EMC MORTGAGE CORPORATION,

as Servicer,

WELLS FARGO BANK, N.A.,

as Master Servicer,

PEOPLES CHOICE HOME LOAN, INC.,

as Subservicer

and

HSBC BANK USA, NATIONAL ASSOCIATION

as Trustee

SERVICING AGREEMENT

Dated as of July 1, 2006

TABLE OF CONTENTS

i

ii

EXHIBITS

iii

THIS IS A SERVICING AGREEMENT, dated as of July 1, 2006 (the Agreement), and is executed among EMC Mortgage Corporation, as servicer (the Servicer), Wells Fargo Bank, N.A., as master servicer (the Master Servicer), Peoples Choice Home Loan, Inc., as the subservicer pursuant to the Subservicing Agreement (the Subservicer) and HSBC Bank USA, National Association, as trustee (the Trustee).

PRELIMINARY STATEMENT:

WHEREAS, pursuant to the pooling and servicing agreement, dated as of July 1, 2006, among Peoples Choice Home Loan Securities Corp., as depositor (the Depositor), the Master Servicer, Wells Fargo Bank, N.A., as the Securities Administrator, the Trustee, the Servicer, the Subservicer and Peoples Choice Home Loan, Inc., as seller (the Pooling and Servicing Agreement), the Issuing Entity (as defined in the Pooling and Servicing Agreement) has issued the Certificates (as defined in the Pooling and Servicing Agreement), which will evidence an ownership interest in, among other things, trust assets consisting of the mortgage loans identified on Exhibit A attached hereto (the Mortgage Loans). The Issuing Entity desires to engage the Servicer to service the Mortgage Loans, itself or through the Subservicer, for the benefit of the holders of the Certificates, and the Servicer desires to accept such engagement, subject and pursuant to the terms of this Agreement.

NOW, THEREFORE, in consideration of the mutual agreements hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01. Defined Terms.

Capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in the Pooling and Servicing Agreement, which is incorporated herein by this reference. Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings:

Agreement: This Servicing Agreement including all exhibits hereto, amendments hereof and supplements hereto.

Ancillary Income: All income derived from the Mortgage Loans other than payments of principal, interest and Escrow Payments (excluding Servicing Fees and Prepayment Charges attributable to the Mortgage Loans), including but not limited to interest received on funds deposited in the Custodial Account or any Escrow Account, all late charges, assumption fees, escrow account benefits (to the extent permitted by law and in the Mortgage Loan Documents), reinstatement fees, fees received with respect to checks on bank drafts returned by the related bank for insufficient funds, and similar types of fees arising from or in connection with any Mortgage Loan to the extent not otherwise payable to the Mortgagor under applicable law or pursuant to the terms of the related Mortgage Note.

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