8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 26, 2010

Flagstar Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Michigan
(State or other jurisdiction of
incorporation) 1-16577
(Commission File
Number) 38-3150651
(I.R.S. Employer
Identification No.)

5151 Corporate Drive, Troy, Michigan
(Address of principal executive offices) 48098
(Zip Code)

(248) 312-2000
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definition Agreement

On January 27, 2010, Flagstar Bancorp, Inc. (the “Company”) and its wholly owned subsidiary, Flagstar Bank, F.S.B. (the “Bank”), each entered into a Supervisory Agreement with the Office of Thrift Supervision (the “OTS”), whereby the Company and the Bank each agreed to take certain actions to address certain banking issues identified by the OTS. The description of the Supervisory Agreement between the Bank and the OTS (the “Bank Supervisory Agreement”) is qualified in its entirety by reference to such Bank Supervisory Agreement, a copy of which is attached hereto as Exhibit 10.1, and is incorporated herein by reference. The description of Supervisory Agreement between the Company and the OTS (the “Company Supervisory Agreement,” and together with the Bank Supervisory Agreement, the “Agreements”) is qualified in its entirety by reference to such Company Supervisory Agreement, a copy of which is attached hereto as Exhibit 10.2, and is incorporated herein by reference.

The Bank Supervisory Agreement requires the Bank to take the following actions:

• prepare a new business plan that will include the requirements contained in the Bank Supervisory Agreement and that also will include, among other things, operating strategies to achieve increased core deposits, realistic core earnings and net income levels which will result in profitability and capital preservation and enhancement strategies;

• within 60 days, implement a written plan to reduce the level of assets classified as doubtful or substandard to certain quarterly targets as a percentage of core capital plus allowance for loan and lease losses;

• within 60 days, adopt revisions to the Bank’s policies and procedures governing loan administration;

• within 30 days, adopt revisions to the Bank’s liquidity risk management program that enhance the continuous identification and monitoring of current and projected funding needs and access to funds to meet those needs;

• within 60 days, adopt specific timelines for the remediation of certain issues related to market risk exposure, within 90 days, engage a qualified and independent third party to perform a model valuation and prepare a model valuation reports with 180 days;

• within 30 day, revise the Bank’s asset concentration policy to establish the existing concentration limit for mortgage servicing rights at a level consistent with the business plan;

• within 90 days, adopt specific timeframes for the remediation of certain issues related to mortgage servicing rights;

• within 90 days, establish a new written consumer compliance program that is appropriate for the Bank’s size, complexity, product lines and business operations and designed to ensure compliance with all applicable consumer and other compliance laws and regulations;

• within 90 days, revise the Bank’s policies, procedures and systems for compliance with flood insurance requirements;

• within 90 days, conduct a review of all loans originated after September 30, 2008 for compliance with flood insurance requirements;

• within 30 days, adopt specific actions and timeframes to addresses certain matters in the Bank’s report of examination;

• restrict quarterly asset growth to an amount not to exceed net interest credited on deposit liabilities until the OTS approves of the new business plan;

• not declare or pay dividends or make any other capital distributions from the Bank without receiving prior OTS approval;

• not make any severance or indemnification payments without complying with regulatory requirements regarding such payments;

• comply with prior regulatory notification requirements for any changes in directors or senior executive officers;

• not enter into, renew, extend or revise any contractual arrangement relating to compensation or benefits for any senior executive officer or director of the Bank, without first providing 30 days prior written regulatory notice of the proposed transaction;

• not increase any salaries, bonuses or director’s fees or make any similar payments to directors or senior executive officers without the prior written consent of the OTS; and

• not enter into any arrangement or contract with a third party service provider that is significant to the overall operation or financial condition of the Bank or outside the Bank’s normal course of business without prior OTS non-objection (a contract will be considered significant where the annual contract amount equals or exceeds 2% of the Bank’s total capital).

The Company Supervisory Agreement requires the Company to take the following actions:

• with in 45 days, submit a capital plan that includes, among other things, (i) the establishment of a minimum tangible capital ratio of tangible equity capital to total tangible assets commensurate with the Company’s consolidated risk profile, (ii) special plans to ensure compliance with the Bank’s business plan, including capital levels projected by the Bank and (iii) operating strategies to achieve net income levels that will result in profitability and adequate debt service;

• not declare, make or pay any cash dividends or other capital distributions or purchase, repurchase or redeem or commit to purchase, repurchase or redeem any Company equity stock without the prior non-objection of the OTS;

• not incur, issue, renew, roll over or increase any debt or commit to do so without the prior non-objection of the OTS (debt includes loans, bonds, cumulative preferred stock, hybrid capital instruments such as subordinated debt or trust preferred securities, and guarantees of debt);

• not engage in transactions with any subsidiary or affiliate without the prior non-objection of the OTS except certain transactions exempt under applicable regulations and intercompany cost-sharing transactions; and

• comply with similar restrictions on the payment of severance and indemnification payments, prior OTS approval of directorate and management changes and prior OTS approval of employment contracts and compensation arrangements contained in the Bank Supervisory Agreement.

The Company and the Bank have complied to date with, and intend to comply in the future with, all of the requirements of the Agreements. Pursuant to the Bank Supervisory Agreement, the Bank submitted a business plan to, and received non-objection from, the OTS and expects to comply with the remaining requirements within the time periods specified therein. Pursuant to the Company Supervisory Agreement, the Company will submit a capital plan to the OTS within 45 days and expects to comply with the remaining requirements within the time periods specified therein. The Company believes that the Agreements should not materially constrain management’s ability to implement the business plan.

The Agreements will remain in effect until terminated, modified, or suspended in writing by the OTS. The failure to comply with the Agreements could result in the initiation of further enforcement action by the OTS, including the

imposition of further operating restrictions and result in additional enforcement actions against us. We have incurred, and expect to continue to incur, significant additional regulatory compliance expense in connection with the Agreements.

Item 5.02 Departure of Directors or Principal Officer; Election of Directors; Appointment of Principal Officer; Compensatory Arrangements of Certain Officers

On January 26, 2010, James A. Ovenden accepted his appointment by the boards of directors of the Company and the Bank to serve as a member of the boards of both companies. In addition, on January 26, 2010, Mr. Ovenden accepted his appointment to serve as a member of the audit committee of the Company and replaced David L. Treadwell who resigned as a member of such committee and will otherwise continue to serve on the board as an independent director.

Mr. Ovenden, age 46, is currently Chief Financial Officer of AstenJohnson Holdings LTD, a manufacturer of paper machine clothing, specialty fabrics, filaments and drainage equipment. Mr. Ovenden was previously a founding principal of OTO Development, Inc., a hospitality development company, and retired as CFO effective December 31, 2007. Prior to that, he served as the Chief Financial Officer, Secretary and Treasurer of Extended Stay America, Inc. from January 2004 until May 2004, when the company was sold. Mr. Ovenden is also the principal consultant with CFO Solutions of SC, LLC, a financial consulting business for middle market companies requiring credit restructuring advisory services. Mr. Ovenden also serves as a director and chairman of the audit committees of The Polymer Group and Insight Health Services Holdings Corp.

Item 8.01. Other Events.

On January 27, 2010, the Company issued a press release in which it announced the initial closing of its previously announced rights offering on January 27, 2010. MP Thrift Investment L.P. (“MP Thrift”) exercised its rights to purchase 422,535,212 shares of the Company’s common stock for approximately $300 million. MP Thrift still holds additional rights to purchase approximately 140,827,288 shares of the Company’s common stock. In the press release, the Company also announced that (i) Mr. Ovenden was appointed as a member of the board of directors and as a member of the audit committee and (ii) it and the Bank entered into the Company Supervisory Agreement and Bank Supervisory Agreement, respectively.

The information contained in this Item 8.01, including the press release contained as Exhibit 99.1 hereto, which is incorporated herein by reference, is being filed with the Securities and Exchange Commission and not furnished.

Item 9.01 Financial Statements and Exhibits

          (d) The following exhibits are being furnished herewith:

Exhibit No.	Exhibit Description
Exhibit 10.1	Supervisory Agreement between the Bank and the OTS
Exhibit 10.2	Supervisory Agreement between the Company and the OTS
Exhibit 99.1	Press release dated January 27, 2010

The rights offering is being made only by means of a prospectus. This Current Report on Form 8-K shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.

Matters discussed in this Current Report on Form 8-K contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties, including,

but not limited to, the risk that, because of business, economic or market conditions or for any other reasons within the Company’s discretion, the Company or the Bank may not be able to fully comply with the terms of the Bank Supervisory Agreement or the Company Supervisory Agreement, or that there will be any further subscriptions and closings of the rights offering. In addition to the risks and uncertainties identified above, reference is also made to other risks and uncertainties detailed in reports filed by the Company with the Securities and Exchange Commission. The Company cautions that the foregoing risks and uncertainties are not exclusive.

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

	FLAGSTAR BANCORP, INC.
Dated: January 28, 2010	By:	/s/ Paul D. Borja
		Paul D. Borja
		Executive Vice-President and Chief Financial Officer

EX-10.1

Exhibit 10.1

SUPERVISORY AGREEMENT

     This Supervisory Agreement (Agreement) is made this 27^th day of January, 2010 (Effective Date), by and through the Board of Directors (Board) of Flagstar Bank, FSB, Troy, Michigan, OTS Docket No. 08412 (Association) and the Office of Thrift Supervision (OTS), acting by and through its Regional Director for the Central Region (Regional Director).

     WHEREAS, the Association is subject to examination, regulation and supervision by the OTS;

     WHEREAS, based on its August 3, 2009 examination of the Association, the OTS finds that the Association has engaged in unsafe or unsound practices in conducting its operations; and

     WHEREAS, in furtherance of their common goal to ensure that the Association addresses the unsafe or unsound practices identified by the OTS in its Report of Examination of the Association dated August 3, 2009 (ROE), the Association and the OTS have mutually agreed to enter into this Agreement.

     NOW THEREFORE, in consideration of the above premises, it is agreed as follows:

Business Plan.

1. (a) By the Effective Date, the Association shall submit to the Regional Director revisions to the Association’s current business plan (Business Plan), acceptable to the Regional Director, to address the requirements of this Agreement. The Business Plan shall cover the period beginning with the quarter beginning January 1, 2010 through the quarter ending December 31, 2012 and, at a minimum, shall include:

(i) development and implementation of operating strategies by business line to achieve increased core deposits, realistic core earnings and net income levels, which will result in profitable operation of the Association;

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(ii) detail the Association’s capital preservation and enhancement strategies with specific narrative goals;

(iii) address the amount of additional capital that will be needed under different forward-looking scenarios involving progressively stressed economic environments. If additional capital is determined to be necessary, then identify the specific sources of additional capital and detail timeframes by which the additional capital will be raised and provide specific target quarter-end capital levels;

(iv) Board oversight and maintenance of adequate Allowance for Loan and Lease Losses (ALLL) provisions;

(v) detailed quarterly financial projections for the Association on a stand-alone basis; and

(vi) detailed assumptions used for all financial projections, such as the assumed interest rate scenarios; assumptions used for noninterest income and noninterest expense; assumptions used to determine disposition of real estate owned (REO); assumptions used to determine the ALLL; assumptions for loan origination rates, using recent experience and taking into consideration current national and regional economic conditions; and assumptions supporting the cost of funds projections.

(b) Upon receipt of the Regional Director’s written determination of non-objection to the Business Plan, the Board shall adopt the Business Plan and the adopted Business Plan shall be incorporated herein by reference and become a part of this Agreement and any

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	material deviation1 of the Business Plan shall be a violation of this Agreement. Thereafter, the Association must operate within the parameters of its Business Plan. Any proposed material deviations from or changes to the Business Plan shall be submitted for the prior, written non-objection of the Regional Director. Requests for any material deviations or changes must be submitted at least forty-five (45) days before a proposed change is implemented.
(c)	On a quarterly basis, beginning with the quarter ending March 31, 2010, the Board shall review written reports comparing projected operating results contained within the Business Plan to actual results (Variance Analysis Reports) within forty-five (45) days after the end of each quarter. The Board shall review and assess the Senior Executive Officers’2 implementation of and the Association’s compliance with the Business Plan. The Board’s review of Variance Analysis Reports and compliance with the Business Plan shall be fully documented in the appropriate Board meeting minutes.
(d)	Within sixty (60) days of the end of each quarter, the Board shall provide the Regional Director with a copy of the Variance Analysis Report required by this Paragraph.

Asset Quality.

2. (a)Within sixty (60) days, the Association shall implement a written plan acceptable to the Regional Director to reduce the level of the Association’s assets classified as Doubtful or Substandard by its internal asset review process (Classified Assets Plan).

1

A deviation shall be considered material under this Paragraph of the Agreement if the Association plans to: (a) engage in any activity that is inconsistent with the Business Plan; or (b) exceed the level of any activity contemplated in the Business Plan or fail to meet target amounts established in the Business Plan by more than ten percent (10%), unless the activity involves assets risk-weighted fifty percent (50%) or less, in which case a variance of more than twenty-five percent (25%) shall be deemed to be a material deviation.

2

The term “Senior Executive Officer” is defined at 12 C.F.R. § 563.555.

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The Classified Assets Plan shall contain a quarterly schedule detailing the projected level of classified assets during calendar years 2010 and 2011. The Classified Assets Plan shall express quarterly targets as a percentage of the Association’s Tier 1 (Core) Capital plus the Association’s ALLL and shall reflect reductions to be accomplished by:

     (i) charge-off;

     (ii) collection; or

     (iii) sufficient improvement in the quality of the classified asset so as to warrant removing any adverse classification.

(b) On a monthly basis, beginning with March 2010, the Board shall review a written progress report comparing the Association’s actual to projected levels of classified assets. The monthly progress reports shall be submitted simultaneously to the Board and Regional Director within thirty (30) days of the end of each calendar month.

Loan Administration Policy.

3. Within sixty (60) days, the Association shall submit to the Regional Director revisions to the Association’s policies and procedures governing loan administration (Credit Administration Policy) to address all corrective actions discussed in the ROE. Such revisions shall be acceptable to the Regional Director.

Liquidity Risk Management Program.

4. Within thirty (30) days, the Association shall submit to the Regional Director revisions to the Association’s liquidity risk management program, acceptable to the Regional Director, that enhance the Association’s continuous identification and monitoring of its current and projected funding needs and its access to sufficient funds to meet those needs. Such revisions to measure

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and monitor liquidity risk and to achieve and maintain sufficient liquidity shall include at a minimum:

     (a) increasing the Association’s liquidity levels commensurate with the Association’s risk profile;

     (b) adding risk limits for early identification of potential restrictions to expected funding capacity and the reduction of brokered deposit funding sources;

     (c) increasing diversification of funding sources based on a thorough understanding of the collateral requirements, if any, of each funding source in a variety of stress scenarios;

     (d) submitting an acceptable liquidity and cash flow analysis to the Regional Director;

     (e) monitoring the current market conditions affecting liquidity generally as well as the specific funding sources relied on by the Association; and

     (f) addressing the Contingency Funding Plan corrective actions contained in the ROE. Within thirty (30) days of receipt of the Regional Director’s comments, the Association shall revise its liquidity risk management program based on such comments.

Market Risk Exposure.

5.	(a) Within sixty (60) days, the Board shall adopt specific timeframes acceptable to the Regional Director for the remediation of all recommendations and corrective actions in the Sensitivity to Market Risk section of the ROE and assign a Senior Executive Officer responsibility to report to the Board monthly on the progress of such remediation.
	(b) Within ninety (90) days, the Association shall engage a qualified and independent third party to perform a model validation and prepare a model validation report as

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recommended in the ROE. Within one-hundred eighty (180) days, the model validation report prepared by the third party shall be transmitted simultaneously to the Board and the Regional Director.

Mortgage Servicing Rights Asset.

6.	(a) Within thirty (30) days, the Association shall revise its asset concentration policy to establish the existing concentration limit for the mortgage servicing rights (MSR) asset at a level consistent with the revised Business Plan submitted in accordance with Paragraph 1 above and acceptable to the Regional Director.
	(b) Within ninety (90) days, the Board shall adopt specific timeframes acceptable to the Regional Director for the remediation of all recommendations and corrective actions in the ROE regarding the Association’s mortgage servicing rights (MSR) and assign a Senior Executive Officer responsibility to report to the Board monthly on the progress of such remediation.

Compliance Program.

7. Within ninety (90) days, the Association shall establish a new written consumer compliance program (Compliance Program) that is: (a) appropriate for the Association’s size, complexity, product lines and business operations; and (b) designed to ensure the Association’s compliance with all applicable consumer and other compliance laws and regulations (Compliance Laws and Regulations)³ on an ongoing basis. At a minimum, the Compliance Program shall:

(a) address all recommended corrective actions set forth in the ROE relating to compliance;

³ The term “consumer and other compliance laws and regulations” means all laws and regulations referenced in Section 1100 (Compliance Oversight Examination Program) of the OTS Examination Handbook.

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(b) conform to applicable regulatory guidelines;

(c) include written descriptions of the duties and responsibilities of the Compliance Officer and other key compliance positions that clearly define authority and accountability and establish the compliance organizational and reporting structure, including any Board-level compliance committees;

(d) provide for the allocation of adequate resources, including staffing with qualified and experienced personnel;

(e) include a formal training program that provides for ongoing training in Compliance Laws and Regulations for all Association employees;

(f) include a formal compliance review process for new or changed products and services;

(g) include detailed recordkeeping processes, reporting requirements and internal control systems to facilitate the Board and Senior Executive Officer’s oversight of the effectiveness of the Compliance Program and

(h) require the Audit Committee to prepare a written report on all internal and external compliance audit findings (Compliance Audit Report).

Flood Insurance.

8. (a) Within ninety (90) days, the Association shall revise its policies, procedures and systems for compliance with the requirements of the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973, as amended, 42 U.S.C. §§ 4001-4129, as implemented by Part 572 of the OTS’s Rules and Regulations, 12 C.F.R. Part 572 (collectively, Flood Laws and Regulations) to address all recommended corrective actions set forth in the ROE relating to Flood Laws and Regulations.

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(b) Within ninety (90) days, the Association shall conduct a review of all loans originated by the Association on or after September 30, 2008 (Relevant Loans) for compliance with the Flood Laws and Regulations. The Association shall identify all Relevant Loans that are secured by buildings or mobile homes located in special flood hazard areas and prepare a written report (Flood Loan Report) that, at a minimum:

(i) identifies and provides details for all loans that were or are not in compliance with the Flood Act Laws and Regulations; and

(ii) sets forth recommended corrective actions with respect to each loan identified.

Remediation of ROE Comments.

9. Within thirty (30) days, the Board shall adopt specific actions and timeframes acceptable to the Regional Director to ensure that the Association addresses all Matters Requiring Board Attention and Corrective Actions noted in the ROE not otherwise covered in this Agreement. The minutes of Board meetings shall document each such action adopted, the completion of each action, and the measures implemented to prevent recurrence.

Growth.

10. Effective immediately, the Association is subject to and shall comply with the requirements and provisions of OTS Regulatory Bulletin 3b. Without the prior written approval of the Regional Director, the Association shall not increase its total assets during any quarter beginning with the quarter starting January 1, 2010, in excess of an amount equal to net interest credited on deposit liabilities during the quarter. The growth restrictions imposed by this Paragraph shall remain in effect until the Regional Director approves the Association’s Business Plan as required under Paragraph 1 of this Agreement.

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Dividends.

11. Effective immediately, the Board shall not declare or pay dividends or make any other capital distributions, as that term is defined in 12 C.F.R. § 563.141, without receiving the prior written approval of the Regional Director. The Association’s written request for written approval should be submitted to the Regional Director at least sixty (60) days prior to the anticipated date of the proposed dividend or distribution of capital.

Severance and Indemnification Payments.

12. Effective immediately, the Association shall not make any golden parachute payment⁴ or any prohibited indemnification payment⁵ unless, with respect to each such payment, the Association has complied with the requirements of 12 C.F.R. Part 359 and, as to indemnification payments, 12 C.F.R. § 545.121.

Directorate and Management Changes.

13. Effective immediately, the Association shall comply with the prior notification requirements for changes in directors and Senior Executive Officers set forth in 12 C.F.R. Part 563, Subpart H.

Employment Contracts and Compensation Arrangements.

14. (a) Effective immediately, the Association shall not enter into, renew, extend, or revise any contractual arrangement relating to compensation or benefits for any Senior Executive Officer or director of the Association, unless it first provides the Regional Director with not less than thirty (30) days prior written notice of the proposed transaction. The notice to the Regional Director shall include a copy of the proposed employment contract or compensation arrangement or a detailed, written description of

4	The term “golden parachute payment” is defined at 12 C.F.R. § 359.1(f).
5	The term “prohibited indemnification payment” is defined at 12 C.F.R. § 359.1(1).

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the compensation arrangement to be offered to such officer or director, including all benefits and perquisites. The Board shall ensure that any contract, agreement, or arrangement submitted to the Regional Director fully complies with the requirements of 12 C.F.R. Part 359, 12 C.F.R. §§ 563.39 and 563.161(b), and 12 C.F.R. Part 570 — Appendix A.

(b) Effective immediately, the Association shall not increase any salaries, bonuses, or director’s fees or make any other similar payments, directly or indirectly, to the Association’s directors or Senior Executive Officers without prior written non-objection from the Regional Director.

Third Party Contracts.

15. Effective immediately, the Association shall not enter into any arrangement or contract with a third party service provider that is significant to the overall operation or financial condition of the Association⁶ or outside the Association’s normal course of business unless, with respect to each such contract, the Association has: (a) provided the Regional Director with a minimum of thirty (30) days prior written notice of such arrangement or contract; (b) determined that the arrangement or contract complies with the standards and guidelines set forth in OTS Thrift Bulletin 82a; and (c) received written notice of non-objection from the Regional Director.

Effective Date.

16. This Agreement is effective on the Effective Date as shown on the first page.

Duration.

17. This Agreement shall remain in effect until terminated, modified or suspended, by written notice of such action by the OTS, acting by and through its authorized representatives.

⁶ A contract will be considered significant to the overall operation or financial condition of the Association where the annual contract amount equals or exceeds two percent (2%) of the Association’s total capital.

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Time Calculations.

18. Calculation of time limitations for compliance with the terms of this Agreement run from the Effective Date and shall be based on calendar days, unless otherwise noted.

19. The Regional Director or an OTS authorized representative may extend any of the deadlines set forth in the provisions of this Agreement upon written request by the Association that includes reasons in support for any extension. Any OTS extension shall be made in writing.

Submissions and Notices.

20. All submissions, including progress reports, to the OTS that are required by or contemplated by the Agreement shall be submitted within the specified timeframes.

21. Except as otherwise provided herein, all submissions, requests, communications, consents or other documents relating to this Agreement shall be in writing and sent by first class U.S. mail (or by reputable overnight carrier, electronic facsimile transmission or hand delivery by messenger) addressed as follows:

(a)	To the OTS: Regional Director Office of Thrift Supervision One South Wacker Drive, Suite 2000 Chicago, Illinois 60606 Facsimile: (312) 917-5001
(b)	To the Association: Chairman of the Board Flagstar Bank, FSB 5151 Corporate Drive Troy, Michigan 48098 Facsimile: (248) 312-6823

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No Violations Authorized.

22. Nothing in this Agreement shall be construed as allowing the Association, its Board, officers or employees to violate any law, rule, or regulation.

OTS Authority Not Affected.

23. Nothing in this Agreement shall inhibit, estop, bar or otherwise prevent the OTS from taking any other action affecting the Association if at any time the OTS deems it appropriate to do so to fulfill the responsibilities placed upon the OTS by law.

Other Governmental Actions Not Affected.

24. The Association acknowledges and agrees that its execution of the Agreement is solely for the purpose of resolving the matters addressed herein, consistent with Paragraph 23 above, and does not otherwise release, discharge, compromise, settle, dismiss, resolve, or in any way affect any actions, charges against, or liability of the Association that arise pursuant to this action or otherwise, and that may be or have been brought by any governmental entity other than the OTS.

Miscellaneous.

25. The laws of the United States of America shall govern the construction and validity of this Agreement.

26. If any provision of this Agreement is ruled to be invalid, illegal, or unenforceable by the decision of any Court of competent jurisdiction, the validity, legality, and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby, unless the Regional Director in his or her sole discretion determines otherwise.

27. All references to the OTS in this Agreement shall also mean any of the OTS’s predecessors, successors, and assigns.

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28. The section and paragraph headings in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.

29. The terms of this Agreement represent the final agreement of the parties with respect to the subject matters thereof, and constitute the sole agreement of the parties with respect to such subject matters.

Enforceability of Agreement.

30. This Agreement is a “written agreement” entered into with an agency within the meaning and for the purposes of 12 U.S.C. § 1818.

Signature of Directors/Board Resolution.

31. Each Director signing this Agreement attests that he or she voted in favor of a Board Resolution authorizing the consent of the Association to the issuance and execution of the Agreement. This Agreement may be executed in counterparts by the directors after approval of execution of the Agreement at a duly called board meeting.

     WHEREFORE, the OTS, acting by and through its Regional Director, and the Board of the Association, hereby execute this Agreement.

FLAGSTAR BANK, FSB Troy, Michigan	Accepted by: Office of Thrift Supervision
/s/ Joseph P. Campanelli	By:	/s/ Daniel T. McKee
Joseph P. Campanelli, Chairman		Daniel T. McKee
		Regional Director, Central Region
/s/ Walter N. Carter	Date:	See Effective Date on page 1
Walter N. Carter, Director
/s/ James D. Coleman
James D. Coleman, M.D., Director

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/s/ Gregory Eng Gregory Eng, Director

/s/ Lesley Goldwasser Lesley Goldwasser, Director

/s/ Jay J. Hansen Jay J. Hansen, Director

/s/ David J. Matlin David J. Matlin, Director

/s/ Mark R. Patterson Mark R. Patterson, Director

/s/ David L. Treadwell David L. Treadwell, Director

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EX-10.2

Exhibit 10.2

SUPERVISORY AGREEMENT

     This Supervisory Agreement (Agreement) is made this 27^th day of January, 2010 (Effective Date), by and through the Board of Directors (Board) of Flagstar Bancorp, Inc., Troy, Michigan, OTS Docket No. H2224 (Holding Company) and the Office of Thrift Supervision (OTS), acting by and through its Regional Director for the Central Region (Regional Director).

     WHEREAS, the Holding Company is subject to examination, regulation and supervision by the OTS; and

     WHEREAS, based on its August 3, 2009 examination of the Holding Company, the OTS finds that the Holding Company has engaged in unsafe or unsound practices in conducting its consolidated operations; and

     WHEREAS, in furtherance of their common goal to ensure that the Holding Company addresses the unsafe or unsound practices identified by the OTS, the Holding Company and the OTS have mutually agreed to enter into this Agreement.

     NOW THEREFORE, in consideration of the above premises, it is agreed as follows: Capital Plan.

1. (a) Within forty-five (45) days, the Holding Company shall submit to the Regional Director an acceptable written plan for enhancing the consolidated capital and earnings of the Holding Company (Capital Plan). The Capital Plan shall cover the period beginning with the quarter starting January 1, 2010 through the quarter ending December 31, 2011. At a minimum, the Capital Plan shall include:

(i) establishment of a minimum tangible capital ratio of tangible equity capital to total tangible assets commensurate with the Holding Company’s consolidated risk profile;

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(ii) specific plans to ensure conformance with the Business Plan of the Holding Company’s wholly-owned savings association subsidiary, Flagstar Bank, FSB, Troy, Michigan, OTS Docket No. 08412 (Association), including capital levels projected by the Association;

(iii) operating strategies to achieve net income levels that will result in profitability and adequate debt service throughout the term of the Capital Plan;

(iv) quarterly cash flow projections for the Holding Company on a stand alone basis from the quarter starting January 1, 2010 through the quarter ending December 31, 2011 that identify both the sources of funds and the expected uses of funds without reliance on dividends from the Association;

(v) detailed, quarterly pro forma Holding Company balance sheets and income statements, including both consolidated and consolidating entries, for the period beginning January 1, 2010 through the quarter ending December 31, 2011 that reflect maintenance throughout the period of the Board established minimum tangible equity capital ratio;

(vi) detailed scenarios to stress-test the consolidated minimum capital targets based on continuing operating results, economic conditions and risk profile of consolidated assets; and

(vii) detailed descriptions of all relevant assumptions and projections and the supporting documentation for all relevant assumptions and projections.

(b) Within thirty (30) days after receiving any written comments from the Regional Director, the Holding Company shall revise the Capital Plan based on such comments and the Board shall adopt the Capital Plan. The Capital Plan shall be incorporated

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herein by reference and become a part of this Agreement and any material deviation¹ of the adopted Capital Plan shall be a violation of this Agreement. A copy of the Capital Plan shall be provided to the Regional Director within five (5) days after Board approval.

(c) Once the Capital Plan is implemented, the Holding Company shall operate within the parameters of its Capital Plan. Any proposed material deviations from or changes to the Capital Plan shall be submitted for the prior, written non-objection of the Regional Director. Requests for any material deviations or changes must be submitted at least forty-five (45) days before a proposed deviation or change is implemented.

(d) The Holding Company shall notify the Regional Director regarding any material event affecting or that may affect the consolidated balance sheet, capital, or the cash flow of the Holding Company within five (5) days after such event.

2. (a) On a quarterly basis, beginning with the quarter ending March 31, 2010, the Board shall review a written report that compares projected operating results contained within the Capital Plan to actual results (Capital Plan Variance Report). The Board shall review each Capital Plan Variance Report and address external and internal risks that may affect the Holding Company’s ability to successfully implement the Capital Plan. This review shall include, but not be limited to, adverse scenarios relating to asset or liability mixes, interest rates, staffing levels and expertise, operating expenses, marketing costs, and economic conditions in the markets where the Holding Company is operating. The Board shall discuss and approve corrective actions, if needed, to ensure the Holding

¹ A deviation shall be considered material under this Paragraph of the Agreement if the Holding Company plans to: (a) engage in any activity that is inconsistent with the Business Plan; or (b) exceed the level of any activity contemplated in the Business Plan or fail to meet target amounts established in the Business Plan by more than ten percent (10%), unless the activity involves assets risk-weighted fifty percent (50%) or less, in which case a variance of more than twenty-five percent (25%) shall be deemed to be a material deviation.

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Company’s adherence to its Capital Plan. The Board’s review of each Capital Plan Variance Report and assessment of the Holding Company’s compliance with the Capital Plan shall be fully documented in the appropriate Board meeting minutes.

(b) Within sixty (60) days after the close of each quarter beginning with the quarter ending March 31, 2010, the Board shall provide the Regional Director with a copy of each Capital Plan Variance Report.

Dividends.

3. Effective immediately, the Holding Company shall not declare, make, or pay any cash dividends or other capital distributions, as that term is defined in 12 C.F.R. § 563.141, or purchase, repurchase or redeem or commit to purchase, repurchase, or redeem any Holding Company equity stock without the prior written non-objection of the Regional Director. The Holding Company shall submit its written request for non-objection to the Regional Director at least forty-five (45) days prior to the anticipated date of the proposed dividend, capital distribution, or stock transaction. The written request for such notice of non-objection shall: (a) contain current and pro forma projections regarding the Holding Company’s capital, asset quality, and earnings; and (b) address compliance with the Capital Plan required by Paragraph 1 of this Agreement.

Debt Restrictions.

4. Effective immediately, the Holding Company shall not, directly or indirectly, incur, issue, renew, roll over, or increase any debt or commit to do so without the prior written non-objection of the Regional Director. The Holding Company shall submit its written request for non- objection to the Regional Director at least forty-five (45) days prior to the anticipated date of the proposed debt transaction. The Holding Company’s written requests for Regional Director non-

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objection to engage in such debt transactions, at a minimum, shall: (a) describe the purpose of the proposed debt; (b) set forth and analyze the terms of the proposed debt and covenants; (c) analyze the Holding Company’s current cash flow resources available to satisfy such debt repayment; and (d) set forth the anticipated source(s) of repayment of the proposed debt. For purposes of this Paragraph of the Agreement, the term “debt” includes, but is not limited to, loans, bonds, cumulative preferred stock, hybrid capital instruments such as subordinated debt or trust preferred securities, and guarantees of debt. For purposes of this Paragraph of the Agreement, the term “debt” does not include liabilities incurred in the ordinary course of business to acquire goods and services and that are normally recorded as accounts payable under generally accepted accounting principles.

Affiliate Transactions.

5. Effective immediately, the Holding Company shall not engage in transactions with any subsidiary or affiliate without the prior written non-objection of the Regional Director, except: (a) exempt transactions under 12 C.F.R. Part 223; and (b) intercompany cost-sharing transactions identified in executed written agreements between the parties. The Holding Company shall provide thirty (30) days advance written notice to the Regional Director of any proposed affiliate transaction, include in the written notice a full description of the transaction, and ensure that the transaction complies with the requirements of 12 C.F.R. § 563.41 and Regulation W, 12 C.F.R. Part 223.

Severance and Indemnification Payments.

6. Effective immediately, the Holding Company shall not make any golden parachute payment² or any prohibited indemnification payment³ unless, with respect to each such payment,

2	The term “golden parachute payment” is defined at 12 C.F.R. § 359.1(f).
3	The term “prohibited indemnification payment” is defined at 12 C.F.R. § 359.1(1).

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the Holding Company has complied with the requirements of 12 CFR Part 359.

Directorate and Management Changes.

7. Effective immediately, the Holding Company shall comply with the prior notification requirements for changes in directors and Senior Executive Officers⁴ set forth in 12 C.F.R. Part 563, Subpart H.

Employment Contracts and Compensation Arrangements.

8. Effective immediately, the Holding Company shall not enter into, renew, extend, or revise any contractual arrangement related to compensation or benefits with any director or Senior Executive Officer of the Holding Company, unless it first provides the Regional Director with not less than thirty (30) days prior written notice of the proposed transaction. The notice to the Regional Director shall include a copy of the proposed employment contract or compensation arrangement, or a detailed written description of the compensation arrangement to be offered to such director or officer, including all benefits and perquisites. The Board shall ensure that any contract, agreement, or arrangement submitted to the Regional Director fully complies with the requirements of 12 C.F.R. Part 359.

Effective Date.

9. This Agreement is effective on the Effective Date as shown on the first page.

Duration.

10. This Agreement shall remain in effect until terminated, modified or suspended, by written notice of such action by the OTS, acting by and through its authorized representatives.

Time Calculations.

11. Calculation of time limitations for compliance with the terms of this Agreement run from the Effective Date and shall be based on calendar days, unless otherwise noted.

⁴ The term “Senior Executive Officer” is defined at 12 C.F.R. § 563.555.

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12. The Regional Director or an OTS authorized representative may extend any of the deadlines set forth in the provisions of this Agreement upon written request by the Holding Company that includes reasons in support for any extension. Any OTS extension shall be made in writing.

Submissions and Notices.

13. All submissions, including progress reports, to the OTS that are required by or contemplated by the Agreement shall be submitted within the specified timeframes.

14. Except as otherwise provided herein, all submissions, requests, communications, consents or other documents relating to this Agreement shall be in writing and sent by first class U.S. mail (or by reputable overnight carrier, electronic facsimile transmission or hand delivery by messenger) addressed as follows:

(a) To the OTS:

Regional Director
Office of Thrift Supervision
One South Wacker Drive, Suite 2000
Chicago, Illinois 60606
Facsimile: (312) 917-5001

(b) To the Holding Company:

Chairman of the Board
Flagstar Bancorp, Inc.
5151 Corporate Drive
Troy, Michigan 48098
Facsimile: (248) 312-6823

No Violations Authorized.

15. Nothing in this Agreement shall be construed as allowing the Holding Company, its Board, officers or employees to violate any law, rule, or regulation.

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OTS Authority Not Affected.

16. Nothing in this Agreement shall inhibit, estop, bar or otherwise prevent the OTS from taking any other action affecting the Holding Company if at any time the OTS deems it appropriate to do so to fulfill the responsibilities placed upon the OTS by law.

Other Governmental Actions Not Affected.

17. The Holding Company acknowledges and agrees that its execution of the Agreement is solely for the purpose of resolving the matters addressed herein, consistent with Paragraph 16 above, and does not otherwise release, discharge, compromise, settle, dismiss, resolve, or in any way affect any actions, charges against, or liability of the Holding Company that arise pursuant to this action or otherwise, and that may be or have been brought by any governmental entity other than the OTS.

Miscellaneous.

18. The laws of the United States of America shall govern the construction and validity of this Agreement.

19. If any provision of this Agreement is ruled to be invalid, illegal, or unenforceable by the decision of any Court of competent jurisdiction, the validity, legality, and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby, unless the Regional Director in his or her sole discretion determines otherwise.

20. All references to the OTS in this Agreement shall also mean any of the OTS’s predecessors, successors, and assigns.

21. The section and paragraph headings in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.

22. The terms of this Agreement represent the final agreement of the parties with respect to

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the subject matters thereof, and constitute the sole agreement of the parties with respect to such subject matters.

Enforceability of Agreement.

23. This Agreement is a “written agreement” entered into with an agency within the meaning and for the purposes of 12 U.S.C. § 1818.

Signature of Directors/Board Resolution.

24. Each Director signing this Agreement attests that he or she voted in favor of a Board Resolution authorizing the consent of the Holding Company to the issuance and execution of the Agreement. This Agreement may be executed in counterparts by the directors after approval of execution of the Agreement at a duly called board meeting.

     WHEREFORE, the OTS, acting by and through its Regional Director, and the Board of the Holding Company, hereby execute this Agreement.

	Accepted by:
FLAGSTAR BANCORP, INC.	Office of Thrift Supervision
Troy, Michigan
/s/ Joseph P. Campanelli	By:	/s/ Daniel T. McKee
Joseph P. Campanelli, Chairman		Daniel T. McKee
		Regional Director, Central Region
/s/ Walter N. Carter	Date: See Effective Date on page 1
Walter N. Carter, Director
/s/ James D. Coleman
James D. Coleman, M.D., Director
/s/ Gregory Eng
Gregory Eng, Director

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/s/ Lesley Goldwasser

Lesley Goldwasser, Director

/s/ Jay J. Hansen

Jay J. Hansen, Director

/s/ David J. Matlin

David J. Matlin, Director

/s/ Mark R. Patterson

Mark R. Patterson, Director

/s/ David L. Treadwell

David L. Treadwell, Director

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EX-99.1

Exhibit 99.1

	NEWS RELEASE For more information, contact:
	Paul D. Borja
	Executive Vice President / CFO
	(248) 312-2000
	FOR IMMEDIATE RELEASE

Flagstar Bancorp Announces $300 million in New Capital

TROY, Mich., January 27, 2010 — Flagstar Bancorp, Inc., (NYSE: FBC) (the “Company”) , the holding company of Flagstar Bank (the “Bank”), announced that the Company has raised $300 million of capital today through a previously announced rights offering, which closes on February 8, 2010.

In addition, the Company announced that Todd McGowan has joined as Chief Risk Officer and James A. Ovenden has been elected to the board of directors and appointed to its audit committee. The Company also announced that it has entered into agreements with the Office of Thrift Supervision (“OTS”) to address certain banking issues identified by the OTS.

Today, MP Thrift Investments L.P. (“MP Thrift”), our controlling stockholder, purchased 422,535,212 shares of the Company’s common stock for approximately $300 million through the exercise of rights it received under the rights offering. MP Thrift still holds additional rights to purchase approximately 140,827,288 shares of the common stock. This investment was made under the Company’s previously announced rights offering of up to 704,234,180 shares of its common stock. Pursuant to the rights offering, each shareholder of record as of December 24, 2009 received, at no charge, 1.5023 non transferable subscription rights for each share of common stock owned on the record date. Each right entitles the holder to purchase one share of common stock at the subscription price of $0.71 per whole share.

“We believe this investment by MP Thrift reflects continuing confidence in the Bank franchise as well as in our executive management team,” said Joseph P. Campanelli, Chairman and CEO of Flagstar Bank. “With a solid capital position, we will be better able to execute on our business plan.”

Todd McGowan joins the Company as its Chief Risk Officer after 22 years at Deloitte Touche, where he last served as its regional Quality Risk Management Partner and advised companies in areas including enterprise risk management, business process controls, and Sarbanes-Oxley compliance. James Ovenden has over 25 years of financial management and business advisory experience and is currently Chief Financial Officer of AstenJohnson Holdings LTD, a

manufacturer of paper machine clothing, specialty fabrics, filaments and drainage equipment. “We are pleased to welcome Todd McGowan and Jim Ovenden to Flagstar. Jim brings a wealth of experience and a fresh perspective to our board’s already broad base of talent,” said Campanelli. “The addition of Todd is another in a line of seasoned executive leaders that we have been able to recruit or retain. Collectively, the management team brings together many years of banking experience in operational efficiencies and business turnarounds and is well-positioned to execute on our overall strategy.”

The Company and the Bank said they have also each entered into a Supervisory Agreement with the OTS. Copies of the agreements and brief descriptions of each are contained in a Form 8-K being filed by the Company with the Securities and Exchange Commission.

“We have developed a sound Business Plan that should not only stabilize Flagstar, but maximize the value of its franchise and position the Bank for growth,” said Campanelli. “The Board has approved the Business Plan, which allows us to diversify our revenue streams, grow our market share and create long-term stakeholder value. We have reviewed the Business Plan with our regulators and we do not believe that the Supervisory Agreements will materially constrain our ability to execute. With the management team in place, we believe we are poised to move forward with the additional capital in an environment in which capital is king.”

Flagstar Bancorp, with $14.8 billion in total assets at September 30, 2009, is the largest savings bank headquartered in the Midwest. At September 30, 2009, Flagstar operated 176 banking centers in Michigan, Indiana and Georgia and 42 home loan centers in 18 states. Flagstar Bank originates loans nationwide and is one of the leading originators of residential mortgage loans.

Matters discussed in this press release contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties, including, but not limited to, the risk that, because of business, economic or market conditions or for any other reasons within the Company’s discretion, the Company or the Bank may not be able to fully comply with the terms of the Supervisory Agreements or that there will be any further subscriptions and closings of the rights offering. In addition to the risks and uncertainties identified above, reference is also made to other risks and uncertainties detailed in reports filed by the Company with the Securities and Exchange Commission. The Company cautions that the foregoing risks and uncertainties are not exclusive