<PAGE>

                                                                   Exhibit 10.12


[LOGO]



November 1, 2004

Mr. Anthony J. Santilli
Chairman, President, CEO and COO
American Business Financial Services, Inc.
The Wanamaker Building
100 Penn Square East
Philadelphia, PA 19107

                   AMERICAN BUSINESS FINANCIAL SERVICES, INC.
                 $150 MILLION SENIOR MORTGAGE WAREHOUSE FACILITY
                                COMMITMENT LETTER

Dear Mr. Santilli:

You have advised The CIT Group/Business Credit, Inc. ("CIT") and Clearwing
Capital, LLC ("CLEARWING" and together with CIT, individually, a "LENDER" and,
collectively, the "LENDERS"), that American Business Financial Services, Inc., a
Delaware corporation (the "COMPANY"), wishes to obtain financing in order to
finance the origination of new qualifying mortgage loans by the Company and
certain of its licensed mortgage origination subsidiaries.

Based upon information known to us today, each Lender is pleased to advise you
of its several and not joint commitment to structure, arrange, syndicate, and
provide a senior secured revolver facility in an aggregate amount of up to
$150,000,000 of which CIT would provide up to $131,578,947 (the "A FACILITY")
and Clearwing would provide up to $18,421,053 of the Credit Facility (the "B
FACILITY" and together with A Facility, the "CREDIT FACILITY") upon the terms
and subject to the conditions set forth or referred to in this commitment letter
(the "COMMITMENT LETTER") including the terms and conditions set forth in
Attachment A hereto (the "ATTACHMENT"). The borrower under the Credit Facility,
ABFS Warehouse Trust 2004, is expected to be a Delaware statutory trust (the
"BORROWER"), to be formed by the Company with JPMorgan Chase Bank, as the
Custodian, ABFS Warehouse Trust 2003-1, a Delaware statutory trust, as the
holder of the Borrower's residual certificate and CIT/Specialty Finance, as the
Backup Servicer (as defined in the Attachment), and Wilmington Trust Company, as
the Owner Trustee.

The commitments and agreements of the Lenders described herein are subject to
(a) there not occurring or becoming known to us any material adverse condition
or material adverse change in or affecting the business, operations, property,
condition (financial or otherwise) or prospects of the Company, its parent or
any of its subsidiaries (the "ORIGINATION PARTIES"), (b) the payment of all fees
due hereunder that are due on or prior to the Closing Date (as defined below),
and (c) the satisfaction of the other conditions set forth or referred to in the
Attachment to the satisfaction of the Lenders. The final documentation of the
commitments made by the Lenders hereunder and of the Credit Facility may contain
material terms and conditions customary for transactions of this type in
addition to the terms and conditions set forth in this Commitment Letter and the
Attachment. Those matters that are not covered by the provisions of this
Commitment Letter and the Attachment is subject to the approval and agreement of
the Lenders and the Borrower and the Company.


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                                      American Business Financial Services, Inc.
                                                                November 1, 2004
                                                                          Page 2

SYNDICATION

It is agreed that CIT, as agent (in such capacity the "AGENT") for the Credit
Facility, will act as sole lead arranger for the Credit Facility and that the
Agent will, in such capacity, perform the duties and exercise the authority
customarily performed and exercised by it in such role. The Lenders do not
intend to syndicate the Credit Facility on the Closing Date (as defined below),
but the Lenders reserve the right to syndicate the Credit Facility after the
Closing Date to one or more financial institutions (the "FINANCIAL
INSTITUTIONS"). In such case, the Lenders or any Financial Institution that
becomes a party to the Credit Facility may assign all or a portion of their
respective loans and commitments under the Credit Facility, or sell
participations therein, to one or more Financial Institutions, provided so long
as no Event of Default has occurred and is continuing each such assignment shall
be subject to, among other things, the consent of the Borrower (which consent
shall not be unreasonably withheld).

The Agent will manage all aspects of the syndication, including decisions as to
the selection of institutions to be approached and when they will be approached,
when its commitments will be accepted, which institutions will participate, the
allocations of the commitments among the Financial Institutions and the amount
and distribution of fees among the Financial Institutions. The Agent shall have
sole discretion in the appointment of, and awarding of titles to, other agents,
co-agents, arrangers or bookrunners, and shall determine if any compensation
will be paid.

To assist the Agent in its syndication efforts, you agree promptly to prepare
and provide to the Agent and the Lenders all information with respect to the
Borrower, Company and its affiliates, and the transactions contemplated hereby,
including all financial information and projections (the "PROJECTIONS"), as we
may reasonably request in connection with the arrangement and syndication of the
Credit Facility. You hereby represent and covenant that (a) all information (the
"INFORMATION") that has been or will be made available to the Agent and the
Lenders by you or any of your representatives is or will be, when furnished,
complete and correct and does not or will not, when furnished, contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein not materially misleading in
light of the circumstances under which such statements are made and (b) the
Projections that have been or will be made available to the Agent and the
Lenders by you or any of your representatives have been or will be prepared in
good faith based upon reasonable assumptions. You understand and agree that in
arranging and syndicating the Credit Facility the Agent, the Lenders and the
Financial Institutions may use and rely on the Information and Projections
without independent verification thereof.


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                                      American Business Financial Services, Inc.
                                                                November 1, 2004
                                                                          Page 3

COSTS AND EXPENSES

In consideration of the several but not joint commitments of the Lenders and
recognizing that in connection herewith the Agent and the Lenders (or their
affiliates) have incurred and will be continuing to incur costs and expenses
(including, without limitation, fees and disbursements of counsel, filing and
recording fees, costs and expenses of due diligence, transportation,
duplication, messenger, appraisal, audit, electronic reporting and consultant
costs and expenses), you hereby agree to pay, or reimburse the Agent, the
Lenders, their affiliates, for all such fees, costs and disbursements,
including, without limitation, those incurred in connection with the negotiation
and documentation of the Credit Facility or any of the transactions contemplated
or referred to herein, regardless of whether any of the transactions
contemplated hereby are consummated. You also agree to pay all reasonable costs
and expenses of the Agent and the Lenders (including, without limitation, fees
and disbursements of counsel) for the enforcement of any of the Agent and the
Lenders' rights and remedies hereunder.

Upon accepting this Commitment Letter, you agree to pay to CIT, for its benefit
and for the benefit of its affiliates, a work fee of $250,000 (the "WORK FEE")
which amount shall be applied to the payment of costs and expenses already
incurred by CIT, its affiliates, or otherwise payable by you pursuant to the
preceding paragraph. Any unapplied balance of the Work Fee will be refunded to
you on the Closing Date. Upon accepting this Commitment Letter, you also agree
to pay to Clearwing the work fee set forth in that certain Commitment Fee Letter
of even date herewith, by and among Borrower, certain of their affiliates and
Clearwing.

FEES

As consideration for the Lenders' commitments hereunder and the Lenders'
agreement to perform the services described herein, you agree to pay to the
Agent and the Lenders the fees set forth in the Attachment (the "Fees"). You
agree that once paid, the Fees shall be unrefundable under any and all
circumstances. In no event shall any portion of the Fees be applied to the
Company's obligation to pay costs and expenses hereunder.

CONFIDENTIALITY

This Commitment Letter is delivered to you on the understanding that none of
this Commitment Letter, the Attachment, or any of their terms or substance shall
be disclosed, directly or indirectly, to any other person except (a) to your
officers, agents and advisors who are directly involved in the consideration of
this matter and (b) as may be compelled in a judicial or administrative
proceeding or as otherwise required by law (including state and federal
securities laws as determined by the Company and its counsel in their sole
discretion) (in which case you agree to inform us promptly thereof).
Notwithstanding anything to the contrary in this paragraph or any other express
or implied agreement, arrangement or understanding, the parties hereto hereby
agree that, from the commencement of discussions with respect to the proposed
transaction, the Origination Parties (and each of their respective employees,
representatives, or agents) are permitted to disclose to any and all persons,
without limitation of any kind, the tax structure and tax aspects of the
proposed transaction, and all materials of any kind (including opinions or other
tax analyses) that are provided to any such party relating to such tax structure
and tax aspects. To the extent not inconsistent with this paragraph, this
authorization does not extend to disclosure of any other information including
(without limitation) (a) the identities of participants or potential
participants in this potential transaction, (b) the existence or status of any
negotiations, or (c) any pricing information or any other term or detail not
related to the tax structure or tax aspects of this potential transaction.


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                                      American Business Financial Services, Inc.
                                                                November 1, 2004
                                                                          Page 4

PUBLIC ANNOUNCEMENTS

You agree that the Agent and the Lenders will have approval rights with respect
to all press releases and other public announcements related to or concerning
the Credit Facility, the Agent, the Lenders, or their affiliates. The approval
or non-approval of any press release or other public announcement will not be
unreasonably withheld or delayed.

INFORMATION

In issuing this Commitment Letter, the Agent and each Lender is relying on the
accuracy of the Information furnished by or on behalf of the Company and its
affiliates, without independent verification thereof.

INDEMNIFICATION

You agree to indemnify and hold harmless the Agent, each Lender, their
affiliates, and all of their respective officers, directors, employees, agents,
advisors, attorneys, and representatives (each, an "INDEMNIFIED PARTY") from and
against any and all claims, damages, losses, liabilities and reasonable expenses
(including, without limitation, reasonable fees and disbursements of counsel),
that may be incurred by, asserted, or awarded against any Indemnified Party, in
each case arising out of, in connection with, or relating to any investigation,
litigation, or proceeding or the preparation of any defense with respect
thereto, arising out of, in connection with, or relating to this Commitment
Letter, the Attachments, the loan documentation, or any of the transactions
contemplated hereby, or any use made or proposed to be made with the proceeds of
the Credit Facility, irrespective of whether such investigation, litigation, or
proceeding is brought by the Company, the Trust, the Borrower or any of their
respective affiliates, any shareholders or creditors of the foregoing, or any
other person and whether the transactions contemplated hereby are consummated,
except to the extent such claim, damage, loss, liability or expense is found in
a final non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or willful misconduct.

You further agree that no Indemnified Party shall have any liability (whether
direct or indirect, in contract, tort, or otherwise) to the Company, the Trust,
the Borrower, or any of their respective affiliates, or any shareholders or
creditors of the foregoing, or any other person for or in connection with the
transactions contemplated hereby, except to the extent such liability is found
in a final non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence, willful misconduct, or
failure to perform its obligations hereunder. In no event, however, shall any
Indemnified Party be liable on any theory of liability for any special,
indirect, consequential, or punitive damages.

GOVERNING LAW, ETC.

This Commitment Letter may be executed in any number of counterparts, each of
which shall be an original, and all of which, when taken together, shall
constitute one agreement. Delivery of an executed signature page of this
Commitment Letter by facsimile transmission shall be effective as delivery of a
manually executed counterpart hereof. This Commitment Letter is the only
agreement that has been entered into among us with respect to the Credit
Facility. This Commitment Letter and the Attachment set forth the entire
understanding of the parties with respect to the Credit Facility and supercede
and replace all prior agreements and understandings of any kind whether oral or
written. This Commitment Letter shall be governed by, and construed in
accordance with, the laws of the State of New York. Your obligations under the
paragraphs captioned "Costs and Expenses", "Fees," "Waiver of Jury Trial,"
"Indemnification", and "Confidentiality" shall survive the expiration or
termination of this Commitment Letter.


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                                      American Business Financial Services, Inc.
                                                                November 1, 2004
                                                                          Page 5

You acknowledge that the Agent, the Lenders or their affiliates may from time to
time effect transactions, for their own account or the account of customers, and
hold positions in loans or options on loans of the Company or any of its
affiliates. In addition, the Agent and the Lenders may employ the services of
their affiliates in providing certain services hereunder and may exchange with
such affiliates information concerning the Company, the Trust, the Borrower, or
any of their respective affiliates, and such affiliates shall be entitled to the
benefits afforded to the Agent and each Lender hereunder.

You also acknowledge that the Agent, the Lenders and their affiliates may be
providing debt financing, equity capital or other services (including financial
advisory services) to other companies in respect of which you may have
conflicting interests regarding the transactions described herein and otherwise.
The Agent, the Lenders and their affiliates will not use confidential
information obtained from you by virtue of the transactions contemplated by this
Commitment Letter or their other relationships with you in connection with the
performance by any of them of services for other companies, and the Agent, the
Lenders and their affiliates will not furnish any such information to other
companies. You also acknowledge that the Agent, the Lenders and their respective
affiliates have no obligation to use in connection with the transactions
contemplated by this Commitment Letter, or to furnish to you, confidential
information obtained from other companies.

This Commitment Letter shall not be assignable by you (and any purported
assignment without such consent shall be null and void), is intended to be
solely for the benefit of the parties hereto and is not intended to confer any
benefits upon, or create any rights in favor of, any person other than the
parties hereto. This Commitment Letter may not be amended or waived except by an
instrument in writing signed by you, the Agent and the Lenders.

WAIVER OF JURY TRIAL

EACH PARTY HERETO IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS COMMITMENT LETTER OR THE TRANSACTIONS
CONTEMPLATED BY THIS COMMITMENT LETTER OR THE ACTIONS OF EACH LENDER IN THE
NEGOTIATION, PERFORMANCE, OR ENFORCEMENT OF THIS COMMITMENT LETTER.


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                                      American Business Financial Services, Inc.
                                                                November 1, 2004
                                                                          Page 6

If the foregoing correctly sets forth our agreement, please indicate your
acceptance of the terms hereof and of the Attachment by returning to the Lenders
executed counterparts hereof, together with the amounts agreed upon pursuant to
this Letter to be payable upon the acceptance hereof so as to be received in
cash or other immediately available funds, not later than 12:00 noon, New York
City time, on Monday, November 1, 2004. If (a) you do not sign this letter and
return it by the date and time set forth above, (b) pay the amounts that are due
hereunder on the date of signing this Commitment Letter by the date and time set
forth above, or (c) execute and deliver definitive loan documentation (as
described in the Attachments) on or before November 30, 2004, the offer of the
Lenders set forth herein to provide the Credit Facility shall automatically
terminate. If you elect to deliver this letter by telecopier, please arrange for
the executed originals to follow by next-day courier.

                            [SIGNATURE PAGE FOLLOWS]




<PAGE>
                                      American Business Financial Services, Inc.
                                                                November 1, 2004
                                                                          Page 7



                                       Very truly yours,

                                       THE CIT GROUP/BUSINESS CREDIT, INC.


                                       By:___________________________________
                                          Name: James P. Conheeney
                                          Title: Vice President



                                       CLEARWING CAPITAL, LLC


                                       By:___________________________________
                                          Name:
                                          Title:









ACCEPTED AND AGREED TO
this 1st day of November, 2004

AMERICAN BUSINESS FINANCIAL
SERVICES, INC.


By:____________________________________
   Name:
   Title:



<PAGE>
                                  ATTACHMENT A
                         SUMMARY OF TERMS AND CONDITIONS
                         SENIOR SECURED LOAN FACILITIES



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

BORROWER:                ABFS Warehouse Trust 2004, a Delaware statutory trust
                         (the "Borrower) to be formed by ABFS Warehouse Trust
                         2003-1 ("TRUST 1"). The Borrower will issue a single
                         certificate to Trust 1.

LENDER:                  The CIT Group/Business Credit, Inc. ("CIT") and
                         Clearwing Capital, LLC ("CLEARWING").

AGENT:                   The CIT Group/Business Credit, Inc.

THE FACILITY:            Lenders will provide a committed, senior lending
                         facility (the "FACILITY") on a full-recourse basis to
                         the Borrower secured by all the assets of the Borrower,
                         including without limitation the Borrower's rights
                         under the Mortgage Loans and REO, hedging contracts
                         associated only with the Mortgage Loans funded under
                         the Facility and the Mortgage Loan servicing rights.

USE OF PROCEEDS:         The purpose of the Facility is to make mortgage loan
                         warehouse facilities available to finance mortgages
                         originated by third party mortgage loan originators
                         approved by the Agent.

MAXIMUM CREDIT:          $150,000,000, with a wet funding sub-line of the lesser
                         of $10,000,000 or 10% of "dry" loans. CIT would provide
                         up to $131,578,947 of the Facility (the "A FACILITY")
                         and Clearwing would provide up to $18,421,053 of the
                         Facility (the "B FACILITY").

COLLATERAL:              The Agent will hold, for the benefit of the Lenders to
                         the A Facility, a first priority perfected security
                         interest in substantially all of Borrower's now owned
                         or hereafter acquired property and assets, including,
                         but not limited to, all Mortgage Loans, all real
                         property owned by the Borrower or collateralizing any
                         Mortgage Loan, the Mortgage Loan servicing rights and
                         all rights of the Borrower under any of the Transaction
                         Documents, together with all inventory, accounts,
                         equipment, chattel paper, documents, instruments,
                         general intangibles, deposit accounts, cash and cash
                         equivalents, and investment property and all proceeds
                         and products of any of the foregoing (collectively, the
                         "COLLATERAL"). The Agent will also hold, for the
                         benefit of the Lenders to the B Facility, a second
                         priority perfected security interest in the Collateral.
                         Both security interests will be subject to the
                         intercreditor and/or subordination agreements referred
                         to in the "Conditions to Close" and otherwise on terms,
                         satisfactory to the Lenders. In the case of an Event of
                         Default, the Lenders may, in their sole discretion,
                         fund a protective advance to fund the cost of hedging
                         contracts satisfactory to Agent in its sole discretion.
                         The proceeds from the hedging contracts shall be
                         deposited in an account subject to a deposit account
                         control agreement in form and substance satisfactory to
                         the Agent.


<PAGE>
                                      American Business Financial Services, Inc.
                                                                November 1, 2004
                                                                          Page 2

TERM:                    The Facility will terminate on October 14, 2006,
                         subject to the earlier termination by Borrower at any
                         time upon payment in full of any amounts due and
                         payable under the Facility. The A Facility will roll
                         over (the "ROLL OVER") until the third anniversary of
                         the Closing Date subject to, among other things, the
                         effectiveness of a committed B Facility in an amount
                         and on terms and conditions substantially satisfactory
                         to CIT.

A FACILITY FINANCING

WAREHOUSE
FINANCING RATE:          Libor + 4.25%, stepping down to:
                         4.00% on sixth-month anniversary,
                         3.50% on nine-month anniversary;
                         or prime + 1.5%.

"WET" LOAN SUB-LIMIT
FINANCING RATE ON THE
A FACILITY:
                         Libor + 7.50%

CLOSING FEE:             2%, half due at signing of commitment and remainder due
                         at closing.

COLLATERAL MANAGEMENT
FEE:                     $200,000 p.a. to CIT Business Credit and $100,000 p.a.
                         to CIT/Specialty Finance, payable annually in advance.

COLLATERAL
MONITORING FEE:          The Company shall pay all costs and expenses of
                         Clayton.

UNUSED FEE:              .50%

PREPAYMENT:              3% year 1; 2% year 2; 1 % year 3 (which, in the case of
                         the 1% prepayment fee on year 3, will be due and
                         payable if the Roll Over does not occur as a result of
                         the Borrower's or its affiliates' failure to procure a
                         committed B Facility in an amount and on terms and
                         conditions substantially satisfactory to CIT), in each
                         case on average daily amount outstanding during prior
                         12 months, or since closing if less. The prepayment fee
                         of 1%

B FACILITY
FINANCING  FEE:          As set forth in that certain Commitment Fee Letter, of
                         even date herewith, among the Borrower, Trust 1 and
                         certain of their affiliates, and Clearwing.

APPROVED MORTGAGE
ORIGINATORS:             Third-party mortgage loan originations companies which
                         are subsidiaries of ABFS. The initial Approved Mortgage
                         Originators are as set forth on Schedule I hereto.


<PAGE>
                                      American Business Financial Services, Inc.
                                                                November 1, 2004
                                                                          Page 3

BORROWING BASE:          From time to time, the Lenders will make Advances to
                         Borrower under the Facility in an amount not to exceed
                         the undrawn available amounts under the Borrowing Base.

                         On the A Facility, the Advance Rate applicable to
                         Mortgage Loans (expressed as a percentage of par) will
                         be the lesser of

                         (a) the greater of

                         (i) the whole loan resale market price (expressed as a
                         percentage of par) of the Mortgage Loans (determined
                         based upon recent sales to third parties of comparable
                         Mortgage Loans under market conditions reasonably
                         equivalent to prevailing market conditions) less 12 %
                         of such price less 3.34% percentage points of par
                         ("WLPAR") (but in any event not to exceed 87.3% of par)
                         and (ii) the "Percentage of Par" shown under "Advance
                         Rate" below less the adjustments shown under "Advance
                         Rate Adjustment" below; and

                         (b) 90% of the fair market value of the loans
                         (expressed as a percentage of par) as determined in
                         good faith by the Lenders taking into account customary
                         Mortgage Loan characteristics and market conditions
                         less 2.7 percentage points of par ("FMPAR").

                         On the B Facility, the Advance Rate applicable to
                         Mortgage Loans (expressed as a percentage of par) will
                         be the lesser of

                         (a) the greater of

                         (i) 14% of WLPAR (but in any event not to exceed 12.22%
                         of par) and (ii) the "Percentage of Par" shown under
                         "Advance Rate" below less the adjustments shown under
                         "Advance Rate Adjustment" below; and

                         (b) 14% of FMPAR

                         Advances shall not be permitted against Mortgage Loans
                         which are delinquent at the time the applicable
                         Mortgage Loan is first funded under the Facility.


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                                      American Business Financial Services, Inc.
                                                                November 1, 2004
                                                                          Page 4

ADVANCE RATE:            An Advance Rate equal to 87.3% of eligible mortgages on
                         the A Facility and 12.22% of eligible mortgages on the
                         B Facility with advance rates against FICO scores as
                         follows:

                              A Facility:
                              -----------
                                 FICO           Percentage of Par
                                 640+                  87.3
                                 600+                  85.0
                                 550+                  83.0
                                 520+                  79.0
                                 <520                   0

                              B Facility:
                              -----------
                                 640+                  12.22
                                 600+                  11.9
                                 550+                  11.62
                                 520+                  11.06
                                 <520                   0

ADVANCE RATE
ADJUSTMENTS:              Delinquency:
                                              Subtract for A      Subtract for B
                          Days Delinquent        Facility            Facility
                          ---------------     --------------      --------------
                                 30                 9%                1.26%
                                 60                18%                2.52%
                              Over 90             100%                 100%

                         Mortgage loans more than 90 days delinquent will be
                         valued at zero.

                         Aging on Facility:

                           $10 million Wet Funding Line: 6 business day
                           eligibility for loans to be closed in advance of the
                           custodian's receipt of legal documents (note, copy of
                           the mortgage, copy of title insurance) and company
                           completion and collection of all credit documents.
                           All wet loans under the Lenders' Wet Funding Line
                           shall be transferred to the warehouse line when "dry"
                           if they have been "dried" prior to the close of
                           business on the 6th business day.

                           Any "wet" loans which have not been "dried" by the
                           end of the 6th business day shall be repurchased by
                           ABFS and deemed ineligible. "Dried" is defined as
                           those loans for which 100% completed legal
                           documentation has been received by the Custodian to
                           facilitate the ultimate third party wholesale loan
                           sale.

                           $140 million Warehouse Line: 89 day eligibility for
                           loans which are to be warehoused for sale to third
                           party purchasers (absent an event of default) in the
                           wholesale loan market, the net purchase price of
                           which will pay down the warehouse line.


<PAGE>
                                      American Business Financial Services, Inc.
                                                                November 1, 2004
                                                                          Page 5

SUBLIMITS:               FICO Scores:
                         ------------
                         FICO 540-580                100,000,000
                         FICO 520-539                50,000,000

                         Delinquencies (related to Warehouse Line only):
                         -----------------------------------------------
                         30+ days past due           10% of Maximum Credit
                         60+ days past due           5% of Maximum Credit (in
                                                     addition to above 30 day
                                                     delinquency sublimit)

                         CLTV
                         >80%                        65% of Maximum Credit
                                                     (inclusive of all other
                                                     CLTV sublimits)
                         >85%                        30% of Maximum Credit
                                                     (inclusive of CLTV >90%
                                                     sublimit)
                         >90%                        10% of Maximum Credit

                         Interest-Only Loans:  Maximum 10% (of total Borrowing
                         Base)

                         Second-Lien Loans:  Maximum 10% (of total Borrowing
                         Base)

                         2-4 Family Units:  Maximum 20% (of total Borrowing
                         Base)

                         Other Property Mix Concentration Limits (% of Total):

                            1. Single Family Homes: Minimum 70%
                            2. Condos: Maximum 20%
                            3. Manufactured Homes: Maximum 5%
                            4. Co-Op Loans and Land Loans: 0% - to - exception
                               overrides (by CIT-SF)

                         Geographic Concentrations by State: exclusive of
                         California, 15% maximum concentration.

MORTGAGE LOANS:          Mortgage Loans that meet all of the following
                         requirements: (a) such Mortgage Loans are originated by
                         Approved Mortgage Originators or acquired under an
                         approved purchase program set forth on Schedule I
                         hereto meeting the criteria below, in addition to such
                         other criteria identified in transaction document, (b)
                         such Mortgage Loans are purchased from the Approved
                         Mortgage Originators by Trust 1, and (c) such Mortgage
                         Loans are purchased from Trust 1 by the Borrower.

                         1.  Underwritten in accordance with Approved
                             Underwriting Guidelines to be satisfactory to
                             CIT/Specialty Finance.
                         2.  No adverse selection.
                         3.  Originated following the closing date of the
                             Facility, provided that subject to satisfactory due
                             diligence up to $50,000,000 of Mortgage Loans may
                             have been originated up to 45 days prior to the
                             closing date of the Facility.


<PAGE>
                                      American Business Financial Services, Inc.
                                                                November 1, 2004
                                                                          Page 6

                         4.  No "high-cost" or "covered" loans under applicable
                             state and federal law, except as specifically
                             approved by Agent.
                         5.  No "Business Purpose" loans except as specifically
                             approved by Agent.
                         6.  Eligible for sale by an Approved Mortgage
                             Originator to an unaffiliated third party pursuant
                             to an established whole loan purchase agreement.
                         7.  50% of all mortgage loans pledged to the Agent on
                             behalf of the Lenders shall have been selected,
                             reviewed and approved in advance by Clayton, a
                             third party adviser or the Agent, with any related
                             expenses paid for by ABFS.

APPROVED UNDERWRITING
GUIDELINES:              The ABFS underwriting guidelines submitted and reviewed
                         by CIT/Specialty Finance, which underwriting guidelines
                         cannot be amended without the consent of the Lenders.

APPLICATION OF
PROCEEDS:                All proceeds of the Mortgage Loans (net of fees and
                         expenses payable to trustees and/or custodians and
                         servicers thereunder) will be applied in the following
                         order of priority:*

                         Prior to a Termination Event:

                         1.  Fees and expenses of Custodian and Backup Servicer.
                         2.  Ratably to pay expenses of the Lenders under the
                             Facility, including out-of-pocket monitoring and
                             reunderwriting.
                         3.  Ratably to pay fees due and payable to the Lenders
                             under the Facility.
                         4.  Ratably to pay the Financing Rate due to the
                             Lenders.
                         5.  Ratably to repay the Lenders any Borrowing Base
                             Shortfall;

                         From and After a Termination Event:

                         1.  Fees and expenses of Custodian and Backup Servicer.
                         2.  Fees and expenses of Agent.
                         3.  All obligations owing to CIT in respect of the A
                             Facility (including, without limitation, CIT's
                             prepayment or early termination fees, if any;
                             provided, that if Clearwing purchases CIT's total
                             exposure in the A Facility then CIT will waive its
                             rights to such prepayment or early termination
                             fees).
                         4.  All obligations owing to Clearwing in respect of
                             the B Facility.

CONDITIONS TO CLOSE          1.  No material adverse change since June 30, 2004.
                             2.  Delivery of 2004 annual financial statements
                                 with unqualified audit opinion.
                             3.  The preparation, execution and delivery of
                                 definitive documentation satisfactory to the
                                 Lender.
                             4.  The Lenders shall have been satisfied that the
                                 Transaction shall have been consummated
                                 simultaneously on the Closing Date in
                                 accordance with the Transaction Documents
                                 satisfactory in form and substance to the
                                 Lenders, including, without limitation "true
                                 sale" and "non-consolidation" legal opinions.
--------
* For the avoidance of doubt, nothing contained herein shall be construed to
prohibit Trust 1 or any person other than Borrower from making any payments to
Clearwing.

<PAGE>
                                      American Business Financial Services, Inc.
                                                                November 1, 2004
                                                                          Page 7

                             5.  Intercreditor and/or subordination agreements,
                                 including in respect of hedging arrangements,
                                 in form and substance acceptable to each Lender
                                 and its counsel.
                             6.  Completion, to the satisfaction of the Lenders,
                                 of due diligence of the Borrower and any
                                 Approved Mortgage Originators and Approved
                                 Purchase Programs shown on Schedule 1,
                                 including but not limited to their respective
                                 mortgage origination practices.
                             7.  Execution of a servicing arrangement and hot
                                 back-up servicing arrangement satisfactory to
                                 the Lenders.
                             8.  All principal and interest payments received on
                                 account of the Mortgage Loans shall be
                                 segregated and maintained in a separate account
                                 in a manner satisfactory to the Lender.
                             9.  Other conditions to closing customary for
                                 transactions similar to the Facility, including
                                 without limitation, (a) the accuracy of all
                                 representations and warranties in the
                                 Transaction Documents, (b) the absence of any
                                 defaults, prepayment events or creation of
                                 liens under debt instruments or other
                                 agreements as a result of the Transaction, (c)
                                 the absence of any material change in the
                                 capital, corporate and organizational structure
                                 of the Originating Parties and their
                                 subsidiaries and the Borrower (after giving
                                 effect to the Transactions), (d) first-priority
                                 perfected security interests in the Collateral,
                                 (e) compliance with applicable laws and
                                 regulations (including employee health and
                                 safety, margin regulations and environmental
                                 laws) in all material respects, (f) evidence of
                                 authority, (g) material consents of all
                                 relevant persons, (h) receipt of a solvency
                                 opinion of the chief financial officer of ABFS
                                 in form and substance satisfactory to the
                                 Lenders and their counsel, (i) receipt of
                                 certified copy of the Approved Underwriting
                                 Guidelines and (j) receipt by the Lenders of
                                 reasonably satisfactory legal opinions.
                             10. Receipt of residual reports prepared on a
                                 monthly basis, in form and substance
                                 satisfactory to the Lenders, stating the amount
                                 of mandatory trigger payments and planned
                                 repurchases of delinquent loans from the period
                                 beginning three months prior to the Closing
                                 Date and ending on the period three months
                                 after the Closing Date.
                             11. There shall not have occurred and be continuing
                                 (a) any general suspension of trading in
                                 securities on the New York or American Stock
                                 Exchange or in the NASDAQ National Market
                                 System (other than circuit breakers), (b) the
                                 declaration of a banking moratorium or any
                                 suspension of payments in respect of banks in
                                 the United States or (c) any other material
                                 adverse change in banking or capital market
                                 conditions that has had a material adverse
                                 effect on the syndication of leveraged bank
                                 Credit Facility, as the case may be, that the
                                 Agent determines makes it impracticable to
                                 consummate the syndication of the Credit
                                 Facility.
                             12. Satisfaction with the terms and conditions of
                                 the Greenwich Warehouse Line.
                             13. Satisfaction with the terms and conditions of
                                 the Fortress credit line.
<PAGE>
                                      American Business Financial Services, Inc.
                                                                November 1, 2004
                                                                          Page 8

                             14. Cash on hand and available working capital
                                 facilities of American Business Financial
                                 Services, Inc. shall not be less than
                                 $40,000,000.
                             15. Documentation to evidence Agent's right to
                                 audit procedures at Agent's discretion.
                             16. Working capital facility of American Business
                                 Financial Services, Inc. or reverse repurchase
                                 line satisfactory to the Agent of not less than
                                 $23,000,000.

IN-ADVANCE (OF ALL
FUNDINGS) DUE
DILIGENCE REQUIRED:      50% Review of All Credit Files in Advance of Fundings:
                         Lenders review, on-site at ABFS offices of 50% of all
                         credit files against compliance with underwriting
                         standards of ABFS approved by CIT-SF. Any exceptions to
                         underwriting and/or compliance guidelines (established
                         in writing by ABFS and approved by CIT-SF) to be
                         approved by CIT-SF on a case-by-case basis.

                         Other exception guidelines as it relates to Level 1 and
                         2 exceptions (but not Level 3 which will be deemed at
                         all times ineligible) to be approved in advance by
                         CIT-SF.

                         Appraisal Due Diligence: Any appraisal deviations > 15%
                         or "no hits" to AVMs be resolved by company hired
                         licensed certified appraisers only (i.e., broker
                         segment's underwriters to be removed from current
                         approval exceptions) or by CIT/Specialty Finance
                         appraisers or by a third party certified appraiser
                         acceptable to Lender.

REPRESENTATIONS AND
WARRANTIES:              Usual and customary for transaction of this type and
                         others to be agreed upon.

AFFIRMATIVE COVENANTS:   Usual and customary for transaction of this type and
                         others to be agreed upon.

NEGATIVE COVENANTS:      Usual and customary for transaction of this type and
                         others to be agreed upon.

TERMINATION EVENTS:      The Facility will terminate and all amounts outstanding
                         under the Facility will become due and payable upon the
                         occurrence of any of the following Termination Events:

                             1.  Usual for facilities and transactions of this
                                 type, including, without limitation, nonpayment
                                 of principal, interest or other amounts;
                                 violation of covenants; incorrectness of
                                 representations and warranties in any material
                                 respect; cross default and cross acceleration
                                 of material agreements, including without
                                 limitations, securitizations and surety bonds;
                                 bankruptcy; material judgments; actual or
                                 asserted invalidity of security documents; and
                                 Change of Control (to be defined); customary
                                 "insolvency" events relating to the Borrower,
                                 any Sponsor, or any Approved Mortgage
                                 Originator.

                             2.  The occurrence of any of the following Events
                                 of Default under an Approved Warehouse
                                 Agreement whether or not declared by the Agent
                                 or the Lenders and any other Events of Default
                                 under the Approved Warehouse Agreement which
                                 have not been waived by the Lenders in writing
                                 within 5 business days of their occurrence:
<PAGE>
                                      American Business Financial Services, Inc.
                                                                November 1, 2004
                                                                          Page 9


                                    a.  Payment or remittance default
                                    b.  Bankruptcy
                                    c.  Insolvency
                                    d.  Breach of liquidity, net worth, debt
                                        incurrence or aggregate indebtedness
                                        covenants
                                    e.  Material Adverse Change
                                    f.  Change in control
                                    g.  Cross-default to other debt facility
                                        (including without limitations,
                                        securitizations and surety bonds)

                             3.  Failure of Borrower to cure a Borrowing Base
                                 Shortfall or to meet any other payment
                                 obligation under the Facility within three
                                 Business Days.

                             4.  If at any time Approved Mortgage Originators
                                 fail to maintain committed third party
                                 financing, other than the Approved Warehouse
                                 Agreements, in an aggregate amount of
                                 $350,000,000 and a wet funding sublimit in an
                                 amount satisfactory to the Lenders.

SERVICING:               The servicing rights relating to the Mortgage Loans
                         will be owned by a special-purpose entity not subject
                         to consolidation into the bankruptcy estate of any
                         Approved Mortgage Originator and freely transferable to
                         a third-party purchaser of the Mortgage Loans in the
                         event of a foreclosure under the Approved Warehouse
                         Agreement. The Mortgage Loans may be subserviced by an
                         Approved Mortgage Servicer on behalf of the
                         special-purpose entity which will own the servicing
                         rights; provided, however, that (i) the term of any
                         such servicing arrangement does not exceed 30 days,
                         (ii) CIT/Specialty Finance or another entity acceptable
                         to the Lenders (the "BACKUP SERVICER") shall be the
                         "hot" back-up servicer, and (iii) such servicing
                         arrangement is otherwise on terms and conditions
                         acceptable to Lenders.

CUSTODIAN:               JP Morgan Chase Bank will hold the mortgage file for
                         each Mortgage Loan as custodian pursuant to a custodial
                         agreement in form and substance acceptable to the
                         Lenders. The Custodian will acknowledge in writing that
                         it is holding the Mortgage Loan documents for the
                         benefit of Lenders and that upon receipt by Custodian
                         of written notice that Borrower has defaulted under the
                         Facility, the Custodian will thereafter take all
                         direction under the Custodial Agreement from the
                         Lenders.

HEDGING:                 In the case of an Event of Default, Borrower will cause
                         the Mortgage Loans pledged under the Facility to be
                         hedged by the Approved Mortgage Originator pursuant to
                         a hedging strategy reasonably acceptable to the Lenders
                         and executed with a financial institution acceptable to
                         Lenders. The Lenders shall have the benefit of such
                         hedges.
<PAGE>
                                      American Business Financial Services, Inc.
                                                                November 1, 2004
                                                                         Page 10

REPORTING                Borrower will provide the Lenders the following
                         information (i) all management reports and financial
                         statements provided by Approved Mortgager Originators
                         (ii) a data tape on all Mortgage Loans financed under
                         the Facility provided on a daily, weekly and/or monthly
                         basis as requested by the Lenders (iii) Borrowing Base
                         (established to reflect above advance rates, sub-limits
                         and advance rate reductions) to be prepared by
                         custodian bank (Chase) daily for wet funding sub-limit
                         and weekly for warehouse line. Clayton to review
                         borrowing base certificates, (iv) Exception Reports
                         prepared by custodian daily for wet funding line and
                         weekly for warehouse line and (v) other information as
                         reasonably requested by the Lenders including trigger
                         management reports and cash flow reports.

                         Borrower agrees to cooperate with the Lenders to
                         provide access to the Approved Mortgage Originators and
                         make available Mortgage Loans in order to support
                         Lenders' re-underwriting of such Mortgage Loans.

OTHER TERMS:             Customary loan-level and Borrower representations and
                         warranties including but not limited to eligibility of
                         Mortgage Loans sold under Facility, requisite
                         authorization, noncontravention and compliance with all
                         applicable laws in origination and servicing of
                         Mortgage Loans. Other terms customary in transactions
                         of this type including receipt of appropriate opinions
                         of counsel.

EXPENSES AND
INDEMNITIES:             Borrower will reimburse the Agent's and the Lenders'
                         reasonable out-of-pocket expenses incurred in
                         connection with the due diligence, negotiation and
                         documentation relating to, and the monitoring and
                         enforcement of, the Facility, including reasonable
                         attorney's fees and expenses and will indemnify the
                         Agent and the Lenders and their respective officers,
                         shareholders and affiliates, including for the breach
                         of any representation or warranty under the Facility.

                         The out-of-pocket cost and expenses of the Lenders in
                         reunderwriting Mortgage Loans shall not exceed the
                         costs and expenses which are usual and customary in the
                         industry for third party loan reunderwriting firms. The
                         Company will be responsible for any upfront fees
                         payable to the Backup Servicer or Custodian.