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 pu