Document:

<PAGE>

                                                                  EXECUTION COPY

                     FIRST AMENDMENT TO DEBTOR-IN-POSSESSION
                           LOAN AND SECURITY AGREEMENT

        THIS FIRST AMENDMENT (this "AMENDMENT"), dated as of March 10, 2005,
among American Business Financial Services, Inc., as a debtor and a
debtor-in-possession, a Delaware corporation ("ABFS" or the "Company"), the
affiliates of ABFS listed on Schedule A thereto, each as a debtor and a
debtor-in-possession (together with ABFS, individually a "BORROWER" and
collectively, the "BORROWERS"), the Lenders party thereto (each individually a
"LENDER" and collectively, the "LENDERS"), Greenwich Capital Financial Products,
Inc., a Delaware corporation, as administrative agent for the Secured Parties
(as defined therein) (in such capacity, the "AGENT"), The CIT Group/Business
Credit, Inc., as syndication agent for the Lenders (in such capacity, the
"SYNDICATION AGENT"), Greenwich Capital Financial Products, Inc. and The CIT
Group/Business Credit, Inc., as co-lead arrangers for the Lenders (in such
capacity, the "CO-LEAD ARRANGERS"), and the other Secured Parties, amends
certain provisions of the Debtor-in-Possession Loan and Security Agreement,
dated as of February 22, 2005 (as amended hereby and as the same may be further
amended, supplemented or otherwise modified from time to time, the "LOAN
AGREEMENT"), among the Borrowers, the Lenders, the Agent, the Syndication Agent,
the Co-Lead Arrangers and the Secured Parties.

                                    RECITALS

        Pursuant to the Loan Agreement, the Lenders have agreed to make Advances
to the Borrowers.

        In connection with the hearing to approve the Final Order, the Borrowers
and the parties hereto have agreed to certain amendments to the Loan Agreement
as more specifically set forth below.

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

        1. DEFINED TERMS. Capitalized terms used and not otherwise defined
herein shall have the meanings assigned to them in the Loan Agreement.

        2. AMENDMENTS TO THE LOAN AGREEMENT. Upon the occurrence of the First
Amendment Effective Date (as defined in SECTION 4 of this Amendment), the Loan
Agreement is hereby amended as follows:

                (a)     By inserting the following definitions in appropriate
alphabetical order in SECTION 1.01 of the Loan Agreement:

                                       1
<PAGE>

        ""APPROVED MORTGAGE LOAN" means a Mortgage Loan that has been
reunderwritten by the Agent and confirmed by the Agent to qualify as an Eligible
Mortgage Loan."

        ""CARVE-OUT ALLOCATION" means (a) any amounts applied to prepay the
Tranche C Advances pursuant to CLAUSE (VI) of SECTION 2.06(D) PLUS (b) any
amounts applied to prepay the Tranche C Advances pursuant to CLAUSE (IX) of
SECTION 2.06(E)."

        ""PRE-FUNDING REUNDERWRITING TRIGGER" shall be deemed to occur if (a)
any random sampling reunderwriting by the Agent of Mortgage Loans originated or
purchased by any Borrower in an aggregate sample size greater than or equal to
$25,000,000 indicates that less than 90% (based upon the aggregate unpaid
principal amount of such Mortgage Loans) of such Mortgage Loans are Approved
Mortgage Loans or (b) any random sampling of drive-by-appraisal of a minimum of
100 Mortgage Loans indicates that more than 10% (based upon the aggregate unpaid
principal amount of such Mortgage Loans) of such Mortgage Loans have a negative
percentage variance in value to the original appraisal in excess of 20%."

        "WEEKLY FEE PAYMENT DATE" means the last Business Day of each week
beginning March 4, 2005.

                (b)     By amending and restating the following definitions set
forth in SECTION 1.01 of the Loan Agreement:

        ""APPLICABLE COLLATERAL PERCENTAGE" means, with respect to an Eligible
Mortgage Loan, the following percentages of the unpaid principal balance
thereof, in each case reduced by any applicable Delinquency Adjustment:

        (a)     if the loan has a FICO Score of 640 or greater, 97%, unless such
Eligible Mortgage Loan is an Approved Mortgage Loan, in which case, 98.5%;

        (b)     if the loan has a FICO Score greater than 599 but less than 640,
95%, unless such Eligible Mortgage Loan is an Approved Mortgage Loan, in which
case, 98.5%;

        (c)     if the loan has a FICO Score greater than 549 but less than 600,
93%, unless such Eligible Mortgage Loan is an Approved Mortgage Loan, in which
case, 98.5%;

        (d)     if the loan has a FICO Score greater than 519 but less than 550,
89%, unless such Eligible Mortgage Loan is an Approved Mortgage Loan, in which
case, 98.5%; and

        (e)     if the loan has a FICO Score less than 520 or no FICO Score, 0%.

        For example, the Applicable Collateral Percentage for a Mortgage Loan
(which is not an Approved Mortgage Loan) (1) with a FICO Score of 550, and (2)
that is 60 days delinquent (delinquent with respect to a Monthly Payment on the
date of the

                                       2
<PAGE>

second scheduled related Monthly Payment becoming due) and therefore subject to
a Delinquency Adjustment, shall be 73% (and such Mortgage Loan shall cease to be
an Eligible Mortgage Loan if it remains delinquent for another two months)."

        ""APPLICABLE MARGIN" means (a) with respect to Tranche A Advances, 3.75%
per annum until such time as the Borrowers have originated and funded Mortgage
Loans in an aggregate amount of at least $350,000,000 and 3.00% per annum
thereafter, (b) with respect to Tranche B Advances, 5.75% per annum, (c) with
respect to Tranche C Advances, 8.25% per annum, (d) with respect to Tranche D
Advances, 8.25% per annum and (e) with respect to Tranche E Advances, 7.00% per
annum."

        ""CARVE-OUT" means (a) amounts payable pursuant to 28 U.S.C. ss.
1930(a)(6), and (b) allowed fees and expenses of attorneys, accountants and
other professionals retained by formal application in the Chapter 11 Cases
(other than ordinary course professionals) pursuant to Sections 327 and 1103 of
the Bankruptcy Code, but the amount entitled to priority under this clause (b)
("PRIORITY PROFESSIONAL EXPENSES") shall not exceed $2,500,000 outstanding and
unpaid in the aggregate at any time (inclusive of any holdbacks required by the
Bankruptcy Court and any amounts unbilled for services performed prior to a
Priority Triggering Event and allocated as set forth in the last sentence of
this definition) (the "PROFESSIONAL EXPENSE CAP") regardless of whether the fees
or expenses are allowed and unpaid at the time of a Priority Triggering Event or
are incurred before or after such event; provided, however, that (A) after the
Agent has provided (by hand or facsimile) written notice to the Administrative
Borrower of the occurrence of an Event of Default hereunder or a default (and
expiration of any applicable cure period) by the Borrowers in any of their
obligations under the Orders (a "PRIORITY TRIGGERING EVENT"), any payments
actually made to such professionals after the occurrence and during the
continuance of such Event of Default or default, under Sections 330 and 331 of
the Bankruptcy Code or otherwise, shall reduce the Professional Expense Cap on a
dollar-for-dollar basis and (B) for the avoidance of doubt, any payment actually
made to such professionals prior to the notice described in subclause (A) above
may be retained by such professionals and will not reduce the Professional
Expense Cap; and PROVIDED, FURTHER, THAT no portion of the Carve-Out shall be
used to challenge this Loan Agreement and the other Loan Documents (including
the Liens securing this Loan Agreement); although the foregoing proviso shall
not prevent any portion of the Carve-Out from being used to investigate the
Greenwich Pre-Petition Loan Agreement (including the Liens securing the
Greenwich Pre-Petition Loan Agreement) as may be permitted by the Bankruptcy
Code. The Professional Expense Cap shall not be reduced by the amount of any
unapplied retainers provided to professionals of the Borrowers. If a Priority
Triggering Event occurs on or after June 1, 2005 at any time the Carve-Out
Allocation is less than $1,000,000, the Professional Expense Cap shall be
allocated (x) to pay Priority Professional Expenses incurred and unpaid prior to
such Priority Triggering Event in an amount not to exceed the sum of (i)
$1,000,000 PLUS (ii) an additional amount not to exceed the Carve-Out Allocation
and (y) to pay Priority Professional Expenses incurred after such Priority
Triggering Event in an amount not to exceed (I) $1,500,000 MINUS (II) the
portion of the Carve-Out Allocation used under clause (x)."

                                       3
<PAGE>

        ""TRANCHE A SUBLIMIT" means (a) prior to June 1, 2005, $250,000,000 and
(b) on and after June 1, 2005, the Maximum Credit less the sum of (i) the
outstanding Obligations (as defined in the Greenwich Pre-Petition Loan
Agreement), (ii) the outstanding Tranche B Advances, (iii) the outstanding
Tranche C Advances, (iv) the outstanding Tranche D Advances and (v) the
outstanding Tranche E Advances."

        ""TRANCHE C BORROWING BASE" means (a) the Tranche C Applicable
Collateral Percentage MULTIPLIED BY the Lending Value of the IOS, as determined
by the Agent, LESS (b) $1,500,000 LESS (c) the Clearing Account Reserve LESS (d)
the Carve-Out Allocation."

        ""WET-INK APPLICABLE COLLATERAL PERCENTAGE" means, with respect to a
Wet-Ink Mortgage Loan, the following percentages of the unpaid principal balance
thereof:

        (a)     if the loan has a FICO Score of 640 or greater, 93%;

        (b)     if the loan has a FICO Score greater than 599 but less than 640,
91%;

        (c)     if the loan has a FICO Score greater than 549 but less than 600,
89%;

        (d)     if the loan has a FICO Score greater than 519 but less than 550,
85%; and

        (e)     if the loan has a FICO Score less than 520 or no FICO Score,
0%."

                (c)     By amending clause (i) of the definition of Allocated
Amount set forth in SECTION 1.01 of the Loan Agreement by (i) inserting
"(D)(VII)," after "(D)(VI)," therein and (ii) replacing "(D)(VII)(A)" with
"(D)(VIII)(A)."

                (d)     By replacing "97%" in CLAUSE (A)(I) of the definition of
Collateral Value set forth in SECTION 1.01 of the Loan Agreement with "98.5%."

                (e)     By amending SECTION 2.06(D) of the Loan Agreement by (i)
replacing "(vi)" at the beginning of clause (vi) thereof with "(vii)" and (ii)
replacing "(vii)" at the beginning of CLAUSE (VII) thereof with "(viii)."

                (f)     By inserting the following new CLAUSE (VI) after CLAUSE
(V) of SECTION 2.06(D):

        "(vi)   until the Carve-Out Allocation equals $1,000,000, to prepay
outstanding Tranche C Advances;"

                (g)     By amending SECTION 2.06(E) of the Loan Agreement by (i)
replacing "$1,000,000" with "$1,200,000" in clause (i) thereof, (ii) deleting
the "and"

                                       4
<PAGE>

at the end of CLAUSE (VIII) thereof and (iii) replacing the "(ix)" at the
beginning of CLAUSE (IX) thereof with "(x)."

                (h)     By inserting the following new CLAUSE (IX) after CLAUSE
(VIII) of SECTION 2.06(E):

        "(ix)   until the Carve-Out Allocation equals $1,000,000, to prepay
outstanding Tranche C Advances; and."

                (i)     By amending SECTION 3.07(A) of the Loan Agreement by
deleting "(x) if the Obligations (other than Clearwing Deferred Payoff
Obligations, Patriot Deferred Payoff Obligations and Clearwing Indemnification
Liabilities) are paid in full by September 30, 2005 and no Event of Default has
occurred prior to such date, $15,000,000 and (y) in all other cases,
$17,500,000," and replacing it with the following: "15,750,000."

                (j)     By amending and restating SECTION 3.07(A)(II)(1) as
follows:

        "(1)    on each Weekly Fee Payment Date, an amount equal to (x) $500,000
divided by (y) the number of Weekly Fee Payment Dates in the applicable month;
PROVIDED, THAT (I) with respect to the Weekly Facility Fee Payments due in May
2005, the Borrowers shall be permitted to defer such payments to the extent
that, after giving effect to any or all of such payments, the Borrowers'
Qualified Cash plus Availability would reasonably be expected to be less than
$6,000,000 within the next 30 days; and (II) with respect to any Weekly Facility
Fee Payment due after June 1, 2005, the Borrowers shall be permitted to defer
such payment if, after giving effect to such payment, the Borrowers' Qualified
Cash plus Availability would reasonably be expected to be less than $5,000,000
within the next 30 days (any payments deferred pursuant to clause (I) or clause
(II) shall not at any time exceed in the aggregate $1,500,000 and shall be paid
by the earlier of (X) the date after May 31, 2005 on which making such payment
would not reasonably be expected to cause the Borrowers' Qualified Cash plus
Availability to be less than $5,000,000 within the next 30 days and (Y) the
Termination Date); PROVIDED, FURTHER, THAT any payment deferred hereunder shall
be treated as though paid for the purpose of the calculation set forth in
SECTION 7.35; and."

                (k)     By amending and restating the second sentence of SECTION
3.07(B) of the Loan Agreement as follows:

        "If such average amount determined for any period as a percentage of the
Maximum Credit (the "UTILIZATION PERCENTAGE") is less than 100%, the Borrowers
shall pay to the Agent for the account of the Lenders on such Monthly Fee
Payment Date or Termination Date, a non-utilization fee equal to the product of
(i) 0.25% per annum, TIMES (ii) the Maximum Credit (the "NON-USAGE FEE")."

                (l)     By inserting the following immediately after "PROVIDED,
HOWEVER, THAT" in SECTION 4.01(K) of the Loan Agreement:

                                       5
<PAGE>

        "notwithstanding the reference to "Obligations" in the clause preceding
this proviso, the Collateralized Sub-debt Shared Collateral shall not at any
time secure Obligations constituting Tranche A Advances advanced to fund
Eligible Mortgage Loans in an aggregate principal amount greater than (i) the
lesser of (x) $10,000,000 and (y) 100% of the aggregate outstanding principal
amount of Collateralized Tranche A Advances and (ii) 10% of the aggregate
outstanding principal amount of Collateralized Tranche A Advances at such time.
"COLLATERALIZED TRANCHE A ADVANCES" means, as of the date of any Event of
Default, the greater of (A) Tranche A Advances outstanding upon the occurrence
of such Event of Default and (B) the maximum amount of Tranche A Advances
outstanding at any time 30 days prior to the occurrence of such Event of
Default. It is understood that."

                (m)     By inserting the following immediately after SECTION
7.38 of the Loan Agreement:

        "7.39 BUDGETED MORTGAGE LOAN ORIGINATIONS. For each two-calendar month
period beginning with the two-calendar month period ending April 30, 2005, the
Borrowers shall not permit the actual aggregate principal amount of Mortgage
Loans originated during such period to be less than 80% of the aggregate
principal amount of Mortgage Loans to be originated during such period as set
forth in the Budget."

                (n)     By inserting the following immediately after SECTION
7.39 of the Loan Agreement:

        "7.40. APPROVED MARKETING EXPENDITURES. The approved marketing
expenditures for the period March through December 2005 is $7,625,000 ("APPROVED
MARKETING EXPENDITURES"). The Borrowers shall not (a) exceed the Approved
Marketing Expenditures or (b) reallocate the difference between the marketing
expenses in the Budget and the Approved Marketing Expenditures to other areas of
the Budget without approval of the Chief Restructuring Officer and notice to the
Committee."

                (o)     By changing the reference to "SECTION 7.38" to "SECTION
7.40" in clause (g)(i) of SECTION 8 of the Loan Agreement

                (p)     By amending SECTION 11.04(C) of the Loan Agreement by
(i) deleting the last two sentences thereof and (ii) inserting the following at
the end of the first sentence thereof immediately prior to ".":

        ", and, so long as no Event of Default has occurred, the Borrowers shall
not be required to reimburse the costs and expenses of such firm to the extent
that such costs and expenses exceed $200,000 in the aggregate."

                (q)     By amending and restating the last sentence of SECTION
11.04(D) of the Loan Agreement as follows:

                                       6
<PAGE>

        "The costs and expenses of such engagement shall be reimbursed by the
Borrowers; PROVIDED, that, the costs and expenses of such engagement from and
after March 1, 2005 shall not exceed $40,000 per month."

                (r)     By inserting "(a) GENERAL." at the beginning of SECTION
11.19 of the Loan Agreement.

                (s)     By inserting the following new SECTIONS 11.19(B),
11.19(C) and 11.19(D) after SECTION 11.19(A) of the Loan Agreement:

        "(b)    PRE-FUNDING REUNDERWRITING. The Agent shall have the right at
any time to reunderwrite Mortgage Loans pre-funding on a select basis, not
expected to exceed 5% of production unless the Agent has reasonable concern
regarding loan quality. Upon the occurrence of a Pre-Funding Reunderwriting
Trigger and subject to the availability of qualified underwriters, the Agent
shall reunderwrite each Mortgage Loan on a pre-funding basis. Once the Borrowers
have evidenced to the satisfaction of the Agent that a Pre-Funding
Reunderwriting Trigger would no longer exist, the Agent shall remove the
requirement that all Mortgage Loans be reunderwritten on a pre-funding basis.

        (c)     POST-FUNDING REUNDERWRITING. During the 90-day period following
the Closing Date or such longer period as the Borrowers and the Committee shall
agree (the "INITIAL PERIOD"), the Agent shall reunderwrite each Mortgage Loan
post-funding consistent with the Agent's customary loan reunderwriting
practices. After the Initial Period, post-funding reunderwriting will be
performed periodically on a random sample basis consistent with the Agent's
customary loan reunderwriting practices. All post funding reunderwriting will be
performed in a timely fashion subject to availability of qualified underwriters.
Reunderwriting results will be shared with the Administrative Borrower and the
Committee as available.

        (d)     REUNDERWRITING. In reunderwriting any Mortgage Loan, the Agent
shall review and underwrite such Mortgage Loan in the manner in which the Agent
would underwrite Mortgage Loans for its own account and, in any event, in a
commercially reasonable manner."

                (t)     By amending and restating SECTION 11.26 as follows:

        "11.26. MORTGAGE LOAN PURCHASE COMMITMENT. Subject to the terms and
conditions set forth in SCHEDULE 11.26 hereto, Greenwich shall be obligated to
purchase Approved Mortgage Loans from the Borrowers."

                (u)     By inserting new SECTION 11.27 as follows:

        "11.27. REPLACEMENT DIP / EXIT FACILITY. In connection with the
Borrowers' confirmation of a Plan of Reorganization and arrangement for
financing upon emerging from the Chapter 11 Cases or refinancing of the
Facility, the Borrowers agree to approach the Agent to arrange such financing,
and Agent shall have the first right of

                                       7
<PAGE>

making an offer to act as the lead arranger for such financing, and shall be
provided with a reasonable period of time to prepare any such offer. Nothing
herein requires the Borrowers to accept the Agent's offer once received, and the
Borrowers may seek offers from other Persons."

        3.      REPLACEMENT OF SCHEDULE 11.26 TO THE LOAN AGREEMENT. SCHEDULE
11.26 to the Loan Agreement is amended and restated in its entirety as set forth
on SCHEDULE 11.26 to this Amendment.

        4.      CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS AMENDMENT.
This Amendment shall become effective on the date (the "FIRST AMENDMENT
EFFECTIVE DATE") when the following conditions precedent have been satisfied:

                (a)     CERTAIN DOCUMENTS. The Agent shall have received, on or
before the First Amendment Effective Date, in form and substance satisfactory to
the Agent, this Amendment, executed by each Borrower, the Lenders, the other
Secured Parties and Trust 2004-1.

                (b)     FINAL ORDER. The Agent shall have received satisfactory
evidence of the entry of the Final Order which shall be in full force and
effect, shall not be the subject of any pending appeal, and shall not have been
vacated, stayed, reversed, modified or amended in any respect without the prior
written consent of the Agent and the Required Lenders.

                (c)     REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by the Borrowers or Trust 2004-1 in or
pursuant to the Loan Agreement, as amended hereby, and the other Loan Documents
to which any of the Borrowers or Trust 2004-1 is a party or by which the
Borrowers or Trust 2004-1 are bound, shall be true and correct in all material
respects on and as of the First Amendment Effective Date (other than
representations and warranties in any such Loan Document which expressly speak
as of a specific date, which shall have been true and correct in all material
respects as of such specific date).

                (d)     NO EVENT OF DEFAULT. No Default or Event of Default
shall have occurred and be continuing on the First Amendment Effective Date.

                (e)     PAST EXPENSES PAID. The Borrowers shall have paid, in
accordance with Section 11.04 of the Loan Agreement, all outstanding costs and
expenses of the Agent and the Lenders, including the reasonable fees and
out-of-pocket expenses of counsel for the Agent and the Lenders incurred prior
to or otherwise in connection with this Amendment.

        5.      REPRESENTATIONS AND WARRANTIES. On and as of the date hereof,
and as of the First Amendment Effective Date, after giving effect to this
Amendment, each Borrower hereby represents and warrants to the Agent and the
Lenders as follows:

                                       8
<PAGE>

                (a)     Each of the representations and warranties contained in
the Loan Agreement or any other Loan Documents are true and correct in all
material respects on and as of such date as if made on and as of such date,
except to the extent that such representations and warranties specifically
relate to a specific date, in which case such representations and warranties
shall be true and correct in all material respects as of such specific date;
PROVIDED, HOWEVER, THAT references therein to the "Loan Agreement" shall be
deemed to include this Amendment; and

                (b)     No Default or Event of Default has occurred and is
continuing.

        6.      CONTINUING EFFECT; NO OTHER AMENDMENTS OR WAIVERS. Except as
expressly amended hereby, all of the terms and provisions of the Loan Agreement
and the other Loan Documents are, and shall remain, in full force and effect.
The amendments contained herein shall not constitute an amendment or a waiver of
any other provision of the Loan Agreement or the other Loan Documents or for any
purpose except as expressly set forth herein.

        7.      LOAN DOCUMENTS. This Amendment is deemed to be a "Loan Document"
for the purposes of the Loan Agreement.

        8.      COSTS AND EXPENSES. The Borrowers agree to pay on demand all
reasonable out-of-pocket costs and expenses of the Agent and the Lenders in
connection with the preparation, execution and delivery of this Amendment and
other instruments and documents to be delivered pursuant hereto, including the
reasonable fees, disbursements and expenses of counsel.

        9.      GOVERNING LAW; COUNTERPARTS; MISCELLANEOUS.

                (a)     This Amendment shall be governed by New York law without
reference to choice of law doctrine (but with reference to Section 5-1401 of the
New York General Obligations Law, which by its terms applies to this Amendment),
except as governed by the Bankruptcy Code.

                (b)     This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Amendment by signing
any such counterpart. Delivery of an executed counterpart of this Amendment by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Amendment.

                (c)     Section captions used in this Amendment are for
convenience only and shall not affect the construction of this Amendment.

                (d)     From and after the First Amendment Effective Date, all
references in the Loan Agreement to the "Agreement" or the "Loan Agreement"
shall be

                                       9
<PAGE>

deemed to be references to such Agreement as modified hereby and this Amendment
and the Loan Agreement shall be read together and construed as a single
instrument.

                            [signature pages follow]

                                       10
<PAGE>

        IN WITNESS WHEREOF, the undersigned parties have executed this First
Amendment to the Debtor-in-Possession Loan and Security Agreement as of the day
and year first above written.

                                      BORROWERS

                                      AMERICAN BUSINESS FINANCIAL SERVICES, INC.

                                      By:        /s/ Albert W. Mandia
                                               --------------------------------
                                      Title:   Executive Vice President and CFO

                                      AMERICAN BUSINESS CREDIT, INC.

                                      By:        /s/ Albert W. Mandia
                                               --------------------------------
                                      Title:   Executive Vice President and CFO

                                      HOMEAMERICAN CREDIT, INC.

                                      By:        /s/ Albert W. Mandia
                                               --------------------------------
                                      Title:   Executive Vice President and CFO

                                      AMERICAN BUSINESS MORTGAGE SERVICES, INC.

                                      By:        /s/ Albert W. Mandia
                                               --------------------------------
                                      Title:   Executive Vice President and CFO

                                      TIGER RELOCATION COMPANY

                                      By:        /s/ Albert W. Mandia
                                               --------------------------------
                                      Title:   Executive Vice President and CFO

                        SIGNATURE PAGE TO FIRST AMENDMENT

<PAGE>

                                      ABFS CONSOLIDATED HOLDINGS, INC.

                                      By:        /s/ Albert W. Mandia
                                               --------------------------------
                                      Title:   Executive Vice President and CFO

                                      AGENT

                                      GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.

                                      By:        /s/ Jason Kennedy
                                               ---------------------------------
                                      Title:   Vice President

                                      LENDERS

                                      GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.

                                      By:        /s/ Jason Kennedy
                                               ---------------------------------
                                      Title:   Vice President

                                      THE CIT GROUP/BUSINESS CREDIT, INC.

                                      By:        /s/ James A. Brennan, Jr.
                                               ---------------------------------
                                      Title:   Vice President

                        SIGNATURE PAGE TO FIRST AMENDMENT

<PAGE>

                                      CLEARWING (for itself and for the
                                      CLEARWING INDEMNIFIED PARTIES)

                                      CLEARWING CAPITAL, LLC

                                      By:        /s/ Gregory L. Segall
                                               ---------------------------------
                                      Title:   Managing Member

                                      PATRIOT

                                      THE PATRIOT GROUP, LLC

                                      By:        /s/ Bruce R. Katz
                                               ---------------------------------
                                      Title:   Senior Vice President

                        SIGNATURE PAGE TO FIRST AMENDMENT

<PAGE>

        For purposes of the Loan Documents to which Trust 2004-1 is party, by
its signature below, Trust 2004-1 hereby consents and agrees to the entering
into of this Amendment and acknowledges and affirms that the Non-Debtor Pledge
Agreement remains in full force and effect in accordance with its terms on the
date hereof and after giving effect to this Amendment.

        It is expressly understood and agreed that (a) this Amendment is
executed and delivered by Wilmington Trust Company, not individually or
personally, but solely in its capacity as trustee, in the exercise of the powers
and authority conferred and vested in it, (b) each of the undertakings and
agreements herein made on the part of Trust 2004-1, is made and intended not as
personal representations, undertakings and agreements by Wilmington Trust
Company, but is made and intended for the purpose of binding only Trust 2004-1,
(c) nothing herein contained shall be construed as creating any liability on
Wilmington Trust Company, individually or personally, to perform any covenant
either expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties hereto and by any person claiming by, through or
under the parties hereto and (d) under no circumstances shall Wilmington Trust
Company be personally liable for the payment of any indebtedness or expenses of
Trust 2004-1 or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by Trust 2004-1 under
this Amendment or any other related documents.

                                   ABFS WAREHOUSE TRUST 2004-1,
                                   by Wilmington Trust Company, not in its
                                   individual capacity, but solely as trustee of
                                   ABFS Warehouse Trust 2004-1

                                   By:        /s/ Jeffrey J. Rossi
                                            ------------------------------------
                                   Title:   Senior Financial Services Officer

                        SIGNATURE PAGE TO FIRST AMENDMENT<PAGE>

                                                 600 Lexington Avenue, 6th Floor
                                                 New York, NY  10022
                                                 Phone: (212) 759-4433
                                                 Fax:   (212) 759-5533

ALVAREZ & MARSAL [LOGO]                          www.alvarezandmarsal.com
--------------------------------------------------------------------------------

March 11, 2005

Mr. Anthony J. Santilli, Jr.
Chairman of the Board of Directors
American Business Financial Services, Inc.
100 Penn Square East
Philadelphia, Pennsylvania 19107

Dear Mr. Santilli:

This letter confirms and sets forth the terms and conditions of the engagement
between Alvarez & Marsal, LLC ("A&M") and American Business Financial Services,
Inc., ABFS Consolidated Holdings, Inc., American Business Mortgage Services,
Inc., Home American Credit, Inc., American Business Credit, Inc., Tiger
Relocation Company (collectively, the "Company"), including the scope of the
services to be performed and the basis of compensation for those services. Upon
execution of this letter by each of the parties below, receipt of the retainer
described below and bankruptcy court approval, this letter will constitute an
agreement between the Company and A&M effective as of March 7, 2005 (the
"Effective Date").

1.      DESCRIPTION OF SERVICES

        a.      OFFICERS, ADDITIONAL PERSONNEL. In connection with this
                engagement, A&M shall make available to the Company:

                (i)     David J. Coles to serve as the Chief Restructuring
                        Officer (the "CRO"); and

                (ii)    Upon the mutual agreement of A&M and the Board of
                        Directors of the Company (the "Board"), such additional
                        personnel as are necessary to assist in the performance
                        of the duties set forth in clause 1.b below. Such
                        additional A&M personnel shall be designated by the
                        Company as senior officers ("Additional Officers");

                (iii)   Upon the determination of A&M and upon reasonable prior
                        notice to the Board, A &M shall provide such other
                        support personnel on an as needed basis for specific
                        projects ("A&M Personnel").

        b.      DUTIES.

                (i)     The duties of the CRO shall be described in Exhibit A
                        hereto.

               Atlanta o Chicago o Denver o Houston o Los Angeles
   New York o Phoenix o San Francisco o Frankfurt o London o Paris o Hong Kong
                             Alvarez & Marsal, LLC

<PAGE>

Mr. Anthony Santilli
Chairman of the Board of Directors
American Business Financial Services, Inc.
March 11, 2005

Page 2

                (ii)    The CRO shall devote his full time, energy, skill and
                        best efforts to the business and affairs of the Company.

                (iii)   The duties of any Additional Officers shall be as
                        designated by the Board and the CRO.

                (iv)    The duties of the A&M Personnel shall be as designated
                        by the CRO.

        c.      REPORTING. The CRO and any Additional Officers shall report to
                the Board and the CRO shall be invited to attend all Board
                meetings and meetings of any committee or subcommittee of the
                Board of Directors. Any other A&M Personnel shall report to the
                CRO.

        d.      EMPLOYMENT BY A&M. The CRO and any Additional Officers and A&M
                Personnel will continue to be employed by A&M and while
                rendering services to the Company will continue to work with
                other personnel at A&M in connection with other unrelated
                matters, which will not unduly interfere with services pursuant
                to this engagement.

        e.      PROJECTIONS; RELIANCE; LIMITATION OF DUTIES. You understand that
                the services to be rendered by the CRO and any Additional
                Officers may include the preparation of projections and other
                forward-looking statements, and that numerous factors can affect
                the actual results of the Company's operations, which may
                materially and adversely differ from those projections and other
                forward-looking statements. In addition, the CRO and any
                Additional Officers will be relying on information provided by
                other members of the Company's management in the preparation of
                those projections and other forward-looking statements. Neither
                the CRO, any Additional Officer nor A&M makes any representation
                or guarantee that an appropriate restructuring proposal or
                strategic alternative can be formulated for the Company, that
                any restructuring proposal or strategic alternative presented to
                the Board will be more successful than all other possible
                restructuring proposals or strategic alternatives, that
                restructuring is the best course of action for the Company or,
                if formulated, that any proposed restructuring plan or strategic
                alternative will be accepted by any of the Company's creditors,
                shareholders and other constituents. Further, neither the CRO,
                any Additional Officer nor A&M assumes responsibility for the
                selection of any restructuring proposal or strategic alternative
                that any such officer assists in formulating and presenting to
                the Board, and the CRO and any Additional Officers shall be
                responsible for implementation only of the proposal or
                alternative approved by the Board and only to the extent and in
                the manner authorized and directed by the Board.

2.      COMPENSATION

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                                                         ALVAREZ & MARSAL [LOGO}

<PAGE>

Mr. Anthony Santilli
Chairman of the Board of Directors
American Business Financial Services, Inc.
March 11, 2005

Page 3

        a.      A&M will be paid by the Company for the services of the CRO
                based on an hourly billing rate of $600. A&M will be paid by the
                Company for any Additional Officers and the A&M Personnel at the
                following hourly billing rates, based on the position held in
                A&M:

                             Managing Director   $525 - $625
                             Senior Director     $500 - $525
                             Director            $375 - $500
                             Associate/Analyst   $200 - $375

        b.      In addition, A&M will be reimbursed by the Company for the
                reasonable out-of-pocket expenses of the CRO and any Additional
                Officers and, if applicable, other A&M Personnel, incurred in
                connection with this assignment, such as travel, lodging,
                duplications, computer research, messenger and telephone
                charges. In addition, A&M shall be reimbursed by the Company for
                the reasonable fees and expenses of its counsel incurred in
                connection with the preparation, negotiation, enforcement and
                approval of this Agreement. All fees and expenses due to A&M
                will be billed on a monthly basis or, at A&M's discretion, more
                frequently. Neither the CRO, Additional Officers, A&M Personnel
                or A&M shall be entitled to any benefits provided to any
                employees of the Company, other than as set forth in paragraphs
                2 and 8 herein.

        c.      The Company shall pay A&M a retainer in the amount of $350,000,
                subject to and promptly following approval of the Bankruptcy
                Court to the payment thereof. Such retainer shall be applied to
                A&M's billings in the order submitted. Fees and expenses shall
                be billed by A&M to the Company on a monthly basis.

        d.      The Company will pay A&M a success fee ("Success Fee") under
                certain conditions subject to bankruptcy court approval. A&M and
                the Company undertake to enter into good-faith discussions, to
                be concluded within sixty (60) days following the commencement
                of the engagement, to determine (i) standards and conditions
                under which a Success Fee would be paid, (ii) the amount or
                calculation of the Success Fee and (iii) the time at which such
                a Success Fee would become payable.

3.      TERM

        The engagement will commence as of the Effective Date and may be
        terminated by either party without cause by giving thirty (30) days'
        written notice to the other party. In the event of any such termination,
        any fees and expenses due to A&M shall be remitted promptly (including
        fees and expenses that accrued prior to but were invoiced subsequent to
        such termination). If the Company terminates this

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                                                         ALVAREZ & MARSAL [LOGO}

<PAGE>

Mr. Anthony Santilli
Chairman of the Board of Directors
American Business Financial Services, Inc.
March 11, 2005

Page 4

        engagement without Cause or if A&M terminates this engagement for Good
        Reason, A&M shall also be entitled to receive the Success Fee upon the
        occurrence of the event or events agreed to as specified in Section 2(d)
        if such event or events occur within six-months months of the
        termination; provided that A&M has performed services under this
        Agreement for a period of not less than four months. The Company may
        immediately terminate A&M's services hereunder at any time for Cause by
        giving written notice to A&M. Upon any such termination, the Company
        shall be relieved of all of its payment obligations under this
        Agreement, except for the payment of fees and expenses through the
        effective date of termination (including fees and expenses that accrued
        prior to but were invoiced subsequent to such termination) and its
        obligations under paragraph 8. For purposes of this Agreement, "Cause"
        shall mean if (i) the CRO, or any of the Additional Officers is
        convicted of, admits guilt in a written document filed with a court of
        competent jurisdiction to, or enters a plea of NOLO CONTENDERE to, an
        allegation of fraud, embezzlement, misappropriation or any felony; (ii)
        the CRO or any of the Additional Officers willfully disobeys a lawful
        direction of the Board; or (iii) a material breach of any of A&M's or
        the CRO or any of the Additional Officers material obligations under
        this Agreement which is not cured within thirty (30) days of the
        Company's written notice thereof to A&M describing in reasonable detail
        the nature of the alleged breach. "Good Reason" shall mean for purposes
        of this Agreement a breach by the Company of its material obligations
        under this Agreement that is not cured within thirty (30) days of A&M
        having given written notice to the Company describing in reasonable
        detail the nature of the alleged breach.

4.      NO AUDIT, DUTY TO UPDATE.

        It is understood that the CRO, any Additional Officers and A&M are not
        being requested to perform an audit, review or compilation, or any other
        type of financial statement reporting engagement that is subject to the
        rules of the AICPA, SEC or other state or national professional or
        regulatory body. They are entitled to rely on the accuracy and validity
        of the data disclosed to them or supplied to them by employees and
        representatives of the Company. The CRO, any Additional Officers and A&M
        are under no obligation to update data submitted to them or review any
        other areas unless specifically requested by the Board to do so.

5.      NO THIRD PARTY BENEFICIARY.

        The Company acknowledges that all advice (written or oral) given by A&M
        to the Company in connection with this engagement is intended solely for
        the benefit and use of the Company (limited to its Board and management)
        in considering the matters to which this engagement relates. The Company
        agrees that no such advice shall be used for any other purpose or
        reproduced, disseminated, quoted or

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                                                         ALVAREZ & MARSAL [LOGO}

<PAGE>

Mr. Anthony Santilli
Chairman of the Board of Directors
American Business Financial Services, Inc.
March 11, 2005

Page 5

        referred to at any time in any manner or for any purpose other than
        accomplishing the tasks referred to herein without A&M's prior approval
        (which shall not be unreasonably withheld), except as required by law.

6.      CONFLICTS.

        A&M is not currently aware of any relationship that would create a
        conflict of interest with the Company or those parties-in-interest of
        which you have made us aware. Because A&M is a consulting firm that
        serves clients on an international basis in numerous cases, both in and
        out of court, it is possible that A&M may have rendered services to or
        have business associations with other entities or people which had or
        have or may have relationships with the Company, including creditors of
        the Company. In the event you accept the terms of this engagement, A&M
        will not represent, and A&M has not represented, the interests of any
        such entities or people in connection with this matter.

7.      CONFIDENTIALITY/NON-SOLICITATION.

        The CRO, any Additional Officers and A&M (collectively, the "A&M
        Parties") shall keep as confidential all non-public information received
        from the Company in conjunction with this engagement, except (i) as
        requested by the Company or its legal counsel; (ii) as required by legal
        proceedings or (iii) to financial advisors or other professionals to the
        key constituents involved in the Chapter 11 case so long as such
        advisors and professionals are subject to confidentiality agreements
        provided that to the extent practicable on a reasonably frequent basis,
        the A&M Parties will notify the Company's bankruptcy counsel and the
        Board of such disclosure. All obligations as to non-disclosure shall
        cease as to any part of such information to the extent that such
        information is or becomes public other than as a result of a breach of
        this provision. Except as specifically provided for in this letter, the
        Company agrees not to solicit, recruit or hire any employees of A&M
        effective from the date of this Agreement and continuing for a period of
        two years subsequent to the termination of this engagement. Should the
        Company extend offers of employment to any A&M employee (other than as
        specifically provided for in this Agreement) and should such an offer be
        accepted, A&M will be entitled to a fee based upon such individual's
        hourly rates multiplied by an assumed annual billing of 2,000 hours.
        This fee would be payable at the time of the individual's acceptance of
        employment from the Company.

8.      INDEMNIFICATION.

        The Company shall indemnify the CRO and all Additional Officers to the
        same extent as the most favorable indemnification it extends to its
        officers or directors, whether under the Company's bylaws, its
        certificate of incorporation, by contract or otherwise, and no reduction
        or termination in any of the benefits provided under any such
        indemnities shall affect the benefits provided to the CRO or such

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                                                         ALVAREZ & MARSAL [LOGO}

<PAGE>

Mr. Anthony Santilli
Chairman of the Board of Directors
American Business Financial Services, Inc.
March 11, 2005

Page 6

        Additional Officer. In addition, the Company agrees to indemnify the A&M
        Personnel for any acts or omissions of such parties, except for gross
        negligence and willful misconduct. The Company agrees that the CRO and
        each Additional Officer shall be covered as officers under the Company's
        existing director and officer liability insurance policy and has
        provided a copy of that policy to A&M for its review. The Company also
        shall use reasonable efforts to maintain any such insurance coverage for
        the CRO and each Additional Officer for a period of not less than two
        years following the date of the termination of such officer's services
        hereunder, but shall not be required to procure insurance for the CRO or
        each Additional Officer that it chooses not to procure for its other
        officers and directors so long as the decision is reasonably made based
        upon the inability to procure such insurance on reasonably acceptable
        terms. The provisions of this section 8 are in the nature of contractual
        obligations and no change in applicable law or the Company's charter,
        bylaws or other organizational documents or policies shall affect the
        CRO's or any Additional Officer's rights hereunder.

9.      MISCELLANEOUS.

        This Agreement shall be: (a) governed and construed in accordance with
        the laws of the State of Delaware, regardless of the laws that might
        otherwise govern under applicable principles of conflict of laws
        thereof; (b) incorporates the entire understanding of the parties with
        respect to the subject matter thereof; and (c) may not be amended or
        modified except in writing executed by each of the signatories hereto.
        The Company and A&M agree to waive trial by jury in any action,
        proceeding or counterclaim brought by or on behalf of the parties hereto
        with respect to any matter relating to or arising out of the performance
        or non-performance of the Company or A&M hereunder. The Company and A&M
        agree that the Bankruptcy Court having jurisdiction over the Company's
        Chapter 11 case (or any case into which it may be converted) shall have
        exclusive jurisdiction over any and all matters arising under or in
        connection with their obligations hereunder.

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                                                         ALVAREZ & MARSAL [LOGO}

<PAGE>

Mr. Anthony Santilli
Chairman of the Board of Directors
American Business Financial Services, Inc.
March 11, 2005

Page 7

If the foregoing is acceptable to you, kindly sign the enclosed copy to
acknowledge your agreement with its terms.

                                            Very truly yours,

                                            Alvarez & Marsal, LLC

                                            By:       /s/ David J. Coles
                                                     --------------------
                                                     David J. Coles
                                                     Managing Director

Accepted and Agreed:

American Business Financial Services, Inc.
ABFS Consolidated Holdings, Inc.
American Business Mortgage Services, Inc.
Home American Credit, Inc.
American Business Credit, Inc.
Tiger Relocation Company

By:       /s/ Anthony Santilli
         ----------------------------------
         Anthony Santilli
         Chairman of the Board of Directors

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                                                         ALVAREZ & MARSAL [LOGO}

<PAGE>

EXHIBIT A

CHIEF RESTRUCTURING OFFICER

I.      POSITIONING WITHIN CORPORATE STRUCTURE

o       An individual who will have the authority and duties comparable to those
        of a chief executive officer of the Debtors subject to the rights,
        duties and authority of the Board of Directors under applicable law, all
        fiduciary duties, Bylaw provisions in effect on the date hereof
        (together with any future amendments which are not inconsistent with the
        provisions hereof), codes of conduct and ethics applicable to all
        executive officers, and the applicable provisions of any Board committee
        charters and protocols applicable to all executive officers adopted by
        Debtors in compliance with the Sarbanes Oxley Act

o       Engaged by, may be terminated by, and will report directly to the Board
        of Directors and will be invited to attend all Board meetings and
        meetings of any committee or subcommittee of the Board of Directors

o       Notwithstanding the foregoing, the CRO shall be limited as provided in
        Section XXVI of the Final Order

II.     RESPONSIBILITIES AND DUTIES

Except as provided above, the duties of the CRO shall include the management and
oversight of all aspects of the Debtors' business and the Chapter 11 process
including, without limitation, the following:

o       Authority to hire, fire and utilize and assign duties and
        responsibilities to Debtors' officers, employees, independent
        contractors, consultants, agents, attorneys and professionals

o       Evaluate viability of Debtors' business units and determine and
        recommend to the Board of Directors whether to continue or modify
        operations or whether to sell, liquidate or pursue other alternatives
        which would maximize value of Debtors for creditors

o       Responsible for development and implementation of restructuring goals
        and restructuring processes including building mortgage loan origination
        platform and executing profitable whole loan sales consistent with the
        Debtors' business plan, as it may be hereafter modified

o       Identify and propose immediate targets for quick action as part of
        restructuring process ("immediate action steps"), such as staffing, cost
        reductions and asset dispositions

o       Evaluate, modify and implement comprehensive business plan, including
        budgeting, cash management and finance

o       Serve as lead negotiator for Debtors in asset dispositions and related
        activities other than with regard to the Servicing Business and Sale as
        provided in Section XXVI of the Final Order

                                     Page 1

<PAGE>

o       Manage compliance with the administrative processes and other
        requirements imposed by Chapter 11 of the Bankruptcy Code and the
        bankruptcy court

o       Develop action plan for implementation of bankruptcy case strategies,
        including, if appropriate, a Plan of Reorganization and emergence from
        Chapter 11 proceedings

o       Negotiate financing arrangements including, without limitation,
        financing for emergence from Chapter 11 proceedings

o       Serve as Debtors' principal liaison with Creditors' Committee,
        collateralized note trustees and other constituencies and their legal
        counsel and financial advisors, subject to fiduciary duties of an
        officer of the Debtors

o       Responsibility for developing restructuring alternatives, such as
        identifying potential sources of equity capital and potential buyers for
        the assets

o       Such other duties as are consistent with the position of chief executive
        officer as provided above

                                     Page 2

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