PEOPLES CHOICE HOME LOAN SECURITIES CORP.,

as Purchaser,

and

PEOPLES CHOICE FUNDING, INC.,

as Seller

MORTGAGE LOAN PURCHASE AGREEMENT

Dated as of [    ]

FIXED AND ADJUSTABLE RATE MORTGAGE LOANS

TABLE OF CONTENTS

Table of Contents

(continued)

ii

This MORTGAGE LOAN PURCHASE AGREEMENT (this Agreement), dated as of [    ] (the Cut-off Date), is made among Peoples Choice Funding, Inc. (the Seller) and Peoples Choice Home Loan Securities Corp. (the Purchaser).

WHEREAS, the Seller owns the Mortgage Loans indicated on the Mortgage Loan Schedule attached as Exhibit I hereto (the Mortgage Loans), including rights to (a) any property acquired by foreclosure or deed in lieu of foreclosure or otherwise, and (b) the proceeds of any insurance policies covering the Mortgage Loans;

WHEREAS, the parties hereto desire that the Seller sell the Mortgage Loans to the Purchaser (other than the servicing rights with respect thereto) and that the Seller make certain representations and warranties and undertake certain obligations with respect to the Mortgage Loans;

WHEREAS, pursuant to the terms of an Amended and Restated Trust Agreement, dated as of [    ] (the Trust Agreement), among the Purchaser, as depositor, [    ], as owner trustee (the Owner Trustee), and [    ], as securities administrator (in such capacity, the Securities Administrator), certificate registrar and certificate paying agent, the Purchaser will convey the Mortgage Loans to the Issuer (as defined below);

WHEREAS, pursuant to the terms of a Sale and Servicing Agreement, dated as of [    ] (the Sale and Servicing Agreement), among the Purchaser, [    ], as master servicer (in such capacity, the Master Servicer) and as Securities Administrator, Peoples Financial Realty Mortgage Securities Series [    ], a Delaware statutory trust (the Issuer), [    ], as indenture trustee (the Indenture Trustee), the Seller, [    ], as servicer (the Servicer), and Peoples Choice Home Loan, Inc., as subservicer (the Subservicer); and

WHEREAS, pursuant to the terms of an Indenture, dated as of [    ] (the Indenture), among the Issuer, the Indenture Trustee and the Securities Administrator, the Issuer will pledge the Mortgage Loans and issue and transfer to the Purchaser the Peoples Choice Home Loan Trust Series [    ], Mortgage-Backed Notes, Series [    ], Class [    ], Class [    ], Class [    ], Class [    ], Class [    ], Class [    ], Class [    ], Class [    ], Class [    ], Class [    ], Class [    ], Class [    ], Class [    ], Class [    ] and Class [    ] Notes (collectively, the Notes), representing debt of the Issuer;

NOW, THEREFORE, inconsideration of the mutual covenants herein contained, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Definitions.

For all purposes of this Agreement, except as otherwise expressly provided herein or unless the context otherwise requires, capitalized terms not otherwise defined herein shall have the meanings assigned to such terms in Appendix A attached to the Indenture. All other capitalized terms used herein shall have the meanings specified herein.

ARTICLE II

SALE OF MORTGAGE LOANS AND RELATED PROVISIONS

Section 2.1 Sale of Mortgage Loans.

(a) The Seller, by the execution and delivery of this Agreement, does hereby sell, assign, set over and otherwise convey to the Purchaser, without recourse but subject to the terms of this Agreement, (i) all of its right, title and interest in the Mortgage Loans, as of the Closing Date, including the related Cut-off Date Principal Balance, all interest accruing thereon on and after the Cut-off Date, and all collections of interest and principal due after the Cut-off Date, other than the servicing rights with respect thereto, (ii) the Sellers interest in any insurance policies and (iii) all proceeds of the foregoing.

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