(f) there shall not have occurred or be continuing an event beyond the reasonable control of the Lender which the Lender reasonably determines may imminently result in the Lender's inability to perform its obligations under this Loan Agreement including, without limitation, acts of God, strikes, lockouts, riots, acts of war or terrorism, epidemics, nationalization, expropriation, currency restrictions, fire, communication line failures, computer viruses, power failures, earthquakes, or other disasters of a similar nature to the foregoing;

(g) no order, judgment or decree of any court, arbitrator or governmental authority shall purport to enjoin or restrain the Lender from making such Advance;

(h) there shall not be pending or, to the knowledge of the Borrower, threatened, any action, suit, proceeding, governmental investigation or arbitration against or affecting the Borrower, the Company or any other Related Party or any of their respective properties that has not been disclosed by the Borrower in writing pursuant to Section 7.02 prior to the making of the last preceding Advance (or, in the case of the initial Advance, prior to the execution of this Loan Agreement), and there shall have occurred no development not so disclosed in any such action, suit, proceeding, governmental investigation or arbitration so disclosed, that, in either event, in the opinion of the Lender, would reasonably be expected to have a Material Adverse Effect;

(i) To the extent requested by Lender, (i) the Lender shall have received the Borrower's Interest Rate Protection Strategy, (ii) the Lender shall have reasonably determined that such Interest Rate Protection Strategy and the Interest Rate Protection Agreements adequately protect the Borrower from interest rate fluctuations, (iii) any Interest Rate Protection Agreements entered into by Borrower shall be consistent with such Interest Rate Protection Strategy, (iv) any Interest Rate Protection Agreements entered into by the Borrower in accordance with such Interest Rate Protection Strategy shall have been assigned to the Lender, and (v) the Lender shall have a security interest in such Interest Rate Protection Agreements in such manner as the Lender may reasonably request; and

(j) the Lender shall have received from the Company, as of the fifth (5th) Business Day of each month, an officer's certificate hereto executed by any of Anthony Santilli, Albert Mandia or Jeffrey Ruben representing as to compliance with the events set forth in Section 8(v), (w) and (x);

(k) if requested by the Lender, the Lender shall have received a satisfactory compliance audit report at the expense of Borrower from auditors acceptable to the Lender relating to the Approved Mortgage Originators and the Initial Servicers for the prior calendar month;

(l) the Borrower and Lender shall have received a compliance and quality assurance report, for the sole benefit of the Lender and which is satisfactory to the Lender, from the Wet Funding Agent or such other Person as is approved by the Lender in its sole discretion, regarding the Mortgage Loans to be pledged to Lender with respect to such Advance; provided further that any reasonable fees and expenses of the Wet Funding Agent or such other Person shall be the obligation of the Borrower;

(m) the Borrower have caused the Servicer to provide to the Lender the Mortgage File and the Servicing File (as defined in the Servicing Agreement) in the form of microfilm or microfiche or such other reliable means of recreating original documents, including but not limited to, optical imagery techniques so long as the Servicer complies with Accepted Servicing Practices.

Each request for a borrowing by the Borrower hereunder shall constitute a certification by the Borrower to the effect set forth in this
Section (both as of the date of such notice, request or confirmation and as of the date of such borrowing).

SECTION 6. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to the Lender that throughout the term of this Loan Agreement:

6.01 Existence. The Borrower (a) is a limited liability company duly formed, validly existing and in good standing under the laws of Delaware, (b) has all requisite limited liability company or other power, and has all governmental licenses, authorizations, consents and approvals, necessary to own its assets and carry on its business as now being or as proposed to be conducted, except where the lack of such licenses, authorizations, consents and approvals would not be reasonably likely to have a Material Adverse Effect; and
(c) is qualified to do business and is in good standing in all other jurisdictions in which the nature of the business conducted by it makes such qualification necessary, except where failure so to qualify would not be reasonably likely (either individually or in the aggregate) to have a Material Adverse Effect, and (d) is in compliance in all material respects with all Requirements of Law.

6.02 Financial Condition. The Borrower has heretofore furnished to the Lender a copy of the Company's audited consolidated balance sheets as of June 30, 2004 with the opinion thereon of BDO Seidman, a copy of which has been provided to Lender. The Borrower has also heretofore furnished to the Lender the related consolidated statement of income and retained earnings and of cash flows for the Company and its consolidated Subsidiaries for the one year period ending June 30, 2004, setting forth comparative form the figures for the previous year. All such financial statements are materially complete and correct and fairly present in all material respects the consolidated financial condition of the Company and its Subsidiaries and the consolidated results of their operations for the fiscal year ended on said date, all in accordance with GAAP applied on a consistent basis. There has been no development or event nor any prospective development or event which constitutes a Material Adverse Change or which otherwise has had or should reasonably be expected to have a Material Adverse Effect.

6.03 Litigation. Except as set forth in Schedule 6.03, there are no actions, suits, arbitrations, investigations or proceedings pending or, to its knowledge, threatened against the Borrower or any Related Party or affecting any of the property thereof before any Governmental Authority (i) as to which, individually or in the aggregate, there is a reasonable likelihood of an adverse decision which would be reasonably likely to have a Material Adverse Effect or (ii) which questions the validity or enforceability of any of the Loan Documents or any action to be taken in connection with the transactions contemplated hereby or thereby and as to which there is a reasonable likelihood of a materially adverse decision or a Material Adverse Effect. The disclosure of any action, suit, arbitrations, investigations or proceedings on Schedule 6.03 shall not operate as a consent to such matter, or a waiver or an amendment of any right, power, or remedy of Lender with respect to such matter, including Lender's right to exercise its remedies in the event that any matter listed on Schedule 6.03 is, results in, or has a Material Adverse Change or has a Material Adverse Effect.

6.04 No Breach. Neither (a) the execution and delivery of the Loan Documents nor (b) the consummation of the transactions therein contemplated in compliance with the terms and provisions thereof will conflict with or result in a breach of the charter, by-laws or other organizational documents of the Borrower, or any applicable law, rule or regulation, or any order, writ, injunction or decree of any Governmental Authority, or other instrument, indenture, or other material agreement, to which the Borrower, a Related Party or any of their respective Subsidiaries is a party or by which any of them or any of their respective properties is bound or to which any of them is subject, or will constitute a default under any such instrument, indenture, or other material agreement or (except for the Liens created pursuant to this Loan Agreement) result in the creation or imposition of any Lien upon any property of the Borrower, a Related Party or any of their respective Subsidiaries pursuant to the terms of any such instrument, indenture or other material agreement.

6.05 Action. The Borrower and each Related Party has all necessary corporate or other power, authority and legal right to execute, deliver and perform its obligations under each of the Loan Documents to which it is a party. The execution, delivery and performance by the Borrower and each Related Party of each of the Loan Documents to which it is a party has been duly authorized by all necessary corporate or other action on its part. Each Loan Document has been duly and validly executed and delivered by the Borrower and each applicable Related Party and constitutes a legal, valid and binding obligation of the Borrower and such Related Party, enforceable against the Borrower or such Related Party in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability.

6.06 Approvals. No authorizations, approvals or consents of, and no filings or registrations with, any Governmental Authority or any other Person are necessary for the execution, delivery or performance by the Borrower or any Related Party of the Loan Documents to which it is a party or for the legality, validity or enforceability thereof, except for filings and recordings in respect of the Liens created pursuant to this Loan Agreement.

6.07 Margin Regulations. Neither the making of any Advance hereunder, nor the use of the proceeds thereof, will violate or be inconsistent with the provisions of Regulation T, U or X.

6.08 Taxes. The Borrower, each Related Party and each of their respective Subsidiaries have filed all Federal income tax returns and all other material tax returns that are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by any of them, except for any such taxes, if any, that are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided. The charges, accruals and reserves on the books of the Borrower, each Related Party and each of their respective Subsidiaries in respect of taxes and other governmental charges are adequate.

6.09 Investment Company Act. Neither the Borrower, any Related Party nor any of their respective Subsidiaries is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. Neither the Borrower nor any Related Party is subject to any Federal or state statute or regulation which limits its ability to incur indebtedness.

6.10 Organizational Documents. The Borrower has delivered to the Lender true, correct and complete copies of all constitutive or organizational documents of the Borrower and each Related Party that is a party to any of the Loan Documents, each of which is in full force and effect and has not been amended except as may have been approved in writing by the Lender.

6.11 No Legal Bar. Neither the execution, delivery and performance of this Loan Agreement, the borrowings hereunder and the use of the proceeds thereof, nor the provisions of any other Loan Documents will (a) violate any Requirement of Law or Contractual Obligation of the Borrower, any Related Party or of any of their respective Subsidiaries or (b) result in, or require, the creation or imposition of any Lien (other than the Liens created hereunder) on any of its or their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation.

6.12 No Default. Neither the Borrower, any Related Party nor any of their respective Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which would reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing.

6.13 Collateral; Collateral Security.

(a) Neither the Borrower nor any Related Party has assigned, pledged, or otherwise conveyed or encumbered any Collateral (including the Mortgage Loans) to any other Person other than the Lender. Immediately prior to the pledge of any Mortgage Loan to the Lender, the Borrower represents that it is the sole owner of such Mortgage Loan and has good and marketable title thereto, free and clear of all Liens, in each case except for Liens to be released simultaneously with the Liens granted in favor of the Lender hereunder and no Person other than the Lender has any Lien on any Mortgage Loan.

(b) The provisions of this Loan Agreement are effective to create in favor of the Lender a valid security interest in all right, title and interest of the Borrower in, to and under the Collateral.

(c) Upon receipt by the Custodian of each Mortgage Note, endorsed in blank by a duly authorized officer of the payee or last endorsee, the Lender shall have a fully perfected first priority security interest therein, in the Mortgage Loan evidenced thereby and in the mortgagee's interest in the related Mortgaged Property.

(d) Upon the filing of financing statements on Form UCC-1 naming the Lender as "Secured Party" and the Borrower as "Debtor", and describing the Collateral, in the jurisdictions and recording offices listed on Schedule 6.13(d), the security interests granted hereunder in the Collateral will constitute fully perfected, first priority security interests under the Uniform Commercial Code in all right, title and interest of the Borrower in, to and under such Collateral, which can be perfected by filing under the Uniform Commercial Code.

(e) The Borrower (or its predecessor in interest) has delivered to the Custodian, to hold pursuant to the terms of the Custodial Agreement, the Mortgage File (including the Mortgage Note) relating to each Mortgage Loan (other than any Wet Mortgage Loan) that is subject to the provisions of this Loan Agreement.

6.14 Chief Executive/Operating Offices. The chief executive office and the chief operating office of each of the Borrower, the Related Parties, and each of their respective Subsidiaries for the period from (a) the earlier of 5 years prior to the Closing Date and the date that such Person was organized, through and including (b) the Closing Date, is specified on Schedule 6.14.

6.15 Location of Books and Records. The location where the Borrower keeps its books and records (including all computer tapes and records) relating to the Collateral is the office of the Custodian.

6.16 True and Complete Disclosure. The information, reports, financial statements, exhibits and schedules furnished in writing by or on behalf of the Borrower and the Related Parties to the Lender in connection with the negotiation, preparation or delivery of this Loan Agreement, the other Loan Documents or included herein or therein or delivered pursuant hereto or thereto, when taken as a whole, do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. All written information furnished after the date hereof by or on behalf of the Borrower to the Lender in connection with this Loan Agreement, the other Loan Documents and the transactions contemplated hereby and thereby will be true, complete and accurate in every material respect, or (in the case of projections) based on reasonable estimates, on the date as of which such information is stated or certified. There is no Material Adverse Change and no fact known to a Responsible Officer that, after due inquiry, could reasonably be expected to have a Material Adverse Effect that has not been disclosed herein, in the other Loan Documents or in a report, financial statement, exhibit, schedule, disclosure letter or other writing furnished to the Lender for use in connection with the transactions contemplated hereby or thereby.

6.17 [reserved.]

6.18 ERISA. Each Plan to which the Company or any of its Subsidiaries makes direct contributions, and, to the knowledge of the Borrower, each other Plan and each Multiemployer Plan, is in compliance in all material respects with, and has been administered in all material respects in compliance with, the applicable provisions of ERISA, the Code and any other Federal or State law. No event or condition has occurred and is continuing as to which the Borrower would be under an obligation to furnish a report to the Lender under
Section 7.01(d). No accumulated funding deficiency (as defined in Section 412 of the Code or Section 302 of ERISA) has occurred with respect to any Plan. Neither the Borrower, the Company nor any ERISA Affiliate is subject to any present or potential liability under Title IV of ERISA which, individually or in the aggregate, could have a Material Adverse Effect. No material liability to the PBGC (other than required premium payments), the Internal Revenue Service, or any Plan or trust established under Title IV of ERISA has been, or is expected by the Borrower or any ERISA Affiliate to be, incurred by the Borrower or any ERISA Affiliate. None of the Borrower, the Company nor any ERISA Affiliate has any contingent liability with respect to any post-retirement benefit under any "welfare plan" (as defined in Section 3(1) of ERISA), other than liability for continuation coverage under Part 6 of Title I of ERISA. No lien under Section 412(n) of the Code or 302(f) of ERISA or requirement to provide security under
Section 401(a)(29) of the Code or Section 307 of ERISA has been or is reasonably expected by the Borrower, the Company or any ERISA Affiliate to be imposed on the assets of the Borrower, the Company or any ERISA Affiliate. Neither the Borrower, the Company nor any ERISA Affiliate has engaged in any transaction prohibited by Section 408 of ERISA or Section 4975 of the Code. As of the Closing Date and throughout the term of the Loan Agreement, the Company and the Borrower are not and will not be an "employee benefit plan" as defined in
Section 3(3) of ERISA, which is subject to Title I of ERISA, and none of the assets of the Borrower or the Company will constitute "plan assets" of one or more such plans for purposes of Title I of ERISA or Section 4975 of the Code.

6.19 No Lender Licenses. The Lender will not be required as a result of financing or taking a pledge of any Mortgage Loans to be licensed, registered or approved or to obtain permits or otherwise qualify (i) to do business in any state in which it currently is not so required or (ii) under any state consumer lending, fair debt collection or other applicable state statute or regulation.

6.20 Approved Mortgage Originators Licenses. Each Approved Mortgage Originator that is a Related Party is licensed (or exempt from licensing) to originate Mortgage Loans in its own name or through brokers on the date of this Loan Agreement in all states as shown on Schedule 6.20.

6.21 True Sales. Any and all interest of an Approved Mortgage Originator in, to and under any Mortgage Loan funded in the name of or acquired by such Approved Mortgage Originator or seller which is an Affiliate of the Borrower has been sold, transferred, conveyed and assigned to the Borrower pursuant to a legal sale, and such Approved Mortgage Originator retains no legal or equitable interest in such Mortgage Loan.

6.22 No Burdensome Restrictions. No Requirement of Law or Contractual Obligation of the Company any Related Party or any of their respective Subsidiaries has or would reasonably be expected to have a Material Adverse Effect.

6.23 Subsidiaries. All of the Subsidiaries of the Company at the date hereof are listed on Schedule 6.23 to this Loan Agreement. The Borrower does not have any Subsidiaries.

6.24 Origination and Acquisition of Mortgage Loans. The Mortgage Loans were either (i) originated by a Approved Mortgage Originator, and the origination and collection practices used by the Approved Mortgage Originator, any subsequent mortgagee and any servicer therefor, as applicable, with respect to the Mortgage Loans have been, in all material respects, legal, proper, prudent and customary in the residential mortgage loan servicing business, and are in accordance with the Approved Underwriting Guidelines, or
(ii) acquired by the Company in conformity with the Approved Underwriting Guidelines and under an Approved Purchase Program.

6.25 No Adverse Selection. Neither the Borrower nor any Related Party used any selection procedures that identified the Mortgage Loans as being less desirable or valuable than other comparable Mortgage Loans owned by such party.

6.26 No Broker. The Borrower has not dealt with any broker, investment banker, agent, or other person, except for the Lender and SSG Capital Advisors, LP, who may be entitled to any commission or compensation in connection with the financing of Mortgage Loans pursuant to this Loan Agreement.

6.27 Representations and Warranties Regarding Mortgage Loans; Delivery of Mortgage Loan File. Each Mortgage Loan sold hereunder and each pool of Mortgage Loans pledged in connection with an Advance hereunder, as of each Funding Date, conform to the applicable representations and warranties set forth in Exhibit R-I attached hereto, except as disclosed to the Lender, and agreed to be the Lender, in writing. It is understood and agreed that the representations and warranties set forth in Exhibit R-I hereto shall survive delivery of the respective Mortgage Loan File to the Lender or its designee (including the Custodian) to the extent permitted by applicable law. With respect to each Mortgage Loan (other than a Wet Mortgage Loan), the Mortgage Note, the Mortgage, the Assignment of Mortgage and any other documents required to be delivered under this Loan Agreement and the Custodial Agreement for such Mortgage Loan have been delivered to the Lender or the Custodian on its behalf. The Borrower or its designee is in possession of a complete, true and accurate Mortgage Loan File with respect to each Mortgage Loan (other than a Wet Mortgage Loan), except for such documents the originals of which have been delivered to the Custodian. With respect to each Wet Mortgage Loan, the Custodian is in possession of copies of all blanket Insured Closing Letters and Escrow Letters, in addition to the current form of individual transaction Insured Closing Letters and Escrow Letter, of the applicable Approved Title Insurance Company, Approved Escrow Company or Approved Closing Attorney and any other documents required to be delivered pursuant to the Custodial Agreement.

6.28 Borrower Solvent; Fraudulent Conveyance. As of the date hereof and immediately after giving effect to each Advance, the fair value of the assets of each of the Borrower and each Related Party, taken as a whole, is greater than the fair value of its respective liabilities (including, without limitation, contingent liabilities if and to the extent required to be recorded as a liability on the financial statements of the Borrower or such Related Party, as applicable, in accordance with GAAP), and the Borrower and each Related Party is and will be solvent, is and will be able to pay its debts as they mature and does not and will not have an unreasonably small capital to engage in the business in which it is engaged and proposes to engage. Neither the Borrower nor any Related Party intends to incur, nor believes that it has incurred, debts beyond its ability to pay such debts as they mature. Neither the Borrower nor any Related Party is contemplating the commencement of any Insolvency Proceeding. Neither the Borrower nor any Related Party is transferring any Mortgage Loans with any intent to hinder, delay or defraud any of its respective creditors.

SECTION 7. COVENANTS OF THE BORROWER. The Borrower covenants and agrees with the Lender that, so long as any Advance is outstanding and until payment in full of all Obligations and the termination of this Loan Agreement:

7.01 Financial Statements. The Borrower shall deliver (or cause to be delivered) to the Lender:

(a) (i) as soon as available and in any event within 20 days after the end of each month, the consolidating balance sheets of the Company and its consolidated Subsidiaries as at the end of such month and the related unaudited consolidated statements of income and retained earnings and of cash flows for the Company and its consolidated Subsidiaries for such month and the portion of the fiscal year through the end of such month, setting forth in each case in comparative form the figures for the previous year, accompanied by a certificate of a Responsible Officer of the Company, which certificate shall state that said consolidating financial statements fairly present the consolidating financial condition and results of operations of the Company and its Subsidiaries in accordance with GAAP, consistently applied, as at the end of, and for, such month (subject to normal year-end audit adjustments);

(ii) as soon as available and in any event within 50 days after the end of each of the first three quarterly fiscal periods of each fiscal year of the Company, the consolidated balance sheets of the Company and its consolidated Subsidiaries as at the end of such period and the related unaudited consolidated statements of income and retained earnings and of cash flows for the Company and its consolidated Subsidiaries for such period and the portion of the fiscal year through the end of such period, setting forth in each case in comparative form the figures for the previous year, accompanied by a certificate of a Responsible Officer of the Company, which certificate shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations of the Company and its Subsidiaries in accordance with GAAP, consistently applied, as at the end of, and for, such period (subject to normal year-end audit adjustments);

(b) as soon as available, and in any event within 120 days after the end of each fiscal year of the Company, the consolidated balance sheets of the Company and its consolidated Subsidiaries as at the end of such fiscal year and the related consolidated statements of income and retained earnings and of cash flows for the Company and its consolidated Subsidiaries for such year, setting forth in each case in comparative form the figures for the previous year, accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall not be qualified as to scope of audit or going concern and shall state that said consolidated financial statements fairly present in all material respects the consolidated financial condition and results of operations of the Company and its consolidated Subsidiaries at the end of, and for, such fiscal year in accordance with GAAP, and a certificate of such accountants stating that, in making the examination necessary for their opinion, they obtained no knowledge, except as specifically stated, of any Default, Event of Default or default under any Loan Document;

(c) from time to time such other information regarding the financial condition, operations, or business of the Borrower or any Related Party as the Lender may reasonably request; and

(d) as soon as reasonably possible, and in any event within ten (10) Business Days after a Responsible Officer knows, or with respect to any Plan or Multiemployer Plan to which the Borrower, the Company or any of its Subsidiaries makes direct contributions, has reason to believe, that any of the events or conditions specified below with respect to any Plan or Multiemployer Plan has occurred or exists, a statement signed by a senior financial officer of the Borrower and the Company setting forth details respecting such event or condition and the action, if any, that the Borrower, the Company or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to PBGC by the Borrower, the Company or an ERISA Affiliate with respect to such event or condition):

(i) any reportable event, as defined in Section 4043(b) of ERISA and the regulations issued thereunder, with respect to a Plan, as to which PBGC has not by regulation or otherwise waived the requirement of Section 4043(a) of ERISA that it be notified within thirty (30) days of the occurrence of such event (provided that a failure to meet the minimum funding standard of Section 412 of the Code or Section 302 of ERISA, including, without limitation, the failure to make on or before its due date a required installment under Section 412(m) of the Code or
Section 302(e) of ERISA, shall be a reportable event regardless of the issuance of any waivers in accordance with Section 412(d) of the Code); and any request for a waiver under Section 412(d) of the Code for any Plan;

(ii) the distribution under Section 4041(c) of ERISA of a notice of intent to terminate any Plan or any action taken by the Borrower, the Company or an ERISA Affiliate to terminate any Plan;

(iii) the institution by PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Borrower, the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that any such action has been taken by PBGC with respect to such Multiemployer Plan;

(iv) the complete or partial withdrawal from a Multiemployer Plan by the Borrower, the Company or any ERISA Affiliate that results in liability under Section 4201 or 4204 of ERISA (including the obligation to satisfy secondary liability as a result of a purchaser default) or the receipt by the Borrower, the Company or any ERISA Affiliate of notice from a Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under Section 4041A of ERISA;

(v) the institution of a proceeding by a fiduciary of any Multiemployer Plan against the Borrower, the Company or any ERISA Affiliate to enforce Section 515 of ERISA, which proceeding is not dismissed within 30 days; and

(vi) the adoption of an amendment to any Plan that, pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the loss of tax-exempt status of the trust of which such Plan is a part if the Borrower, the Company or an ERISA Affiliate fails to timely provide security to such Plan in accordance with the provisions of said Sections.

The Borrower will furnish to the Lender, at the time it furnishes each set of financial statements pursuant to paragraphs (a) and (b) above, a certificate of a Responsible Officer on behalf of each of the Borrower and each Related Party to the effect that each of the Borrower and each Related Party during such fiscal period or year has observed or performed all of its covenants and other agreements, and satisfied every material condition, contained in this Loan Agreement and the other Loan Documents to be observed, performed or satisfied by it, and that there has been no Default, Event of Default or default under any Loan Document except as specified in such certificate (and, if any such Default, Event of Default or default has occurred and is continuing, describing the same in reasonable detail and describing the action the Borrower or the applicable Related Party has taken or proposes to take with respect thereto).

7.02 Litigation. The Borrower will promptly, and in any event within 5 Business Days after service of process on the Borrower or any Related Party, give to the Lender notice of all legal or arbitrable proceedings affecting the Borrower or any Related Party that questions or challenges the validity or enforceability of any of the Loan Documents or as to which there is a reasonable likelihood of adverse determination which would result in a Material Adverse Effect.

7.03 Existence, Etc. Each of the Borrower and each Related Party will:

(a) preserve and maintain its legal existence and all of its material rights, privileges, licenses and franchises;

(b) comply with the requirements of all applicable laws, rules, regulations and orders of Governmental Authorities (including, without limitation, truth in lending, real estate settlement procedures and all environmental laws) if the failure to comply with such requirements would be reasonably likely (either individually or in the aggregate) to have a Material Adverse Effect;

(c) keep adequate records and books of account, in which complete entries will be made in accordance with GAAP consistently applied;

(d) not move its chief operating office from the addresses referred to in Section 6.14 unless it shall have provided the Lender 30 days prior written notice of such change;

(e) pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its Property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained; and

(f) permit representatives of the Lender or any Lender-Related Party, during normal business hours upon three (3) Business Days' prior written notice at a mutually desirable time (or at any time and from time to time during the continuance of an Event of Default), to examine, copy and make extracts from its and the Servicer's books and records, to inspect any of its and the Servicer's Properties, and to discuss its and the Servicer's business and affairs with its and the Servicer's officers, all to the extent reasonably requested by the Lender or any Lender-Related Party.

7.04 Prohibition of Fundamental Changes. The Borrower shall not enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or dissolution) or sell all or substantially all of its assets.

7.05 Borrowing Base Deficiency. If at any time there exists a Borrowing Base Deficiency the Borrower shall cure same in accordance with
Section 2.06.

7.06 Notices. The Borrower shall give notice to the Lender promptly:

(a) upon the Borrower becoming aware of, and in any event within one (1) Business Day after, the occurrence of any Default or Event of Default or any event of default or default under any other material agreement of the Borrower or a Related Party;

(b) upon, and in any event within three (3) Business Days after, service of process on the Borrower or any Related Party, or any agent thereof for service of process, in respect of any legal or arbitrable proceedings affecting the Borrower or any Related Party (i) that questions or challenges the validity or enforceability of any of the Loan Documents or (ii) in which the amount in controversy exceeds $300,000;

(c) upon the Borrower becoming aware of any default related to any Collateral, any Material Adverse Change, or any Material Adverse Effect;

(d) upon the Borrower becoming aware during the normal course of its business that (i) the Mortgaged Property in respect of any Mortgage Loan with an unpaid principal balance of at least $250,000 or (ii) the Mortgaged Properties in respect of any group of Mortgage Loans with an aggregate unpaid principal balance of at least $1,000,000, has or have been damaged by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other casualty, or otherwise damaged so as to materially and adversely affect the Collateral Value of such Mortgage Loan;

(e) upon the entry of a judgment or decree affecting the Borrower in an amount in excess of $100,000.

Each notice pursuant to this Section 7.06 shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken or proposes to take with respect thereto.

7.07 Servicing. Except as provided in Section 11.15(c), the Borrower shall not permit any Person other than the Servicer (in accordance with the terms of the Servicing Agreement) to service Mortgage Loans without the prior written consent of the Lender, which consent shall not be unreasonably withheld.

7.08 Public Disclosure. Except as required by Requirements of Law, none of the Borrower or any Related Party will make any public disclosure of this Loan Agreement or its contents without the prior consent of the Lender, such consent not to be unreasonably withheld or delayed.

7.09 Underwriting Guidelines. The Borrower shall cause the Company to provide prompt notice to the Lender of any revisions or modifications to the Approved Underwriting Guidelines; provided that no such changes which are material shall become effective without the prior written consent of the Lender.

7.10 Lines of Business. The Borrower will not engage to any substantial extent in any line or lines of business activity other than the businesses specifically permitted by the trust agreement constituting the Borrower in effect as of the Closing Date.

7.11 Transactions with Affiliates. Other than with respect to the Asset Purchase Agreement, the Servicing Agreement and the Asset Sale Agreement, the Borrower will not enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (a) otherwise permitted under this Loan Agreement or the other Loan Documents, (b) in the ordinary course of the Borrower's business and (c) upon fair and reasonable terms no less favorable to the Borrower than it would obtain in a comparable arm's length transaction with a Person which is not an Affiliate, or make a payment that is not otherwise permitted by this Section 7.11 to any Affiliate.

7.12 Use of Proceeds. The Borrower will use the proceeds of the Advances solely to (a) distribute such proceeds pursuant to the Trust Agreement, (b) acquire the Mortgage Loans (i) from Approved Mortgage Originators in accordance with the Approved Underwriting Guidelines or (ii) from Approved Mortgage Purchasers pursuant to Approved Purchase Agreements, or (c) fund deposits to the Expense Reserve Account required to be funded from the amount of each Advance pursuant to Section 2.08, or (d) fund Lender Expenses and amounts needed by the Borrower to meet operating expenses in connection with the conduct of its business in accordance with Section 7.10.

7.13 Limitation on Liens. The Borrower will not create, incur or permit to exist any Lien, security interest or claim on or to any of its Property, except for (i) Permitted Liens and (ii) liens on the Property of the Borrower created pursuant to this Loan Agreement. The Borrower will defend its Property against, and will take such other action as is necessary to remove, any Lien, security interest or claim on or to any of its Property, other than the security interests created under this Loan Agreement, and the Borrower will defend the right, title and interest of the Lender in and to any of its Property against the claims and demands of all persons whomsoever.

7.14 Limitation on Sale of Assets. The Borrower shall not convey, sell, lease, assign, transfer or otherwise dispose of (collectively, "Transfer"), all or substantially all of its Property, business or assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, or allow any Related Party to Transfer substantially all of its assets to any Person; provided, that the Borrower may after prior written notice to the Lender allow such action with respect to any Related Party which is not a material part of the Borrower's overall business operations.

7.15 Limitation on Distributions. Without the Lender's consent, the Borrower shall not make any payment on account of, or set apart assets for a sinking or other analogous fund for the purchase, redemption, defeasance, retirement or other acquisition of, any stock or senior or subordinate debt of the Borrower, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower.

7.16 Restricted Payments. The Borrower shall not make any Restricted Payment (a) at any time when a Default or an Event of Default has occurred and is continuing or (b) which would result in the sum of (i) the aggregate amount of Qualified Cash of the Borrower plus (ii) the aggregate amount of the Haircuts in respect of all Mortgage Loans that are then subject to this Loan Agreement being less than $1,500,000 after giving effect to such Restricted Payment.

7.17 Information from Approved Mortgage Originators and Servicing Transmission. The Borrower shall provide to the Lender, as soon as practicable, all management reports and financial statements provided to the Borrower by any Approved Mortgage Originator, including all activity reports showing any Approved Mortgage Originator's usage of credit facilities other than the warehouse facility provided pursuant to the terms of this Loan Agreement. The Borrower shall also provide (or cause to be provided) to the Lender on a monthly basis, no later than 11:00 a.m. (eastern time) two (2) Business Days prior to each Payment Date (or such other day requested by Lender), (i) the Servicing Transmission, on a loan-by-loan basis and in the aggregate, with respect to the Mortgage Loans serviced by the Initial Servicer which were funded prior to the first day of the current month, summarizing the Initial Servicer's delinquency and loss experience with respect to Mortgage Loans serviced by the Initial Servicer (including, in the case of the Mortgage Loans, the following categories: current, 30-59, 60-89, 90-119, 120-149 and 150+) and (ii) any other information reasonably requested by the Lender or the Servicer with respect to the Mortgage Loans. The Borrower also agrees to provide such other information regarding any Approved Mortgage Originator or the servicing of the Mortgage Loans as the Lender may reasonably request from time to time.

7.18 No Amendment or Waiver. The Borrower will not, without the prior consent of the Lender, nor will it permit or allow any other Person to, amend, modify, terminate or waive any provision of any Mortgage Loan to which the Borrower is a party in any manner which shall reasonably be expected to materially and adversely affect the value of such Mortgage Loan as Collateral.

7.19 Maintenance of Property; Insurance. The Borrower shall keep all of its property useful and necessary in its business in good working order and condition. The Borrower shall maintain errors and omissions insurance or mortgage impairment insurance and blanket bond coverage in such amounts as are in effect on the Closing Date (as disclosed to the Lender in writing) and shall not permit the reduction of such coverage without the written consent of the Lender, and shall also cause to be maintained such other insurance with financially sound and reputable insurance companies, and with respect to property and risks of a character usually maintained by entities engaged in the same or similar business similarly situated, against loss, damage and liability of the kinds and in the amounts customarily maintained by such entities.

7.20 Further Identification of Collateral. No later than ten
(10) Business Days following the end of each of month, beginning with November, 2004, the Borrower will furnish (or cause to be furnished) to the Lender a statement and related schedules (each, a "Monthly Statement") in hard copy and on diskette and/or a copy through electronic mail, in form and substance satisfactory to the Lender, further identifying and describing the Collateral and such other reports in connection with the Collateral all in reasonable detail.

7.21 Mortgage Loan Determined to be Defective. Upon discovery by the Borrower or the Lender of any breach of any representation or warranty listed on Schedule R-1 hereto applicable to any Mortgage Loan, the party discovering such breach shall promptly give notice of such discovery to the other. Neither the existence nor the substance of any provision of Schedule R-1 shall be construed to limit, restrict or qualify the Lender's rights (i) under this Loan Agreement in respect of determining the value or Market Value of any Mortgage Loans or (ii) under Section 2.06. The Borrower shall also enforce for the benefit of the Lender all of its applicable rights and remedies under applicable Loan Documents (whether they arise by assignment or otherwise) in respect of any material breach of representation or warranty by a Related Party.

7.22 Interest Rate Protection Agreements. At the Lender's request, the Borrower shall deliver (or cause to be delivered) to the Lender any and all information relating to any Interest Rate Protection Agreements.

7.23 Certificate of a Responsible Officer of the Borrower. At the time that the Borrower delivers financial statements to the Lender in accordance with Section 7.01, the Borrower shall forward to the Lender a certificate of a Responsible Officer of the Borrower which certifies that the Borrower is in compliance with the covenants set forth in Sections 7.16, 7.17 and 7.18.

7.24 Maintenance of Separateness. The Borrower acknowledges that the Lender is relying upon and will continue to rely on the separate legal identity and the separate assets of the Borrower as distinguished from any other Person or Related Party. The Borrower agrees that its business shall be operated and its affairs shall be conducted in such a manner that its assets and liabilities can be readily determined and shall not be substantively consolidated with those of any other Person in the event of the bankruptcy or insolvency of the Borrower or such other Person. Without limiting the foregoing or any other provision of this Loan Agreement or any other Loan Documents, the Borrower shall conduct its business in its own name, maintain its books and records separate from those of any other Person, maintain its bank accounts separate from those of any other Person, maintain separate financial statements, showing its assets and liabilities separate and apart from those of any other Person, pay its own liabilities and expenses only out of its own funds, enter into a transaction with an Affiliate only if such transaction is intrinsically fair, commercially reasonable and on the same terms as would be available in an arm's length transaction with a Person or entity that is not an Affiliate, allocate fairly and reasonably any overhead expenses that are shared with an Affiliate, hold itself out as a separate entity, maintain adequate capital in light of its contemplated business operations and observe all other appropriate entity and other organizational formalities.

7.25 ERISA. The Borrower and the Company shall not engage in any transaction which would cause any obligation, or action taken or to be taken, hereunder (or the exercise by the Lender of any of its rights under this Loan Agreement or the other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under ERISA or result in a violation of a state statute regulating governmental plans that would subject the Lender to liability for a violation of ERISA or such state statute.

7.26 [reserved]

7.27 Hedging. Upon the Lender's written request, the Borrower will cause the Mortgage Loans pledged under this Loan Agreement to be hedged by the Company pursuant to an Interest Rate Protection Strategy; provided that, in the event the Borrower does not implement any hedging so requested by the Lender within twenty-four (24) hours after the Borrower's receipt of such request, the Lender may itself in its reasonable judgment implement such hedging and the costs and expenses related to such hedging shall be for the sole account of the Borrower. The Lender shall have the benefit of the Interest Rate Protection strategy in accordance with Section 5.02(i).

7.28 Other Indebtedness. The Borrower shall not incur any Indebtedness (including any accrued interest thereon) other than Indebtedness incurred under this Loan Agreement.

7.29 Opinions. If the aggregate outstanding principal balance of Eligible Mortgage Loans secured by Mortgaged Property located in any individual state exceeds 5% of the aggregate outstanding principal balance of all Eligible Mortgage Loans, then, upon the Lender's request, the Borrower shall deliver an opinion of counsel acceptable to the Lender in such state within 30 days of the date that the aggregate outstanding principal balance of Eligible Mortgage Loans that are subject to this Loan Agreement and that are secured by Mortgaged Properties located in such state exceeds 5% of the aggregate outstanding principal balance of all Eligible Mortgage Loans that are subject to this Loan Agreement.

SECTION 8. EVENTS OF DEFAULT. Each of the following events shall constitute an event of default (an "Event of Default") hereunder:

(a) the Borrower shall fail to (i) make a payment of any principal of or interest on any Advance when such payment is due (whether at stated maturity or upon acceleration) or (ii) deposit into the Expense Reserve Account any amount required to be deposited therein pursuant to Section 2.08 or
(iii) make any other payment which is due and payable under the Loan Documents; or

(b) the Borrower shall fail to comply with Section 7.05 or shall fail to make any mandatory prepayment under Section 2.06 to cure a Borrowing Base Deficiency; or

(c) the Borrower shall default in the payment of any other Obligation or any other amount due under any other Loan Document after notification by the Lender of such default, and such default shall have continued unremedied for two (2) Business Days; or

(d) the Initial Servicer shall fail to remit to the Collection Accounts any material amount required to be so remitted within two (2) Business Days of the date required; or

(e) any representation, warranty or certification made or deemed made herein (including in Section 6) or in any other Loan Document by the Borrower, or in any certificate furnished to the Lender pursuant to the provisions thereof, shall prove to have been false or misleading in any material respect as of the time made or furnished (other than the representations and warranties set forth in Schedule R-1, which shall be considered solely for the purpose of determining the Collateral Value of the Mortgage Loans unless (i) the Borrower shall have made any such representations and warranties with knowledge that they were materially false or misleading at the time made or (ii) any such representations and warranties have been determined in good faith by the Lender to be materially false or misleading either on a regular basis or as to a material quantity of Mortgage Loans); or

(f) the Borrower shall fail to comply with the requirements of
Section 7.03(a), Section 7.04, Section 7.06 (a) or (c), Sections 7.12 through 7.19; and such default shall continue unremedied for a period of one (1) Business Day; or

(g) Borrower shall fail to comply with the requirements of
Section 7.24; or

(h) the Borrower shall fail to observe or perform any agreement, covenant or condition contained in this Loan Agreement or any other Loan Document that is not otherwise set forth in this Section 8 and such failure to observe or perform shall continue unremedied for a period of five (5) Business Days; or

(i) a final judgment or judgments for the payment of money in excess of $250,000 in the aggregate (to the extent that it is, in the reasonable determination of the Lender, uninsured and provided that any insurance or other credit posted in connection with an appeal shall not be deemed insurance for these purposes) shall be rendered against the Borrower, a Related Party or any of their respective Subsidiaries by one or more courts, administrative tribunals or other bodies having jurisdiction over them and the same shall not be discharged (or provision shall not be made for such discharge) or bonded, or a stay of execution thereof shall not be procured, within 60 days from the date of entry thereof and the Borrower or any such Related Party or Subsidiary shall not, within said period of 60 days, or such longer period during which execution of the same shall have been stayed or bonded, appeal therefrom and cause the execution thereof to be stayed during such appeal; or

(j) the Borrower or a Related Party or any of their respective Subsidiaries shall admit in writing its inability to pay its debts as such debts become due; or

(k) an Insolvency Proceeding is commenced by or against the Borrower, a Related Party, any of their respective Subsidiaries, or any Approved Mortgage Originator and, in the case of any such Insolvency Proceeding commenced without the application or consent of such Person, such Insolvency Proceeding shall continue undismissed, or an order, judgment or decree approving or ordering the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over such Person or over all or a substantial part of its property shall have been entered, or there shall have occurred the involuntary appointment of an interim receiver, trustee or other custodian of any such Person or all or a substantial part of its property; or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of such Person and any of the foregoing shall continue unstayed and in effect, for a period of 60 or more days, or an order for relief shall be entered against such Person; or

(l) the Custodial Agreement or any other Loan Document shall for whatever reason (including an event of default thereunder) be terminated or the lien on the Collateral created by this Loan Agreement, Borrower's material obligations hereunder or under any Loan Document shall cease to be in full force and effect or, in Lender's good faith determination, otherwise cease to benefit the Lender, or the enforceability thereof shall be contested by the Borrower or any Related Party; or

(m) the occurrence of a Material Adverse Change or a Material Adverse Effect; or

(n) (i) any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any material "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan, or the Borrower, any Related Party or any ERISA Affiliate shall fail to make a required installment payment to any Plan on or before the date due under Section 302 of ERISA or Section 412 of the Code, or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower, any Related Party or any ERISA Affiliate, (iii) a reportable event as defined in
Section 4043(b) of ERISA and the regulations issued thereunder shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Plan, which reportable event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Lender, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower, any Related Party or any ERISA

Affiliate shall, or in the reasonable opinion of the Lender is likely to, incur any liability in connection with a withdrawal from, or the insolvency or reorganization of, a Multiemployer Plan, (vi) the Borrower, any Related Party or any ERISA Affiliate shall fail to pay when due or is in default on an amount which it shall have become liable to pay to the PBGC, any Plan, any Multiemployer Plan or a trust established under Section 4049 of ERISA, (vii) a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that an ERISA Plan must be terminated or have a trustee appointed to administer any ERISA Plan, (viii) any other event or condition shall occur or exist with respect to any Plan which could subject the Borrower, any Related Party or any ERISA Affiliate to any tax, penalty or other liability or the imposition of any lien or security interest on the Borrower, any Related Party or any ERISA Affiliate, (ix) the Borrower or any Related Party shall incur any liability for any post-retirement or post-termination health or life insurance or (x) the assets of the Borrower or any Related Party become or are deemed to be "plan assets" of a plan subject to ERISA or Section 4975 of the Code. No Event of Default shall be deemed to be, or have been, waived or corrected because of any disclosure of any of the foregoing by the Borrower; and in each case in clauses (i) through (ix) above, the applicable event or condition described therein shall not constitute an Even of Default unless such event or condition, together with all other events or conditions described in clauses (i) through (ix) above, if any, could reasonably be expected to have a Material Adverse Effect; or

(o) (i) any Change of Control shall occur or (ii) Anthony Santilli, Albert Mandia or Jeffrey Ruben shall no longer be an executive officer of the Company unless a satisfactory replacement has been found within sixty
(60) days; or

(p) the Borrower shall grant, or suffer to exist, any Lien on any Property of the Borrower except the Liens in favor of Lender and contemplated hereby; or the Liens in favor of the Lender shall cease to be valid and perfected first priority Liens on all the Property of the Borrower; or

(q) at any time after the date that is three (3) weeks after the Closing Date, the Company is unable for any reason to sell or issue subordinated notes (A) for more than three consecutive weeks or (B) on more than two occasions in any 12 month period irrespective of the length of time of any such occasions; or

(r) the Borrower, any Related Party or any Subsidiary or Affiliate of the Borrower or a Related Party shall default under, or fail to perform as required under, or shall otherwise materially breach the terms of, any instrument, agreement or contract between the Borrower or such other Person, on the one hand, and the Lender or any of the Lender's Affiliates, on the other hand; or any Related Party or any Subsidiary or Affiliate of a Related Party shall default under, or fail to perform as requested under, the terms of any indenture, repurchase agreement, loan and security agreement or similar credit facility or agreement for borrowed funds entered into by such Person and any third party, which default or failure entitles any party to require acceleration or prepayment of any indebtedness thereunder; or

(s) an event of default shall have occurred under any Control Agreement; or

(t) any servicing agreement (other than a servicing agreement relating to a securitization or other transaction in which Radian Group, Inc. or any of its Affiliates has provided bond insurance or similar credit enhancement) under which the Company or any of its Subsidiaries is servicer is terminated for cause or an event of default; or

(u) The Company shall be delisted from the NASDAQ Stock Market or any other stock market or securities exchange for at least 3 consecutive days; or

(v) the Net Worth of the Company and its Subsidiaries shall be
(i) negative at the end of any calendar month or (ii) less than $10,000,000 at the end of any calendar quarter; or

(w) from and after December 31, 2004, the Company and the Related Parties have Qualified Cash and undrawn borrowing capacity under committed borrowing facilities (including Availability) of less than $20,000,000; or

(x) from and after December 31, 2004, the Company and the Related Parties at any time shall have minimum cash of less than $10,000,000.

SECTION 9. REMEDIES UPON DEFAULT.

(a) Upon the occurrence of one or more Events of Default
(subject to the expiration of the applicable cure period contained therein) other than those referred to in Section 8(k), the Lender may immediately declare the principal amount of the Advances then outstanding to be immediately due and payable, together with all interest and other Obligations payable hereunder (including amounts payable pursuant to Sections 2.05, and 3.04); provided that, upon the occurrence of an Event of Default referred to in Sections 8(i) or (j), such amounts shall immediately and automatically become due and payable without any further action by any Person. Upon such declaration or such automatic acceleration, the balance then outstanding shall become immediately due and payable, without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by the Borrower, and the Lender may thereupon exercise any remedies available to it at law and pursuant to the Loan Documents, including, but not limited to, the transfer of servicing or the liquidation of the Collateral on a servicing-released basis.

(b) Upon the occurrence of one or more Events of Default, the Lender shall have the right to obtain physical possession of the Servicing Records and all other files of the Borrower relating to the Collateral and all documents relating to the Collateral which are then or may thereafter come into the possession of the Borrower or any third party acting for the Borrower, and the Borrower shall deliver to the Lender such assignments as the Lender shall request. The Lender shall be entitled to specific performance of all agreements of the Borrower contained in this Loan Agreement.

SECTION 10. NO DUTY ON LENDER'S PART. The powers conferred on the Lender hereunder are solely to protect the Lender's interests in the Collateral and shall not impose any duty upon it to exercise any such powers. The Lender shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to the Borrower for any act or failure to act hereunder, except for its or their own gross negligence or willful misconduct.

SECTION 11. MISCELLANEOUS.

11.01 Waiver. No failure on the part of the Lender to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under any Loan Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided herein are cumulative and not exclusive of any remedies provided by law.

11.02 Notices. Except as otherwise expressly permitted by this Loan Agreement or otherwise expressly provided in the applicable Loan Document, all notices, requests and other communications provided for herein and under the other Loan Documents (including, without limitation, any modifications of, or waivers, requests or consents under, this Loan Agreement) shall be given or made in writing (including, without limitation, by or telecopy) and delivered to the intended recipient at the "Address for Notices" specified below its name on the signature pages hereof or, as to any party, at such other address as shall be designated by such party in a written notice to each other party. Except as otherwise provided in this Loan Agreement and except for notices given under
Section 2 (which shall be effective only on receipt), all such communications shall be deemed to have been duly given when transmitted by telecopier or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid.

11.03 Indemnification and Expenses.

(a) The Borrower shall hold each Lender-Related Party and each Participant (each Lender-Related Party and each Participant, an "Indemnified Party") harmless from and indemnify any Indemnified Party against all liabilities, losses, damages, judgments, costs and expenses of any kind which may be imposed on, incurred by or asserted against such Indemnified Party (collectively, the "Indemnified Liabilities") relating to or arising out of this Loan Agreement, any other Loan Document or any transaction contemplated hereby or thereby, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Loan Agreement, any other Loan Document or any transaction contemplated hereby or thereby. Without limiting the generality of the foregoing, the Borrower agrees to hold any Indemnified Party harmless from and indemnify such Indemnified Party against all Indemnified Liabilities with respect to all Mortgage Loans relating to or arising out of any violation or alleged violation of any environmental law, rule or regulation or any consumer credit laws, including without limitation laws with respect to unfair or deceptive lending practices and predatory lending practices, the Truth in Lending Act or the Real Estate Settlement Procedures Act. In any suit, proceeding or action brought by an Indemnified Party in connection with any Mortgage Loan for any sum owing thereunder, or to enforce any provisions of any

Mortgage Loan, the Borrower will save, indemnify and hold such Indemnified Party harmless from and against all expense, loss or damage suffered by reason of any defense, set-off, counterclaim, recoupment or reduction or liability whatsoever of the account debtor or obligor thereunder, arising out of a breach by the Borrower of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such account debtor or obligor or its successors from the Borrower. The Borrower also agrees to reimburse an Indemnified Party as and when billed by such Indemnified Party for all such Indemnified Party's costs and expenses incurred in connection with the enforcement or the preservation of such Indemnified Party's rights under this Loan Agreement any other Loan Document or any transaction contemplated hereby or thereby, including without limitation the fees and disbursements of its counsel. The Borrower hereby acknowledges that, notwithstanding the fact that the Advances are secured by the Collateral, the obligation of the Borrower with respect to each Advance is a recourse obligation of the Borrower. The foregoing to the contrary notwithstanding, the Borrower shall have no obligation to any Indemnified Party under this Section 11.03 with respect to any Indemnified Liability that a court of competent jurisdiction finally determines to have resulted from the gross negligence or willful misconduct of such Indemnified Party or any Indemnified Party's breach of this Loan Agreement. In no event, however, shall any Indemnified Party be liable on any theory of liability for any special, indirect, consequential, or punitive damages.

(b) The Borrower shall pay, as and when billed by the Lender, all of the Lender Expenses through the Closing Date, including all out-of-pocket costs and expenses incurred by the Lender and its Affiliates in connection with the development, preparation and execution of (A) this Loan Agreement and any other Loan Document, to the extent such expenses as of the Closing Date exceed the portion of the Deposit (as defined in the Commitment Letter) that is retained by Lender; and (B) from and after the Closing Date, any Loan Document, amendment, restatement, supplement, or modification of this Loan Agreement or any other Loan Document. The Borrower shall pay, as and when billed by the Lender, all Lender Expenses from and after the Closing Date, including all of the out-of-pocket costs and expenses incurred by the Lender or any of its Affiliates in connection with the consummation and administration of the transactions contemplated hereby and thereby or with respect to the Collateral, including, without limitation, (i) all the fees, disbursements and expenses of counsel, (ii) all search fees and filing and recording fees, (iii) all the due diligence, inspection, testing and review costs and expenses (subject to the last clause of Section 11.16, as applicable), and (iv) those costs and expenses incurred pursuant to Sections 11.03(a), 11.14 and 11.16. Without limiting the foregoing, the Borrower shall pay the actual charges paid or incurred by the Lender or any of its Affiliates for the services of any third-party hired by the Lender or any of its Affiliates for performing financial audits, appraising the Collateral, or assessing compliance by any Related Party or the Borrower with the terms, conditions, representations and other provisions of any of the Loan Documents.

11.04 Amendments. Except as otherwise expressly provided in this Loan Agreement, any provision of this Loan Agreement may be amended, supplemented or otherwise modified only by an instrument in writing signed by the Borrower and the Lender, and any provision of this Loan Agreement may be waived only with the written consent of the Lender.

11.05 Successors and Assigns. This Loan Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

11.06 Survival. The obligations of the Borrower under Sections 3.03 and 11.03 shall survive the payment of the Obligations and the termination of this Loan Agreement. In addition, each representation and warranty made, or deemed to be made by a request for a borrowing, herein or pursuant hereto shall survive the making of such representation and warranty, and the Lender shall not be deemed to have waived, by reason of making any Advance, any Default that may arise by reason of such representation or warranty proving to have been false or misleading, notwithstanding that the Lender may have had notice or knowledge or reason to believe that such representation or warranty was false or misleading at the time such Advance was made.

11.07 Captions. The table of contents and captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Loan Agreement.

11.08 Counterparts; Telefacsimile Execution. This Loan Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Loan Agreement by signing any such counterpart. Delivery of an executed counterpart of this Loan Agreement by telefacsimile shall be equally as effective as delivery of an original executed counterpart of this Loan Agreement. Any party delivering an executed counterpart of this Loan Agreement by telefacsimile also shall deliver an original executed counterpart of this Loan Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Loan Agreement. This Section shall apply to each other Loan Document mutatis mutandis.

11.09 LOAN AGREEMENT CONSTITUTES SECURITY AGREEMENT; GOVERNING LAW. THIS LOAN AGREEMENT SHALL BE GOVERNED BY NEW YORK LAW WITHOUT REFERENCE TO CHOICE OF LAW DOCTRINE (BUT WITH REFERENCE TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, WHICH BY ITS TERMS APPLIES TO THIS LOAN AGREEMENT), AND SHALL CONSTITUTE A SECURITY AGREEMENT WITHIN THE MEANING OF THE UNIFORM COMMERCIAL CODE.

11.10 SUBMISSION TO JURISDICTION; WAIVERS. THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY:

(a) SUBMITS FOR ITSELF AND ITS PROPERTY, IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;

(b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;

(c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF WHICH THE LENDER SHALL HAVE BEEN NOTIFIED;

(d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW AND FURTHER AGREES THAT IT WILL NOT COMMENCE ANY ACTION OR PROCEEDING ARISING OUT OF, RELATED TO, OR OTHERWISE CONNECTED WITH THIS LOAN AGREEMENT IN ANY FORUM OR JURISDICTION OTHER THAN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE BOROUGH OF MANHATTAN; AND

(e) IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO OR IN THE NATURE OF SET-OFF, ABATEMENT, SUSPENSION, RECOUPMENT OR OTHER RIGHT TO WITHHOLD ANY PAYMENT OR PERFORMANCE DUE BY THE BORROWER OR ON ITS BEHALF, TO OR FOR THE BENEFIT OF THE LENDER OR RELATED TO THE COLLATERAL.

11.11 WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE LENDER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS LOAN AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

11.12 Acknowledgments. The Borrower hereby acknowledges that:

(a) it has been advised by counsel in the negotiation, execution and delivery of this Loan Agreement and the other Loan Documents;

(b) the Lender has no fiduciary relationship to the Borrower, and the relationship between the Borrower and the Lender is solely that of debtor and creditor; and

(c) no joint venture exists among or between the Lender and the Borrower.

11.13 Hypothecation or Pledge of Collateral. The Lender shall have free and unrestricted use of all Collateral, and nothing in this Loan Agreement shall preclude the Lender from engaging in repurchase transactions with the Collateral or otherwise pledging, repledging, transferring, hypothecating, or rehypothecating the Collateral. Nothing contained in this Loan Agreement shall obligate the Lender to segregate any Collateral delivered to the Lender by the Borrower.

11.14 ASSIGNMENTS; PARTICIPATIONS.

(a) Assignments.

(i) The Borrower may not assign any of its rights or obligations hereunder except with the prior written consent of the Lender, which may be given or withheld in its sole and absolute discretion. The Lender may assign or transfer to any bank or other financial institution that makes or invests in loans, or to any Affiliate of the Lender, all or any of its rights and obligations under this Loan Agreement and the other Loan Documents. The Lender is under no obligation to disclose the identities of such financial institutions to the Company, the Borrower or any other Person. Notwithstanding anything in this Agreement to the contrary, so long as no Default or Event of Default has occurred or is continuing, the Lender shall not assign or transfer its rights and obligations under this Loan Agreement to (a) any of JPMorgan Chase Bank, Bear Stearns & Co., Inc., Credit Suisse First Boston LLC, UBS A.G., Lehman Brothers, Residential Funding Corporation, or Deutsche Bank AG, or (b) any direct competitor of the Company, without the prior consent of the Company. Subject to the limitations in the prior sentence, the Lender will manage all aspects of any syndication, including decisions as to the selection of institutions to be approached and when they will be approached, when its commitments will be accepted, which institutions will participate, the allocations of the commitments among the financial institutions and the amount and distribution of fees among the financial institutions. The Lender shall have sole discretion in the appointment of, and awarding of titles to, other agents, co-agents, arrangers or bookrunners, and shall determine if any compensation will be paid.

(ii) To assist the Lender in its syndication efforts, the Borrower shall promptly prepare and provide to the Lender all information with respect to the Company and its affiliates, and the transactions contemplated hereby, including all financial information and projections (the "Projections"), as Lender may reasonably request in connection with such syndication. The Borrower represents and covenants that (a) all information other than the Projections (the "Information") that has been or will be made available to the Lender by the Borrower or any of the Borrower's representatives, is or will be, when furnished, complete and correct in all material respects and does not or will not, when furnished, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made and (b) the Projections that have been or will be made available to the Lender by the Borrower or any of the Borrower's representatives have been or will be prepared in good faith based upon reasonable assumptions. The Borrower understands and agrees that, in arranging and syndicating the credit, the Lender and any of its assignees or prospective assignees may use and rely on the Information and Projections without independent verification thereof.

(b) Participations. The Lender may, in accordance with applicable law, at any time sell to one or more lenders or other entities ("Participants") participating interests in any Advance, its right to make Advances, or any other interest of the Lender hereunder and under the other Loan Documents. Notwithstanding anything in this Agreement to the contrary, so long as no Default or Event of Default has occurred or is continuing, the Lender shall not sell a participation under this Loan Agreement to (a) any of JPMorgan Chase Bank, Bear Stearns & Co., Inc., Credit Suisse First Boston LLC, UBS A.G., Lehman Brothers, Residential Funding Corporation, or Deutsche Bank AG, or (b) any direct competitor of the Company, without the prior consent of the Company. In the event of any such sale by the Lender of participating interests to a Participant, the Lender's obligations under this Loan Agreement to the Borrower shall remain unchanged, the Lender shall remain solely responsible for the performance thereof and of the other Loan Documents, and the Borrower shall continue to deal solely and directly with the Lender in connection with the Lender's rights and obligations under this Loan Agreement and the other Loan Documents. The Borrower agrees that if amounts outstanding under this Loan Agreement are due or unpaid, or shall have been declared or shall have become due and payable during the continuance of an Event of Default, each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Loan Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Loan Agreement; provided, that such Participant shall only be entitled to such right of set-off if it shall have agreed in the agreement pursuant to which it shall have acquired its participating interest to share with the Lender the proceeds thereof. The Lender also agrees that each Participant shall be entitled to the benefits of Sections 2.07 and 11.03 with respect to its participation in the Advances outstanding from time to time; provided, that the Lender and all Participants shall be entitled to receive no greater amount in the aggregate pursuant to such Sections than the Lender would have been entitled to receive had no such transfer occurred.

(c) The Lender may furnish any information concerning the Borrower or any Related Party in the possession of such Lender from time to time to assignees and Participants (including prospective assignees and Participants) only after securing signed confidentiality statements (a form of which is attached hereto as Exhibit 11.14(c)) and only for the sole purpose of evaluating participations or assignments, as the case may be, and for no other purpose.

(d) The Borrower agrees to cooperate with the Lender in connection with any such assignment or participation, to execute and deliver such replacement notes, and to enter into such restatements of, and amendments, supplements and other modifications to, this Loan Agreement and the other Loan Documents in order to give effect to such assignment or participation.

11.15 Servicing.

(a) The Borrower covenants to cause the Mortgage Loans to be serviced pursuant to the Servicing Agreement and to cause the Initial Servicer to provide written notice to the Lender within one (1) Business Day with respect to any Mortgage Loans that continue to be serviced by the Initial Servicer as of the 120th day after the date of the related Advance. The Borrower agrees that the Initial Servicer shall have no right to service any Mortgage Loan after the date which is 150 days as of the date of the related Advance without the prior written consent of the Lender, which may be given or withheld in its sole and absolute discretion. The payment of any servicing fees of an Initial Servicer shall be subordinate to the payment of amounts due to the Lender under this Loan Agreement.

(b) During the term of this Loan Agreement, (i) the Borrower agrees that the Lender has a first priority perfected security interest in all servicing records, including but not limited to any and all servicing agreements, files, documents, records, databases, computer tapes, copies of computer tapes, proofs of insurance coverage, insurance policies, appraisals, other closing documentation, payment history records, and any other records relating to or evidencing the servicing of any Mortgage Loans (collectively, the "Servicing Records"), and (ii) the Borrower grants the Lender a security interest in all servicing fees, the Borrower's rights relating to the Mortgage Loans and all Servicing Records, in each case to secure the obligation of any Servicer to service in conformity with this Section and the Servicing Agreement and any other obligations of the Borrower to the Lender. The Borrower covenants to safeguard such Servicing Records and to deliver them promptly to the Lender or its designee (including the Custodian) at the Lender's request.

(c) The Borrower shall provide a copy of the Servicing Agreement, or any amendments or supplements thereto, to the Lender at least three (3) Business Days prior to the applicable Funding Date or the date on which such Initial Servicer shall begin servicing the Mortgage Loans, which shall be in the form and substance acceptable to Lender, and the Borrower shall have obtained the written consent of the Lender for the Initial Servicer to service the Mortgage Loans.

(d) The Borrower agrees that upon the occurrence of an Event of Default, the Lender may, in its sole discretion, terminate the Initial Servicer and all of its respective rights under the Servicing Agreement, with or without cause, in each case without payment of any fee (including without limitation a termination fee) or any expense. In addition, the Borrower shall provide to the Lender a letter from the Borrower to the effect that, upon the occurrence of an Event of Default, the Lender may terminate the Initial Servicer and all of its respective rights under the Servicing Agreement, with or without cause, in each case without payment of any fee (including without limitation a termination fee), or any expense, and direct that collections with respect to the Mortgage Loans be remitted in accordance with the Lender's instructions. The Borrower agrees to cooperate with the Lender in connection with any transfer of servicing of any Mortgage Loans.

(e) After the Closing Date, and until the pledge of any Mortgage Loan is relinquished by the Custodian, the Borrower will have no right to modify or alter the terms of such Mortgage Loan or consent to the modification or alteration of the terms of such Mortgage Loan, and the Borrower will have no obligation or right to repossess any Mortgage Loan or substitute another Mortgage Loan, except as provided in any Custodial Agreement.

(f) The Borrower shall permit the Lender, upon reasonable prior written notice (which shall be no more than five (5) Business Days' prior notice) and at a mutually convenient time, to inspect the Borrower's or any Related Party's servicing facilities, as the case may be, for the purpose of satisfying the Lender that the Borrower or such Related Party, as the case may be, has the ability to service the Mortgage Loans as provided in this Loan Agreement. In addition, with respect to a Servicer which is not a Related Party, the Borrower shall use its reasonable best efforts to enable the Lender to inspect the servicing facilities of such Servicer.

(g) To the extent that any provision of this Section 11.15 shall be in conflict with the provisions of the Servicing Agreement, the provisions of the Servicing Agreement shall control.

11.16 Periodic Due Diligence Review. The Borrower acknowledges that the Lender has the right to perform continuing due diligence reviews with respect any or all of the Mortgage Loans or Related Parties, as desired by the Lender from time to time, for purposes of verifying compliance with the representations, warranties and specifications made hereunder, or otherwise, and the Borrower agrees that the Lender or its authorized representatives will be permitted during normal business hours on any business day to examine, inspect, make copies of, and make extracts of, the Mortgage Files and any and all documents, records, agreements, instruments or information relating to such Mortgage Loans in the possession, or under the control, of the Borrower, the Company or the Custodian. The Borrower also shall make available to the Lender a knowledgeable financial or accounting officer for the purpose of answering questions respecting the Mortgage Files and the Mortgage Loans. Without limiting the generality of the foregoing, the Borrower acknowledges that the Lender shall make Advances to the Borrower based solely upon the information provided by the Borrower to the Lender in the Mortgage Loan Data Transmission and the representations, warranties and covenants contained herein, and that the Lender, at its option, has the right, at any time, to conduct a partial or complete due diligence review on some or all of the Mortgage Loans securing such Advance, including, without limitation, ordering new credit reports, new appraisals on the related Mortgaged Properties and otherwise re-generating the information used to originate such Mortgage Loan. The Lender may underwrite such Mortgage Loans itself or engage a mutually agreed upon third party underwriter to perform such underwriting. The Borrower agrees to cooperate with the Lender and any third party underwriter in connection with such underwriting, including, but not limited to, providing the Lender and any third party underwriter with access to any and all documents, records, agreements, instruments or information relating to such Mortgage Loans in the possession, or under the control, of the Borrower. In addition, the Lender has the right to perform continuing due diligence reviews of the Borrower and its Affiliates, directors, officers, employees and significant shareholders. The Borrower and Lender further agree that all out-of-pocket costs and expenses incurred by the Lender in connection with the Lender's reunderwriting of Mortgage Loans pursuant to this Section 11.16 shall be paid by the Borrower; provided that the amount to be reimbursed does not exceed the costs and expenses which are usual and customary in the mortgage industry for third-party loan reunderwriting firms. In addition, the Borrower shall pay the Lender a fee of $1,500 per day (in addition to any out-of-pocket expenses incurred by the Lender or a Lender-Related Party) for any due diligence reviews that the Lender or any Lender-Related Party conducts a due diligence review pursuant to this Section 11.16.

11.17 Set-Off. In addition to any rights and remedies of the Lender provided by this Loan Agreement and by law, the Lender shall have the right during the continuance of an Event of Default, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise) to set-off and appropriate and apply against such amount any and all Property and deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Lender or any Affiliate thereof to or for the credit or the account of the Borrower. The Lender may set-off cash, the proceeds of the liquidation of any Collateral and all other sums or obligations owed by the Lender or its Affiliates to Borrower against all of Borrower's obligations to the Lender or its Affiliates, whether under this Loan Agreement or under any other agreement between the parties or between the Borrower and any affiliate of the Lender, or otherwise, whether or not such obligations are then due, without prejudice to the Lender's or its Affiliate's right to recover any deficiency. The Lender agrees promptly to notify the Borrower after any such set-off and application made by the Lender; provided that the failure to give such notice shall not affect the validity of such set-off and application.

11.18 Replacement by Repurchase Agreement. The Borrower hereby acknowledges and agrees that this Loan Agreement may at any time and without any further cost to the Borrower, in the sole discretion of the Lender, be replaced by a repurchase facility with substantially similar terms as those contained in this Loan Agreement. The Borrower hereby agrees to take such action and execute such documents and instruments as is necessary to effectuate such conversion.

11.19 Entire Agreement. This Loan Agreement embodies the entire agreement and understanding of the parties hereto and supersedes any and all prior agreements, arrangements and understandings relating to the matters provided for herein. No alteration, waiver, amendments, or change or supplement hereto shall be binding or effective unless the same is set forth in writing by a duly authorized representative of each party hereto.

11.20 Confidentiality. Each of Lender, the Borrower, the Company, and their Affiliates shall take normal and reasonable precautions to maintain the confidentiality of all non-public information obtained pursuant to the requirements of this Loan Agreement and the other Loan Documents which has been identified as such by the Borrower, but may, in any event, make disclosures
(i) in the case of Lender, as reasonably required by any actual or proposed Participant or assignee in connection with the contemplated assignment of any interest under this Loan Agreement or participations therein, or (ii) as required or requested by any governmental agency or representative thereof or as required pursuant to legal process, or (iii) to its officers, attorneys, accountants, agents, and advisors who are directly involved in the transactions described in this Loan Agreement, or (iv) as required by law, or (v) in connection with litigation involving the Lender, or (vi) to any and all persons, without limitation of any kind, of the federal tax treatment and federal tax structure of the transaction and all materials of any kind (including all written materials related to such tax structure and tax treatment) that are provided to the taxpayer relating to such tax treatment and tax structure. Subsection (vi) of this Section 11.20 is intended to cause the transactions contemplated hereby to not be treated as having been offered under conditions of confidentiality for purposes of Section 1.6011-4(b)(3) (or any successor provision) of the Treasury Regulations promulgated under Section 6011 or the Code, and shall be construed in a manner consistent with such purpose. Notwithstanding anything in this Section to the contrary, none of the Borrower, the Company or any of their Affiliates shall disclose (a) the identities of participants in this transaction, (b) the existence or status of any negotiations, or (c) any pricing information not related to the tax structure or tax aspects of this transaction except as expressly permitted in this Section 11.20.

11.21 Public Announcements. The Lender shall have approval rights with respect to all press releases and other public announcements related to or concerning this Loan Agreement and the other Loan Documents; provided that, with respect to any such public disclosure required to be made by the Securities and Exchange Commission, the Borrower shall only be required to (a) afford the Lender a reasonable opportunity to review and comment on such disclosure prior to its being made public and (b) not unreasonably refuse to incorporate any changes to such disclosure that are requested by the Lender and that relate to the Lender or any of its Affiliates. The approval or non-approval of any press release or other public announcement will not be unreasonably withheld or delayed.

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

BORROWER

PENN SQUARE EAST FUNDING, LLC

By: /s/ Jeffrey M. Ruben
   -------------------------------
Name: Jeffrey M. Ruben
Title: Executive Vice President

Penn Square East Funding, LLC Wanamaker Building 100 Penn Square East Philadelphia, PA 19107 Attention: President Telecopier number: (215) 940-3299 Telephone number: (215) 940-4000

LENDER

FORTRESS CREDIT CORP.

By: /s/ Constantine Dakiolas
    -------------------------
Title:  Chief Credit Officer

Fortress Credit Corp.

1251 Avenue of the Americas
16th Floor
New York, NY 10020
Telecopier No.: (212) 798-6131
Attention: Kevin Treacy

With a copy to:
Sidley Austin Brown & Wood LLP
787 Seventh Avenue
New York, New York 10019
Telecopier No.: (212) 839-5599
Attention: Jonathan Williams

Exhibit 10.6

EXECUTION COPY

ASSET PURCHASE AGREEMENT

among

HOMEAMERICAN CREDIT, INC.,
and
AMERICAN BUSINESS MORTGAGE SERVICES, INC.

jointly and severally, as Sellers

and

PENN SQUARE EAST FUNDING, LLC
as Purchaser

Dated as of November 4, 2004

ASSET PURCHASE AGREEMENT

ASSET PURCHASE AGREEMENT, dated as of November 4, 2004 (this "Agreement"), among HOME AMERICAN CREDIT, INC., a Pennsylvania corporation ("HAC"); AMERICAN BUSINESS MORTGAGE SERVICES, INC., a New Jersey corporation ("ABMS"; HAC and ABMS are referred to herein collectively as the "Sellers" and each individually as a "Seller"); and PENN SQUARE EAST FUNDING, LLC, a Delaware limited liability company (the "Purchaser").

W I T N E S S E T H

WHEREAS, each Seller owns and from time to time originates and acquires certain Mortgage Loans (as defined in the Loan Agreement defined below) as described in the APA Assignment (as hereinafter defined) secured primarily by mortgages, deeds of trust and security deeds on certain Mortgaged Properties (as defined in the Loan Agreement) and the Mortgage Loan Documents (as defined in the Loan Agreement) related thereto;

WHEREAS, (a) the Mortgage Loans, (b) the related Mortgage Loan Documents together with all promissory notes, and Servicing Records and any other collateral pledged or otherwise relating to such Mortgage Loans, all files, material documents, instruments, surveys, certificates, correspondence, appraisals, computer records, computer storage media, accounting records and books and records relating thereto, (c) the related Mortgaged Properties or any interest in real property collateralizing any Mortgage Loan, (d) the related Mortgage Files, (e) the related Servicing Files, (f) all mortgage guaranties and insurance (issued by governmental agencies or otherwise) and any mortgage insurance certificate or other document evidencing such mortgage guaranties or insurance relating to any Mortgage Loans and all claims and payments thereunder,
(g) all other insurance policies and insurance proceeds relating to any Mortgage Loans or the related Mortgaged Property, (h) all Interest Rate Protection Agreements, if any (as defined in the Loan agreement defined below), (i) all rights under the Servicing Agreement (as defined in the Loan Agreement), the Custodial Agreement (as defined in the Loan Agreement) or any other document related to Mortgage Loans or the related Mortgaged Properties, and (j) all purchase or take-out commitments relating to or constituting any or all of the related Mortgage Loans or the Mortgaged Properties; together with any other property and any other rights related thereto the foregoing assets and property described in (a) through (j) are hereinafter referred to, collectively, as the "Assets");

WHEREAS, the parties hereto desire that on each Transfer Date (as defined in the related APA Assignment) the Sellers sell all of their right, title and interest in and to certain of the Assets to Purchaser pursuant to the terms of this Agreement; and

WHEREAS, the Purchaser and Fortress Credit Corp. (together with its successors and assigns, the "Lender") will be parties to the Master Loan and Security Agreement, dated as of the date hereof (as amended, supplemented or otherwise modified and in effect from time to time, the "Loan Agreement"), pursuant to which the Lender shall agree, subject to the terms and conditions of the Loan Agreement, to make revolving credit loans to the Purchaser to finance the Purchaser's acquisition of the Assets.

NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS; CONSTRUCTION

Section 1.01 Definitions. For purposes of this Agreement all capitalized terms used but not defined herein shall have the meanings assigned thereto in the Loan Agreement.

Section 1.02 Construction. Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the term "including" is not limiting, and the term "or" has, except where otherwise indicated, the inclusive meaning represented by the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement refer to this Agreement or such other Loan Document as a whole and not to any particular provision of this Agreement or such other Loan Document. Section, subsection, clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified. Any reference in this Agreement or in the other Loan Documents to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein). Any reference herein to any Person shall be construed to include such Person's successors and assigns. Any requirement of a writing contained herein or in the other Loan Documents shall be satisfied by the transmission of a record and any record transmitted shall constitute a representation and warranty as to the accuracy and completeness of the information contained therein.

ARTICLE II

SALE OF ASSETS; PAYMENT OF PURCHASE PRICE

Section 2.01 Sale of Assets to Purchaser. On the terms and conditions of this Agreement:

(a) On each Transfer Date (as defined in each APA Assignment), each Seller agrees to offer for sale, and to sell, transfer, assign, set over and otherwise convey, absolutely and not as collateral security, without recourse, the Assets described in the related APA Assignment substantially in the form attached hereto as Exhibit A (the "APA Assignment") to the Purchaser and to deliver, transfer, assign, set over and otherwise convey, absolutely and not as collateral security, without recourse, all of its rights under and to the related Mortgage Loan Documents, to the Purchaser or such other Person at the Purchaser's direction, as applicable, and the Purchaser agrees to purchase such Assets offered for sale by the applicable Seller.

(b) The cash price paid by the Purchaser for the Assets sold on each Transfer Date (the "Sales Price") shall be the sum of the Collateral Values as of the Transfer Date with respect to the Assets conveyed on such date (determined after giving effect to all payments of principal received thereon on or prior to the Cut-off Date as set forth in the related APA Assignment).

(c) On each Transfer Date, each Seller shall sell, transfer, assign, set over and otherwise convey, absolutely and not as collateral security, without recourse, to the Purchaser the Assets and the Purchaser shall pay or cause to be paid to the applicable Seller (or to such other Person as may be specified by such Seller) the Sales Price in respect of such Assets; provided, however, that the Purchaser's obligation under this clause (c) shall be subject to the satisfaction of each of the following conditions on or prior to such Transfer Date:

(i) the applicable Seller shall have delivered to the Purchaser a duly executed APA Assignment with respect to all of the Assets conveyed on such Transfer Date, which shall have attached thereto an Asset Schedule (as defined in the APA Assignment) setting forth the appropriate information with respect to all Assets conveyed on such Transfer Date and shall have delivered to the Lender a computer readable transmission of such Asset Schedule;

(ii) all collections received with respect to each of the Assets relating to the period after the applicable Cut-off Date shall have been deposited into the related Collection Account (as set forth in the related APA Assignment);

(iii) as of such date, neither the Sellers nor the Purchaser shall (A) be insolvent, (B) be made insolvent by its respective sale or purchase of Assets or (C) have reason to believe that its insolvency is imminent;

(iv) the applicable Seller shall have delivered the underlying Mortgage Files conveyed on such Transfer Date to the Custodian in accordance with the Custodial Agreement (in addition, the APA Assignment shall be delivered to the Custodian promptly after the Transfer Date), and the Purchaser and the Lender shall have received a copy of the Custodian Loan Transmission and Exception Report and a copy of the Trust Receipt;

(v) each of the representations and warranties made by each Seller set forth in Schedules 1 and 2 shall be true and correct as of the related Transfer Date with the same effect as if then made, and each Seller shall have performed all obligations to be performed by it under each of the related Mortgage Loan Documents on and prior to such Transfer Date;

(vi) the applicable Seller shall, at its own expense, on the Transfer Date, indicate in its computer files that the Assets identified in the related APA Assignment have been sold to the Purchaser pursuant to this Agreement and provide evidence of the same to the Purchaser and the Lender, in form and substance satisfactory to the Lender, within one Business Day of the Transfer Date;

(vii) the applicable Seller shall have taken any action requested by the Purchaser or the Lender required to maintain the ownership interest of the Purchaser in the Collateral and the perfected first priority security interest therein of the Lender; and

(viii) all conditions precedent in Sections 2.03, 5.01 and 5.02 of the Loan Agreement shall have been satisfied.

(d) Each of the conveyances contemplated hereby shall be sales from the Sellers to the Purchaser of all of the Sellers' right, title and interest in and to the Assets. Notwithstanding the foregoing, in the event that, despite the parties expressed intentions that such transactions are sales, the transactions set forth herein are deemed not to be sales, each Seller hereby grants to the Purchaser a first priority security interest in all of such Seller's right, title and interest in, to and under the Assets, whether now existing or hereafter created, to secure each Seller's obligations hereunder, and this Agreement shall constitute a security agreement under applicable law, in which event Purchaser shall have all the rights and remedies of a secured party under the Uniform Commercial Code and other applicable law.

Section 2.02 Obligations of Sellers.

(a) Within ten days after the Closing Date (or such other time as may be agreed to by the Lender, including as agreed to in the Custodial Agreement) and on or prior to each Transfer Date, the Lender shall have received evidence satisfactory to it of (i) the completion of all recordings, registrations and filings as may be necessary or, in the opinion of the Lender, desirable to perfect or evidence the sale and assignment by the Sellers to the Purchaser of the Sellers' ownership interest in the Assets, the related property and the proceeds thereof and (ii) the completion of all recordings, registrations and filings as may be necessary or, in the opinion of the Lender, desirable to perfect or evidence the grant of a perfected first priority security interest in the Assets, the related property and the proceeds thereof granted by the Sellers in favor of the Purchaser (as contemplated by Section 2.01(d)). Each Seller agrees to file all necessary continuation statements and any amendments to the UCC-1 financing statements necessary to perfect the interest of the Purchaser and the Lender in and to the Assets and the Purchaser's rights under this Agreement and to take such other action as may be necessary or, in the opinion of the Purchaser or the Lender, desirable to perfect or evidence the Purchaser's and the Lender's interest in the Assets and the Purchaser's rights under this Agreement conveyed under the Loan Documents.

(b) (i) In connection with each sale of an Asset hereunder, each Seller shall deliver to and deposit with the Custodian, on behalf of the Purchaser for the benefit of the Lender as set forth in the Loan Agreement, the underlying Mortgage File with respect to each Asset conveyed on such Transfer Date on or before the related Transfer Date. In connection with each sale of an Asset hereunder that is a wet ink mortgage loan, each Seller shall cause the related Settlement Agent to deliver to and deposit with the Custodian, on behalf of the Purchaser for the benefit of the Lender as set forth in the Loan Agreement, the underlying Mortgage File with respect to each Asset conveyed within six (6) Business Days of such Transfer Date; provided, that each Seller shall cause the related Settlement Agent to directly deliver to and deposit with the Custodian, within one (1) Business Day of the Transfer Date, the Mortgage Note. With respect to any Assets that are set forth as exceptions in the Custodian Loan Transmission and Exception Report, each Seller hereby agrees and covenants that it shall take all such actions and shall perform all such obligations, on behalf of the Purchaser and the Lender, as are necessary to cure such exceptions or repurchase such Assets in accordance with Section 5 of the Custodial Agreement.

(ii) It is understood and agreed that the obligations set forth in Section 2.02(b)(i) shall survive delivery of the Mortgage Files to the Custodian (as the agent of the Purchaser and the Lender) and shall inure to the benefit of the Purchaser and the Lender.

(c) Each Seller hereby further confirms to the Purchaser that, within one Business Day of the Closing Date and each Transfer Date, it shall provide evidence to the Purchaser and the Lender that the portions of such Seller's electronic ledger relating to the Assets have been clearly and unambiguously marked to indicate that the Assets have been sold to the Purchaser hereunder and the Assets have been pledged to the Lender by the Purchaser.

(d) On and after each Transfer Date, the Purchaser shall own the Assets which have been identified as being sold by the applicable APA Assignment and the Sellers shall not take any action inconsistent with such ownership and shall not claim any ownership interest in any such conveyed Asset.

Section 2.03 Dispositions.

Each Seller hereby agrees and covenants that in connection with each disposition of Assets it shall perform, on behalf of the Purchaser, such duties and take such actions as specified in Sections 7.17, 7.20, 7.21, 7.22, 7.27, 11.16 and 11.21 of the Loan Agreement.

ARTICLE III

REPRESENTATIONS AND
WARRANTIES; REMEDIES FOR BREACH

Section 3.01 Sellers' Representations and Warranties. (a) Each Seller makes each of the representations and warranties set forth in Schedule 1 hereto to the Purchaser (i) as of the Closing Date, and (ii) as of each Transfer Date with respect to the Assets conveyed on such Transfer Date.

(b) Each Seller further makes, as of the Closing Date and as of each Transfer Date, each of the representations and warranties set forth in Schedule 2 hereto.

It is understood and agreed that the representations and warranties set forth in this Section 3.01 shall survive delivery of the respective Mortgage Files to the Custodian (as the agent of the Purchaser and the Lender) and shall inure to the benefit of the Purchaser, the Servicer, the Custodian and the Lender. Upon the discovery by the Servicer, the Custodian, the Sellers, the Purchaser or the Lender of a breach of any of the representations and warranties of the Sellers set forth in Schedule 1 or 2 hereto that materially and adversely affects the value of any of the Assets, or the interests of the Lender in any Asset, with respect to which such representation or warranty is made, the Sellers shall be jointly and severally obligated to (a) promptly cure such breach in all material respects, or (b) purchase such Mortgage Loan on the next succeeding Payment Date, at the Repurchase Price (as hereinafter defined). "Repurchase Price" shall mean, with respect to any Mortgage Loan, the principal balance of such Mortgage Loan as of the date of re-purchase, plus all accrued and unpaid interest on such principal balance computed, as of the date of re-purchase, at the Mortgage Interest Rate, plus the amount of any unreimbursed Servicing Advances (as defined in the Servicing Agreement) made by the Servicer with respect to such Mortgage Loan, which purchase price shall be deposited in the Collection Account on the next succeeding Determination Date (as defined in the Servicing Agreement), after deducting therefrom any amounts received in respect of such repurchased Mortgage Loan or Loans and being held in the Collection Account for future payment to the extent such amounts have not yet been applied to principal or interest on such Mortgage Loan. The obligations of the Sellers set forth herein to cure such breach or repurchase an affected Asset or, as the case may be, shall constitute the sole remedies available hereunder to the Purchaser respecting a breach of the representations and warranties contained in Section 3.01(a) and (b) hereof or Schedules 1 and 2 hereto.

Section 3.02 Reconstitution of Mortgage Loans.

(a) The Sellers acknowledge that, with respect to some or all of the Mortgage Loans, such Mortgage Loans may be subject to:

(i) one or more sales as whole loan transfers by the Purchaser (each, a "Whole Loan Transfer"); and/or

(ii) one or more sales as public or private pass-through transfers (each, a "Pass-Through Transfer").

(b) With respect to each Whole Loan Transfer or Pass-Through Transfer, as the case may be, the Sellers agree:

(i) to cooperate with any prospective purchaser with respect to all reasonable requests and due diligence procedures (including participating in a reasonable number of meetings with rating agencies, bond insurers and such other parties as Purchaser shall designate and participating in meetings with prospective purchasers of the Mortgage Loans or interests therein and providing information as reasonably requested by such purchasers), and with respect to the preparation (including, but not limited to, the endorsement, delivery, assignment, and execution) of the Mortgage Loan documents and other related documents, and with respect to servicing requirements reasonably requested by the rating agencies and credit enhancers;

(ii) to execute all reconstitution agreements reasonably required to be executed by the Sellers in connection with such Pass-Through Transfer or Whole Loan Transfer (including a mutually acceptable assignment assumption and recognition agreement);

(iii) to deliver for inclusion in any prospectus or other offering material such publicly available information regarding the Sellers, their financial condition and their mortgage loan delinquency, foreclosure and loss experience and any additional information reasonably requested, and which the Sellers are capable of providing without unreasonable effort or expense, and to deliver any similar non public, unaudited financial information and such statements and audit letters of reputable, certified public accountants pertaining to information provided by the Sellers pursuant to the above as shall be reasonably requested, and to indemnify certain Persons for material misstatements or omissions contained in such information;

(iv) to deliver such statements and audit letters of reputable, certified public accountants pertaining to information pursuant to clause (iv) above as shall be reasonably requested; and

(v) to deliver such legal documents and in-house opinions of counsel as are customarily delivered by originators or servicers, as the case may be in connection with Whole Loan Transfers or Pass-Through Transfers.

(c) With respect to each Whole Loan Transfer or Pass-Through Transfer, as the case may be, the Sellers in their capacity as Servicer agree to make all the representations and warranties set forth in Schedule 1 and 2, as of the date of the Whole Loan Transfer or Pass-Through Transfer and (1) modified to the extent necessary to reflect the pool statistics of the Mortgage Loans as of the date of such Whole Loan Transfer or Pass-Through Transfer, (2) supplemented by additional representations and warranties that are not unreasonable under the circumstances as of the date of such Whole Loan Transfer or Pass-Through Transfer and to the extent that any events or circumstances, including changes in applicable law occurring subsequent to the related closing date(s), would render a related Mortgage Loan unmarketable to a material segment of the secondary mortgage or mortgage-backed securities market if such additional representations and warranties were not made, and (3) subject to exceptions relating to conditions or circumstances with respect to the Mortgage Loans that arose after the Transfer Date and are identified by the Sellers in their capacity as Servicer.

ARTICLE IV

SELLER COVENANTS

Section 4.01 No Further Sale or Transfer. Each Seller hereby covenants that, except for the sales hereunder, such Seller will not sell, pledge, assign or transfer to any other Person, or grant, create, incur, assume or suffer to exist any lien on, any Asset, or any interest therein.

Section 4.02 Defense of Right, Title and Interest. Each Seller will defend the right, title and interest of the Purchaser in, to and under the Assets against all claims of third parties claiming through or under such Seller.

Section 4.03 Separateness Covenants. Each Seller hereby covenants that it will not take any actions or fail to take any actions which would cause the Purchaser to violate the covenants set forth in Article V.

Section 4.04 Further Assurances. Whenever and so often as reasonably requested by the Purchaser or the Lender, each Seller shall promptly execute and deliver or cause to be executed and delivered all such other and further instruments, documents, or assurances, and promptly do or cause to be done all such other things, as may be necessary and reasonably required to vest more fully in the requesting party all rights, both directly and indirectly, interests, powers, benefits, privileges and advantages conferred or intended to be conferred upon it by this Agreement.

ARTICLE V

PURCHASER COVENANTS

The Purchaser hereby covenants as follows:

(a) The Purchaser shall not amend, alter, change or repeal the definition of "Independent Director" or Sections 5(c), 7, 8, 9, 10, 16, 20, 21, 22, 23, 24, 25, 26, 29 or 31 or Schedule A of the Operating Agreement without the unanimous written consent of its board, including the Independent Director, as set forth in the Operating Agreement.

(b) The Purchaser shall not, without the prior unanimous written consent of its members and its board (including the Independent Director), take any Material Action (as defined in the Operating Agreement).

(c) The Purchaser shall do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that the Purchaser shall not be required to preserve any such right or franchise if its board shall determine that the preservation thereof is no longer desirable for the conduct of its business and that the loss thereof is not disadvantageous in any material respect to the Purchaser. The Purchaser also shall:

(i) maintain its own separate books and records and bank accounts;

(ii) at all times hold itself out to the public and all other Persons as a legal entity separate from its members and any other Person;

(iii) have a board of directors separate from that of its members and any other Person;

(iv) file its own tax returns, if any, as may be required under applicable law, to the extent (1) not part of a consolidated group filing a consolidated return or returns or (2) not treated as a division for tax purposes of another taxpayer, and pay any taxes so required to be paid under applicable law;

(v) except as contemplated by the Basic Documents (as set forth in the Operating Agreement), not commingle its assets with assets of any other Person;

(vi) conduct its business in its own name and strictly comply with all organizational formalities to maintain its separate existence;

(vii) maintain separate financial statements;

(viii) pay its own liabilities only out of its own funds;

(ix) maintain an arm's length relationship with its Affiliates and any member;

(x) pay the salaries of its own employees, if any;

(xi) not hold out its credit or assets as being available to satisfy the obligations of others;

(xii) allocate fairly and reasonably any overhead for shared office space;

(xiii) use separate stationery, invoices and checks;

(xiv) except as contemplated by the Basic Documents, not pledge its assets for the benefit of any other Person;

(xv) correct any known misunderstanding regarding its separate identity;

(xvi) maintain adequate capital in light of its contemplated business purpose, transactions and liabilities;

(xvii) cause its board of directors to meet at least annually or act pursuant to written consent and keep minutes of such meetings and actions and observe all other Delaware limited liability company formalities;

(xviii) not acquire any securities of any Member;

(xix) cause its directors, officers, agents and other representatives of the Purchaser to act at all times with respect to the Purchaser consistently and in furtherance of the foregoing and in the best interests of the Purchaser; and

(xx) Failure of the Purchaser, or its members or board on behalf of the Purchaser, to comply with any of the foregoing covenants or any other covenants contained in this Agreement shall not affect the status of the Purchaser as a separate legal entity or the limited liability of its members or its directors.

(d) The Purchaser shall not:

(i) except as contemplated by the Basic Documents, guarantee any obligation of any Person, including any Affiliate;

(ii) engage, directly or indirectly, in any business other than the actions required or permitted to be performed under Section 7 of the Operating Agreement, the Basic Documents or Section 9(j) of the Operating Agreement;

(iii) incur, create or assume any indebtedness other than as expressly permitted under the Basic Documents;

(iii) make or permit to remain outstanding any loan or advance to, or own or acquire any stock or securities of, any Person, except that the Purchaser may invest in those investments permitted under the Basic Documents and may make any advance required or expressly permitted to be made pursuant to any provisions of the Basic Documents and permit the same to remain outstanding in accordance with such provisions;

(iv) to the fullest extent permitted by law, engage in any dissolution, liquidation, consolidation, merger, asset sale or transfer of ownership interests other than such activities as are expressly permitted pursuant to any provision of the Basic Documents; or

(v) form, acquire or hold any subsidiary (whether corporate, partnership, limited liability company or other).

ARTICLE VI

TERMINATION

Section 6.01 Termination. The respective obligations and responsibilities of the Sellers and the Purchaser created hereby shall terminate upon payment in full of all Obligations under the Loan Agreement.

ARTICLE VII

MISCELLANEOUS PROVISIONS

Section 7.01 Amendment. This Agreement may be amended from time to time with the prior written consent of the Lender, in its sole discretion, by a written agreement signed by the Sellers and the Purchaser.

Section 7.02 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws. With respect to all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby, each party irrevocably submits to the non-exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan, City of New York, and each party irrevocably waives any objection which it may have at any time to the laying of venue of any suit, action or proceeding arising out of or relating hereto brought in any such court, irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in any inconvenient forum and further irrevocably waives the right to object, with respect to such claim, suit, action or proceeding brought in any such court, that such court does not have jurisdiction over such party, provided that service of process is made by any lawful means. Nothing in this Section 7.02 shall affect the right of any party hereto or its assignees, or of the Lender or its assignees, to bring any other action or proceeding against any party hereto or its property in the courts of other jurisdictions.

Section 7.03 Notices. All demands, notices and communications hereunder shall be in writing and shall be deemed to have been duly given upon receipt thereof if (i) personally delivered or mailed by registered mail, postage prepaid, or (ii) transmitted by facsimile (with a copy delivered by overnight courier) upon telephone confirmation of receipt of such transmission, as follows:

(a) if to the Sellers:

American Business Financial Services, Inc. The Wanamaker Building 100 Penn Square East
Philadelphia, PA 19107 Attention: Stephen M. Giroux, Esq.

Telecopy number: (215) 940-3246

with a copy to:

Blank Rome LLP
One Logan Square
Philadelphia, PA 19163-6998 Attention: Lawrence F. Flick II Telecopy number: (215) 832-5556

or, such other persons and at such other addresses, facsimile numbers and confirmation numbers as may hereafter be furnished to the Purchaser in writing by ABFS.

(b) if to the Purchaser:

Penn Square East Funding, LLC The Wanamaker Building 100 Penn Square East Philadelphia, PA 19107 Attention:
Telecopy number:
Telephone number:

with a copy to:

Blank Rome LLP
One Logan Square
Philadelphia, PA 19103-6998 Attention: Lawrence F. Flick II Telecopy number: (215) 832-5556 Telephone number: (215) 569-5556

or such other addresses, facsimile numbers and confirmation numbers as may hereafter be furnished to the Sellers in writing by the Purchaser.

Section 7.04 Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be held invalid for any reason whatsoever, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement.

Section 7.05 Counterparts. This Agreement may be executed in one or more counterparts and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed to be an original and such counterparts, together, shall constitute one and the same agreement.

Section 7.06 Further Agreements. Each Seller and the Purchaser each agree to execute and deliver to the other such amendments to documents and such additional documents, instruments or agreements as reasonably may be necessary or appropriate to effectuate the purposes of this Agreement or in connection with the offering of securities representing interests in the Assets.

Section 7.07 Recordation and Sales. The Purchaser is hereby purchasing the Assets and each Seller is hereby selling the Assets. Accordingly, as of the Closing Date and as of each Transfer Date, the sale of each of the Assets conveyed by the Sellers on the Closing Date or such Transfer Date shall be reflected on the balance sheets and other financial statements (including the footnotes thereto) of the Sellers as a sale of such Assets by the Sellers under GAAP.

Section 7.08 Successors and Assigns; Assignment of Purchase Agreement. This Agreement shall bind each Seller and the Purchaser and inure to the benefit of and be enforceable by each Seller and the Purchaser, together with the Lender as a third party beneficiary. The obligations of the Sellers under this Agreement cannot be assigned or delegated to a third party without the consent of each of the Purchaser and the Lender, which consent shall be at each such Person's sole discretion. The parties hereto acknowledge that the Purchaser will borrow under the Loan Agreement, with its obligations thereunder secured by the Assets. As an inducement to the Purchaser to purchase the Assets and to the Lender to enter into the Loan Agreement with the Purchaser, each Seller acknowledges and consents to the assignment by the Purchaser to the Lender of all of the Purchaser's rights against the Sellers pursuant to this Agreement and to the enforcement or exercise of any right or remedy against the Sellers pursuant to this Agreement by the Purchaser or the Lender. Such enforcement of a right or remedy by the Purchaser or the Lender, shall have the same force and effect as if the right or remedy had been enforced or exercised by the Purchaser directly.

Section 7.09 Survival. The representations and warranties set forth in Article III and the provisions of Articles II, IV, V, VI and VII shall survive the Purchaser's purchase of the Assets hereunder.

Section 7.10 Restrictions on Transfer. Aside from any of Seller's repurchase obligations pursuant to Section 3.01(c), the Purchaser shall not be permitted to transfer, assign, set over, contribute or sell the Assets to the Sellers except as set forth in Section 2.07(a) of the Loan Agreement. Any such transfer shall be null and void and of no force and effect whatsoever.

Section 7.11 Joint and Several Liability. The Sellers hereby acknowledge and agree that the obligations of each Seller hereunder shall be joint and several.

IN WITNESS WHEREOF, each Seller and the Purchaser have caused this Asset Purchase Agreement to be duly executed on their behalf by their respective officers thereunto duly authorized as of the day and year first above written.

HOME AMERICAN CREDIT, INC., d/b/a
UPLAND MORTGAGE,
as a Seller

By: /s/ Stephen M. Giroux
    ---------------------
Name: Stephen M. Giroux
Title: Executive Vice President, General Counsel
       and Secretary

AMERICAN BUSINESS MORTGAGE SERVICES, INC.,
as a Seller

By: /s/ Stephen M. Giroux
    ---------------------
Name: Stephen M. Giroux
Title: Executive Vice President, General Counsel
       and Secretary

PENN SQUARE EAST FUNDING, LLC,
as Purchaser

By: /s/ Jeffrey M. Ruben
    --------------------
Name: Jeffrey M. Ruben
Title: Executive Vice President

SCHEDULE 1

REPRESENTATIONS AND WARRANTIES RE: MORTGAGE LOANS

As to each Mortgage Loan that forms part of the Assets being transferred hereunder (and the related Mortgage, Mortgage Note, Assignment of Mortgage and Mortgaged Property), each Seller shall make the following representations and warranties to the Purchaser:

(a) The information set forth in each Mortgage Loan Data Transmission with respect to such Mortgage Loan is complete, true and correct;

(b) The information provided by the Borrower or any Related Party in connection with such Mortgage Loan will be true and correct in all material respects on the date or dates when such information is furnished;

(c) Except as set forth in clause (n) below, such Mortgage is a valid and enforceable first or second lien on a fee simple (or its equivalent under applicable state law) estate in the real property securing the amount owed by the Mortgagor under such Mortgage Note subject only to Permitted Liens (other than Borrower);

(d) The Borrower has good title to, and is the sole owner of such Mortgage Loan, free of any interest, including, without limitation, any and all liens, charges or security interests of any nature of any other Person (other than the Lender), and the Borrower has granted a valid and enforceable first priority security interest in such Mortgage Loan to the Lender, which security interest is perfected. Furthermore, immediately prior to the grant of the aforementioned security interest to Lender, neither such Mortgage Loan nor any of the related Mortgage Loan Documents were subject to any liens, charges or security interests of any nature of any other Person;

(e) At origination, such Mortgage Loan had an original term to maturity of no greater than 360 months;

(f) There is no mechanics' lien or claim for work, labor or material (and no rights are outstanding that under law could give rise to such lien) affecting the premises subject to such Mortgage which is or may be a lien prior to, or equal or coordinate with, the lien of such Mortgage, except those which are insured against by the title insurance policy referred to in clause
(aa) below;

(g) There is no delinquent tax or assessment lien against such Mortgaged Property;

(h) Such Mortgage Loan, Mortgage and Mortgage Note, including, without limitation, the obligation of the Mortgagor to pay the unpaid principal of and interest on such Mortgage Note, are each not subject to any right of rescission (or any such rescission right has expired in accordance with applicable law), set-off, counterclaim, or defense, including the defense of usury, nor will the operation of any of the terms of such Mortgage Note or such Mortgage, or the exercise of any right thereunder, render either such Mortgage Note or such Mortgage unenforceable, in whole or in part, or subject to any right of rescission, set-off, counterclaim, or defense, including the defense of usury, and no such right of rescission, set-off, counterclaim, or defense has been asserted with respect thereto;

(i) Such Mortgaged Property is free of any material damage and is in generally good repair, and there is no pending or threatened proceeding for the total or partial condemnation of such Mortgaged Property;

(j) Neither the Company, the Borrower, or any Related Party has received a notice of default of any mortgage loan secured by such Mortgaged Property which has not been cured by a party;

(k) Such Mortgage Note and Mortgage are in substantially the forms previously provided to the Lender on behalf of the Borrower;

(l) Such Mortgage Loan had, at the date of origination, a Combined LTV of 100.00% or less;

(m) Such Mortgage Loans was (i) originated by an Approved Mortgage Originator in the normal course of its business or purchased by an Approved Mortgage Purchaser pursuant to an Approved Purchase Agreement, (ii) not selected by any Approved Mortgage Purchaser for sale to the Borrower under an Approved Purchase Agreement on any basis adverse to the Borrower relative to the portfolio of similar mortgage loans of the Approved Mortgage Purchaser, and
(iii) prior to the Closing Date, serviced by the Approved Mortgage Originator or an Affiliate thereof in accordance with Accepted Servicing Practices;

(n) In the event a material portion of the estate of the Mortgagor under such Mortgage Loan is a leasehold estate, the cost of the leasehold expense has been factored into the debt-to-income calculations with respect to the such Mortgagor and the maturity date of the ground lease is later than the maturity date of such Mortgage Loan. In addition, the aforementioned ground lease is prior to any mortgage or other lien upon the related fee interest and the landlord under the ground lease has not entered into any agreement to subordinate the ground lease to future mortgages or liens on the fee interest;

(o) Such Mortgage and Mortgage Note contain customary and enforceable provisions which render the rights and remedies of the holder thereof adequate for the realization against the such Mortgaged Property of the benefits of the security including (A) if such Mortgage is designated as a deed of trust, by trustee's sale, and (B) otherwise, by judicial foreclosure. There is no homestead or other exemption available to the related Mortgagor which would materially interfere with the right to sell such Mortgaged Property at a trustee's sale or the right to foreclose such Mortgage. Such Mortgage contains customary and enforceable provisions for the acceleration of the payment of the principal balance of such Mortgage Loan in the event all or any part of such Mortgaged Property is sold or otherwise transferred without the prior written consent of the holder thereof;

(p) The proceeds of such Mortgage Loan have been fully disbursed, including reserves set aside by the Approved Mortgage Originator, and there is no requirement for, and neither the Borrower, the Company, or any Related Party shall make any, future advances thereunder. Any future advances made prior to the applicable Funding Date have been consolidated with the principal balance secured by such Mortgage, and such principal balance, as consolidated, bears a single interest rate and single repayment term reflected on the applicable Mortgage Loan Data Transmission. The principal balance of such Mortgage Loan as of the applicable Funding Date does not exceed the original principal amount of such Mortgage Loan. Any and all requirements as to completion of any on-site or off-site improvements and as to disbursements of any escrow funds therefor have been complied with. All costs, fees and expenses incurred in making or recording such Mortgage Loan have been paid;

(q) Such Mortgage Loans was originated in compliance with the Approved Underwriting Guidelines;

(r) Since origination, the terms of such Mortgage and Mortgage Note have not been impaired, waived, altered, or modified in any respect, except by a written instrument which has been recorded, if necessary, to protect the interest of the mortgagee and which has been delivered to the Custodian. The substance of any such alteration or modification will be reflected on the applicable Mortgage Loan Data Transmission and, to the extent necessary, has been or will be approved by (i) the insurer under the applicable mortgage title insurance policy, and (ii) the insurer under any other insurance policy required hereunder for such Mortgage Loan where such insurance policy requires approval and the failure to procure approval would impair coverage under such policy;

(s) No instrument of release, waiver, alteration or modification has been executed in connection with such Mortgage Loan, and the related Mortgagor has not been released, in whole or in part, except in connection with an assumption agreement which has been approved by the insurer under any insurance policy required hereunder for such Mortgage Loan where such policy requires approval and the failure to procure approval would impair coverage under such policy, and which is part of the mortgage file and has been delivered to the Custodian, and the terms of which are reflected in the applicable Mortgage Loan Data Transmission;

(t) Except as disclosed in the applicable Mortgage Loan Data Transmission, there is no default, breach, violation or event of acceleration existing under such Mortgage or Mortgage Note and no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute such a default, breach, violation or event of acceleration, and neither the Approved Mortgage Originator nor the Borrower has waived any such default, breach, violation or event of acceleration. All taxes, governmental assessments (including assessments payable in future installments), insurance premiums, water, sewer, and municipal charges, leaseholder payments or ground rents which previously became due and owing in respect of or affecting such Mortgaged Property have been paid. Neither the Approved Mortgage Originator nor the Borrower has advanced funds or induced, solicited or knowingly received any advance of funds by a party other than the related Mortgagor, directly or indirectly, for the payment of any amount required by such Mortgage or Mortgage Note;

(u) All of the improvements which were included for the purposes of determining the Appraised Value of such Mortgaged Property were completed prior to or at the time that such Mortgage Loan was originated and lie wholly within the boundaries and building restriction lines of such Mortgaged Property. No improvements on adjoining properties encroach upon such Mortgaged Property. No improvement located on or being part of such Mortgaged Property is in violation of any applicable zoning law or regulation. All inspections, licenses and certificates required to be made or issued with respect to all occupied portions of such Mortgaged Property (including all such improvements which were included for the purpose of determining such Appraised Value) and, with respect to the use and occupancy of the same, including, but not limited, to certificates of occupancy and fire underwriter's certificates, have been made or obtained from the appropriate authorities and such Mortgaged Property is lawfully occupied under applicable law. In addition, such Mortgaged Property (i) is located on or adjacent to a dedicated road, or has access to an irrevocable easement permitting ingress and egress, (ii) is served by public utilities, water and sewer (or septic facilities), and (iii) has parking as required under applicable law;

(v) There do not exist any circumstances or conditions with respect to such Mortgage, such Mortgaged Property, the related Mortgagor or such Mortgagor's credit standing that can be reasonably expected to cause such Mortgage Loan to become delinquent or adversely affect the value or marketability of such Mortgage Loan, other than any such circumstances or conditions expressly permitted under the Approved Underwriting Guidelines;

(w) All parties which have had any interest in such Mortgage, whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period in which they held and disposed of such interest, were) (i) in compliance with any and all applicable licensing requirements of the laws of the state wherein such Mortgaged Property is located, and (ii) (A) organized under the laws of such state, (B) qualified to do business in such state, (C) federal savings and loan associations or national banks having principal offices in such state, (D) not doing business in such state, or (E) not required to qualify to do business in such state;

(x) such Mortgage Note and Mortgage are genuine, and each is the legal, valid and binding obligation of the maker thereof, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and except that the equitable remedy of specific performance and other equitable remedies are subject to the discretion of the courts. All parties to such Mortgage Note and Mortgage had legal capacity to execute such Mortgage Note and Mortgage and to convey the estate therein purported to be conveyed, and such Mortgage Note and Mortgage have been duly and properly executed by such parties or pursuant to a valid power-of-attorney that has been recorded with such Mortgage;

(y) The sales, transfers and conveyances of such Mortgage Note and Mortgage as and in the manner contemplated by the Asset Purchase Agreement, and this Loan Agreement (the "Prior Conveyance Agreements") are sufficient (i) to fully transfer to the Borrower all right, title and interest of the transferor thereto as note holder and mortgagee, and (ii) to the extent that the transferor retains an interest in such Mortgage Note or Mortgage despite such sale, transfer and conveyance, to grant to the Borrower the security interest referred to in the prior Conveyance Agreements hereof and thereafter, and to pledge the interest of the Borrower to the Lender. Such Mortgage has been duly assigned by the Approved Mortgage Originator to the Lender, and such Mortgage Note has been duly endorsed as required under the terms of this Loan Agreement. The related Assignment of Mortgage delivered pursuant to Section 2(a) and Annex 14 of the Custodial Agreement is in recordable form and is acceptable for recording under the laws of the applicable jurisdiction. The endorsement of such Mortgage Note, the delivery to the Custodian, on behalf of the Lender, of the

endorsed Mortgage Note, and such Assignment of Mortgage, and the delivery of such Assignment of Mortgage to the Custodian are sufficient to permit the Lender to avail itself of all protection available under applicable law against the claims of any present or future creditors of the Borrower, the Related Parties or the Approved Mortgage Originator, and are sufficient to prevent any other sale, transfer, assignment, pledge or hypothecation of such Mortgage Note or Mortgage by the Borrower, the Related Parties or the Approved Mortgage Originator from being enforceable, even if the Lender does not record such Assignment of Mortgage in the applicable recording office. After the transfer pursuant to Section 4.01, the Lender shall have a first priority perfected security interest in such Mortgage Loan;

(z) Any and all requirements of any federal, state, or local law including, without limitation, usury, truth-in-lending, real estate settlement procedures, consumer credit protection, equal credit opportunity, predatory and abusive lending or disclosure laws applicable to such Mortgage Loan have been complied with, and the Initial Servicer shall maintain in its possession, available for the Lender's inspection, and shall deliver to the Lender or its designee upon demand, evidence of compliance with all such requirements. The consummation of the transactions contemplated by this Loan Agreement will not cause the violation of any such laws;

(aa) Such Mortgage Loan is covered by an ALTA mortgage title insurance policy or such other generally used and acceptable form of policy, issued by and the valid and binding obligation of a title insurer qualified to do business in the jurisdiction where such Mortgaged Property is located, insuring the Originator and its successors and assigns, as to the first or second priority lien, as applicable, of such Mortgage in the original principal amount of such Mortgage Loan. The assignment to the Lender of the Borrower's interest in such mortgage title insurance policy does not require the consent of or notification to the insurer. Such mortgage title insurance policy is in full force and effect and will be in full force and effect and inure to the benefit of the Lender upon the consummation of the transactions contemplated by this Loan Agreement. No claims have been made under such mortgage title insurance policy and none of the Company, the Borrower, or any Related Party, or any prior holder of such Mortgage has done, by act or omission, anything which would impair the coverage of such mortgage title insurance policy;

(bb) All improvements upon such Mortgaged Property are insured against loss by fire, hazards of extended coverage, and such other hazards as are customary in the area where such Mortgaged Property is located, including, without limitation, earthquake hazards, pursuant to insurance policies conforming to the requirements of the Accepted Servicing Practices and consistent with the Approved Underwriting Guidelines. If such Mortgaged Property at origination was located in an area identified on a flood hazard boundary map or flood insurance rate map issued by the Federal Emergency Management Agency as having special flood hazards (and such flood insurance has been made available), such Mortgaged Property was covered by flood insurance at origination. Each individual insurance policy is the valid and binding obligation of the insurer, is in full force and effect, and will be in full force and effect and inure to the benefit of the Borrower upon the consummation of the transactions contemplated by this Loan Agreement, and contain a standard mortgage clause naming the originator of such Mortgage Loan, and its successors and assigns, as

mortgagee and loss payee. All premiums thereon have been paid. In addition each insurance policy requires prior notice to the insured of termination or cancellation and no such notice has been received. Such Mortgage obligates the related Mortgagor to maintain all such insurance at such Mortgagor's cost and expense, and upon such Mortgagor's failure to do so, authorizes the holder of such Mortgage to obtain and maintain such insurance at such Mortgagor's cost and expense and to seek reimbursement therefor from such Mortgagor, and none of the Company, the Borrower, the Related Parties, or any prior holder of such Mortgage has acted or failed to act so as to impair the coverage of any such insurance policy or the validity, binding effect, and enforceability thereof;

(cc) If such Mortgage constitutes a deed of trust, a trustee, duly qualified under applicable law to serve as such, has been properly designated and currently so serves and is named in such Mortgage, and no fees or expenses are or will become payable by Borrower or any other Person to any trustee under the deed of trust, except in connection with a trustee's sale after default by the related Mortgagor;

(dd) Such Mortgaged Property consists of one or more parcels of real property separately assessed for tax purposes. To the extent there is erected thereon a detached or an attached one-family residence or a detached two-to-six-family dwelling, or an individual condominium unit in a low-rise condominium, or an individual unit in a planned unit development, or a commercial property, a manufactured home, or a mixed use or multiple purpose property, such residence, dwelling or unit is not (i) a unit in a cooperative apartment, (ii) a property constituting part of a syndication, (iii) a time share unit, (iv) a property held in trust, (v) a mobile home, (vi) a log-constructed home, or (vii) a recreational vehicle;

(ee) There exist no material deficiencies with respect to escrow deposits and payments, if such are required, for which customary arrangements for repayment thereof have not been made or which the Borrower expects not to be cured, and no escrow deposits or payments of other charges or payments due the mortgagee have been capitalized under such Mortgage or Mortgage Note. All escrow deposits and similar payments required pursuant to such Mortgage Loan are in the Escrow Account;

(ff) Such Mortgage Loan was not originated at a below market interest rate. Such Mortgage Loan does not have a shared appreciation feature, or other contingent interest feature, or negative amortization;

(gg) The origination and collection practices used by the Borrower and the Initial Servicer with respect to such Mortgage Loan have been in all respects legal, proper, prudent, and customary in the mortgage origination and servicing business with respect to mortgage loans similar to such Mortgage Loan. No fraudulent acts were committed by the Company, the Borrower, any Related Party, or the Initial Servicer in connection with or related to the origination, servicing or collection of such Mortgage Loan;

(hh) The related Mortgagor has, to the extent required by applicable law, executed a statement to the effect that such Mortgagor has received all disclosure materials, if any, required by applicable law with respect to the making of fixed-rate mortgage loans. The Initial Servicer has maintained or caused to be maintained such statement in the Servicing File;

(ii) All amounts received by the Approved Mortgage Originators with respect to such Mortgage Loan after the applicable Cut-Off Date and required to be deposited in the Collection Accounts have been so deposited in the Collection Accounts and are, as of the Closing Date, or will be as of the Funding Date, as applicable, in the Collection Accounts;

(jj) The appraisal report with respect to such Mortgaged Property contained in the Servicing File was signed prior to the approval of the application for such Mortgage Loan by a qualified appraiser, duly appointed by the originator of such Mortgage Loan, who had no interest, direct or indirect, in such Mortgaged Property or in any loan made on the security thereof and whose compensation is not affected by the approval or disapproval of such application;

(kk) Except as disclosed in the related Mortgage Loan Data Transmission, the related Mortgagor represented at the time of origination that such Mortgagor would occupy such Mortgaged Property as such Mortgagor's primary residence;

(ll) There has been no governmental or regulatory action or third party claim made, instituted or threatened in writing with respect to such Mortgaged Property relating to a violation of any applicable federal, state or local environmental law, statute, ordinance, regulation, order, decree or standard;

(mm) Such Mortgage Loan is eligible to be a "qualified mortgage" within the meaning of Section 860G(a)(3) of the Code assuming a REMIC election were to be made and an Eligible Mortgage Loan;

(nn) With respect to any Second Lien Mortgage Loan:

(oo) the related Mortgagor has not received notice from the holder of the prior mortgage that such prior mortgage is in default;

(pp) no consent from the holder of the prior mortgage is needed for the creation of the related second lien Mortgage or, if required, has been obtained and is in the related Servicing File;

(qq) if the prior mortgage has a negative amortization, the Combined LTV was determined using the maximum loan amount of such prior mortgage; and

(rr) the related first mortgage loan encumbering the related Mortgaged Property does not have a mandatory future advance provision.

(ss) No error, omission, misrepresentation, negligence, fraud or similar occurrence with respect to such Mortgage Loan has taken place on the part of any person, including, without limitation, the related Mortgagor, any appraiser, any builder or developer, or any other party involved in the origination of such Mortgage Loan or in the application of any insurance in relation to such Mortgage Loan;

(tt) Such Mortgaged Property is in compliance with all environmental laws, ordinances, rules, regulations and orders of federal, state or governmental authorities relating thereto. No hazardous material has been or is incorporated in, stored on or under (other than properly stored materials used for reasonable residential purposes), released from, treated on, transported to or from, or disposed of on or from, such Mortgaged Property such that, under applicable law (A) any such hazardous material would be required to be eliminated before such Mortgaged Property could be altered, renovated, demolished or transferred, or (B) the owner of such Mortgaged Property, or the holder of a security interest therein, could be subjected to liability for the removal of such hazardous material or the elimination of the hazard created thereby. Neither Borrower, the Company nor any Related Party has received notification from any federal, state or other governmental authority relating to any hazardous materials on or affecting such Mortgaged Property or to any potential or known liability under any environmental law arising from the ownership or operation of such Mortgaged Property. For the purposes of this subsection, the term "hazardous materials" shall include, without limitation, gasoline, petroleum products, explosives, radioactive materials, polychlorinated biphenyls or related or similar materials, asbestos or any material containing asbestos, lead, lead-based paint and any other substance or material as may be defined as a hazardous or toxic substance by any federal, state or local environmental law, ordinance, rule, regulation or order, including, without limitation, CERCLA, the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Toxic Substances Control Act and any regulations promulgated pursuant thereto;

(uu) Such Mortgage Loan is not a loan the proceeds of which were to be used for business purposes, except for those indicated by code in the Mortgage Loan Data Transmission;

(vv) Such Mortgage Loan has not been made to limited or no documentation borrowers unless such Mortgage Loan conforms to a limited or no documentation program identified in the Approved Underwriting Guidelines;

(ww) Such Mortgage Loan is not cross-collateralized or cross-defaulted except as has been disclosed to and approved by Lender in writing;

(xx) Such Mortgage Loan is not (a) subject to the provisions of the Homeownership and Equity Protection Act of 1994 as amended ("HOEPA"), (b) a "high cost" mortgage loan, "covered" mortgage loan or "predatory" mortgage loan or any other comparable term, no matter how defined, under any federal, state or local law, or (c) subject to any comparable effective federal, state or local statutes or regulations, including, without limitation, the provisions of the Georgia Fair Lending Act, the City of Oakland, California Anti-Predatory Lending Ordinance No. 12361 or any other statute or regulation providing assignee liability to holders of such mortgage loans. The total combined points and fees charged in connection with the origination of such consumer Mortgage Loan does not exceed 8% of the original principal balance of such Mortgage Loan;

(yy) No predatory, abusive or deceptive lending practices, including but not limited to, the extension of credit to the related Mortgagor without regard for such Mortgagor's ability to repay such Mortgage Loan and the extension of credit to a mortgagor which has no apparent benefit to such Mortgagor, were employed in connection with the origination of such Mortgage Loan;

(zz) such Mortgage Loan complies with all applicable consumer credit statutes and regulations, including, without limitation, the respective Uniform Consumer Credit Code laws in effect in Colorado, Idaho, Indiana, Iowa, Kansas, Maine, Oklahoma, South Carolina, Utah and Wyoming, has been originated by a properly licensed entity or by an entity not required to be licensed in certain states, as applicable, and in all other respects, complies with all of the material requirements of any such applicable laws;

(aaa) The information set forth in the related Mortgage Loan Schedule is complete, true and correct in all material respects and each prepayment charge is permissible, enforceable and collectable under applicable federal and state law;

(bbb) If such Mortgage Loan is secured by a Mortgaged Property located in the State of Georgia, such Mortgage Loan was not originated prior to March 7, 2003;

(ccc) Such Mortgage Loan is eligible for sale in the secondary market or for inclusion in a pass-through transfer without unreasonable credit enhancement;

(ddd) All points, fees and charges related to such Mortgage Loan (whether or not financed, assessed, collected or to be collected in connection with the origination and servicing of such Mortgage Loan) were disclosed in writing to the related Mortgagor in accordance with applicable state and federal law and regulation. Such Mortgagor was not charged "points and fees" (whether or not financed) in an amount greater than 5% of the principal amount of such Mortgage Loan;

(eee) Except as set forth on the related Mortgage Loan Schedule, such Mortgage Loan is not subject to a prepayment penalty. If such Mortgage Loan was originated prior to October 1, 2002 and is subject to a prepayment penalty, such prepayment penalty does not extend beyond five years after the date of origination. If such Mortgage Loan was originated on or following October 1, 2002 and is subject to a prepayment penalty, such prepayment penalty does not extend beyond three years after the date of origination. If such Mortgage Loan contains a provision permitting imposition of a premium upon a prepayment prior to maturity: [(i) prior to such Mortgage Loan's origination, the related Mortgagor agreed to such premium in exchange for a monetary benefit, including but not limited to a rate or fee reduction, (ii) prior to such Mortgage Loan's origination, such Mortgagor was offered the option of obtaining a Mortgage Loan that did not require payment of such a premium,]
(iii) the prepayment premium is disclosed to such Mortgagor in the loan documents pursuant to applicable state and federal law, and (iv) notwithstanding any state or federal law to the contrary, no Approved Mortgage Originator shall impose such prepayment premium in any instance when the mortgage debt is accelerated as the result of such Mortgagor's default in making the loan payments;

(fff) Each Approved Mortgage Originator has complied with all applicable anti-money laundering laws and regulations, including without limitation the USA Patriot Act of 2001, as amended (collectively, the "Anti-Money Laundering Laws"); the Approved Mortgage Originator has established an anti-money laundering compliance program as required by the Anti-Money Laundering Laws, has conducted the requisite due diligence in connection with the origination of such Mortgage Loan for purposes of the Anti-Money Laundering Laws, including with respect to the legitimacy of the related Mortgagor and the origin of the assets used by the such Mortgagor to purchase the property in question, and maintains, and will maintain, sufficient information to identify such Mortgagor for purposes of the Anti-Money Laundering Laws;

(ggg) Such Mortgage Loan is not secured by real property or secured by a manufactured home located in the state of Georgia unless (x) such Mortgage Loan was originated prior to October 1, 2002 or after March 6, 2003, or
(y) the property securing such Mortgage Loan is not, nor will be, occupied by the related Mortgagor as such Mortgagor's principal dwelling. Such Mortgage Loan is not a "High Cost Home Loan" as defined in the Georgia Fair Lending Act, as amended (the "Georgia Act"). If such Mortgage Loan is a "Home Loan" under the Georgia Act, such Mortgage Loan complies with all applicable provisions of the Georgia Act. If such Mortgage Loan is secured by owner-occupied real property or an owner-occupied manufactured home located in the State of Georgia, such Mortgage Loan was originated (or modified) on or after October 1, 2002 and or before March 6, 2003;

(hhh) The related Mortgagor was not encouraged or required to select a Mortgage Loan product offered by such Mortgage Loan's originator which is a higher cost product designed for less creditworthy borrowers, unless at the time of such Mortgage Loan's origination, such Mortgagor did not qualify taking into account credit history and debt to income ratios for a lower cost credit product then offered by such Mortgage Loan's originator or any affiliate of such Mortgage Loan's originator;

(iii) The methodology used in underwriting the extension of credit for such Mortgage Loan employs objective mathematical principles which relate the related Mortgagor's income, assets and liabilities to the proposed payment, and such underwriting methodology does not rely on the extent of such Mortgagor's equity in the collateral as the principal determining factor in approving such credit extension. Such underwriting methodology confirmed that at the time of origination (application/approval) such Mortgagor had a reasonable ability to make timely payments on such Mortgage Loan;

(jjj) All fees and charges (including finance charges) and whether or not financed, assessed, collected or to be collected in connection with the origination and servicing of such Mortgage Loan have been disclosed in writing to the related Mortgagor in accordance with applicable state and federal law and regulation;

(kkk) If such Mortgage Loan is secured by manufactured housing, such Mortgage Loan satisfies the requirements for inclusion in residential mortgage backed securities transactions rated by Standard & Poor's Ratings Services;

(lll) The Mortgage File delivered to the Custodian pursuant to the terms hereof with respect to such Mortgage Loan is complete in all material respects; and

(mmm) No proceeds from such Mortgage Loan were used to finance single-premium credit life insurance.

(nnn) Unless such Mortgage Loan is a Wet Mortgage Loan, such Mortgage Note, such Mortgage, such Assignment of Mortgage and any other documents required to be delivered under the Custodial Agreement for such Mortgage Loan have been delivered to the Custodian. The Borrower or its agent is in possession of a complete, true and materially accurate Mortgage File for such Mortgage Loan in compliance with the Custodial Agreement, except for such documents the originals or copies of which have been delivered to the Custodian.

(ooo) Unless such Mortgage Loan has been assigned to MERS, the assignment of such Mortgage is in recordable form and is acceptable for recording under the laws of the jurisdiction in which such Mortgaged Property is located.

(ppp) The related Mortgagor has not notified the Borrower, and the Borrower has no knowledge of, any relief requested or allowed to such Mortgagor under the Servicemembers' Civil Relief Act of 2003.

SCHEDULE 2

REPRESENTATIONS AND WARRANTIES RE: SELLER

Each Seller represents and warrants to the Purchaser that:

(a) Existence. The Seller (a) is corporation duly incorporated, validly existing and in good standing under the laws of the state of its incorporation,
(b) has all requisite corporate or other power, and has all governmental licenses, authorizations, consents and approvals, necessary to own its assets and carry on its business as now being or as proposed to be conducted, except where the lack of such licenses, authorizations, consents and approvals would not be reasonably likely to have a Material Adverse Effect; and (c) is qualified to do business and is in good standing in all other jurisdictions in which the nature of the business conducted by it makes such qualification necessary, except where failure so to qualify would not be reasonably likely (either individually or in the aggregate) to have a Material Adverse Effect, and (d) is in compliance in all material respects with all Requirements of Law.

(b) Financial Condition. The Seller has heretofore furnished to the Lender the related consolidated statements of income and retained earnings and of cash flows for American Business Financial Services, Inc. and its consolidated Subsidiaries for the one year period ending June 30, 2004, setting forth comparative form the figures for the previous year. All such financial statements are materially complete and correct and fairly present the consolidated financial condition of the Seller and its Subsidiaries and the consolidated results of their operations for the fiscal year ended on said date, all in accordance with GAAP applied on a consistent basis. Except as disclosed in the Loan Agreement, there has been no development or event nor any prospective development or event which has had or should reasonably be expected to have a Material Adverse Effect.

(c) Litigation. Except as disclosed in the Loan Agreement, there are no actions, suits, arbitrations, investigations or proceedings pending or, to its knowledge, threatened against the Seller or any of its Subsidiaries or affecting any of the property thereof before any Governmental Authority, (i) as to which individually or in the aggregate there is a reasonable likelihood of an adverse decision which would be reasonably likely to have a Material Adverse Effect, or
(ii) which questions the validity or enforceability of this Agreement, the Loan Documents or any action to be taken in connection with the transactions contemplated hereby or thereby and there is a reasonable likelihood of a materially adverse decision or a Material Adverse Effect. The disclosure of any action, suit, arbitrations, investigations or proceedings in Schedule 6.03 of the Loan Agreement shall not operate as a consent to such matter, or a waiver or an amendment of any right, power, or remedy of Lender with respect to such matter, including Lender's right to exercise its remedies in the event that any matter listed on Schedule 6.03 of the Loan Agreement is, results in, or has a Material Adverse Change or has a Material Adverse Effect.

(d) No Breach. Neither (a) the execution and delivery of this Agreement or any of the other the Loan Documents nor (b) the consummation of the transactions herein and therein contemplated in compliance with the terms and provisions hereof and thereof, will conflict with or result in a breach of the charter or by-laws of the Seller, or any applicable law, rule or regulation, or any order, writ, injunction or decree of any Governmental Authority, or any other instrument, indenture or other material agreement to which the Seller or any of its Subsidiaries is a party or by which any of them or any of their property is bound or to which any of them is subject, or constitute a default under any such instrument, indenture or other material agreement, or (except for the Liens created pursuant to the Loan Agreement) result in the creation or imposition of any Lien upon any property of the Seller or any of its Subsidiaries, pursuant to the terms of any such agreement or instrument.

(e) Action. The Seller has all necessary corporate or other power, authority and legal right to execute, deliver and perform its obligations hereunder and under each of the Loan Documents to which it is a party; the execution, delivery and performance by the Seller of this Agreement and each of the Loan Documents to which it is a party has been duly authorized by all necessary corporate or other action on its part; and this Agreement and each Loan Document to which it is a party has been duly and validly executed and delivered by the Seller and constitutes a legal, valid and binding obligation of the Seller, enforceable against it in accordance with its terms.

(f) Approvals. No authorizations, approvals or consents of, and no filings or registrations with, any Governmental Authority, or any other Person, are necessary for the execution, delivery or performance by the Seller of this Agreement, and each of the Loan Documents to which it is a party or for the legality, validity or enforceability hereof and thereof, except for filings and recordings in respect of the Liens created pursuant to the Loan Agreement.

(g) Taxes. The Seller and its Subsidiaries have filed all Federal income tax returns and all other material tax returns that are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by any of them, except for any such taxes, if any, that are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided. The charges, accruals and reserves on the books of the Seller and its Subsidiaries in respect of taxes and other governmental charges are adequate.

(h) Investment Company Act. Neither the Seller nor any of its Subsidiaries is an "investment company," or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. Neither the Seller, nor any of its Subsidiaries is subject to any Federal or state statute or regulation which limits its ability to incur indebtedness.

(i) No Legal Bar. The execution, delivery and performance of this Agreement, will not violate any Requirement of Law or Contractual Obligation of the Seller or of any of its Subsidiaries and will not result in, or require, the creation or imposition of any Lien (other than the Liens created under the Loan Agreement) on any of its or their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation.

(j) No Default. Neither the Seller nor any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which should reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing.

(k) Chief Operating Office. The Seller's chief executive office and operating office on the Effective Date are located at the locations described in the Loan Agreement.

(l) Location of Books and Records. The location where the Seller keeps its books and records including all computer tapes and records relating to the Assets is its chief executive office or chief operating office.

(m) Collateral; Collateral Security.

(i) Neither the Seller nor any of its Subsidiaries has assigned, pledged, or otherwise conveyed or encumbered any Collateral (including the Mortgage Loans) to any other Person other than the Purchaser. Immediately prior to the pledge of any Mortgage Loan to the Purchaser, the Seller represents that it is the sole owner of such Mortgage Loan and has good and marketable title thereto, free and clear of all Liens, in each case except for Liens to be released simultaneously with the Liens granted in favor of the Purchaser hereunder and no Person other than the Purchaser has any Lien on any Mortgage Loan.

(ii) The provisions of this Agreement are effective to create in favor of the Purchaser a valid first priority security interest in all right, title and interest of the Seller and its Subsidiaries in, to and under the Collateral.

(iii) Upon receipt by the Purchaser of each Mortgage Note, endorsed in blank by a duly authorized officer of the payee or last endorsee, the Purchaser shall have a fully perfected first priority security interest therein, in the Mortgage Loan evidenced thereby and in the mortgagee's interest in the related Mortgaged Property.

(iv) Upon the filing of financing statements on Form UCC-1 naming the Purchaser as "Secured Party" and the Seller as "Debtor", and describing the Collateral, in the jurisdictions and recording offices listed on Schedule 6.12(d), the security interests granted hereunder in the Collateral will constitute fully perfected, first priority security interests under the Uniform Commercial Code in all right, title and interest of the Seller and its Subsidiaries in, to and under such Collateral, which can be perfected by filing under the Uniform Commercial Code.

(v) Pursuant to the Custodial Agreement, the Seller and its Subsidiaries (or its predecessor in interest) have delivered to the Purchaser the Mortgage File (including the Mortgage Note) relating to each Mortgage Loan (other than any Wet Mortgage Loan) that is subject to the provisions of this Loan Agreement.

(n) True and Complete Disclosure. The information, reports, financial statements, exhibits and schedules furnished in writing by or on behalf of the Seller to the Purchaser or the Lender in connection with the negotiation, preparation or delivery of this Agreement, the Loan Agreement, the other Loan Documents or included herein or therein or delivered pursuant hereto or thereto, when taken as a whole, do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. All written information furnished after the date hereof by or on behalf of the Seller to the Purchaser or the Lender in connection with this Agreement, the Loan Agreement, and the other Loan Documents and the transactions contemplated hereby and thereby will be true, complete and accurate in every material respect, or (in the case of projections) based on reasonable estimates, on the date as of which such information is stated or certified. There is no Material Adverse Change and no fact known to a Responsible Officer that, after due inquiry, could reasonably be expected to have a Material Adverse Effect that has not been disclosed herein, the Loan Agreement in the other Loan Documents or in a report, financial statement, exhibit, schedule, disclosure letter or other writing furnished to the Lender for use in connection with the transactions contemplated hereby or thereby.

(o) ERISA. Each Plan to which the Seller or its Subsidiaries make direct contributions, and, to the knowledge of Seller, each other Plan and each Multiemployer Plan, is in compliance in all material respects with, and has been administered in all material respects in compliance with, the applicable provisions of ERISA, the Code and any other Federal or State law. No event or condition has occurred and is continuing as to which the Seller would be under an obligation to furnish a report to the Lender under the Loan Agreement. No accumulated funding deficiency (as defined in Section 412 of the Code or Section 302 of ERISA) has occurred with respect to any Plan. Neither the Seller nor any ERISA Affiliate is subject to any present or potential liability under Title IV of ERISA which, individually or in the aggregate, could have a Materially Adverse Effect. No material liability to the PBGC (other than required premium payments), the Internal Revenue Service, any Plan or trust established under Title IV of ERISA has been, or is expected by the Seller or any ERISA Affiliate to be, incurred by the Seller or any ERISA Affiliate. None of the Seller nor any ERISA Affiliate has any contingent liability with respect to any post-retirement benefit under any "welfare plan" (as defined in Section 3(1) of ERISA), other than liability for continuation coverage under Part 6 of Title I of ERISA. No lien under Section 412(n) of the Code or 302(f) of ERISA or requirement to provide security under Section 401(a)(29) of the Code or Section 307 of ERISA has been or is reasonably expected by the Seller or ERISA Affiliate to be imposed on the assets of the Seller or any member ERISA Affiliate. Neither the Seller nor any ERISA Affiliate has engaged in any transaction prohibited by
Section 408 of ERISA or Section 4975 of the Code. As of the Closing Date and throughout the term of the Agreement, the Seller is not and will not be an "employee benefit plan" as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, and none of the assets of the Seller will constitute "plan assets" of one or more such plans for purposes of Title I of ERISA or section 4975 of the Code.

(p) No Licenses. The Purchaser will not be required as a result of acquiring title to the Assets hereunder to be licensed, registered or approved or to obtain permits or otherwise qualify (i) to do business in any state in which it currently is not so required or (ii) under any state consumer lending, fair debt collection or other applicable state statute or regulation.

(q) Relevant States. The Seller is licensed (or exempt from licensing) to originate Mortgage Loans in its own name or through brokers on the date of this Agreement in all states where it originates Mortgage Loans.

(r) True Sales. Any and all interest of a Qualified Originator in, to and under any Mortgage funded in the name of or acquired by such Qualified Originator or seller which is an Affiliate of the Purchaser has been sold, transferred, conveyed and assigned to the Seller pursuant to a legal sale and such Qualified Originator retains no legal or equitable interest in such Mortgage Loan, and if so requested by the Purchaser, is covered by an opinion of counsel to that effect in form and substance acceptable to the Purchaser.

(s) No Burdensome Restrictions. No Requirement of Law or Contractual Obligation of the Seller or any of its Subsidiaries has been enacted or entered into since the date of the financial statements previously delivered to the Lender which would preclude Seller from continuing its operations consistent with past practices or which is reasonably expected to have a Material Adverse Effect.

(t) Subsidiaries. All of the Subsidiaries of the Seller at the date hereof are listed on Schedule 6.22 to the Loan Agreement.

(u) Origination and Acquisition of Mortgage Loans. The Mortgage Loans were either (i) originated by a Approved Mortgage Originator, and the origination and collection practices used by the Approved Mortgage Originator, any subsequent mortgagee and any servicer therefor, as applicable, with respect to the Mortgage Loans have been, in all material respects, legal, proper, prudent and customary in the residential mortgage loan servicing business, and are in accordance with the Approved Underwriting Guidelines, or (ii) acquired by the Seller in conformity with the Approved Underwriting Guidelines and under an Approved Purchase Program.

(v) No Adverse Selection. Neither the Seller nor any of its Subsidiaries used any selection procedures that identified the Mortgage Loans as being less desirable or valuable than other comparable Mortgage Loans owned by such party.

(w) No Broker. Neither the Seller nor any of its Subsidiaries has dealt with any broker, investment banker, agent, or other person, except for the Lender and SSG Capital Advisors, LP, who may be entitled to any commission or compensation in connection with the financing of Mortgage Loans pursuant to the Loan Agreement.

(x) Representations and Warranties Regarding Mortgage Loans; Delivery of Mortgage Loan File. With respect to each Mortgage Loan (other than a Wet Mortgage Loan), the Mortgage Note, the Mortgage, the Assignment of Mortgage and any other documents required to be delivered under this Agreement for such Mortgage Loan have been delivered to the Lender or the Custodian on behalf of the Purchaser. The Seller and its Subsidiaries or its designee is in possession of a complete, true and accurate Mortgage Loan File with respect to each Mortgage Loan (other than a Wet Mortgage Loan), except for such documents the originals of which have been delivered to the Custodian.

(y) Seller Solvent; Fraudulent Conveyance. As of the date hereof and immediately following each Transfer Date after giving effect to the applicable transfer, the fair value of the assets of the Seller is greater than the fair value of its respective liabilities (including, without limitation, contingent liabilities if and to the extent required to be recorded as a liability on the financial statements of the Seller in accordance with GAAP), and the Seller is and will be solvent, is and will be able to pay its debts as they mature and does not and will not have an unreasonably small capital to engage in the business in which it is engaged and proposes to engage. The Seller does not intend to incur, nor believes that it has incurred, debts beyond its ability to pay such debts as they mature. The Seller is not contemplating the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of the Seller or any of its assets. The Seller is not transferring any Mortgage Loans with any intent to hinder, delay or defraud any of its respective creditors.

TABLE OF CONTENTS

                                                                                                             Page
                                                                                                             ----
ARTICLE I             DEFINITIONS; CONSTRUCTION..................................................................2

         Section 1.01          Definitions.......................................................................2

         Section 1.02          Construction......................................................................2

ARTICLE II            SALE OF ASSETS; PAYMENT OF PURCHASE PRICE..................................................2

         Section 2.01          Sale of Assets to Purchaser.......................................................2

         Section 2.02          Obligations of Sellers............................................................4

         Section 2.03          Dispositions......................................................................5

ARTICLE III           REPRESENTATIONS AND WARRANTIES; REMEDIES FOR BREACH........................................5

         Section 3.01          Sellers' Representations and Warranties...........................................5

ARTICLE IV            SELLER COVENANTS...........................................................................6

         Section 4.01          No Further Sale or Transfer.......................................................6

         Section 4.02          Defense of Right, Title and Interest..............................................6

         Section 4.03          Separateness Covenants............................................................6

         Section 4.04          Further Assurances................................................................6

ARTICLE V             PURCHASER COVENANTS........................................................................6

ARTICLE VI            TERMINATION................................................................................7

         Section 6.01          Termination.......................................................................7

ARTICLE VII           MISCELLANEOUS PROVISIONS...................................................................7

         Section 7.01          Amendment.........................................................................7

         Section 7.02          Governing Law.....................................................................8

         Section 7.03          Notices...........................................................................8

         Section 7.04          Severability of Provisions........................................................9

         Section 7.05          Counterparts......................................................................9

         Section 7.06          Further Agreements................................................................9

         Section 7.07          Recordation and Sales.............................................................9

         Section 7.08          Successors and Assigns; Assignment of Purchase Agreement..........................9

         Section 7.09          Survival..........................................................................9

TABLE OF CONTENTS
(continued)

                                                                           Page
                                                                           ----

EXHIBIT A    Form of APA Assignment
Schedule A   Asset Schedule
Schedule 1   Representations and Warranties re: Mortgage Loans
Schedule 2   Representations and Warranties re: Seller

Exhibit 10.7

Execution Copy

SERVICING AGREEMENT

Dated as of November 4, 2004

Penn Square East Funding, LLC, as Owner,

FORTRESS CREDIT CORP.,
as Lender,

AMERICAN BUSINESS MORTGAGE SERVICES, INC.,

and

HOME AMERICAN CREDIT, INC.
jointly and severally, as Servicer

and

COUNTRYWIDE HOME LOANS SERVICING LP,
as Backup Servicer

TABLE OF CONTENTS

                                                                                                               Page
                                                                                                               ----
ARTICLE I DEFINITIONS.............................................................................................1

Section 1.01      Defined Terms...................................................................................1

ARTICLE II SERVICING OF MORTGAGE LOANS; POSSESSION OF SERVICING FILES; BOOKS AND RECORDS; DELIVERY OF
  MORTGAGE LOAN DOCUMENTS.........................................................................................8

Section 2.01      Servicing of Mortgage Loans.....................................................................8
Section 2.02      Maintenance of Servicing Files..................................................................8
Section 2.03      Books and Records...............................................................................8
Section 2.04      Delivery of Mortgage Loan Documents.............................................................9
Section 2.05      Quality Control Procedures......................................................................9

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SERVICER.......................................................10


ARTICLE IV ADMINISTRATION AND SERVICING OF MORTGAGE LOANS........................................................12

Section 4.01      Servicer to Act as Servicer....................................................................12
Section 4.02      Collection of Mortgage Loan Payments...........................................................13
Section 4.03      Realization Upon Defaulted Mortgage Loans......................................................14
Section 4.04      Establishment of Collection Accounts; Deposits in Collection Accounts; Lender's
                  Security Interest in the Collection Account....................................................14
Section 4.05      Permitted Withdrawals From the Collection Account..............................................16
Section 4.06      Establishment of Escrow Accounts; Deposits in Escrow Accounts; Lender's Security
                  Interest in the Escrow Account.................................................................17
Section 4.07      Permitted Withdrawals From Escrow Account......................................................18
Section 4.08      Payment of Taxes, Insurance and Other Charges; Collections Thereunder..........................19
Section 4.09      Maintenance of Hazard Insurance................................................................19
Section 4.10      [RESERVED].....................................................................................20
Section 4.11      Fidelity Bond, Errors and Omissions Insurance..................................................20
Section 4.12      Title, Management and Disposition of REO Property..............................................20

ARTICLE V PAYMENTS...............................................................................................22

Section 5.01      Remittances....................................................................................22
Section 5.02      Statements to the Owner and Lender.............................................................23
Section 5.03      [Reserved].....................................................................................24
Section 5.04      Liquidation Reports............................................................................24

ARTICLE VI GENERAL SERVICING PROCEDURES..........................................................................24

Section 6.01      Assumption Agreements..........................................................................24
Section 6.02      Satisfaction of Mortgages and Release of Mortgage Loan Documents...............................25
Section 6.03      Servicing Compensation.........................................................................26
Section 6.04      Annual Statement as to Compliance..............................................................26
Section 6.05      Annual Independent Certified Public Accountants' Servicing Report..............................27
Section 6.06      Right to Examine Servicer Records..............................................................27
Section 6.07      Non-solicitation...............................................................................27

ARTICLE VII REPORTS TO BE PREPARED BY SERVICER...................................................................28

Section 7.01      Servicer Shall Provide Information as Reasonably Required......................................28

ARTICLE VIII THE SERVICER........................................................................................28

Section 8.01      Indemnification; Third Party Claims............................................................28
Section 8.02      Existence of the Servicer......................................................................29
Section 8.03      Limitation on Liability of the Servicer and Others.............................................29
Section 8.04      Servicer Not to Resign.........................................................................29
Section 8.05      No Transfer of Servicing.......................................................................29
Section 8.06      Separateness...................................................................................30

ARTICLE IX DEFAULT...............................................................................................30

Section 9.01      Events of Default..............................................................................30
Section 9.02      Waiver of Defaults.............................................................................32
Section 9.03      Backup Servicer................................................................................32

ARTICLE X TERMINATION............................................................................................36

Section 10.01     Servicing Term.................................................................................36
Section 10.02     Termination....................................................................................36
Section 10.03     Termination Without Cause......................................................................37

ARTICLE XI MISCELLANEOUS PROVISIONS..............................................................................37

Section 11.01     Amendment......................................................................................37
Section 11.02     Recordation of Agreement.......................................................................37
Section 11.03     Governing Law..................................................................................37
Section 11.04     Notices. 37
Section 11.05     Severability of Provisions.....................................................................39
Section 11.06     Exhibits.......................................................................................39
Section 11.07     General Interpretive Principles................................................................39
Section 11.08     Reproduction of Documents......................................................................40
Section 11.09     Confidentiality of Information.................................................................40
Section 11.10     Recordation of Assignments of Mortgage.........................................................40
Section 11.11     Assignment.....................................................................................41
Section 11.12     No Partnership.................................................................................41
Section 11.13     Execution; Successors and Assigns..............................................................41
Section 11.14     Entire Agreement...............................................................................41

Exhibit A  Custodial Loan Transmission
Exhibit B  Blocked Account Control Agreement
Exhibit C  Escrow Account Letter Agreement

THIS SERVICING AGREEMENT, dated as of November 4, 2004, is executed among PENN SQUARE EAST FUNDING, LLC, a Delaware limited liability company (the "Owner"), FORTRESS CREDIT CORP., a Delaware corporation (the "Lender"), AMERICAN BUSINESS MORTGAGE SERVICES, INC., a New Jersey corporation, and Home American Credit, Inc., a Pennsylvania corporation (jointly and severally, the "Servicer"), and COUNTRYWIDE HOME LOANS SERVICING LP, a Texas limited partnership (the "Backup Servicer").

W I T N E S S E T H :

WHEREAS, the Owner is the owner of the Mortgage Loans;

WHEREAS, the Owner has pledged the Mortgage Loans to the Lender and the Lender has a perfected first priority security interest in the Mortgage Loans;

WHEREAS, the Owner, the Lender, the Servicer and the Backup Servicer wish to prescribe the permanent management, servicing and control of the Mortgage Loans;

NOW, THEREFORE, in consideration of the mutual agreements hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Owner, the Lender, the Servicer and the Backup Servicer agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01 Defined Terms.

Whenever used in this Agreement, capitalized terms shall have the meaning as set forth below; provided, that capitalized terms not defined in this Agreement shall have the meaning set forth in the Loan Agreement.

Agreement: This Servicing Agreement including all exhibits hereto, amendments hereof and supplements hereto.

APA Assignment: As defined in the Loan Agreement.

Backup Servicer: Countrywide Home Loan Servicing LP, or any of its successors in interest or any successor under this Agreement appointed as herein provided.

Backup Servicing Fee: The fee payable to the Backup Servicer on each Payment Date for its services as Backup Servicer hereunder, in an amount equal to the greater of (1) the Minimum Backup Servicing Fee and (2) the Backup Servicing Fee Rate accrued for one month (on the basis of a 360-day year and twelve 30-day months) on the Principal Balance of the Mortgage Loans as of the close of business on the Determination Date immediately preceding such Payment Date; provided, however, if the Servicer has been removed (with or without cause) as Servicer or has resigned as Servicer or if the Servicer's term as servicer has expired, and in any such case if a Backup Servicer is no longer required hereunder, then the Minimum Backup Servicing Fee shall be $0 and the Backup Servicing Fee Rate shall be 0.00% per annum.

Backup Servicing Fee Rate: 0.04% per annum.

Business Day: Any day other than (i) a Saturday or Sunday,
(ii) a day on which the New York Stock Exchange, the Federal Reserve Bank of New York, the Custodian or banking and savings and loan institutions in the State of New York, or the City of New York or the city or state in which the Custodian's offices are located are closed, or (iii) a day on which trading in securities on the New York Stock Exchange or any other major securities exchange in the United States is not conducted.

Code: The Internal Revenue Code of 1986, as amended from time to time.

Collection Account: The separate demand account (or, if necessary, accounts), created and maintained pursuant to Section 4.04 which shall be (i) entitled "[servicer] Collection Account in trust for Penn Square East Funding, LLC, Fortress Credit Corp. and various Mortgagors", (ii) established at a Qualified Depository, each of which accounts shall in no event contain funds in excess of the FDIC insurance limits and (iii) subject to the Collection Account Control Agreement at the sole dominion and control of the Lender.

Condemnation Proceeds: All awards or settlements in respect of a Mortgaged Property, whether permanent or temporary, partial or entire, by exercise of the power of eminent domain or condemnation, to the extent not required to be released to a Mortgagor in accordance with the terms of the related Mortgage Loan Documents.

Countrywide: Countrywide Home Loan Servicing L.P.

Custodial Agreement: The Custodial Agreement, dated as of November 4, 2004, among Owner, Custodian, Servicer, and Lender, as the same may be amended, supplemented or otherwise modified from time to time.

Custodial Loan Transmission: As defined in the Custodial Agreement.

Custodian: JPMorgan Chase Bank, its successors, participants and assigns, or such other custodian as Owner shall designate with the prior written approval of Lender.

Cut-off Date: With respect to each Mortgage Loan, the date designated as such in the related APA Assignment.

Determination Date: The last Business Day of the month immediately preceding the month of the Payment Date.

Due Date: The day of the month on which the Monthly Payment is due on a Mortgage Loan, exclusive of any days of grace.

Effective Date: November 4, 2004.

Escrow Account: The separate demand account (or, if necessary, accounts), created and maintained pursuant to Section 4.06 which shall be (i) entitled "[servicer] Escrow Account in trust for Penn Square East Funding, LLC, Fortress Credit Corp. and various Mortgagors", (ii) established at a Qualified Depository, each of which accounts shall in no event contain funds in excess of the FDIC insurance limits and (iii) subject to the Collection Account Control Agreement at the sole dominion and control of the Lender.

Escrow Payments: With respect to any Mortgage Loan, the amounts constituting ground rents, taxes, assessments, water rates, sewer rents, municipal charges, mortgage insurance premiums, fire and hazard insurance premiums, condominium charges, and any other payments required to be escrowed by the Mortgagor with the mortgagee pursuant to the Mortgage or any other document.

Event of Default: Any one of the conditions or circumstances enumerated in Section 9.01.

FDIC: The Federal Deposit Insurance Corporation, or any successor thereto.

Fidelity Bond: A fidelity bond to be maintained by the Servicer pursuant to Section 4.12.

FIRREA: The Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended from time to time.

GAAP: Generally accepted accounting principles as in effect from time to time in the United States of America.

HUD: The United States Department of Housing and Urban Development or any successor.

Initial Set-Up Fee: The fee payable to the Backup Servicer on the Effective Date of this Agreement for the initial cracking of the information provided by the Servicer pursuant to Section 9.03 hereof, in an amount equal to $15,000.

Insurance Proceeds: With respect to each Mortgage Loan, proceeds of insurance policies insuring the Mortgage Loan or the related Mortgaged Property.

Lender: Fortress Credit Corp., a Delaware corporation, and its successors and assigns.

Liquidation Proceeds: Cash received in connection with the liquidation of a defaulted Mortgage Loan, whether through the sale or assignment of such Mortgage Loan, trustee's sale, foreclosure sale or otherwise, other than amounts received following the acquisition of an REO Property pursuant to
Section 4.13.

Loan Agreement: The Master Loan and Security Agreement dated as of November 4, 2004, between the Owner and the Lender, as the same may be amended, supplemented or otherwise modified from time to time.

Minimum Backup Servicing Fee: $7,500.

Monthly Payment: The scheduled monthly payment of principal and interest on a Mortgage Loan as adjusted in accordance with changes in the Mortgage Interest Rate pursuant to the provisions of the Mortgage Note for an adjustable rate Mortgage Loan.

Mortgage: With respect to a Mortgage Loan, the mortgage, deed of trust or other instrument, which creates a first lien or second lien (as indicated on the Mortgage Loan Data Transmission) on the fee simple or a leasehold estate in the real property described therein.

Mortgage File: As defined in the Custodial Agreement.

Mortgage Interest Rate: The annual rate of interest borne on a Mortgage Note, which shall be adjusted from time to time with respect to adjustable rate Mortgage Loans.

Mortgage Loan: An individual Mortgage Loan described herein and as further identified on the Custodial Loan Transmission, which Mortgage Loan includes without limitation the Mortgage Loan Documents, the Monthly Payments, Principal Prepayments, Liquidation Proceeds, Condemnation Proceeds, Insurance Proceeds, REO Disposition Proceeds and all other rights, benefits, proceeds and obligations arising from or in connection with such Mortgage Loan.

Mortgage Loan Documents: With respect to a Mortgage Loan, the documents comprising the Mortgage File for such Mortgage Loan.

Mortgage Note: The original executed promissory note or other evidence of the indebtedness of a Mortgagor with respect to a Mortgage Loan.

Mortgaged Property: The real property (including all improvements, buildings, fixtures, building equipment and personal property thereon and all additions, alterations and replacements made at any time with respect to the foregoing) and all other collateral securing repayment of the debt evidenced by a Mortgage Note.

Mortgagor: The obligor on a Mortgage Note. The Mortgagor is a natural person who is a party to the Mortgage Note and Mortgage in an individual capacity.

Nonrecoverable Advance: Any expenses incurred pursuant to
Section 4.08 which, in the good faith judgment of the Servicer, may not be ultimately recoverable by the Servicer from Liquidation Proceeds. The determination by the Servicer that it has made a Nonrecoverable Advance shall be evidenced by an Officer's Certificate of the Servicer delivered to the Owner and detailing the reasons for such determination.

OCC: Office of the Comptroller of the Currency, its successors and assigns.

Officers' Certificate: A certificate signed by the Chairman of the Board, the Vice Chairman of the Board, the President, a Senior Vice President or a Vice President or by the Treasurer or the Secretary or one of the Assistant Treasurers or Assistant Secretaries of the Servicer, and delivered to the Owner as required by this Agreement.

Opinion of Counsel: A written opinion of counsel, who may be an employee of the party on behalf of whom the opinion is being given, reasonably acceptable to the Owner.

OTS: Office of Thrift Supervision, its successors and assigns.

Owner: Penn Square East Funding, LLC, its successors in interest and assigns.

Pass-Through Transfer: The sale or transfer of some or all of the Mortgage Loans to a trust as part of a publicly issued or privately placed, rated or unrated Mortgage pass-through transaction.

Payment Date: The 15th day of any month, or if such 15th day is not a Business Day, the first Business Day immediately preceding such 15th day. The first Payment Date shall occur on November 15, 2004.

Person: Any individual, corporation, company, voluntary association, partnership, joint venture, limited liability company, trust, unincorporated association or government (or any agency, instrumentality or political subdivision thereof).

Primary Mortgage Insurance Policy: Each primary policy of mortgage insurance, or any replacement policy therefor obtained by the Servicer, if any.

Prime Rate: The prime rate of U.S. money center banks as published from time to time in The Wall Street Journal.

Principal Prepayment: Any payment or other recovery of principal on a Mortgage Loan, full or partial, which is received in advance of its scheduled Due Date, including any prepayment penalty or premium thereon and which is not accompanied by an amount of interest representing scheduled interest due on any date or dates in any month or months subsequent to the month of prepayment.

Qualified Appraiser: With respect to any Mortgage Loan, an appraiser, duly appointed by the Servicer, who had no interest, direct or indirect in the related Mortgaged Property or in any loan made on the security thereof, and whose compensation is not affected by the approval or disapproval of such Mortgage Loan, which appraiser and the appraisal made by such appraiser both satisfy the requirements of Title XI of FIRREA and the regulations promulgated thereunder, all as in effect on the date such Mortgage Loan was originated.

Qualified Depository: The Custodian or, with the written consent of the Lender, not to be unreasonably withheld, a depository, the accounts of which are insured by the FDIC and the short term debt ratings and the long term deposit ratings of which are rated in one of the two highest rating categories by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies Inc., Moody's Investors Service, Inc., and Fitch IBCA Inc.

Qualified Insurer: With respect to any Mortgage loan, an insurance company duly qualified as such under the laws of the state in which the related Mortgaged Property is located, duly authorized and licensed in such state to transact the applicable insurance business and to write the insurance provided in accordance with the Approved Underwriting Guidelines, and approved as an insurer by Fannie Mae and Freddie Mac and whose claims paying ability is rated in the two highest rating categories by any of the rating agencies with respect to primary mortgage insurance and in the two highest rating categories by Best's with respect to hazard and flood insurance.

REMIC: A "real estate mortgage investment conduit" within the meaning of Section 860D of the Code.

REMIC Provisions: The provisions of the Federal income tax law relating to a REMIC, which appear at Section 860A through 860G of Subchapter M of Chapter 1, Subtitle A of the Code, and related provisions, and regulations, rulings or pronouncements promulgated thereunder, as the foregoing may be in effect from time to time.

REO Disposition: The final sale by the Servicer of any REO Property.

REO Disposition Proceeds: Amounts received by the Servicer in connection with a related REO Disposition.

REO Property: A Mortgaged Property acquired by the Servicer on behalf of the Owner as described in Section 4.13.

Servicer: Jointly and severally, American Business Mortgage Services, Inc., and/or Home American Credit, Inc. or any of their successors in interest or any successor under this Agreement appointed as herein provided.

Servicing Advances: All customary, reasonable and necessary "out of pocket" costs and expenses (including reasonable attorneys' fees and disbursements) incurred prior to, on and subsequent to the Effective Date in the performance by the Servicer of its servicing obligations relating to each Mortgage Loan, including, but not limited to, the cost of (a) the preservation, restoration and protection of the Mortgaged Property, (b) any enforcement, administrative or judicial proceedings, or any legal work or advice specifically related to servicing the Mortgage Loans, including but not limited to, foreclosures, bankruptcies, condemnations, drug seizures, elections, foreclosures by subordinate or superior lienholders, and other legal actions incidental to the servicing of the Mortgage Loans (provided that such expenses are reasonable and that the Servicer specifies the Mortgage Loan(s) to which such expenses relate), (c) the management and liquidation of the Mortgaged Property if the Mortgaged Property is acquired in full or partial satisfaction of the Mortgage, (d) taxes, assessments, water rates, sewer rates and other charges which are or may become a lien upon the Mortgaged Property, and Primary Mortgage Insurance Policy premiums and fire and hazard insurance coverage and
(e) compliance with the obligations under Section 4.08.

Servicing Fee: With respect to each Mortgage Loan, the amount of the annual fee the Owner shall pay to the Servicer, which shall, for a period of one full month, be equal to one-twelfth of the product of (a) the applicable Servicing Fee Rate and (b) the outstanding principal balance of such Mortgage Loan. Such fee shall be payable monthly, computed on the basis of the same principal amount and period respecting which any related interest payment on a Mortgage Loan is computed. The obligation of the Owner to pay the Servicing Fee is limited to, and the Servicing Fee is payable solely from, the interest portion (not including recoveries of interest from Liquidation Proceeds or otherwise) of the Monthly Payment collected by the Servicer in respect of such Mortgage Loan, or as otherwise provided under Section 4.05.

Servicing Fee Rate: The Servicing Fee Rate shall be a rate per annum equal to 0.35% with respect to any Mortgage Loan; provided, however, that if the Backup Servicer has succeeded as the successor Servicer hereunder, the Servicing Fee Rate shall be a rate per annum equal to 0.50% after the Servicing Transfer Date; provided further, however, that in the event of an Event of Default under the Loan Agreement, the Servicing Fee Rate shall be a commercially reasonable rate or per loan fee (taking into consideration, among other factors, the fact that the Loan Agreement is no longer a revolving facility) as agreed upon by the Backup Servicer and the Lender, who agree to act in good faith based upon the then Principal Balance of the Mortgage Loans outstanding at such time and anticipated balances going forward, and the 0.50% rate shall be applicable for a minimum of three (3) months following such a Servicing Transfer Date.

Servicing File: With respect to each Mortgage Loan, the file retained by the Servicer consisting of originals of all material documents in the Mortgage File which are not delivered to the Custodian and copies of the Mortgage Loan Documents set forth in Section 2 of the Custodial Agreement.

Servicing Officer: Any officer of the Servicer involved in, or responsible for, the administration and servicing of the Mortgage Loans whose name appears on a list of servicing officers furnished by the Servicer to the Owner upon request, as such list may from time to time be amended.

Servicing Transfer Costs: All reasonable costs and expenses incurred by the Backup Servicer in connection with the transfer of servicing from a predecessor Servicer, including, without limitation, any reasonable costs or expenses associated with the complete transfer of all servicing data and the completion, correction or manipulation of such servicing data as may be required by the Backup Servicer to correct any errors or insufficiencies in the servicing data or otherwise to enable the Backup Servicer to service the Mortgage Loans properly and effectively and any fees of MERS, costs of preparing any assignments of Mortgage, or fees and costs of filing any assignments of Mortgage that may be required as a result of the transfer of servicing; provided, that in the event that less than one hundred (100) Mortgage Loans are transferred to the Backup Servicer, the cost and expenses shall be deemed $100 (one hundred dollars) per Mortgage Loan.

Servicing Transfer Date: The date on which the Backup Servicer receives the written notice of the termination of Servicer pursuant to 9.01 hereof.

Whole Loan Transfer: The sale or transfer of some or all of the ownership interest in the Mortgage Loans by the Owner to one or more third parties in whole loan or participation format.

Capitalized terms which are not otherwise defined herein shall have the meanings assigned to such terms in the Loan Agreement.

ARTICLE II

SERVICING OF MORTGAGE LOANS; POSSESSION OF SERVICING FILES;
BOOKS AND RECORDS; DELIVERY OF MORTGAGE LOAN DOCUMENTS

Section 2.01 Servicing of Mortgage Loans.

From and after the Effective Date, the Servicer does hereby agree to service the Mortgage Loans, but subject to the terms of this Agreement. The rights of the Owner and Lender to receive payments with respect to the Mortgage Loans shall be as set forth in this Agreement except where in conflict with the Loan Agreement, in which case the terms of the Loan Agreement shall control.

Section 2.02 Maintenance of Servicing Files.

The Servicer shall maintain a Servicing File consisting of all documents necessary to service each Mortgage Loan. The possession of each Servicing File by the Servicer is for the sole purpose of servicing the related Mortgage Loan, and such retention and possession by the Servicer is in a custodial capacity only. The Servicer acknowledges that the ownership of each Mortgage Loan, including the Mortgage Note, the Mortgage, all other Mortgage Loan Documents and all rights, benefits, proceeds and obligations arising therefrom or in connection therewith, has been vested in the Owner and that the Owner has pledged to the Lender each Mortgage Loan, including the Mortgage Note, the Mortgage, all other Mortgage Loan Documents and all rights, benefits, proceeds and obligations arising therefrom or in connection therewith. All rights arising out of the Mortgage Loans including, but not limited to, all funds received on or in connection with the Mortgage Loans and all records or documents with respect to the Mortgage Loans prepared by or which come into the possession of the Servicer shall be received and held by the Servicer in trust for the benefit of the Lender as the pledgee of the related Mortgage Loans pursuant to the Custodial Agreement. Any portion of the related Servicing Files retained by the Servicer shall be appropriately identified in the Servicer's computer system to clearly reflect the ownership of the related Mortgage Loans by the Owner and the perfected first priority security interest therein of the Lender. The Servicer shall release its custody of the contents of the related Servicing Files only in accordance with written instructions of the Owner (with the written consent of the Lender), except when such release is required as incidental to the Servicer's servicing of the Mortgage Loans, such written instructions shall not be required.

Section 2.03 Books and Records.

The Servicer shall be responsible for maintaining, and shall maintain, a complete set of books and records for the Mortgage Loans which shall be appropriately identified in the Servicer's computer system to clearly reflect the ownership of the Mortgage Loans by the Owner and the perfected first priority security interest therein of the Lender. In particular, the Servicer shall maintain in its possession, available for inspection by the Owner, the Lender or their designees, and shall deliver to the Owner or Lender upon demand, evidence of compliance with all federal, state and local laws, rules and regulations, as applicable, including but not limited to documentation as to the method used in determining the applicability of the provisions of the Flood Disaster Protection Act of 1973, as amended, to each Mortgaged Property, documentation evidencing insurance coverage and eligibility of any condominium project and periodic inspection reports as required by Section 4.13. To the extent that original documents are not required for purposes of realization of Liquidation Proceeds or Insurance Proceeds, documents maintained by the Servicer may be in the form of microfilm or microfiche or such other reliable means of recreating original documents, including but not limited to, optical imagery techniques so long as the Servicer complies with Accepted Servicing Practices.

The Servicer shall maintain with respect to each Mortgage Loan, and shall make available for inspection by the Owner, the Lender or their designees, the related Servicing File (or copies thereof) during the time the Owner retains ownership of such Mortgage Loan or the Lender retains its security interest in such Mortgage Loan and thereafter in accordance with applicable laws and regulations.

Section 2.04 Delivery of Mortgage Loan Documents.

The Servicer shall forward to the Custodian on behalf of the Owner and for the benefit of Lender original documents evidencing an assumption, modification, consolidation or extension of any Mortgage Loan entered into in accordance with Section 4.01 or 6.01 promptly after their execution; provided, however, that the Servicer shall provide the Custodian on behalf of the Owner and for the benefit of Lender with a certified true copy of any such document submitted for recordation promptly after its execution, and shall provide the original of any document submitted for recordation or a copy of such document certified by the appropriate public recording office to be a true and complete copy of the original within 180 days of its execution. If delivery is not completed within 180 days solely due to delays in making such delivery by reason of the fact that such documents shall not have been returned by the appropriate recording office, the Servicer shall continue to use its best efforts to effect delivery as soon as possible thereafter.

From time to time the Servicer may have a need for Mortgage Loan Documents to be released by the Custodian. If the Servicer shall require any of the Mortgage Loan Documents, the Servicer shall notify the Custodian in writing of such request in the form of the request for release provided for in the Custodial Agreement. As set forth in Section 5 of the Custodial Agreement, the Custodian (with the written consent of the Lender, as applicable) shall deliver to the Servicer a copy of any requested Mortgage Loan Document previously delivered to the Custodian; provided that such documentation is promptly returned to the Custodian when the Servicer no longer requires possession of the document, and provided that during the time that any such documentation is held by the Servicer, such possession is in trust for the benefit of the Lender.

Section 2.05 Quality Control Procedures.

The Servicer shall maintain at all times an internal quality control program that verifies, on a regular basis, the existence and accuracy of the legal documents, credit documents, property appraisals, and underwriting decisions. The program must be capable of evaluating and monitoring the overall quality of its servicing activities. The purpose of the program is to ensure that the Mortgage Loans are serviced in accordance with prudent mortgage banking practices and accounting principles; guard against dishonest, fraudulent, or negligent acts; and guard against errors and omissions by officers, employees, or other authorized persons.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE SERVICER

The Servicer represents, warrants and covenants to the Owner and the Lender that as of the Effective Date or as of such date specifically provided herein:

(a) The Servicer is a validly existing corporation in good standing under the laws of the State of its organization and is qualified to transact business in, is in good standing under the laws of, and possesses all licenses necessary for the conduct of its business in, each state in which any Mortgaged Property is located or is otherwise exempt or not required under applicable law to effect such qualification or license and no demand for such qualification or license has been made upon the Servicer by any such state, and in any event the Servicer is in compliance with the laws of each such State to the extent necessary to ensure the enforceability of each Mortgage Loan and the servicing of the Mortgage Loans in accordance with the terms of this Agreement;

(b) The Servicer has full power and authority to execute, deliver and perform, and to enter into and consummate all transactions contemplated by this Agreement and to conduct its business as presently conducted, has duly authorized the execution, delivery and performance of this Agreement, has duly executed and delivered this Agreement, and this Agreement constitutes a legal, valid and binding obligation of the Servicer, enforceable against it in accordance with its terms subject to bankruptcy laws and other similar laws of general application affecting rights of creditors and subject to the application of the rules of equity, including those respecting the availability of specific performance;

(c) None of the execution and delivery of this Agreement, the consummation of the transactions contemplated thereby and hereby, or the fulfillment of or compliance with the terms and conditions of this Agreement will conflict with any of the terms, conditions or provisions of the Servicer's articles of incorporation or by-laws or materially conflict with or result in a material breach of any of the terms, conditions or provisions of any legal restriction or any agreement or instrument to which the Servicer is now a party or by which it is bound, or constitute a default or result in an acceleration under any of the foregoing, or result in the material violation of any law, rule, regulation, order, judgment or decree to which the Servicer or its property is subject;

(d) Except as disclosed in the Annual Report on Form 10-K of American Business Financial Services, Inc. for the year ended June 30, 2004, there is no litigation pending or threatened with respect to the Servicer which is reasonably likely to have a material adverse effect on the execution, delivery or enforceability of this Agreement, or which is reasonably likely to have a material adverse effect on the financial condition of the Servicer;

(e) No consent, approval, authorization or order of any court or governmental agency or body is required for the execution, delivery and performance by the Servicer of or compliance by the Servicer with this Agreement or the consummation of the transactions contemplated by this Agreement except for consents, approvals, authorizations and orders which have been obtained;

(f) The consummation of the transactions contemplated by this Agreement is in the ordinary course of business of the Servicer;

(g) The collection and servicing practices used by the Servicer, with respect to each Mortgage Note and Mortgage have been in all material respects legal, proper and prudent in the mortgage servicing business. With respect to escrow deposits and payments that the Servicer collects, all such payments are in the possession of, or under the control of, the Servicer, and there exist no deficiencies in connection therewith for which customary arrangements for repayment thereof have not been made. No escrow deposits or other charges or payments due under the Mortgage Note have been capitalized under any Mortgage or the related Mortgage Note;

(h) [RESERVED];

(i) The Servicer does not believe, nor does it have any cause or reason to believe, that it cannot perform each and every covenant contained in this Agreement;

(j) No statement, report or other document furnished or to be furnished pursuant to this Agreement contains or will contain any statement that is or will be inaccurate or misleading in any material respect or omits to state a material fact required to be stated therein or necessary to make the information and statements therein not misleading;

(k) No fraud or misrepresentation or omission of a material fact with respect to the servicing of a Mortgage Loan has taken place on the part of the Servicer;

(l) At the time Servicer commenced servicing the Mortgage Loans, either (i) each Mortgagor was properly notified with respect to Servicer's servicing of the related Mortgage Loan in accordance with the Cranston Gonzalez National Affordable Housing Act of 1990, as the same may be amended from time to time, and the regulations provided in accordance with the Real Estate Settlement Procedures Act or (ii) such notification was not required; and

(m) At the time Servicer commenced servicing the Mortgage Loans, all applicable taxing authorities and insurance companies (including primary mortgage insurance policy insurers, if applicable) and/or agents were notified of the transfer of the servicing of the Mortgage Loans to Servicer, or its designee, and Servicer currently receives all related notices, tax bills and insurance statements (either directly or indirectly through third party tax services). Additionally, any and all costs, fees and expenses associated with the Servicer's commencement of the servicing of the Mortgage Loans, including the costs of any insurer notifications, the transfer or implementation of tax service contracts, flood certification contracts, and any and all other servicing transfer-related costs and expenses have been paid for by the Servicer and will, in no event, be the responsibility of the Owner or the Lender.

ARTICLE IV

ADMINISTRATION AND SERVICING OF MORTGAGE LOANS

Section 4.01 Servicer to Act as Servicer.

The Servicer, as independent contract servicer, shall service and administer the Mortgage Loans in accordance with this Agreement and with Accepted Servicing Practices, and shall have full power and authority, acting alone, to do or cause to be done any and all things in connection with such servicing and administration which the Servicer may deem necessary or desirable and consistent with the terms of this Agreement and with Accepted Servicing Practices and shall exercise the same care that it customarily employs for its own account. Except as set forth in this Agreement, the Servicer shall service the Mortgage Loans in accordance with Accepted Servicing Practices, which include, but are not limited to, provisions regarding the liquidation of Mortgage Loans, the collection of Mortgage Loan payments, the payment of taxes, insurance and other charges, the maintenance of hazard insurance with a Qualified Insurer, the maintenance of fidelity bond and errors and omissions insurance, inspections, the restoration of Mortgaged Property, insurance claims, and title insurance, management of REO Property, permitted withdrawals with respect to REO Property, liquidation reports, and reports of foreclosures and abandonments of Mortgaged Property, the transfer of Mortgaged Property, the release of Mortgage Loan Documents, annual statements, and examination of records and facilities. In the event of any conflict, inconsistency or discrepancy between any of the servicing provisions of this Agreement and Accepted Servicing Practices, the provisions of this Agreement shall control and be binding upon the Owner and the Servicer. The Owner may, upon the written consent of Lender, deliver powers-of-attorney to the Servicer sufficient to allow the Servicer as servicer to execute all documentation requiring execution on behalf of Owner with respect to the servicing of the Mortgage Loans, including satisfactions, partial releases, modifications and foreclosure documentation or, in the alternative, shall as promptly as reasonably possible, execute and return such documentation to the Servicer.

Consistent with the terms of this Agreement and Accepted Servicing Practices, the Servicer may waive, modify or vary any term of any Mortgage Loan or consent to the postponement of any such term or in any manner grant indulgence to any Mortgagor but only if (i) in the Servicer's reasonable and prudent determination such waiver, modification, postponement or indulgence is not materially adverse to the Owner or the Lender and (ii) the Servicer has obtained the prior written consent of the Owner and Lender. Without limiting the generality of the foregoing, upon receipt of a Principal Prepayment in full and deposit of same in the Collection Account, the Servicer shall continue, and is hereby authorized and empowered, to prepare, execute and deliver, all instruments of satisfaction or cancellation, or of partial or full release, discharge and all other comparable instruments, with respect to the Mortgage Loans and with respect to the Mortgaged Properties in accordance with the terms of this Agreement and Accepted Servicing Practices.

The Servicer shall perform all of its servicing responsibilities hereunder or may, with the Owner's, the Backup Servicer's and Lender's prior written approval, cause a subservicer to perform any such servicing responsibilities on its behalf pursuant to a written subservicing agreement approved in writing by, and assigned to, the Lender, but the use by the Servicer of a subservicer shall not release the Servicer from any of its obligations hereunder and the Servicer shall remain responsible hereunder for all acts and omissions of each subservicer as fully as if such acts and omissions were those of the Servicer. Any such subservicer that the Owner and Lender shall approve shall agree in writing to conform to the Accepted Servicing Practices. The Servicer shall pay all fees and expenses of each subservicer from its own funds, and a subservicer's fee shall not exceed the Servicing Fee.

At the cost and expense of the Servicer, without any right of reimbursement from the Collection Account, the Servicer shall be entitled to terminate the rights and responsibilities of a subservicer and arrange, with the Owner's, the Backup Servicer's and Lender's prior written approval, for any servicing responsibilities to be performed by a successor subservicer meeting the requirements in the preceding paragraph, provided, however, that nothing contained herein shall be deemed to prevent or prohibit the Servicer, at the Servicer's option, from electing to service the related Mortgage Loans itself. In the event that the Servicer's responsibilities and duties under this Agreement are terminated pursuant to Section 8.04, 9.01 or 10.02, and if requested to do so in writing by the Owner, the Backup Servicer and the Lender, the Servicer shall at its own cost and expense terminate the rights and responsibilities of each subservicer effective as of the date of termination of the Servicer. The Servicer shall pay all fees, expenses or penalties necessary in order to terminate the rights and responsibilities of each subservicer from the Servicer's own funds without reimbursement from the Owner or Lender.

Notwithstanding any of the provisions of this Agreement relating to agreements or arrangements between the Servicer and a subservicer or any reference herein to actions taken through a subservicer or otherwise, the Servicer shall not be relieved of its obligations to the Owner and Lender, the Backup Servicer's and shall be obligated to the same extent and under the same terms and conditions as if it alone were servicing and administering the Mortgage Loans. The Servicer shall be entitled to enter into an agreement with a subservicer for indemnification of the Servicer by the subservicer and nothing contained in this Agreement shall be deemed to limit or modify such indemnification.

Any subservicing agreement and any other transactions or services relating to the Mortgage Loans involving a subservicer shall be deemed to be between such subservicer and Servicer alone, and the Owner (and the Lender) shall have no obligations, duties or liabilities with respect to such subservicer including no obligation, duty or liability of Owner (or the Lender) to pay such subservicer's fees and expenses. For purposes of distributions by the Servicer pursuant to this Agreement, the Servicer shall be deemed to have received a payment on a Mortgage Loan when a subservicer has received such payment.

Section 4.02 Collection of Mortgage Loan Payments.

Continuously from the Effective Date until the date each Mortgage Loan ceases to be subject to this Agreement, the Servicer will proceed with reasonable diligence to collect all payments due under each Mortgage Loan when the same shall become due and payable and shall, to the extent such procedures shall be consistent with this Agreement and the terms and provisions of related Primary Mortgage Insurance Policy, if any, follow such collection procedures as it follows with respect to mortgage loans comparable to the Mortgage Loans and held for its own account and in accordance with Accepted Servicing Practices. Further, the Servicer will take reasonable care in ascertaining and estimating annual ground rents, taxes, assessments, water rates, fire and hazard insurance premiums, mortgage insurance premiums, and all other charges that, as provided in the Mortgage, will become due and payable to the end that the installments payable by the Mortgagors will be sufficient to pay such charges as and when they become due and payable.

Section 4.03 Realization Upon Defaulted Mortgage Loans.

The Servicer shall use its reasonable efforts, consistent with Accepted Servicing Practices, to foreclose upon or otherwise comparably convert the ownership of properties securing such of the Mortgage Loans as come into and continue in default and as to which no satisfactory arrangements can be made for collection of delinquent payments pursuant to Section 4.01. The Servicer shall use its reasonable efforts to realize upon defaulted Mortgage Loans in such manner as will maximize the receipt of principal and interest by the Owner and Lender, taking into account, among other things, the timing of foreclosure proceedings. The foregoing is subject to the provisions that, in any case in which Mortgaged Property shall have suffered damage, the Servicer shall not be required to expend its own funds toward the restoration of such property unless it shall determine in its discretion (i) that such restoration will increase the proceeds of liquidation of the related Mortgage Loan to the Owner and Lender after reimbursement to itself for such expenses, and (ii) that such expenses will be recoverable by the Servicer through Insurance Proceeds or Liquidation Proceeds from the related Mortgaged Property, as contemplated in Section 4.05. The Servicer shall notify the Owner and Lender in writing of the commencement of foreclosure proceedings. The Servicer shall be responsible for all costs and expenses incurred by it in any such proceedings or functions as Servicing Advances; provided, however, that it shall be entitled to reimbursement therefor from the related Mortgaged Property, as contemplated in Section 4.05. Notwithstanding anything to the contrary contained herein, in connection with a foreclosure or acceptance of a deed in lieu of foreclosure, in the event the Servicer has reasonable cause to believe that a Mortgaged Property is contaminated by hazardous or toxic substances or wastes, or if the Owner or Lender otherwise requests an environmental inspection or review of such Mortgaged Property, such an inspection or review is to be conducted by a qualified inspector. Upon completion of the inspection, the Servicer shall promptly provide the Owner and Lender with a written report of the environmental inspection. After reviewing the environmental inspection report, the Owner, after receipt of written consent of the Lender, and Lender shall determine how the Servicer shall proceed with respect to the Mortgaged Property.

Section 4.04 Establishment of Collection Accounts; Deposits in Collection Accounts; Lender's Security Interest in Collection Accounts.

With respect to each Mortgage Loan, the Servicer shall direct the related Mortgagor to send all payments relating to such Mortgage Loan directly to the Lockbox as set forth in the Loan Agreement; provided, that with respect to each Mortgage Loan that has been transferred to the Backup Servicer in its capacity as Servicer, the Backup Servicer, as Servicer of such Mortgage Loan, shall not be required to direct payments to the Lockbox but may instead use its internal lockbox. If any payments relating to any Mortgage Loan are nevertheless received directly by the Servicer, the Servicer shall deposit such payments directly into the Collection Account pursuant to this Section 4.04 or into the Escrow Account (in the case of Escrow Payments) pursuant to Section 4.06 below.

The Servicer shall not under any circumstances commingle any payments relating to any Mortgage Loan with any of its or another Person's own funds and general assets. The Servicer shall segregate and hold all funds collected and received pursuant to each Mortgage Loan separate and apart from any of its own funds and general assets and shall only deposit payments or recoveries relating to the Mortgage Loans into the Collection Account. The Collection Account shall be established with a Qualified Depository and as set forth in the Loan Agreement. The Collection Account shall be under the sole dominion and control of the Lender as set forth in the form of Blocked Account Control Agreement attached hereto as Exhibit B-1; provided, that if servicing is transferred to the Backup Servicer in its capacity as Servicer, then the Backup Servicer in its capacity as Servicer shall have the authority to direct withdrawals from the Collection Account at anytime before a notice of default is sent from the Lender to the Depositary as set forth the form of Blocked Account Control Agreement attached hereto as Exhibit B-2. An executed original of such Collection Account - Blocked Account Control Agreement shall be delivered to the Owner, Lender and Backup Servicer.

The Servicer shall deposit in the Collection Account or Accounts no later than one (1) Business Day after receipt (or two (2) Business Days after receipt, in the case of Backup Servicer acting as Servicer) and retain therein the following payments and collections:

(i) all payments on account of principal and interest, including Principal Prepayments, on the Mortgage Loans received after the Cut-off Date;

(ii) all Liquidation Proceeds and REO Disposition Proceeds received after the Cut-off Date;

(iii) any net amounts received by the Servicer after the Cut-off Date in connection with any REO Property pursuant to Section 4.13;

(iv) all Insurance Proceeds received after the Cut-off Date including amounts required to be deposited pursuant to Sections 4.08 and 4.10, other than proceeds to be held in the Escrow Account and applied to the restoration or repair of the Mortgaged Property or released to the Mortgagor in accordance with the Servicer's normal servicing procedures, the loan documents or applicable law;

(v) all Condemnation Proceeds affecting any Mortgaged Property received after the Cut-off Date other than proceeds to be held in the Escrow Account and applied to the restoration or repair of the Mortgaged Property or released to the Mortgagor in accordance with the Servicer's normal servicing procedures, the loan documents or applicable law;

(vi) any amounts received after the Cut-off Date and required to be deposited in the Collection Account pursuant to 6.02; and

(vii) funds resulting from the liquidation of any Permitted Investments together with an amount equal to any losses related thereto which shall be deposited into the Collection Account no later than one (1) Business Day (or two (2) Business Days, in the case of Backup Servicer acting as Servicer) after receipt prior to the related Payment Date.

The foregoing requirements for deposit in the Collection Account shall be exclusive, it being understood and agreed that, without limiting the generality of the foregoing, ancillary fees including payments in the nature of late payment charges and assumption fees, to the extent permitted by Section 6.01, need not be deposited by the Servicer in the Collection Account. Any interest paid on funds deposited in the Collection Account by the Qualified Depository shall accrue to the benefit of the Servicer and the Servicer shall be entitled to be paid the amount of such interest from the Collection Account pursuant to Section 4.05(iv).

The Servicer hereby assigns, pledges and grants a first priority security interest to the Lender in all of its right, title and interest (if any) in, to and under the Collection Account, whether now owned or hereafter acquired, now existing or hereafter created and wherever located, to secure the payment of the Obligations. The Servicer agrees to mark its computer records and tapes to evidence the security interests granted to the Lender hereunder.

Section 4.05 Permitted Withdrawals From the Collection Account.

The Servicer shall make withdrawals from the Collection Account only for the following purposes:

(i) to make payments in the amounts and in the manner provided for in Section 5.01;

(ii) [Reserved;]

(iii) to reimburse Servicer for unreimbursed Servicing Advances, the Servicer's right to reimburse itself pursuant to this subclause
(iii) with respect to any Mortgage Loan being limited to excess Liquidation Proceeds, Condemnation Proceeds and Insurance Proceeds (after application of all such amounts to principal, interest on late fees on the related Mortgage Loan) received after the Cut-off Date related to such Mortgage Loan. Upon written notice from the Owner or the Lender from time to time, the Servicer will provide the Owner and Lender with copies of invoices, bills and other documentation relating to Servicing Advances that are to be reimbursed from the Collection Account, in a form that would permit the Owner or Lender to fully recover any amounts due pursuant to any insurance policies. In no instance shall Servicing Advances related to a Mortgage Loan be reimbursed from payments or proceeds of any other Mortgage Loan;

(iv) to pay interest earned on the balance in the Collection Account to the Servicer;

(v) to reimburse the Servicer for any Nonrecoverable Advances made by it;

(vi) to transfer funds to another Qualified Depository in accordance with Section 4.09 hereof;

(vii) to remove funds inadvertently placed in the Collection Account in error by the Servicer; and

(viii) to clear and terminate the Collection Account upon the termination of this Agreement.

Section 4.06 Establishment of Escrow Accounts; Deposits in Escrow Accounts; Lender's Security Interest in the Escrow Account.

The Escrow Account shall be established with a Qualified Depository and as set forth in the Loan Agreement. The Escrow Account shall be under the sole dominion and control of the Lender. The Servicer shall deposit Escrow Payments relating to the Mortgage Loans into the Escrow Account as set forth in Section 4.04 above. The Servicer shall segregate and hold all funds collected and received pursuant to each Mortgage Loan which constitute Escrow Payments separate and apart from any of its own funds and general assets and shall only deposit payments relating to a Mortgage Loan in the Escrow Account. The Escrow Account shall be established with a Qualified Depository. Funds deposited in the Escrow Account may be drawn on by the Servicer in accordance with Section 4.07. The Escrow Account shall be under the sole dominion and control of the Lender as set forth in the form of Blocked Account Control Agreement attached hereto as Exhibit B-1; provided, that if servicing is transferred to the Backup Servicer in its capacity as Servicer, then the Backup Servicer in its capacity as Servicer shall have the authority to direct withdrawals from the Escrow Account at anytime before a notice of default is sent from the Lender to the Depositary as set forth the form of Blocked Account Control Agreement attached hereto as Exhibit B-2. An original of such letter agreement shall be furnished to the Owner, the Backup Servicer and Lender.

The Servicer shall deposit in the Escrow Account or Accounts no later than one (1) Business Day after receipt (or, two (2) Business Days after receipt, in the case of Countrywide as Servicer) on a daily basis and retain therein:

(i) all Escrow Payments collected on account of the Mortgage Loans, for the purpose of effecting timely payment of any items as are required under the terms of this Agreement;

(ii) all Insurance Proceeds which are to be applied to the restoration or repair of any Mortgaged Property; and

(iii) all Servicing Advances for Mortgagors whose Escrow Payments are insufficient to cover escrow disbursements.

The Servicer shall make withdrawals from an Escrow Account only to effect such payments as are required under this Agreement, and for such other purposes as shall be as set forth in and in accordance with Section 4.07. The Servicer shall be entitled to retain or be paid any interest paid on funds deposited in an Escrow Account by the Qualified Depository other than interest on escrowed funds required by law to be paid to the Mortgagor and, to the extent required by law, the Servicer shall pay interest on escrowed funds to the Mortgagor notwithstanding that the Escrow Account is non-interest bearing or that interest paid thereon is insufficient for such purposes.

The Servicer hereby assigns, pledges and grants a first priority security interest to the Lender in all of its right, title and interest (if any) in, to and under the Escrow Account, whether now owned or hereafter acquired, now existing or hereafter created and wherever located, to secure the payment of the Obligations. The Servicer agrees to mark its computer records and tapes to evidence the security interests granted to the Lender hereunder.

Section 4.07 Permitted Withdrawals From Escrow Account.

Withdrawals from the Escrow Account may be made by the Servicer only:

(i) to effect timely payments of ground rents, taxes, assessments, water rates, fire and hazard insurance premiums, Primary Mortgage Insurance Policy premiums, if applicable, and comparable items;

(ii) to reimburse Servicer for any Servicing Advance made by Servicer with respect to a related Mortgage Loan but only from amounts received on the related Mortgage Loan which represent late payments or collections of Escrow Payments thereunder;

(iii) to refund to the Mortgagor any funds as may be determined to be overages;

(iv) for transfer to the Collection Account in connection with an acquisition of REO Property;

(v) for application to restoration or repair of the Mortgaged Property securing a Mortgage Loan to the extent that the applicable Escrow Payments relate to such Mortgage Loan;

(vi) to pay to the Servicer, or to the Mortgagor to the extent required by law, any interest paid on the funds deposited in the Escrow Account;

(vii) to pay to the Mortgagors or other parties Insurance Proceeds deposited in accordance with Section 4.06;

(viii) to remove funds inadvertently placed in an Escrow Account in error by the Servicer; and

(ix) to clear and terminate the Escrow Account on the termination of this Agreement.

As part of its servicing duties, the Servicer shall pay to the Mortgagors interest on funds in an Escrow Account, to the extent required by law, and to the extent that interest earned on funds in the Escrow Account is insufficient, shall pay such interest from its own funds, without any reimbursement therefor.

Section 4.08 Payment of Taxes, Insurance and Other Charges; Collections Thereunder.

With respect to each Mortgage Loan, the Servicer shall maintain accurate records reflecting the status of ground rents, taxes, assessments, water rates and other charges which are or may become a lien upon the Mortgaged Property and the status of fire and hazard insurance coverage and shall obtain, from time to time, all bills for the payment of such charges, including renewal premiums and shall effect payment thereof prior to the applicable penalty or termination date and at a time appropriate for securing maximum discounts allowable, employing for such purpose deposits of the Mortgagor in the Escrow Account which shall have been estimated and accumulated by the Servicer in amounts sufficient for such purposes, as allowed under the terms of the Mortgage or applicable law. To the extent that the Mortgage does not provide for Escrow Payments, the Servicer shall determine that any such payments are made by the Mortgagor at the time they first become due. The Servicer assumes full responsibility for the timely payment of all such bills and shall effect timely payments of all such bills irrespective of the Mortgagor's faithful performance in the payment of same or the making of the Escrow Payments and shall make advances from its own funds to effect such payments.

Section 4.09 Maintenance of Hazard Insurance.

The Servicer shall cause to be maintained for each Mortgage Loan fire and hazard insurance with extended coverage as is customary in the area where the Mortgaged Property is located in an amount which is equal to the lesser of (i) the maximum insurable value of the improvements securing such Mortgage Loan or (ii) the greater of (a) the outstanding principal balance of such Mortgage Loan, and (b) the percentage such that the proceeds thereof shall be sufficient to prevent the Mortgagor and/or the Mortgagee from becoming a co-insurer. If the Mortgaged Property is in an area identified in the Federal Register by the Federal Emergency Management Agency as being a special flood hazard area that has federally-mandated flood insurance requirements, the Servicer will cause to be maintained a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administration with a generally acceptable insurance carrier, in an amount representing coverage not less than the least of (i) the outstanding principal balance of such Mortgage Loan, (ii) the maximum insurable value of the improvements securing such Mortgage Loan or (iii) the maximum amount of insurance which is available under the Flood Disaster Protection Act of 1973, as amended. The Servicer shall also maintain on the REO Property, fire and hazard insurance with extended coverage in an amount which is at least equal to the maximum insurable value of the improvements which are a part of such property, liability insurance and, to the extent required and available under the Flood Disaster Protection Act of 1973, as amended, flood insurance in an amount as provided above. Any amounts collected by the Servicer under any such policies other than amounts to be deposited in the Escrow Account and applied to the restoration or repair of the Mortgaged Property or REO Property, or released to the Mortgagor in accordance with the Servicer's normal servicing procedures, shall be deposited in the Collection Account, subject to withdrawal pursuant to Section 4.05. It is understood and agreed that no other additional insurance need be required by the Servicer or the Mortgagor or maintained on property acquired in respect of the Mortgage Loans, other than pursuant to such applicable state or federal laws and regulations as shall at any time be in force and as shall require such additional insurance. All such policies shall be endorsed with standard mortgagee clauses with loss payable to the Servicer and its successors and/or assigns and shall provide for at least thirty days prior written notice of any cancellation, reduction in the amount or material change in coverage to the Servicer. The Servicer shall not interfere with the Mortgagor's freedom of choice in selecting either his insurance carrier or agent, provided, however, that the Servicer shall not accept any such insurance policies from insurance companies unless such companies currently reflect a General Policy Rating in Best's Key Rating Guide currently acceptable to Fannie Mae and are licensed to do business in the state wherein the property subject to the policy is located.

Section 4.10 [RESERVED]

Section 4.11 Fidelity Bond, Errors and Omissions Insurance.

The Servicer shall maintain, at its own expense, a blanket fidelity bond and an errors and omissions insurance policy, with broad coverage with responsible companies on all officers, employees or other persons acting in any capacity with regard to the Mortgage Loans and who handle funds, money, documents and papers relating to the Mortgage Loans. The Fidelity Bond and errors and omissions insurance shall be in the form of the Mortgage Banker's Blanket Bond and shall protect and insure the Servicer against losses, including forgery, theft, embezzlement, fraud, errors and omissions and negligent acts of such persons. Such Fidelity Bond and errors and omissions insurance shall also protect and insure the Servicer against losses in connection with the failure to maintain any insurance policies required pursuant to this Agreement and the release or satisfaction of a Mortgage Loan without having obtained payment in full of the indebtedness secured thereby. No provision of this Section 4.11 requiring the Fidelity Bond and errors and omissions insurance shall diminish or relieve the Servicer from its duties and obligations as set forth in this Agreement. The minimum coverage under any such Fidelity Bond and insurance policy shall be at least equal to the corresponding amounts required under Accepted Servicing Practices. The Servicer shall, upon request of Lender, deliver to the Lender a certificate from the surety and the insurer as to the existence of the Fidelity Bond and errors and omissions insurance policy and shall obtain a statement from the surety and the insurer that such Fidelity Bond or insurance policy shall in no event be terminated or materially modified without thirty days prior written notice to the Owner and Lender. The Servicer shall notify the Owner and Lender within five Business Days of receipt of notice that such Fidelity Bond or insurance policy will be, or has been, materially modified or terminated. The Owner, Lender and their respective successors or assigns as their interests may appear must be named as loss payees on the Fidelity Bond and as additional insured on the errors and omissions policy.

Section 4.12 Title, Management and Disposition of REO Property.

In the event that title to any Mortgaged Property is acquired in foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale shall be taken in the name of the Owner or its designee as designated in writing by Lender. Any such Person or Persons holding such title other than the Owner shall acknowledge in writing that such title is being held as nominee for the benefit of the Owner and Lender.

The Servicer shall notify the Owner and Lender in accordance with Accepted Servicing Practices of each acquisition of REO Property upon such acquisition, and thereafter assume the responsibility for marketing such REO Property in accordance with Accepted Servicing Practices. Thereafter, the Servicer shall continue to provide certain administrative services to the Owner and Lender relating to such REO Property as set forth in this Section 4.12. The REO Property must be sold within three years following the end of the calendar year of the date of acquisition, unless a REMIC election has been made with respect to the arrangement under which the Mortgage Loans and REO Property are held and (i) the Owner and Lender shall have been supplied with an Opinion of Counsel to the effect that the holding by the related trust of such Mortgaged Property subsequent to such three-year period (and specifying the period beyond such three-year period for which the Mortgaged Property may be held) will not result in the imposition of taxes on "prohibited transactions" of the related trust as defined in Section 860F of the Code, or cause the related REMIC to fail to qualify as a REMIC, in which case the related trust may continue to hold such Mortgaged Property (subject to any conditions contained in such Opinion of Counsel), or (ii) the Owner (at the Servicer's expense) or the Servicer shall have applied for, prior to the expiration of such three-year period, an extension of such three-year period in the manner contemplated by Section 856(e)(3) of the Code, in which case the three-year period shall be extended by the applicable period. If a period longer than three years is permitted under the foregoing sentence and is necessary to sell any REO Property, (i) the Servicer shall report monthly to the Owner and Lender as to progress being made in selling such REO Property and (ii) if, with the written consent of the Owner and Lender, a purchase money mortgage is taken in connection with such sale, such purchase money mortgage shall name the Servicer as mortgagee, and such purchase money mortgage shall not be held pursuant to this Agreement, but instead a separate participation agreement between the Servicer and Owner shall be entered into with respect to such purchase money mortgage.

Notwithstanding any other provision of this Agreement, if a REMIC election has been made, no Mortgaged Property held by a REMIC shall be rented (or allowed to continue to be rented) or otherwise used for the production of income by or on behalf of the related trust or sold in such a manner or pursuant to any terms that would (i) cause such Mortgaged Property to fail to qualify at any time as "foreclosure property" within a meaning of
Section 860G(a)(8) of the Code, (ii) subject the related trust to the imposition of any federal or state income taxes on "net income from foreclosure property" with respect to such Mortgaged Property within the meaning of Section 860G(c) of the Code, or (iii) cause the sale of such Mortgaged Property to result in the receipt by the related trust or any income from non-permitted assets as described in Section 860F(a) (2)(B) of the Code, unless the Servicer has agreed to indemnify and hold harmless the related trust with respect to the imposition of any such taxes.

The Servicer shall, either itself or through an agent selected by the Servicer, and in accordance with the Accepted Servicing Practices, manage, conserve, protect and operate each REO Property in the same manner that it manages, conserves, protects and operates other foreclosed property for its own account, and in the same manner that similar property in the same locality as the REO Property is managed. Each REO Disposition shall be carried out by the Servicer at such price and upon such terms and conditions as the Servicer deems to be in the best interest of the Owner and Lender. The REO Disposition Proceeds from the sale of the REO Property shall be promptly deposited in the Collection Account. As soon as practical thereafter, the expenses of such sale shall be paid and the Servicer shall be reimbursed for any related Servicing Advances.

The Servicer shall cause each REO Property to be inspected promptly upon the acquisition of title thereto and shall cause each REO Property to be inspected at least monthly thereafter or more frequently as may be required by the circumstances. The Servicer shall make or cause the inspector to make a written report of each such inspection. Such reports shall be retained in the Servicing File and copies thereof shall be forwarded by the Servicer to the Owner.

Notwithstanding anything to the contrary set forth in this
Section 4.13, the parties hereto hereby agree that the Owner, upon the written consent of Lender, shall be entitled to manage, conserve, protect and operate each REO Property for its own benefit (such option, an "REO Option"). In connection with the exercise of an REO Option, the prior two paragraphs and the related provisions of Section 4.03 and Section 4.04(iii) (such provisions, the "REO Marketing Provisions") shall be revised as follows. Following the acquisition of any Mortgaged Property, the Servicer shall submit to the Owner and Lender copies of invoices, bills and other documentation relating to Servicing Advances in a form that would permit the Owner or Lender to fully recover any amounts due pursuant to any insurance policies and, upon exercising the REO Option, the Owner shall promptly reimburse the Servicer for such amounts. In the event the REO Option is exercised with respect to an REO Property, Section 4.04 (iii) shall not be applicable thereto. References made in
Section 4.03 with respect to the reimbursement of Servicing Advances shall, for purposes of such REO Property, be deemed to be covered by this paragraph. The Owner acknowledges that, in the event it exercises an REO Option, with respect to the related REO Property, there shall be no breach by the Servicer based upon or arising out of the Servicer's failure to comply with the REO Marketing Provisions.

ARTICLE V

PAYMENTS

Section 5.01 Remittances.

On each Payment Date, the Servicer shall cause to be remitted all amounts credited to the Collection Account as of the close of business on the related preceding Determination Date, net of charges against or withdrawals from the Collection Account pursuant to Section 4.05. One Business Day prior to each Payment Date, the Servicer shall deliver to the Lender a remittance report. The Lender shall confirm the amounts contained in the report and authorize the remittance of such amounts in the following order of priority:

(a) to pay the fees and expenses of the independent director of the Owner then due;

(b) to pay the fees and expenses of the Custodian then due;

(c) to pay any Servicing Fee then due;

(d) to pay the accrued Back-up Servicing Fee then due, including any Servicing Transfer Costs payable pursuant to Section 9.03 hereof;

(e) to pay to the Lender the unreimbursed Lender Expenses and Indemnified Liabilities of the Lender-Related Parties;

(f) to pay the interest due to the Lender;

(g) to pay the principal due to the Lender to satisfy any Borrowing Base Deficiency or otherwise;

(h) to pay the Servicer for any Nonrecoverable Advances made by it;

(i) to pay into the Expense Reserve Account any amount then required to be deposited therein pursuant to Section 2.08 of the Loan Agreement; and

(j) to pay the balance to the Owner.

Section 5.02 Statements to the Owner and Lender.

The Servicer shall furnish to the Owner, the Backup Servicer and Lender an individual Mortgage Loan accounting report (a "Report"), as of the last Business Day of each month, in the Servicer's assigned loan number order to document Mortgage Loan payment activity on an individual Mortgage Loan basis. With respect to each month, such Report shall be received by the Owner, the Backup Servicer and Lender (i) no later than the fifth Business Day of the following month of the related Payment Date on a disk or tape or other computer-readable format, in such format as may be mutually agreed upon by the Owner, Lender and the Servicer, and (ii) no later than the tenth Business Day of the following month of the related Payment Date in hard copy (provided, however, that if the Backup Servicer has succeeded as the successor Servicer hereunder, the duty to provide such Report in hard copy shall be at the option of the successor Servicer), which Report shall contain the following:

(i) With respect to each Monthly Payment (on both an actual and scheduled basis with respect to Mortgage Loan balances and on an actual basis with respect to paid-through dates), the amount of such remittance allocable to principal (including a separate breakdown of any Principal Prepayment, including the date of such prepayment, and any prepayment penalties or premiums, along with a detailed report of interest on Principal Prepayment amounts remitted in accordance with Section 5.01);

(ii) with respect to each Monthly Payment, the amount of such remittance allocable to interest;

(iii) the aggregate Stated Principal Balance of the Mortgage Loans;

(iv) the aggregate of any Servicing Advances reimbursed to the Servicer during the prior distribution period pursuant to Section 4.05;

(v) the number and aggregate outstanding principal balances of Mortgage Loans (a) delinquent (1) 30 to 59 days, (2) 60 to 89 days, (3) 90 days or more; (b) as to which foreclosure has commenced; and (c) as to which REO Property has been acquired;

(vi) the identity of each Mortgage Loan which has been pledged to the Lender for 120 days or more; and

(vii) such other reports as may reasonably be required by the Owner or Lender.

The Servicer shall also provide a trial balance, sorted in the Owner's assigned loan number order, in such form as the Servicer, Lender and the Owner shall agree, with each such Report.

The Servicer shall prepare and file any and all information statements or other filings required to be delivered to any governmental taxing authority or to Owner pursuant to any applicable law with respect to the Mortgage Loans and the transactions contemplated hereby. In addition, the Servicer shall provide the Owner with such information concerning the Mortgage Loans as is necessary for the Owner to prepare its federal income tax return as the Owner may reasonably request from time to time.

In addition, not more than 60 days after the end of each calendar year, the Servicer shall furnish to each Person who was an Owner at any time during such calendar year an annual statement in accordance with the requirements of applicable federal income tax law together with a copy to Lender as to the aggregate of remittances of principal and interest for the applicable portion of such year.

Section 5.03 [Reserved].

Section 5.04 Liquidation Reports.

Upon the foreclosure sale of any Mortgaged Property or the acquisition thereof by the Owner pursuant to a deed-in--lieu of foreclosure, the Servicer shall submit to the Owner a liquidation report with respect to such Mortgaged Property in such form as the Servicer and the Owner shall agree. The Servicer shall also provide reports on the status of REO Property containing such information as Owner may reasonably require.

ARTICLE VI

GENERAL SERVICING PROCEDURES

Section 6.01 Assumption Agreements.

The Servicer will, to the extent it has knowledge of any conveyance or prospective conveyance by any Mortgagor of a Mortgaged Property (whether by absolute conveyance or by contract of, sale, and whether or not the Mortgagor remains or is to remain liable under the Mortgage Note and/or the Mortgage), exercise its rights to accelerate the maturity of such Mortgage Loan under any "due-on-sale" clause to the extent permitted by law; provided, however, that the Servicer shall not exercise any such rights if prohibited by law or the terms of the Mortgage Note from doing so or if the exercise of such rights would impair or threaten to impair any recovery under the related Primary Mortgage Insurance Policy, if any. If the Servicer reasonably believes it is unable under applicable law to enforce such "due-on-sale" clause, the Servicer, with the approval of the Owner and Lender (such approval not to be unreasonably withheld), will enter into an assumption agreement with the person to whom the Mortgaged Property has been conveyed or is proposed to be conveyed, pursuant to which such person becomes liable under the Mortgage Note and, to the extent permitted by applicable state law, the Mortgagor remains liable thereon. Where an assumption is allowed pursuant to this Section 6.01, the Servicer, with the prior consent of the primary mortgage insurer, if any, is authorized to enter into a substitution of liability agreement with the person to whom the Mortgaged Property has been conveyed or is proposed to be conveyed pursuant to which the original mortgagor is released from liability and such Person is substituted as mortgagor and becomes liable under the related Mortgage Note. Any such substitution of liability agreement shall be in lieu of an assumption agreement.

In connection with any such assumption or substitution of liability, the Servicer shall follow the underwriting practices and procedures of the Approved Underwriting Guidelines. With respect to an assumption or substitution of liability, the Mortgage Interest Rate borne by the related Mortgage Note and the amount of the Monthly Payment may not be changed. The Servicer shall notify the Owner and Lender that any such substitution of liability or assumption agreement has been completed by forwarding to the Owner and Lender the original of any such substitution of liability or assumption agreement, which document shall be added to the related Mortgage Loan Documents and shall, for all purposes, be considered a part of such related mortgage file to the same extent as all other documents and instruments constituting a part thereof. All fees collected by the Servicer for entering into an assumption or substitution of liability agreement shall belong to the Servicer.

Notwithstanding the foregoing paragraphs of this section or any other provision of this Agreement, the Servicer shall not be deemed to be in default, breach or any other violation of its obligations hereunder by reason of any assumption of a Mortgage Loan by operation of law or any assumption which the Servicer may be restricted by law from preventing, for any reason whatsoever. For purposes of this Section 6.01, the term "assumption" is deemed to also include a sale of the Mortgaged Property subject to the Mortgage that is not accompanied by an assumption or substitution of liability agreement.

Section 6.02 Satisfaction of Mortgages and Release of Mortgage Loan Documents.

Upon the payment in full of any Mortgage Loan, the Servicer will immediately notify the Custodian with a certification and request for release by a Servicing Officer, which certification shall include a statement to the effect that all amounts received in connection with such payment which are required to be deposited in the Collection Account pursuant to Section 4.04 have been so deposited, and a request for delivery to the Servicer of the portion of the Mortgage Loan Documents held by the Custodian, and unless the related Mortgage Loans are the subject of a Pass-Through Transfer, such request is to be acknowledged by the Owner and Lender. Upon receipt of such certification and request, the Owner and Lender shall promptly release or cause the Custodian to promptly release the related Mortgage Loan Documents to the Servicer and the Servicer shall prepare and deliver for execution by the Owner or at the Owner's option execute under the authority of a power of attorney delivered to the Servicer by the Owner any satisfaction or release. No expense incurred in connection with any instrument of satisfaction or deed of reconveyance shall be chargeable to the Collection Account.

In the event the Servicer satisfies or releases a Mortgage without having obtained payment in full of the indebtedness secured by the Mortgage or should it otherwise prejudice any right the Owner or Lender may have under the mortgage instruments, the Servicer, upon written demand, shall remit within two Business Days to the Lender the then outstanding principal balance of the related Mortgage Loan by deposit thereof in the Collection Account. The Servicer shall maintain the Fidelity Bond insuring the Servicer against any loss it may sustain with respect to any Mortgage Loan not satisfied in accordance with the procedures set forth herein and in accordance with Accepted Servicing Practices.

From time to time and as appropriate for the servicing or foreclosure of the Mortgage Loans, including for the purpose of collection under any Primary Mortgage Insurance Policy, upon request of the Servicer and delivery to the Custodian of a servicing receipt signed by a Servicing Officer (and unless the related Mortgage Loans are the subject of a Pass-Through Transfer, acknowledged by the Owner and Lender), the Custodian shall release the portion of the Mortgage Loan Documents held by the Custodian to the Servicer. Such servicing receipt shall obligate the Servicer to promptly return the related Mortgage Loan Documents to the Custodian, when the need therefor by the Servicer no longer exists, unless the Mortgage Loan has been liquidated and the Liquidation Proceeds relating to the Mortgage Loan have been deposited in the Collection Account or such documents have been delivered to an attorney, or to a public trustee or other public official as required by law, for purposes of initiating or pursuing legal action or other proceedings for the foreclosure of the Mortgaged Property either judicially or non-judicially, and the Servicer has promptly delivered to the Owner, Lender and the Custodian a certificate of a Servicing Officer certifying as to the name and address of the Person to which such documents were delivered and the purpose or purposes of such delivery. Upon receipt of a certificate of a Servicing Officer stating that such Mortgage Loan was liquidated, the servicing receipt shall be released by the Owner, Lender and/or the Custodian, as applicable, to the Servicer.

Section 6.03 Servicing Compensation.

As compensation for its services hereunder, the Servicer shall be entitled to direct remittances from the Collection Account on the Mortgage Loans in the amounts provided for as the Servicer's Servicing Fee under Section
5.01. Additional servicing compensation in the form of interest earned on the Collection Account, assumption fees, as provided in Section 6.01, late payment charges and other ancillary fees shall be retained by the Servicer to the extent not required to be deposited in the Collection Account. The Servicer shall be required to pay all expenses incurred by it in connection with its servicing activities hereunder and shall not be entitled to reimbursement therefor except as specifically provided for.

Section 6.04 Annual Statement as to Compliance.

The Servicer will deliver to the Owner, the Backup Servicer and Lender not later than 90 days following the end of each fiscal year of the Servicer, an Officers' Certificate stating, as to each signatory thereof, that
(i) a review of the activities of the Servicer during the preceding calendar year and of performance under this Agreement has been made under such officers' supervision, and (ii) to the best of such officers' knowledge, based on such review, the Servicer has fulfilled all of its obligations under this Agreement throughout such year, or, if there has been a default in the fulfillment of any such obligation, specifying each such default known to such officers and the nature and status thereof except for such defaults as such Officers in their good faith judgment believe to be immaterial.

Section 6.05 Annual Independent Certified Public Accountants' Servicing Report.

Not later than 90 days following the end of each fiscal year of the Servicer, the Servicer at its expense shall cause a firm of independent public accountants which is a member of the American Institute of Certified Public Accountants to furnish a statement to the Owner and Lender to the effect that such firm has examined certain documents and records relating to the Servicer's servicing of mortgage loans of the same type as the Mortgage Loans pursuant to servicing agreements substantially similar to this Agreement, which agreements may include this Agreement, and that, on the basis of such an examination, conducted substantially in accordance with the Uniform Single Attestation Program for Mortgage Bankers, such firm is of the opinion that the Servicer's servicing has been conducted in compliance with the agreements examined pursuant to this Section 6.05, except for (i) such exceptions as such firm shall believe to be immaterial, and (ii) such other exceptions as shall be set forth in such statement.

Section 6.06 Right to Examine Servicer Records.

Each of the Owner, the Backup Servicer and Lender shall have the right to examine and audit, at its respective expense, upon reasonable notice to the Servicer, during business hours or at such other times as might be reasonable under applicable circumstances, any and all of the books, records, documentation or other information of the Servicer, or held by another for the Servicer or on its behalf or otherwise, which relate to the performance or observance by the Servicer of the terms, covenants or conditions of this Agreement.

The Servicer shall provide to the Owner, the Lender and any supervisory agents or examiners representing a state or federal governmental agency having jurisdiction over the Owner or the Lender, including but not limited to OTS, FDIC and other similar entities, access to any documentation regarding the Mortgage Loans in the possession of the Servicer which may be required by any applicable regulations. Such access shall be afforded without charge, upon reasonable request, during normal business hours and at the offices of the Servicer, and in accordance with the applicable federal government agency, FDIC, OTS, or any other similar regulations.

Section 6.07 Non-solicitation.

The Servicer or any agent or affiliate shall not knowingly conduct any solicitation exclusively targeted to the Mortgagors for the purpose of inducing or encouraging the early prepayment or refinancing of the related Mortgage Loans. It is understood and agreed that promotions undertaken by the Servicer or any agent or affiliate of the Servicer which are directed to the general public at large, including, without limitation, mass mailings based on commercially acquired mailing lists, newspaper, radio and television advertisements shall not constitute solicitation under this section. Nothing contained herein shall prohibit the Servicer from (i) distributing any general advertising including information brochures, coupon books, or other similar documentation which indicates services the Seller offers, including refinances to all Mortgagors in Servicer's servicing portfolio or (ii) providing financing of home equity loans to Mortgagors at the Mortgagor's request.

ARTICLE VII

REPORTS TO BE PREPARED BY SERVICER

Section 7.01 Servicer Shall Provide Information as Reasonably Required.

The Servicer shall furnish to Lender and the Owner upon request, during the term of this Agreement, such periodic, special or other reports or information, whether or not provided for herein, as shall be necessary, reasonable or appropriate with respect to the purposes of this Agreement. The Servicer may negotiate with the Owner or Lender for a reasonable fee for providing such report or information, unless (i) the Servicer is required to supply such report or information pursuant to any other section of this Agreement, or (ii) the report or information has been requested in connection with Internal Revenue Service, OTS, FDIC or other regulatory agency requirements. All such reports or information shall be provided by and in accordance with all reasonable instructions and directions given by the Owner or Lender. The Servicer agrees to execute and deliver all such instruments and take all such action as the Owner or Lender, from time to time, may reasonably request in order to effectuate the purpose and to carry out the terms of this Agreement.

ARTICLE VIII

THE SERVICER

Section 8.01 Indemnification; Third Party Claims.

The Servicer agrees to indemnify the Owner, the Backup Servicer and Lender and hold each harmless from and against any and all claims, losses, damages, penalties, fines, forfeitures, legal fees and related costs, judgments, and any other costs, fees and expenses that the Owner, the Backup Servicer or Lender may sustain in any way related to the failure of the Servicer to perform in any way its duties and service the Mortgage Loans in strict compliance with the terms of this Agreement and for breach of any representation or warranty of the Servicer contained herein. The Servicer shall immediately notify the Owner, the Backup Servicer and Lender if a claim is made by a third party with respect to this Agreement or the Mortgage Loans, assume (with the consent of the Owner and with counsel reasonably satisfactory to the Owner) the defense of any such claim and pay all expenses in connection therewith, including counsel fees, and promptly pay, discharge and satisfy any judgment or decree which may be entered against it, the Owner, the Backup Servicer or Lender in respect of such claim but failure to so notify the Owner, the Backup Servicer or Lender shall not limit its obligations hereunder. The Servicer agrees that it will not enter into any settlement of any such claim without the consent of the Owner, the Backup Servicer and Lender unless such settlement includes an unconditional release of the Owner from all liability that is the subject matter of such claim. The provisions of this Section 8.01 shall survive termination of this Agreement.

Section 8.02 Existence of the Servicer.

The Servicer will keep in full effect its existence, rights and franchises as a corporation under the laws of the state of its incorporation except as permitted herein, and will obtain and preserve its qualification to do business as a foreign corporation in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Agreement or any of the Mortgage Loans and to perform its duties under this Agreement.

Section 8.03 Limitation on Liability of the Servicer and Others.

Neither the Servicer nor any of the officers, employees or agents of the Servicer shall be under any liability to the Owner for any action taken or for refraining from the taking of any action in good faith pursuant to this Agreement, or for errors in judgment made in good faith; provided, however, that this provision shall not protect the Servicer or any such person against any breach of warranties or representations made herein, or failure to perform in any way its obligations in compliance with any standard of care set forth in this Agreement, or any liability which would otherwise be imposed by reason of negligence or any breach of the terms and conditions of this Agreement. The Servicer and any officer, employee or agent of the Servicer may rely in good faith on any document of any kind prima facie properly executed and submitted by the Owner respecting any matters arising hereunder. The Servicer shall not be under any obligation to appear in, prosecute or defend any legal action which is not incidental to its duties to service the Mortgage Loans in accordance with this Agreement and which in its opinion may involve it in any expenses or liability; provided, however, that the Servicer may, with the consent of the Owner and Lender, which consent shall not be unreasonably withheld, undertake any such action which it may deem necessary or desirable with respect to this Agreement and the rights and duties of the parties hereto. In such event, the reasonable legal expenses and costs of such action and any liability resulting therefrom shall be expenses, costs and liabilities for which the Owner will be liable, and the Servicer shall be entitled to be reimbursed therefor from the Owner upon written demand.

Section 8.04 Servicer Not to Resign.

The Servicer shall not resign from the obligations and duties hereby imposed on it except by mutual consent of the Servicer, the Owner and Lender or upon the determination that its duties hereunder are no longer permissible under applicable law and such incapacity cannot be cured by the Servicer. Any such determination permitting the resignation of the Servicer shall be evidenced by an Opinion of Counsel to such effect delivered to the Owner and Lender which Opinion of Counsel shall be in form and substance acceptable to the Owner and Lender. No such resignation shall become effective until a successor shall have assumed the Servicer's responsibilities and obligations hereunder in the manner provided in Sections 9.01 and 9.03.

Section 8.05 No Transfer of Servicing.

With respect to the retention of the Servicer to service the Mortgage Loans hereunder, the Servicer acknowledges that the Owner and Lender have acted in reliance upon the Servicer's independent status, the adequacy of its servicing facilities, plan, personnel, records and procedures, its integrity, reputation and financial standing and the continuance thereof. Without in any way limiting the generality of this section, the Servicer shall not either assign this Agreement or the servicing hereunder or delegate its rights or duties hereunder or any portion thereof, or sell or otherwise dispose of all or substantially all of its property or assets, without the prior written approval of the Owner and Lender.

Section 8.06 Separateness.

The Servicer agrees to conduct its Servicing activities under this Agreement and its activities otherwise involving the Mortgage Loans in a manner which is consistent with Borrower's compliance with the separateness requirements in its LLC Agreement and Section 7.24 of the Loan Agreement.

ARTICLE IX

DEFAULT

Section 9.01 Events of Default.

In case one or more of the following Events of Default by the Servicer shall occur and be continuing, that is to say:

(i) any failure by the Servicer to remit any payment required to be made under the terms of this Agreement which continues unremedied for either one (1) Business Day, if the Servicer is ABMS and/or HAC (or two (2) Business Days, in case the Backup Servicer is acting as Servicer) (it being understood that this subparagraph shall not affect Servicer's obligation pursuant to Section 5.01 to pay default interest on any remittance received after the Business Day on which such payment was due); or

(ii) any failure on the part of the Servicer duly to observe or perform in any material respect any other of the covenants or agreements on the part of the Servicer set forth in this Agreement, the breach of which has a material adverse effect and which continue unremedied for a period of thirty days (except that such number of days shall be fifteen in the case of a failure to pay any premium for any insurance policy required to be maintained under this Agreement and such failure shall be deemed to have a material adverse effect) after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer by the Owner or Lender; or

(iii) a decree or order of a court or agency or supervisory authority having jurisdiction for the appointment of a conservator or receiver or liquidator in any insolvency, bankruptcy, readjustment of debt, marshaling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Servicer and such decree or order shall have remained in force undischarged or unstayed for a period of sixty days; or

(iv) the Servicer shall consent to the appointment of a conservator or receiver or liquidator in any insolvency, bankruptcy, readjustment of debt, marshaling of assets and liabilities or similar proceedings of or relating to the Servicer or of or relating to all or substantially all of its property; or

(v) the Servicer shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency or reorganization statute, make an assignment for the benefit of its creditors, or voluntarily suspend payment of its obligations; or

(vi) only if ABMS and/or HAC is the Servicer, there occurs an "Event of Default" as defined in the Loan Agreement; or

(vii) only if ABMS and/or HAC is the Servicer, the Servicer attempts to assign its right to servicing compensation hereunder or the Servicer attempts, without the consent of the Owner, to sell or otherwise dispose of all or substantially all of its property or assets or to assign this Agreement or the servicing responsibilities hereunder or to delegate its duties hereunder or any portion thereof except as otherwise permitted herein; or

(viii) the Servicer ceases (either directly or indirectly through its subservicers) to be qualified to transact business in any jurisdiction where it is currently so qualified, but only to the extent such non-qualification materially and adversely affects the Servicer's ability to perform its obligations hereunder; or

(ix) only if ABMS and/or HAC is the Servicer, the Servicer shall cease to be a direct or indirect wholly-owned subsidiary of ABSFI; or

then, and in each and every such case, so long as an Event of Default shall not have been remedied, the Owner (with prior written consent of Lender) or Lender, by notice in writing to the Servicer and a copy to Backup Servicer may, in addition to whatever rights the Owner or Lender may have under Section 8.01 and at law or equity to damages, including injunctive relief and specific performance, terminate all the rights and obligations of the Servicer under this Agreement and in and to the Mortgage Loans and the proceeds thereof without compensating the Servicer for the same (or paying any other fees and expenses). On or after the receipt by the Servicer and Backup Servicer of such written notice of the termination of Servicer, all authority and power of the Servicer under this Agreement, whether with respect to the Mortgage Loans or otherwise, shall pass to and be vested in the Backup Servicer pursuant to and under this Section, and, without limitation, the Backup Servicer, is hereby authorized and empowered, as attorney-in-fact or otherwise, to execute and deliver, on behalf of and at the expense of the Servicer, any and all documents and other instruments and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such notice of termination, whether to complete the transfer and endorsement or assignment of the Mortgage Loans and related documents, or otherwise. Upon written request from the Owner and the Lender, the Servicer shall prepare, execute and deliver, any and all documents and other instruments, and place in the Backup Servicer's possession all Servicing Files, and do or accomplish all other acts or things necessary or appropriate to effect the purposes of such notice of termination, whether to complete the transfer and endorsement or assignment of the Mortgage Loans and related documents, or otherwise, at the Servicer's sole expense. The Servicer agrees to cooperate with the Owner, the Lender and the Backup Servicer in effecting the termination of the Servicer's responsibilities and rights hereunder, including, without limitation, the transfer to the Backup Servicer for administration by it of all cash amounts which shall at the time be credited by the Servicer to the Collection Account or Escrow Account or otherwise held by the Servicer or thereafter received with respect to the Mortgage Loans or any REO Property.

In the event that the Backup Servicer becomes the successor Servicer, the parties hereby agree that there shall no longer be the requirement to have a Backup Servicer.

Section 9.02 Waiver of Defaults.

The Owner may waive only by written notice and only upon the written consent of Lender any default by the Servicer in the performance of its obligations hereunder and its consequences. Upon any such waiver of a past default, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been remedied for every purpose of this Agreement. No such waiver shall extend to any subsequent or other default or impair any right consequent thereon except to the extent expressly so waived in writing.

Section 9.03 Backup Servicer.

(a) From and after the Effective Date hereof until the Servicing Transfer Date, the Backup Servicer shall act as back-up servicer with respect to the Mortgage Loans, and shall perform such functions, duties, obligations, undertakings and responsibilities as set forth in Section 9.03(b) below subject to this Section 9.03(a). Prior to the Servicing Transfer Date, the Backup Servicer shall have only those duties and obligations imposed by it described in Section 9.03(b) below, and shall have no obligations or duties under any agreement to which it is not a party, including but not limited to the various agreements named herein; provided, that prior to the Servicing Transfer Date, with respect to any Mortgage Loans which are pledged to the Lender for at least 150 days, the Backup Servicer shall service all such Mortgage Loans as if it were the Servicer and shall be compensated a fee of $20 per month per Mortgage Loan with respect to each such Mortgage Loan in excess of the 50th Mortgage Loan transferred to the Backup Servicer (it being understood that this fee of $20 per month per Mortgage Loan is only applicable during the period before the Servicing Transfer Date). In its capacity as Backup Servicer, it shall in no event be liable for any obligations of the Owner or the Servicer to any party, whether hereunder or under any other agreement, which are not related to servicing functions, including, without limitation, any repurchase obligations; provided, that the Backup Servicer shall have all of the rights, duties and obligations of the Servicer with respect to each Mortgage Loans transferred to it for servicing before the Servicing Transfer Date.

(b) No later than the fifth (5th) Business Day of each calendar month, the Servicer shall deliver to the Backup Servicer a complete set of servicing records in computer-readable form with respect to the payment, collection and other servicing activity of the Mortgage Loans during the preceding calendar month, which records shall contain sufficient data to permit the Backup Servicer to assume the duties of the Servicer hereunder without delay on account of the absence of relevant servicing information. The information described in the foregoing sentence and all other information provided by the Servicer to the Backup Servicer pursuant to the Agreement shall be in form and substance satisfactory to the Backup Servicer. On at least a monthly basis, the Backup Servicer shall convert and "map" the data contained in such servicing records to its own servicing system, and shall provide the Lender not later than the 15th day of each month commencing November 15, 2004, with a certification by an appropriate officer of the Backup Servicer to the effect that it has received from the Servicer each monthly submission of servicing data, has completed such conversion and mapping of the data delivered with respect to the immediately preceding month, and is capable of assuming the duties of the Servicer if required to do so hereunder upon at least 15 days' prior to written notice from the Lender.

(c) The Backup Servicer, prior to assuming any of the Servicer's duties hereunder may not resign hereunder unless it arranges for a successor Backup Servicer reasonably acceptable to the Owner and the Lender with not less than 90 days' notice delivered to the Owner, the Lender and the Servicer.

(d) From and after the Servicing Transfer Date, the Backup Servicer shall perform all of the functions, duties, obligations, undertakings and responsibilities of the Servicer hereunder and shall be the successor to the Servicer hereunder, but only in its capacity as Servicer under this Agreement. In the event the Backup Servicer becomes the successor Servicer, it shall not be liable for any acts or omissions of the Servicer under this Agreement or any other agreement and shall not be deemed to have made any representations and warranties of the Servicer or any predecessor Servicer under this Agreement or any other agreement. In the event the Backup Servicer becomes the successor Servicer, it shall be not deemed to be in default thereunder by reason of any failure to make, or any delay in making, any distribution hereunder or any portion thereof caused by (a) the failure of the Servicer or any predecessor Servicer to (i) deliver, or any delay in delivering, cash, documents or records to it, (ii) cooperate as required by this Agreement, or (iii) deliver the Mortgage Loans to the Custodian as required by this Agreement, or (b) restrictions imposed by any regulatory authority having jurisdiction over the Servicer.

(e) Upon the transfer of the servicing of the Mortgage Loans, prior to the first Payment Date after the Servicing Transfer Date, the Lender shall cause the Custodian to provide the Backup Servicer with an officer's certificate that contains (i) a complete description of all material breaches by the Servicer which have not been fully cured and (ii) a confirmation that all reports required to be filed by the Custodian have been timely filed.

(f) The Backup Servicer agrees to indemnify the Owner, the Servicer and the Lender, and any of their respective directors, officers, employees or agents from, and hold them harmless against, any and all costs, expenses (including reasonable attorney fees and disbursements), losses, claims, damages and liabilities to the extent that such cost, expense, loss, claim, damage or liability arose out of, or was imposed upon the Owner, the Servicer or the Lender and their respective directors, officers, employees and agents through the Backup Servicer's intentional misconduct or gross negligence, except to the extent such indemnified party's own bad faith, willful misconduct or gross negligence contributes to the costs, loss, claim, damage or liability. Each of the Owner, the Servicer and the Lender agrees, severally and not jointly, to indemnify the Backup Servicer, and any of its respective directors, officers, employees or agents from, and hold them harmless against, any and all costs, expenses (including reasonable attorney fees and disbursements), losses, claims, damages and liabilities to the extent that such cost, expense, loss, claim, damage or liability arose out of, or was imposed upon the Backup Servicer and its respective directors, officers, employees and agents through the intentional misconduct or gross negligence of the Owner, the Servicer or the Lender, except to the extent such indemnified party's own bad faith, willful misconduct or gross negligence contributes to the costs, loss, claim, damage or liability (for the avoidance of doubt, in no event shall Owner or Lender indemnify the Backup Servicer for the intentional misconduct or gross negligence of either (x) the other or (y) the Servicer).

(g) The Backup Servicer will not be obligated to incur any expenses or costs (including, without limitation, legal fees and the preparation and recording of all intervening assignments of mortgage) in connection with the transfer of servicing of the Mortgage Loans to the Backup Servicer, or to compel the performance of any obligations by any party to the Agreement. Without limiting any obligations of a terminated Servicer as provided above, if the Servicer is no longer the Servicer hereunder for any reason, such predecessor Servicer shall be responsible for paying any Servicing Transfer Costs incurred by the Backup Servicer in connection with the transfer of servicing from the predecessor Servicer; provided, that if the predecessor Servicer fails to pay any such Servicing Transfer Costs, the Lender shall cause such Servicing Transfer Costs to be paid out of the Collection Account. In addition, if the Backup Servicer is the successor to the Servicer, and if the predecessor Servicer fails to pay any Servicing Transfer Costs incurred by the Backup Servicer, then the Backup Servicer may offset any such Servicing Transfer Costs against amounts that are payable or reimbursable to the predecessor Servicer with respect to unpaid Servicing Fees and unreimbursed Servicing Advances as set forth below in the following paragraph below (and the Backup Servicer shall only be paid such Servicing Transfer Costs from the Collection Account to the extent it reasonably determines that such Servicing Transfer Costs will not be recoverable pursuant to such offsets). To the extent such Servicing Transfer Costs remain unpaid by the predecessor Servicer, from the Collection Account, or from offset against amounts that are payable or reimbursable to the predecessor Servicer with respect to unpaid Servicing Fees and unreimbursed Servicing Advances, such unpaid Servicing Transfer Costs shall be paid by the Owner and the predecessor Servicer, jointly and severally. The foregoing obligation of the predecessor Servicer with respect to Servicing Transfer Costs shall not be deemed to limit any other liability the predecessor Servicer may have to the other parties hereto in respect of any breach of its obligations or duties hereunder.

(h) If the Backup Servicer is the successor to the Servicer, the Backup Servicer in such capacity shall remit all unpaid Servicing Fees accrued during the period prior to the Servicing Transfer and unreimbursed Servicing Advances outstanding on the Servicing Transfer Date to the predecessor Servicer; provided, however, there shall be no duty to so remit if the Servicing Transfer is the result of an Event of Default under this Agreement with respect to the predecessor Servicer; and provided further, that such duty to reimburse relates only to all such unpaid Servicing Fees accrued during the period prior to the Servicing Transfer and unreimbursed Servicing Advances made by the predecessor Servicer prior to Servicing Transfer Date; and, further, provided, that the Backup Servicer in its capacity as successor Servicer shall be obliged to make such reimbursement only out of collections on the related Mortgage Loan, (including monthly collections, Liquidation Proceeds, Released Mortgaged Property Proceeds, Insurance Proceeds, or their equivalent under the Basic Document) and such other amounts that the Servicer is permitted to collect from the related Mortgagor or otherwise relating to the related Mortgage Loan before the Backup Servicer in its capacity as successor Servicer reimburses itself for any unreimbursed Servicing Advances which it makes with respect to such Mortgage Loan. The Backup Servicer in its capacity as successor Servicer shall remit any funds due to the predecessor Servicer under this paragraph on the Payment Date.

(i) The Backup Servicer, as compensation for its obligations and duties as Backup Servicer hereunder, shall be paid the Backup Servicing Fee on each Payment Date pursuant to Section 5.01. If the Backup Servicer shall succeed as Servicer hereunder, the Backup Servicer shall no longer be entitled to be paid the Backup Servicing Fee with respect to any period after the Servicing Transfer Date.

(j) In addition, as compensation for its assumption of its duties as Backup Servicer hereunder, the Lender shall deliver to the Backup Servicer on the Effective Date hereof, from the Lender's own funds, the Initial Setup Fee.

(k) As compensation for its assumption of its duties as successor to the Servicer hereunder, on and after the Servicing Transfer Date, the Backup Servicer in its capacity as successor to the Servicer hereunder shall become entitled to receive the Servicing Fee for three (3) months (regardless of the actual number of months that the Backup Servicer has acted as the successor Servicer) on each Mortgage Loan and such other compensation to the Servicer as is provided in this Agreement (other than any such compensation due to the predecessor Servicer for any period prior to the Servicing Transfer Date); provided, however that the predecessor Servicer shall nonetheless be entitled to payment or reimbursement for unpaid Servicing Fees accrued during the period prior to the Servicing Transfer Date or Servicing Advances made by such predecessor Servicer during the period prior to the Servicing Transfer Date pursuant to Section 9.03(h) hereof. The parties agree that if the Backup Servicer has succeeded as the successor Servicer hereunder, the Servicing Fee Rate shall be equal to 0.50% after the Servicing Transfer Date, provided, however, in the event of an Event of Default under the Loan Agreement, the Servicing Fee Rate shall be a commercially reasonable rate or per loan fee (taking into consideration, among other factors, the fact that the Loan Agreement is no longer a revolving facility) as agreed upon by the Backup Servicer and the Lender, who agree to act in good faith based upon the then Principal Balance of the Mortgage Loans outstanding at such time and anticipated balances going forward; and provided further, that the 0.50% rate shall be applicable for a minimum of three (3) months following such a Servicing Transfer Date. If the Lender and the Backup Servicer fail to set a mutually agreeable Servicing Fee Rate in good faith negotiations after the Servicing Transfer Date and the subsequent Event of Default, the Backup Servicer may in its sole discretion resign as successor Servicer hereunder at no cost to the Backup Servicer and the Lender shall reimburse the Backup Servicer for any unreimbursed Servicing Advances made by the Backup Servicer with respect to the Mortgage Loans and any unreimbursed Servicing Transfer Costs incurred by the Backup Servicer prior to the date of such resignation.

(l) If the Backup Servicer is terminated as Backup Servicer without cause or, is required by the Owner (with the prior written consent of the Lender) or the Lender to resign as Backup Servicer, the Backup Servicer shall be paid from the Collection Account (or from the Lender if there are insufficient funds in the Collection Account) a termination fee equal to the Backup Servicing Fee Rate accrued for nine (9) months (on the basis of a 360-day year and twelve 30-day months) less the number of months that the Backup Servicer has already received a payment as Backup Servicer on the aggregate principal balance of the Mortgage Loans on the date of such termination, if such termination or forced resignation occurs on or prior to the nine month anniversary of the Effective Date. No termination fee shall be payable to the Backup Servicer if the Backup Servicer is terminated as Backup Servicer without cause or, is required to resign as Backup Servicer, after the 9-month anniversary of the Effective Date or if the Backup Servicer resigns pursuant to
Section 9.03(k).

ARTICLE X

TERMINATION

Section 10.01 Servicing Term.

The Servicer hereby covenants and agrees to act as the Servicer under this Agreement as of the Closing Date through the Termination Date; provided, that the right of the Servicer to service any given Mortgage Loan shall automatically expire on the 150th day after such Mortgage Loan is pledged to the Lender pursuant to the Loan Agreement without any further notice from or other action by the Lender or Owner. However, if the Backup Servicer shall become the Servicer hereunder the term of the Backup Servicer as Servicer shall not be subject to expiration pursuant to this Section 10.01.

With respect to each Mortgage Loan, upon the expiration of the right of the Servicer to service such Mortgage Loan as set forth in this Section 10.01, the Backup Servicer shall be the successor in all respects to the Servicer in its capacity as Servicer under this Agreement and the transactions set forth or provided for herein and shall be subject to all the responsibilities, duties and liabilities relating thereto and arising thereafter placed on the Servicer (except for any representations or warranties of the Servicer under this Agreement by the terms and provisions hereof); provided, that the Backup Servicer shall continue to be compensated in its capacity as the Backup Servicer (and not in the capacity as Servicer) until the Servicing Transfer Date occurs.

Section 10.02 Termination.

Notwithstanding the foregoing Section 10.01, the respective obligations and responsibilities of the Servicer shall terminate upon the earliest of (i) the later of the final payment of the last Mortgage Loan and the remittance of all funds due hereunder; or (ii) mutual consent of the Servicer, the Owner and the Lender in writing; or (iii) termination by the Lender pursuant to Section 9.01; or (iv) the expiration of servicing pursuant to Section 10.01 above; provided, that with respect to Countrywide as Backup Servicer and Servicer, if Countrywide's agreed-upon fees and expenses are not paid within 60 days of notice of default, Countrywide's obligations and responsibilities as Backup Servicer and Servicer shall terminate and Countrywide shall return any Mortgage Files in its possession as directed by the Lender.

Section 10.03 Termination Without Cause.

The Lender may, at its sole option, terminate any rights the Servicer may have hereunder, without cause, upon 20 days prior written notice. Any such notice of termination shall be in writing and delivered to the Servicer as provided in Section 11.05 of this Agreement.

Termination pursuant to this Section 10.03 shall be effective on the date (the "Transfer Date") on which the Servicer transfers all responsibilities, rights, duties and obligations under this Agreement to the successor appointed pursuant to Sections 9.01 and 9.03. The Lender shall appoint such successor and the Transfer Date shall be no more than 20 days following the date on which the Servicer receives notice of termination.

ARTICLE XI

MISCELLANEOUS PROVISIONS

Section 11.01 Amendment.

This Agreement may be amended from time to time by the Servicer, the Owner, the Lender and the Backup Servicer by written agreement signed by the Servicer, the Owner, the Lender and the Backup Servicer.

Section 11.02 Recordation of Agreement.

To the extent permitted by applicable law, this Agreement is subject to recordation in all appropriate public offices for real property records in all the counties or other comparable jurisdictions in which any of all the properties subject to the Mortgages are situated, and in any other appropriate public recording office or elsewhere, such recordation to be effected by the Servicer at the Servicer's expense on direction of the Owner or Lender accompanied by an opinion of counsel to the effect that such recordation materially and beneficially affects the interest of the Owner or Lender or is necessary for the administration or servicing the Mortgage Loans.

Section 11.03 Governing Law.

THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS. THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

Section 11.04 Notices.

Any demands, notices or other communications permitted or required hereunder shall be in writing and shall be deemed conclusively to have been given if personally, delivered, sent by overnight courier with proof of delivery, mailed by certified mail, postage prepaid, and return receipt requested or transmitted by telecopier and confirmed by a similar writing delivered by overnight courier, as follows:

(i) if to the Servicer:

American Business Mortgage Services, Inc. The Wanamaker Bldg.

100 Penn Square East
Philadelphia, PA 19107
Attention: Stephen M. Giroux
Telecopier No.: (215) 940-3299

HomeAmerican Credit, Inc.
The Wanamaker Bldg.
100 Penn Square East
Philadelphia, PA 19107
Attention: Stephen M. Giroux
Telecopier No.: (215) 940-3299

with a copy to:

Blank Rome LLP
One Logan Square
Philadelphia, PA 19103
Attention: Lawrence F. Flick, II
Telecopier No.: (215) 569-5555

(ii) if to the Owner:

Penn Square East Funding, LLC The Wanamaker Bldg.

100 Penn Square East
Philadelphia, PA 19107
Attention: Stephen M. Giroux
Telecopier No.: (215) 940-3299

with a copy to:

Blank Rome LLP
One Logan Square
Philadelphia, PA 19103
Attention: Lawrence F. Flick, II
Telecopier No.: (215) 569-5555

(iii) if to the Lender:

Fortress Credit Corp.

1251 Avenue of the Americas
16th Floor
New York, New York 10020
Attention: Kevin Treacy
Telecopier No.: (212) 798-6131

(iv) if to the Backup Servicer:

Countrywide Home Loans Servicing LP 450 American Street, MS-SV3-A Simi Valley, CA 93065 Telecopier No.: (805) 578-6177 Attention: Thomas P. Lin

or such other address as may hereafter be furnished to the other party by like notice. Any such demand, notice, or communication hereunder shall be deemed to have been received on the date delivered to or received at the premises of the address (as evidenced, in the case of registered or certified mail, by the date noted on the return receipt).

Section 11.05 Severability of Provisions.

Any part, provision, representation or warranty of this Agreement which is prohibited or which is held to be void or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any part, provision, representation or warranty of this Agreement which is prohibited or unenforceable or is held to be void or unenforceable in any jurisdiction shall be ineffective, as to such jurisdiction, to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction as to any Mortgage Loan shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the parties hereto waive any provision of law which prohibits or renders void or unenforceable any provision hereof. If the invalidity of any part, provision, representation or warranty of this Agreement shall deprive any party of the economic benefit intended to be conferred by this Agreement, the parties shall negotiate, in good faith, to develop a structure the economic effect of which is nearly as possible the same as the economic effect of this Agreement without regard to such invalidity.

Section 11.06 Exhibits.

The exhibits to this Agreement are hereby incorporated and made a part hereof and are an integral part of this Agreement.

Section 11.07 General Interpretive Principles.

For purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

(i) the terms defined in this Agreement have the meanings assigned to them in this Agreement and include the plural as well as the singular, and the use of any gender herein shall be deemed to include the other gender;

(ii) accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles;

(iii) references herein to "Articles," "Sections," "Subsections," "Paragraphs," and other subdivisions without reference to a document are to designated Articles, Sections, Subsections, Paragraphs and other subdivisions of this Agreement;

(iv) a reference to a Subsection without further reference to a Section is a reference to such Subsection as contained in the same Section in which the reference appears, and this rule shall also apply to Paragraphs and other subdivisions;

(v) the words "herein," "hereof," "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular provision; and

(vi) the term "include" or "including" shall mean without limitation by reason of enumeration.

Section 11.08 Reproduction of Documents.

This Agreement and all documents relating hereto, including, without limitation, (i) consents, waivers and modifications which may hereafter be executed, (ii) documents received by any party at the closing, and (iii) financial statements, certificates and other information previously or hereafter furnished, may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.

Section 11.09 Confidentiality of Information.

Each party recognizes that, in connection with this Agreement, it may become privy to non-public information regarding the financial condition, operations and prospects of the other party. Except as required to be disclosed by law, each party agrees to keep all non-public information regarding the other party strictly confidential, and to use all such information solely in order to effectuate the purpose of this Agreement.

Section 11.10 Recordation of Assignments of Mortgage.

To the extent permitted by applicable law, each of the Assignments of Mortgage may be subject to recordation in all appropriate public offices for real property records in all the counties or other comparable jurisdictions in which any or all of the Mortgaged Properties are situated, and in any other appropriate public recording office or elsewhere, such recordation to be effected by the Servicer. The Servicer shall not be responsible for the cost or preparation of such recordation.

Section 11.11 Assignment.

This Agreement is assignable by the Lender upon notice to the Owner, the Servicer and the Backup Servicer (the "Notice Date") in whole or in part without the consent of the Owner, the Servicer or the Backup Servicer, provided that the rights with respect to this Agreement shall not be assigned without the associated liabilities with respect to events occurring after the Notice Date (Lender shall remain liable with respect to events occurring up to and including the Notice Date). The Owner shall have the right, only upon prior written consent of the Lender, but without the consent of the Servicer and the Backup Servicer, to assign, in whole or in part, its interest under this Agreement with respect to some or all of the Mortgage Loans, and designate any person to exercise any rights of the Owner hereunder. In no event shall Owner sell a partial interest in any Mortgage Loan. The Backup Servicer shall not assign this Agreement without the prior written consent of the Lender, which consent shall not be unreasonably withheld, delayed or conditioned. All references to the Owner in this Agreement shall be deemed to include its assignees or designees.

Section 11.12 No Partnership.

Nothing herein contained shall be deemed or construed to create a co-partnership or joint venture between the parties hereto and the services of the Servicer shall be rendered as an independent contractor and not as agent for Owner.

Section 11.13 Execution; Successors and Assigns.

This Agreement may be executed in one or more counterparts and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed to be an original; such counterparts, together, shall constitute one and the same agreement. Subject to Sections 8.04 and 9.03 and 11.11, this Agreement shall inure to the benefit of and be binding upon the Servicer, the Backup Servicer and the Owner and their respective successors and assigns.

Section 11.14 Entire Agreement.

Each of the Servicer, the Owner and the Backup Servicer acknowledges that no representations, agreements or promises were made to it by the other party or any of its employees other than those representations, agreements or promises specifically contained herein. This Agreement sets forth the entire understanding among the parties hereto and shall be binding upon all successors of all of the parties.

IN WITNESS WHEREOF, the Servicer, the Owner, the Lender and the Backup Servicer have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the date and year first above written.

AMERICAN BUSINESS MORTGAGE SERVICES,
INC.

By: /s/ Stephen M. Giroux
    --------------------------------------------------
    Name: Stephen M. Giroux
    Title: Executive Vice President, General Counsel
           and Secretary

PENN SQUARE EAST FUNDING, LLC

By: /s/ Jeffrey M. Ruben
    --------------------------------------------------
    Name: Jeffrey M. Ruben
    Title: Executive Vice President

FORTRESS CREDIT CORP.

By: /s/ Constantine Dakolias
    --------------------------------------------------
    Name: Constantine Dakolias
    Title: Chief Credit Officer

COUNTRYWIDE HOME LOANS SERVICING LP

By: /s/ Thomas P. Lin
    --------------------------------------------------
    Name: Thomas P. Lin
    Title: Senior Vice President

Exhibit 10.8

EXECUTION VERSION

PLEDGE AND SECURITY AGREEMENT

THIS PLEDGE AND SECURITY AGREEMENT (this "Pledge Agreement"), dated as of November 4, 2004, is made and given by HOMEAMERICAN CREDIT, INC., a Pennsylvania corporation ("HAC"), and AMERICAN BUSINESS MORTGAGE SERVICES, INC., a New Jersey corporation ("ABMS"; together with HAC, each a "Grantor" and, collectively, "Grantors"), in favor of FORTRESS CREDIT CORP., a Delaware corporation ("Secured Party").

RECITALS

WHEREAS, Grantors are the sole equity members of Penn Square East Funding, LLC, a Delaware limited liability company ("Borrower");

WHEREAS, Secured Party and Borrower have entered into that certain Master Loan and Security Agreement, dated as of the date hereof (the "Loan Agreement"; capitalized terms used herein without definition having the meanings assigned to those terms in the Loan Agreement), pursuant to which Secured Party has agreed to make certain credit facilities available to Borrower; and

WHEREAS, as a condition precedent to Secured Party's agreement to provide such credit facilities to Borrower, Secured Party has required that Grantors enter into this Pledge Agreement to secure the Obligations.

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises set forth in this Pledge Agreement, the parties hereto, intending to be legally bound, agree as follows:

Section 1. Construction/Defined Terms. Unless the context hereof clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the term "including" is not limiting, and the term "or" has, except where otherwise indicated, the inclusive meaning represented by the phrase "and/or." Any reference in this Pledge Agreement to any agreement, instrument or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders and supplements, thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders and supplements set forth therein). Any reference herein to any Person shall be construed to include such Person's successors and assigns. As used in this Pledge Agreement, the following terms shall have the following respective meanings:

"LLC Agreement" means that certain Limited Liability Company Agreement, dated as of November __, 2004, among Grantors, as Members, and Orlando Figueroa, as the Special Member, whereby Borrower was created.

"UCC" shall mean - except where the context refers to the Uniform Commercial Code of another State of the United States of America - the Uniform Commercial Code as amended from time to time and in force in the State of New York, or any successor statute.

Section 2. Grant of Security Interest. As collateral security for the prompt and complete payment and performance when due (whether at the stated maturity thereof, by acceleration or otherwise) of all the Obligations, each Grantor hereby pledges, hypothecates, assigns, charges and mortgages to Secured Party, and hereby grants to Secured Party a continuing security interest in, all of the following property now owned, or at any time hereafter acquired, by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (all of which is hereinafter collectively referred to as the "Collateral"):

2.1. The membership interests of such Grantor in Borrower and all certificates representing any such membership interests in Borrower, all of the right, title and interest of such Grantors in, to and under its respective percentage interest, shares or units as a member and all investment property in respect of such membership interests, including, without limitation, such Grantor's interest in (or allocation of) the profits, losses, income, gains, deductions, credits or similar items of Borrower and the right to receive distributions of Borrower's cash, other property, assets, and all options and warrants for the purchase of membership interests, whether now existing or hereafter arising, whether arising under the terms of the certificate of formation, the LLC Agreement or any of the other organizational documents of Borrower, or at law or in equity, or otherwise and any and all of the proceeds thereof (all of said membership interests, certificates and warrants being hereinafter collectively referred to as the "Pledged Membership Interests") herewith or hereafter delivered to Secured Party, and all distributions, cash, instruments, investment property and other property from time to time received, receivable or otherwise distributed in respect of, or in exchange for, any or all of the Pledged Membership Interests;

2.2. Any additional membership interests in Borrower from time to time acquired by such Grantor in any manner and any certificates, which shall be delivered to Secured Party, representing such additional membership interests or any additional percentage interests, shares, units, options or warrants to acquire membership interests in Borrower (and any such additional interests shall constitute part of the Pledged Membership Interests), and all options, warrants, distributions, investment property, cash, instruments and other rights and options from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such interests (and such Grantor shall promptly thereafter deliver to Secured Party a certificate duly executed by such Grantor describing such percentage interests, certificates, units, options or warrants and certifying that the same have been duly pledged hereunder); and

2.3. To the extent not otherwise covered in Sections 2.1 and 2.2 above, all proceeds of the foregoing Collateral. As used in this Pledge Agreement, the term "proceeds" shall have the meaning ascribed to that term in the UCC.

Section 3. Delivery of Certain Collateral. Each Grantor shall deliver possession of all certificates or instruments representing or evidencing any Collateral of such Grantor from time to time to Secured Party, in each case in suitable form for transfer by delivery, accompanied by all necessary instruments of transfer or assignment, duly executed in blank.

Section 4. Rights of Secured Party; Limitations on Secured Party's Obligations. Secured Party shall not have any obligation or liability under any contract or undertaking of either Grantor by reason of or arising out of this Pledge Agreement or the assignment to Secured Party or the receipt by Secured Party of any payment relating to any ownership interest in the Collateral, nor shall Secured Party be required or obligated in any manner to perform or fulfill any of the obligations of either Grantor under or pursuant to any contract, to make any payment, to make any inquiry as to the source, nature, propriety or sufficiency of any payment received by Secured Party or as to the sufficiency of any performance by any party under any agreement, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to Secured Party or to which Secured Party may be entitled at any time or times.

Section 5. Representations and Warranties. Each Grantor hereby represents and warrants to Secured Party that, from and after the date of this Pledge Agreement until the Obligations are fully satisfied:

5.1. Title; No Other Security Interests. Except for the security interest granted hereunder to Secured Party:

(a) Such Grantor owns its interest in the Collateral in which it hereby grants a security interest and which it hereby pledges to Secured Party free and clear of any and all liens other than the security interests created hereby, has the unrestricted right to grant the security interest and pledge its assets as provided for herein and has granted to, or for the benefit of, Secured Party a valid and perfected security interest in the Collateral of such Grantor, as a first priority security interest, free of all other liens, encumbrances and transfer restrictions; such Grantor is, and at the time of pledge and delivery of such Collateral will be, the sole holder of record and the sole beneficial owner of such Collateral, free and clear of any lien thereon or affecting title thereto other than the security interests created hereby; all consents required for the fully effective pledge of the Collateral of such Grantor as herein provided have been obtained;

(b) The certificates evidencing the Pledged Membership Interests have been duly authorized and validly issued and are fully paid and non-assessable;

(c) Such Grantor has the right and requisite authority to pledge, assign, transfer, deliver, deposit and set over the Collateral of such Grantor to Secured Party as provided herein;

(d) As of the date hereof, there are no existing options, warrants, calls, purchase rights or commitments of any character whatsoever relating to the Collateral of such Grantor;

(e) None of the Collateral of such Grantor has been issued or transferred in violation of the securities registration, securities disclosure or similar laws of any jurisdiction to which such issuance or transfer may be subject;

(f) Except as may have been filed in favor of Secured Party, there is no effective financing statement covering the Collateral of such Grantor or its proceeds on file in any public office, and, if such Grantor learns otherwise, such Grantor will promptly cause it to be terminated of record;

(g) Such Grantor will warrant and forever defend the title to the Collateral of such Grantor and its proceeds and the security interest of Secured Party therein against the claims and demands of all Persons whomsoever claiming or to claim the same or any part thereof and will maintain and preserve such security and the priority and perfection of Secured Party's security interest therein so long as this Pledge Agreement shall remain in effect; and

(h) A true and complete copy of the LLC Agreement, including all amendments, supplements and other modifications thereto, has previously been delivered to Secured Party. The LLC Agreement is a legal, valid and binding agreement, enforceable by and against such Grantor (and, to such Grantor's knowledge, each other party thereto) in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting creditors' rights and to equitable principles of general applicability. No additional contributions are required to be made by such Grantor in respect of the Pledged Membership Interests of such Grantor and there exist no liabilities or obligations, monetary or otherwise, of such Grantor to Borrower.

5.2. Trade Names. Such Grantor's jurisdiction of organization is correctly set forth in the introductory paragraph hereof. Any and all trade names under which such Grantor transacts any part of its business, and all former names of such Grantor, are those which are set forth on Schedule 1 attached hereto.

5.3. Accuracy of Information. All information, certificates or statements given to Secured Party pursuant to this Pledge Agreement are and shall be true and complete in all respects.

5.4. Power and Authority; Enforceability. Such Grantor has the requisite power and authority to execute and deliver this Pledge Agreement and to perform all of its obligations hereunder. The execution, delivery, observance and performance of this Pledge Agreement, and the transactions contemplated hereby, by such Grantor have been duly authorized by all necessary action. The execution, delivery, observance and performance of this Pledge Agreement, and the transactions contemplated hereby, by such Grantor will not result in the creation of any lien, pledge, charge or encumbrance upon any properties or assets of such Grantor (except in favor of Secured Party). It is not necessary for such Grantor to obtain or make any (i) governmental consent, approval or authorization, registration or filing (except for any appropriate UCC financing statements) which has not been obtained from or with any governmental authorities or (ii) consent, approval, waiver or notification of partners, creditors, lessors or other nongovernmental persons, in each case, in connection with (x) the execution and delivery of this Pledge Agreement, (y) the pledge by such Grantor of the Pledged Collateral of such Grantor under this Pledge Agreement or (z) for the exercise by Secured Party of the rights provided for in this Pledge Agreement or the remedies in respect of the Collateral which has not been given or obtained. This Pledge Agreement has been duly executed and delivered by such Grantor and constitutes the valid and binding obligation of such Grantor, enforceable against such Grantor in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereinafter in effect relating to creditors' rights generally, and general equitable principles.

Section 6. Covenants. Each Grantor covenants and agrees with Secured Party that, from and after the date of this Pledge Agreement and until the Obligations are fully satisfied:

6.1. Deliver Certificates. If, at any time, such Grantor obtains possession of any certificate or instrument constituting any of the Collateral (or its proceeds), such Grantor shall deliver such certificate or instrument to Secured Party forthwith, duly endorsed in blank without restriction.

6.2. Uncertificated Securities. If any of the Collateral is now or hereafter becomes uncertificated securities, such Grantor shall either
(i) procure the issuance of security certificates to represent such Collateral and endorse and deliver such certificates as required by Section 6.1, (ii) enter into a control agreement with Secured Party and any securities intermediary which maintains a security entitlement in favor of such Grantor in respect of such securities, or (iii) enter into an agreement, in form and substance satisfactory to Secured Party, with Secured Party and the issuer of such securities to the effect that such issuer will comply with instructions originated by Secured Party with respect to such securities without further consent by such Grantor.

6.3. Other Collateral. As to all Collateral that is capable of being perfected by the filing of a financing statement under the relevant jurisdiction pursuant to the UCC, such Grantor authorizes Secured Party to file such financing statements or other instruments as are deemed necessary by Secured Party to enable it to perfect its security interest in such Collateral under applicable law.

6.4. Further Documentation; Pledge of Instruments. At any time and from time to time, upon the written request of Secured Party, and at the sole expense of such Grantor, such Grantor will promptly and duly authorize and authenticate when requested any and all such further instruments and documents and take such further action as Secured Party may reasonably request for the purpose of obtaining the full benefits of this Pledge Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the UCC, which may be filed by Secured Party without further authorization from such Grantor.

6.5. Defend and Cure Defects. If the validity or priority of this Pledge Agreement or of any rights, titles, security interests or other interests created or evidenced hereby or their priority or perfection shall be attacked, threatened or questioned in writing, or if any legal proceedings are instituted with respect thereto, such Grantor will give prompt written notice thereof to Secured Party and, at such Grantor's own cost and expense, will diligently endeavor to cure any defect that may be developed or claimed, and will take all necessary and proper steps for the defense of such legal proceedings, and Secured Party (whether or not named as a party) is hereby authorized and empowered to take such additional steps as in its judgment and discretion may be reasonably necessary or proper for the defense of any such legal proceedings or the protection of the validity or the priority of this Pledge Agreement and the rights, titles, security interests and other interests created or evidenced hereby, and all expenses so incurred of every kind and character shall be a demand obligation owing by such Grantor as part of the Obligations.

6.6. Payment of Obligations. Such Grantor will pay promptly when due all taxes, assessments and governmental charges or levies, if any, imposed upon the Collateral of such Grantor or in respect of the income or profits therefrom, as well as all claims of any kind against or with respect to such Collateral.

6.7. Limitation on Liens on Collateral. Such Grantor will not create, incur or permit to exist, and will defend the Collateral of such Grantor against, and will take such other action as is necessary to remove, any lien on or with respect to such Collateral other than the security interests created hereby, and will defend the right, title and interest of Secured Party in and to any of such Collateral against the claims and demands of all Persons. Such Grantor will not sell, assign, transfer, pledge or otherwise dispose of any type or item of such Collateral except as expressly permitted by this Pledge Agreement.

6.8. Limitations on Modifications of Collateral; No Waivers, Extensions. Such Grantor will not (i) amend, modify, terminate or waive any provision of any agreement giving rise to or evidencing its rights and interests in the Collateral of such Grantor in any manner which might materially adversely affect the value of such interests or such Collateral, or (ii) fail to exercise promptly and diligently each and every right which it may have in respect of such interests and each agreement giving rise thereto in any manner which could materially adversely affect the value of such Collateral.

6.9. Change of Name; Jurisdiction of Organization. Such Grantor agrees that it will not change (a) its name; (b) its jurisdiction of organization; (c) its corporate structure; (d) the location of any office in which it maintains books or records relating to the Collateral of such Grantor; or (e) its federal taxpayer identification number without giving Secured Party at least 30 days prior written notice of any such proposed change.

Section 7. Attorney-in-Fact.

(a) Without limiting anything contained in this Pledge Agreement, each Grantor irrevocably makes, constitutes, and appoints Secured Party (and any of Secured Party's officers, employees, or agents designated by Secured Party) as its true and lawful attorney, with power to, at any time that an Event of Default has occurred and is continuing, endorse such Grantor's name on any Collateral of such Grantor in the possession of Secured Party or its designated agents. The appointment of Secured Party as such Grantor's attorney, and each and every one of its rights and power, being coupled with an interest, is irrevocable until all of the Obligations have been fully and finally repaid and performed (in accordance with the provisions for termination thereof).

(b) The powers conferred on Secured Party in this Pledge Agreement are solely to protect its interests in the Collateral and shall not impose any duty upon Secured Party to exercise any such powers. Secured Party shall be accountable only for amounts that it actually receives as a result of the exercise of such powers and neither Secured Party nor any of its officers, directors, employees or agents shall be responsible to either Grantor for any act or failure to act, even if such act or failure to act is negligent, except for the gross negligence or willful misconduct of Secured Party or any of its authorized agents acting within the scope of their authority.

Section 8. Performance by Secured Party of a Grantor's Obligations. If either Grantor fails to perform or comply with any of its agreements contained herein and Secured Party, as provided for by the terms of this Pledge Agreement, shall perform or comply, or otherwise cause performance or compliance, with such agreement, the expenses of Secured Party incurred in connection with such performance or compliance, shall be payable by such Grantor to Secured Party on demand and shall constitute Obligations secured hereby.

Section 9. Remedies Upon the Occurrence of an Event of Default.

9.1. General. Upon the occurrence and during the continuance of an Event of Default, Secured Party may exercise, in addition to all other rights and remedies granted to it in this Pledge Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the UCC and other applicable law. Without limiting the generality of the foregoing, subject to Section 10 hereof, each Grantor expressly agrees that, upon the occurrence and during the continuance of an Event of Default, Secured Party may forthwith collect, receive, appropriate and realize upon the Collateral of such Grantor, or any part thereof, and may forthwith sell, lease, assign, or otherwise dispose of and deliver such Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange or broker's board or at any of Secured Party's offices or elsewhere at such prices as it may deem best for cash or on credit or for future delivery without assumption of any credit risk. Secured Party shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of such Collateral so sold, free of any right or equity of redemption in either Grantor, which right or equity is hereby waived or released to the extent permitted by law. Each Grantor further agrees, at Secured Party's request, to assemble the Collateral of such Grantor, make it available to Secured Party at places which Secured Party shall reasonably select, whether at such Grantor's premises or elsewhere, at such Grantor's sole cost and expense. All Proceeds which Secured Party realizes in connection with the Collateral shall be applied in accordance with Section 10 of this Pledge Agreement. To the extent permitted by applicable law, each Grantor waives all claims, damages, and demands against Secured Party arising out of the repossession, retention or sale of the Collateral. Each Grantor agrees that Secured Party need not give more than ten (10) days' prior written notice of the time and place of any public sale or of the time after which a private sale may take place and that such notice is reasonable notification of such matters.

9.2. Costs. Each Grantor agrees to pay all costs of Secured Party, including, without limitation, reasonable attorneys' fees (whether in-house or outside counsel is used, whether legal assistants are used, and whether such fees are incurred in negotiations, formal or informal collection actions, federal bankruptcy proceedings, probate proceedings, on appeal or otherwise) and legal expenses, actually incurred with respect to the collection of any of the Obligations and the enforcement by Secured Party of any of its rights hereunder.

Section 10. Application of Proceeds. All monies collected by Secured Party upon any sale or other disposition of the Collateral, together with all other monies received by Secured Party hereunder or otherwise, shall first be applied to the payment of all costs and expenses incurred by Secured Party in connection with such sale, the delivery of the Collateral or the collection of any such monies (including, without limitation, reasonable attorneys' fees and expenses), and the balance of such monies shall be applied to satisfy the Obligations in the manner set forth in the other Loan Documents. Any surplus remaining after payment in full of the Obligations shall be returned to the applicable Grantor(s) or to any other Person lawfully entitled thereto. Anything contained in this Pledge Agreement, any of the other Loan Documents or the UCC to the contrary notwithstanding, Secured Party's recourse hereunder is limited to the Collateral and, if the proceeds of any sale or other disposition of the Collateral are insufficient to pay all the Obligations in full to Secured Party, Grantors shall not be liable for any deficiency.

Section 11. Limitation on Secured Party's Duty in Respect of Collateral. Secured Party's sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under the UCC or otherwise, shall be to deal with it in the same manner as Secured Party deals with similar property for its own account. Neither Secured Party nor any of its directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of either Grantor or otherwise (unless such conduct constitutes gross negligence or willful misconduct).

Section 12. Powers Coupled with an Interest. All authorizations and agencies herein contained with respect to the Collateral are irrevocable and powers coupled with an interest.

Section 13. Lien Absolute. To the extent that the obligations secured under this Pledge Agreement constitute obligations other than those of Grantors, each Grantor agrees that this is a guaranty of payment and performance and not of collection, limited in recourse to Secured Party's rights in respect of the Collateral except with respect to the direct obligations of Grantors set forth herein. Each Grantor agrees that all rights of Secured Party hereunder, and all obligations of such Grantor hereunder, shall be primary, absolute and unconditional irrespective of:

(a) any lack of validity or enforceability of, or any future amendment of, or change in, any of the Loan Documents or any other agreement or instrument governing or evidencing any of the Obligations;

(b) any change in the time, manner or place of payment of, or in any other term of, all or any part of the Obligations, or any other amendment or waiver of or any consent to any departure from any of the Loan Documents or any other agreement or instrument governing or evidencing any Obligations;

(c) any exchange, release or non-perfection of any Collateral, or any action, or the absence of any action, by Secured Party in respect thereof (including, without limitation, the release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Obligations);

(d) the insolvency of either Grantor;

(e) the absence of any action to enforce this Pledge Agreement or the waiver or consent by Secured Party with respect to any of the provisions hereof;

(f) any extension or waiver for the performance of, or compliance with, any term, covenant or agreement on its part to be performed or observed under the Loan Documents or any other agreement or instrument governing or evidencing any of the Obligations, or any waiver of such performance or compliance or consent to a failure of, or departure from, such performance of compliance, for any obligor under any of the foregoing;

(g) the release of anyone who may be liable in any manner for the payment of any of the Obligations; and

(h) any other circumstance which might otherwise constitute a legal or equitable discharge or defense available to, or a discharge of a surety or guarantor.

Section 14. Waivers; Consents; Release.

(a) Each Grantor consents to, waives and agrees, as applicable, that Secured Party may at any time, or from time to time, in its discretion:

(i) renew, extend or change the time of payment, and/or the manner, place or terms of payment of all or any part of the Obligations; and

(ii) exchange, release and/or surrender all or any of the Collateral, or any part thereof, by whomsoever deposited, which is now or may hereafter be held by Secured Party in connection with all or any of the Obligations in accordance with the terms of this Pledge Agreement; all in such manner and upon such terms as Secured Party may deem proper, and without notice to or further assent from either Grantor, it being hereby agreed that each Grantor shall be and remain bound upon this Pledge Agreement, irrespective of the value or condition of any of the Collateral, and notwithstanding any such change, exchange, settlement, compromise, surrender, release, renewal or extension, and notwithstanding also that the Obligations may, at any time, exceed the aggregate amount thereof set forth in the Loan Documents or any other agreement or instrument governing or evidencing any of the Obligations.

(b) Each Grantor hereby waives, and agrees that it shall not at any time insist upon, plead or in any manner whatever claim or take the benefit or advantage of, any appraisal, valuation, stay, extension, marshaling of assets or redemption laws, or exemption, whether now or at any time hereafter in force, which may delay, prevent or otherwise affect the performance by such Grantor of its Obligations under, or the enforcement by Secured Party of, this Pledge Agreement. Each Grantor hereby waives notice of acceptance of this Pledge Agreement, and also diligence, presentment, demand, protest (whether for non-payment or protest or of acceptance, maturity, extension of time, change in nature or form of the Obligations, acceptance of further security, release of further security, composition or agreement arrived at as to the amount of, or the terms of, the Obligations, notice of adverse change in the financial condition of any obligor under the Obligations other than such Grantor or any other fact which might increase the risk to such Grantor) and notice of dishonor, of any and all of the Obligations, and promptness in commencing suit against any party hereto or liable hereon, and in giving any notice to or of making any claim or demand hereunder upon such Grantor. No act or omission of

any kind on Secured Party's part shall in any event affect or impair this Pledge Agreement. Each Grantor represents, warrants and agrees that, as of the date of this Pledge Agreement, its Obligations under this Pledge Agreement are not subject to any offsets or defenses against Secured Party of any kind. Each Grantor further agrees that its Obligations under this Pledge Agreement shall not be subject to any counterclaims, offsets or defenses against Secured Party of any kind which may arise in the future. It is agreed among Grantors and Secured Party that the waivers set forth in this Pledge Agreement, including, without limitation, the foregoing waivers, are of the essence of the transaction contemplated by the Pledge Agreement and that, but for such waivers, Secured Party would decline to provide commitment and credit support.

(c) In no event shall Secured Party have any obligation (although it is entitled, at its option) to proceed against any obligor under the Obligations other than any collateral pledged to secure Obligations, and Secured Party may proceed, prior or subsequent to, or simultaneously with, the enforcement of Secured Party's rights hereunder, to exercise any right or remedy which it may have against any collateral, as a result of any lien it may have as security for all or any portion of the Obligations.

(d) Upon termination of this Pledge Agreement and payment to the Secured Party of all Obligations in full in cash, including without limitation all amounts required to be paid pursuant to Section 9.2 hereof, Secured Party shall release its security interest in any remaining Collateral and execute and deliver, at Grantors' expense, such additional documents as may be reasonably requested by Grantors to effectuate such release; provided that if any payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of either Grantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or a trustee or similar officer for either Grantor or any substantial part of its property, or otherwise, this Pledge Agreement, all rights hereunder and the liens created hereby shall continue to be effective, or be reinstated, until such payments have been made.

Section 15. Deferral of Subrogation, Etc. Notwithstanding anything to the contrary in this Pledge Agreement, each Grantor hereby:

(a) expressly and irrevocably waives, on behalf of itself and its successors and assigns (including any surety) until the payment in full of the Obligations, any and all rights at law or in equity to subrogation, to reimbursement, to exoneration, to contribution, to indemnification, to set off or to any other rights that could accrue to a surety against a principal, to a guarantor against a principal, to a guarantor against a maker or obligor, to an accommodation party against the party accommodated, to a holder or transferee against a maker, or to the holder of any claim against any Person, and which such Grantor may have or hereafter acquire against Secured Party in connection with or as a result of such Grantor's execution, delivery and/or performance of this Pledge Agreement, or any other documents to which such Grantor is a party or otherwise; and

(b) acknowledges and agrees that this waiver is intended to benefit Secured Party only (and no third party) and shall not limit or otherwise effect such Grantor's liability hereunder or the enforceability of this Pledge Agreement.

Section 16. Indemnification. Each Grantor agrees to hold Secured Party harmless from and indemnify Secured Party against all liabilities, losses, damages, judgments, costs and expenses of any kind which may be imposed on, incurred by or asserted against Secured Party relating to or arising out of (i) this Pledge Agreement, any other document or any transaction contemplated hereby or thereby, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Pledge Agreement, any other document or any transaction contemplated hereby or thereby, other than due to Secured Party's breach hereof or thereof, (ii) any delay in paying any and all excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral and (iii) any delay in complying with any Requirement of Law applicable to any of the Collateral. In any suit, proceeding or action brought by Secured Party for any sum owing in respect of the Collateral, or to enforce any provisions of such Collateral, each Grantor will save, indemnify and keep Secured Party harmless from and against all expense, loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment or reduction of liability whatsoever of the trustee of any trusts, or any receiver, bankruptcy trustee or other representative thereof, or any successor, or any other Person obligated on the Collateral, arising out of a breach by either Grantor of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such account debtor or obligor or its successors from such Grantor, and all such obligations of such Grantor shall be and remain enforceable against and only against such Grantor and shall not be enforceable against Secured Party.

Section 17. Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by Federal Express, Express Mail, or similar overnight delivery or courier service or delivered (in person or by telecopy, telex, or similar telecommunications equipment) against receipt to the party to whom it is to be given, addressed as follows:

If to Grantors:

c/o American Business Financial Services, Inc. Wanamaker Building
100 Penn Square East
Philadelphia, PA 19107 Telephone No.: (215) 940-4000 Fax No.: (215) 940-3299 Attention: President

If to Secured Party:

Fortress Credit Corp.
c/o Fortress Investment Group, LLC
1251 Avenue of the Americas
New York, New York 10020

Telephone No: (212) ________ Fax No.: (212) 202-3685 Attention: Kevin Treacy, Chief Financial Officer

Any notice shall be deemed given at the time of receipt thereof.

Section 18. Severability. The holding of any provision of this Pledge Agreement to be invalid or unenforceable by a court of competent jurisdiction shall not affect any other provision of this Pledge Agreement, which shall remain in full force and effect. If any provision of this Pledge Agreement shall be declared by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced in whole or in part, such provision shall be interpreted so as to remain enforceable to the maximum extent permissible consistent with applicable law and the remaining conditions and provisions or portions thereof shall nevertheless remain in full force and effect and enforceable to the extent they are valid, legal and enforceable, and no provisions shall be deemed dependent upon any other covenant or provision unless so expressed herein.

Section 19. Section Headings. The headings in this Pledge Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

Section 20. No Waiver; Cumulative Remedies. Secured Party shall not by any act of delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Event of Default or in any breach of the terms and conditions hereof. A waiver by Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which Secured Party would otherwise have had on any future occasion. No failure to exercise nor any delay in exercising on the part of Secured Party any right, power or privilege hereunder, shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or future exercise thereof or the exercise of any other right, power or privilege. The rights and remedies hereunder provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights and remedies provided by applicable law.

Section 21. Waivers and Amendments; Successors and Assigns; Governing Law. None of the terms or provisions of this Pledge Agreement may be waived, altered, modified or amended except by a written instrument, duly executed by each Grantor and the Secured Party. This Pledge Agreement and all obligations of the parties hereunder shall bind and benefit the successors and assigns of the parties, provided that neither Grantor may assign or transfer any of its rights or obligations hereunder without the prior written consent of Secured Party. Nothing in this Pledge Agreement, express or implied, shall be construed to confer upon any other person (other than the parties hereto and their respective successors and assigns) any rights or remedies. This Pledge Agreement shall be governed by, and be construed and interpreted in accordance with, the internal laws (and not the laws of conflict) of the State of New York.

Section 22. Counterparts. This Pledge Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which together shall constitute one and the same instrument, and it shall not be necessary in making proof of this Pledge Agreement to produce or account for more than one such counterpart.

Section 23. Entire Agreement. This Pledge Agreement sets forth the entire understanding of the parties with respect to the subject matter herein between Grantors and Secured Party and supercedes all existing agreements between them concerning such subject matter.

[Signature Page Follows]

IN WITNESS WHEREOF, Grantors and Secured Party have caused this Pledge Agreement to be executed by their duly authorized offices on the date first set forth above.

HOMEAMERICAN CREDIT, INC.

By: /s/ Stephen M. Giroux
    ------------------------------------
Name: Stephen M. Giroux
Title: Executive Vice President, General
Counsel and Secretary

AMERICAN BUSINESS MORTGAGE SERVICES, INC.

By: /s/ Stephen M. Giroux
    ------------------------------------
Name: Stephen M. Giroux
Title: Executive Vice President, General
Counsel and Secretary

FORTRESS CREDIT CORP.

By: /s/ Marc K. Furstein
   -------------------------------------
     Name: Marc K. Furstein
     Title: Chief Operating Officer

Exhibit 10.9

Patriot
The Patriot Group, LLC

October 26, 2004

American Business Financial Services, Inc. The Wanamaker Building
100 Penn Square East, 8th Floor
Philadelphia, Pennsylvania 19109

Attention: Anthony J. Santilli, Chairman, President, Chief Executive Officer and Chief Operating Officer

Ladies and Gentlemen:

Reference is made to (i) the Commitment Letter dated September 17, 2004 executed and delivered by The Patriot Group, LLC, on behalf of itself, its affiliates and subsidiaries ("Patriot"; also referred to herein as "we" and "us") to, but not accepted or executed by, American Business Financial Services, Inc. (together with its affiliates and subsidiaries, "ABFS"; also referred to herein as "you"; such letter, the "Original Commitment Letter") and (ii) the letter dated October 6, 2004 executed and delivered by Patriot and ABFS pursuant to which the parties agreed, among other things, to continue our discussions concerning certain facilities that Patriot would consider entering into with ABFS (the "Extension Letter").

Patriot would be pleased and is prepared to proceed with ABFS toward a facility (the "Committed Facility") on the terms contained in this letter agreement (the "Commitment Letter") and in the Summaries of Terms and Conditions attached as Exhibit A-1 and Exhibit A-2 hereto and incorporated herein by reference (collectively, the "Commitment Terms"). As provided in the Commitment Terms, the Committed Facility will consist of (i) a US$30,000,000 funding commitment dedicated primarily to Wet Loans (defined below) (the "Wet Warehouse") and (ii) a commitment of up to US$23,000,000 for the purchase of specified ABFS-owned residual interests (the "Purchased Securities") from one or more outstanding ABFS securitizations (the "Residual Repo"). Neither the Wet Warehouse nor the Residual Repo is offered individually; both must be accepted by ABFS. Patriot will commit to organize the Investor and the Purchaser (which may be the same entity) described in the Commitment Terms and such entities will provide the financing for the Wet Warehouse and will purchase the Purchased Securities under the Residual Repo, respectively, subject to the terms thereof.

Patriot reserves the right to involve other investors and/or purchasers (both junior and senior) in the Committed Facility, and you agree to cooperate with us in our efforts to bring such investors and purchasers into the Committed Facility. To assist Patriot in its efforts with respect to the Committed Facility, you agree promptly to prepare and provide to Patriot all information with respect to ABFS and the transactions contemplated hereby, including projections (the "Projections") and all financial information, as we may reasonably request. You hereby represent and covenant that (a) all information other than the Projections (the "Information") that has been or will be made available to Patriot by you or any of your representatives is or will be, when furnished, complete and correct in all material respects and does not or will not, when furnished, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made, (b) the Projections that have been or will be made available to Patriot by you or any of your representatives have been or will be prepared in good faith based upon commercially reasonable and supportable assumptions, and (c) you will provide to Patriot timely updates to the Information whenever, based upon the passage of time or the occurrence of events or both, such updates are necessary to prevent the Information from including an untrue statement of a material fact or failing to include a material fact necessary in order to make the statements contained in the Information not materially misleading in light of the circumstances under which such statements were made. You understand that in making available the Committed Facility we may use and rely on the Information and Projections without independent verification thereof.

As consideration for Patriot's agreements hereunder, ABFS agrees to pay to Patriot the fees set forth in Annex I to each Summary of Terms and Conditions attached hereto and Work Fees as provided hereinbelow.

Patriot's agreements hereunder are subject to (a) approval of the Committed Facility by Patriot's investment committee (which approval will be sought after ABFS has executed and delivered a counterpart of this Commitment Letter and, if obtained, will be confirmed to ABFS in writing prior to 6:00 p.m. on the seventh (7th) business day following the date of such execution and delivery), (b) all amounts due from ABFS upon ABFS's acceptance of the Commitment Letter having been received by Patriot before the expiration date and time set forth in the last paragraph on page 5 hereof and all other amounts due thereafter from ABFS having been paid; (c) there not occurring or becoming known to us any material adverse condition or material adverse change in or affecting the business, operations, property, condition (financial or otherwise) or prospects of ABFS and its subsidiaries, taken as a whole, other than as has been disclosed in ABFS's public filings through October 1, 2004 (the date of the latest SEC filing by ABFS reviewed by Patriot and its counsel to date); (d) our not becoming aware after the date hereof of any information or other matter affecting ABFS and/or its affiliates and subsidiaries or the transactions contemplated hereby which is inconsistent in a material and adverse manner with any Information, Projections or other matter disclosed to us prior to the date hereof; (e) there not having occurred a material disruption of or material adverse change in financial, banking or capital market conditions that, in our judgment, could materially impair our ability to provide or arrange the Committed Facility; (f) the negotiation, execution and delivery not later than November 5, 2004 of definitive documentation with respect to the Committed Facility satisfactory to Patriot and its counsel; and (g) the other conditions set forth or referred to in the Commitment Terms.

The parties agree that if either (A) Patriot delivers to ABFS written confirmation of the approval by its investment committee of the Committed Facility within the time period allotted under clause (a) of the immediately preceding paragraph (which confirmation shall reflect any adjustments to Annex II to Exhibit A-2 theretofore made after reasonable consultation with ABFS and Clearwing Capital, LLC ("Clearwing"), as provided in "Purchased Securities" in Exhibit A-2), or (B) at any time on or prior to the Closing Date, ABFS (i) accepts any proposal or commitment with respect to any facility which, if consummated, would either (x) prevent the Committed Facility from being executed on the terms contemplated herein or (y) render the Committed Facility unenforceable in whole or in part, or (ii) fails to cooperate fully with Patriot in the performance of any and all further due diligence required by Patriot pursuant hereto (which due diligence shall include, but not be limited to, supplying Patriot with Excel files containing the complete performance history of ABFS's securitizations), then in either case the Commitment Fee payable pursuant to Annex I to Exhibit A-1 shall be permanently retained by Patriot. However, if neither (A) nor (B) above occurs, it is agreed that Patriot shall return such Commitment Fee to ABFS, net of any assessed but unpaid Work Fees.

You agree (a) to indemnify and hold harmless Patriot and its officers, members, directors, employees, advisors, and agents (each, an "indemnified person") from and against any and all losses, claims, damages and liabilities (including for taxes, it being the intention and agreement of the parties that
(i) the Committed Facility will be treated as a financing for federal and state income tax purposes, as a result of which the Seller under the Residual Repo will continue to own the Purchased Securities for federal and state income tax purposes, and (ii) neither ABFS nor any affiliate thereof shall transfer or pledge to any other entity, or suffer to exist any competing security interest (other than Clearwing's pledge and security interest existing on the date hereof) on, any of the Additional Collateral), to which any such indemnified person may become subject arising out of or in connection with the Original Commitment Letter, the Extension Letter, this Commitment Letter, the Committed Facility, the use of the proceeds thereof or any related transaction or any claim, litigation, investigation or proceeding relating to any of the foregoing, regardless of whether any indemnified person is a party thereto, and to reimburse each indemnified person upon demand for any legal or other expenses incurred in connection with investigating or defending any of the foregoing, provided that the foregoing indemnity will not, as to any indemnified person, apply to losses, claims, damages, liabilities or related expenses to the extent they are found by a final, non-appealable judgment of a court to arise from the willful misconduct or gross negligence of such indemnified person, and (b) to reimburse Patriot on demand for all out-of-pocket expenses (including diligence expenses, consultants' fees and expenses, travel expenses, and reasonable fees, charges and disbursements of counsel and other advisors) incurred in connection with the Original Commitment Letter, the Extension Letter, this Commitment Letter and the preparation, execution and delivery of the Committed Facility and all related documentation (including any amounts related to efforts to involve other investors and/or purchasers in the Committed Facility), subject to the Work Fee provisions contained in the immediately succeeding paragraph. No indemnified person shall be liable for any special, indirect, consequential or punitive damages in connection with its activities related to the Committed Facility. No indemnified person shall be liable for any damages arising from the use by others of Information or other materials obtained through electronic, telecommunications or other information transmission systems or for any special, indirect, consequential or punitive damages.

As provided in the Extension Letter, you confirm your agreement to pay Patriot a Work Fee of up to US$1,400,000 (the "Patriot Work Fee Limit") which will be used to pay out-of-pocket diligence and transaction expenses related to the Committed Facility (including any prior expenses of Patriot incurred in connection with negotiations between Patriot and ABFS culminating in the Original Commitment Letter but excluding the diligence expenses of any participants in or lenders to Investor or Purchaser other than Patriot). It is agreed that US$825,000 of Work Fees have been paid to Patriot (and credited toward the Patriot Work Fee Limit) as of the date hereof. ABFS shall remit by wire transfer in immediately available funds an additional Work Fee amount of US$100,000 to Patriot on the date of execution and delivery of the Commitment Letter by ABFS, and such amount will be credited toward the Patriot Work Fee Limit. Additional Work Fee amounts, subject to the Patriot Work Fee Limit, may be requested by Patriot and will be deposited by ABFS if and as needed, including on a prospective basis. You also confirm your agreement to pay to Patriot the diligence and other expenses of any participants in or lenders to Investor or Purchaser other than Patriot, as and when requested by Patriot, up to a limit of US$400,000, which limit is separate from and in addition to the Patriot Work Fee Limit and any other fees and expenses set forth herein. Any unused amounts of the Work Fees or participant and lender expenses deposited with Patriot will be refunded to ABFS.

This Commitment Letter shall not be assignable by you without the prior written consent of Patriot (and any purported assignment without such consent shall be null and void), is intended to be solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto. This Commitment Letter may not be amended or waived except by an instrument in writing signed by you and Patriot. This Commitment Letter may be executed in any number of counterparts, each of which shall be an original, and all of which, when taken together, shall constitute one agreement. Delivery of an executed signature page of this Commitment Letter by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. The Nondisclosure Agreement between ABFS and Patriot, dated as of September 9, 2004 (as amended in accordance with the Extension Letter, the "NDA"), the Extension Letter, and, upon your execution and delivery of a counterpart original of this letter to us, this Commitment Letter, will be the only agreements in effect with respect to the Committed Facility, will supersede all prior understandings with respect to the Committed Facility and will set forth the entire understanding of the parties with respect thereto. This Commitment Letter shall be governed by, and construed in accordance with, the laws of the State of New York.

This Commitment Letter is delivered to you on the understanding that none of this Commitment Letter or the Commitment Terms, nor any of their terms or substance, shall be disclosed, directly or indirectly, to any other person except (a) to your officers, agents, attorneys and other advisors who are directly involved in the consideration of this matter, (b) to Clearwing, provided that Clearwing has agreed to keep its contents confidential, (c) to persons or entities other than those listed in (a) and (b) hereof with Patriot's prior written permission, or (d) as may be compelled in a judicial or administrative proceeding or as otherwise required by law (in which case you agree to inform us promptly thereof).

You acknowledge that Patriot may be providing debt financing, equity capital or other funding or services (including financial advisory services) to other companies with whom you compete or in respect of which you may have conflicting interests regarding the transactions described herein or otherwise.

You also acknowledge that Patriot has no obligation to use in connection with the transactions contemplated by this letter, or to furnish to you, confidential information obtained from other companies.

The compensation, reimbursement, indemnification and confidentiality provisions contained herein (respectively, the "Surviving Provisions") and in the NDA and the Extension Letter shall remain in full force and effect regardless of whether definitive documentation shall be executed and delivered and notwithstanding the non-acceptance or termination of this Commitment Letter or termination of Patriot's commitment hereunder. Your obligations under this Commitment Letter, other than those arising under the Surviving Provisions, shall terminate upon the termination hereof and if documentation with respect to a Committed Facility is executed, shall be superseded by the provisions of such documentation upon the initial funding thereunder.

If the foregoing correctly sets forth our agreement, please indicate your acceptance of the terms hereof, and of the Commitment Terms, by returning to us an executed counterpart hereof, together with the amounts payable upon the acceptance hereof, not later than 12:00 noon, New York City time, on Wednesday, October 27, 2004. Please note that Patriot's wire transfer instructions for the payments required in connection herewith are set forth on Exhibit B hereto. Patriot's commitment and agreements herein will automatically expire at such time in the event Patriot has not received such executed counterpart and such amounts in accordance with this paragraph.

[Remainder of page intentionally left blank]

Patriot is pleased to have the opportunity to assist you in connection with this important facility.

Very truly yours,

THE PATRIOT GROUP, LLC

By: /s/ Charles A. Forbes, Jr.
    -------------------------------
Name:  Charles A. Forbes, Jr.
Title: Co-Chief Executive Officer

Accepted and agreed to as of
the date first written above by:

AMERICAN BUSINESS FINANCIAL SERVICES, INC.

By: /s/ Anthony J. Santilli
    -----------------------------------------
Name:  Anthony J. Santilli, Jr.
Title: Chairman, President, Chief Executive Officer
       and Chief Operating Officer

Issuer Parent:                 A special purpose bankruptcy-remote Delaware
                               statutory trust ("Trust 3" or the "Issuer
                               Parent"), 97% of the beneficial interests in
                               which shall be owned by ABFS Consolidated
                               Holdings, Inc. ("Holdings"), a direct,
                               wholly-owned subsidiary of American Business
                               Financial Services, Inc., and 3% of the
                               beneficial interests in which shall be owned by
                               the Originators (as defined below).

Issuer:                        A special purpose bankruptcy-remote Delaware
                               statutory trust ("Trust 4" or the "Issuer"), all
                               of the beneficial interests in which shall be
                               owned by Trust 3. The Issuer may be the same
                               entity as the Seller under the Residual Repo.

Investor:                      A limited purpose entity to be formed by Patriot
                               (or one or more of its affiliates and/or
                               subsidiaries). Investors may include participants
                               in addition to Patriot, and Patriot may obtain
                               capital from or arrange direct participation by
                               third parties on a senior or junior basis (such
                               investors, collectively, the "Investor"). The
                               Investor may be the same entity as the Purchaser
                               under the Residual Repo.

Custodian:                     A third party that can fulfill all duties,
                               including necessary wire transfers to acquire wet
                               funded mortgage loans, pursuant to a Custodial
                               Agreement satisfactory to Patriot in its sole
                               discretion. JPMorgan Chase Bank would be
                               acceptable to Patriot as Custodian.

Issuer Owner
Trustee:                       A financial institution to be selected by ABFS
                               that can fulfill all duties required of it under
                               an Issuer Trust Agreement, satisfactory to
                               Patriot in its sole discretion.

Parent Owner
Trustee:                       A financial institution to be selected by ABFS
                               that can fulfill all duties required of it under
                               an Issuer Parent Trust Agreement, satisfactory to
                               Patriot in its sole discretion.

                                     A-1-1

Investor Co-
Trustees:                      (i) A nationally-chartered commercial bank and
                               (ii) a Delaware trustee, both to be selected by
                               Patriot in its sole discretion, that can, between
                               them, fulfill all duties required of them under
                               an Investor Trust Agreement, satisfactory to
                               Patriot in its sole discretion.

Servicer:                      ABFS, on a short-term renewable basis. The
                               Servicer will earn a servicing fee (to be
                               approved by the Investor in its sole discretion).
                               Investor, in its sole discretion, will grant
                               renewals from time to time. Servicer shall
                               deposit collections daily into a segregated
                               collection/distribution account, subject to the
                               commingling prohibitions contained herein, at the
                               Custodian or the applicable Investor Co-Trustee
                               (as determined by the Investor) for the benefit
                               and under the control of Investor.

Back-up Servicer:              Countrywide Home Loan Servicing LP, pursuant to a
                               Back-up Servicing Agreement satisfactory to
                               Patriot.

II.      FACILITY AMOUNT AND STRUCTURE

Facility Amount:               US$30,000,000.

Facility Term:                 Three (3) years from Closing Date.

Structure:                     Structured warehouse facility with advances
                               evidenced by one or more master variable funding
                               notes (collectively, the "VFN") issued by the
                               Issuer. The VFN, having a principal amount of up
                               to US$30,000,000, will provide funding for, and
                               will be secured primarily by, Wet Loans (as
                               defined below) and proceeds thereof. The VFN may
                               also be secured by Wet Loans which have become
                               Eligible Loans (as defined below). The
                               outstanding principal amount of all advances
                               under the VFN may at no time exceed the Borrowing
                               Base (as defined below). The VFN will be secured
                               by all Loan Collateral (as defined below) and by
                               all Additional Collateral (as defined below).
                               Investor will purchase the VFN on the Closing
                               Date.

                               Issuer will acquire the Wet Loans, on a daily
                               basis, in legal true sales. Trust 3 will purchase
                               Wet Loans from the Originators and Issuer will
                               purchase Wet Loans from Trust 3.

                               Investor reserves the right to bring one or more
                               lenders into the Wet Warehouse provided that the
                               resulting structure provides ABFS with
                               substantially identical funding availability and
                               pricing to the availability and pricing described
                               herein.

Borrowing Base:                As to any loan funded under the Wet Warehouse, at
                               any date, the lesser of (x) the Facility Amount
                               and (y) the product of the Advance Rate (as
                               defined below) applicable to such loan and the
                               lesser of (i) the then-current principal balance
                               of such loan or (ii) the fair market value of
                               such loan as determined by the Investor in its
                               sole discretion.

                                     A-1-2

Wet Warehouse
Collateral:                    The VFN will be secured by (i) a perfected first
                               priority security interest in and lien upon all
                               Wet Loans, including all Wet Loans that become
                               Eligible Loans (as defined below), all proceeds
                               thereof, all funds from time to time on deposit
                               in the concentration/distribution and
                               disbursement accounts maintained by the
                               Custodian, all funds returned or to be returned
                               by any Approved Closing Agent (as defined below)
                               and all rights under all Closing Protection
                               Letters and Funds Receipt Agreements (as defined
                               below) (collectively, the "Loan Collateral");
                               (ii) a direct pledge by ABFS of 100% of the
                               common stock of Holdings; (iii) a preferred
                               certificate (the "Trust 3 P Certificate") to be
                               issued by Trust 3 to Investor, entitling Investor
                               to a priority interest in all assets and
                               distributions received by Trust 3 and such rights
                               with respect thereto as are satisfactory to
                               Investor in its sole discretion; (iv) a perfected
                               first priority security interest in and lien on
                               all rights to reimbursement for servicer
                               advances, unearned fees of all types and prepay,
                               late, forbearance, satisfaction, NSF and other
                               similar earned fees due to ABFS as servicer, the
                               "par" amount of which on the Closing Date shall
                               not be less than US$37,000,000 (which shall
                               constitute a super-priority claim to collections
                               within each securitization trust), all pledged by
                               American Business Credit, Inc., or any other
                               applicable affiliate thereof (the "Servicer
                               Reimbursement and Fee Collateral"); and (v) a
                               perfected first priority security interest in and
                               lien on the value of the Purchased Securities in
                               excess of the amount necessary for Seller to
                               satisfy its obligations to Purchaser under the
                               Residual Repo (the "Repo-related Collateral" and,
                               together with the Trust 3 P Certificate and the
                               Servicer Reimbursement and Fee Collateral, the
                               "Additional Collateral"), all on a basis
                               acceptable to Investor in its sole discretion
                               (the collateral described in clauses (i)-(v)
                               immediately above, the "Wet Warehouse
                               Collateral"). It is agreed by the parties that
                               upon the termination of the Residual Repo, the
                               Issuer shall identify replacement Wet Warehouse
                               Collateral acceptable to the Investor in its sole
                               discretion and pledge such replacement Wet
                               Warehouse Collateral to the Investor to replace
                               such Repo-related Collateral as shall be released
                               from the lien of the Investor; provided, that if
                               and only if the Residual Repo shall be terminated
                               on its Termination Date (as defined in Exhibit
                               A-2), then upon thirty (30) days' prior written
                               notice to Investor, Issuer may terminate the Wet
                               Warehouse on the second anniversary of the
                               Closing Date and pay the Investor a one-time
                               termination fee of US$600,000 by wire transfer in
                               immediately available funds (such termination of
                               the Wet Warehouse becoming effective upon
                               confirmation by Investor of receipt of such
                               termination fee as well as all other amounts then
                               due to Investor under the Wet Warehouse and the
                               Residual Repo).

                                     A-1-3

                               Holdings owns 97% of the "common" equity
                               certificates (or "R Certificates") of ABFS
                               Warehouse Trust 2003-1 ("Trust 1"), which owns
                               the outstanding retained interest-only strips
                               ("IOs") and securitization over-collateralization
                               and residual interests set forth on Schedule I
                               attached hereto (the IOs and such other scheduled
                               interests, collectively, the "Trust 1 IO
                               Collateral"). Three other ABFS entities, American
                               Business Mortgage Services, Inc., HomeAmerican
                               Credit, Inc., and American Business Credit, Inc.
                               (collectively, the "Originators") own and hold
                               the remaining 3% of the Trust 1 R Certificates.

                               The Trust 1 R Certificates (together with all
                               rights relating thereto, the "Trust 3 Assets")
                               will be sold by Holdings and the Originators to
                               Trust 3 in a true sale on the Closing Date. ABFS
                               shall have the responsibility to obtain all
                               consents necessary for such sales.

                               Trust 3 will receive all distributions on the
                               Trust 1 R Certificates. The Trust 3 P Certificate
                               will entitle the holder thereof to receive 100%
                               of the value of the Trust 3 Assets, including
                               without limitation, such distributions and any
                               other Trust 3 Assets, and any proceeds from or
                               other sales or dispositions of any of the
                               foregoing. On the Closing Date, Trust 3 will
                               issue the Trust 3 P Certificate to Investor to
                               secure the obligations of Issuer hereunder and of
                               the Seller under the Residual Repo. The Investor,
                               as the holder of the Trust 3 P Certificate, will
                               be entitled to apply 100% of such value to such
                               obligations. As the holder of the Trust 3 P
                               Certificate, Investor, and its successors and
                               assigns, will have the right to exercise all
                               rights with respect to Trust 3 and the Trust 3
                               Assets, including any rights of termination and
                               any of the rights of the Trust 1 R
                               Certificateholders with respect to Trust 1 and
                               the IO Collateral held by Trust 1 under the
                               Amended and Restated Trust Agreement, dated as of
                               October 14, 2003, pursuant to which Trust 1 was
                               established. In an Event of Default under the Wet
                               Warehouse Facility Documentation, Investor, as
                               the holder of the Trust 3 P Certificate, will
                               have rights customary for secured creditors,
                               including the right to foreclose upon and sell
                               the Trust 3 Assets to satisfy the obligations of
                               the Issuer hereunder and the obligations of the
                               Seller under the Residual Repo; provided that for
                               as long as the Chrysalis Warehouse is
                               outstanding, Investor will not effect any sale or
                               transfer of the Trust 3 Assets to any entity that
                               is not either (i) an affiliate of Investor or
                               (ii) a securitization vehicle or other similar
                               special purpose financing entity.

                               On the Closing Date, Trust 3 will issue Trust 3 R
                               Certificates to Holdings (representing 97% of the
                               Trust 3 common equity) and to the Originators
                               (representing 3% of such equity). ABFS has
                               advised Patriot that any and all of the cash flow
                               from these Trust 3 R Certificates, as well as any
                               and all Trust 3 P Certificate cash flow not

                                     A-1-4

                               applied to the obligations owed to Investor under
                               the Wet Warehouse or to Purchaser under the
                               Residual Repo, will secure the obligations of
                               ABFS to the holders of its currently outstanding
                               senior collateralized subordinated notes as are
                               secured by the cash flow from the Trust 1 R
                               Certificates. Otherwise, the Trust 3 R
                               Certificates may not be assigned or pledged.

                               The Wet Warehouse Collateral will secure (a) the
                               principal balance of the VFN (except that the
                               Trust 3 P Certificate will secure only 15% of the
                               principal balance of the VFN (but 100% if a Fraud
                               Event occurs)); (b) all earned interest and fees;
                               and (c) all expenses and indemnities at any time
                               reimbursable to Investor. In addition, all Wet
                               Warehouse Collateral (except the Repo-related
                               Collateral) shall secure Seller's obligations
                               under the Residual Repo, and the Investor may
                               apply the Wet Warehouse Collateral in any order
                               to the Issuer's obligations under the Wet
                               Warehouse. A "Fraud Event" shall include, but not
                               be limited to, the pledge or transfer by the
                               Issuer or any other person of any of the mortgage
                               notes or other documents or collateral relating
                               to the Wet Loans to any party not authorized to
                               receive or obtain a security or ownership
                               interest in the same under the terms of the Wet
                               Warehouse Facility Documentation, any Wet Loans
                               not being actual bona fide mortgage loans, any
                               diversion of funds advanced by Investor - or by
                               the Custodian on the Investor's behalf - from
                               their intended use, any material
                               misrepresentation regarding such loans or any
                               attempt to force either Trust 3 or Trust 4 into
                               bankruptcy or violate their separateness
                               covenants.

                               The collateral securing that certain Master Loan
                               and Security Agreement, dated as of October 14,
                               2003, between ABFS Warehouse Trust 2003-2 ("Trust
                               2") and Chrysalis Warehouse Funding, LLC
                               ("Chrysalis;" such facility, in the form filed in
                               2003 with the SEC, the "Chrysalis Warehouse;"
                               such agreement, in the form filed in 2003 with
                               the SEC, the "Chrysalis Loan Agreement"), will at
                               all times be limited to the mortgage loans funded
                               thereunder and the additional collateral granted
                               to Chrysalis by Trust 1 as of the effective date
                               of such credit facility, less the residual
                               interests released by Chrysalis as contemplated
                               herein (the "Remaining Chrysalis Additional
                               Collateral"). Chrysalis' senior claim to the
                               Remaining Chrysalis Additional Collateral will at
                               all times be consistent with its claims under the
                               Chrysalis Warehouse (i.e., based on 10% of its
                               facility outstandings (which percentage has been
                               modified to 12.22% as agreed with ABFS; no other
                               terms have been modified) and percentage fees and
                               interest rates as provided in the original
                               Chrysalis Warehouse) and will be based on a
                               maximum facility size of US$400,000,000
                               (US$250,000,000 if the Chrysalis Warehouse shall
                               fail to be upsized to US$400,000,000 by the
                               earlier of (x) the January 12, 2005 deadline
                               contemplated under the terms thereof (as such
                               deadline may be extended by the parties to the
                               Chrysalis warehouse by mutual agreement) or (y)
                               March 31, 2005).

                                     A-1-5

Purpose:                       The VFN will fund the purchase by Trust 4 of
                               residential first and second mortgage loans
                               originated by various ABFS subsidiaries and
                               meeting ABFS's underwriting guidelines in effect
                               from time to time (the "Underwriting
                               Guidelines").

Eligible Loans:                Whole loan eligibility criteria to be
                               substantially similar to those contained in the
                               Chrysalis Warehouse ("Eligibility Criteria"),
                               including a certification with respect to each
                               loan from the Custodian. Whole loans originally
                               funded as Wet Loans which come to meet the
                               Eligibility Criteria are referred to herein as
                               "Eligible Loans".

Wet Loans:                     Funded and closed mortgage loans which by their
                               terms would qualify as Eligible Loans but for the
                               fact that full and complete documentation has not
                               been received by the Custodian ("Wet Loans"). The
                               funding of Wet Loans will at all times be subject
                               to the requirements set forth under "Wet Loan
                               Advance Requirements" below.

Advance Rate:                  As to any Wet Loan funded under the Wet
                               Warehouse, as provided under that certain Amended
                               and Restated Senior Secured Credit Agreement,
                               dated as of September 22, 2003 (the "Chase
                               Warehouse"), between ABFS and JPMorgan Chase Bank
                               as Agent (90% for fixed-rate first mortgage
                               loans, 88% for adjustable-rate first mortgage
                               loans and 75% for second mortgage loans). Wet
                               Loan purchases will be the subject of the
                               additional requirements set forth under "Wet Loan
                               Advance Requirements" below.

                               Wet Loans (i) may be financed under the Wet
                               Warehouse for a maximum of six (6) business days
                               from and including the date of origination of
                               each such Wet Loan and (ii) cannot have been
                               financed under any other wet loan financing
                               facility, except those Wet Loans financed on the
                               Closing Date that were - immediately prior
                               thereto - financed under the Chase Warehouse if
                               the Chase Warehouse is being terminated on the
                               Closing Date; provided, that Wet Loans which
                               become Eligible Loans prior to the close of the
                               sixth business day from origination may remain
                               financed under the Wet Warehouse for a maximum of
                               sixty (60) additional days. Such Eligible Loans
                               will continue to be financed at the lesser of (a)
                               the applicable Advance Rate or (b) the advance
                               rate which would be applicable to such loan under
                               the Chrysalis Warehouse (if such loan were
                               subject to such facility), subject in all cases
                               and at all times to the principal balance of the
                               VFN not exceeding the Facility Amount. Wet Loans
                               and Eligible Loans will only be released as Wet
                               Warehouse Collateral if the principal balance of
                               the VFN does not exceed the Borrowing Base -
                               after giving effect to such release - and no
                               default or event of default under the Wet
                               Warehouse has occurred and is continuing.

                                     A-1-6

                               In addition, the Advance Rate provided by
                               Investor with respect to any category of Wet
                               Loans or Eligible Loans will at no time exceed
                               the advance rate offered to ABFS under any other
                               ABFS warehouse facility for similar loans (as
                               determined by the Investor), and to effectuate
                               such intent ABFS will provide to Investor (and/or
                               the Custodian), no less frequently than weekly,
                               copies of all borrowing base certificates and
                               remittance reports provided to or by other
                               lenders and such other information as the
                               Custodian or Investor may request. Investor may,
                               in its discretion in connection with its ongoing
                               monitoring of the Wet Warehouse Collateral,
                               including but not limited to its ongoing review
                               of contract underwriting, decrease the Advance
                               Rates for the Wet Warehouse from time to time.

Loan Advance
Mechanics:                     The Custodian will act as the disbursing agent
                               for funding of all advances under the Wet
                               Warehouse at the expense of the Issuer, including
                               but not limited to funding for all Wet Loan
                               purchases by Trust 4. Funding for Wet Loan
                               purchases by Trust 4 shall be deposited by
                               Investor and Issuer into a
                               concentration/distribution account maintained by
                               the Custodian. Once the Custodian has received
                               all amounts due from each of Investor (advance in
                               accordance with applicable Advance Rates) and
                               Issuer (deposit representing applicable haircut
                               amount and fees) in the concentration/
                               distribution account, the combined deposit will
                               be transferred to a disbursement account
                               maintained by the Custodian. The amounts needed
                               by Issuer to fund the concentration/distribution
                               account will be supplied to it solely through
                               capital contributions made by Holdings (which
                               will also obtain the needed funds solely by
                               capital contributions) through Trust 3 and by
                               excess cash flow. The Custodian will wire
                               transfer the Wet Loan purchase price to the
                               Approved Closing Agent, subject to such
                               procedures with respect to validating wire
                               transfer instructions provided by ABFS as are
                               satisfactory to Investor, and will receive by
                               direct delivery the related documentation for
                               such Wet Loan from such Approved Closing Agent.

Wet Loan Advance
Requirements:                  Wet Loans will be closed in escrow by an Approved
                               Closing Agent which is bonded by an Approved
                               Title Insurer pursuant to a Closing Protection
                               Letter (except in New York, where a guarantee
                               letter shall be provided in form and substance
                               acceptable to the Investor) and Funds Receipt
                               Agreement benefiting the Investor and specific
                               closing instructions provided by the Custodian on
                               behalf of the Investor.

                                     A-1-7

                               An "Approved Title Insurer" shall mean any
                               single-A-rated insurance company reasonably
                               satisfactory to the Custodian on behalf of the
                               Investor.

                               An "Approved Closing Agent" shall mean a closing
                               agent which is independently owned and operated
                               (i.e., has no affiliation with ABFS), is bonded
                               by an Approved Title Insurer (or a guarantee
                               letter in New York) and is insured against errors
                               and omissions in an amount satisfactory to
                               Patriot in its sole discretion.

                               Under each "Closing Protection Letter" (or
                               guarantee letter in New York) the applicable
                               Approved Title Insurer (or comparable entity
                               under a guarantee letter in New York) will
                               guarantee the performance of the applicable
                               Approved Closing Agent and agree to reimburse the
                               Investor for any losses incurred due to (i)
                               malfeasance or fraud on the part of the Approved
                               Closing Agent or (ii) the failure of the Approved
                               Closing Agent to follow the specific closing
                               instructions specified by the Investor.

                               Each "Funds Receipt Agreement" will provide
                               specific instructions for the applicable Approved
                               Closing Agent to close and deliver mortgage loans
                               funded by Investor immediately or to wire the
                               funds back to Investor (or the Custodian, if so
                               directed by the Investor in writing) if the
                               funding does not occur within one (1) business
                               day, such wire to include, without limitation,
                               the applicable haircut amount deposited by the
                               Issuer. If any Approved Closing Agent at any time
                               fails to either deliver the loan collateral file
                               (such file to consist of the note, the mortgage,
                               the title policy, the assignment of mortgage and
                               all other related documents) or return funds to
                               the Custodian as required (it being understood
                               that all Approved Closing Agents will be required
                               to deliver loan documents directly to the
                               Custodian), the applicable Approved Title Insurer
                               pursuant to the Closing Protection Letter (or
                               comparable entity under a guarantee letter in New
                               York) will be obligated to reimburse the Investor
                               for the full amount of the wire.

Additional Collateral:         The market value (as determined by the Investor
                               in its sole discretion) of the Additional
                               Collateral (as adjusted to take into account all
                               potential senior claims of Chrysalis against the
                               Trust 1 IO Collateral represented by the
                               Remaining Chrysalis Additional Collateral) shall
                               be greater than US$60,000,000 at all times.

Distributions:                 (i) Any payments of principal, interest and other
                               amounts paid by obligors with respect to the Wet
                               Loans and Eligible Loans, and all foreclosure
                               proceeds, insurance proceeds and other recoveries
                               thereon, (ii) any proceeds of the refinancing,
                               sale or securitization of any Wet Loans or
                               Eligible Loans and any other proceeds of the Loan
                               Collateral, (iii) any cash flow from the Trust 1
                               IO Collateral released by Chrysalis under the

                                     A-1-8

                               Chrysalis Warehouse, all of which shall be turned
                               over to the Parent Owner Trustee, for the benefit
                               of the Trust 3 P Certificate holder and other
                               parties with interests in the Trust 3 R
                               Certificates, (iv) all proceeds of Servicer
                               Reimbursement and Fee Collateral, and (v) any
                               proceeds of Repo-related Collateral
                               (collectively, the "Wet Warehouse Available
                               Collections"), shall be deposited into one or
                               more collection/distribution accounts
                               (established under such terms as are satisfactory
                               to the Investor) and be paid on a monthly basis
                               on each Payment Date (as defined in Annex I to
                               Exhibit A-1) as follows:

                               first, to the Issuer Owner Trustee, Parent Owner
                               Trustee, Investor Co-Trustees, Custodian and
                               Back-up Servicer, pro rata, any outstanding fees
                               not paid by the Issuer;

                               second, to the Servicer to pay any servicing
                               fees;

                               third, to the Investor to pay any fees owed to
                               Investor;

                               fourth, to the Investor to pay any interest owed
                               to Investor;

                               fifth, to the Investor to pay any principal
                               amounts of the VFN needed to remain in compliance
                               with the Borrowing Base and to pay the
                               outstanding principal balance of the VFN upon the
                               maturity, early termination or acceleration of
                               the Wet Warehouse;

                               sixth, to the Investor to pay any other amounts
                               due to Investor under the Wet Warehouse;

                               seventh, remaining Wet Warehouse Available
                               Collections (other than any remaining portion
                               thereof described in clause (v) of the definition
                               of "Wet Warehouse Available Collections") to the
                               Purchaser or other applicable parties (other than
                               the Seller) under the Residual Repo to the extent
                               the funds available under such facility are
                               insufficient to make the required payments
                               thereunder; and

                               eighth, provided no Event of Default has occurred
                               and is continuing under the Wet Warehouse, the
                               remainder to the Issuer.

                               Amounts due Investor under priorities "third"
                               through "sixth" shall be deemed to be "Required
                               Distributions" for purposes of the Wet Warehouse,
                               and failure of Investor to receive such Required
                               Distributions in full, by operation of the
                               waterfall above or otherwise, shall constitute an
                               Event of Default under the Wet Warehouse.

                               More frequent payments, resulting from the
                               refinancing, sale or securitization of Eligible
                               Loans, will also be permitted, under arrangements
                               satisfactory to the Investor. Release of excess
                               cash flow from the Trust 1 IO Collateral received
                               on the 15th of each month may be permitted by the

                                     A-1-9

                               Investor prior to a Payment Date subject to such
                               conditions as the Investor shall determine in its
                               sole discretion. Wet Warehouse Available
                               Collections referred to in clauses (iii), (iv)
                               and (v) of the definition thereof shall not be
                               commingled with funds pledged or belonging to
                               others; Wet Warehouse Available Collections
                               referred to in clauses (i) and (ii) of the
                               definition thereof may be commingled with funds
                               pledged to other ABFS lenders or belonging to
                               ABFS whole loan purchasers under arrangements
                               satisfactory to Investor in its sole discretion.

III.     CERTAIN PAYMENT PROVISIONS

Investor Fees and
Interest Rates:                As set forth on Annex I to Exhibit A-1.

Other Fees and
Expenses:                      Fees and expenses of the Issuer Owner Trustee,
                               Parent Owner Trustee, Investor Co-Trustees,
                               Custodian, Servicer and Back-up Servicer to be
                               paid by ABFS, such fees and expenses being
                               separate and apart from any fees and expenses
                               owed to Patriot or Investor (including the
                               Monitoring Fee (as defined below) and Work Fees).
                               In addition, all out-of-pocket fees and expenses
                               incurred by the Investor in connection with the
                               administration, amendment and/or enforcement of
                               the Wet Warehouse will be reimbursed by the
                               Issuer or ABFS on demand.

IV.      CERTAIN CONDITIONS

Initial Conditions:            The availability of the Wet Warehouse shall be
                               conditioned upon satisfaction of, among other
                               things, the following conditions precedent not
                               later than November 5, 2004 (the date upon which
                               all such conditions precedent shall be satisfied,
                               the "Closing Date"):

                               (a) The Issuer shall have executed and delivered
                               definitive financing documentation with respect
                               to the Wet Warehouse, including without
                               limitation the Trust 3 P Certificate (the "Wet
                               Warehouse Facility Documentation") and a master
                               repurchase agreement with respect to the Residual
                               Repo in form and substance satisfactory to
                               Investor;

                               (b) The Investor and all participants therein or
                               lenders thereto shall have received all fees
                               required to be paid (including but not limited to
                               all Work Fees), and all expenses for which
                               invoices have been presented shall have been paid
                               in full, on or before the Closing Date (with Work
                               Fees being applied thereto as provided herein);

                               (c) All governmental and third party approvals
                               necessary or, in the discretion of the Investor,
                               advisable in connection with the transactions
                               contemplated hereby and the continuing operations
                               of ABFS and its subsidiaries, including Holdings,
                               the Issuer Parent and the Issuer, shall have been
                               obtained and be in full force and effect;

                                     A-1-10

                               (d) The Investor shall have received and
                               determined as satisfactory, prior to the Closing
                               Date, (i) ABFS's annual report and final audited,
                               consolidated financial statements for the fiscal
                               year ended June 30, 2004 substantially in the
                               form filed or to be filed with the Securities and
                               Exchange Commission (the "SEC") on Form 10-K,
                               together with the opinion thereon of BDO Seidman,
                               LLP; (ii) satisfactory unaudited interim
                               consolidated financial statements of ABFS for
                               each of July, August, September and October of
                               the current fiscal year (to the extent such
                               statements have been produced by ABFS); (iii) all
                               correspondence between ABFS and the SEC regarding
                               ABFS's registration statement on Form S-2 filed
                               on October 15, 2004 regarding its retail secured
                               subordinated indebtedness; (iv) ABFS's latest
                               contingent financial restructuring plan; and (v)
                               any other correspondence between ABFS and the SEC
                               which Patriot may request;

                               (e) The Investor shall have received such legal
                               opinions, documents and other instruments as are
                               customary for transactions of this type and as
                               they may reasonably request;

                               (f) ABFS and its affiliates shall be in full
                               compliance (after giving effect to any waivers
                               obtained thereunder satisfactory to Patriot) with
                               all terms and conditions contained in the
                               Chrysalis Loan Agreement, all other financings
                               and all of its securitizations;

                               (g) ABFS shall have received one or more
                               definitive warehouse commitments from one or more
                               other new lenders to the company to provide an
                               aggregate minimum US$100,000,000 in warehouse
                               funding, with an aggregate minimum US$30,000,000
                               sub-limit for wet loans ("Additional Warehouse
                               Lines"), which Additional Warehouse Lines shall
                               be required to close not later than the Closing
                               Date;

                               (h) ABFS shall have obtained a "key man" life
                               insurance policy on the life of Anthony J.
                               Santilli, to be collaterally assigned to the
                               Investor, in an amount at least equal to
                               US$2,000,000 (provided that ABFS shall use its
                               best efforts to increase the amount of such
                               policy to US$5,000,000 within six months of the
                               Closing Date);

                               (i) Investor shall have entered into such
                               intercreditor agreements with ABFS's other
                               lenders as are, in Investor's sole discretion,
                               necessary to effectuate the intent of the Wet
                               Warehouse and preserve its interests in the Wet
                               Warehouse Collateral, in each case on terms and
                               conditions satisfactory to Investor in its sole
                               discretion, including but not limited to (a)
                               restrictions on the sale or disposition of

                                     A-1-11

                               Trust 1 IO Collateral and (b) the commingling of
                               Wet Warehouse Available Collections referred to
                               in clauses (i) and (ii) of the definition thereof
                               under "Distributions" above;

                               (j) All conditions contained in the Commitment
                               Letter shall each have been satisfied;

                               (k) Investor shall have received copies of
                               certified resolutions of the Board of Directors
                               of ABFS and Holdings (including any applicable
                               committees thereof) authorizing and approving the
                               Wet Warehouse, in form and substance satisfactory
                               to Investor; and

                               (l) ABFS, Holdings and the pledgor(s) of Servicer
                               Reimbursement and Fee Collateral shall provide
                               Investor with current financial statements,
                               prepared in accordance with GAAP, along with
                               certifications, which must evidence that each has
                               a positive net worth (and cover related matters)
                               as of the Closing Date.

On-Going
Conditions:                    Each financing shall be conditioned upon (a) the
                               accuracy of all representations and warranties in
                               the Wet Warehouse Facility Documentation
                               (including, without limitation, material adverse
                               change and litigation representations) and (b)
                               there being no default or event of default in
                               existence at the time of, or after giving effect
                               to the making of, such extension of credit. As
                               used herein and in the Wet Warehouse Facility
                               Documentation, a "material adverse change" shall
                               mean any event, development or circumstance that
                               has had or could reasonably be expected to have a
                               material adverse effect on (x) the business,
                               assets, property, condition (financial or
                               otherwise), or prospects of ABFS and its
                               affiliates taken as a whole or on the value of
                               the Wet Warehouse Collateral, or (y) the validity
                               or enforceability of any of the Wet Warehouse
                               Facility Documentation or the rights or remedies
                               of the Investor thereunder.

                               ABFS shall maintain an effective registration
                               statement with the SEC for retail subordinated
                               indebtedness with availability of at least
                               $30,000,000 at all times. In addition, as
                               provided under the Chrysalis Warehouse, ABFS
                               shall not be unable for any reason to sell or
                               issue subordinated debentures or senior
                               collateralized subordinated notes under any
                               existing Sub-debt Indentures (defined in the
                               Chrysalis Loan Agreement as all indentures
                               entered into prior to the closing date of that
                               credit facility between ABFS and U.S. Bank
                               National Association) or any other similar future
                               indentures for more than three consecutive weeks
                               or on more than two occasions in any twelve-month
                               period irrespective of the length of time of any
                               such occasions.

                                     A-1-12

                               ABFS must at all times satisfy all requirements
                               for continuing its current Nasdaq listing status.
                               A delisting notification will be a default under
                               the Wet Warehouse Facility Documentation, with a
                               cure period provided to reestablish ABFS's
                               listing on Nasdaq equal to the applicable cure
                               period provided in Nasdaq's listing standards
                               and/or regulations.

                               ABFS shall not make any material changes to its
                               Underwriting Guidelines, unless Investor shall
                               have given prior written approval for such
                               changes.

                               ABFS shall at all times keep Investor informed in
                               writing of its mortgage loan programs and related
                               program pricing, including without limitation any
                               and all changes thereto as and when made.

                               ABFS and Issuer shall at all times maintain all
                               required lending and other licenses in each
                               applicable jurisdiction in which it transacts
                               business.

                               At all times during the term of the Committed
                               Facility, ABFS shall retain Anthony J. Santilli,
                               Jeffrey Ruben and Albert Mandia in their current
                               positions at ABFS or, if and to the extent
                               Jeffrey Ruben or Albert Mandia shall cease to
                               hold their current positions, secure a
                               replacement employee reasonably satisfactory to
                               Investor within 60 days thereafter.

                               At all times during the life of the Wet
                               Warehouse, ABFS shall maintain in force a "key
                               man" life insurance policy on the life of Anthony
                               J. Santilli, to be collaterally assigned to the
                               Investor, in an amount at least equal to
                               US$2,000,000 (provided that ABFS shall use its
                               best efforts to increase the amount of such
                               policy to US$5,000,000 within six months of the
                               Closing Date).

                               Investor shall be added as a named insured to
                               ABFS's errors and omissions insurance and
                               fidelity bond.

                               ABFS shall at all times preserve current coverage
                               levels of general liability, errors and omissions
                               and fidelity bond coverage.

                               ABFS shall not discriminate against the Investor
                               with respect to the Wet Loans it chooses to
                               finance under the Wet Warehouse.

V. CERTAIN DOCUMENTATION MATTERS

The Wet Warehouse Facility Documentation shall contain representations, warranties, covenants and events of default customary for agreements of this type and other terms deemed appropriate by the Investor, including, without limitation:

Certain Financial
Covenants:                     ABFS to have at least US$350,000,000 in aggregate
                               active warehouse facility commitments from one or
                               more other lenders or investors at all times.
                               Terms and conditions of facilities shall be
                               reasonably acceptable to Investor.

                               The pledgor(s) of the Servicer Reimbursement and
                               Fee Collateral shall periodically certify, and
                               provide monthly financial statements prepared in
                               accordance with GAAP evidencing, that each
                               maintains a positive net worth at the end of the
                               period covered by each such certification.

Other Covenants/
Representations:               Covenants/representations to include but not be
                               limited to those set forth in the Chrysalis Loan
                               Agreement (with covenants covering the Wet
                               Warehouse Collateral), and the following (all
                               schedules to be revised as of the Closing Date,
                               with any changes therein being satisfactory to
                               Investor in its sole discretion):

                               As of the Closing Date, there are no material
                               actions or proceedings threatened or commenced
                               and continuing against ABFS where the evaluated
                               exposure as determined by ABFS in consultation
                               with its outside legal counsel is in excess of
                               US$50,000, other than those summarized on
                               Schedule B attached to the Commitment Letter.

                               As of the Closing Date, there are no material
                               complaints asserted against ABFS by consumers or
                               regulators on their behalf other than those
                               summarized on Schedule C attached to the
                               Commitment Letter.

                               As of the Closing Date, there are no threatened
                               or pending enforcement actions, administrative
                               proceedings or investigations involving ABFS by
                               any federal, state or local governmental entity
                               other than those summarized on Schedule D
                               attached to the Commitment Letter.

                               With respect to ABFS-sponsored securitizations
                               which were insured by financial guaranty
                               company(ies), Schedule E lists (and ABFS has
                               provided copies of) all amendments and waivers to
                               contracts related to such securitizations, all
                               correspondence with such financial guaranty
                               company(ies) that is or may be material to the
                               holders of the residual interests in such
                               securitization and all servicer extension notices
                               and waivers related thereto received by ABFS
                               prior to the Closing Date from the financial
                               guaranty company.

                               ABFS is licensed and qualified to originate loans
                               and transact business in and is in good standing
                               under the laws of each state where it originates
                               and services mortgage loans unless otherwise
                               exempt under applicable law from such licensing
                               or qualification.

                                     A-1-14

                               No mortgage loans subject to the Wet Warehouse
                               are: (a) mortgage loans that are subject to the
                               provisions of the Homeownership and Equity
                               Protection Act of 1994 as amended; (b) "high
                               cost" mortgage loans, "covered" mortgage loans,
                               "high risk home" mortgage loans or "predatory"
                               mortgage loans or any other comparable term, no
                               matter how defined under any federal, state or
                               local law, (c) mortgage loans subject to any
                               comparable federal, state or local statutes or
                               regulations, or any other statute or regulation
                               providing for heightened regulatory scrutiny or
                               assignee liability to holders of such mortgage
                               loans, or (d) High Cost Loans or Covered Loans as
                               applicable (as such terms are defined in the
                               Standard & Poor's LEVELS(R) Glossary Revised,
                               Appendix E, as such Appendix E may be revised
                               from time to time).

                               ABFS does not and will not engage in any
                               predatory or deceptive lending practices,
                               including but not limited to, the extension of
                               credit to a mortgagor without regard for the
                               mortgagor's ability to repay the mortgage loan
                               and the extension of credit to a mortgagor which
                               has no apparent benefit to the mortgagor, in
                               connection with the mortgage loans that it
                               originates.

                               ABFS does not and will not require mortgagors to
                               purchase any credit life, disability, accident or
                               health insurance product as a condition of
                               obtaining an extension of credit.

                               The information set forth in the multi-state
                               prepayment charge grid attached on Schedule F
                               attached to the Commitment Letter is complete,
                               true and correct in all material respects and
                               each prepayment charge imposed by ABFS in the
                               mortgage loans that it originates is permissible,
                               enforceable and collectable under applicable
                               federal and state law.

Events of Default:             Events of Default to include, but not be limited
                               to, failure to satisfy any of the "Initial
                               Conditions," any of the "On-Going Conditions",
                               those events of default under Chrysalis Loan
                               Agreement, and the following:

                               Failure by ABFS to obtain required Additional
                               Warehouse Lines required by the Wet Warehouse
                               Facility Documentation.

                               Loss of servicing rights under (i) more than two
                               outstanding ABFS securitizations or (ii) any
                               warehouse facility (including the Wet Warehouse).

                               Any other customary Events of Default and any
                               events of default under the Residual Repo.

                                     A-1-15

                               Upon an Event of Default, the Wet Warehouse will
                               terminate and all outstandings thereunder,
                               including, without limitation, amounts due under
                               the VFN, will be immediately due and payable.
                               Investor shall be entitled to enforce any rights
                               and all remedies pursuant to the Wet Warehouse
                               Facility Documentation and applicable law,
                               including without limitation its right to sell
                               all or portions of the Loan Collateral on a
                               servicing-released basis and its rights with
                               respect to the Trust 3 P Certificate and the
                               other Additional Collateral.

Governing Law                  State of New York.

Jurisdiction:                  Federal and State Courts located in the borough
                               of Manhattan, City of New York.

Counsel to Investor
and Patriot:                   Thacher Proffitt & Wood LLP and Kirkland &
                               Ellis LLP.

Opinions:                      Closing opinions acceptable to Investor
                               including, but not limited to, perfected security
                               interest opinions with respect to all of the Wet
                               Warehouse Collateral, a non-consolidation opinion
                               (which shall include, but not be limited to,
                               opinions regarding the non-consolidation of the
                               Issuer, on the one hand, with Trust 1, Trust 3,
                               Holdings and American Business Financial
                               Services, Inc., on the other hand) and true sale
                               opinions with respect to the Wet Loans and
                               Eligible Loans as between the Originators and
                               Trust 3, and Trust 3 and the Issuer.

A-1-16

Pricing:                       Rate - 1 month Libor + 2.50% per annum on all
                               outstanding VFN balances, payable on the last day
                               of the relevant interest period. Interest
                               generally shall be due monthly, and interest
                               shall also be due whenever the VFN balance is
                               repaid (e.g., when Eligible Loans are released to
                               be refinanced under another warehouse line or
                               sold or securitized) on the balance repaid.

                               Default Rate - Rate plus 5.00% applicable upon
                               and following an Event of Default and applicable
                               to overdue interest, fees and other obligations,
                               as well as to principal amounts then due.

                               Payment Date - Generally to coincide with each
                               Roll Date under the Residual Repo. Payment Dates
                               may be scheduled more frequently as Investor
                               deems necessary to apply proceeds arising from
                               the refinancing, sale or securitization of
                               Eligible Loans.

Fees:                          Commitment Fee - US$950,000, payable by 6:00 p.m.
                               on the date of acceptance by ABFS of the
                               Commitment Letter.

                               Closing Fee - US$250,000 payable on the Closing
                               Date; provided, however, that as agreed in the
                               Extension Letter, if the Closing Date occurs on
                               or prior to November 5, 2004 (or such later date
                               as Issuer and Investor may agree), Investor will
                               credit to the Closing Fee the US$250,000 fee paid
                               by ABFS in connection with the Extension Letter,
                               resulting in a reduction of the Closing Fee to
                               US$-0-.

                               Facility Fee - US$600,000, payable on the first
                               anniversary of the Closing Date.

                               Credit Support and Arrangement Fee - US$150,000
                               per month, payable on the Closing Date and on a
                               specific day of each month thereafter (as shall
                               be determined by the Investor). Credit Support
                               and Arrangement Fees payable for the first twelve
                               (12) months after the Closing Date (US$1,800,000
                               in aggregate) will be fully-earned on the Closing
                               Date. Credit Support and Arrangement Fees payable
                               thereafter will be fully earned as they become
                               due.

                               Non-Use Fee - 0.50% per annum on the undrawn
                               portion of the Wet Warehouse.

                                     A-1-17

                               Monitoring Fee - US$50,000 per calendar quarter,
                               payable on the Closing Date and thereafter at
                               three-month intervals during the term of the Wet
                               Warehouse, for a total of US$600,000. Monitoring
                               Fees payable in respect of the first four (4)
                               calendar quarters after the Closing Date
                               (US$200,000 in aggregate) will be fully earned on
                               the Closing Date. Monitoring Fees payable
                               thereafter will be fully earned as they come due.

                               Termination Fee - US$600,000 payable in
                               connection with any termination by Issuer of the
                               Wet Warehouse as contemplated in the first
                               paragraph under "Wet Warehouse Collateral" in
                               Exhibit A-1.

Rate and
Fee Basis:                     Shall at all times be calculated on the basis of
                               a 360-day year and the actual number of days
                               elapsed.

A-1-18

Seller:                        Trust 4. Holdings will contribute the Purchased
                               Assets (defined below) to Trust 3 on the Closing
                               Date. Trust 3 will contribute the Purchased
                               Assets to the Seller on the Closing Date.

Purchaser:                     A limited purpose entity to be formed by Patriot
                               (or one or more of its affiliates and/or
                               subsidiaries). Purchasers may include
                               participants in addition to Patriot, and Patriot
                               may obtain capital from or arrange direct
                               participation by third parties on a senior or
                               junior basis (such purchasers, collectively, the
                               "Purchaser"). Purchaser shall from time to time
                               enter into transactions (the "Transactions") to
                               purchase Purchased Securities (as defined below)
                               with an obligation of Seller to repurchase the
                               Purchased Securities.

Seller Owner
Trustee:                       The same financial institution designated as the
                               Issuer Owner Trustee and Parent Owner Trustee in
                               Exhibit A-1.

Purchaser Co-
Trustees:                      The same financial institutions designated as the
                               Investor Co-Trustees in Exhibit A-1.

Purchased Securities:          Residual interests set forth on Annex II hereto
                               (subject to modification by Patriot in accordance
                               with the immediately succeeding paragraph),
                               relating to one or more issued and outstanding
                               ABFS securitizations, together with (i) any and
                               all rights of Seller, Servicer and/or applicable
                               affiliates thereof to effect a cleanup call with
                               respect to the securitization(s) to which such
                               residual interests relate and (ii) any and all
                               rights to purchase delinquent loans (including,
                               without limitation, for the purpose of managing
                               delinquency and loss percentages used to
                               calculate whether a "Trigger Event" or a similar
                               event has occurred under the related pooling and
                               servicing agreement or the related sale and
                               servicing agreement pursuant to which the
                               Purchased Securities were issued); provided, that
                               Purchaser shall only control the exercise of such
                               rights to purchase delinquent loans from the
                               related trust upon an Event of Default (and,
                               accordingly, ABFS may exercise such rights prior
                               thereto) (collectively, the "Purchased
                               Securities"). Purchased Securities will be

                                     A-2-1

                               delivered to Purchaser free and clear of any and
                               all liens and encumbrances, together with bond
                               powers necessary and sufficient to permit
                               re-registration of the Purchased Securities in
                               the name of Purchaser. Any Additional Residual
                               Interests (as defined below) shall also
                               constitute Purchased Securities.

                               The parties agree that the initial selection of
                               the Purchased Securities set forth on Annex II
                               hereto may be adjusted by Purchaser (in
                               reasonable consultation with ABFS and Clearwing
                               Capital, LLC) at any time on or prior to the date
                               and time by which Patriot shall have delivered
                               written confirmation of its investment committee
                               approval of the Committed Facility, provided that
                               the aggregate book value of the Purchased
                               Securities finally selected - determined by
                               reference to ABFS's Analysis of Interest-Only
                               Strip and MSA Fair Values for deals 1998-3
                               through 2003-2, as at 9/30/04, provided by ABFS
                               to Patriot on October 8, 2004 (as to any residual
                               interest included in such analysis, the "ABFS
                               Book Value") - does not exceed by more than
                               US$3,000,000 the aggregate ABFS Book Value of the
                               Purchased Securities identified in Annex II to
                               Exhibit A-2. Notwithstanding the foregoing, the
                               parties agree that the Preliminary Securities
                               Purchase Price may be adjusted by Purchaser at
                               any time prior to the Closing Date to reflect any
                               change in the Repo Market Value of the Purchased
                               Securities which may result from distributions on
                               the Purchased Securities after September 30,
                               2004, changes in market conditions or other
                               factors as determined by Purchaser (any such
                               adjustment, a "Pre-Closing Adjustment") (see also
                               "Securities Purchase Price" below).

II.      FACILITY AMOUNT AND STRUCTURE

Facility Amount:               The Initial Securities Purchase Price (as defined
                               below), which shall in no event exceed
                               US$23,000,000 (the "Facility Amount"). The
                               Facility Amount shall reflect any Pre-Closing
                               Adjustment and shall be reduced by any and all
                               Permanent Margin Payments (defined below), which
                               shall be applied to permanently reduce the then
                               current Securities Purchase Price on the
                               applicable Roll Date (as defined below) (or other
                               date selected by Purchaser in its sole
                               discretion).

Termination Date:              Two (2) years from Closing Date.

Structure:                     Repurchase facility. On the Closing Date,
                               Purchaser will acquire the Purchased Securities
                               from Seller pursuant to the terms of the Master
                               Repurchase Agreement (as defined below), for the
                               Preliminary Securities Purchase Price (adjusted
                               to reflect any Pre-Closing Adjustment). Purchaser
                               will receive all payments and distributions on
                               the Purchased Securities directly from the
                               issuers thereof, to be applied pursuant to
                               "Distributions" below.

                                     A-2-2

                               Purchaser reserves the right to include one or
                               more purchasers in the Residual Repo provided
                               that the resulting structure provides ABFS with
                               substantially identical funding availability and
                               pricing to the availability and pricing described
                               herein.


Securities
Purchase Price:                Initially, US$23,000,000 (the "Preliminary
                               Securities Purchase Price"), which amount shall
                               be adjusted to reflect any Pre-Closing Adjustment
                               (so adjusted, the "Initial Securities Purchase
                               Price"), and on any date following the Closing
                               Date, the Initial Securities Purchase Price less
                               the sum of all Permanent Margin Payments made by
                               Seller to Purchaser up to such date (each such
                               resulting amount, the then applicable "Securities
                               Purchase Price").

Roll Date:                     The 26th calendar day of each month (or, if such
                               day is not a business day, the next succeeding
                               business day) or such other calendar day of each
                               month agreed by the parties and reflected in the
                               Residual Repo Facility Documentation.

Securities
Repurchase Price:              The aggregate of (i) the Securities Purchase
                               Price; (ii) any accrued and unpaid Price
                               Differential; and (iii) any accrued and unpaid
                               fees (including any due and unpaid Repurchase
                               Option Premium), expenses, breakage costs and/or
                               indemnity amounts, such amounts to be paid in
                               connection with Seller's repurchase of the
                               Purchased Securities on the Termination Date in
                               accordance with the Residual Repo Facility
                               Documentation.

Price Differential:            As of any date of determination, the aggregate
                               amount obtained by daily application of the
                               Pricing Rate (or during the continuation of an
                               Event of Default, by daily application of the
                               Default Rate) to the Securities Purchase Price on
                               a 360-day-per-year basis for the actual number of
                               days elapsed during the period commencing on (and
                               including) the Closing Date and ending on (but
                               excluding) the date of determination (reduced by
                               any amount of such Price Differential in respect
                               of such period previously paid by Seller to
                               Purchaser). The accrued Price Differential shall
                               be paid monthly on each Roll Date.

Valuation:                     The value of the Purchased Securities (the "Repo
                               Market Value") will be determined by Purchaser in
                               its sole discretion and will be marked to market
                               daily at Purchaser's sole discretion.

Margin Call:                   If on any date the Repo Market Value of the
                               Purchased Securities is less than the Purchaser's
                               Margin Amount for all Purchased Securities (such
                               value shortfall, a "Margin Deficit"), then
                               Purchaser may make a margin call on Seller (a
                               "Margin Call"). If a Margin Call is made, Seller

                                     A-2-3

                               shall be obligated, but shall have the option, to
                               (A) transfer cash or additional residual
                               interests to Purchaser acceptable to Purchaser in
                               its sole discretion ("Additional Residual
                               Interests"), so that such cash (which shall be
                               valued at the then applicable Purchaser's Margin
                               Percentage) and the Repo Market Value of the
                               Purchased Securities, including any such
                               Additional Residual Interests, will thereupon
                               equal or exceed the Purchaser's Margin Amount
                               and/or (B) pay to Purchaser such amount of the
                               outstanding Securities Purchase Price as is
                               needed to eliminate the Margin Deficit (and any
                               such payment shall permanently reduce the
                               Securities Purchase Price and the then
                               outstanding Facility Amount) (each such payment,
                               a "Permanent Margin Payment"). Seller shall have
                               one (1) business day to specify the extent to
                               which it is exercising options (A) and/or (B)
                               above (and otherwise will be deemed to have
                               elected option (B) above), and shall have an
                               additional four (4) business days to satisfy any
                               such Margin Call. Residual Repo Available
                               Collections (as defined below) may - and, to the
                               extent Seller fails to make an election following
                               a Margin Call, such amounts will - be applied as
                               and when provided below to make Permanent Margin
                               Payments. Any and all cash transferred by Seller
                               in connection with a Margin Call pursuant to
                               option (A) above will be deposited into an
                               account controlled by the Purchaser (the
                               "Residual Repo Cash Margin Account"). Amounts at
                               any time on deposit in the Residual Repo Cash
                               Margin Account may be applied by the Purchaser to
                               offset any deficit in amounts available to effect
                               the payments contemplated under priorities
                               "first" through "fifth" under "Distributions"
                               below and will be released to the Seller if the
                               Seller makes any Permanent Margin Payments needed
                               to eliminate any Margin Deficit and is not in
                               default under the Residual Repo or the Wet
                               Warehouse.

Purchaser's
Margin Amount:                 As of any date, the amount equal to the product
                               of the Purchaser's Margin Percentage and the
                               Securities Repurchase Price.

Purchaser's
Margin Percentage:             Initially, two hundred percent (200%); provided,
                               that on each of the first ten (10) Roll Dates,
                               the Purchaser's Margin Percentage shall increase
                               by five percentage points (5%), reaching two
                               hundred fifty percent (250%) on the tenth (10th)
                               Roll Date and remaining at 250% at all times
                               thereafter.

Optional
Termination:                   On any Roll Date prior to the Termination Date,
                               the Seller may terminate the Residual Repo by
                               repurchasing the Purchased Securities (in whole
                               but not in part) for the Securities Repurchase
                               Price (including therein any unpaid Repurchase
                               Option Premium) and paying the applicable Exit
                               Fee to the Purchaser (a "Seller Termination").

                                     A-2-4

Repo Additional
Collateral:                    The Wet Warehouse Collateral (other than the
                               Repo-related Collateral) (the "Repo Additional
                               Collateral") will secure the Securities
                               Repurchase Price (expressly including all accrued
                               Price Differential, fees and all expenses and
                               indemnities at any time reimbursable to
                               Purchaser), except that the Trust 3 P Certificate
                               will secure such amounts only up to the limits
                               contemplated under "Wet Warehouse Collateral" in
                               Exhibit A-1.

Distributions:                 Any distributions on or with respect to the
                               Purchased Securities (the "Residual Repo
                               Available Collections"), plus the proceeds of any
                               Repo Additional Collateral (to the extent
                               necessary to make the payments set forth in
                               priorities "first" through "fourth" below), shall
                               be deposited into a collection/distribution
                               account (established under such terms as are
                               satisfactory to the Purchaser) and applied on a
                               monthly basis on each Roll Date (taking into
                               account the election or deemed election of Seller
                               with respect to any Margin Call as contemplated
                               under "Margin Call" above) as follows:

                               first, to the Purchaser to pay any Repurchase
                               Option Premium and other fees then due;

                               second, to the Purchaser to pay the accrued Price
                               Differential;

                               third, to the Purchaser for any Permanent Margin
                               Payments then due and payable;

                               fourth, to the Purchaser to pay any other amounts
                               due to Purchaser under the Master Repurchase
                               Agreement;

                               fifth, remaining Residual Repo Available
                               Collections to the Investor or other applicable
                               parties (other than the Issuer) under the Wet
                               Warehouse to the extent the funds available under
                               such facility are insufficient to make the
                               required payments thereunder; and

                               sixth, provided no Event of Default has occurred
                               and is continuing under the Residual Repo, the
                               remainder to the Seller.

                               Amounts due Purchaser under priorities "first"
                               through "fourth" shall be deemed to be "Required
                               Distributions" for purposes of the Residual Repo,
                               and failure of Purchaser to receive such Required
                               Distributions in full, by operation of the
                               waterfall above or otherwise, shall constitute an
                               Event of Default under the Residual Repo.

                                     A-2-5

                               Release of excess Residual Repo Available
                               Collections received on the 15th of each month
                               may be permitted by the Purchaser prior to the
                               Roll Date subject to such conditions as the
                               Purchaser shall determine in its sole discretion.

III.     CERTAIN PAYMENT PROVISIONS

Purchaser Fees and
Premiums:                      As set forth on Annex I to Exhibit A-2.

Other Fees and
Expenses:                      Fees and expenses of the Seller Owner Trustee,
                               Purchaser Co-Trustees and Custodian to be paid by
                               ABFS and such fees and expenses shall be separate
                               and apart from any fees and expenses owed to
                               Patriot or Purchaser (including the Monitoring
                               Fee and Work Fee). In addition, all out-of-pocket
                               fees and expenses incurred by the Purchaser in
                               connection with the administration, amendment
                               and/or enforcement of the Residual Repo will be
                               reimbursed by the Seller on demand.

IV.      CERTAIN CONDITIONS

Initial Conditions:            The availability of the Residual Repo shall be
                               conditioned upon satisfaction of, among other
                               things, the following conditions precedent not
                               later than November 5, 2004 (the date upon which
                               all such conditions precedent shall be satisfied,
                               the "Closing Date"):

                               (a) The Seller shall have executed and delivered
                               definitive repurchase documentation, including a
                               Master Repurchase Agreement (the "Master
                               Repurchase Agreement"), with respect to the
                               Residual Repo in form and substance satisfactory
                               to Purchaser (the "Residual Repo Facility
                               Documentation");

                               (b) The Purchaser and all participants therein or
                               lenders thereto shall have received all fees
                               required to be paid, and reimbursement for all
                               expenses for which invoices have been presented,
                               on or before the Closing Date;

                               (c) Purchaser shall have entered into the
                               intercreditor agreement(s) referred to in Exhibit
                               A-1;

                               (d) Patriot shall have received copies of
                               certified resolutions of the Board of Directors
                               of ABFS and Holdings (including any applicable
                               committees thereof) authorizing and approving the
                               Residual Repo, in form and substance satisfactory
                               to Patriot; and

                               (e) All Initial Conditions to the Wet Warehouse
                               shall have been satisfied.

                                     A-2-6

On-Going Conditions:           The availability of the funding provided by the
                               Residual Repo shall at all times be conditioned
                               upon (i) the continued accuracy of all
                               representations and warranties in the Residual
                               Repo Facility Documentation (including, without
                               limitation, the material adverse change and
                               litigation representations), (ii) there not
                               having occurred any Event of Default and (iii)
                               the satisfaction of any other applicable On-Going
                               Conditions under the Wet Warehouse. As used
                               herein and in the Residual Repo Facility
                               Documentation a "material adverse change" shall
                               mean any event, development or circumstance that
                               has had or could reasonably be expected to have a
                               material adverse effect on (a) the business,
                               assets, property, condition (financial or
                               otherwise), or prospects of ABFS and its
                               affiliates taken as a whole or the value of the
                               Purchased Securities or (b) the validity or
                               enforceability of any of the Residual Repo
                               Facility Documentation or the rights or remedies
                               of the Purchaser thereunder.

Covenants/
Representations:               Covenants/representations to include but not be
                               limited to those set forth in Chrysalis Loan
                               Agreement as well as all applicable covenants and
                               representations made with respect to the Wet
                               Warehouse and those appropriate for financings of
                               residual interests.

Events of Default:             Events of Default to include, but not limited to,
                               those customary in repurchase agreements and in
                               financings of residual interests, as well as any
                               of the "Initial Conditions," any of the "On-Going
                               Conditions", and all Events of Default set forth
                               with respect to the Wet Warehouse. Failure of
                               Purchaser to receive Required Distributions as
                               contemplated hereinabove shall also constitute an
                               Event of Default.

                               Upon an Event of Default, the Master Repurchase
                               Agreement will terminate and the aggregate
                               Securities Repurchase Price of the Purchased
                               Securities will be immediately due and payable.
                               Purchaser shall be entitled to any and all
                               remedies pursuant to the Master Repurchase
                               Agreement documents and applicable law.

Governing Law:                 State of New York.

Jurisdiction:                  Federal and State Courts located in the borough
                               of Manhattan, City of New York.

Counsel to the
Purchaser and Patriot:         Thacher Proffitt & Wood LLP and Kirkland & Ellis
                               LLP.

                                     A-2-7

Opinions:                      Standard closing opinions acceptable to Purchaser
                               including, but not limited to, a perfected
                               security interest opinion, a nonconsolidation
                               opinion, a true sale opinion regarding the sales
                               of the Purchased Securities to Trust 3 and to the
                               Seller, and a "securities contract" opinion.

VI. ACKNOWLEDGEMENTS WITH RESPECT TO RESIDUAL REPO

ABFS acknowledges by signing the Commitment Letter that (i) Purchaser's assessments of Repo Market Value will be made in Purchaser's sole discretion;
(ii) as current distributions on the Purchased Securities are received, future distributions, and therefore the discounted value of such distributions, will decline, which will have the general effect of reducing the Securities Purchase Price over time; (iii) because distributions on the Purchased Securities will be applied to make required Permanent Margin Payments to Purchaser prior to any releases of funds to Seller, Seller may experience significant volatility in the cash flows it receives from the Purchased Securities, and may receive no such cash flows over extended periods of time; and (iv) the management and board of directors of ABFS fully understand the implications of the Residual Repo as they relate to the ongoing financial and liquidity needs of ABFS.

A-2-8

Pricing:          Repurchase Option Premium: An amount equal to 6.0% of the
                  Facility Amount, payable on the Closing Date, plus another
                  amount, payable on the one-year anniversary of the Closing
                  Date, equal to 6.0% of the Facility Amount as of such date.

                  Pricing Rate: As of any date of calculation, 13.5% per annum,
                  compounded monthly.

                  Default Rate: As of any date of calculation, 20% per annum,
                  compounded monthly, applicable upon and following an Event of
                  Default.

Fees:             Exit Fee - 3.0% of the Facility Amount (immediately prior to
                  the Seller Termination or Termination Date, as applicable),
                  payable upon any Seller Termination or otherwise on the
                  Termination Date.

                  Monitoring Fee - An amount per month to be determined by the
                  Purchaser, based in part on the number of residual interests
                  which are included in the Purchased Securities, payable until
                  the earlier of a Seller Termination and the Termination Date.
                  Substantially all of the Monitoring Fee will be applied to
                  offset fees assessed by an independent residual valuation
                  expert to analyze and value the Purchased Securities on behalf
                  of the Purchaser on a monthly basis.

A-2-9

1. Class X Certificate, No. X-1, issued by ABFS Mortgage Loan Trust 2001-2.

2. Certificate No. 1, issued by ABFS Mortgage Loan Trust 2000-2.

3. Certificate No. 2, issued by ABFS Mortgage Loan Trust 2000-2.

4. Pool I Certificate No. 1, issued by ABFS Mortgage Loan Trust 1999-4.

5. Pool I Certificate No. 2, issued by ABFS Mortgage Loan Trust 1999-4.

6. Pool II Certificate No. 1, issued by ABFS Mortgage Loan Trust 1999-4.

7. Pool II Certificate No. 2, issued by ABFS Mortgage Loan Trust 1999-4.

8. Pool I Certificate No. 1, issued by ABFS Mortgage Loan Trust 1999-3.

9. Pool I Certificate No. 2, issued by ABFS Mortgage Loan Trust 1999-3.

10. Pool II Certificate No. 1, issued by ABFS Mortgage Loan Trust 1999-3.

11. Pool II Certificate No. 2, issued by ABFS Mortgage Loan Trust 1999-3.

12. Pool I Certificate No. 1, issued by ABFS Mortgage Loan Trust 1999-2.

13. Pool I Certificate No. 2, issued by ABFS Mortgage Loan Trust 1999-2.

14. Pool II Certificate No. 1, issued by ABFS Mortgage Loan Trust 1999-2.

15. Pool II Certificate No. 2, issued by ABFS Mortgage Loan Trust 1999-2.

16. Pool I Certificate No. 1, issued by ABFS Mortgage Loan Trust 1999-1.

17. Pool I Certificate No. 2, issued by ABFS Mortgage Loan Trust 1999-1.

18. Pool II Certificate No. 1, issued by ABFS Mortgage Loan Trust 1999-1.

19. Pool II Certificate No. 2, issued by ABFS Mortgage Loan Trust 1999-1.

20. Pool I Certificate No. 1, issued by ABFS Mortgage Loan Trust 1998-4.

21. Pool I Certificate No. 2, issued by ABFS Mortgage Loan Trust 1998-4.

22. Pool II Certificate No. 1, issued by ABFS Mortgage Loan Trust 1998-4.

23. Class R Certificate, No. R-1, issued by ABFS Mortgage Loan Trust 1998-3

A-2-10

Exhibit 10.10

Patriot
The Patriot Group, LLC

November 8, 2004

American Business Financial Services, Inc. The Wanamaker Building
100 Penn Squire East, 8th Floor
Philadelphia, Pennsylvania 19109

Attention: Anthony J. Santilli, Chairman, President, Chief Executive Officer and Chief Operating Officer

Ladies and Gentlemen:

Reference is made to the Commitment Letter dated October 26, 2004 executed and delivered by The Patriot Group, LLC, on behalf of itself, its affiliates and subsidiaries ("Patriot"), and accepted by American Business Financial Services, Inc. (together with its affiliates and subsidiaries, "ABFS") on October 27, 2004, as amended by an exchange of e-mails on November 5, 2004 (the "Commitment Letter"). Terms not defined herein shall have the meanings ascribed to them in the Commitment Letter.

This letter constitutes written notification that Patriot has obtained the approval of the Committed Facility by its investment committee within the time frame required by the Commitment Letter and hereby confirms its commitment to execute the Committed Facility on the terms and subject to the conditions set forth in the Commitment Letter. Accordingly, Patriot shall permanently retain the Commitment Fee of $950,000 previously paid to Patriot.

At the present time, all of the conditions to execution and delivery of the Committed Facility have not been met. In order to be of assistance to ABFS, Patriot hereby extends its deadline for execution and delivery of definitive documentation for the Committed Facility and satisfaction of initial conditions of the Wet Warehouse and Residual Repo to November 22, 2004. Moreover, the deadline for the credit of $250,000 toward the Closing Fee (as contemplated in Annex I to Exhibit A-1 of the Commitment Letter) is hereby extended to November 22, 2004.

Patriot also remains interested in providing an interim residual repurchase facility to ABFS if agreement is reached as to the size and terms of, and additional collateral for, this facility, and ABFS can obtain the necessary consents.

We await your guidance as to whether and how ABFS wishes to proceed with respect to an interim residual repurchase facility and look forward to working with you to complete the Committed Facility.

Very truly yours,

THE PATRIOT GROUP, LLC

By:    /s/   Charles A. Forbes, Jr.
       ------------------------------
Name:  Charles A. Forbes, Jr.
Title: Co-Chief Executive Officer

Exhibit 10.11

Clearwing Capital, LLC
c/o Chrysalis Management Group, LLC
The Belgravia Building
1811 Chestnut Street, Suite 700
Philadelphia, Pennsylvania 19103

October 26, 2004

ABFS Consolidated Holdings, Inc.
The Wanamaker Building
100 Penn Square East
Philadelphia, PA 19107

To Whom It May Concern:

Reference is made to (a) that certain Loan and Security Agreement, dated as of October 14, 2003 (the "Loan Agreement"), between ABFS Warehouse Trust 2003-2 (the "Borrower") and Chrysalis Warehouse Funding, LLC (the "Lender"), a wholly-owned affiliate of Clearwing Capital, LLC ("Clearwing"), (b) that certain Trust Agreement, dated as of October 14, 2003 (the "Trust Agreement"), among ABFS Consolidated Holdings, Inc. ("Holdings") and certain subsidiaries of Holdings (such subsidiaries, the "Loan Depositors") and Wilmington Trust Company, as trustee for ABFS Warehouse Trust 2003-1, a Delaware statutory trust ("Trust 2003-1"), (c) that certain Pledge and Security Agreement, dated as of October 14, 2003 (the "Pledge Agreement"), between Trust 2003-1 and Clearwing, and (d) that certain Fee Letter, dated as of October 14, 2003, by and among Borrower and certain of its affiliates (Borrower and such affiliates, the "Qbligors") and Clearwing (the "2003 Fee Letter"). Except as provided in Paragraph 4 herein or as otherwise indicated capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them in the Pledge Agreement.

American Business Financial Services, Inc., a Delaware corporation (the "Company") and Holdings have advised us that the Company is in the process of entering into a commitment letter for financing (the "Patriot Financing") with The Patriot Group, LLC ("Patriot"). A true and correct copy of such commitment letter is attached hereto as Exhibit "A" (the "Patriot Commitment Letter").

Pursuant to the Patriot Commitment Letter, (a) the Patriot Financing is to be secured by, among other things, a pledge by Holdings of the interest-only strips listed on Exhibit B attached hereto (the "Exhibit B IOS"), and (b) Holdings and each of the Loan Depositors will transfer their interests in the residual "common" equity certificates Nos. R-1, R-2, R-3, and R-4 of Trust 2003-1 (the "R Certificates" to a special purpose statutory business trust organized under the laws of Delaware (the "R Certificate Holder").

Pursuant to the Pledge Agreement, Trust 2003-1 granted to Clearwing a security interest in, among other things, all of its right, title and interest in and to the Exhibit B IOS. Under the terms of the Trust Agreement, Trust 2003-1 issued to Clearwing the "preferred" equity certificate No. P-1 of Trust 2003-1 (the "P Certificate").

The Company has (a) advised Clearwing that it desires to execute the Patriot Commitment Letter, (b) requested that Clearwing consent to the release of its liens on the Exhibit B IOS, and (c) requested that Clearwing consent to the transfer of the R Certificates to the R Certificate Holder.

Subject to the terms and conditions contained herein, Clearwing is willing to (a) release its liens on the Exhibit B IOS, and (b) consent to the transfer of the R Certificates to the R Certificate Holder.

1. Consent to Distribution of and Release of Liens on Exhibit B IOS. Effective as of the date that all of the conditions set forth in Paragraph 3 below shall have been satisfied, Clearwing hereby (a) consents to the distribution by Trust 2003-1 to Holdings of the Exhibit B IOS, and (b) agrees to release its liens on the Exhibit B IOS.

2. Consent to Transfer of R Certificates. Effective as of the date that all of the conditions set forth in Paragraph 3 below shall have been satisfied and so long as (a) the structure and the organizational and governing documents of the R Certificate Holder are satisfactory to Clearwing, (b) the Trust Agreement is amended such that no holder of an R Certificate shall have any rights with respect to Trust 2003-1 from and after a default or an event of default under (i) the documents that evidence the Patriot Financing, (ii) the Loan Agreement, the Trust Agreement, the Pledge Agreement, or any other Loan Documents (as defined in the Loan Agreement), or (iii) any other documents regarding any other facility in which Trust 2003-1 has any obligation to Clearwing, and (c) Patriot consents to the amendment of the Trust Agreement as described in subsection (b) of this Paragraph 2, Clearwing hereby consents to the transfer of the R Certificates to the R Certificate Holder.

3. Conditions to Consents. The effectiveness of the consents provided herein are subject to the fulfillment, to the satisfaction of Clearwing, of the following conditions:

(a) Clearwing shall have received this letter agreement duly executed by the Obligors, and the same shall be in full force and effect;

(b) All documents and legal matters in connection with the Patriot Financing shall have been delivered, executed, or recorded and shall be in form and substance satisfactory to Clearwing, including the organizational and governing documents of the R Certificate Holder.

(c) All of the conditions set forth in the documents evidencing the Patriot Financing shall have been satisfied and the Patriot Financing shall be consummated in accordance with its terms;

(d) The Obligors shall have received all licenses, approvals, or consents necessary to consummate the Patriot Financing (including, without limitation, the consent of U.S. Bank, as trustee, to the pledge of the Exhibit B IOS and the R Certificates in favor of Patriot);

(e) The representations and warranties in this letter agreement, the Pledge Agreement, the Trust Agreement, and the Fee Letter shall be true and correct in all material respects as of the date hereof, as though made on such date (except to the extent that such representations and warranties relate solely to an earlier date);

(f) No Event of Default under the Pledge Agreement and no Event of Default under and as defined in the Loan Agreement shall have occurred and be continuing on the date hereof, nor shall result from the consummation of the transactions contemplated herein;

(g) No injunction, writ, restraining order, or other order of any nature prohibiting, directly or indirectly, the consummation of the transactions contemplated herein shall have been issued and remain in force by any governmental authority against any of the Obligors, Patriot, Clearwing, any of their affiliates, or any other Person;

(h) The Obligors shall have paid Clearwing, for the benefit of Clearwing, the Lender, and their affiliates, a work fee in an amount equal to $500,000, which amount (i) shall be in addition to all other work fees and all expense deposits paid by any of the Obligors to Clearwing or the Lender, (ii) shall be applied to the payment of costs and expenses incurred at any time by Clearwing and its affiliates in connection with the Patriot Financing or any other financing in favor of any of the Obligors, and (iii) shall be paid as follows: (x) $200,000 of such work fee shall be paid on November 1, 2004, and
(y) the remaining $300,000 of such work fee shall be paid on the date of the initial funding of the residual repurchase commitment under the Patriot Facility.

(i) Clearwing shall have received the fees set forth in the 2003 Fee Letter, as amended by Paragraph 4 herein;

(j) Clearwing shall have received an opinion from counsel for the Obligors in form and substance satisfactory to Clearwing; and

(k) Clearwing shall have received the consent, if necessary or appropriate, from the Pledgee Lender (as defined in the Loan Agreement).

(l) The Lender shall have (i) consummated an amendment to the Loan Agreement, which increases the advance rate on Eligible Mortgage Loans to an advance rate satisfactory to the Lender and the Borrower, and (ii) received the consent of the Pledgee Lender (as defined in the Loan Agreement) to such amendment.

4. Amendments to 2003 Fee Letter. Capitalized terms used solely in this Paragraph 4 and not otherwise defined in this letter agreement shall have the meaning ascribed to them in the 2003 Fee Letter. As consideration for Clearwing's consents as provided herein and effective upon the date of execution of the documents evidencing the Patriot Facility (the "Patriot Closing Date"), the Obligors, jointly and severally, agree to the following amendments to the 2003 Fee Letter and the Loan Agreement:

(a) The expiration date of the Commitment Transaction Fee set forth in Section 4(b) of the 2003 Fee Letter shall be extended from January 11, 2005 to and including September 30, 2006;

(b) Subject to the amendment set forth in Section 4(c) below, the definition of "Maximum Credit" as set forth in the Loan Agreement shall be amended and restated to read as follows:

"Maximum Credit" means $250,000,000, provided however, that the amount of the Maximum Credit may, in the sole discretion of the Lender at any time after the first anniversary of the Closing Date up November 30, 2005, be increased to at least $400,000,000, provided further, however, that the Company shall have the right to terminate the option of the Lender to so increase the amount of the Maximum Credit so long as (i) the Company and the Lender agree in writing to terminate such option, and (ii) the Increase Option Termination Fee (as defined in the Fee Letter) is paid to Clearwing pursuant to the terms of the Fee Letter.

(c) Section 5 of the 2003 Fee Letter shall be amended and restated to read as follows:

"5. Increase Commitment Fees. If the Maximum Credit is increased to at least $400,000,000 at the sole discretion of Clearwing (the date of such increase, the "Increase Date"), the Obligors shall pay to Clearwing the following fees:

a. Increase Commitment Exercise Fee. A commitment exercise fee (the "Increase Commitment Exercise Fee") of $10,000,000, which shall be fully earned on the Increase Date, nonrefundable when paid, and due and payable in equal monthly installments on the first day of each month commencing with the first day of the first full month following the Increase Date and continuing until all Obligations have been paid in full, with any remaining balance due and payable on the Termination Date, provided, however, that if the Increase Date is on or after June 30, 2005, the Increase Commitment Exercise Fee shall be reduced by an amount equal to (i) $250,000, times
(ii) the total number of full months that exist during the period from June 30, 2005 through and including the Increase Date.

b. Increase Credit Support Fee. An increase credit support fee of $1,350,000, which fee shall be fully earned and due and payable on the Termination Date, and nonrefundable when paid.

c. Increase Loan Commitment Fee. An increase loan commitment fee of $10,500,000, which fee shall be fully earned and due and payable on the Increase Date, and nonrefundable when paid, and shall be payable in advance in 24 equal monthly installments of $437,500 each, payable on the first day of each calendar month from and after the Increase Date through the date on which all of the Obligations are paid in full in accordance with the terms of the Loan Agreement, and the commitments of the Lender under the Loan Agreement are terminated, provided, however, that (a) the increase loan commitment fee that is due in advance for the period from the Increase Date through the last day of the calendar month in which the Increase Date falls shall be due and payable on the Increase Date and shall be an amount equal to (i) $437,500, times (ii) the result of the total number of days that will elapse from (and including) the Increase Date through the last day of the calendar month in which the Increase Date falls divided by the total number of days in such month, and (b) on the Termination Date, the Obligors shall pay an amount necessary to pay in full the remaining balance of the increase loan commitment fee, provided further, however, that if the Increase Date is on or after June 30, 2005, the Increase Loan Commitment Fee shall be reduced by an amount equal to (i) $437,500, times (ii) the total number of full months that exist during the period from June 30, 2005 through and including the Increase Date.

d. Increase Option Termination Fee. The Increase Option Termination Fee (as referenced in the definition of Maximum Credit Amount in the Loan Agreement) shall be an amount equal to (i) $7,500,000 plus (ii) an amount equal to $500,000 times each month during the term of the Loan Agreement that the Maximum Credit was not increased to at least $400,000,000."

(d) The unpaid balance of the Loan Commitment Fee set forth in Paragraph 2 of the 2003 Fee Letter shall be accelerated such that (i) $2,000,000 of such unpaid balance shall be due and payable on the Patriot Closing Date, and
(ii) the balance remaining after payment of such $2,000,000 shall be paid in equal monthly of $1,000,000 on the first day of each month commencing with the first day of the first full month following the Patriot Closing Date until the Loan Commitment Fee is paid in full.

(e) The following new Paragraph 10 shall be added to the Fee Letter:

10. Evergreen Expense Deposit. From and after October 26, 2004 through and including the date that all Obligations have been paid in full in accordance with the terms of the Loan Agreement, the Obligors shall maintain at all times a $100,000 expense deposit with Clearwing, for the benefit of Clearwing, the Lender, and their affiliates.

5. Limited Consents. This consents shall be limited precisely as provided for herein, and shall not be deemed to be a waiver of, amendment of, consent to or modification of any other term, provision or Event of Default under Loan Agreement, the Pledge Agreement or of any term or provision of any other Loan Document or other instrument referred to therein or herein or of any transaction or further or future action on the part of the Borrower or Trust 2003-1 which would require the consent of the Lender or Clearwing under the Loan Agreement or the Pledge Agreement.

6. Reservation of Rights. You are hereby advised that the Lender and Clearwing expressly reserve all of their respective rights and remedies against the Borrower and Trust 2003-1 under the Loan Agreement, the Pledge Agreement and the other Loan Documents and at law and in equity with respect to all existing or future Events of Default. Neither the Lender nor Clearwing shall be deemed to have waived any term or condition of the Loan Agreement, the Pledge Agreement or any other Loan Document or to have agreed to a forbearance with respect to any right or remedy which the Lender or Clearwing may now have or in the future may have under the Loan Agreement, the Pledge Agreement or any other Loan Document, at law, in equity or otherwise on account of any Default or Events of Default, Neither the Lender nor Clearwing shall by virtue of any action or omission be deemed to have altered or prejudiced any rights or remedies under or in connection with the Loan Agreement, the Pledge Agreement or under or in connection with any Default under the Loan Documents except as specifically set forth herein. All of the terms and conditions of the Loan Agreement and the other Loan Documents are and shall remain in full force and effect.

7. Miscellaneous

(a) This letter agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this letter agreement by facsimile or electronic mail shall be equally effective as delivery of a manually executed counterpart.

(b) Section and paragraph headings herein are included for convenience of reference only and shall not constitute a part of this letter agreement for any other purpose.

(c) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK.

Very truly yours,

CLEARWING CAPITAL, LLC
By: Chrysalis Capital Partners, LLC,
Its Manager

By: /s/ Gregory L. Segall
   -----------------------------
     Name: Gregory L. Segall
     Its: Sole Member

Accepted and Agreed to this
26th day of October 2004:

ABFS WAREHOUSE TRUST 2003-2

By:  /s/ Anthony J. Santilli
     -------------------------------
     Name: Anthony J. Santilli
     Title: Chief Executive Officer

ABFS WAREHOUSE TRUST 2003-1

By:  /s/ Anthony J. Santilli
     -------------------------------
     Name: Anthony J. Santilli
     Title: Chief Executive Officer

AMERICAN BUSINESS FINANCIAL SERVICES, INC.

By:  /s/ Anthony J. Santilli
     -------------------------------
     Name: Anthony J. Santilli
     Title: Chief Executive Officer

ABFS CONSOLIDATED HOLDINGS, INC.

By:  /s/ Anthony J. Santilli
     -------------------------------
     Name: Anthony J. Santilli
     Title: Chief Executive Officer

AMERICAN BUSINESS CREDIT, INC.

By:  /s/ Anthony J. Santilli
     -------------------------------
     Name: Anthony J. Santilli
     Title: Chief Executive Officer

AMERICAN BUSINESS MORTGAGE SERVICES, INC.

By:  /s/ Anthony J. Santilli
     -------------------------------
     Name: Anthony J. Santilli
     Title: Chief Executive Officer

HOMEAMERICAN CREDIT, INC.,
D/B/A UPLAND MORTGAGE

By:  /s/ Anthony J. Santilli
     -------------------------------
     Name: Anthony J. Santilli
     Title: Chief Executive Officer

Exhibit 10.12

[LOGO]

November 1, 2004

Mr. Anthony J. Santilli
Chairman, President, CEO and COO
American Business Financial Services, Inc. The Wanamaker Building
100 Penn Square East
Philadelphia, PA 19107

AMERICAN BUSINESS FINANCIAL SERVICES, INC.
$150 MILLION SENIOR MORTGAGE WAREHOUSE FACILITY
COMMITMENT LETTER

Dear Mr. Santilli:

You have advised The CIT Group/Business Credit, Inc. ("CIT") and Clearwing Capital, LLC ("CLEARWING" and together with CIT, individually, a "LENDER" and, collectively, the "LENDERS"), that American Business Financial Services, Inc., a Delaware corporation (the "COMPANY"), wishes to obtain financing in order to finance the origination of new qualifying mortgage loans by the Company and certain of its licensed mortgage origination subsidiaries.

Based upon information known to us today, each Lender is pleased to advise you of its several and not joint commitment to structure, arrange, syndicate, and provide a senior secured revolver facility in an aggregate amount of up to $150,000,000 of which CIT would provide up to $131,578,947 (the "A FACILITY") and Clearwing would provide up to $18,421,053 of the Credit Facility (the "B FACILITY" and together with A Facility, the "CREDIT FACILITY") upon the terms and subject to the conditions set forth or referred to in this commitment letter (the "COMMITMENT LETTER") including the terms and conditions set forth in Attachment A hereto (the "ATTACHMENT"). The borrower under the Credit Facility, ABFS Warehouse Trust 2004, is expected to be a Delaware statutory trust (the "BORROWER"), to be formed by the Company with JPMorgan Chase Bank, as the Custodian, ABFS Warehouse Trust 2003-1, a Delaware statutory trust, as the holder of the Borrower's residual certificate and CIT/Specialty Finance, as the Backup Servicer (as defined in the Attachment), and Wilmington Trust Company, as the Owner Trustee.

The commitments and agreements of the Lenders described herein are subject to
(a) there not occurring or becoming known to us any material adverse condition or material adverse change in or affecting the business, operations, property, condition (financial or otherwise) or prospects of the Company, its parent or any of its subsidiaries (the "ORIGINATION PARTIES"), (b) the payment of all fees due hereunder that are due on or prior to the Closing Date (as defined below), and (c) the satisfaction of the other conditions set forth or referred to in the Attachment to the satisfaction of the Lenders. The final documentation of the commitments made by the Lenders hereunder and of the Credit Facility may contain material terms and conditions customary for transactions of this type in addition to the terms and conditions set forth in this Commitment Letter and the Attachment. Those matters that are not covered by the provisions of this Commitment Letter and the Attachment is subject to the approval and agreement of the Lenders and the Borrower and the Company.

American Business Financial Services, Inc. November 1, 2004

SYNDICATION

It is agreed that CIT, as agent (in such capacity the "AGENT") for the Credit Facility, will act as sole lead arranger for the Credit Facility and that the Agent will, in such capacity, perform the duties and exercise the authority customarily performed and exercised by it in such role. The Lenders do not intend to syndicate the Credit Facility on the Closing Date (as defined below), but the Lenders reserve the right to syndicate the Credit Facility after the Closing Date to one or more financial institutions (the "FINANCIAL INSTITUTIONS"). In such case, the Lenders or any Financial Institution that becomes a party to the Credit Facility may assign all or a portion of their respective loans and commitments under the Credit Facility, or sell participations therein, to one or more Financial Institutions, provided so long as no Event of Default has occurred and is continuing each such assignment shall be subject to, among other things, the consent of the Borrower (which consent shall not be unreasonably withheld).

The Agent will manage all aspects of the syndication, including decisions as to the selection of institutions to be approached and when they will be approached, when its commitments will be accepted, which institutions will participate, the allocations of the commitments among the Financial Institutions and the amount and distribution of fees among the Financial Institutions. The Agent shall have sole discretion in the appointment of, and awarding of titles to, other agents, co-agents, arrangers or bookrunners, and shall determine if any compensation will be paid.

To assist the Agent in its syndication efforts, you agree promptly to prepare and provide to the Agent and the Lenders all information with respect to the Borrower, Company and its affiliates, and the transactions contemplated hereby, including all financial information and projections (the "PROJECTIONS"), as we may reasonably request in connection with the arrangement and syndication of the Credit Facility. You hereby represent and covenant that (a) all information (the "INFORMATION") that has been or will be made available to the Agent and the Lenders by you or any of your representatives is or will be, when furnished, complete and correct and does not or will not, when furnished, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made and (b) the Projections that have been or will be made available to the Agent and the Lenders by you or any of your representatives have been or will be prepared in good faith based upon reasonable assumptions. You understand and agree that in arranging and syndicating the Credit Facility the Agent, the Lenders and the Financial Institutions may use and rely on the Information and Projections without independent verification thereof.

American Business Financial Services, Inc. November 1, 2004

COSTS AND EXPENSES

In consideration of the several but not joint commitments of the Lenders and recognizing that in connection herewith the Agent and the Lenders (or their affiliates) have incurred and will be continuing to incur costs and expenses (including, without limitation, fees and disbursements of counsel, filing and recording fees, costs and expenses of due diligence, transportation, duplication, messenger, appraisal, audit, electronic reporting and consultant costs and expenses), you hereby agree to pay, or reimburse the Agent, the Lenders, their affiliates, for all such fees, costs and disbursements, including, without limitation, those incurred in connection with the negotiation and documentation of the Credit Facility or any of the transactions contemplated or referred to herein, regardless of whether any of the transactions contemplated hereby are consummated. You also agree to pay all reasonable costs and expenses of the Agent and the Lenders (including, without limitation, fees and disbursements of counsel) for the enforcement of any of the Agent and the Lenders' rights and remedies hereunder.

Upon accepting this Commitment Letter, you agree to pay to CIT, for its benefit and for the benefit of its affiliates, a work fee of $250,000 (the "WORK FEE") which amount shall be applied to the payment of costs and expenses already incurred by CIT, its affiliates, or otherwise payable by you pursuant to the preceding paragraph. Any unapplied balance of the Work Fee will be refunded to you on the Closing Date. Upon accepting this Commitment Letter, you also agree to pay to Clearwing the work fee set forth in that certain Commitment Fee Letter of even date herewith, by and among Borrower, certain of their affiliates and Clearwing.

FEES

As consideration for the Lenders' commitments hereunder and the Lenders' agreement to perform the services described herein, you agree to pay to the Agent and the Lenders the fees set forth in the Attachment (the "Fees"). You agree that once paid, the Fees shall be unrefundable under any and all circumstances. In no event shall any portion of the Fees be applied to the Company's obligation to pay costs and expenses hereunder.

CONFIDENTIALITY

This Commitment Letter is delivered to you on the understanding that none of this Commitment Letter, the Attachment, or any of their terms or substance shall be disclosed, directly or indirectly, to any other person except (a) to your officers, agents and advisors who are directly involved in the consideration of this matter and (b) as may be compelled in a judicial or administrative proceeding or as otherwise required by law (including state and federal securities laws as determined by the Company and its counsel in their sole discretion) (in which case you agree to inform us promptly thereof). Notwithstanding anything to the contrary in this paragraph or any other express or implied agreement, arrangement or understanding, the parties hereto hereby agree that, from the commencement of discussions with respect to the proposed transaction, the Origination Parties (and each of their respective employees, representatives, or agents) are permitted to disclose to any and all persons, without limitation of any kind, the tax structure and tax aspects of the proposed transaction, and all materials of any kind (including opinions or other tax analyses) that are provided to any such party relating to such tax structure and tax aspects. To the extent not inconsistent with this paragraph, this authorization does not extend to disclosure of any other information including (without limitation) (a) the identities of participants or potential participants in this potential transaction, (b) the existence or status of any negotiations, or (c) any pricing information or any other term or detail not related to the tax structure or tax aspects of this potential transaction.

American Business Financial Services, Inc. November 1, 2004

PUBLIC ANNOUNCEMENTS

You agree that the Agent and the Lenders will have approval rights with respect to all press releases and other public announcements related to or concerning the Credit Facility, the Agent, the Lenders, or their affiliates. The approval or non-approval of any press release or other public announcement will not be unreasonably withheld or delayed.

INFORMATION

In issuing this Commitment Letter, the Agent and each Lender is relying on the accuracy of the Information furnished by or on behalf of the Company and its affiliates, without independent verification thereof.

INDEMNIFICATION

You agree to indemnify and hold harmless the Agent, each Lender, their affiliates, and all of their respective officers, directors, employees, agents, advisors, attorneys, and representatives (each, an "INDEMNIFIED PARTY") from and against any and all claims, damages, losses, liabilities and reasonable expenses (including, without limitation, reasonable fees and disbursements of counsel), that may be incurred by, asserted, or awarded against any Indemnified Party, in each case arising out of, in connection with, or relating to any investigation, litigation, or proceeding or the preparation of any defense with respect thereto, arising out of, in connection with, or relating to this Commitment Letter, the Attachments, the loan documentation, or any of the transactions contemplated hereby, or any use made or proposed to be made with the proceeds of the Credit Facility, irrespective of whether such investigation, litigation, or proceeding is brought by the Company, the Trust, the Borrower or any of their respective affiliates, any shareholders or creditors of the foregoing, or any other person and whether the transactions contemplated hereby are consummated, except to the extent such claim, damage, loss, liability or expense is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct.

You further agree that no Indemnified Party shall have any liability (whether direct or indirect, in contract, tort, or otherwise) to the Company, the Trust, the Borrower, or any of their respective affiliates, or any shareholders or creditors of the foregoing, or any other person for or in connection with the transactions contemplated hereby, except to the extent such liability is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence, willful misconduct, or failure to perform its obligations hereunder. In no event, however, shall any Indemnified Party be liable on any theory of liability for any special, indirect, consequential, or punitive damages.

GOVERNING LAW, ETC.

This Commitment Letter may be executed in any number of counterparts, each of which shall be an original, and all of which, when taken together, shall constitute one agreement. Delivery of an executed signature page of this Commitment Letter by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. This Commitment Letter is the only agreement that has been entered into among us with respect to the Credit Facility. This Commitment Letter and the Attachment set forth the entire understanding of the parties with respect to the Credit Facility and supercede and replace all prior agreements and understandings of any kind whether oral or written. This Commitment Letter shall be governed by, and construed in accordance with, the laws of the State of New York. Your obligations under the paragraphs captioned "Costs and Expenses", "Fees," "Waiver of Jury Trial," "Indemnification", and "Confidentiality" shall survive the expiration or termination of this Commitment Letter.

American Business Financial Services, Inc. November 1, 2004

You acknowledge that the Agent, the Lenders or their affiliates may from time to time effect transactions, for their own account or the account of customers, and hold positions in loans or options on loans of the Company or any of its affiliates. In addition, the Agent and the Lenders may employ the services of their affiliates in providing certain services hereunder and may exchange with such affiliates information concerning the Company, the Trust, the Borrower, or any of their respective affiliates, and such affiliates shall be entitled to the benefits afforded to the Agent and each Lender hereunder.

You also acknowledge that the Agent, the Lenders and their affiliates may be providing debt financing, equity capital or other services (including financial advisory services) to other companies in respect of which you may have conflicting interests regarding the transactions described herein and otherwise. The Agent, the Lenders and their affiliates will not use confidential information obtained from you by virtue of the transactions contemplated by this Commitment Letter or their other relationships with you in connection with the performance by any of them of services for other companies, and the Agent, the Lenders and their affiliates will not furnish any such information to other companies. You also acknowledge that the Agent, the Lenders and their respective affiliates have no obligation to use in connection with the transactions contemplated by this Commitment Letter, or to furnish to you, confidential information obtained from other companies.

This Commitment Letter shall not be assignable by you (and any purported assignment without such consent shall be null and void), is intended to be solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto. This Commitment Letter may not be amended or waived except by an instrument in writing signed by you, the Agent and the Lenders.

WAIVER OF JURY TRIAL

EACH PARTY HERETO IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS COMMITMENT LETTER OR THE TRANSACTIONS CONTEMPLATED BY THIS COMMITMENT LETTER OR THE ACTIONS OF EACH LENDER IN THE NEGOTIATION, PERFORMANCE, OR ENFORCEMENT OF THIS COMMITMENT LETTER.

American Business Financial Services, Inc. November 1, 2004

If the foregoing correctly sets forth our agreement, please indicate your acceptance of the terms hereof and of the Attachment by returning to the Lenders executed counterparts hereof, together with the amounts agreed upon pursuant to this Letter to be payable upon the acceptance hereof so as to be received in cash or other immediately available funds, not later than 12:00 noon, New York City time, on Monday, November 1, 2004. If (a) you do not sign this letter and return it by the date and time set forth above, (b) pay the amounts that are due hereunder on the date of signing this Commitment Letter by the date and time set forth above, or (c) execute and deliver definitive loan documentation (as described in the Attachments) on or before November 30, 2004, the offer of the Lenders set forth herein to provide the Credit Facility shall automatically terminate. If you elect to deliver this letter by telecopier, please arrange for the executed originals to follow by next-day courier.

[SIGNATURE PAGE FOLLOWS]

American Business Financial Services, Inc. November 1, 2004

Very truly yours,

THE CIT GROUP/BUSINESS CREDIT, INC.

By:___________________________________
Name: James P. Conheeney
Title: Vice President

CLEARWING CAPITAL, LLC

By:___________________________________
Name:
Title:

ACCEPTED AND AGREED TO
this 1st day of November, 2004

AMERICAN BUSINESS FINANCIAL
SERVICES, INC.

By:____________________________________
Name:
Title:

BORROWER:                ABFS Warehouse Trust 2004, a Delaware statutory trust
                         (the "Borrower) to be formed by ABFS Warehouse Trust
                         2003-1 ("TRUST 1"). The Borrower will issue a single
                         certificate to Trust 1.

LENDER:                  The CIT Group/Business Credit, Inc. ("CIT") and
                         Clearwing Capital, LLC ("CLEARWING").

AGENT:                   The CIT Group/Business Credit, Inc.

THE FACILITY:            Lenders will provide a committed, senior lending
                         facility (the "FACILITY") on a full-recourse basis to
                         the Borrower secured by all the assets of the Borrower,
                         including without limitation the Borrower's rights
                         under the Mortgage Loans and REO, hedging contracts
                         associated only with the Mortgage Loans funded under
                         the Facility and the Mortgage Loan servicing rights.

USE OF PROCEEDS:         The purpose of the Facility is to make mortgage loan
                         warehouse facilities available to finance mortgages
                         originated by third party mortgage loan originators
                         approved by the Agent.

MAXIMUM CREDIT:          $150,000,000, with a wet funding sub-line of the lesser
                         of $10,000,000 or 10% of "dry" loans. CIT would provide
                         up to $131,578,947 of the Facility (the "A FACILITY")
                         and Clearwing would provide up to $18,421,053 of the
                         Facility (the "B FACILITY").

COLLATERAL:              The Agent will hold, for the benefit of the Lenders to
                         the A Facility, a first priority perfected security
                         interest in substantially all of Borrower's now owned
                         or hereafter acquired property and assets, including,
                         but not limited to, all Mortgage Loans, all real
                         property owned by the Borrower or collateralizing any
                         Mortgage Loan, the Mortgage Loan servicing rights and
                         all rights of the Borrower under any of the Transaction
                         Documents, together with all inventory, accounts,
                         equipment, chattel paper, documents, instruments,
                         general intangibles, deposit accounts, cash and cash
                         equivalents, and investment property and all proceeds
                         and products of any of the foregoing (collectively, the
                         "COLLATERAL"). The Agent will also hold, for the
                         benefit of the Lenders to the B Facility, a second
                         priority perfected security interest in the Collateral.
                         Both security interests will be subject to the
                         intercreditor and/or subordination agreements referred
                         to in the "Conditions to Close" and otherwise on terms,
                         satisfactory to the Lenders. In the case of an Event of
                         Default, the Lenders may, in their sole discretion,
                         fund a protective advance to fund the cost of hedging
                         contracts satisfactory to Agent in its sole discretion.
                         The proceeds from the hedging contracts shall be
                         deposited in an account subject to a deposit account
                         control agreement in form and substance satisfactory to
                         the Agent.

TERM:                    The Facility will terminate on October 14, 2006,
                         subject to the earlier termination by Borrower at any
                         time upon payment in full of any amounts due and
                         payable under the Facility. The A Facility will roll
                         over (the "ROLL OVER") until the third anniversary of
                         the Closing Date subject to, among other things, the
                         effectiveness of a committed B Facility in an amount
                         and on terms and conditions substantially satisfactory
                         to CIT.

FINANCING RATE:          Libor + 4.25%, stepping down to:
                         4.00% on sixth-month anniversary,
                         3.50% on nine-month anniversary;
                         or prime + 1.5%.

                         Libor + 7.50%

CLOSING FEE:             2%, half due at signing of commitment and remainder due
                         at closing.

COLLATERAL MANAGEMENT
FEE:                     $200,000 p.a. to CIT Business Credit and $100,000 p.a.
                         to CIT/Specialty Finance, payable annually in advance.

COLLATERAL
MONITORING FEE:          The Company shall pay all costs and expenses of
                         Clayton.

UNUSED FEE:              .50%

PREPAYMENT:              3% year 1; 2% year 2; 1 % year 3 (which, in the case of
                         the 1% prepayment fee on year 3, will be due and
                         payable if the Roll Over does not occur as a result of
                         the Borrower's or its affiliates' failure to procure a
                         committed B Facility in an amount and on terms and
                         conditions substantially satisfactory to CIT), in each
                         case on average daily amount outstanding during prior
                         12 months, or since closing if less. The prepayment fee
                         of 1%

B FACILITY
FINANCING  FEE:          As set forth in that certain Commitment Fee Letter, of
                         even date herewith, among the Borrower, Trust 1 and
                         certain of their affiliates, and Clearwing.

APPROVED MORTGAGE
ORIGINATORS:             Third-party mortgage loan originations companies which
                         are subsidiaries of ABFS. The initial Approved Mortgage
                         Originators are as set forth on Schedule I hereto.

BORROWING BASE:          From time to time, the Lenders will make Advances to
                         Borrower under the Facility in an amount not to exceed
                         the undrawn available amounts under the Borrowing Base.

                         On the A Facility, the Advance Rate applicable to
                         Mortgage Loans (expressed as a percentage of par) will
                         be the lesser of

                         (a) the greater of

                         (i) the whole loan resale market price (expressed as a
                         percentage of par) of the Mortgage Loans (determined
                         based upon recent sales to third parties of comparable
                         Mortgage Loans under market conditions reasonably
                         equivalent to prevailing market conditions) less 12 %
                         of such price less 3.34% percentage points of par
                         ("WLPAR") (but in any event not to exceed 87.3% of par)
                         and (ii) the "Percentage of Par" shown under "Advance
                         Rate" below less the adjustments shown under "Advance
                         Rate Adjustment" below; and

                         (b) 90% of the fair market value of the loans
                         (expressed as a percentage of par) as determined in
                         good faith by the Lenders taking into account customary
                         Mortgage Loan characteristics and market conditions
                         less 2.7 percentage points of par ("FMPAR").

                         On the B Facility, the Advance Rate applicable to
                         Mortgage Loans (expressed as a percentage of par) will
                         be the lesser of

                         (a) the greater of

                         (i) 14% of WLPAR (but in any event not to exceed 12.22%
                         of par) and (ii) the "Percentage of Par" shown under
                         "Advance Rate" below less the adjustments shown under
                         "Advance Rate Adjustment" below; and

                         (b) 14% of FMPAR

                         Advances shall not be permitted against Mortgage Loans
                         which are delinquent at the time the applicable
                         Mortgage Loan is first funded under the Facility.

ADVANCE RATE:            An Advance Rate equal to 87.3% of eligible mortgages on
                         the A Facility and 12.22% of eligible mortgages on the
                         B Facility with advance rates against FICO scores as
                         follows:

                              A Facility:
                              -----------
                                 FICO           Percentage of Par
                                 640+                  87.3
                                 600+                  85.0
                                 550+                  83.0
                                 520+                  79.0
                                 <520                   0

                              B Facility:
                              -----------
                                 640+                  12.22
                                 600+                  11.9
                                 550+                  11.62
                                 520+                  11.06
                                 <520                   0

ADVANCE RATE
ADJUSTMENTS:              Delinquency:
                                              Subtract for A      Subtract for B
                          Days Delinquent        Facility            Facility
                          ---------------     --------------      --------------
                                 30                 9%                1.26%
                                 60                18%                2.52%
                              Over 90             100%                 100%

Mortgage loans more than 90 days delinquent will be valued at zero.

Aging on Facility:

$10 million Wet Funding Line: 6 business day eligibility for loans to be closed in advance of the custodian's receipt of legal documents (note, copy of the mortgage, copy of title insurance) and company completion and collection of all credit documents. All wet loans under the Lenders' Wet Funding Line shall be transferred to the warehouse line when "dry" if they have been "dried" prior to the close of business on the 6th business day.

Any "wet" loans which have not been "dried" by the end of the 6th business day shall be repurchased by ABFS and deemed ineligible. "Dried" is defined as those loans for which 100% completed legal documentation has been received by the Custodian to facilitate the ultimate third party wholesale loan sale.

$140 million Warehouse Line: 89 day eligibility for loans which are to be warehoused for sale to third party purchasers (absent an event of default) in the wholesale loan market, the net purchase price of which will pay down the warehouse line.

SUBLIMITS:               FICO Scores:
                         ------------
                         FICO 540-580                100,000,000
                         FICO 520-539                50,000,000

                         30+ days past due           10% of Maximum Credit
                         60+ days past due           5% of Maximum Credit (in
                                                     addition to above 30 day
                                                     delinquency sublimit)

                         CLTV
                         >80%                        65% of Maximum Credit
                                                     (inclusive of all other
                                                     CLTV sublimits)
                         >85%                        30% of Maximum Credit
                                                     (inclusive of CLTV >90%
                                                     sublimit)
                         >90%                        10% of Maximum Credit

                         Interest-Only Loans:  Maximum 10% (of total Borrowing
                         Base)

                         Second-Lien Loans:  Maximum 10% (of total Borrowing
                         Base)

                         2-4 Family Units:  Maximum 20% (of total Borrowing
                         Base)

                         Other Property Mix Concentration Limits (% of Total):

                            1. Single Family Homes: Minimum 70%
                            2. Condos: Maximum 20%
                            3. Manufactured Homes: Maximum 5%
                            4. Co-Op Loans and Land Loans: 0% - to - exception
                               overrides (by CIT-SF)

                         Geographic Concentrations by State: exclusive of
                         California, 15% maximum concentration.

MORTGAGE LOANS:          Mortgage Loans that meet all of the following
                         requirements: (a) such Mortgage Loans are originated by
                         Approved Mortgage Originators or acquired under an
                         approved purchase program set forth on Schedule I
                         hereto meeting the criteria below, in addition to such
                         other criteria identified in transaction document, (b)
                         such Mortgage Loans are purchased from the Approved
                         Mortgage Originators by Trust 1, and (c) such Mortgage
                         Loans are purchased from Trust 1 by the Borrower.

                         1.  Underwritten in accordance with Approved
                             Underwriting Guidelines to be satisfactory to
                             CIT/Specialty Finance.
                         2.  No adverse selection.
                         3.  Originated following the closing date of the
                             Facility, provided that subject to satisfactory due
                             diligence up to $50,000,000 of Mortgage Loans may
                             have been originated up to 45 days prior to the
                             closing date of the Facility.

American Business Financial Services, Inc. November 1, 2004

4. No "high-cost" or "covered" loans under applicable state and federal law, except as specifically approved by Agent.
5. No "Business Purpose" loans except as specifically approved by Agent.
6. Eligible for sale by an Approved Mortgage Originator to an unaffiliated third party pursuant to an established whole loan purchase agreement.
7. 50% of all mortgage loans pledged to the Agent on behalf of the Lenders shall have been selected, reviewed and approved in advance by Clayton, a third party adviser or the Agent, with any related expenses paid for by ABFS.

GUIDELINES:              The ABFS underwriting guidelines submitted and reviewed
                         by CIT/Specialty Finance, which underwriting guidelines
                         cannot be amended without the consent of the Lenders.

APPLICATION OF
PROCEEDS:                All proceeds of the Mortgage Loans (net of fees and
                         expenses payable to trustees and/or custodians and
                         servicers thereunder) will be applied in the following
                         order of priority:*

                         Prior to a Termination Event:

                         1.  Fees and expenses of Custodian and Backup Servicer.
                         2.  Ratably to pay expenses of the Lenders under the
                             Facility, including out-of-pocket monitoring and
                             reunderwriting.
                         3.  Ratably to pay fees due and payable to the Lenders
                             under the Facility.
                         4.  Ratably to pay the Financing Rate due to the
                             Lenders.
                         5.  Ratably to repay the Lenders any Borrowing Base
                             Shortfall;

                         From and After a Termination Event:

                         1.  Fees and expenses of Custodian and Backup Servicer.
                         2.  Fees and expenses of Agent.
                         3.  All obligations owing to CIT in respect of the A
                             Facility (including, without limitation, CIT's
                             prepayment or early termination fees, if any;
                             provided, that if Clearwing purchases CIT's total
                             exposure in the A Facility then CIT will waive its
                             rights to such prepayment or early termination
                             fees).
                         4.  All obligations owing to Clearwing in respect of
                             the B Facility.

CONDITIONS TO CLOSE          1.  No material adverse change since June 30, 2004.
                             2.  Delivery of 2004 annual financial statements
                                 with unqualified audit opinion.
                             3.  The preparation, execution and delivery of
                                 definitive documentation satisfactory to the
                                 Lender.
                             4.  The Lenders shall have been satisfied that the
                                 Transaction shall have been consummated
                                 simultaneously on the Closing Date in
                                 accordance with the Transaction Documents
                                 satisfactory in form and substance to the
                                 Lenders, including, without limitation "true
                                 sale" and "non-consolidation" legal opinions.
--------

* For the avoidance of doubt, nothing contained herein shall be construed to prohibit Trust 1 or any person other than Borrower from making any payments to Clearwing.

American Business Financial Services, Inc. November 1, 2004

5. Intercreditor and/or subordination agreements, including in respect of hedging arrangements, in form and substance acceptable to each Lender and its counsel.
6. Completion, to the satisfaction of the Lenders, of due diligence of the Borrower and any Approved Mortgage Originators and Approved Purchase Programs shown on Schedule 1, including but not limited to their respective mortgage origination practices.
7. Execution of a servicing arrangement and hot back-up servicing arrangement satisfactory to the Lenders.
8. All principal and interest payments received on account of the Mortgage Loans shall be segregated and maintained in a separate account in a manner satisfactory to the Lender.
9. Other conditions to closing customary for transactions similar to the Facility, including without limitation, (a) the accuracy of all representations and warranties in the Transaction Documents, (b) the absence of any defaults, prepayment events or creation of liens under debt instruments or other agreements as a result of the Transaction, (c) the absence of any material change in the capital, corporate and organizational structure of the Originating Parties and their subsidiaries and the Borrower (after giving effect to the Transactions), (d) first-priority perfected security interests in the Collateral,
(e) compliance with applicable laws and regulations (including employee health and safety, margin regulations and environmental laws) in all material respects, (f) evidence of authority, (g) material consents of all relevant persons, (h) receipt of a solvency opinion of the chief financial officer of ABFS in form and substance satisfactory to the Lenders and their counsel, (i) receipt of certified copy of the Approved Underwriting Guidelines and (j) receipt by the Lenders of reasonably satisfactory legal opinions.
10. Receipt of residual reports prepared on a monthly basis, in form and substance satisfactory to the Lenders, stating the amount of mandatory trigger payments and planned repurchases of delinquent loans from the period beginning three months prior to the Closing Date and ending on the period three months after the Closing Date.
11. There shall not have occurred and be continuing
(a) any general suspension of trading in securities on the New York or American Stock Exchange or in the NASDAQ National Market System (other than circuit breakers), (b) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or (c) any other material adverse change in banking or capital market conditions that has had a material adverse effect on the syndication of leveraged bank Credit Facility, as the case may be, that the Agent determines makes it impracticable to consummate the syndication of the Credit Facility.
12. Satisfaction with the terms and conditions of the Greenwich Warehouse Line.
13. Satisfaction with the terms and conditions of the Fortress credit line.

                             14. Cash on hand and available working capital
                                 facilities of American Business Financial
                                 Services, Inc. shall not be less than
                                 $40,000,000.
                             15. Documentation to evidence Agent's right to
                                 audit procedures at Agent's discretion.
                             16. Working capital facility of American Business
                                 Financial Services, Inc. or reverse repurchase
                                 line satisfactory to the Agent of not less than
                                 $23,000,000.

IN-ADVANCE (OF ALL
FUNDINGS) DUE
DILIGENCE REQUIRED:      50% Review of All Credit Files in Advance of Fundings:
                         Lenders review, on-site at ABFS offices of 50% of all
                         credit files against compliance with underwriting
                         standards of ABFS approved by CIT-SF. Any exceptions to
                         underwriting and/or compliance guidelines (established
                         in writing by ABFS and approved by CIT-SF) to be
                         approved by CIT-SF on a case-by-case basis.

                         Other exception guidelines as it relates to Level 1 and
                         2 exceptions (but not Level 3 which will be deemed at
                         all times ineligible) to be approved in advance by
                         CIT-SF.

                         Appraisal Due Diligence: Any appraisal deviations > 15%
                         or "no hits" to AVMs be resolved by company hired
                         licensed certified appraisers only (i.e., broker
                         segment's underwriters to be removed from current
                         approval exceptions) or by CIT/Specialty Finance
                         appraisers or by a third party certified appraiser
                         acceptable to Lender.

REPRESENTATIONS AND
WARRANTIES:              Usual and customary for transaction of this type and
                         others to be agreed upon.

AFFIRMATIVE COVENANTS:   Usual and customary for transaction of this type and
                         others to be agreed upon.

NEGATIVE COVENANTS:      Usual and customary for transaction of this type and
                         others to be agreed upon.

TERMINATION EVENTS:      The Facility will terminate and all amounts outstanding
                         under the Facility will become due and payable upon the
                         occurrence of any of the following Termination Events:

                             1.  Usual for facilities and transactions of this
                                 type, including, without limitation, nonpayment
                                 of principal, interest or other amounts;
                                 violation of covenants; incorrectness of
                                 representations and warranties in any material
                                 respect; cross default and cross acceleration
                                 of material agreements, including without
                                 limitations, securitizations and surety bonds;
                                 bankruptcy; material judgments; actual or
                                 asserted invalidity of security documents; and
                                 Change of Control (to be defined); customary
                                 "insolvency" events relating to the Borrower,
                                 any Sponsor, or any Approved Mortgage
                                 Originator.

                             2.  The occurrence of any of the following Events
                                 of Default under an Approved Warehouse
                                 Agreement whether or not declared by the Agent
                                 or the Lenders and any other Events of Default
                                 under the Approved Warehouse Agreement which
                                 have not been waived by the Lenders in writing
                                 within 5 business days of their occurrence:

                                      American Business Financial Services, Inc.
                                                                November 1, 2004
                                                                          Page 9


                                    a.  Payment or remittance default
                                    b.  Bankruptcy
                                    c.  Insolvency
                                    d.  Breach of liquidity, net worth, debt
                                        incurrence or aggregate indebtedness
                                        covenants
                                    e.  Material Adverse Change
                                    f.  Change in control
                                    g.  Cross-default to other debt facility
                                        (including without limitations,
                                        securitizations and surety bonds)

                             3.  Failure of Borrower to cure a Borrowing Base
                                 Shortfall or to meet any other payment
                                 obligation under the Facility within three
                                 Business Days.

                             4.  If at any time Approved Mortgage Originators
                                 fail to maintain committed third party
                                 financing, other than the Approved Warehouse
                                 Agreements, in an aggregate amount of
                                 $350,000,000 and a wet funding sublimit in an
                                 amount satisfactory to the Lenders.

SERVICING:               The servicing rights relating to the Mortgage Loans
                         will be owned by a special-purpose entity not subject
                         to consolidation into the bankruptcy estate of any
                         Approved Mortgage Originator and freely transferable to
                         a third-party purchaser of the Mortgage Loans in the
                         event of a foreclosure under the Approved Warehouse
                         Agreement. The Mortgage Loans may be subserviced by an
                         Approved Mortgage Servicer on behalf of the
                         special-purpose entity which will own the servicing
                         rights; provided, however, that (i) the term of any
                         such servicing arrangement does not exceed 30 days,
                         (ii) CIT/Specialty Finance or another entity acceptable
                         to the Lenders (the "BACKUP SERVICER") shall be the
                         "hot" back-up servicer, and (iii) such servicing
                         arrangement is otherwise on terms and conditions
                         acceptable to Lenders.

CUSTODIAN:               JP Morgan Chase Bank will hold the mortgage file for
                         each Mortgage Loan as custodian pursuant to a custodial
                         agreement in form and substance acceptable to the
                         Lenders. The Custodian will acknowledge in writing that
                         it is holding the Mortgage Loan documents for the
                         benefit of Lenders and that upon receipt by Custodian
                         of written notice that Borrower has defaulted under the
                         Facility, the Custodian will thereafter take all
                         direction under the Custodial Agreement from the
                         Lenders.

HEDGING:                 In the case of an Event of Default, Borrower will cause
                         the Mortgage Loans pledged under the Facility to be
                         hedged by the Approved Mortgage Originator pursuant to
                         a hedging strategy reasonably acceptable to the Lenders
                         and executed with a financial institution acceptable to
                         Lenders. The Lenders shall have the benefit of such
                         hedges.

                                      American Business Financial Services, Inc.
                                                                November 1, 2004
                                                                         Page 10

REPORTING                Borrower will provide the Lenders the following
                         information (i) all management reports and financial
                         statements provided by Approved Mortgager Originators
                         (ii) a data tape on all Mortgage Loans financed under
                         the Facility provided on a daily, weekly and/or monthly
                         basis as requested by the Lenders (iii) Borrowing Base
                         (established to reflect above advance rates, sub-limits
                         and advance rate reductions) to be prepared by
                         custodian bank (Chase) daily for wet funding sub-limit
                         and weekly for warehouse line. Clayton to review
                         borrowing base certificates, (iv) Exception Reports
                         prepared by custodian daily for wet funding line and
                         weekly for warehouse line and (v) other information as
                         reasonably requested by the Lenders including trigger
                         management reports and cash flow reports.

                         Borrower agrees to cooperate with the Lenders to
                         provide access to the Approved Mortgage Originators and
                         make available Mortgage Loans in order to support
                         Lenders' re-underwriting of such Mortgage Loans.

OTHER TERMS:             Customary loan-level and Borrower representations and
                         warranties including but not limited to eligibility of
                         Mortgage Loans sold under Facility, requisite
                         authorization, noncontravention and compliance with all
                         applicable laws in origination and servicing of
                         Mortgage Loans. Other terms customary in transactions
                         of this type including receipt of appropriate opinions
                         of counsel.

EXPENSES AND
INDEMNITIES:             Borrower will reimburse the Agent's and the Lenders'
                         reasonable out-of-pocket expenses incurred in
                         connection with the due diligence, negotiation and
                         documentation relating to, and the monitoring and
                         enforcement of, the Facility, including reasonable
                         attorney's fees and expenses and will indemnify the
                         Agent and the Lenders and their respective officers,
                         shareholders and affiliates, including for the breach
                         of any representation or warranty under the Facility.

                         The out-of-pocket cost and expenses of the Lenders in
                         reunderwriting Mortgage Loans shall not exceed the
                         costs and expenses which are usual and customary in the
                         industry for third party loan reunderwriting firms. The
                         Company will be responsible for any upfront fees
                         payable to the Backup Servicer or Custodian.