REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this ?Agreement?) is made and entered into as of December 28, 2004, by and between People?s Choice Financial Corporation, a Maryland corporation (together with any successor entity thereto, the ?Company?), 1-2-3 Mortgage, LLC, a Wyoming limited liability company (?1-2-3 Mortgage?), Lehman Commercial Paper, Inc., a New York corporation (?Lehman?), Friedman, Billings, Ramsey & Co., Inc., a Delaware corporation (?FBR?), and the other parties hereto for the benefit of 1-2-3 Mortgage and other persons listed on Exhibit A attached hereto under the heading ?Management Holders? (collectively, the ?Management Holders?), the persons listed on Exhibit A attached hereto under the heading ?Original Holders? (collectively, the ?Original Holders?), Lehman, FBR, the purchasers of the Company?s common stock, par value $0.01 per share, the participants (?Participants?) in the private placement by the Company of shares of its common stock on December 28, 2004 (the ?Private Placement?), and the direct and indirect transferees of FBR, each of Original Holders, each of the Management Holders, Lehman and each of the Participants.

This Agreement is made pursuant to the Purchase/Placement Agreement (the ?Purchase/Placement Agreement?), dated as of December 21, 2004, by and among the Company, People?s Choice Home Loan, Inc., a Wyoming corporation (?PCHLI?), and People?s Choice Funding, Inc., a Delaware corporation, 1-2-3 Mortgage and FBR. In order to induce the investors who are purchasing the Common Stock in the Private Placement to purchase such Common Stock and FBR to enter into the Purchase/Placement Agreement, the Company has agreed to provide the registration rights provided for in this Agreement to FBR, the Participants, each of Original Holders, each of the Management Holders, Lehman and their respective direct and indirect transferees. The execution and delivery of this Agreement is a condition to the closing of the transactions contemplated by the Purchase/Placement Agreement.

The parties hereto hereby agree as follows:

1. Definitions

As used in this Agreement, the following terms shall have the following meanings:

Accredited Investor Shares: The shares of Common Stock initially sold by the Company to ?accredited investors? (within the meaning of Rule 501(a) promulgated under the Securities Act) as Participants.

Additional Shares: Common Stock or other securities of the Company issued in respect of the Shares by reason of or in connection with any stock dividend, stock distribution, stock split, purchase in any rights offering or in connection with any exchange for or replacement of such shares or any combination of shares, recapitalization, merger or consolidation, or any other equity securities issued pursuant to any other pro rata distribution with respect to the Common Stock.

Agreement: As defined in the preamble hereof.

Affiliate: As to any specified Person, (i) any Person directly or indirectly owning, controlling or holding, with power to vote, ten percent or more of the outstanding voting securities of such other Person, (ii) any Person ten percent or more of whose outstanding voting securities are directly or indirectly owned, controlled or held, with power to vote, by such other Person, (iii) any Person directly or indirectly controlling, controlled by or under common control with such other Person, (iv) any executive officer, director, trustee, managing member or general partner of such Person and (v) any legal entity for which such Person acts as an executive officer, director, trustee, managing member or general partner. For purposes of this definition, ?control? (including the correlative meanings of the terms ?controlled by? and ?under common control with?), as used with respect to any Person, shall mean the possession, directly, or indirectly through one or more intermediaries or relationships, of the power to direct or cause the direction of the management and policies of such Person, whether by contract, through the ownership of voting securities, partnership or member interests or other equity interests or otherwise. An indirect relationship shall include circumstances in which a Person?s spouse, children, parents, siblings or mother-, father-, sister- or brother-in-law is or has been associated with a Person.

Business Day: With respect to any act to be performed hereunder, each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in New York, New York or other applicable places where such act is to occur are authorized or obligated by applicable law, regulation or executive order to close.

Closing Time: December 28, 2004.

Commission: The Securities and Exchange Commission.

Common Stock: The common stock, par value $0.01 per share, of the Company.

Company: As defined in the preamble hereof.

Controlling Person: As defined in Section 6(a) hereof.

End of Suspension Notice: As defined in Section 5(b) hereof.

Exchange Act: The Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the Commission thereunder.

FBR: As defined in the preamble hereof.

Holder: Each owner of any Registrable Shares from time to time, including FBR and its Affiliates.

Indemnified Party: As defined in Section 6(c) hereof.

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Indemnifying Party: As defined in Section 6(c) hereof.

IPO Registration Statement: As defined in Section 2(b) hereof.

Lehman: As defined in the preamble hereof.

Lehman Shares: The shares of Common Stock that may be purchased by Lehman pursuant to that certain Amended and Restated Warrant Agreement dated December 28, 2004 by and between the Company, PCHLI and Lehman as of the Closing Time and any Additional Shares with respect thereto.

Liabilities: As defined in Section 6(a) hereof.

Management Holders: As defined in the preamble hereof.

Management Shares: The shares of Common Stock collectively held or that may be purchased pursuant to the exercise of options by the Management Holders as of the date of this Agreement, after giving effect to the sale of the Common Stock pursuant to the Offering Memorandum as of the Closing Time and any Additional Shares with respect thereto.

NASD: The National Association of Securities Dealers, Inc.

Offering Memorandum: The Offering Memorandum of the Company dated December 21, 2004 pursuant to which the Rule 144A Shares, the Regulation S Shares and the Accredited Investor Shares are offered and sold.

1-2-3 Mortgage: As defined in the preamble hereof.

Original Holder Shares: The shares of Common Stock in the aggregate that may be purchased pursuant to the exercise of options by the Original Holders as of the date of this Agreement as of the Closing Time and any Additional Shares with respect thereto.

Original Holders: As defined in the preamble hereof.

Participant: As defined in the preamble hereof.

Person: An individual, partnership, limited liability company, corporation, trust, unincorporated organization, government or agency or political subdivision thereof, or any other legal entity.

Private Placement: As defined in the preamble hereof.

Proceeding: An action (including a class action), claim, suit, demand, arbitration or other proceeding (including without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or, to the knowledge of the Person subject thereto, threatened, by any Person.

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Prospectus: The prospectus included in any Registration Statement, including any preliminary prospectus, and all other amendments and supplements to any such prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference, if any, in such prospectus.

Purchase/Placement Agreement: As defined in the preamble, as amended from time to time in accordance with the terms thereof.

Purchaser Indemnitee: As defined in Section 6(a) hereof.

Registrable Shares: The Shares, upon original issuance thereof, and at all times subsequent thereto, including upon the transfer thereof by the original holder or any subsequent holder and any Additional Shares, until the earliest to occur of (i) the date on which such shares have been sold pursuant to an effective Registration Statement, (ii) the date on which such shares are sold, transferred or otherwise disposed of pursuant to Rule 144, (iii) the date on which, in the opinion of counsel to the Company, such shares not held by Affiliates of the Company are eligible for sale without registration under the Securities Act pursuant to subparagraph (k) of Rule 144, (iv) the date on which such shares are sold to the Company or any of its subsidiaries, or (v) the second anniversary of the initial effective date of the Shelf Registration Statement or, in the case of any Additional Shares for which tacking under Rule 144A is not available and which are not included in the Shelf Registration Statement, until the second anniversary of the issuance of the Additional Shares (subject to extension pursuant to Section 5(c) hereof).

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