EXHIBIT 10.27

STOCK OPTION AGREEMENT AMENDMENT NO. 2
                                          (Replacement Amendment)

This Stock Option  Agreement  Amendment  No. 2 is dated  October 23,  2002,  but is effective as of
June 25, 2002 by and between  Wilshire  Financial  Services  Group Inc. (the  "Company")  and Jay H. Memmott
(the "Optionee"), with reference to the following facts:

A.       The Company and the Optionee  have entered into certain stock option  agreements  dated as
of  September  29,  2000 and October 2, 2001,  pursuant  to which the  Company  has granted to the  Optionee
options to purchase certain shares of the common stock of the Company.

B.       The Company and the  Optionee  desire to amend the stock option  agreements  in the manner
set forth below.

NOW
THEREFORE, the Company and the Optionee hereby amend the stock option agreements
as follows:

1.       Section  1.3.2 of each  stock  option  agreement  is  hereby  amended  to  provide  in its
entirety, as follows:

| | 1.3.2
Notwithstanding anything to the contrary in Section 1.3.1 hereof, upon the
occurrence of a Change in Control of the Company, as defined in the Plan or a
change in control of Wilshire Credit Corporation (WCC) as described
below, the unvested portion of this option shall immediately vest and become
exercisable.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | For
purposes of this amendment, a change-in-control of WCC will be
deemed to occur if, and only if, any Person or Group (as
such terms are defined in Section 13(d) of the Securities Exchange Act of 1934
(the Exchange Act) and the rules and regulations promulgated
thereunder), other than the Company or any of its subsidiaries, is or becomes
the Beneficial Owner (within the meaning of Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities representing more than
fifty percent (50%) of the combined voting power of the then outstanding voting
securities of the WCC Business Entity. WCC Business Entity shall
mean, at any time, the principal corporation, limited liability company or other
entity that is then engaged in the specialty mortgage servicing and related
business activities in which WCC is currently engaged, which entity may be (i)
WCC, (ii) any entity resulting from a merger, consolidation, reorganization or
other similar transaction involving WCC or a successor entity thereto, or (iii)
any entity that has succeeded to the business of WCC through the sale, transfer,
contribution or other disposition of all or substantially all of the assets of
WCC or a successor entity thereto.
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2.       In all other respects the terms and  provisions of the stock option  agreements are hereby
ratified and declared to be in full force and effect.

3.       This  Replacement  Amendment  amends in its entirety and supersedes the prior Stock Option
Agreement Amendment No. 2 dated as of June 25, 2002.

| | Wilshire Financial Services Group Inc.     
| | -------------------------------------------
| |                                            
| | By: _______________________________________
| | Name:    Stephen P. Glennon                
| | Title:   Chief Executive Officer           

| | ____________________________________________
| | --------------------------------------------
| | Jay H. Memmott