<PAGE>
                    WAREHOUSING CREDIT AND SECURITY AGREEMENT
                         (SINGLE FAMILY MORTGAGE LOANS)

                                     BETWEEN

                    NEW JERSEY MORTGAGE AND INVESTMENT CORP.,
                            a New Jersey corporation

                                       AND

                         AMERICAN BUSINESS CREDIT, INC.,
                           a Pennsylvania corporation

                                       AND

                HOMEAMERICAN CREDIT, INC. d/b/a UPLAND MORTGAGE,
                           a Pennsylvania corporation

                                       AND

                        RESIDENTIAL FUNDING CORPORATION,
                             a Delaware corporation





                             Dated as of May 5, 2000





<PAGE>

                                TABLE OF CONTENTS
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1.   DEFINITIONS..................................................................................................1
   1.1    Defined Terms...........................................................................................1
   1.2    Other Definitional Provisions..........................................................................11

2.   THE CREDIT..................................................................................................11
   2.1    The Commitment.........................................................................................11
   2.2    Procedures for Obtaining Advances......................................................................12
   2.3    Note...................................................................................................13
   2.4    Interest...............................................................................................13
   2.5    Principal Payments.....................................................................................15
   2.6    Expiration of Commitment...............................................................................17
   2.7    Method of Making Payments..............................................................................17
   2.8    Commitment Fees and Non-Usage Fees.....................................................................17
   2.9    Warehousing Fees.......................................................................................18
   2.10   Miscellaneous Charges..................................................................................18
   2.11   Interest Limitation....................................................................................19
   2.12   Increased Costs; Capital Requirements..................................................................19

3.   COLLATERAL..................................................................................................20
   3.1    Grant of Security Interest.............................................................................20
   3.2    Release of Security Interest in Collateral.............................................................21
   3.4    Release of Collateral..................................................................................23
   3.5    Collection and Servicing Rights........................................................................23
   3.6    Return of Collateral at End of Commitment..............................................................23

4.   CONDITIONS PRECEDENT........................................................................................24
   4.1    Initial Advance........................................................................................24
   4.2    Each Advance...........................................................................................27

5.   REPRESENTATIONS AND WARRANTIES..............................................................................28
   5.1    Organization; Good Standing; Subsidiaries..............................................................28
   5.2    Authorization and Enforceability.......................................................................28
   5.3    Approvals..............................................................................................29
   5.4    Financial Condition....................................................................................29
   5.5    Litigation.............................................................................................29
   5.6    Compliance with Laws...................................................................................29
   5.7    Regulation U...........................................................................................29
   5.8    Investment Company Act.................................................................................30
   5.9    Payment of Taxes.......................................................................................30
   5.10   Agreements.............................................................................................30
   5.11   Title to Properties....................................................................................30
   5.12   ERISA..................................................................................................31
   5.13   Eligibility............................................................................................31
   5.14   Place of Business......................................................................................31
   5.15   Special Representations Concerning Collateral..........................................................31
   5.16   Servicing..............................................................................................33
   5.17   No Adverse Selection...................................................................................33
   5.18   Year 2000 Compliance...................................................................................33
   5.19   Assumed Names..........................................................................................33

</TABLE>

                                       i

<PAGE>
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6.   AFFIRMATIVE COVENANTS.......................................................................................34
   6.1    Payment of Note........................................................................................34
   6.2    Financial Statements and Other Reports.................................................................34
   6.3    Maintenance of Existence; Conduct of Business..........................................................36
   6.4    Compliance with Applicable Laws........................................................................36
   6.5    Inspection of Properties and Books.....................................................................36
   6.6    Notice.................................................................................................37
   6.7    Payment of Debt, Taxes, etc............................................................................37
   6.8    Insurance..............................................................................................37
   6.9    Closing Instructions...................................................................................38
   6.10   Subordination of Certain Indebtedness..................................................................38
   6.11   Other Loan Obligations.................................................................................38
   6.12   Use of Proceeds of Advances............................................................................38
   6.13   Special Affirmative Covenants Concerning Collateral....................................................38

7.   NEGATIVE COVENANTS..........................................................................................39
   7.1    Contingent Liabilities.................................................................................40
   7.2    Sale or Pledge of Servicing Contracts..................................................................40
   7.3    Merger; Sale of Assets; Acquisitions...................................................................40
   7.4    Deferral of Subordinated Debt..........................................................................40
   7.5    Loss of Eligibility....................................................................................40
   7.6    Debt to Tangible Net Worth Ratio.......................................................................40
   7.7    Minimum Tangible Net Worth.............................................................................40
   7.8    Net Income.............................................................................................40
   7.9    Transactions with Affiliates...........................................................................41
   7.10   Acquisition of Recourse Servicing Contracts............................................................41
   7.11   Gestation Facilities...................................................................................41
   7.12   Special Negative Covenants Concerning Collateral.......................................................41

8.   DEFAULTS; REMEDIES..........................................................................................41
   8.1    Events of Default......................................................................................41
   8.2    Remedies...............................................................................................44
   8.3    Application of Proceeds................................................................................47
   8.4    Lender Appointed Attorney-in-Fact......................................................................47
   8.5    Right of Set-Off.......................................................................................48

9.   NOTICES.....................................................................................................48

10.     REIMBURSEMENT OF EXPENSES; INDEMNITY.....................................................................49

11.     FINANCIAL INFORMATION....................................................................................50

12.     MISCELLANEOUS............................................................................................50
   12.1   Terms Binding Upon Successors; Survival of Representations.............................................50
   12.2   Assignment.............................................................................................50
   12.3   Amendments.............................................................................................50
   12.4   Governing Law..........................................................................................50
   12.5   Participations.........................................................................................50
   12.6   Relationship of the Parties............................................................................51
   12.7   Severability...........................................................................................51
   12.8   Operational Reviews....................................................................................51
   12.9   Consent to Credit References...........................................................................52
   12.10  Consent to Jurisdiction................................................................................52
   12.11  Counterparts...........................................................................................52
   12.12  Entire Agreement.......................................................................................52
   12.13     WAIVER OF JURY TRIAL................................................................................52
</TABLE>

                                       ii

<PAGE>

                                    EXHIBITS

Exhibit A         Promissory Note
Exhibit B         Guaranty
Exhibit C-SF      Request for Advance Against Single Family Mortgage Loans
Exhibit D-SF      Procedures and Documentation for Warehousing Single Family
                    Mortgage Loans
Exhibit E         Schedule of Servicing Contracts
Exhibit F         Subordination of Debt Agreement
Exhibit G         Subsidiaries
Exhibit H         Legal Opinion
Exhibit I-SF      Officer's Certificate
Exhibit J         Schedule of Existing Warehouse Lines
Exhibit K         Funding Bank Agreement (Wire)
Exhibit L         Commitment Summary Report
Exhibit M         Terms Applicable to Advances Against Eligible Loans
Exhibit N         RFConnects Pledge Agreement
Exhibit O         Assumed Names
Exhibit P         Terms of Guaranteed Obligations



                                      iii
<PAGE>





         THIS WAREHOUSING CREDIT AND SECURITY AGREEMENT, dated as of May 5,
2000, between NEW JERSEY MORTGAGE AND INVESTMENT CORP., a New Jersey corporation
("New Jersey Mortgage"), AMERICAN BUSINESS CREDIT, INC., a Pennsylvania
corporation ("American Business Credit"), and HOMEAMERICAN CREDIT, INC. d/b/a
UPLAND MORTGAGE, a Pennsylvania corporation ("Upland") (New Jersey Mortgage,
American Business Credit and Upland are hereinafter collectively referred to as
the "Borrowers"), having their principal office at 111 Presidential Boulevard,
Suite 125, Bala Cynwyd, PA 19004 and RESIDENTIAL FUNDING CORPORATION, a Delaware
corporation (the "Lender"), having its principal office at 8400 Normandale Lake
Blvd., Suite 600, Minneapolis, Minnesota 55437.

         WHEREAS, the Borrowers and the Lender desire to set forth herein the
terms and conditions upon which the Lender shall provide warehouse financing to
the Borrowers;

         NOW, THEREFORE, the parties hereto hereby agree as follows:

1.       DEFINITIONS.

         1.1      Defined Terms.  Capitalized terms defined below or elsewhere
in this Agreement (including the Exhibits hereto) shall have the following
meanings:

                  "Advance" means a disbursement by the Lender under the
Commitment pursuant to Section 2.1 of this Agreement.

                  "Advance Request" has the meaning set forth in Section 2.2(a)
hereof.

                  "Affiliate" has the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.

                  "Agency Security" means a Mortgage-backed Security issued or
guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.

                  "Agreement" means this Warehousing Credit and Security
Agreement (Single Family Mortgage Loans), either as originally executed or as it
may from time to time be supplemented, modified or amended.

                  "Approved Custodian" means a pool custodian or other Person
which is deemed acceptable to the Lender from time to time in its sole
discretion to hold a Mortgage Loan for inclusion in a Mortgage Pool or to hold a
Mortgage Loan as agent for an Investor who has issued a Purchase Commitment for
such Mortgage Loan.

                  "Borrowers" has the meaning set forth in the first paragraph
of this Agreement.

                  "Business Day" means any day excluding Saturday or Sunday and
excluding any day on which national banking associations in the United States
are closed for business.


<PAGE>

                  "Calendar Quarter" means the 3 month period beginning on any
January 1, April 1, July 1 or October 1.

                  "Cash Collateral Account" means a demand deposit account
maintained at the Funding Bank in the name of the Lender and designated for
receipt of the proceeds of the sale or other disposition of the Collateral.

                  "Change of Control" means the occurrence, after the Closing
Date, of any of the following circumstances: (a) the Guarantor not owning,
directly or indirectly, all of the issued and outstanding capital stock of each
of the Borrowers; or (b) any Person, or two or more Persons acting in concert,
other than Anthony J. Santilli and his wife, or their respective estates or
heirs, acquiring beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended), directly or indirectly, of securities of the Guarantor (or other
securities convertible into such securities) representing 15% or more of the
combined voting power of all securities of the Guarantor entitled to vote in the
election of directors; or (c) any Person, or two or more Persons acting in
concert, other than Anthony J. Santilli and his wife, or their respective
estates or heirs, acquiring by contract or otherwise, or entering into a
contract or arrangement which upon consummation will result in its or their
acquisition of, control over securities of the Guarantor (or other securities
convertible into such securities) representing 15% or more of the combined
voting power of all securities of NCFC entitled to vote in the election of the
directors.

                  "Check Disbursement Account" means a demand deposit account
maintained by the Funding Bank in the name of the Lender for the benefit of the
Borrowers for the clearing of checks written by the Borrowers to fund the
closing of Pledged Mortgages.

                  "Closing Date" means May 5, 2000.

                  "Collateral" has the meaning set forth in Section hereof.

                  "Collateral Documents" means, with respect to each Mortgage
Loan: (a) the Mortgage Note, the Mortgage, and all other documents executed in
connection with or otherwise relating to the Mortgage Loan, (b) as applicable,
the original lender's ALTA Policy of Title Insurance or its equivalent,
documents evidencing the FHA commitment to insure or the VA guaranty, the
appraisal, Private Mortgage Insurance, the Regulation Z Statement, certificates
of casualty or hazard insurance, credit information on the maker(s) of the
Mortgage Note, the HUD-1 or corresponding purchase advice, and (c) any other
documents that are customarily desired for inspection or transfer incidental to
the purchase of any Mortgage Note by an Investor or which are customarily
executed by the seller of a Mortgage Note to an Investor.

                  "Collateral Value" means (a) with respect to any Eligible Loan
as of the date of determination, the lesser of (i) the amount of any Advance
made against such Eligible Loan under Section hereof or (ii) the Fair Market
Value of such Eligible Loan; (b) in the event Pledged Mortgages have been
exchanged for Agency Securities, the lesser of (A) the amount of any Advances
outstanding against the Eligible Loans backing such Agency Securities or (B) the
Fair Market Value of such Agency Securities; and (c) with respect to cash, the
amount of such cash.


                                       2
<PAGE>
                  "Commitment" has the meaning set forth in Section hereof.

                  "Commitment Amount" means $25,000,000.

                  "Commitment Fee" means a fee payable by the Borrowers in
consideration of the Lender's issuance of the Commitment. The amount of the
Commitment Fee, if any, is set forth in Section _____ hereof.

                  "Committed Purchase Price" means for an Eligible Loan the
product of the Mortgage Note Amount multiplied by (a) the price (expressed as a
percentage) as set forth in a Purchase Commitment for the Eligible Loan or (b)
in the event the Eligible Loan is to be used to back an Agency Security, the
price (expressed as a percentage) as set forth in a Purchase Commitment for the
Agency Security.

                  "Credit Score" means a mortgagor's overall consumer credit
rating, represented by a single numeric credit score calculated using the Fair,
Isaac consumer credit scoring system, provided by a credit repository acceptable
to the Lender and the Investor that issued the Purchase Commitment covering the
related Mortgage Loan.

                  "Debt" means, with respect to any Person at any date, (a) all
indebtedness or other obligations of such Person which, in accordance with GAAP,
would be included in determining total liabilities as shown on the liabilities
side of a balance sheet of such Person at such date, and (b) all indebtedness or
other obligations of such Person for borrowed money or for the deferred purchase
price of property or services; provided that for purposes of this Agreement,
there shall be excluded from Debt at any date deferred taxes arising from
capitalized excess servicing fees and capitalized servicing rights.

                  "Default" means the occurrence of any event or existence of
any condition described in Section 8.1 which, but for the giving of Notice, the
lapse of time, or both, would constitute an Event of Default.

                  "Depository Benefit" shall mean the compensation received by
the Lender, directly or indirectly, as a result of the Borrowers' maintenance of
Eligible Balances with a Designated Bank.

                  "Designated Bank" means any bank(s) designated from time to
time by the Lender as a Designated Bank, but only for as long as the Lender has
an agreement under which the Lender can receive a Depository Benefit.


                                       3
<PAGE>

                  "Designated Bank Charges" means any fees, interest or other
charges that would otherwise be payable to a Designated Bank in connection with
Eligible Balances maintained at a Designated Bank, including Federal Deposit
Insurance Corporation insurance premiums, service charges and such other charges
as may be imposed by governmental authorities from time to time.

                  "Electronic Advance Request" means an electronic transmission
through RFConnects Delivery containing the same information as Exhibit C-SF to
this Agreement, together with the RFConnects Pledge Agreement, duly executed by
the Borrowers, and a list of the Mortgage Loans (including mortgagor's name,
loan number and loan amount) to be funded with the Advance sent to the Lender by
facsimile.

                  "Eligible Balances" means all funds of or maintained by the
Borrowers and their Subsidiaries in accounts at a Designated Bank, less balances
to support float, reserve requirements, and such other reductions as may be
imposed by governmental authorities from time to time.

                  "Eligible Loan" means a Single Family Mortgage Loan secured by
a Mortgage on real property located in one of the states of the United States or
the District of Columbia that is designated as such on Exhibit M attached hereto
and made a part hereof.

                  "Eligible Mortgage Pool" means a Mortgage Pool for which (a)
an Approved Custodian has issued its initial certification (on the basis of
which an Agency Security is to be issued), (b) there exists a Purchase
Commitment covering such Agency Security, and (c) such Agency Security will be
delivered to the Lender.

                  "ERISA" means the Employee Retirement Income Security Act of
1974 and all rules and regulations promulgated thereunder, as amended from time
to time and any successor statute.

                  "Event of Default" means any of the conditions or events set
forth in Section hereof.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute.

                  "Fair Market Value" means at any time for an Eligible Loan or
the related Agency Security (if the Eligible Loan is to be used to back an
Agency Security), (a) if the Eligible Loan is covered by a Purchase Commitment
from Fannie Mae or Freddie Mac, or the Eligible Loan is to be exchanged for an
Agency Security and such Agency Security is covered by a Purchase Commitment,
the Committed Purchase Price, or (b) otherwise, the market price for such
Eligible Loan or Agency Security, determined by the Lender based on market data
for similar Mortgage Loans or Agency Securities and such other criteria as the
Lender deems appropriate.


                                       4
<PAGE>


                  "Fannie Mae" means Fannie Mae, a corporation created under the
laws of the United States, and any successor thereto.

                  "FHA" means the Federal Housing Administration and any
successor thereto.

                  "FICA" means the Federal Insurance Contributions Act.

                  "FIRREA" means the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, as amended from time to time, and the regulations
promulgated and rulings issued thereunder.

                  "First Mortgage" means a Mortgage which constitutes a first
Lien on the property covered thereby.

                  "First Mortgage Loan" means a Mortgage Loan secured by a First
Mortgage.

                  "Freddie Mac" means Freddie Mac, a corporation created under
the laws of the United States, and any successor thereto.

                  "Funding Bank" means Bank One, NA or any other bank designated
from time to time by the Lender.

                  "Funding Bank Agreement" means the letter agreement
substantially in the form of Exhibit K hereto.

                  "GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, which are applicable to the circumstances of the
Borrowers as of the date of determination.

                  "Gestation Agreement" means an agreement under which the
Borrowers agree to sell or finance (a) a Pledged Mortgage prior to the date of
purchase by an Investor, or (b) a Mortgage Pool prior to the date an Agency
Security backed by such Mortgage Pool is issued.

                  "Ginnie Mae" means the Government National Mortgage
Association, an agency of the United States government, and any successor
thereto.

                  "Guarantor" means AMERICAN BUSINESS FINANCIAL SERVICES, INC.,
a Delaware corporation, and any other Person that hereafter guarantees all or
any portion of the Borrowers' Obligations. If more than one Person is named as
Guarantor, the term "Guarantor" shall mean each of such Persons and all of them.


                                       5
<PAGE>
                  "Guaranty" means a guaranty of all or any portion of the
Borrowers' Obligations. If more than one Guaranty is executed and delivered to
the Lender, the term "Guaranty" shall mean each of such Guaranties and all of
them.

                  "Hedging Arrangements" means, with respect to any Person, any
agreements or other arrangement (including, without limitation, interest rate
swap agreements, interest rate cap agreements and forward sale agreements)
entered into by such Person to protect itself against changes in interest rates
or the market value of assets.

                  "HUD" means the Department of Housing and Urban Development
and any successor thereto.

                  "HUD 203(K) Mortgage Loan" means an FHA insured closed-end
First Mortgage Loan, of which a portion will be used for the purpose of
rehabilitating and/or repairing the related single family property, and which
satisfies the definition of "rehabilitation loan" under 24 C.F.R. Section
203.50(a).

                  "Indemnified Liabilities" has the meaning set forth in Article
10 hereof.

                  "Internal Revenue Code" means the Internal Revenue Code of
1986, Title 26 of the United States Code, the regulations, rulings and
interpretations issued thereunder, and any subsequent federal income tax law or
laws, as any of the foregoing have been or may from time to time be amended.

                  "Investor" means Fannie Mae, Freddie Mac or a financially
responsible private institution which is deemed acceptable by the Lender from
time to time in its sole discretion with respect to a particular category of
Pledged Mortgages.

                  "Lender" has the meaning set forth in the first paragraph of
this Agreement.

                  "LIBOR" means, for each calendar week, the rate of interest
per annum which is equal to the arithmetic mean of the U.S. Dollar London
Interbank Offered Rates for 1 month periods of certain U.S. banks as of 11:00
a.m. London time on the first Business Day of each week on which the London
Interbank market is open, as published by Bloomberg L.P. If such U.S. dollar
LIBOR rates are not so offered or published for any period, then during such
period LIBOR shall mean the London Interbank Offered Rate for 1 month periods
published on the first Business Day of each week on which the London Interbank
market is open, in the Wall Street Journal in its regular column entitled "Money
Rates."

                  "Lien" means any lien, mortgage, deed of trust, pledge,
security interest, charge or encumbrance of any kind (including any conditional
sale or other title retention agreement, any lease in the nature thereof, and
any agreement to give any security interest).


                                       6
<PAGE>
                  "Loan Documents" means this Agreement, the Note, the Guaranty,
any agreement of the Borrowers relating to Subordinated Debt, and each other
document, instrument or agreement executed by the Borrowers in connection
herewith or therewith, as any of the same may be amended, restated, renewed or
replaced from time to time.

                  "Manufactured Home" means a structure that is built on a
permanent chassis (steel frame) with the wheel assembly necessary for
transportation in one or more sections to a permanent site or semi-permanent
site and which has been built in compliance with the National Manufactured
Housing Construction and Safety Standards established by HUD.

                  "Margin Stock" has the meaning assigned to that term in
Regulation U of the Board of Governors of the Federal Reserve System as in
effect from time to time.

                  "Maturity Date" shall mean the earlier of: (a) the close of
business on December 31, 2000, as such date may be extended from time to time in
writing by the Lender, in its sole discretion, on which date the Commitment
shall expire of its own term and without the necessity of action by the Lender,
and (b) the date the Advances become due and payable pursuant to Section 8.2
below.

                  "Miscellaneous Charges" has the meaning set forth in Section
hereof.

                  "Mortgage" means a mortgage or deed of trust on improved and
substantially completed real property (including, without limitation, real
property to which a Manufactured Home has been affixed in a manner such that the
Lien of a mortgage or deed of trust would attach to such Manufactured Home under
applicable real property law).

                  "Mortgage-backed Securities" means securities that are secured
or otherwise backed by Mortgage Loans.

                  "Mortgage Loan" means any loan evidenced by a Mortgage Note
and secured by a Mortgage.

                  "Mortgage Note" means a promissory note secured by a Mortgage.

                  "Mortgage Note Amount" means, as of the date of determination,
the then outstanding unpaid principal amount of a Mortgage Note (whether or not
an additional amount is available to be drawn thereunder).

                  "Mortgage Pool" means a pool of one or more Pledged Mortgages
on the basis of which there is to be issued a Mortgage-backed Security.

                  "Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA which is maintained for employees of the
Borrowers or any Subsidiary of the Borrowers.




                                       7
<PAGE>
                  "Non-Usage Fee" has the meaning set forth in Section hereof.

                  "Note" has the meaning set forth in Section hereof.

                  "Notices" has the meaning set forth in Article 9 hereof.

                  "Obligations" means any and all indebtedness, obligations and
liabilities of the Borrowers to the Lender (whether now existing or hereafter
arising, voluntary or involuntary, whether or not jointly owed with others,
direct or indirect, absolute or contingent, liquidated or unliquidated, and
whether or not from time to time decreased or extinguished and later increased,
created or incurred), whether arising out of or related to the Loan Documents or
other contractual relationships between any Borrower and the Lender.

                  "Officer's Certificate" means a certificate executed on behalf
of the Borrowers by the chief financial officer or the treasurer of American
Business Financial Services, Inc. or by such other officer as may be designated
herein and substantially in the form of Exhibit I-SF attached hereto.

                  "Operating Account" means a demand deposit account maintained
at the Funding Bank in the name of the Borrowers and designated for funding that
portion of each Eligible Loan not funded by an Advance made against such
Eligible Loan and for returning any excess payment from an Investor for a
Pledged Mortgage or Pledged Security.

                  "Participant" has the meaning set forth in Section hereof.

                  "Person" means and includes natural persons, corporations,
limited liability companies, limited partnerships, general partnerships, joint
stock companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.

                  "Plans" has the meaning set forth in Section hereof.

                  "Pledged Mortgages" has the meaning set forth in Section
hereof.

                  "Pledged Securities" has the meaning set forth in Section
hereof.

                  "Purchase Commitment" means a written commitment, in form and
substance satisfactory to the Lender, issued in favor of the Borrowers by an
Investor pursuant to which that Investor commits to purchase Mortgage Loans or
Mortgage-backed Securities.

                  "Release Amount" has the meaning set forth in Section hereof.

                                       8

<PAGE>
                  "RFConnects Delivery" means the Lender's proprietary service
to support the electronic exchange of information between the Lender and the
Borrowers, including, but not limited to, Advance Requests, shipping requests,
payoff requests, activity reports and exception reports.

                  "RFConnects Pledge Agreement means a pledge agreement in the
form of Exhibit N to the Agreement.

                  "Second Mortgage" means a Mortgage which constitutes a second
Lien on the property covered thereby.

                  "Second Mortgage Loan" means a Mortgage Loan secured by a
Second Mortgage.

                  "Servicing Contract" means, with respect to any Person, the
arrangement, whether or not in writing, pursuant to which such Person has the
right to service Mortgage Loans.

                  "Servicing Portfolio" means, as to any Person, the unpaid
principal balance of Mortgage Loans serviced by such Person under Servicing
Contracts.

                  "Single Family Mortgage Loan" means a Mortgage Loan secured by
a Mortgage covering improved real property containing one to four family
residences.

                  "Statement Date" means the date of the most recent financial
statements of American Business Financial Services, Inc. and its Subsidiaries
delivered to the Lender under the terms of this Agreement.

                  "Sublimit" means the aggregate amount of Advances (expressed
as a dollar amount or as a percentage of the Commitment Amount) that is
permitted to be outstanding at any one time against a specific type of Eligible
Loan.

                  "Subordinated Debt" means (a) all indebtedness of the
Borrowers for borrowed money which is effectively subordinated in right of
payment to all other present and future Obligations either (i) pursuant to a
Subordination of Debt Agreement in the form of Exhibit F hereto or (ii)
otherwise on terms acceptable to the Lender, and (b) solely for purposes of
Section hereof, all indebtedness of the Borrowers which is required to be
subordinated by Section 4.1(b) or Section hereof.

                  "Subsidiary" means any corporation, association or other
business entity in which more than 50% of the total voting power or shares of
stock entitled to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by any
Person or one or more of the other Subsidiaries of that Person or a combination
thereof.


                                       9
<PAGE>

                  "Tangible Net Worth" means with respect to any Person at any
date, the excess of the total assets of such Person over total liabilities of
such Person on such date, each to be determined in accordance with GAAP
consistent with those applied in the preparation of the financial statements
referred to in Section hereof, provided that, for purposes of calculating
Tangible Net Worth, there shall be excluded from total assets advances or loans
to shareholders, officers, employees or Affiliates, investments in Affiliates,
assets pledged to secure any liabilities not included in the Debt of such
Person, intangible assets, those other assets which would be deemed by HUD to be
non-acceptable in calculating adjusted net worth in accordance with its
requirements in effect as of such date, as such requirements appear in the
"Audit Guide for Audit of Approved Non-Supervised Mortgagees," and other assets
deemed unacceptable by the Lender in its sole discretion.

                  "Title I Mortgage Loan" means an FHA co-insured closed-end
First Mortgage Loan or Second Mortgage Loan which is underwritten in accordance
with HUD underwriting standards for the Title I Property Improvement Program as
set forth in and which is reported for insurance under the Mortgage Insurance
Program authorized and administered under Title I of the National Housing Act of
1934, as amended and the regulations promulgated thereunder.

                  "Trust Receipt" means a trust receipt in a form approved by
and pursuant to which the Lender may deliver any document relating to the
Collateral to the Borrowers for correction or completion.

                  "Unused Portion" has the meaning set forth in Section hereof.

                  "Used Portion" has the meaning set forth in Section hereof.

                  "VA" means the U.S. Department of Veterans Affairs and any
successor thereto.

                  "Warehousing Fee" has the meaning set forth in Section hereof.

                  "Warehouse Period" means, for any Eligible Loan, the maximum
number of days an Advance against that type of Eligible Loan is permitted to
remain outstanding as set forth on Exhibit M attached to this Agreement.

                  "Wet Settlement Advance" means with respect to any Advance,
the time from the date the Advance is made until the date of the Lender's
receipt of the Collateral Documents as provided in Section 2.2(b) and the
Exhibit referenced therein.

                  "Wire Disbursement Account" means a demand deposit account
maintained at the Funding Bank in the name of the Lender for the benefit of the
Borrowers for the clearing of wire transfers requested by the Borrowers to fund
Advances.

                  "Year 2000 Problem" means the risk that computer applications
may not be able to properly perform date-sensitive functions after December 31,
1999.


                                       10
<PAGE>

         1.2      Other Definitional Provisions.

                  1.2(a) Accounting terms not otherwise defined herein shall
have the meanings given the terms under GAAP.

                  1.2(b) Defined terms may be used in the singular or the
plural, as the context requires.

                  1.2(c) All references to time of day shall mean the then
applicable time in Chicago, Illinois, unless expressly provided to the contrary.

2.       THE CREDIT.

         2.1      The Commitment.

                  2.1(a) Subject to the terms and conditions of this Agreement
and provided no Default or Event of Default has occurred and is continuing, the
Lender agrees from time to time during the period from the Closing Date to, but
not including, the Maturity Date, to make Advances to the Borrowers, provided
the total aggregate principal amount outstanding at any one time of all such
Advances shall not exceed the Commitment Amount. The obligation of the Lender to
make Advances hereunder up to the Commitment Amount is hereinafter referred to
as the "Commitment." Within the Commitment, the Borrowers may borrow, repay and
reborrow. All Advances under this Agreement shall constitute a single
indebtedness, and all of the Collateral shall be security for the Note and for
the performance of all the Obligations. Advances shall be made to New Jersey
Mortgage, American Business Credit or Upland, as shall be requested by New
Jersey Mortgage, American Business Credit or Upland, but each Advance, whether
made to New Jersey Mortgage, American Business Credit or Upland shall be deemed
made to or for the benefit of New Jersey Mortgage, American Business Credit and
Upland, jointly and severally, and each Borrower shall be obligated to repay any
Advances made to New Jersey Mortgage, American Business Credit or Upland under
this Agreement. With respect to its obligation to repay Advances made to the
other Borrowers, each Borrower agrees to the terms set forth in Exhibit P
attached hereto and made a part hereof.

                  2.1(b) Advances shall be used by the Borrowers solely for
the purpose of funding the acquisition or origination of Eligible Loans and
shall be made at the request of the Borrowers, in the manner hereinafter
provided in Section hereof, against the pledge of such Eligible Loans as
Collateral therefor. The limitations on the use of Advances set forth on Exhibit
M attached hereto and made a part hereof shall be applicable. In addition, the
following limitations on the use of Advances shall be applicable:

                           (1) No Advance shall be made against a Mortgage Loan
other than a Mortgage Loan secured by a Mortgage on real property located in one
of the states of the United States or the District of Columbia.


                                       11
<PAGE>

                  2.1(c) No Advance shall exceed the following amount
applicable to the type of Eligible Loan at the time it is pledged to secure an
Advance hereunder:

                           (1) For an Eligible Loan pledged hereunder, the
amount set forth on Exhibit M attached hereto and made a part hereof.

         2.2      Procedures for Obtaining Advances.

                  2.2(a) To obtain an Advance, the Borrowers must comply with
the conditions set forth in Sections 4.1 and 4.3 of this Agreement, the
procedures set forth in this Section 2.2(a), and the procedures and
documentation required under the Exhibit D for the type of Mortgage Loan against
which the Borrowers are requesting the Advance. The Borrowers will request an
Advance either by delivering to Lender a completed and signed advance request in
the applicable form of Exhibit C or by sending to Lender an Electronic Advance
Request, together with a list of Mortgage Loans for which the request is being
made and a completed and signed RFConnects Pledge Agreement sent by facsimile
(each an "Advance Request"), each no later than 1 Business Day prior to the
Business Day the requested Advance is to be made. The current forms of the
Exhibit C and Exhibit D referred to above are attached to this Agreement. The
Lender is entitled, upon not less than 5 Business Days' prior Notice to the
Borrowers, to modify any of those Exhibits or the form of Electronic Advance
Request to conform to current legal requirements or Lender's reasonable lending
practices. Exhibits and Electronic Advance Requests so modified automatically
become a part of this Agreement.

                  2.2(b) In the case of a Wet Settlement Advance, the
Borrowers shall follow the procedures and, at or prior to the Lender's making of
such Wet Settlement Advance, shall deliver to the Lender the documents set forth
in Exhibit D-SF hereto. In the case of a Mortgage Loan financed through a Wet
Settlement Advance, the Borrowers shall cause all Collateral Documents required
to be delivered to the Lender pursuant to Exhibit D-SF within 7 Business Days
after the date of the Wet Settlement Advance relating thereto.

                  2.2(c) Before funding, the Lender shall have a reasonable
time (1 Business Day under ordinary circumstances) to examine such Advance
Request and the Collateral Documents to be delivered prior to such requested
Advance, as set forth in the applicable Exhibit hereto, and may reject such of
them as do not meet the requirements of this Agreement or of the related
Purchase Commitment. If the Lender determines not to make an Advance against any
Mortgage Loan with respect to which the Borrowers have submitted Collateral
Documents to the Lender for such purpose, the Lender shall promptly return the
original Mortgage Note, the original assignment of the Mortgage and any other
original documentation related to such Mortgage Loan to the Borrowers.

                  2.2(d) The Borrowers shall hold in trust for the Lender, and
the Borrowers shall deliver to the Lender promptly upon request, or if the
recorded Collateral Documents have not yet been returned from the recording
office, immediately upon receipt by the Borrowers of such recorded Collateral


                                       12
<PAGE>


Documents, unless the Pledged Mortgage is being held by an Investor for purchase
or has been redeemed from pledge, the following: (1) the originals of the
Collateral Documents for which copies are required to be delivered to the Lender
pursuant to Exhibit D-SF, (2) the original lender's ALTA Policy of Title
Insurance or an equivalent thereto, and (3) any other documents relating to a
Pledged Mortgage which the Lender may request, including, without limitation,
documentation evidencing the FHA Commitment to Insure or the VA Guaranty of any
Pledged Mortgage which is either FHA insured or VA guaranteed, the appraisal,
Private Mortgage Insurance Certificate, if applicable, the Regulation Z
Statement, certificates of casualty or hazard insurance, credit information on
the maker of each such Mortgage Note, a copy of a HUD-1 or corresponding
purchase advice and other documents of all kinds which are customarily desired
for inspection or transfer incidental to the purchase of any Mortgage Note by an
Investor and any additional documents which are customarily executed by the
seller of a Mortgage Note to an Investor.

                  2.2(e) To make an Advance, the Lender shall cause the
Funding Bank to credit the Wire Disbursement Account upon compliance by the
Borrowers with the terms of the Loan Documents. The Lender shall cause Advances
and other amounts on deposit in the Wire Disbursement Account to be disbursed by
the Funding Bank to fund the related Mortgage Loans as specified in the related
Advance Request (subject to all of the terms and conditions of this Agreement
and the Exhibits hereto).

                  2.2(f) If, pursuant to the authorization given by the
Borrowers in the Funding Bank Agreement, for the purpose of funding a Mortgage
Loan against which the Lender has made an Advance in accordance with a Request
for Advance, (i) the Lender debits the Borrowers' Operating Account at the
Funding Bank to the extent necessary to cover a wire to be initiated by the
Lender, or (ii) the Lender directs the Funding Bank to honor a check drawn by
the Borrowers on its Check Disbursement Account at the Funding Bank, and such
debit or direction results in an overdraft, the Lender may make an additional
Advance to fund such overdraft.

         2.3 Note. The Borrowers' Obligations shall be evidenced by the
promissory note (the "Note") dated as of the date hereof substantially in the
form of Exhibit A attached hereto. The term "Note" shall include all extensions,
renewals and modifications of the Note and all substitutions therefor. All terms
and provisions of the Note are hereby incorporated herein.

         2.4 Interest.

                  2.4(a) Except as otherwise provided in Section hereof, the
unpaid amount of each Advance against an Eligible Loan shall bear interest, from
the date of the Advance until paid in full, at the rate(s) per annum set forth
on Exhibit M attached hereto and made a part hereof.


                                       13
<PAGE>
                  2.4(b) Provided no Default or Event of Default exists, the
Borrowers is entitled to receive a benefit in the form of an "Earnings Credit"
on the portion of the Eligible Balances maintained in time deposit accounts with
a Designated Bank, and the Borrowers are entitled to receive a benefit in the
form of an "Earnings Allowance" on the portion of the Eligible Balances
maintained in demand deposit accounts with a Designated Bank. Any Earnings
Allowance shall be used first and any Earnings Credit shall be used second as a
credit against accrued Designated Bank Charges, any other Miscellaneous Charges
and fees, including, but not limited to Commitment Fees, Non-Usage Fees and
Warehousing Fees, and may be used, at the Lender's option, to reduce accrued
interest. Any Earnings Allowance not used during the month in which the benefit
was received shall be accumulated for use and must be used within 6 months of
the month in which the benefit was received. Provided no Default or Event of
Default exists, any Earnings Credit not used during the month in which the
benefit was received shall be used to provide a cash benefit to the Borrowers.
Any Earnings Credit retained by the Lender as a result of a Default or Event of
Default will be applied to the payment of the Borrowers' Obligations in such
order as the Lender will determine in its sole discretion. The Lender's
determination of the Earnings Credit and the Earnings Allowance for any month
shall be determined by the Lender in its sole discretion and shall be conclusive
and binding absent manifest error. In no event shall the benefit received by the
Borrowers exceed the Depository Benefit.

                  Either party hereto may terminate the benefits provided for in
this Section effective immediately upon Notice to the other party, if the
terminating party shall have determined (which determination shall be conclusive
and binding absent manifest error) at any time that any applicable law, rule,
regulation, order or decree or any interpretation or administration thereof by
any governmental authority charged with the interpretation or administration
thereof, or compliance by such party with any request or directive (whether or
not having the force of law) of any such authority, shall make it unlawful or
impossible for such party to continue to offer or receive the benefits provided
for in this Section. No Notice is required for a termination of benefits as a
result of a Default or Event of Default.

                  2.4(c) Interest shall be computed on the basis of a 360-day
year and applied to the actual number of days elapsed in each interest
calculation period and shall be payable monthly in arrears, on the first day of
each month, commencing with the first month following the Closing Date and on
the Maturity Date.

                  2.4(d) If, for any reason, no interest is due on an Advance,
the Borrowers agree to pay to the Lender an administrative fee equal to one day
of interest on such Advance at the rate of interest applicable to such Advance,
as in effect on the date of such Advance. Administrative and other fees shall be
due and payable in the same manner as interest is due and payable hereunder.

                  2.4(e) Upon Notice to the Borrowers, after the occurrence
and during the continuation of an Event of Default, the unpaid amount of each
Advance shall bear interest until paid in full at a per annum rate of interest
(the "Default Rate") equal to 4% in excess of the rate of interest otherwise
applicable to the Advance or, if no rate is applicable, the highest rate then
applicable to any outstanding Advances.


                                       14
<PAGE>
                  2.4(f) The floating rates of interest provided for in this
Agreement will be adjusted as of the effective date of each change in the
applicable index. The Lender's determination of such rates as of any date of
determination shall be conclusive and binding, absent manifest error.

         2.5      Principal Payments.
                  ------------------

                  2.5(a) The outstanding principal amount of all Advances
shall be payable in full on the Maturity Date.

                  2.5(b) The Borrowers shall have the right to prepay the
outstanding Advances in whole or in part, from time to time, without premium or
penalty.

                  2.5(c) The Borrowers shall pay the Lender, without the
necessity of prior demand or notice from the Lender, and the Borrowers authorize
the Lender to cause the Funding Bank to charge the Borrowers' Operating Account
for, the amount of any outstanding Advance against a specific Pledged Mortgage,
upon the earliest occurrence of any of the following events:

                           (1) 1 Business Day elapses from the date an Advance
was made against an Eligible Loan that was not closed and funded.

                           (2) 10 Business Days elapse from the date a
Collateral Document was delivered to the Borrowers for correction or completion
under a Trust Receipt, if such Collateral Document has not been returned to the
Lender.

                           (3) On the date on which a Pledged Mortgage is
determined to have been originated based on untrue, incomplete or inaccurate
information, whether or not the Borrowers have knowledge of such
misrepresentation or incorrect information or on the date on which the Borrowers
know, or have reason to know, or receives notice from the Lender, that one or
more of the representations and warranties set forth in Section were inaccurate
or incomplete in any material respect on any date when made or deemed made.

                           (4) On the date the Pledged Mortgage has been in
default for a period of 60 days or more.

                           (5) 3 Business Days after the mandatory delivery date
of the related Purchase Commitment and the specific Pledged Mortgage or the
Pledged Security backed thereby was not delivered under the Purchase Commitment
prior to such mandatory delivery date, or the Purchase Commitment is terminated;
unless in each case, such Pledged Mortgage or Pledged Security is eligible for
delivery to an Investor under a comparable Purchase Commitment acceptable to the
Lender.

                                       15
<PAGE>

                           (6) Upon sale or other disposition of the Pledged
Mortgage or, if a Pledged Mortgage is included in an Eligible Mortgage Pool,
upon sale or other disposition of the related Agency Security.

                  2.5(d) Upon Notice to the Borrowers by the Lender, the
Borrowers shall pay to the Lender, and the Borrowers authorize the Lender to
cause the Funding Bank to charge the Borrowers' Operating Account for, the
amount of any outstanding Advance against a specific Pledged Mortgage upon the
earliest occurrence of any of the following events:

                           (1) For any Pledged Mortgage, the Warehouse Period
elapses.

                           (2) On the date the payment of a Lien prior to a
Pledged Mortgage is delinquent for a period of 60 days.

                           (3) 45 days elapse from the date the Pledged Mortgage
was delivered to an Investor or an Approved Custodian for examination and
purchase or inclusion in a Mortgage Pool, without the purchase being made or an
Eligible Mortgage Pool being initially certified, or upon rejection of the
Pledged Mortgage as unsatisfactory by an Investor or an Approved Custodian.

                           (4) 7 Business Days elapse from the date a Wet
Settlement Advance was made without receipt by the Lender of all Collateral
Documents relating to such Pledged Mortgage, or such Collateral Documents, upon
examination by the Lender, are found not to be in compliance with the
requirements of this Agreement or the related Purchase Commitment.

                           (5) With respect to any Pledged Mortgage, any of the
items described in Section 2.2(d), upon examination by the Lender, are found not
to be in compliance with the requirements of this Agreement or the related
Purchase Commitment, unless such non-compliance is correctible and the Lender
delivers such item(s) to the Borrowers for correction or completion under a
Trust Receipt.

                  2.5(e) The outstanding amount of any Advance made pursuant
to Section shall be payable in full within 1 Business Day after the date of such
Advance.

                  2.5(f) In addition to the payments required pursuant to
Sections 2.5(d) and 2.5(e), if the principal amount of any Pledged Mortgage is
prepaid in whole or in part while an Advance is outstanding against such Pledged
Mortgage, the Borrowers shall be obligated to pay to the Lender, without the
necessity of prior demand or notice from the Lender, and the Borrowers authorize
the Lender to cause the Funding Bank to charge the Borrowers' Operating Account
for the amount of such prepayment, to be applied to such Advance.

                  2.5(g) The proceeds of the sale or other disposition of
Pledged Mortgages and Pledged Securities shall be paid directly by the Investor
to the Cash Collateral Account. The Borrowers shall give Notice to the Lender
(telephonically, to be followed by written notice) of the Pledged Mortgages or

                                       16
<PAGE>

Pledged Securities for which proceeds have been received. Upon receipt of such
Notice the Advances against such Pledged Mortgages or Pledged Securities shall
be repaid from such proceeds and such Pledged Mortgages or Pledged Securities
shall be considered to have been redeemed from pledge. The Lender is entitled to
rely upon the Borrowers' affirmation that deposits in the Cash Collateral
Account represent payment from Investors for the purchase of Pledged Mortgages
or Pledged Securities as specified by the Borrowers. In the event that the
payment from an Investor for the purchase of Pledged Mortgages or Pledged
Securities is less than the outstanding Advances against such Pledged Mortgages
or the Mortgage Loans backing Pledged Securities, the Lender is authorized to
cause the Funding Bank to charge the Operating Account for an amount equal to
such deficiency. Provided no Default or Event of Default exists, the Lender
shall return any excess payment from an Investor for Pledged Mortgages or
Pledged Securities to the Borrowers.

         2.6   Expiration of Commitment. The Commitment shall expire on the
               Maturity Date.

         2.7   Method of Making Payments.

                  2.7(a) Except as otherwise specifically provided herein, all
payments hereunder shall be made to the Lender not later than the close of
business on the date when due unless such date is a non-Business Day, in which
case, such payment shall be due on the first Business Day thereafter, and shall
be made in lawful money of the United States of America in immediately available
funds transferred via wire to accounts designated by the Lender in writing from
time to time.

                  2.7(b) After the occurrence and during the continuance of an
Event of Default, and without the necessity of prior demand or notice from the
Lender, the Borrowers authorize the Lender to cause the Funding Bank to charge
the Borrowers' Operating Account for any Obligations due and owing the Lender.

         2.8   Commitment Fees and Non-Usage Fees.

                  2.8(a) The Borrowers agree to pay to the Lender a Commitment
Fee in the amount of 1/8% per annum of the Commitment Amount which Commitment
Fee shall be paid quarterly in advance and shall be computed on the basis of a
365-day year and applied to the actual number of days elapsed in such Calendar
Quarter. On the Closing Date, the Borrowers shall pay the prorated portion of
the quarterly Commitment Fee due from the Closing Date to the last day of the
current Calendar Quarter. Thereafter, the Borrowers shall make quarterly
payments of the Commitment Fee on the first day of each Calendar Quarter. If the
Maturity Date is other than the last day of a Calendar Quarter, the Borrowers
shall pay the prorated portion of the quarterly Commitment Fee due from the
beginning of the then current Calendar Quarter to and including the Maturity
Date. The Borrowers shall not be entitled to a reduction in the amount of the
Commitment Fee, in the event the Commitment Amount is reduced or in the event
that the Commitment is terminated at the request of the Borrowers or as a result
of an Event of Default. If the Commitment terminates at the request of the
Borrowers or as a result of an Event of Default, the unpaid balance of the
Commitment Fee shall be due and payable in full on the date of such termination.

                                       17
<PAGE>

                  2.8(b) At the end of each Calendar Quarter, during the term
hereof commencing with the Calendar Quarter beginning on April 1, 2000, the
Lender shall determine the average usage of the Commitment by calculating the
arithmetic daily average of the Advances outstanding during such Calendar
Quarter. The Lender shall then subtract such quarterly average usage (the "Used
Portion") from the arithmetic daily average of the Commitment Amount (and the
result thereof shall be known as the "Unused Portion"), and the Borrowers shall
pay in arrears, within 30 days after the end of each Calendar Quarter, a
Non-Usage Fee (the "Non-Usage Fee") equal to 1/16% per annum on the total amount
of the Unused Portion of the Commitment during such Calendar Quarter; provided
that no Non-Usage Fee shall be payable with respect to any Calendar Quarter for
which the Used Portion is equal to or greater than 50% of the Commitment Amount.
If the Maturity Date of the Commitment is other than the last day of a Calendar
Quarter, the Borrowers shall pay the prorated portion of the quarterly Non-Usage
Fee due from the beginning of the then current Calendar Quarter to and including
the Maturity Date. In the absence of manifest error, the calculation by the
Lender of the amount of any Non-Usage Fee shall be conclusive. If the Commitment
terminates at the request of the Borrowers or as a result of an Event of
Default, the Non-Usage Fee shall be due and owing through the last day of the
current Calendar Quarter.

         2.9 Warehousing Fees. The Borrowers agree, at the time of each Advance,
to pay to the Lender a Warehousing Fee in the amount of $15.00 for each Mortgage
Loan pledged as Collateral for such Advance; provided, however, if the Borrowers
are not delivering all Advance Requests as Electronic Advance Requests via
RFConnects Delivery within ninety (90) days after the Closing Date, the
Warehousing Fee for each Mortgage Loan pledged as Collateral for an Advance
thereafter shall be $20.00. Warehousing Fees are due when incurred, but shall
not be delinquent if paid within fifteen (15) days after receipt of an invoice
or an account analysis statement from the Lender.

         2.10 Miscellaneous Charges. The Borrowers agree to reimburse the Lender
for miscellaneous charges and expenses (collectively, "Miscellaneous Charges")
incurred by or on behalf of the Lender in connection with the handling and
administration of Advances, and to reimburse the Lender for Miscellaneous
Charges incurred by or on behalf of the Lender in connection with the handling
and administration of the Collateral, except to the extent explicitly addressed
elsewhere in this Agreement. For the purposes hereof, Miscellaneous Charges
shall include, but not be limited to, costs for UCC, tax lien and judgment
searches conducted by the Lender, filing fees, charges for wire transfers, check
processing charges, charges for security delivery fees, charges for overnight
delivery of Collateral to Investors, the Funding Bank's service fees and
overdraft charges and Designated Bank Charges. Miscellaneous Charges are due
when incurred, but shall not be delinquent if paid within 15 days after receipt
of an invoice or an account analysis statement from the Lender.


                                       18
<PAGE>

         2.11 Interest Limitation. All agreements between the Borrowers and the
Lender are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of maturity of this Agreement or
the Note or otherwise, shall the amount paid or agreed to be paid to the Lender
for the use, forbearance, loaning or retention of the Advances secured by this
Agreement exceed the maximum permissible under applicable law. If from any
circumstances whatsoever, fulfillment of any provisions hereof or of the Note,
or any other document securing this Agreement at any time given shall involve
transcending the limit of validity prescribed by law, then, the obligation to be
fulfilled shall automatically be reduced to the limit of such validity, and if
from any circumstances the Lender should ever receive as interest an amount
which would exceed the highest lawful rate of interest, such amount which would
be in excess of interest shall be applied to the reduction of the principal
balance secured by the Note and not to the payment of interest thereunder. This
provision shall control every other provision of all agreements between the
Borrowers and Lender and shall also be binding upon and available to any
subsequent holder of the Note.

         2.12 Increased Costs; Capital Requirements. In the event any applicable
law, order, regulation or directive issued by any governmental or monetary
authority, or any change therein or in the governmental or judicial
interpretation or application thereof, or compliance by the Lender with any
request or directive (whether or not having the force of law) by any
governmental or monetary authority:

                  2.12(a) Does or shall subject the Lender to any tax of any
kind whatsoever with respect to this Agreement or any Advances made hereunder,
or change the basis of taxation on payments to the Lender of principal, fees,
interest or any other amount payable hereunder (except for change in the rate of
tax on the overall gross or net income of the Lender by the jurisdiction in
which the Lender's principal office is located);

                  2.12(b) Does or shall impose, modify or hold applicable any
reserve, capital requirement, special deposit, compulsory loan or similar
requirement against assets held by, or deposits or other liabilities in or for
the account of, advances or loans by, or other credit extended by, or any other
acquisition of funds by, any office of the Lender which are not otherwise
included in the determination of the interest rate as calculated hereunder;

and the result of any of the foregoing is to increase the cost to the Lender of
making, renewing or maintaining any Advance or to reduce any amount receivable
in respect thereof or to reduce the rate of return on the capital of the Lender
or any Person controlling the Lender as it relates to credit facilities in the
nature of that evidenced by this Agreement, then, in any such case, the
Borrowers shall promptly pay any additional amounts necessary to compensate the
Lender for such additional cost or reduced amounts receivable or reduced rate of
return as determined by the Lender with respect to this Agreement or Advances
made hereunder. If the Lender becomes entitled to claim any additional amounts
pursuant to this Section, it shall notify the Borrowers of the event by reason
of which it has become so entitled and the Borrowers shall pay such amount
within 15 days thereafter. A certificate as to any additional amount payable
pursuant to the foregoing sentence containing the calculation thereof in


                                       19
<PAGE>
reasonable detail submitted by the Lender to the Borrowers shall be conclusive
in the absence of manifest error. The obligations of the Borrowers under this
Section shall survive the payment of all other Obligations and the termination
of this Agreement. In the event the Lender notifies the Company of any payment
due under this Section 2.12, the Borrowers may, within 30 days after its receipt
of such notice pay all of the outstanding Obligations and terminate the
Commitment, without paying any additional Commitment Fee or any Non-Usage Fee
for the period after the effective date of such termination, provided, that the
Borrowers shall not be entitled to any refund of any Commitment Fees previously
paid, and shall remain liable for all Obligations (including, without
limitation, any payment due under this Section 2.12) accrued through the
effective date of such payment and termination.

3.       COLLATERAL.

         3.1 Grant of Security Interest. As security for the payment of the Note
and for the performance of all of the Borrowers' Obligations, the Borrowers
hereby assign and transfers to the Lender all right, title and interest in and
to and grants a security interest to the Lender in the following described
property (the "Collateral"):

                  3.1(a) All Mortgage Loans, including all Mortgage Notes and
Mortgages evidencing or securing such Mortgage Loans, which from time to time
are delivered or caused to be delivered to the Lender (including delivery to a
third party on behalf of the Lender), come into the possession, custody or
control of the Lender for the purpose of assignment or pledge or in respect of
which an Advance has been made by the Lender hereunder, including without
limitation all Mortgage Loans in respect of which Wet Settlement Advances have
been made by the Lender (the "Pledged Mortgages").

                  3.1(b) All Mortgage-backed Securities which are from time to
time created in whole or in part on the basis of the Pledged Mortgages or are
delivered or caused to be delivered to, or are otherwise in the possession of
the Lender or its agent, bailee or custodian as assignee, or pledged to the
Lender, or for such purpose are registered by book-entry in the name of the
Lender (including delivery to or registration in the name of a third party on
behalf of the Lender) hereunder or in respect of which from time to time an
Advance has been made by the Lender hereunder (the "Pledged Securities").

                  3.1(c) All private mortgage insurance and all commitments
issued by the FHA or VA to insure or guarantee any Mortgage Loans included in
the Pledged Mortgages; all Purchase Commitments held by the Borrowers covering
the Pledged Mortgages or the Pledged Securities and all proceeds resulting from
the sale thereof to Investors pursuant thereto; and all personal property,
contract rights, servicing and servicing fees and income or other proceeds,
amounts and payments payable to the Borrowers as compensation or reimbursement,
accounts, payments, intangibles and other general intangibles of whatsoever kind
relating to the Pledged Mortgages, the Pledged Securities, said FHA commitments
or VA commitments and the Purchase Commitments, and all other documents or
instruments relating to the Pledged Mortgages and the Pledged Securities,
including, without limitation, any interest of the Borrowers in any fire,


                                       20
<PAGE>

casualty or hazard insurance policies and any awards made by any public body or
decreed by any court of competent jurisdiction for a taking or for degradation
of value in any eminent domain proceeding as the same relate to the Pledged
Mortgages.

                  3.1(d) All right, title and interest of the Borrowers in and
to all escrow accounts, documents, instruments, files, surveys, certificates,
correspondence, appraisals, computer programs, tapes, discs, cards, accounting
records (including all information, records, tapes, data, programs, discs and
cards necessary or helpful in the administration or servicing of the Collateral)
and other information and data of the Borrowers relating to the Collateral.

                  3.1(e) All now existing or hereafter acquired cash delivered
to or otherwise in the possession of the Lender, the Funding Bank, or the
Lender's agent, bailee or custodian or designated on the books and records of
the Borrowers as assigned and pledged to the Lender.

                  3.1(f) All cash and non-cash proceeds of the Collateral,
including all dividends, distributions and other rights in connection with, and
all additions to, modifications of and replacements for, the Collateral, and all
products and proceeds of the Collateral, together with whatever is receivable or
received when the Collateral or proceeds thereof are sold, collected, exchanged
or otherwise disposed of, whether such disposition is voluntary or involuntary,
including, without limitation, all rights to payment with respect to any cause
of action affecting or relating to the Collateral or proceeds thereof.

         3.2      Release of Security Interest in Collateral.

                  3.2(a) Pledged Mortgages shall be released from the Lender's
security interest only against payment to the Lender of the Release Amount in
connection with such Pledged Mortgages.

                  3.2(b) If Pledged Mortgages are to be transferred to a pool
custodian or to Freddie Mac or Fannie Mae for inclusion in a Mortgage Pool, the
Lender's security interest in such Pledged Mortgages shall be released only
against payment to the Lender of the Release Amount in connection with such
Pledged Mortgages. If the Lender's security interest in the Pledged Mortgages
comprising the Mortgage Pool is not released prior to the issuance of the
Mortgage-backed Security, then the Mortgage-backed Security, when issued, shall
be a Pledged Security. The Lender's security interest shall continue in such
Pledged Mortgages and the Pledged Security. The Lender shall be entitled to
possession of such Pledged Security in the manner provided below.

                  3.2(c) If Pledged Mortgages are transferred to an Approved
Custodian and included in an Eligible Mortgage Pool, the Lender's security
interest in the Pledged Mortgages comprising the Eligible Mortgage Pool shall be
released upon the issuance of the Agency Security, which shall be a Pledged
Security. The Lender's security interest in such Pledged Security shall be
released only against payment to the Lender of the Release Amount in connection
with the Pledged Mortgages backing such Pledged Security. The Lender shall be
entitled to possession of such Pledged Security in the manner provided below.


                                       21
<PAGE>

                  3.2(d) The Lender shall have the exclusive right to the
possession of the Pledged Securities or, if the Pledged Securities are issued in
book-entry form or issued in certificated form and delivered to a clearing
corporation (as such term is defined in the Uniform Commercial Code of
Minnesota) or its nominee, the Lender shall have the right to have the Pledged
Securities registered in the name of a securities intermediary (as such term is
defined in the Uniform Commercial Code of Minnesota) in an account containing
only customer securities and credited to an account of the Lender. The Lender
shall have the right to cause delivery of the Pledged Securities to be made to
the Investor or the Pledged Securities credited to the account of the Investor
or the Investor's designee only against payment therefor. The Borrowers
acknowledge that the Lender may enter into one or more standing arrangements
with other financial institutions with respect to Pledged Securities issued in
book entry form or issued in certificated form and delivered to a clearing
corporation, pursuant to which such Pledged Securities are registered in the
name of such financial institution, as agent or securities intermediary for the
Lender, and the Borrowers agree upon request of the Lender to execute and
deliver to such other financial institutions the Borrowers' written concurrence
in any such standing arrangements.

                  3.2(e) Prior to the occurrence of an Event of Default, the
Borrowers may redeem a Pledged Mortgage or Pledged Security from the Lender's
security interest by notifying the Lender of its intention to redeem such
Pledged Mortgage or Pledged Security from pledge and either (a) paying, or
causing an Investor to pay, to the Lender, for application to prepayment of the
principal balance of the Note, the Release Amount in connection with such
Pledged Mortgage or Pledged Security, or (b) delivering substitute Collateral
which, in addition to being acceptable to the Lender in its sole discretion
will, when included with the Collateral, result in a Collateral Value of all
Collateral held by the Lender which is at least equal to the aggregate
outstanding Advances.

                  3.2(f) Following the occurrence of a Default or Event of
Default, the Lender may, with no liability to the Borrowers or any Person,
continue to release its security interest in any Pledged Mortgage or Pledged
Security against payment of the Release Amount in connection with such Pledged
Mortgage or Pledged Security.

                  3.2(g) The amount (the "Release Amount") to be paid by the
Borrowers to obtain the release of the Lender's security interest in a Pledged
Mortgage shall be (i) prior to the occurrence of an Event of Default, the
principal amount of the Advances outstanding against such Pledged Mortgage, and
(ii) from and after the occurrence and during the continuance of an Event of
Default, the Committed Purchase Price of such Pledged Mortgage or, if there is
no Purchase Commitment therefor, the amount paid to the Lender in a commercially
reasonable disposition thereof.


                                       22
<PAGE>
         3.3 Delivery of Additional Collateral or Mandatory Prepayment. At any
time that the aggregate Collateral Value of the Collateral then pledged
hereunder is less than the aggregate amount of the Advances then outstanding
hereunder, the Lender may request, and the Borrowers shall within 2 Business
Days after Notice by the Lender (a) deliver to the Lender for pledge hereunder
additional Collateral, with a Collateral Value sufficient to cover the
difference between the Collateral Value of the Collateral pledged and the
aggregate amount of Advances outstanding hereunder, and/or (b) repay the
Advances in an amount sufficient to reduce the aggregate balance thereof
outstanding to or below the Collateral Value of the Collateral pledged
hereunder.

         3.4      Release of Collateral.

                  3.4(a) The Lender may deliver documents relating to the
Collateral to the Borrowers for correction or completion pursuant to a Trust
Receipt.

                  3.4(b) Prior to the occurrence of a Default or Event of
Default, upon delivery by the Borrowers to the Lender of shipping instructions
pursuant to Exhibit D-SF, the Lender will transmit Pledged Mortgages or Pledged
Securities and all related loan documents or pool documents to the applicable
Investor, Approved Custodian or other party.

                  3.4(c) Upon receipt of Notice from the Borrowers under
Section hereof, and repayment of the Release Amount with respect to a Pledged
Mortgage identified by the Borrowers, any Collateral Documents relating to the
redeemed Pledged Mortgage or Mortgage Loan backing a Pledged Security which have
not been delivered to an Investor or Approved Custodian shall be released by the
Lender to the Borrowers.

         3.5 Collection and Servicing Rights. So long as no Event of Default
shall have occurred and be continuing, the Borrowers shall be entitled to
service and receive and collect directly all sums payable to the Borrowers in
respect of the Collateral other than proceeds of any Purchase Commitment or
proceeds of the sale of any Collateral. Following the occurrence of any Event of
Default and Notice thereof from the Lender to the Borrowers, the Lender or its
designee shall thereafter be entitled to service and receive and collect all
sums payable to the Borrowers in respect of the Collateral, and in such case (a)
the Lender or its designee in its discretion may, in its own name, in the name
of the Borrowers or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for any
of the Collateral, but shall be under no obligation to do so, (b) the Borrowers
shall, if the Lender so requests, hold in trust for the benefit of the Lender
and forthwith pay to the Lender at its office designated by Notice hereunder,
all amounts thereafter received by the Borrowers upon or in respect of any of
the Collateral, advising the Lender as to the source of such funds, and (c) all
amounts so received and collected by the Lender shall be held by it as part of
the Collateral.

         3.6 Return of Collateral at End of Commitment. If (a) the Commitment
shall have expired or been terminated, and (b) no Advances, interest or other
Obligations shall be outstanding and unpaid, the Lender shall deliver or release
its security interest and shall deliver all Collateral in its possession to the
Borrowers at the Borrowers' expense. The receipt of the Borrowers for any


                                       23
<PAGE>

Collateral released or delivered to the Borrowers pursuant to any provision of
this Agreement shall be a complete and full acquittance for the Collateral so
returned, and, as long as all Collateral Documents are returned to the Borrowers
without modification or amendment other than as provided for hereunder, the
Lender shall thereafter be discharged from any liability or responsibility
therefor.

4.       CONDITIONS PRECEDENT.

         4.1 Initial Advance. The obligation of the Lender to make the initial
Advance under this Agreement is subject to the satisfaction, in the sole
discretion of the Lender, on or before the date thereof of the following
conditions precedent:

                  4.1(a)The Lender shall have received the following, all of
which must be satisfactory in form and content to the Lender, in its sole
discretion:

                           (1) The Note and this Agreement duly executed by the
Borrowers.

                           (2) New Jersey Mortgage's articles of incorporation
as certified by the Secretary of State of New Jersey, bylaws certified by the
corporate secretary of New Jersey Mortgage, and certificates of good standing
dated no less recently than 90 days prior to the date of this Agreement.

                           (3) A resolution of the board of directors of New
Jersey Mortgage, certified as of the date of this Agreement by its corporate
secretary, authorizing the execution, delivery and performance of this Agreement
and the other Loan Documents, and all other instruments or documents to be
delivered by New Jersey Mortgage pursuant to this Agreement.

                           (4) A certificate of New Jersey Mortgage's corporate
secretary as to the incumbency and authenticity of the signatures of the
officers of New Jersey Mortgage executing this Agreement and the other Loan
Documents and each Advance Request and all other instruments or documents to be
delivered pursuant hereto (the Lender being entitled to rely thereon until a new
such certificate has been furnished to the Lender).

                           (5) American Business Credit's articles of
incorporation as certified by the Secretary of State of the Commonwealth of
Pennsylvania, bylaws certified by the corporate secretary of American Business
Credit, and certificates of good standing dated no less recently than 90 days
prior to the date of this Agreement.

                           (6) A resolution of the board of directors of
American Business Credit, certified as of the date of this Agreement by its
corporate secretary, authorizing the execution, delivery and performance of this
Agreement and the other Loan Documents, and all other instruments or documents
to be delivered by American Business Credit pursuant to this Agreement.


                                       24
<PAGE>
                           (7) A certificate of American Business Credit's
corporate secretary as to the incumbency and authenticity of the signatures of
the officers of American Business Credit executing this Agreement and the other
Loan Documents and each Advance Request and all other instruments or documents
to be delivered pursuant hereto (the Lender being entitled to rely thereon until
a new such certificate has been furnished to the Lender).

                           (8) Upland's articles or certificate of incorporation
as certified by the Secretary of State of the Commonwealth of Pennsylvania,
bylaws certified by the corporate secretary of Upland, and certificates of good
standing dated no less recently than 90 days prior to the date of this
Agreement.

                           (9) A resolution of the board of directors of Upland,
certified as of the date of this Agreement by its corporate secretary,
authorizing the execution, delivery and performance of this Agreement and the
other Loan Documents, and all other instruments or documents to be delivered by
Upland pursuant to this Agreement.

                           (10) A certificate of Upland's corporate secretary as
to the incumbency and authenticity of the signatures of the officers of Upland
executing this Agreement and the other Loan Documents and each Advance Request
and all other instruments or documents to be delivered pursuant hereto (the
Lender being entitled to rely thereon until a new such certificate has been
furnished to the Lender).

                           (11) Financial statements of the Guarantor and its
Subsidiaries, on a consolidated and consolidating, basis containing a balance
sheet as of June 30, 1999, and related statements of income, changes in
stockholders' equity and cash flows for the fiscal year ended on such date, all
prepared in accordance with GAAP applied on a basis consistent with prior
periods and audited by independent certified public accountants of recognized
standing acceptable to the Lender, together with an unqualified auditor's
opinion regarding the financial statements.

                           (12) Financial statements of the Guarantor and its
Subsidiaries, on a consolidated basis, containing a balance sheet as of December
31, 1999, related statements of income and changes in stockholders' equity for
the period ended on such date prepared in accordance with GAAP applied on a
basis consistent with the Guarantor's most recent audited financial statements.

                           (13) The Guaranty, in the form attached hereto as
Exhibit B, duly executed by the Guarantor.

                           (14) Copies of the Guarantor's articles or
certificate of incorporation as certified by the Secretary of State of Delaware,
bylaws certified by the corporate secretary of the Guarantor, and certificates
of good standing issued by the Secretary of State dated no less recently than 90
days prior to the date of this Agreement.


                                       25
<PAGE>



                           (15) A resolution of the board of directors of the
Guarantor, certified as of the date of the Agreement by its corporate secretary,
authorizing the execution, delivery and performance of the Guaranty and all
other instruments or documents to be delivered by the Guarantor pursuant to this
Agreement.

                           (16) A certificate of the Guarantor's corporate
secretary as to the incumbency and authenticity of the signatures of the
officers of the Guarantor executing the Guaranty and all other instruments or
documents to be delivered pursuant hereto (the Lender being entitled to rely
thereon until a new such certificate has been furnished to the Lender).

                           (17) A favorable written opinion of counsel to the
Borrowers and the Guarantor (or of separate counsel at the option of the
Borrowers and the Guarantor), dated as of the date of this Agreement
substantially in the form of Exhibit H attached hereto, addressed to the Lender.

                           (18) Uniform Commercial Code, tax lien and judgment
searches of the appropriate public records for the Borrowers and the Guarantor,
which searches shall not have disclosed the existence of any prior Lien on the
Collateral other than in favor of the Lender or as permitted hereunder.

                           (19) Copies of the certificates, documents or other
written instruments which evidence the Borrowers' eligibility described in
Section hereof, all in form and substance satisfactory to the Lender.

                           (20) Copies of each of the Borrowers' errors and
omissions insurance policies or mortgage impairment insurance policies and
blanket bond coverage policies, or certificates in lieu of policies, all in form
and content satisfactory to the Lender, showing compliance by the Borrowers as
of the date of this Agreement with the related provisions of Section _________
hereof.

                           (21) Executed financing statements in recordable form
covering the Collateral and ready for filing in all jurisdictions required by
the Lender.

                           (22) Receipt by the Lender of any fees due on the
date hereof, including, but not limited to, Commitment Fees and document
production fees.

                           (23) Evidence that all accounts necessary into which
Advances will be funded have been established at the Funding Bank and receipt of
a fully executed Funding Bank Agreement.

                           (24) Assumed Name Certificate dated no less recently
than 90 days prior to the date of this Agreement for any assumed name used by
the Borrowers in the conduct of its business.


                                       26
<PAGE>


                  4.1(b) All directors, officers and shareholders of the
Borrowers and the Guarantor, all Affiliates of the Borrowers or the Guarantor,
and of any Subsidiary of the Borrowers, or the Guarantor, to which any of the
Borrowers shall be indebted as of the date of this Agreement, which indebtedness
has a term of more than 1 year or is in excess of $25,000, shall have
subordinated such indebtedness to the Obligations (unless such indebtedness is
already subordinated to the Lender's satisfaction), by executing a Subordination
of Debt Agreement, in the form of Exhibit F hereto; and the Lender shall have
received an executed copy of any such Subordination of Debt Agreement, certified
by the corporate secretary of the Borrowers to be true and complete and in full
force and effect as of the date of the Advance.

         4.2 Each Advance. The obligation of the Lender to make the initial and
each subsequent Advance under this Agreement is subject to the satisfaction, in
the sole discretion of the Lender, as of the date of each such Advance, of the
following additional conditions precedent:

                  4.2(a) The Borrowers shall have delivered to the Lender the
Advance Request, Collateral Documents, and documents relating to Wet Settlement
Advances, called for under, and shall have satisfied the procedures set forth
in, Section hereof and the applicable Exhibits hereto described in that Section,
according to the type of the requested Advance. All items delivered to the
Lender shall be satisfactory to the Lender in form and content, and the Lender
may reject such of them as do not meet the requirements of this Agreement or of
the related Purchase Commitment.

                  4.2(b) The Lender shall have received evidence satisfactory
to it as to the making and/or continuation of any book entry or the due filing
and recording in all appropriate offices of all financing statements and other
instruments as may be necessary to perfect the security interest of the Lender
in the Collateral under the Uniform Commercial Code or other applicable law.

                  4.2(c) The representations and warranties of the Borrowers
contained in Article 5 hereof shall be accurate and complete in all material
respects as if made on and as of the date of each Advance.

                  4.2(d) The Borrowers shall have performed all agreements to
be performed by it hereunder, and after giving effect to the requested Advance,
there shall exist no Default or Event of Default hereunder.

                  4.2(e) The Guarantor shall have performed all agreements to
be performed by the Guarantor under the Guaranty.

                  4.2(f) The Lender shall have received from counsel for the
Borrowers or for the Guarantor or both, if requested by the Lender in its sole
discretion, an updated opinion, in form and substance satisfactory to the
Lender, addressed to the Lender and dated as of the date of such Advance,
covering such of the matters as the Lender may reasonably request.

                                       27
<PAGE>
                  Delivery of an Advance Request by the Borrowers shall be
deemed a representation by the Borrowers that all conditions set forth in this
Section shall have been satisfied as of the date of such Advance.

5.       REPRESENTATIONS AND WARRANTIES.

         The Borrowers hereby represent and warrant to the Lender, as of the
date of this Agreement and as of the date of each Advance Request and the making
of each Advance, that:

         5.1 Organization; Good Standing; Subsidiaries. Each Borrower and each
Subsidiary of the Borrowers is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
has the full legal power and authority to own its property and to carry on its
business as currently conducted and is duly qualified as a foreign corporation
to do business and is in good standing in each jurisdiction in which the
transaction of its business makes such qualification necessary, except in
jurisdictions, if any, where a failure to be in good standing has no material
adverse effect on the business, operations, assets or financial condition of the
Borrowers or any such Subsidiary. For the purposes hereof, good standing shall
include qualification for any and all licenses and payment of any and all taxes
required in the jurisdiction of its incorporation and in each jurisdiction in
which the Borrowers transact business. Neither the Guarantor nor the Borrowers
have any Subsidiaries except as set forth on Exhibit G hereto. Exhibit G sets
forth with respect to each such Subsidiary, its name, address, place of
incorporation, each state in which it is qualified as a foreign corporation, and
the percentage ownership of its capital stock by the Guarantor or the Borrowers.

         5.2 Authorization and Enforceability. The Borrowers have the power and
authority to execute, deliver and perform this Agreement, the Note and all other
Loan Documents to which the Borrowers are party and to make the borrowings
hereunder. The Guarantor has the power and legal capacity to execute, deliver
and perform the Guaranty. The execution, delivery and performance by the
Borrowers of this Agreement, the Note and all other Loan Documents to which the
Borrowers are party and the making of the borrowings hereunder and thereunder
have been duly and validly authorized by all necessary corporate action on the
part of the Borrowers (none of which actions has been modified or rescinded, and
all of which actions are in full force and effect) and do not and will not
conflict with or violate any provision of law, of any judgments binding upon the
Borrowers, or of the articles of incorporation or by-laws of the Borrowers,
conflict with or result in a breach of or constitute a default or require any
consent under, or result in the creation of any Lien upon any property or assets
of the Borrowers other than the Lien on the Collateral granted hereunder, or
result in or require the acceleration of any indebtedness of the Borrowers
pursuant to any agreement, instrument or indenture to which the Borrowers are
party or by which the Borrowers or their property may be bound or affected. This
Agreement, the Note and all other Loan Documents contemplated hereby or thereby
constitute legal, valid, and binding obligations of the Borrowers or of the
Guarantor, as applicable, enforceable in accordance with their respective terms,
except as limited by bankruptcy, insolvency or other such laws affecting the
enforcement of creditors' rights and by general principles of equity.

                                       28
<PAGE>
         5.3 Approvals. The execution and delivery of this Agreement, the Note
and all other Loan Documents and the performance of the Borrowers' obligations
hereunder and thereunder and the validity and enforceability hereof and thereof
do not require any license, consent, approval or other action of any state or
federal agency or governmental or regulatory authority other than those which
have been obtained and remain in full force and effect.

         5.4 Financial Condition. The balance sheet of the Guarantor and its
Subsidiaries, on a consolidated and consolidating basis, as of the Statement
Date, and the related statements of income and changes in stockholders' equity
for the fiscal period ended on the Statement Date, heretofore furnished to the
Lender, fairly present the financial condition of the Guarantor and its
Subsidiaries as of the Statement Date and the results of its operations for the
fiscal period ended on the Statement Date. The Borrowers had, on the Statement
Date, no known material liabilities, direct or indirect, fixed or contingent,
matured or unmatured, or liabilities for taxes, long-term leases or unusual
forward or long-term commitments not disclosed by, or reserved against in, said
balance sheet and related statements, and at the present time there are no
material unrealized or anticipated losses from any loans, advances or other
commitments of the Borrowers except as heretofore disclosed to the Lender in
writing. Said financial statements were prepared in accordance with GAAP applied
on a consistent basis throughout the periods involved. Since the Statement Date,
there has been no material adverse change in the business, operations, assets or
financial condition of the Guarantor and its Subsidiaries, nor is the Guarantor
aware of any state of facts which (with or without notice or lapse of time or
both) would or could result in any such material adverse change.

         5.5 Litigation. There are no actions, claims, suits or proceedings
pending or, to the knowledge of the Borrowers, threatened or reasonably
anticipated against or affecting the Borrowers or any Subsidiary of the
Borrowers in any court or before any arbitrator or before any government
commission, board, bureau or other administrative agency which, if adversely
determined, may reasonably be expected to result in any material and adverse
change in the business, operations, assets or financial condition of the
Borrowers as a whole, or which would affect the validity or enforceability of
this Agreement, the Note or any other Loan Document.

         5.6 Compliance with Laws. None of the Borrowers or any Subsidiary of
the Borrowers are in violation of any provision of any law, or of any judgment,
award, rule, regulation, order, decree, writ or injunction of any court or
public regulatory body or authority which might have a material adverse effect
on the business, operations, assets or financial condition of the Borrowers as a
whole or which would affect the validity or enforceability of this Agreement,
the Note or any other Loan Document.

         5.7 Regulation U. The Borrowers are not engaged principally, or as one
of its important activities, in the business of extending credit for the purpose
of purchasing or carrying Margin Stock, and no part of the proceeds of any
Advances made hereunder will be used to purchase or carry any Margin Stock or to
extend credit to others for the purpose of purchasing or carrying any Margin
Stock.

                                       29
<PAGE>
         5.8 Investment Company Act. The Borrowers are not an "investment
company" or controlled by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.

         5.9 Payment of Taxes. The Borrowers and each of their Subsidiaries has
filed or caused to be filed all federal, state and, to the best of the
Borrowers' knowledge, local income, excise, property and other tax returns with
respect to the operations of the Borrowers and their Subsidiaries which are
required to be filed, all such returns are true and correct, and the Borrowers
and each of their Subsidiaries has paid or caused to be paid all taxes as shown
on such returns or on any assessment, to the extent that such taxes have become
due, including, but not limited to, all FICA payments and withholding taxes, if
appropriate. The amounts reserved, as a liability for income and other taxes
payable, in the financial statements described in Section hereof are sufficient
for payment of all unpaid federal, state and, to the best of the Borrowers'
knowledge, local income, excise, property and other taxes, whether or not
disputed, of the Borrowers and their Subsidiaries accrued for or applicable to
the period and on the dates of such financial statements and all years and
periods prior thereto and for which the Borrowers and their Subsidiaries may be
liable in its own right or as transferee of the assets of, or as successor to,
any other Person. No tax Liens have been filed and no material claims are being
asserted with respect to any such taxes, fees or charges.

         5.10 Agreements. None of the Borrowers or any Subsidiary of the
Borrowers are a party to any agreement, instrument or indenture or subject to
any restriction materially and adversely affecting its business, operations,
assets or financial condition, except as disclosed in the financial statements
described in Section hereof. Neither the Borrowers or any Subsidiary of the
Borrowers are in default in the performance, observance or fulfillment of any of
the obligations, covenants or conditions contained in any agreement, instrument,
or indenture which default could have a material adverse effect on the business,
operations, properties or financial condition of the Borrowers as a whole. No
holder of any indebtedness of the Borrowers or of any of their Subsidiaries has
given notice of any asserted default thereunder, and no liquidation or
dissolution of the Borrowers or of any of their Subsidiaries and no
receivership, insolvency, bankruptcy, reorganization or other similar
proceedings relative to the Borrowers or of any of its Subsidiaries or any of
its properties is pending, or to the knowledge of the Borrowers, threatened.

         5.11 Title to Properties. The Borrowers and each Subsidiary of the
Borrowers have good, valid, insurable (in the case of real property) and
marketable title to all of their properties and assets (whether real or
personal, tangible or intangible) reflected on the financial statements
described in Section hereof, except for such properties and assets as have been
disposed of since the date of such financial statements as no longer used or
useful in the conduct of its business or as have been disposed of in the
ordinary course of business, and all such properties and assets are free and
clear of all Liens except as disclosed in such financial statements and the lien
search reports described in Section 4.1(a)(18).


                                       30
<PAGE>

         5.12 ERISA. All plans ("Plans") of a type described in Section 3(3) of
ERISA in respect of which the Borrowers or any Subsidiary of the Borrowers is an
"Employer," as defined in Section 3(5) of ERISA, are in substantial compliance
with ERISA, and none of such Plans is insolvent or in reorganization, has an
accumulated or waived funding deficiency within the meaning of Section 412 of
the Internal Revenue Code, and none of the Borrowers or any Subsidiary of the
Borrowers have incurred any material liability (including any material
contingent liability) to or on account of any such Plan pursuant to Sections
4062, 4063, 4064, 4201 or 4204 of ERISA; and no proceedings have been instituted
to terminate any such Plan, and no condition exists which presents a material
risk to the Borrowers or a Subsidiary of the Borrowers of incurring a liability
to or on account of any such Plan pursuant to any of the foregoing Sections of
ERISA. No Plan or trust forming a part thereof has been terminated since
September 1, 1974.

         5.13 Eligibility. The Borrowers are approved and qualified and in good
standing as a lender or seller/servicer, as set forth below, and meets all
requirements applicable to its status as such:

                  5.13(a) New Jersey is a Fannie Mae approved seller/servicer
of Mortgage Loans, eligible to originate, purchase, hold, sell, and service
Mortgage Loans to be sold to Fannie Mae.

                  5.13(b) New Jersey is a HUD approved mortgagee, eligible to
originate, purchase, hold, sell and service FHA fully insured Mortgage Loans.

         5.14 Place of Business. The principal place of business of the
Borrowers is 111 Presidential Boulevard, Suite 125, Bala Cynwyd, PA 19004.

         5.15 Special Representations Concerning Collateral. The Borrowers
hereby represent and warrant to the Lender, as of the date of this Agreement and
as of the date of each Advance Request and the making of each Advance, that:

                  5.15(a) The Borrowers are the legal and equitable owners and
holders, free and clear of all Liens (other than Liens granted hereunder), of
the Pledged Mortgages and the Pledged Securities. All Pledged Mortgages, Pledged
Securities and Purchase Commitments have been duly authorized and validly issued
to the Borrowers, and all of the foregoing items of Collateral comply with all
of the requirements of this Agreement, and have been and will continue to be
validly pledged or assigned to the Lender, subject to no other Liens.

                  5.15(b) The Borrowers have, and will continue to have, the
full right, power and authority to pledge the Collateral pledged and to be
pledged by it hereunder.

                  5.15(c) Any Mortgage Loan and any related document included
in the Pledged Mortgages (1) has been duly executed and delivered by the parties
thereto at a closing held not more than 90 days prior to the date of the Advance
Request for such Mortgage Loan, (2) has been made in compliance with all
requirements of the Real Estate Settlement Procedures Act, Equal Credit



                                       31
<PAGE>

Opportunity Act, the federal Truth-In-Lending Act and all other applicable laws
and regulations, (3) is and will continue to be valid and enforceable in
accordance with its terms, without defense or offset, (4) has not been modified
or amended except in writing, which writing is part of the Collateral Documents,
nor any requirements thereof waived, (5) has been evaluated or appraised in
accordance with Title XI of FIRREA, and (6) complies and will continue to comply
with the terms of this Agreement and, if applicable, with the related Purchase
Commitment held by the Borrowers. Each Mortgage Loan, other than an open-ended
Pledged Loan, has been fully advanced in the face amount thereof. Each First
Mortgage is a first Lien on the premises described therein and each Second
Mortgage is secured by a second Lien on the premises described therein, and has
or will have a title insurance policy, in American Land Title Association form
or equivalent thereof, from a recognized title insurance company, insuring the
priority of the Lien of the Mortgage and meeting the usual requirements of
Investors purchasing such Mortgage Loans.

                  5.15(d) No default has occurred and is continuing for more
than 60 days under any Mortgage Loan included in the Pledged Mortgages without
the Advance against such Pledged Mortgage having been repaid in accordance with
Section 2.5(c)(4) hereof, provided, however, that with respect to Pledged
Mortgages which have already been pledged as Collateral hereunder, if any
default has occurred, the Borrowers will promptly notify the Lender.

                  5.15(e) The Borrowers have complied and will continue to
comply with all laws, rules and regulations in respect of the FHA insurance or
VA guaranty of each Mortgage Loan included in the Pledged Mortgages designated
by the Borrowers as an FHA insured or VA guaranteed Mortgage Loan, and such
insurance or guarantee is and will continue to be in full force and effect.

                  5.15(f) All fire and casualty policies covering the premises
encumbered by each Mortgage included in the Pledged Mortgages (1) name and will
continue to name the Borrowers and their successors and assigns as the insured
under a standard mortgagee clause, (2) are and will continue to be in full force
and effect, and (3) afford and will continue to afford insurance against fire
and such other risks as are usually insured against in the broad form of
extended coverage insurance from time to time available.

                  5.15(g) Pledged Mortgages secured by premises located in a
special flood hazard area designated as such by the Director of the Federal
Emergency Management Agency are and shall continue to be covered by special
flood insurance under the National Flood Insurance Program.

                  5.15(h) Each Pledged Mortgage, against which an Advance is
made on the basis of a Purchase Commitment, meets all requirements of such
Purchase Commitment. The Borrowers shall assure that Pledged Mortgages which are
intended to be used in the formation of Mortgage-backed Securities shall comply
or, prior to the formation of any such Mortgage-backed Security, shall comply
with the requirements of the governmental instrumentality, department, agency or
other Person issuing or guaranteeing such Mortgage-backed Security. The
Borrowers shall assure that Mortgage Loans pledged hereunder that are not
covered by a Purchase Commitment meet all requirements of one or more Investors
with which the Borrowers have agreements or other arrangements to sell similar
Mortgage Loans.


                                       32
<PAGE>
                  5.15(i) For Pledged Mortgages which will be used to back
Ginnie Mae Mortgage-backed Securities, the Borrowers have received from Ginnie
Mae a confirmation notice or confirmation notices for Request Additional
Commitment Authority and for Request Pool Numbers, and there remains available
thereunder a commitment on the part of Ginnie Mae sufficient to permit the
issuance of Ginnie Mae Mortgage-backed Securities in an amount at least equal to
the amount of such Pledged Mortgages designated by the Borrowers as the Mortgage
Loans to be used to back such Ginnie Mae Mortgage-backed Securities; each such
Confirmation Notice is in full force and effect; each of such Pledged Mortgages
has been assigned by the Borrowers to one of such Pool Numbers and a portion of
the available Ginnie Mae Commitment has been allocated thereto by the Borrowers,
in an amount at least equal to such Pledged Mortgages; and each such assignment
and allocation has been reflected in the books and records of the Borrowers.

                  5.15(j) Each Pledged Mortgage secured by real property to
which a Manufactured Home is affixed will create a valid Lien on such
Manufactured Home that will have priority over any other Lien on such
Manufactured Home, whether or not arising under applicable real property law.

         5.16 Servicing. Attached hereto as Exhibit E is a true and complete
list of the Borrowers' Servicing Portfolio. All of the Borrowers' Servicing
Contracts are in full force and effect and, except as otherwise indicated, are
unencumbered by Liens. No default or event which, with notice or lapse of time
or both, would become a default, exists under any such Servicing Contract.

         5.17 No Adverse Selection. The Borrowers have not selected the
Collateral in a manner so as to affect adversely the Lender's interests.

         5.18 Year 2000 Compliance. The Borrowers have conducted a comprehensive
review and assessment of the Borrowers' computer applications and made inquiry
of the Borrowers' key suppliers, vendors, customers, and Investors with respect
to the "Year 2000 Problem" and, based on that review and inquiry and the passage
of time during the year 2000, the Borrowers do not believe the Year 2000 Problem
will result in a material adverse change in the Borrowers' business condition
(financial or otherwise), operations, properties or prospects, or ability to
repay the credit.

         5.19 Assumed Names. The Borrowers do not originate Mortgage Loans or
otherwise conduct business under any names other than its legal name and the
assumed name(s) set forth on Exhibit O attached hereto and made a part hereof.
The Borrowers have made all filings and taken all other action as may be
required under the laws of any jurisdiction in which it originates Mortgage
Loans or otherwise conducts business under any assumed name. The Borrowers' use
of assumed name(s) set forth herein does not conflict with any other Person's
legal rights to any such name(s), nor otherwise give rise to any liability by
the Borrowers to any other Person.


                                       33
<PAGE>


6.       AFFIRMATIVE COVENANTS.

         The Borrowers hereby covenant and agree that, so long as the Commitment
is outstanding or there remain any Obligations to be paid or performed under
this Agreement or under any other Loan Document, the Borrowers shall:

         6.1 Payment of Note. Punctually pay or cause to be paid all Obligations
payable hereunder and under the Note in accordance with the terms hereof and
thereof.

         6.2 Financial Statements and Other Reports. Deliver to the Lender:

                  6.2(a) As soon as available and in any event within 45 days
after the end of each fiscal quarter of the Guarantor each fiscal year,
statements of income and changes in stockholders' equity of the Guarantor and
its Subsidiaries, on a consolidated basis, for the period from the beginning of
such fiscal year to the end of such fiscal quarter, and the related balance
sheet as of the end of such fiscal quarter, all in reasonable detail and
certified as to the fairness of presentation by the chief financial officer of
the Guarantor, subject, however, to year-end audit adjustments.

                  6.2(b) As soon as available and in any event within 90 days
after the end of each fiscal year of the Guarantor, statements of income,
changes in stockholders' equity and cash flow of the Guarantor and its
Subsidiaries, on a consolidated and consolidating basis for such year, and the
related balance sheet as of the end of such year (setting forth in comparative
form the corresponding figures for the preceding fiscal year), all in reasonable
detail and accompanied by an opinion (which opinion shall not be qualified due
to possible failure to take all appropriate steps to successfully address Year
2000 Problem) in form and substance satisfactory to the Lender and prepared by
an accounting firm reasonably satisfactory to the Lender, or other independent
certified public accountants of recognized standing selected by the Guarantor
and acceptable to the Lender, as to said financial statements and a certificate
signed by the chief financial officer of the Guarantor stating that said
financial statements fairly present the financial condition and results of
operations of the Guarantor and its Subsidiaries as of the end of, and for, such
year.

                  6.2(c) Together with each delivery of financial statements
required in this Section , an Officer's Certificate substantially in the form of
Exhibit I-SF hereto: (1) setting forth in reasonable detail all calculations
necessary to show that the Guarantor and its Subsidiaries are in compliance with
the requirements of Sections , , and hereof as of the end of such quarter or
year (or, if the Borrowers are not in compliance, showing the extent of
non-compliance and specifying the period of non-compliance and what actions the
Borrowers have taken, are taking or propose to take with respect thereto); (2)
certifying that the Borrowers were, as of the end of the period, in compliance
and in good standing with applicable HUD, Ginnie Mae, or Investor net worth


                                       34
<PAGE>


requirements; (3) certifying that the representation set forth in Section hereof
is true and correct as of the date of such certificate or, if such
representation is not true and correct as of such date, specifying the nature of
the problem and what action the Borrowers have taken, are taking and propose to
take with request thereto, and (4) stating that the signers have reviewed the
terms of this Agreement and have made, or caused to be made under their
supervision, a review in reasonable detail of the transactions and conditions of
the Guarantor and its Subsidiaries during the accounting period covered by such
financial statements and that such review has not disclosed the existence during
or at the end of such accounting period, and that the signers do not have
knowledge of the existence as of the date of the Officer's Certificate, of any
Default or Event of Default, or if any Default or Event of Default existed or
exists, specifying the nature and period of the existence thereof and what
action the Borrowers have taken, are taking and propose to take with respect
thereto.

                  6.2(d) As soon as available and in any event within 30 days
after the end of each calendar month, a consolidated report, substantially in
the form of Exhibit L (the "Commitment Summary Report"), setting forth for each
forward commitment entered into by the Borrowers and the Lender, the following
information: size of the forward commitment, amount available, amount used and
such additional information as the Lender may from time to time request.

                  6.2(e) As soon as available and in any event within 45 days
after the end of each Calendar Quarter, a consolidated report (the "Servicing
Portfolio Report") as of the end of the Calendar Quarter detailing, as to all
Mortgage Loans the servicing rights to which are owned by the Borrowers
(specified by investor type, recourse and non-recourse) regardless of whether
such Mortgage Loans are Pledged Mortgages and which report shall indicate
Mortgage Loans which (A) are current and in good standing, (B) are more than 30,
60 or 90 days past due, respectively, (C) are, for Mortgage Loans serviced with
recourse, more than 360 days past due, (D) are the subject of pending bankruptcy
or foreclosure proceedings, or (E) have been converted (through foreclosure or
other proceedings in lieu thereof) by the Borrowers into real estate owned by
the Borrowers.

                  6.2(f) As soon as available and in any event within 30
Business Days after the end of each calendar month, a report detailing any and
all repurchase requests and the status thereof and any and all indemnification
agreements entered into by the Borrowers with respect to such repurchase
requests no later than the last day of the month immediately following each
calendar month end.

                  6.2(g) As soon as available and in any event within 30 days
after the end of each Calendar Quarter, a consolidated report (the "Loan
Production Report") as of the end of such fiscal quarter, presenting the total
dollar volume and the number of Mortgage Loans originated or purchased during
such fiscal quarter and the fiscal year to date, specified by property type and
loan type.


                                       35

<PAGE>
                  6.2(h) As soon as available and in any event within 30 days
after the end of each calendar month, one or more reports (collectively, the
"Status Report") as of the end of the calendar month, setting forth for each
Mortgage Loan held by the Borrowers for sale, the following information: loan
type, delinquency status, Credit Score (to the extent available),
bankruptcy/foreclosure status, unpaid principal balance, and such additional
information as the Lender may from time to time request (to the extent
available).

                  6.2(i) Reports in respect of the Pledged Mortgages and
Pledged Securities, in such detail and at such times as the Lender in its
discretion may reasonably request at any time or from time to time.

                  6.2(j) Copies of all regular or periodic financial and other
reports, if any, which the Borrowers shall file with the Securities and Exchange
Commission or any governmental agency successor thereto, copies of any audits
completed by Ginnie Mae, Fannie Mae or Freddie Mac and copies of the Mortgage
Bankers' Financial Reporting Forms (Freddie Mac Form 1055/Fannie Mae Form 1002)
which the Borrowers are required to have filed, as the Lender may reasonably
request.

                  6.2(k) From time to time, with reasonable promptness, such
further information regarding the business, operations, properties or financial
condition of the Borrowers as the Lender may reasonably request.

         6.3 Maintenance of Existence; Conduct of Business. Preserve and
maintain its corporate existence in good standing and all of its rights,
privileges, licenses and franchises necessary or desirable in the normal conduct
of its business, including, without limitation, its eligibility as lender,
seller/servicer and issuer described under Section hereof; conduct its business
in an orderly and efficient manner; maintain a net worth of acceptable assets as
required for maintaining the Borrowers' eligibility as lender, seller/servicer
and issuer described under Section 5.13 hereof; not change the nature or
character of its business; not engage in any business other than the mortgage
banking business; and not change its name, state of incorporation or principal
place of business.

         6.4 Compliance with Applicable Laws. Comply with the requirements of
all applicable laws, rules, regulations and orders of any governmental
authority, a breach of which could materially adversely affect its business,
operations, assets, or financial condition, except where contested in good faith
and by appropriate proceedings.

         6.5 Inspection of Properties and Books. Permit authorized
representatives of the Lender or any Participant to discuss the business,
operations, assets and financial condition of the Guarantor and its Subsidiaries
with their officers and employees and to examine their books of account and make
copies or extracts thereof, all at such reasonable times as the Lender or any
Participant may request; provided, that unless a Default or Event of Default has
occurred and is continuing, the Lender shall not conduct more than 2 such
inspections in any calendar year. The Borrowers will provide their accountants
with a copy of this Agreement promptly after the execution hereof and will
instruct its accountants to answer candidly any and all questions that the
officers of the Lender or any Participant or any authorized representatives of



                                       36
<PAGE>

the Lender or any Participant may address to them in reference to the financial
condition or affairs of the Borrowers and their Subsidiaries. The Borrowers may
have their representatives in attendance at any meetings between the officers or
other representatives of the Lender or any Participant and the Borrowers'
accountants held in accordance with this authorization. As long as no Default or
Event of Default exists, such discussions, examinations, copies and meetings
shall be at the expense of the Lender, but any such discussions, examinations,
copies and meetings that occur while any Default or Event of Default is
continuing shall be at the expense of the Borrowers.

         6.6 Notice. Give prompt Notice to the Lender of (a) any action, suit or
proceeding instituted by or against the Borrowers or any of their Subsidiaries
in any federal or state court or before any commission or other regulatory body
(federal, state or local, domestic or foreign) which action, suit or proceeding
has at issue in excess of $250,000, or any such proceedings threatened against
the Borrowers or any of their Subsidiaries in a writing containing the details
thereof, (b) the filing, recording or assessment of any federal, state or local
tax Lien against the Borrowers, or any of its assets or any of its Subsidiaries,
(c) the occurrence of any Event of Default hereunder or the occurrence of any
Default and continuation thereof for 5 days, (d) the suspension, revocation or
termination of the Borrowers' eligibility, in any respect, as approved lender,
seller/servicer or issuer as described under Section hereof, (e) the involuntary
transfer, loss or termination of any Servicing Contract to which the Borrowers
are a party, or which is held for the benefit of the Borrowers, and the reason
for such transfer, loss or termination, if known to the Borrowers, and (f) any
other action, event or condition of any nature which may lead to or result in a
material adverse effect upon the business, operations, assets, or financial
condition of the Borrowers and their Subsidiaries or which, with or without
notice or lapse of time or both, would constitute a default under any other
agreement, instrument or indenture to which the Borrowers or any of their
Subsidiaries is a party or to which the Borrowers or any of their Subsidiaries,
their properties, or assets may be subject.

         6.7 Payment of Debt, Taxes, etc. Pay and perform all obligations and
indebtedness of the Borrowers, and cause to be paid and performed all
obligations and indebtedness of its Subsidiaries, promptly and in accordance
with the terms thereof and pay and discharge or cause to be paid and discharged
promptly all taxes, assessments and governmental charges or levies imposed upon
the Borrowers or their Subsidiaries or upon their respective income, receipts or
properties before the same shall become past due, as well as all lawful claims
for labor, materials and supplies or otherwise which, if unpaid, might become a
Lien or charge upon such properties or any part thereof; provided, however, that
the Borrowers and their Subsidiaries shall not be required to pay taxes,
assessments or governmental charges or levies or claims for labor, materials or
supplies prior to their due date or for which the Borrowers or their
Subsidiaries shall have obtained an adequate bond or adequate insurance or which
are being contested in good faith and by proper proceedings which are being
reasonably and diligently pursued and for which proper reserves have been
created.

         6.8 Insurance. Maintain (a) errors and omissions insurance or mortgage
impairment insurance and blanket bond coverage, with such companies and in such
amounts as satisfy prevailing requirements applicable to a lender,
seller/servicer and issuer described under Section 5.13 hereof, and (b)


                                       37
<PAGE>

liability insurance and fire and other hazard insurance on its properties, with
responsible insurance companies approved by the Lender, in such amounts and
against such risks as is customarily carried by similar businesses operating in
the same vicinity. Copies of such policies shall be furnished to the Lender
without charge upon request of the Lender.

         6.9 Closing Instructions. Indemnify and hold the Lender harmless from
and against any loss, including reasonable attorneys' fees and costs,
attributable to the failure of a title insurance company, agent or approved
attorney to comply with the disbursement or instruction letter or letters of the
Borrowers relating to any Mortgage Loan. The Lender shall have the right to
pre-approve the Borrowers' forms of closing instructions to title insurance
companies, agents or attorneys, and any departure therefrom in any case where
the Mortgage Loan to be created at settlement is intended to be warehoused by
the Borrowers to be included as Collateral pursuant hereto.

         6.10 Subordination of Certain Indebtedness. Cause any indebtedness of
the Borrowers, incurred after the date of this Agreement, to any shareholder,
director or officer of the Borrowers, or to any Affiliate of the Borrowers or of
any Subsidiary of the Borrowers, or to any Guarantor, which indebtedness has a
term of more than 1 year or is in excess of $25,000 to be subordinated to all
Obligations by the execution of a Subordination of Debt Agreement in the form of
Exhibit F hereto and deliver to the Lender an executed copy of said Agreement.

         6.11 Other Loan Obligations. Perform all material obligations under the
terms of each loan agreement, note, mortgage, security agreement or debt
instrument by which the Borrowers are bound or to which any of its property is
subject, and promptly notify the Lender in writing of a declared default under
or the termination, cancellation, reduction or nonrenewal of any of its other
lines of credit or agreements with any other lender. Exhibit J hereto is a true
and complete list of all lines of credit or agreements to which the Guarantor or
any Borrower are a party as of the date hereof (including Gestation Agreements),
and the Borrowers hereby agree to give the Lender Notice before the Guarantor or
any Borrower obtains financing under any additional lines of credit or
agreements.

         6.12 Use of Proceeds of Advances. Use the proceeds of each Advance
solely for the purpose set forth in Section 2.1(b) for Advances of that type.

         6.13     Special Affirmative Covenants Concerning Collateral.

                  6.13(a) Warrant and defend the right, title and interest of
the Lender in and to the Collateral against the claims and demands of all
Persons whomsoever.

                  6.13(b) Service or cause to be serviced all Mortgage Loans in
accordance with the standard requirements of the issuers of Purchase Commitments
covering the same, the requirements of any Investor with which the Borrowers
have agreements or other arrangements to sell similar Mortgage Loans, and all
applicable FHA and VA requirements, including without limitation taking all



                                       38
<PAGE>

actions necessary to enforce the obligations of the obligors under such Mortgage
Loans. The Borrowers shall service or cause to be serviced all Mortgage Loans
backing Pledged Securities in accordance with applicable governmental
requirements and requirements of issuers of Purchase Commitments covering the
same. The Borrowers shall hold all escrow funds collected in respect of Pledged
Mortgages and Mortgage Loans backing Pledged Securities in trust, without
commingling the same with non-custodial funds, and apply the same for the
purposes for which such funds were collected.

                  6.13(c) Execute and deliver to the Lender such Uniform
Commercial Code financing statements with respect to the Collateral as the
Lender may reasonably request. The Borrowers shall also execute and deliver to
the Lender such further instruments of sale, pledge or assignment or transfer,
and such powers of attorney, as required by the Lender, and shall do and perform
all matters and things necessary or desirable to be done or observed, for the
purpose of effectively creating, maintaining and preserving the security and
benefits intended to be afforded the Lender under this Agreement. The Lender
shall have all the rights and remedies of a secured party under the Uniform
Commercial Code of Minnesota, or any other applicable law, in addition to all
rights provided for herein.

                  6.13(d)..Notify the Lender within 2 Business Days of any
default under, or of the termination of, any Purchase Commitment relating to any
Pledged Mortgage, Eligible Mortgage Pool or Pledged Security.

                  6.13(e) Promptly comply in all respects with the terms and
conditions of all Purchase Commitments, and all extensions, renewals and
modifications or substitutions thereof or thereto. The Borrowers will cause to
be delivered to the Investor the Pledged Mortgages and Pledged Securities to be
sold under each Purchase Commitment prior to the mandatory delivery date
thereof.

                  6.13(f) Maintain, at its principal office or in a regional
office approved by the Lender, or in the office of a computer service bureau
engaged by the Borrowers and approved by the Lender, and, upon request, make
available to the Lender the originals, or copies in any case where the originals
have been delivered to the Lender or to an Investor, of its Mortgage Notes and
Mortgages included in Pledged Mortgages, Mortgage-backed Securities delivered to
the Lender as Pledged Securities, Purchase Commitments, and all related Mortgage
Loan documents and instruments, and all files, surveys, certificates,
correspondence, appraisals, computer programs, tapes, discs, cards, accounting
records and other information and data relating to the Collateral.

7.       NEGATIVE COVENANTS.

         The Borrowers hereby covenant and agree that, so long as the Commitment
is outstanding or there remain any Obligations to be paid or performed, the
Borrowers shall not, either directly or indirectly, without the prior written
consent of the Lender:


                                       39
<PAGE>

         7.1 Contingent Liabilities. Assume, guarantee, endorse, or otherwise
become contingently liable for the obligation of any Person, except (a) by one
Borrower of the obligations of another, (b) by endorsement of negotiable
instruments for deposit or collection in the ordinary course of business, and
(c) by any Borrower of the obligations of an Affiliate provided the aggregate
amount of such obligations outstanding does not exceed $109,000.

         7.2 Sale or Pledge of Servicing Contracts. Sell, pledge or grant a
security interest in any existing or future Servicing Contracts of the Borrowers
other than to the Lender, except as otherwise expressly permitted in this
Agreement, or omit to take any action required to keep all such Servicing
Contracts in full force and effect; provided, however, that if no Event of
Default has occurred and is continuing, servicing on individual Mortgage Loans
may be sold concurrently with and incidental to the sale of such Mortgage Loans
(with servicing released) in the ordinary course of the Borrowers' business.

         7.3 Merger; Sale of Assets; Acquisitions. Liquidate, dissolve,
consolidate or merge or sell any substantial part of its assets, or acquire any
substantial part of the assets of another; provided, however, the Borrowers may
acquire a substantial part of the assets of another as long as such assets
consist of (i) Eligible Assets or similar assets acceptable to the Credit Agent,
and (ii) other assets related to the mortgage banking business with an aggregate
value not to exceed $1,000,000 in any fiscal year, and the Borrowers provide the
Lender with at least 5 Business Days advance Notice of such acquisition.

         7.4 Deferral of Subordinated Debt. Pay in advance of the stated
maturity thereof any Subordinated Debt of the Borrowers or, if a Default or
Event of Default hereunder shall have occurred, make any payment of any kind
thereafter on such Subordinated Debt until all Obligations have been paid and
performed in full and any applicable preference period has expired.

         7.5 Loss of Eligibility. Take any action that would cause the Borrowers
to lose all or any part of their status as an eligible lender, seller/servicer
and issuer as described under Section hereof.

         7.6 Debt to Tangible Net Worth Ratio. Permit the ratio of Debt
(excluding, for this purpose only, Debt arising under the Hedging Arrangements,
to the extent of assets arising under the same Hedging Arrangements) to Tangible
Net Worth, determined for the Guarantor and its Subsidiaries, on a consolidated
basis, at any time to exceed 12 to 1.

         7.7 Minimum Tangible Net Worth. Permit Tangible Net Worth of the
Guarantor and its Subsidiaries, on a consolidated basis, at any time to be less
than $30,000,000 plus 50% of the Guarantor's consolidated net income for all
completed fiscal years ending after the Closing Date in which such consolidated
net income was positive.

         7.8 Net Income. Permit the net income of the Guarantor and its
Subsidiaries, on a consolidated basis, to be less than zero for any period of
two (2) consecutive Calendar Quarters.


                                       40
<PAGE>

         7.9 Transactions with Affiliates. Directly or indirectly (a) make any
loan, advance, extension of credit or capital contribution to any of its
Affiliates, except to the other Borrowers or in the ordinary course of business
on terms no less favorable than those that such Borrower could obtain in an
arms-length transaction with an unaffiliated Person, (b) transfer, sell, pledge,
assign or otherwise dispose of any of its assets to or on behalf of such
Affiliates, (c) merge or consolidate with or purchase or acquire assets from
such Affiliates, except from the other Borrowers or in the ordinary course of
business on terms no less favorable than those such Borrower could obtain in an
arms-length transaction with an unaffiliated Person, or (d) pay management fees
to or on behalf of such Affiliates.

         7.10 Acquisition of Recourse Servicing Contracts. Acquire Servicing
Contracts under which the Borrowers are obligated to repurchase or indemnify the
holder of the Mortgage Loans as a result of defaults on the Mortgage Loans at
any time during the term of such Mortgage Loans.

         7.11 Gestation Facilities. Directly or indirectly sell or finance
Pledged Mortgages under any Gestation Agreements, except pursuant to the
Gestation Agreement described on Exhibit J attached hereto and made a part
hereof.

         7.12 Special Negative Covenants Concerning Collateral.

                  7.12(a) The Borrowers shall not amend or modify, or waive any
of the terms and conditions of, or settle or compromise any claim in respect of,
any Pledged Mortgages or Pledged Securities.

                  7.12(b) The Borrowers shall not sell, assign, transfer or
otherwise dispose of, or grant any option with respect to, or pledge or
otherwise encumber (except pursuant to this Agreement or as permitted herein)
any of the Collateral or any interest therein.

                  7.12(c) The Borrowers shall not make any compromise,
adjustment or settlement in respect of any of the Collateral or accept other
than cash in payment or liquidation of the Collateral.

8.       DEFAULTS; REMEDIES.

         8.1 Events of Default. The occurrence of any of the following
conditions or events shall be an event of default ("Event of Default"):

                  8.1(a) Failure to pay the principal of any Advance when due,
whether at stated maturity, by acceleration, or otherwise; or failure to pay any
installment of interest on any Advance or any other amount due under this
Agreement within 10 days after the due date; or failure to pay, within any
applicable grace period, any other Obligations of the Borrowers due the Lender;
or

                                       41
<PAGE>
                  8.1(b) Failure of the Guarantor or any of its Subsidiaries
to pay, or any default in the payment of, any principal or interest on any other
indebtedness or in the payment of any contingent obligation within any period of
grace provided; breach or default with respect to any other material term of any
other indebtedness or of any loan agreement, mortgage, indenture or other
agreement relating thereto, if the effect of such breach or default is to cause,
or to permit the holder or holders thereof (or a trustee on behalf of such
holder or holders) to cause, indebtedness of the Guarantor or its Subsidiaries
in the aggregate amount of $250,000 or more to become or be declared due prior
to its stated maturity (upon the giving or receiving of notice, lapse of time,
both, or otherwise); or

                  8.1(c) Failure of the Borrowers to perform or comply with
any term or condition applicable to it contained in Sections ________, or
________ or in any Section of Article 7 of this Agreement; or

                  8.1(d) Any of the Borrowers' representations or warranties
made or deemed made herein or in any other Loan Document (other than the
representations and warranties set forth in Section 5.15 hereof), or in any
statement or certificate at any time given by the Borrowers in writing pursuant
hereto or thereto shall be inaccurate or incomplete in any material respect on
the date as of which made or deemed made; or

                  8.1(e) The Borrowers or the Guarantor shall default in the
performance of or compliance with any term contained in this Agreement or any
other Loan Document other than those referred to above in Subsections , or and
such default shall not have been remedied or waived within 30 days after the
earliest of (i) receipt by the Borrowers of Notice from the Lender of such
default, (ii) receipt by the Lender of Notice from the Borrowers or the
Guarantor of such default, or (iii) the date the Borrowers should have notified
the Lender of such default pursuant to Section (c); or

                  8.1(f) (1) A court having jurisdiction shall enter a decree or
order for relief in respect of the Guarantor, the Borrowers or any other
Subsidiary of the Guarantor in an involuntary case under any applicable
bankruptcy, insolvency or other similar law in respect of the Guarantor, the
Borrowers or any other Subsidiary of the Guarantor now or hereafter in effect,
which decree or order is not stayed; the Guarantor, the Borrowers or any other
Subsidiary of the Guarantor shall consent to the entry of any such decree or
order; or a filing of a voluntary case under any applicable bankruptcy,
insolvency or other similar law in respect of the Guarantor, the Borrowers or
any other Subsidiary of the Guarantor has occurred; or any other similar relief
shall be granted under any applicable federal or state law; or (2) the filing of
an involuntary case in respect of the Guarantor, the Borrowers or any other
Subsidiary of the Guarantor under any applicable bankruptcy, insolvency or other
similar law; or a decree or order of a court having jurisdiction for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or other
officer having similar powers over the Guarantor, the Borrowers or any other
Subsidiary of the Guarantor, or over all or a substantial part of their
respective property, shall have been entered; or the involuntary appointment of
an interim or permanent receiver, trustee or other custodian of the Guarantor,




                                       42
<PAGE>



the Borrowers or any other Subsidiary of the Guarantor for all or a substantial
part of their respective property; or the issuance of a warrant of attachment,
execution or similar process against any substantial part of the property of the
Guarantor, the Borrowers or any other Subsidiary of the Guarantor, and the
continuance of any such events in Subsection (2) above for 60 days unless
dismissed, bonded off or discharged; or

                  8.1(g) The Guarantor, the Borrowers or any other Subsidiary
of the Guarantor shall consent to the appointment of or taking possession by a
receiver, trustee or other custodian for all or a substantial part of its
property; the making by the Guarantor, the Borrowers or any other Subsidiary of
the Guarantor of any assignment for the benefit of creditors; or the inability
or failure of the Guarantor, the Borrowers or any other Subsidiary of the
Guarantor, or the admission by the Guarantor, the Borrowers or any other
Subsidiary of the Guarantor in writing of its inability, to pay its debts as
such debts become due; or

                  8.1(h) Failure of the Borrowers to perform any contractual
obligations which they may have to repurchase Mortgage Loans, if such
obligations in the aggregate exceed $500,000; or

                  8.1(i) Any money judgment, writ or warrant of attachment, or
similar process involving in any case an amount in excess of $250,000 shall be
entered or filed against the Guarantor or any of its Subsidiaries or any of
their respective assets and shall remain undischarged, unvacated, unbonded or
unstayed for a period of 30 days or in any event later than 5 days prior to the
date of any proposed sale thereunder; or

                  8.1(j) Any order, judgment or decree shall be entered
against the Borrowers decreeing the dissolution or split up of the Borrowers and
such order shall remain undischarged or unstayed for a period in excess of 20
days; or

                  8.1(k) Any Plan maintained by the Guarantor or any of its
Subsidiaries shall be terminated within the meaning of Title IV of ERISA or a
trustee shall be appointed by an appropriate United States District Court to
administer any Plan, or the Pension Benefit Guaranty Corporation (or any
successor thereto) shall institute proceedings to terminate any Plan or to
appoint a trustee to administer any Plan if as of the date thereof the liability
of the Guarantor or any Subsidiary (after giving effect to the tax consequences
thereof) to the Pension Benefit Guaranty Corporation (or any successor thereto)
for unfunded guaranteed vested benefits under the Plan exceeds the then current
value of assets accumulated in such Plan by more than $25,000 (or in the case of
a termination involving the Guarantor or any of its Subsidiaries as a
"substantial employer" (as defined in Section 4001(a)(2) of ERISA) the
withdrawing employer's proportionate share of such excess shall exceed such
amount); or

                  8.1(l) The Guarantor or any of its Subsidiaries as employer
under a Multiemployer Plan shall have made a complete or partial withdrawal from
such Multiemployer Plan and the plan sponsor of such Multiemployer Plan shall
have notified such withdrawing employer that such employer has incurred a
withdrawal liability in an annual amount exceeding $25,000; or


                                       43
<PAGE>

                  8.1(m) The Borrowers or the Guarantor shall purport to
disavow their obligations hereunder or under the Guaranty, as the case may be,
or shall contest the validity or enforceability hereof or of the Guaranty; or
the Lender's security interest on any portion of the Collateral shall become
unenforceable or otherwise impaired; provided that, subject to the Lender's
approval, no Event of Default shall occur as a result of such impairment if all
Advances made against any such Collateral shall be paid in full within 10 days
of the date of such impairment; or


                  8.1(n) Anthony J. Santilli shall cease to be the Chief
Executive Officer of the Guarantor unless the same results from unsolicited
resignation, death, disability, unsolicited retirement or termination for cause
and the Guarantor has, within 60 days, selected a replacement officer reasonably
acceptable to the Lender; or

                  8.1(o) Any Lien for any taxes, assessments or other
governmental charges (i) is filed against the Borrowers or any of their
property, or is otherwise enforced against the Borrowers or any of their
property, or (ii) obtains priority that is equal or greater than the priority of
the Lender's security interest in any of the Collateral; or

                  8.1(p) A material adverse change occurs, or is reasonably
likely to occur, in the business condition (financial or otherwise), operations,
properties or prospects of the Borrowers, or in the ability of the Borrowers to
repay the Obligations.

         8.2 Remedies.

                  8.2(a) Upon the occurrence of any Event of Default described
in Sections or , the Commitment shall be terminated and the unpaid principal
amount of and accrued interest on the Note and all other Obligations shall
automatically become due and payable, without presentment, demand or other
requirements of any kind, all of which are hereby expressly waived by the
Borrowers.

                  8.2(b) Upon the occurrence of any Event of Default, other
than those described in Sections and , the Lender may, by Notice to the
Borrowers, terminate the Commitment and/or declare all Obligations to be
immediately due and payable, whereupon the same shall forthwith become due and
payable, together with all accrued interest thereon, and the obligation of the
Lender to make any Advances shall thereupon terminate.

                  8.2(c) Upon the occurrence of any Event of Default, the Lender
may also do any of the following:

                                       44
<PAGE>

                           (1) Foreclose upon or otherwise enforce its security
interest in and Lien on the Collateral to secure all payments and performance of
the Obligations in any manner permitted by law or provided for hereunder.

                           (2) Notify all obligors in respect of Collateral that
the Collateral has been assigned to the Lender and that all payments thereon are
to be made directly to the Lender or such other party as may be designated by
the Lender; settle, compromise, or release, in whole or in part, any amounts
owing on the Collateral, any such obligor or any Investor or any portion of the
Collateral, on terms acceptable to the Lender; enforce payment and prosecute any
action or proceeding with respect to any and all Collateral; and where any such
Collateral is in default, foreclose on and enforce security interests in such
Collateral by any available judicial procedure or without judicial process and
sell property acquired as a result of any such foreclosure.

                           (3) Act, or contract with a third party to act, as
servicer or subservicer of each item of Collateral requiring servicing and
perform all obligations required in connection with Servicing Contracts and
Purchase Commitments, such third party's fees to be paid by the Borrowers.

                           (4) Require the Borrowers to assemble the Collateral
and/or books and records relating thereto and make such available to the Lender
at a place to be designated by the Lender.

                           (5) Enter onto property where any Collateral or books
and records relating thereto are located and take possession thereof with or
without judicial process; and obtain access to the Borrowers' data processing
equipment, computer hardware and software relating to the Collateral and to use
all of the foregoing and the information contained therein in any manner the
Lender deems necessary for the purpose of effectuating its rights under this
Agreement and any other Loan Document.

                           (6) Prior to the disposition of the Collateral,
prepare it for disposition in any manner and to the extent the Lender deems
appropriate.

                           (7) Exercise all rights and remedies of a secured
creditor under the Uniform Commercial Code of Minnesota or other applicable law,
including, but not limited to, selling or otherwise disposing of the Collateral,
or any part thereof, at one or more public or private sales, whether or not such
Collateral is present at the place of sale, for cash or credit or future
delivery, on such terms and in such manner as the Lender may determine,
including, without limitation, sale pursuant to any applicable Purchase
Commitment. If notice is required under such applicable law, the Lender will
give the Borrowers not less than 10 days' notice of any such public sale or of
the date after which any private sale may be held. The Borrowers agree that 10
days' notice shall be reasonable notice. The Lender may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same may be so
adjourned. In case of any sale of all or any part of the Collateral on credit or



                                       45
<PAGE>





for future delivery, the Collateral so sold may be retained by the Lender until
the selling price is paid by the purchaser thereof, but the Lender shall not
incur any liability in case of the failure of such purchaser to take up and pay
for the Collateral so sold and, in case of any such failure, such Collateral may
again be sold upon like notice. The Lender may, however, instead of exercising
the power of sale herein conferred upon it, proceed by a suit or suits at law or
in equity to collect all amounts due upon the Collateral or to foreclose the
pledge of and sell the Collateral or any portion thereof under a judgment or
decree of a court or courts of competent jurisdiction, or both.

                           (8) Proceed against the Borrowers on the Note or
against the Guarantor under the Guaranty or both.

                  8.2(d) The Lender shall incur no liability as a result of
the sale or other disposition of the Collateral, or any part thereof, at any
public or private sale or disposition. The Borrowers hereby waive (to the extent
permitted by law) any claims it may have against the Lender arising by reason of
the fact that the price at which the Collateral may have been sold at such
private sale was less than the price which might have been obtained at a public
sale or was less than the aggregate amount of the outstanding Advances and the
unpaid interest accrued thereon, even if the Lender accepts the first offer
received and does not offer the Collateral to more than one offeree. Any sale of
Collateral pursuant to the terms of a Purchase Commitment, or any other
disposition of Collateral arranged by the Borrowers, whether before or after the
occurrence of an Event of Default, shall be deemed to have been made in a
commercially reasonable manner.

                  8.2(e) The Borrowers acknowledge that Mortgage Loans and
Mortgage-backed Securities are collateral of a type which is customarily sold on
a recognized market. The Borrowers waive any right they may have to prior notice
of the sale of any Pledged Mortgage or Pledged Security, and agrees that the
Lender may purchase any Pledged Mortgages or Pledged Securities at a private
sale of such Collateral.

                  8.2(f) The Borrowers specifically waive and release (to the
extent permitted by law) any equity or right of redemption, all rights of
redemption, stay or appraisal which the Borrowers have or may have under any
rule of law or statute now existing or hereafter adopted, and any right to
require the Lender to (1) proceed against any Person, (2) proceed against or
exhaust any of the Collateral or pursue its rights and remedies as against the
Collateral in any particular order, or (3) pursue any other remedy in its power.
The Lender shall not be required to take any steps necessary to preserve any
rights of the Borrowers against holders of mortgages prior in lien to the Lien
of any Mortgage included in the Collateral or to preserve rights against prior
parties.

                  8.2(g) The Lender may, but shall not be obligated to,
advance any sums or do any act or thing necessary to uphold and enforce the Lien
and priority of, or the security intended to be afforded by, any Mortgage
included in the Collateral, including, without limitation, payment of delinquent
taxes or assessments and insurance premiums. All advances, charges, costs and

                                       46
<PAGE>

expenses, including reasonable attorneys' fees and disbursements, incurred or
paid by the Lender in exercising any right, power or remedy conferred by this
Agreement, or in the enforcement hereof, together with interest thereon, at the
Default Rate, from the time of payment until repaid, shall become a part of the
principal balance outstanding hereunder and under the Note.

                  8.2(h) No failure on the part of the Lender to exercise, and
no delay in exercising, any right, power or remedy provided hereunder, at law or
in equity shall operate as a waiver thereof; nor shall any single or partial
exercise by the Lender of any right, power or remedy provided hereunder, at law
or in equity preclude any other or further exercise thereof or the exercise of
any other right, power or remedy. Without intending to limit the foregoing, all
defenses based on the statute of limitations are hereby waived by the Borrowers
to the extent permitted by law. The remedies herein provided are cumulative and
are not exclusive of any remedies provided at law or in equity.

                  8.2(i) The Lender is hereby granted a license or other right
to use, without charge, the Borrowers' computer programs, other programs,
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks, service marks and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, in advertising for sale and
selling any Collateral, and the Borrowers' rights under all licenses and all
other agreements related to the foregoing shall inure to the Lender's benefit
until the Obligations are paid in full, subject to the terms of any applicable
lease or license of any related software.

         8.3 Application of Proceeds. The proceeds of any sale, disposition or
other enforcement of the Lender's security interest in all or any part of the
Collateral shall be applied by the Lender to the Obligations in such order as
the Lender, in its sole and absolute discretion, will determine.

                  If the proceeds of any sale, disposition or other enforcement
are insufficient to cover the costs and expenses of the sale, and the payment in
full of all Obligations, the Borrowers will remain liable for any deficiency.

         8.4 Lender Appointed Attorney-in-Fact. The Lender is hereby appointed
the attorney-in-fact of the Borrowers, with full power of substitution, for the
purpose of carrying out the provisions hereof and taking any action and
executing any instruments which the Lender may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of the
foregoing, the Lender shall have the right and power to give notices of its
security interest in the Collateral to any Person, either in the name of the
Borrowers or in their own name, to endorse all Pledged Mortgages or Pledged
Securities payable to the order of the Borrowers, to change or cause to be
changed the book-entry registration or name of subscriber or Investor on any
Pledged Security, or to receive, endorse and collect all checks made payable to
the order of the Borrowers representing any payment on account of the principal
of or interest on, or the proceeds of sale of, any of the Pledged Mortgages or
Pledged Securities and to give full discharge for the same. Except as set forth
in the preceding sentence, the Lender shall not exercise the foregoing power of
attorney except following the occurrence and during the continuance of a Default
or Event of Default.

                                       47
<PAGE>
         8.5 Right of Set-Off. If the Borrowers shall default in the payment of
the Note, any interest accrued thereon, or any other sums which may become
payable hereunder when due, or in the performance of any of its other
obligations or liabilities under this Agreement, the Lender shall have the
right, at any time and from time to time, without notice, to set-off and to
appropriate or apply any and all property or indebtedness of any kind at any
time held or owing by the Lender to or for the credit or the account of the
Borrowers against and on account of the Obligations of the Borrowers under the
Note and this Agreement, irrespective of whether or not the Lender shall have
made any demand hereunder and whether or not said Obligations shall have
matured.

9.       NOTICES.

         All notices, demands, consents, requests and other communications
required or permitted to be given or made hereunder (collectively, "Notices")
shall, except as otherwise expressly provided hereunder, be in writing and shall
be delivered in person or telecopied or mailed, first class or delivered by
overnight courier, return receipt requested, postage prepaid, addressed to the
respective parties hereto at their respective addresses hereinafter set forth
or, as to any such party, at such other address as may be designated by it in a
Notice to the other. All Notices shall be conclusively deemed to have been
properly given or made when duly delivered, in person, by telecopy or by
overnight courier, or if mailed, on the date of receipt as noted on the return
receipt, addressed as follows:

                  if to the Borrowers:

                  NEW JERSEY MORTGAGE AND INVESTMENT CORP.
                  AMERICAN BUSINESS CREDIT, INC.
                  HOMEAMERICAN CREDIT, INC. d/b/a
                       UPLAND MORTGAGE
                  111 Presidential Boulevard, Suite 125
                  Bala Cynwyd, PA  19004
                  Attention:  Jeffrey M. Ruben, EVP
                  Telecopier No.:  (610) 668-4164

                                       48
<PAGE>
                  if to the Lender:

                  RESIDENTIAL FUNDING CORPORATION
                  440 Sawgrass Corp. Parkway
                  Suite 204
                  Sunrise, Florida  33325
                  Attention: Robin Swanson, Director
                  Telecopier No.:  (954) 846-8352



10.      REIMBURSEMENT OF EXPENSES; INDEMNITY.

         The Borrowers shall: (a) pay a documentation production fee of $7,500
in connection with the preparation and negotiation of this Agreement; (b) pay
such additional documentation production fees as the Lender may require and all
out-of-pocket costs and expenses of the Lender, including, without limitation,
reasonable fees, service charges and disbursements of counsel (including
allocated costs of internal counsel), in connection with the amendment,
enforcement and administration of this Agreement, the Note, and other Loan
Documents and the making and repayment of the Advances and the payment of
interest thereon; (c) indemnify, pay, and hold harmless the Lender and any
holder of the Note from and against, any and all present and future stamp,
documentary and other similar taxes with respect to the foregoing matters and
save the Lender and the holder or holders of the Note harmless from and against
any and all liabilities with respect to or resulting from any delay or omission
to pay such taxes; and (d) indemnify, pay and hold harmless the Lender and any
of its officers, directors, employees or agents and any subsequent holder of the
Note (collectively called the "Indemnitees") from and against any and all
liabilities, obligations, losses, damages, penalties, judgments, suits, costs,
expenses and disbursements of any kind or nature whatsoever (including without
limitation, the reasonable fees and disbursements of counsel of the Indemnitees
(including allocated costs of internal counsel) in connection with any
investigative, administrative or judicial proceeding, whether or not such
Indemnitees shall be designated a party thereto) which may be imposed upon,
incurred by or asserted against such Indemnitees in any manner relating to or
arising out of this Agreement, the Note, or any other Loan Document or any of
the transactions contemplated hereby or thereby (the "Indemnified Liabilities");
provided, however, that the Borrowers shall have no obligation hereunder with
respect to Indemnified Liabilities arising from the gross negligence or willful
misconduct of any such Indemnitees. To the extent that the undertaking to
indemnify, pay and hold harmless as set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, the Borrowers
shall contribute the maximum portion which it is permitted to pay and satisfy
under applicable law, to the payment and satisfaction of all Indemnified
Liabilities incurred by the Indemnitees or any of them. The agreement of the
Borrowers contained in this Subsection (d) shall survive the expiration or
termination of this Agreement and the payment in full of the Note. Attorneys'
fees and disbursements incurred in enforcing, or on appeal from, a judgment
pursuant hereto shall be recoverable separately from and in addition to any
other amount included in such judgment, and this clause is intended to be
severable from the other provisions of this Agreement and to survive and not be
merged into such judgment.


                                       49
<PAGE>

11.      FINANCIAL INFORMATION.

         All financial statements and reports furnished to the Lender hereunder
shall be prepared in accordance with GAAP, applied on a basis consistent with
that applied in preparing the financial statements as at the end of and for the
last fiscal year ended (except to the extent otherwise required to conform to
good accounting practice).

12.      MISCELLANEOUS.

         12.1 Terms Binding Upon Successors; Survival of Representations. The
terms and provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns. All
representations, warranties, covenants and agreements herein contained on the
part of the Borrowers shall survive the making of any Advance and the execution
of the Note, and shall be effective so long as the Commitment is outstanding or
there remain any Obligations to be paid or performed.

         12.2 Assignment. This Agreement cannot be assigned by the Borrowers.
This Agreement and the Note, along with the Lender's security interest in any or
all of the Collateral, may, at any time, be transferred or assigned, in whole or
in part, by the Lender, with the prior written consent of the Borrowers, which
shall not be unreasonably withheld, and any assignee thereof may enforce this
Agreement, the Note and its security interest in the Collateral so assigned.
Notwithstanding the foregoing or anything in Section 12.5 below, nothing
contained in this Agreement shall in any manner or to any extent affect the
right of the Lender to assign, pledge or participate the Notes and its right to
receive and retain payments on the Notes in connection with any arrangement
maintained by the Lender to fund credit facilities provided by the Lender,
provided the Lender remains primarily and directly liable to perform all of its
obligations under this Agreement.

         12.3 Amendments. Except as otherwise provided in this Agreement, this
Agreement may not be amended, modified or supplemented unless such amendment,
modification or supplement is set forth in a writing signed by the parties
hereto.

         12.4 Governing Law. This Agreement and the other Loan Documents shall
be governed by the laws of the State of Minnesota, without reference to its
principles of conflicts of laws.

         12.5 Participations. The Lender may at any time sell, assign or grant
participations in, or otherwise transfer to any other Person (a "Participant"),
all or part of the Obligations. Without limitation of the exclusive right of the
Lender to collect and enforce such Obligations, the Borrowers agrees that each
disposition will give rise to a debtor-creditor relationship of the Borrowers to
the Participant, and the Borrowers authorize each Participant, upon the
occurrence of an Event of Default, to proceed directly by right of setoff,
banker's lien, or otherwise, against any assets of the Borrowers which may be in
the hands of such Participant. Notwithstanding the sale by the Lender of any


                                       50

<PAGE>
participation hereunder, (i) no participant shall be deemed to be or have the
rights and obligations of the Lender hereunder except as provided in the
preceding sentence, and (ii) the Lender shall not in connection with selling any
such participation condition the Lender's rights in connection with consenting
to amendments or granting waivers concerning any matter under any Loan Document
upon obtaining the consent of such participant other than on matters relating to
(A) any reduction in the amount of any principal of, or the amount of or rate of
interest on, the Notes or any Advances in which such participation is sold, (B)
any postponement of the date fixed for any payment of principal of or interest
on the Notes or any Advance, or the termination of the Warehousing Commitment or
the Term Loan Commitment, or (C) the release or subordination of any material
portion of the Collateral. The Borrowers authorize the Lender to disclose to any
prospective Participant and any Participant any and all information in the
Lender's possession concerning the Borrowers, this Agreement and the Collateral.

         12.6 Relationship of the Parties. This Agreement provides for the
making of Advances by the Lender, in its capacity as a lender, to the Borrowers,
in their capacity as a borrower, and for the payment of interest, repayment of
principal by the Borrowers to the Lender, and for the payment of certain fees by
the Borrowers to the Lender. The relationship between the Lender and the
Borrowers are limited to that of creditor/secured party, on the one hand, and
debtor, on the other hand. The provisions herein for compliance with financial
covenants and delivery of financial statements are intended solely for the
benefit of the Lender to protect its interests as lender in assuring payments of
interest and repayment of principal and payment of certain fees, and nothing
contained in this Agreement shall be construed as permitting or obligating the
Lender to act as a financial or business advisor or consultant to the Borrowers,
as permitting or obligating the Lender to control the Borrowers or to conduct
the Borrowers' operations, as creating any fiduciary obligation on the part of
the Lender to the Borrowers, or as creating any joint venture, agency, or other
relationship between the parties hereto other than as explicitly and
specifically stated in this Agreement. The Borrowers acknowledge that it has had
the opportunity to obtain the advice of experienced counsel of its own choosing
in connection with the negotiation and execution of this Agreement and to obtain
the advice of such counsel with respect to all matters contained herein. The
Borrowers further acknowledge that it is experienced with respect to financial
and credit matters and has made its own independent decisions to apply to the
Lender for credit and to execute and deliver this Agreement.

         12.7 Severability. If any provision of this Agreement shall be declared
to be illegal or unenforceable in any respect, such illegal or unenforceable
provision shall be and become absolutely null and void and of no force and
effect as though such provision were not in fact set forth herein, but all other
covenants, terms, conditions and provisions hereof shall nevertheless continue
to be valid and enforceable.

         12.8 Operational Reviews. From time to time upon reasonable advance
request, the Borrowers shall permit the Lender or its representative access to
its premises and records, for the purpose of conducting a review of the
Borrowers' general mortgage business methods, policies, and procedures, auditing
loan files and reviewing financial and operational aspects of the Borrowers'
business; provided, that unless a Default or an Event of Default has occurred
and is continuing the Lender shall not conduct more than 2 such reviews in any
calendar.


                                       51
<PAGE>
         12.9 Consent to Credit References. The Borrowers hereby consent to the
disclosure of information regarding the Borrowers and their relationships with
the Lender to Persons making credit inquiries to the Lender. This consent is
revocable by the Borrowers at any time upon Notice to the Lender as provided in
Section hereof.

         12.10 Consent to Jurisdiction. The Borrowers hereby agree that any
action or proceeding under the Loan Documents, the Note or any document
delivered pursuant hereto may be commenced against it in any court of competent
jurisdiction within the State of Minnesota, by service of process upon the
Borrowers by first class registered or certified mail, return receipt requested,
addressed to the Borrowers at its address last known to the Lender. The
Borrowers agree that any such suit, action or proceeding arising out of or
relating to this Agreement or any other such document may be instituted in the
Hennepin County State District Court or in the United States District Court for
the District of Minnesota at the option of the Lender; and the Borrowers hereby
waive any objection to the jurisdiction or venue of any such court with respect
to, or the convenience of any court as a forum for, any such suit, action or
proceeding. Nothing herein shall affect the right of the Lender to accomplish
service of process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Borrowers in any other jurisdiction
or court.

         12.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute but one and the same instrument.

         12.12 Entire Agreement. This Agreement, the Note and the other Loan
Documents represent the final agreement among the parties hereto and thereto
with respect to the subject matter hereof and thereof, and may not be
contradicted by evidence of prior or contemporaneous oral agreements among such
parties. There are no oral agreements among the parties with respect to the
subject matter hereof and thereof.

         12.13 WAIVER OF JURY TRIAL. THE BORROWERS AND THE LENDER EACH HEREBY
(a) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF
RIGHT BY A JURY, AND (b) FULLY WAIVES ANY RIGHT TO TRIAL BY JURY TO THE EXTENT
THAT ANY SUCH RIGHT NOW EXISTS OR HEREAFTER ARISES. THE LENDER AND THE BORROWERS
EACH GIVES THIS WAIVER OF RIGHT TO JURY TRIAL KNOWINGLY AND VOLUNTARILY. THIS
WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY,
BY THE BORROWERS AND THE LENDER, AND THIS WAIVER IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE FOR WHICH THE RIGHT OF A JURY TRIAL
WOULD OTHERWISE ACCRUE. THE LENDER AND THE BORROWERS ARE EACH HEREBY AUTHORIZED
AND REQUESTED TO SUBMIT THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE


                                       52
<PAGE>


SUBJECT MATTER AND THE PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF
THIS WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, THE BORROWERS AND THE LENDER
EACH HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF THE OTHER PARTY,
INCLUDING THE OTHER PARTY'S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO
ANY OF ITS REPRESENTATIVES OR AGENTS THAT THE OTHER PARTY WILL NOT SEEK TO
ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.

                                   NEW JERSEY MORTGAGE AND INVESTMENT
                                            CORP., a New Jersey corporation

                                   By:
                                      ----------------------------------------

                                   Its:
                                       ---------------------------------------

                                   AMERICAN BUSINESS CREDIT, INC.,
                                   a Pennsylvania corporation

                                   By:
                                      ----------------------------------------

                                   Its:
                                       ---------------------------------------

                                   HOMEAMERICAN CREDIT, INC.
                                   d/b/a UPLAND MORTGAGE,
                                   a Pennsylvania corporation

                                   By:
                                      ----------------------------------------

                                   Its:
                                       ---------------------------------------

                                   RESIDENTIAL FUNDING CORPORATION,
                                   a Delaware corporation

                                   By:
                                      ----------------------------------------

                                   Its:  Director


                                       53
<PAGE>



STATE OF _______________   )
                           ) ss
COUNTY OF ______________   )

         On __________,2000, before me, a Notary Public, personally
appeared _______________, the ________ of NEW JERSEY MORTGAGE AND INVESTMENT
CORP., a New Jersey corporation, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person whose name is subscribed to
the within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the instrument
the person, or the entity upon behalf of which the person acted, executed the
instrument.

         WITNESS my hand and official seal.

                                                     Notary Public
(SEAL)                                      My Commission Expires:




STATE OF _______________   )
                           ) ss
COUNTY OF ______________   )

         On __________,2000, before me, a Notary Public, personally appeared
_______________, the ________ of AMERICAN BUSINESS CREDIT, INC., a Pennsylvania
corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.

         WITNESS my hand and official seal.


                                                     Notary Public
  (SEAL)                                    My Commission Expires:


                                       54

<PAGE>


STATE OF _______________   )
                           ) ss
COUNTY OF ______________   )

         On __________, 2000, before me, a Notary Public, personally appeared
_______________, the ________ of HOMEAMERICAN CREDIT, INC. d/b/a UPLAND
MORTGAGE, a Pennsylvania corporation, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person whose name is subscribed to
the within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.

         WITNESS my hand and official seal.


                                                     Notary Public
(SEAL)                                      My Commission Expires:



STATE OF _______________   )
                           ) ss
COUNTY OF ______________   )

         On __________, 2000, before me, a Notary Public, personally appeared
_______________, the Director of RESIDENTIAL FUNDING CORPORATION, a Delaware
corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.

         WITNESS my hand and official seal.


                                                     Notary Public
(SEAL)                                      My Commission Expires:



                                       55

<PAGE>


                                  EXHIBIT I-SF

                              OFFICER'S CERTIFICATE


         Reference is made to that certain Warehousing Credit and Security
Agreement (Single Family Mortgage Loans) between NEW JERSEY MORTGAGE AND
INVESTMENT CORP., a New Jersey corporation, AMERICAN BUSINESS CREDIT, INC., a
Pennsylvania corporation, and HOMEAMERICAN CREDIT, INC. d/b/a UPLAND MORTGAGE, a
Pennsylvania corporation (the "Borrowers") and RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation (the "Lender"), dated as of May 5, 2000 (as the same may
be amended, modified, supplemented, renewed or restated from time to time, the
"Agreement"). All capitalized terms used herein and all Section numbers given
herein refer to those terms and Sections set forth in the Agreement. This
Officer's Certificate is submitted to the Lender pursuant to Section of the
Agreement.

         The undersigned hereby certifies to the Lender that as of the close of
business on ________________, ("Statement Date"), and with respect to American
Business Financial Services, Inc. (the "Guarantor") and its Subsidiaries on a
consolidated basis:

1.       I am the chief financial officer of American Business Financial
         Services, Inc., and my current title at American Business Financial
         Services, Inc. is ___________________ .

2.       As illustrated in the attached calculations supporting this Officer's
         Certificate, the Guarantor and its Subsidiaries met the covenants set
         forth in Sections , , and , or if the Guarantor and its Subsidiaries
         did not meet any of such covenants, a detailed explanation is attached
         setting forth the nature and period of the existence of the Default and
         the action the Guarantor and its Subsidiaries have taken, are taking,
         and propose to take with respect thereto.

3.       No Servicing Contracts have been sold or pledged by the Borrowers
         except as permitted under the terms of the Agreement.

4.       No recourse Servicing Contracts have been acquired by the Borrowers.

5.       No payments in advance of the scheduled maturity date have been made
         with respect to any Subordinated Debt. The Borrowers have incurred no
         Debt required to be subordinated pursuant to Section .

6.       The Borrowers were in compliance with the applicable HUD, Ginnie Mae or
         Investor net worth requirements, and in good standing with VA, HUD,
         Ginnie Mae and each Investor.

7.       The representation set forth in Section of the Agreement is true and
         correct as of the date of this Officer's Certificate, or, if such
         representation is not true and correct as of such date, the nature of
         the problem and the action the Guarantor and its Subsidiaries have
         taken, are taking and propose to take with respect thereto are
         specified in the statement attached hereto.


                                       56

<PAGE>
8.       I have reviewed the terms of the Agreement and have made, or caused to
         be made under my supervision, a review in reasonable detail of the
         transactions and conditions of the Guarantor and its Subsidiaries and
         such review has not disclosed the existence, and I have no knowledge of
         the existence, of any Default or Event of Default, or if any Default or
         Event of Default existed or exists, a detailed explanation is attached
         specifying the nature and period of the existence of the Default and
         the action the Guarantor and its Subsidiaries have taken, are taking
         and propose to take with respect thereto.

9.       Pursuant to Section 6.2 of the Agreement, enclosed are the financial
         statements of the Guarantor as of the Statement Date. The financial
         statements for the period ending on the Statement Date fairly present
         the financial condition and results of operations of the Guarantor and
         its Subsidiaries as of the Statement Date.


                   NEW JERSEY MORTGAGE AND INVESTMENT CORP.
                   AMERICAN BUSINESS CREDIT, INC.
                   HOMEAMERICAN CREDIT, INC. d/b/a
                       UPLAND MORTGAGE

                   Name:
                           -----------------------------------


                   Title:
                         -------------------------------------



                                       57
<PAGE>


                  CALCULATIONS SUPPORTING OFFICER'S CERTIFICATE

Company Name: AMERICAN BUSINESS FINANCIAL SERVICES, INC. and its Subsidiaries

Statement Date:
               -----------------------------------

All financial calculations set forth herein are as of the Statement Date.

I.       TANGIBLE NET WORTH

A.       Consolidated Tangible Net Worth of American Business
             Financial Services, Inc. is:

             Excess of total assets over total liabilities:  $

             Minus:  Advances to owners, officers, employees or Affiliates:  $

             Minus:  Investments in Affiliates:  $

             Minus:  Assets pledged to secure liabilities not
                     included in Debt: $

             Minus:  Intangible assets:  $

             Minus:  Any other HUD nonacceptable assets:  $

             Minus:  Other assets unacceptable to the Lender: $


             TANGIBLE NET WORTH OF AMERICAN BUSINESS FINANCIAL SERVICES, INC. $


         B.  Requirements of Section  of the Agreement:

             MINIMUM TANGIBLE NET WORTH OF AMERICAN BUSINESS FINANCIAL SERVICES,
             INC. AND ITS SUBSIDIARIES OF $30,000,000, PLUS 50% OF NET INCOME,
             IF POSITIVE, FOR COMPLETED FISCAL YEARS.

         C.  Covenant Satisfied:____   Covenant Not Satisfied:____

II.      DEBT OF AMERICAN BUSINESS FINANCIAL SERVICES, INC.

         Total liabilities $

                  Minus:    Debt arising under Hedging Arrangements
                               (to the extent of offsetting assets)    $

                  Minus:    Deferred taxes arising from capitalized excess
                               servicing fees and capitalized servicing
                               rights:   $


                  DEBT         $

                                       58
<PAGE>
III.     RATIO OF DEBT TO TANGIBLE NET WORTH

A.       The ratio of Debt to Tangible Net Worth ( to I) is:      to 1

         B.       Requirements of Section  of the Agreement:

                  THE RATIO OF DEBT TO TANGIBLE NET WORTH OF AMERICAN BUSINESS
                  FINANCIAL SERVICES, INC. AND ITS SUBSIDIARIES SHALL NOT
                  EXCEED 12 TO 1.

         C.       Covenant Satisfied:____   Covenant Not Satisfied:____

IV.      NET INCOME

         A.       Consolidated net income of American Business Financial
                  Services, Inc. and its Subsidiaries for the most recently
                  completed two Calendar Quarters:   $

         B.       Requirements of Section  of the Agreement:

                  CONSOLIDATED NET INCOME SHALL NOT BE LESS THAN ZERO FOR ANY
TWO CALENDAR QUARTER PERIOD.

         C.       Covenant Satisfied:____   Covenant Not Satisfied:____

V.       TRANSACTIONS WITH AFFILIATES

         A.       Loans, advances, and extensions of credit made by American
                  Business Financial Services, Inc. to its Affiliates total:
                  $

         B.       Capital contributions made by American Business Financial
                  Services, Inc. to its Affiliates total:        $

         C.       Management fees paid to Affiliates during the current
                  fiscal year total:    $

         D.       Transfers, sales, pledges, assignments or other dispositions
                  of assets made by American Business Financial Services,
                  Inc. to its Affiliates total:      $

         E.       Requirements of Section  of the Agreement:

                  1.       No loans, advances, extensions of credit or capital
                           contributions shall be made by American Business
                           Financial Services, Inc. to Affiliates.

                  Covenant Satisfied:____   Covenant Not Satisfied:____

                                       59
<PAGE>
                  2.       No transfers, sales, pledges assignments or other
                           dispositions of assets by American Business Financial
                           Services, Inc. to Affiliates.

                  Covenant Satisfied:____   Covenant Not Satisfied:____

                  3.       No merger, consolidation, purchase or acquisition of
                           assets by American Business Financial Services, Inc.
                           to Affiliates.

                  Covenant Satisfied:____   Covenant Not Satisfied:____

                  4.       No Management fees shall be paid by American Business
                           Financial Services, Inc. to Affiliates.

                  Covenant Satisfied:____   Covenant Not Satisfied:____

                                       60