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1.	to elect nine directors to the Board of Directors to hold office for a term of one year and until their successors shall have been duly elected and qualified;

2.	to vote on an advisory (non-binding) resolution to approve named executive officer compensation;

3.	to hold an advisory (non-binding) vote on the frequency of future advisory votes on named executive officer compensation;

4.	to reapprove the performance criteria set forth in the Flagstar Bancorp, Inc. 2006 Equity Incentive Plan;

5.	to approve an amendment to the Flagstar Bancorp, Inc. 2006 Equity Incentive Plan to increase the number of shares available for awards and the individual award limits thereunder;

6.	to ratify the appointment of Baker Tilly Virchow Krause, LLP as the Company's independent registered public accountants for the year ending December 31, 2013; and

7.	to transact such other business as may properly come before the Annual Meeting or any adjournments thereof.

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1.	to elect nine directors to the Board. Our nominees are Walter Carter, Jay J. Hansen, John D. Lewis, David J. Matlin, James A. Ovenden, Peter Schoels, Michael J. Shonka, Michael J. Tierney and David L. Treadwell. All

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2.	to approve an advisory (non-binding) resolution to approve named executive officer compensation;

3.	to select, on an advisory (non-binding) basis, the frequency of future advisory votes on named executive officer compensation;

4.	to reapprove the performance criteria set forth in the 2006 Equity Incentive Plan, as amended to date (the “2006 Plan”);

5.	to approve an amendment to the 2006 Plan to increase the number of shares available for awards and the individual award limits thereunder;

6.	to ratify the appointment of Baker Tilly as our independent registered public accountants for the year ending December 31, 2013.

1.

Election of Directors. Each director nominee shall be elected if that director receives a majority of the number of votes cast with respect to the director. For purposes of the election of directors, a majority of the votes cast means that the number of shares voted “for” a director must exceed the number of shares voted “against” that director. Shares that are not voted, abstentions and broker non-votes will have no effect on the election of directors because they will not be counted as votes cast. Cumulative voting is not permitted.

2.

Advisory Vote to Approve Named Executive Officer Compensation. Adoption of an advisory resolution approving the compensation of the named executive officers as disclosed in this Proxy Statement requires the affirmative vote of a majority of the votes cast at the Annual Meeting. For purposes of this proposal, a majority of the votes cast means that the number of shares voted “for” this proposal must exceed the number of shares voted “against” this proposal. Shares that are not voted, abstentions and broker non-votes will have no effect on this proposal because they will not be counted as votes cast. While this vote is advisory and therefore not binding on us, the Compensation Committee or the Board, we value the opinions of our stockholders. Accordingly, the Board will take the results of this vote under advisement and will consider our stockholders' concerns when making future decisions regarding our executive compensation programs.

3.

Frequency of Advisory Vote on Named Executive Officer Compensation. Stockholders will have the opportunity to specify one of four choices for this proposal on the proxy card: (1) every year, (2) every two years, (3) every three years or (4) abstain. Stockholders are not voting to approve or disapprove of the Board's recommendation. Rather, stockholders are being asked to express their preference regarding the frequency of future advisory votes

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4.

Reapproval of the Performance Criteria in the 2006 Plan. Reapproval of the performance criteria set forth in the 2006 Plan requires the affirmative vote of a majority of the votes cast at the Annual Meeting. For purposes of this proposal, a majority of the votes cast means that the number of shares voted “for” this proposal must exceed the number of shares voted “against” this proposal. Shares that are not voted, abstentions and broker non-votes will have no effect on this proposal because they will not be counted as votes cast. While this vote is advisory and therefore not binding on us, the Compensation Committee or the Board, we value the opinions of our stockholders. Accordingly, the Board will take the results of this vote under advisement and will consider our stockholders' concerns when making future decisions regarding the frequency of advisory votes on executive compensation programs.

5.

Amend the 2006 Plan to Increase the Number of Shares Available for Awards and the Individual Award Limits. An amendment to the 2006 Plan to increase the number of shares available for awards and the individual award limits requires the affirmative vote of a majority of the votes cast at the Annual Meeting, provided that the total votes cast on the proposal represents over 50% in interest of all shares entitled to vote on the proposal. For purposes of this proposal, a majority of the votes cast means that the number of shares voted “for” this proposal must exceed the number of shares voted “against” this proposal. Shares that are not voted, abstentions and broker non-votes will have no effect on this proposal because they will not be counted as votes cast.

6.

Ratification of Independent Registered Public Accountants. The action will be approved if a majority of the votes cast on this proposal are voted in favor of ratification. For purposes of this proposal, a majority of the votes cast means that the number of shares voted “for” this proposal must exceed the number of shares voted “against” this proposal. Shares that are not voted and abstentions will have no effect on this proposal because they will not be counted as votes cast.

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1.	attending the Annual Meeting and voting your shares in person;

2.	submitting prior to August 20, 2013 a new executed Proxy Card bearing a date that is later than the date on your most recently submitted Proxy Card; or

3.	delivering written notice to our Secretary for receipt prior to August 20, 2013, stating that you are revoking your proxy.

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(1)	Mr. DiNello was appointed to the Board on May 15, 2013, subject to receipt of non-objection from the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Mr. DiNello became a director effective June 12, 2013 upon receipt of notice of non-objection from the Federal Reserve.

(2)	Mr. Lewis was appointed to the Board on October 1, 2012 subject to receipt of non-objection from the Federal Reserve. Mr. Lewis became a director effective February 12, 2013 upon receipt of notice of non-objection from the Federal Reserve.

(3)

Messrs, Matlin and Schoels were designated by MP Thrift pursuant to Section 4.1(c) of Investment Agreement between us and MP Thrift dated as of December 17, 2008 (the “Investment Agreement”). Pursuant to the terms of the Investment Agreement, MP Thrift is entitled to designate such number of directors to serve on the Board in proportion to the total voting power of voting stock beneficially owned by MP Thrift until such time as they no longer own at least 10% of the total voting power in us. MP Thrift beneficially owns 63.5% of our common stock.

(3)	Mr. Schoels was elected to the Board at our 2012 annual meeting of stockholders held on September 24, 2012, subject to receipt of non-objection from the Federal Reserve. Mr. Schoels became a director effective February 14, 2013 upon receipt of notice of non-objection from the Federal Reserve.

(4)	Mr. Schoels was elected to the Board at our 2012 annual meeting of stockholders held on September 24, 2012, subject to receipt of non-objection from the Federal Reserve. Mr. Schoels became a director effective February 14, 2013 upon receipt of notice of non-objection from the Federal Reserve.

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•	Possessing personal and professional ethics, integrity and values, and commitment to representing the best interests of our stockholders and other constituencies;

•	Reputations, both personal and professional, consistent with our image and reputation;

•	Relevant experience and expertise and ability to add value and offer advice and guidance to our Chief Executive Officer based on that experience and expertise;

•	Current knowledge and contacts in our industry and other industries relevant to our business, ability to work with others as an effective group and ability to commit adequate time as a director;

•	The ability to exercise sound business judgment; and

•	Such nominee would complement the diversity, including diversity of background, skill, education and experience, among the existing members of the Board.

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•	Annual retainer, $55,000;

•	Annual retainer fee for the members of the Audit Committee, $20,000;

•	Annual additional retainer fee for the chairman of the Audit Committee, $12,500;

•	Annual retainer fee for the members of the Compensation Committee, $3,000;

•	Annual additional retainer fee for the chairman of the Compensation Committee, $2,000;

•	Annual retainer fee for the members of the Nominating/Corporate Governance Committee, $3,000;

•	Annual retainer fee for the members of the Risk Committee, $4,000;

•	Annual additional retainer fee for the chairman of the Risk Committee, $10,000;

•	Annual retainer fee for the members of the Compliance Committee, $4,000; and

•	Annual retainer for Lead Director, $10,000.1

(1)	Effective October 1, 2012, the Board separated the positions of chairman of the board and chief executive officer and terminated the position of separate Lead Director.

(1)	Messrs. Matlin, Patterson, Schoels and Eng waived the receipt of compensation for serving on the Board or its committees. Mr. Patterson resigned effective July 9, 2012, and Mr. Eng resigned effective March 25, 2013.

(2)	As of December 31, 2012, Jay J. Hansen had options to purchase 15 shares of common stock, all of which were awarded prior to 2007.

(3)

Mr. Lewis was appointed to the Board on October 1, 2012, subject to receipt of non-objection from the Federal Reserve. Mr. Lewis became a director effective February 12, 2013 upon receipt of notice of non-objection from the Federal Reserve. Prior to receipt of non-objection, we entered into a consulting agreement with Mr. Lewis pursuant to which he was paid $50,000 in cash and $67,400 in unrestricted shares of common stock for the year ended December 31, 2012.

(4)	Mr.Schoels was elected to the Board at our 2012 annual meeting of stockholders held on September 24, 2012, subject to receipt of non-objection from the Federal Reserve. Mr. Schoels became a director effective February 14, 2013 upon receipt of notice of non-objection from the Federal Reserve.

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(1)

The percentage owned is calculated for each stockholder by dividing with respect to our common stock, (i) the total number of outstanding shares beneficially owned by such stockholder as of the Record Date plus the number of shares such person has the right to acquire within 60 days of the Record Date, into (ii) the total number of outstanding shares as of the Record Date plus the total number of shares that such person has the right to acquire within 60 days of the Record Date.

(2)

Based solely on a Schedule 13D filed with the SEC on December 27, 2010, which reports beneficial ownership of these persons of, 35,600,352 shares of our common stock over which they have shared voting and dispositive power, and as adjusted to give effect to a 1-for-10 reverse stock split of our common stock that was effective October 10, 2012. Both Mr. Matlin's and Mr. Patterson's exact pecuniary interest are not readily determinable because they are subject to several variables, and they each disclaim beneficial ownership of any of the shares except to the extent of their individual pecuniary interest therein.

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(1)	These amounts include beneficial ownership of shares with respect to which voting or investment power may be deemed to be directly or indirectly controlled.

(2)	Please see footnote (2) to the “Security Ownership of Certain Beneficial Owners” table above for further information with respect to the share holdings of Mr. Matlin.

(3)	Mr. Schoels does not have voting or dispositive power over shares held by MP Thrift, but he may be deemed to have an indirect pecuniary interest in such shares. Mr. Schoels' exact pecuniary interest is not readily determinable because it is subject to several variables, and he disclaims beneficial ownership of any of the shares except to the extent of his pecuniary interest therein.

(4)	These amounts also include 114 shares of common stock underlying options exercisable as of the Record Date, or that will become exercisable within 60 days thereafter, regardless of exercise price, to purchase shares of common stock held by Mr. Borja.

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•	Michael J. Tierney - former President and Chief Executive Officer. Mr. Tierney was appointed to serve as our President effective October 1, 2012 and our Chief Executive Officer effective November 1, 2012, subject to regulatory non-objection which was received on December 21, 2012. Mr. Tierney resigned as our President and Chief Executive Officer as of May 15, 2013.

•	Paul D. Borja - Executive Vice-President and Chief Financial Officer.

•	Matthew A. Kerin - President, Mortgage Banking Division.

•	Steven J. Issa - former Executive Vice President. Mr. Issa entered into a retention agreement pursuant to which he remained employed as our Executive Vice President through April 30, 2013 to facilitate obtaining consents from third parties necessary to complete the sales of commercial loans based upon agreements entered into during the fourth quarter of 2012 and the first quarter 2013.

•	Daniel Landers - former Executive Vice President and Chief Credit Officer. Mr. Landers resigned as our Executive Vice President and Chief Credit Officer effective December 31, 2012, but he remained employed as Executive Vice President and Senior Advisor to the President and Chief Executive Officer through June 30, 2013.

•

Joseph P. Campanelli - former Chairman of the Board, President and Chief Executive Officer. Mr. Campanelli's employment agreement was mutually terminated pursuant to a separation agreement effective November 1, 2012. On the same date, we entered into a consulting agreement with Mr. Campanelli subject to applicable regulatory approval or non-objection. Mr. Campanelli has not received any compensation under the consulting agreement, because the applicable regulatory approval or non-objection has not been received yet. Mr. Campanelli is our named executive officer because he served as our principal executive officer during a portion of 2012.

•

Salvatore J. Rinaldi - former Executive Vice-President and Chief Operating Officer. Mr. Rinaldi resigned as our Executive Vice-President and Chief Operating Officer effective December 18, 2012, but he remained employed as a Senior Advisor through July 1, 2013. Mr. Rinaldi is our named executive officer because he would have been one of our most highly compensated executive officers for 2012 had he been serving as an executive officer at December 31, 2012.

•	Marshall P. Soura - Executive Vice President and Director, Mortgage Servicing and Representation and Warranty. Mr. Soura is our named executive officer because he would have been one of our most highly compensated executive officers for 2012 had he been considered an executive officer at December 31, 2012.

•	Named Executive Officer Compensation Program. In 2012, the Compensation Committee did not change the overall named executive officer compensation program which consisted of base salary, a share salary, and an equity-based long-term incentive award, all compliant with the TARP compensation limitations.

•	Incentive Plan Risk Review and Modification. In 2012, we conducted on behalf of the Compensation Committee, a company-wide review of all divisional short-term incentive plans regarding 24 individual risk evaluation components within one of four categories: financial risk; compensation strategy; plan design; and governance.

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•	Annual Incentives. Named executive officers and the next 10 most highly compensated employees (“MHCEs”) were not eligible for annual cash incentives awards under TARP. Other executives continue to participate in a modest performance based program with a “capped” funding level dependent upon our performance.

•	Long-Term Incentives. Under TARP, restricted stock grants to named executive officers and the next 10 MHCEs could not exceed one-third of such participant’s annual compensation, require regulatory review and approval, and are subject to transferability and payout restrictions. Restricted stock grants to other executives continue to be subject to 3-year pro-rata vesting.

•	Retirement Benefits. Our employment agreement with Mr. Tierney does not include supplemental retirement benefits.

•	Limited Perquisites. Perquisites in 2012 were limited to basic commuting expenses for four named executive officers, a modest auto allowance for three other named executive officers and a modest communication allowance for one named executive officer.

•	Gross-ups. Flagstar does not provide tax gross-ups to employees, including named executive officers or the 20 next MHCEs.

•	Severance or Golden Parachute Payments. All named executive officers and next five MHCEs are currently prohibited from receiving severance or golden parachute payments.

•	Maximum Individual Share Limitation. If a restricted stock grant is cancelled, the cancelled grant continues to be counted against the maximum number of shares for which grants may be awarded to each such participant under our stockholder approved 2006 Equity Incentive Plan (the “2006 Plan”).

•	No Repricing. The Compensation Committee is prohibited from repricing any grant unless approved pursuant to a vote of the stockholders.

•	No Reloads. Any stock options or stock appreciation rights granted under the 2006 Plan may not contain any provisions entitling a participant to an automatic grant of additional options or stock appreciation rights in connection with any exercise of the original option or stock appreciation right.

•	Antidilution. In the event of any change in the outstanding shares of common stock, other than for consideration received by us, restricted stock granted under the 2006 Plan may be, but is not required to be, appropriately adjusted for participants by the Compensation Committee in its sole and absolute discretion.

•	Clawback. As required by TARP, all contracts, employment agreements and terms of named executive officers required that any bonus, retention award or incentive pay based on earnings, gains or other criteria later found to be materially inaccurate were subject to repayment (also refer to as a “clawback”).

•	Forfeiture. Pursuant to our restricted stock agreements, if a grantee violates any post-termination obligation, the proceeds of any grant received on or after one year prior to the date of termination must be returned to us immediately upon demand.

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(1)	The base salary and share salary increases for 2013 reflect Mr. Tierney's former position as our Chief Executive Officer. He is also eligible for a restricted stock award up to $600,000 at the end of each fiscal year, subject to regulatory non-objection.

(2)	The base salary and share salary increases for 2013 reflect Mr. Kerin's new position as President, Mortgage Banking Division.

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(3)

Mr. Issa's retention agreement effective from January 1, 2013 through April 30, 2013, provided for his base salary and share salary to increase to $1,000,000 and $600,000, respectively, on an annualized basis. Mr. Issa's retention agreement also provided for two retention payments subject to the satisfaction of various conditions. He received a retention payment of $15,484 on March 29, 2013, and a second retention payment of $250,000 on April 25, 2013. The 2013 increases in Mr. Issa's base salary and share salary and the two retention payments are subject to compliance with applicable laws and regulation and the restrictions under the TARP Capital Purchase Program.

(4)

Effective as of February 21, 2013, Mr. Landers entered into a retention agreement that provides financial incentives for him to remain employed through June 2013. Pursuant to the retention agreement, Mr. Landers's 2013 annualized cash salary is $630,000 and his annualized share salary is $470,000. In addition, Mr. Landers received a retention payment of $2,903 on April 12, 2013 based upon the achievement of certain conditions, and his retention agreement provided for a second retention payment of $110,000 on June 18, 2013 if Mr. Landers was actively employed by us on that date and other conditions had been satisfied. The 2013 increases in Mr. Landers' base salary and share salary and the two retention payments are subject to compliance with applicable laws and regulation and the restrictions under the TARP Capital Purchase Program.

(5)

Mr. Campanelli's employment was terminated effective November 1, 2012. However, our consulting agreement with Mr. Campanelli provided for a monthly fee of $158,333 in cash and $62,500 grant of unrestricted shares from November 1, 2012 through May 1, 2013 and a grant of $500,000 in restricted shares with vesting subject to achievement of performance criteria established by the Board. The agreement is subject to the applicable regulatory approval or non-objection, which has not been received yet, so Mr. Campanelli has not received any compensation under the consulting agreement.

(6)

Mr. Rinaldi served as a senior advisor of the Bank and provide transitional services to the Chief Executive Officer through July 1, 2013. In addition to continuation of his base salary and share salary, Mr. Rinaldi received a retention payment of $2,419 on April 12, 2013 based upon the achievement of certain conditions, and he was scheduled to receive a second retention payment of $125,000 on June 30, 2013 if Mr. Rinaldi was actively employed by us on that date and other conditions had been satisfied. Mr. Rinaldi's retention payments are subject to compliance with applicable laws and regulation and the restrictions under the TARP Capital Purchase Program.

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•

TARP involves the designation of the Chief Executive Officer as the Principal Executive Officer, the Chief Financial Officer as the Principal Financial Officer, and other selected named executive officers to possibly be designated as senior executive officers depending on whether their total compensation results in their designation as one of the MHCEs. Senior executive officers categories involve direct reports to the Principal Executive Officer and range from the next 5 MHCEs to the next 10 MHCEs, depending on the executive compensation pay element and issue. Where referenced within this document as they apply to named executive officers, TARP terms (e.g. Principal Executive Officer, Principal Financial Officer) and more traditional executive position terms (Chief Executive Officer and Chief Financial Officer here, respectively) as well as those named executive officers that also meet the requirements of senior executive officers (e.g. next five MHCEs) should generally be considered synonymous.

•	The senior executive officers in January 2009 individually entered into letter agreements with the U.S. Treasury, as a condition for participating in the TARP Capital Purchase Program, accepting the restrictions and limitations on compensation as may be required by the TARP Capital Purchase Program rules; and

•	The Compensation Committee conducts a review of our senior executive officer compensation programs from a risk perspective from time to time and concludes that those programs do not encourage unnecessary or excessive risk.

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•	Prohibition on paying or accruing any bonus, incentive or retention compensation for our senior executive officers and next ten MHCEs, other than certain awards of long-term restricted stock or bonuses payable under existing employment contracts;

•	Prohibition on any golden parachute payments to our senior executive officers and next five MHCEs for a departure from the Company, other than compensation earned for services rendered or accrued benefits;

•	Condition on bonus, incentive and retention payments made to our senior executive officers and next twenty MHCEs subjecting each to clawback if based on statements of earnings, revenues, gains or other criteria that are later found to be materially inaccurate; and

•	Prohibition on any compensation plan that would encourage manipulation of reported earnings.

•	Base salary;

•	Share salary;

•	Long-term restricted stock;

•	401(k) plan;

•	A supplemental retirement pension; and

•	Perquisites and other benefits.

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1.	The compensation program components were not tied to short term performance factors;

2.	Under the TARP Capital Purchase Program, incentive compensation for senior executive officers was limited to restricted stock, which typically does not vest for several years, in an amount not to exceed one-third of the officer's total annual compensation;

3.	Certain compensation is subject to recovery, or clawback, if found to be based on materially inaccurate financial statements or other materially inaccurate performance criteria; and

4.	The Compensation Committee determined, in reliance upon an analysis provided by our compensation consultant, that the overall level of incentive compensation that we award does not appear to be excessive compared to incentive compensation awarded to employees of comparable institutions in our selected peer group.

1.	The Compensation Committee has reviewed the senior executive officer compensation plans with the Chief Risk Officer and has made all reasonable efforts to ensure that these plans do not encourage senior executive officers to take unnecessary and excessive risks that threaten our value;

2.	The Compensation Committee has reviewed with the Chief Risk Officer the employee compensation plans and has made all reasonable efforts to limit any unnecessary risks these plans pose to us;

3.	The Compensation Committee has reviewed the employee compensation plans to eliminate any features of these plans that would encourage the manipulation of our reported earnings to enhance the compensation of any employee.

4.

The Compensation Committee as long as we have outstanding debt or equity securities (but excluding any warrants to purchase common stock) issued to and held by the U.S. Treasury under the TARP Capital Purchase Program, will discuss, evaluate and review, at least semiannually with the Chief Risk Officer, all such compensation to ensure ongoing compliance with the TARP Capital Purchase Program including without limitation, any limits imposed by the TARP Capital Purchase Program with respect to incentive compensation that may be paid to any employee.

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(1)	Salary represents amounts paid in cash or shares of our common stock. In 2012, named executive officers received cash salaries and share salaries, of which the share salaries were paid using shares of our common stock, as valued on the day of the grant and payable every two weeks:

(2)	Although Messrs. Tierney, Landers and Soura were executive officers prior to 2012, they did not qualify as named executive officers in 2011 or prior and, accordingly, the above table does not include any compensation data for those periods.

(3)	The amount reflected in this column for Mr. Tierney includes a car allowance of $6,000 and matching contributions made by the Flagstar Bank 401(k) Plan of $3,750.

(4)	The amount reflected in this column for Mr. Borja includes matching contributions made by the Flagstar Bank 401(k) Plan of $3,750.

(5)	The amount reflected in this column for Mr. Kerin includes travel and hotel expenses of $38,712 in connection with commuting and matching contributions made by the Flagstar Bank 401(k) Plan of $3,563.

(6)	The amount reflected in this column for Mr. Issa includes a car allowance of $9,600, a communications allowance of $2,400 and matching contributions made by the Flagstar Bank 401(k) Plan of $3,378.

(7)	The amount reflected in this column for Mr. Landers includes a car allowance of $6,000 and matching contributions made by the Flagstar Bank 401(k) Plan of $3,514.

(8)	The amount reflected in this column for Mr. Campanelli includes the change in pension values for fiscal year ended December 31, 2012. For the assumptions used to determine the change in the pension value, see the section entitled “Pension Benefit for Fiscal Year 2012” below.

(9)	The amount reflected in this column for Mr. Campanelli includes travel and hotel expenses of $8,812 in connection with commuting and matching contributions made the Flagstar Bank 401(k) Plan of $3,750.

(10)	The amount reflected in this column for Mr. Rinaldi includes travel and hotel expenses of $48,841 in connection with commuting.

(11)	The amount reflected in this column for Mr. Soura includes travel and hotel expenses of $62,098 in connection with commuting.

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(1)	The amounts in this column are the grant date fair values of the awards of shares of restricted stock calculated in accordance with FASB ASC Topic 718. Amounts reported for share salaries represent the aggregate of 26 separate grants paid in accordance with our normal payroll cycle.

(2)

This amount reflects the number of shares of stock paid in 2012 as share salary to the named individuals pursuant to the 2006 Plan. These grants were made in accordance with our normal payroll cycle throughout 2012 and are fully vested upon grant. The number of shares paid as share salary was calculated by dividing the dollar amount of the share salary for the relevant pay period by the closing price for a share of our common stock on the NYSE on the pay date for such pay period. During 2012, such closing prices ranged from $6.00 to $19.07 per share. As a result, there were 26 separate grant dates, each corresponding to our normal payroll cycle.

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(1)	Represents stock appreciation rights issued on January 24, 2008. The stock appreciation rights vested in four equal parts beginning January 24, 2009 and each one-year anniversary afterwards through 2012. The stock appreciation rights are required to be settled in cash.

(2)	Represents stock appreciation rights issued on January 24, 2007. The stock appreciation rights vested in four equal parts beginning January 24, 2008 and each one-year anniversary afterwards through 2011. The stock appreciation rights are required to be settled in cash.

(3)	Represents stock appreciation rights issued on May 26, 2006. The stock appreciation rights vested in four equal parts beginning February 3, 2007 and each one-year anniversary afterwards through 2010. The stock appreciation rights are required to be settled in cash.

(4)

Represents a stock option award issued May 25, 2005. The options were scheduled to vest in four equal parts starting on the first anniversary of the grant date. However, the options are fully vested after our accelerated vesting of all out-of-the money options at December 31, 2005. The primary purpose of the accelerated vesting was to enable us to avoid recognizing future compensation expenses associated with accelerated stock options.

(1)	The amounts in this column are the grant date fair values of the awards of shares of restricted stock calculated in accordance with FASB ASC Topic 718. Amounts reported for share salaries represent the aggregate of semi-monthly grants paid in accordance with our normal payroll cycle.

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(1)	Mr. Campanelli’s benefit was based on monthly accruals as described below, as opposed to years of credited service. The number listed in this column indicates the number of monthly accruals as of December 31, 2012, divided by 12 to be expressed in years.

(2)	In the calculation of Mr. Campanelli’s SERP benefit, the following is assumed: a discount rate of 4.25% based on 30-year Treasury Bond rates during September 2009.

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•	revenue;

•	revenue growth;

•	earnings (including earnings per share, earnings before interest, taxes, depreciation and amortization, earnings before interest and taxes, and earnings before or after taxes);

•	operating income;

•	gross profit;

•	net income;

•	profit margins;

•	earnings per share;

•	return on assets;

•	return on equity;

•	return on invested capital;

•	economic value-added;

•	efficiency ratio (other expenses as a percentage of other income plus net interest income);

•	stock price;

•	gross dollar volume;

•	cost containment or reduction;

•	total stockholder return;

•	market share;

•	book value;

•	asset growth;

•	deposit growth;

•	expense deposit ratios;

•	management;

•	cash flow;

•	customer satisfaction;

•	regulatory compliance metrics;

•	CAMELS rating; and

•	loan originations.

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(1)

Consists of the 2006 Plan, which provides for the granting of Stock Incentives and other awards. The 2006 Plan consolidated, merged, amended and restated our 1997 Employees and Directors Stock Option Plan, 2000 Stock Incentive Plan, and 1997 Incentive Compensation Plan. Awards still outstanding under any of the prior plans will continue to be governed by their respective terms. Under the 2006 Plan, the exercise price of any option granted must be at least equal to the fair value of our common stock on the date of grant. Non-qualified stock options granted to directors expire five years from the date of grant. Grants other than non-qualified stock options have term limits set by the board of directors in the applicable agreement. All securities remaining for future issuance represent option and stock awards available for award under the 2006 Plan.

(2)	Restated for one-for-ten reverse stock splits effective on October 10, 2012 and May 27, 2010.

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(1)	Comprised of professional services rendered in connection with the regular annual audit of our financial statements, approximately $300,000 related to additional audit services provided in connection with the reviews of the financial statements included in each of our Quarterly Reports on Form 10-Q for the years indicated.

(2)	Audit-related fees are for professional services related to the audit of our employee benefit plans.

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(a)	“2011 Amendments” means the amendments to the Plan approved by the stockholders of the Company at the Annual Meeting of Stockholders held May 17, 2011.

(b)	“2013 Amendments” means the amendments to the Plan approved by the stockholders of the Company at the Annual Meeting of Stockholders held August 20, 2013.

(c)	“Act” means the Securities Act of 1933, as amended.

(d)	“Affiliate” means any “parent corporation” or “subsidiary corporation” of the Company as those terms are defined in Code Sections 424(e) and (f), respectively.

(e)	“Agreement” means a written agreement entered into between the Company and the recipient of a Grant which sets forth the terms and conditions of the Grant.

(f)	“Board” means the Board of Directors of the Company.

(g)

“Cause” means, unless otherwise provided in a Participant's Agreement, (i) engaging in (A) willful or gross misconduct or (B) willful or gross neglect, (ii) repeatedly failing to adhere to the directions of superiors or the Board or the written policies and practices of the Company, (iii) the commission of a felony, a crime of moral turpitude or any crime involving the Company, (iv) fraud, misappropriation, dishonesty or embezzlement, (v) incompetence or a material breach of the Participant's employment agreement (if any) with the Company (other than a termination of employment by the Participant), or (vi) any unlawful act detrimental to the Company, all as determined in the sole discretion of the Committee.

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(h)

“Change in Control” means any one of the following events: (i) a complete dissolution or liquidation of the Company, (ii) a sale of substantially all of the assets of the Company, (iii) a merger or combination involving the Company after which the owners of Common Stock of the Company immediately prior to the merger or combination own less than 50% of the outstanding shares of common stock of the surviving corporation, or (iv) the acquisition of more than 25% of the outstanding shares of Common Stock of the Company, whether by tender offer or otherwise, by any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company. The decision of the Committee as to whether a Change in Control has occurred shall be conclusive and binding.

(i)	“Code” means the Internal Revenue Code of 1986, as amended, and any related rules, regulations and interpretations.

(j)

“Committee” means the Compensation Committee of the Board; provided that the Committee shall at all times consist solely of at least two persons who each qualify as a “Non‑Employee Director” under Rule 16b‑3(b)(3)(i) promulgated under the Exchange Act and, to the extent that relief from the limitation of Section 162(m) of the Code is sought, as an “Outside Director” under Section 1.162‑27(e)(3)(i) of the Treasury Regulations.

(k)	“Common Stock” means the Company's Common Stock, par value $0.01, either currently existing or authorized hereafter and any other stock or security resulting from adjustment thereof as described herein, or the Common Stock of any successor to the Company which is designated for the purpose of the Plan.

(l)	“Company” means Flagstar Bancorp, Inc., a Michigan corporation, and any successor or assignee corporation(s) into which the Company may be merged, changed or consolidated; any corporation for whose Securities the Securities of the Company shall be exchanged; and any assignee of or successor to substantially all of the assets of the Company.

(m)	“Disability” means a physical or mental condition, which in the sole and absolute discretion of the Committee is reasonably expected to be of indefinite duration and substantially prevents a Participant from fulfilling his or her duties or responsibilities to the Company or an Affiliate.

(n)	“Effective Date” means the date this Plan is approved by the Company's shareholders.

(o)

“Eligible Persons” means officers, directors and Employees of the Company and its Affiliates and other persons expected to provide significant services (of a type expressly approved by the Committee as covered services for these purposes) to the Company or its Affiliates. The Committee will determine the eligibility of Employees, officers, directors and others expected to provide significant services to the Company and its Affiliates based on, among other factors, the position and responsibilities of such individuals and the nature and value to the Company or its Affiliates of such individual's accomplishments and potential contribution to the success of the Company or its Affiliates.

(p)

“Employee” means an individual, including an officer or director of the Company or an Affiliate, who is employed as a common‑law employee of the Company or an Affiliate. An “Employee” shall not include any person classified by the Company as an independent contractor even if the individual is subsequently reclassified as a common‑law employee by a court, administrative agency or other adjudicatory body. The payment of director's fees by the Company is not sufficient to constitute “employment” of the director by the Company.

(q)	“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder.

(r)	“Exercise Price” means the price per share of Common Stock, determined by the Board or the Committee, at which an Option or SAR may be exercised.

(s)	“Fair Market Value” means the value of one share of Common Stock, determined as follows:

(i)

If the Common Stock is listed on a national stock exchange, the average of the highest and lowest selling prices on the exchange for the date of determination, but if no sales were reported for the date of determination, the average of the highest and lowest selling prices on the exchange for the last preceding date on which there was a sale of Common Stock on such exchange, as determined by the Committee, or such other reasonable basis determined by the Committee using actual transactions in the Common Stock as reported by such market and consistently applied by the Committee.

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(ii)	If the Common Stock is not then listed on a national stock exchange but is traded on an over‑the‑counter market, the average of the closing bid and asked prices for the Common Stock in such over‑the‑counter market for the last preceding date on which there was a sale of Common Stock in such market, as determined by the Committee.

(t)	“Grant” means an award of an Incentive Stock Option, Non‑qualified Stock Option, SAR, Restricted Stock, Restricted Stock Unit, Performance Unit, Performance Share, Incentive Award, Other Award or any combination thereof to an Eligible Person.

(u)	“Incentive Award” means a right granted a Participant under Section 11.4.

(v)	“Incentive Stock Option” means an Option of the type described in Section 422(b) of the Code awarded to an Employee.

(w)	“Non‑qualified Stock Option” means an Option not described in Section 422(b) of the Code awarded to an Eligible Person, the taxation of which is pursuant to Section 83 of the Code.

(x)	“Option” means any option, whether an Incentive Stock Option or a Non‑qualified Stock Option, to purchase shares of Common Stock at a price and for the term fixed by the Committee in accordance with Article VII of the Plan and subject to such other limitations and restrictions in the Plan and the applicable Agreement.

(y)	“Other Award” means a right granted a Participant under Section 11.3.

(z)	“Participant” means any Eligible Person to whom a Grant is made, or the Successors of the Participant, as the context so requires.

(aa)	“Performance Period” means the period established by the Committee during which any performance goals specified by the Committee with respect to a Grant are to be measured.

(ab)	“Performance Share” means a right granted a Participant under Section 11.2.

(ac)	“Performance Unit” means a right granted a Participant under Section 11.1.

(ad)	“Plan” means the Company's 2006 Equity Incentive Plan, as set forth herein, and as the same may from time to time be amended.

(ae)	“Purchase Price” means the Exercise Price times the number of shares of Common Stock with respect to which an Option is exercised.

(af)	“Restricted Stock” means Common Stock granted to a Participant subject to the terms and conditions established by the Committee pursuant to Article IX.

(ag)	“Restricted Stock Unit” means a right granted to a Participant under Article X.

(ah)	“Restriction Period” means the period of time during which restrictions established by the Committee shall apply to a Grant.

(ai)	“Retirement” means, unless otherwise provided by the Committee in the Participant's Agreement, the Termination of Service (other than for Cause) of a Participant:

(i)	on or after the Participant's attainment of age 65; or

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(ii)	on or after the Participant's attainment of age 55, provided the Participant's age plus years of service with the Company or an Affiliate, including service in the employer‑employee relationship, directorship or both, equals or exceeds 75 years.

(aj)	“Stock Appreciation Right” or “SAR” means a right granted to a Participant under Article VIII.

(ak)	“Successor of the Participant” means the legal representative of the estate of a deceased Participant or the person or persons who acquire the right to exercise an Option or SAR by bequest or inheritance or by reason of the death of the Participant.

(al)

“Termination of Service” means the time when the employee‑employer relationship or directorship or other service relationship (sufficient to constitute service as an Eligible Person) between the Participant and the Company or an Affiliate is terminated for any reason, with or without Cause, including, but not limited to, any termination by resignation, discharge, Disability, death or Retirement; provided, however, Termination of Service shall not include: (i) a termination where there is a simultaneous reemployment of the Participant by the Company or an Affiliate or other continuation of service (sufficient to constitute service as an Eligible Person) for the Company or an Affiliate or (ii) an employee who is on military leave, sick leave or other bona fide leave of absence (to be determined in the discretion of the Committee). The Committee, in its absolute discretion, shall determine the effects of all matters and questions relating to Termination of Service, including but not limited to the question of whether any Termination of Service was for Cause and all questions of whether particular leaves of absence constitute Terminations of Employment.

(a)	to determine from time to time the Eligible Persons who are to be awarded Grants and the nature and amount of Grants, and to generally determine the terms, provisions and conditions (which need not be identical) of Grants awarded under the Plan, not inconsistent with the terms of the Plan;

(b)

to construe and interpret the Plan and Grants thereunder and to establish, amend and revoke rules and regulations for administration of the Plan. In this connection, the Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan, in any Agreement or in any related agreements in the manner and to the extent it shall deem necessary or expedient to make the Plan fully effective;

(c)	to amend any outstanding Grant, subject to Sections 8.2(f), 12.3, 12.5 and 12.9, and to accelerate or extend the vesting or exercisability of any Grant, subject to Section 12.3, and to waive conditions or restrictions on any Grants, subject to Section 8.2(f), all to the extent it shall deem appropriate;

(d)	to cancel, with the consent of a Participant or as otherwise permitted by the Plan, outstanding Grants;

(e)	to determine whether, and to what extent and under what circumstances, Grants may be settled in cash, Common Stock, other property or a combination of the foregoing, subject to Section 8.2(f);

(f)	to appoint agents as the Committee deems necessary or desirable to administer the Plan;

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(g)	to provide for the forms of Agreements to be utilized in connection with the Plan, which need not be identical for each Participant;

(h)	to establish any “blackout” period the Committee in its sole discretion deems necessary or advisable; and

(i)	generally to exercise such powers and to perform such acts as are deemed necessary or expedient to carry out the terms of the Plan and to promote the best interests of the Company and its Affiliates with respect to the Plan.

(a)

Grants. Subject to adjustment pursuant to Section 5.4 and except as provided in subsection (b), the maximum number of shares of Common Stock that may be issued under the Plan as a result of any Grants is: (i) 22,682 shares, which is the total shares attributable to any authorized shares not issued or not subject to outstanding awards under the Company's 1997 Employees and Directors Stock Option Plan and 2000 Stock Incentive Plan, both as amended, as of the Effective Date, plus (ii) any shares subject to outstanding awards under the Company's 1997 Employees and Directors Stock Option Plan and 2000 Stock Incentive Plan, both as amended, as of the Effective Date that on or after the Effective Date cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent they are exercised for or settled in vested and nonforfeitable shares), plus (iii) 750,000 shares, plus (iv) 1,500,000 shares effective on the date of adoption of the 2011 Amendments, plus (v) 5,000,000 shares effective on the date of the adoption of the 2013 Amendments.

(b)

Cash‑Settled SARs. Grants of SARs under which the Grant Agreement provides they will be settled only in cash shall not be considered in the limit under subsection (a); provided, however, once made, a Grant of a SAR which will be settled in only cash may not later be amended, modified or otherwise changed to be settled in Common Stock or a combination of Common Stock and cash, as provided in Section 8.2(f).

(a)	Common Stock subject to a Grant that has been forfeited;

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(b)	Common Stock under a Grant that otherwise terminates, fails to vest, expires or lapses without issuance of Common Stock being made to a Participant; and

(c)	Common Stock subject to any Grant that settles in cash or a form other than Common Stock.

(a)	The aggregate number and kind of shares that may be issued under this Plan may be adjusted appropriately; and

(b)	Rights under outstanding Grants made to Eligible Persons hereunder, both as to the number of subject shares and the Exercise Price, may be adjusted appropriately.

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(a)

Termination of Service, Except by Death, Retirement or Disability. Upon any Termination of Service for any reason other than a Participant's death, Retirement or Disability, the Participant has the right, subject to the restrictions of Section 7.4, to exercise his or her Options or SARs at any time within three months after Termination of Service, but only to the extent that, at the date of Termination of Service, the Participant's right to exercise such Options or SARs had accrued pursuant to the terms of the Agreement and had not previously been exercised; provided, however, that, unless otherwise provided in the Agreement, if there occurs a Termination of Service for Cause, any Option or SAR not exercised in full prior to such Termination of Service shall be canceled.

(b)

Death of Participant. If the Participant dies while an Eligible Person or within three months after any Termination of Service other than for Cause, his or her Options or SARs may be exercised in full, subject to the restrictions of Section 7.4, at any time within 24 months after the Participant's death, by the Successor of the Participant, but only to the extent that, at the date of death, the Participant's right to exercise such Options or SARs had accrued, had not been forfeited pursuant to the terms of the Agreement and had not previously been exercised.

(c)

Disability or Retirement of Participant. Upon Termination of Service for reason of Disability or Retirement, a Participant shall have the right, subject to the restrictions of Section 7.4, to exercise his or her Options or SARs in full at any time within 12 months after Termination of Service, but only to the extent that, at the date of Termination of Service, the Participant's right to exercise such Options or SARs had accrued pursuant to the terms of the applicable Agreement and had not previously been exercised.

(a)

Termination of Service, Except by Death, Retirement or Disability. In the event of a Participant's Termination of Service for any reason other than the Participant's death, Retirement or Disability, the Participant's Grants of Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares, Incentive Awards and Other Awards shall be forfeited upon the Participant's Termination of Service.

(b)

Death, Retirement or Disability of Participant. Restricted Stock, Restricted Stock Units and Other Awards shall fully vest on a Participant's Termination of Service by reason of the Participant's death, Retirement or Disability. Performance Units, Performance Shares and Incentive Awards or any award tied to performance may be paid out at a target level and paid or distributed at the same time payments are made to other Participants who did not incur such a Termination of Service as determined by the Committee.

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(a)	Options may be exercised in whole or part at any time within the period permitted for the exercise thereof and shall be exercised by written notice of intent to exercise the Option delivered to the Secretary of the Company at its principal executive offices.

(b)

Except as may otherwise be provided below, the Purchase Price for each Option granted to an Eligible Person shall be payable in full in United States dollars upon the exercise of the Option. In the event the Company determines that it is required to withhold taxes as a result of the exercise of an Option, as a condition to the exercise thereof, an Employee may be required to make arrangements satisfactory to the Company to enable it to satisfy such withholding requirements in accordance with Section 12.8 hereof. If the applicable Agreement so provides, and the Committee otherwise so permits, the Purchase Price may be paid in one or a combination of the following:

(i)	by a certified or bank cashier's check;

(ii)	by the surrender of shares of Common Stock in good form for transfer, owned by the person exercising the Option and having a Fair Market Value on the date of exercise equal to the Purchase Price, or in any combination of cash and shares of Common Stock, as long as the sum of the cash so paid and the Fair Market Value of the shares of Common Stock so surrendered equals the Purchase Price;

(iii)	by cancellation of indebtedness owed by the Company to the Participant; or

(iv)	by any combination of such methods of payment or any other method acceptable to the Committee in its discretion.

(a)

Aggregate Fair Market Value. In the case of Incentive Stock Options granted hereunder, the aggregate Fair Market Value (determined as of the date of the Grant thereof) of the Common Stock with respect to which Incentive Stock Options become exercisable by any Participant for the first time during any calendar year (under the Plan and all other plans maintained by the Company or its Affiliates) shall not exceed $100,000.

(b)

Rules Applicable to Certain Owners. In the case of an individual described in Section 422(b)(6) of the Code (relating to certain 10 % owners), the Exercise Price with respect to an Incentive Stock Option shall not be less than 110 % of the Fair Market Value of a share of Common Stock on the day the Option is granted and the term of an Incentive Stock Option shall be no more than five years from the date of grant.

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(c)

Disqualifying Disposition. If shares of Common Stock acquired upon exercise of an Incentive Stock Option are disposed of in a disqualifying disposition within the meaning of Section 422 of the Code by a Participant prior to the expiration of either two years from the date of grant of such Option or one year from the transfer of such shares to the Participant pursuant to the exercise of such Option, or in any other disqualifying disposition within the meaning of Section 422 of the Code, such Participant shall notify the Company in writing as soon as practicable thereafter of the date and terms of such disposition and, if the Company thereupon has a tax‑withholding obligation, shall pay to the Company an amount equal to any withholding tax the Company is required to pay as a result of the disqualifying disposition.

(d)

Disability. Solely for purposes of the provisions of the Plan as applied to Incentive Stock Options and notwithstanding any other provision of the Plan, “Disability” means a Participant's inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.

(a)	Grants. Each director who is not an Employee on the date he or she takes office as a director on or after the Effective Date shall receive a Grant of 100 Non‑qualified Stock Options as of such date. Each director is entitled to such other Grants (excluding Incentive Stock Options) as the Board may award at any time and from time to time.

(b)	Exercise Price. The Exercise Price of Non‑qualified Stock Options granted to a director equals the Fair Market Value of the Common Stock on such date.

(c)

Term. Non‑qualified Stock Options granted to directors hereunder shall have a term of five years; provided that Grants of Non‑qualified Stock Options expire one year after the date of which a director terminates his or her service as a director, but in no event later than the date on which such Non‑qualified Stock Options would otherwise expire. Grants other than Non‑qualified Stock Options shall have such terms as set by the Board in the applicable Agreement.

(d)

Exercise and Expiration. Unless provided otherwise by the Board in an Agreement, Options and SARs granted to a director hereunder are fully (100%) exercisable on the one‑year anniversary of the date of grant. Directors may exercise Non‑qualified Stock Options in the manner set forth in Section 7.2. Grants to directors pursuant to this Section 7.5 shall be governed by the same provisions for termination in the event of the director's death as contained in Sections 6.4(b) and 6.5(b) and in the event of the director's Disability as contained in Sections 6.4(c) and 6.5(b).

(a)	Price. The grant price of a SAR may not be less than 100% of the Fair Market Value per share of Common Stock on the date of grant, and the exercise price of a SAR may not be less than 100% of the Fair Market Value per share of Common Stock on the date of exercise.

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(b)	Term and Exercisability. The term and exercisability of a SAR shall be no longer than ten (10) years after the Grant Date. The Committee may provide in a SAR Agreement or thereafter for an accelerated exercise of all or part of a SAR upon such events or standards that it may determine, including one or more performance measures.

(c)	Method of Exercise. A Participant shall exercise a SAR by giving written notice of exercise to the Company specifying in whole shares the portion of the SAR to be exercised and if the Participant has more than one Grant of SARs which could be exercised, designating the particular Grant to be exercised.

(d)	No Deferral Features. To the extent necessary to comply with Code Section 409A, the SAR Agreement shall not include any features allowing the Participant to defer recognition of income past the date of exercise.

(e)	Modification. Notwithstanding any provision of the Plan to the contrary, the Committee shall not amend or otherwise modify a Grant of a SAR, which explicitly requires settlement only in cash, after the date of grant to permit settlement in Common Stock or a combination of Common Stock and cash.

(a)	Term. The standard term of a SAR shall be seven (7) years beginning on the Grant Date.

(b)	Exercisability. The standard rate at which a SAR shall be exercisable shall be 25 percent of the Grant on each of the first four annual anniversaries of the Grant Date.

(c)	Nontransferability of Stock Appreciation Rights. The standard SAR Agreement shall provide that no SAR shall be sold, assigned, margined, transferred, encumbered, conveyed, gifted, alienated, hypothecated, pledged or otherwise disposed of, other than by will or the laws of descent and distribution, and all SARs shall be exercisable during the Participant's lifetime only by the Participant.

(a)	Restrictions. The Committee may condition the grant or vesting of the Restricted Stock on the performance of services for the Company or the attainment of performance goals, or both.

(b)

Delivery. The Company shall issue the shares of Restricted Stock to each recipient who is awarded a Grant of Restricted Stock either in certificate form or in book entry form, registered in the name of the recipient, with legends or notations, as applicable, referring to the terms, conditions and restrictions applicable to any such Grant and record the transfer on the Company's official shareholder records; provided that the Company may require that any stock certificates evidencing Restricted Stock granted hereunder be held in the custody of the Company until the restrictions thereon shall have lapsed, and that as a condition of any Grant of Restricted Stock, the Participant shall have delivered a stock power, endorsed in blank, relating to the Common Stock covered by such Grant.

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(a)	Restriction Period. Standard Grants of Restricted Stock will vest in 50% increments on each annual anniversary of the date of grant beginning with the first anniversary.

(b)	Restrictions. The standard restrictions applicable to Restricted Stock are continued service of the Participant for the Company during the Restriction Period.

(c)	Rights. The standard terms of a Restricted Stock Agreement shall provide that the Participant shall have, with respect to the Restricted Stock, all of the rights of a shareholder of the Company holding the class of Common Stock that is the subject of the Restricted Stock, including, if applicable, the right to vote the shares and the right to receive any cash dividends, subject to Section 6.3.

(a)	Restrictions. The Committee may condition the grant or vesting of the Restricted Stock Units on the performance of services for the Company, the attainment of performance goals, or both. To the extent tied to performance, the Company will comply with Section 11.5 if it desires to obtain a deduction.

(b)	Rights. The Committee shall be entitled to specify in a Restricted Stock Unit Agreement the extent to which and on what terms and conditions the applicable Participant shall be entitled to receive payments corresponding to the dividends payable on the Common Stock.

(a)	Restriction Period. The standard Restriction Period shall be one year from the Grant Date.

(b)	Restrictions. The standard restrictions applicable to a Restricted Stock Unit are continued service of the Participant for the Company during the Restriction Period.

(c)	Rights. The standard terms of the Restricted Stock Units shall provide that the Participant is entitled to receive current payments corresponding to the dividends payable on the Common Stock.

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(a)	Awards subject to this Section must vest (or may be granted or vest) solely on the attainment of one or more objective performance goals unrelated to term of employment. Grants will also be subject to the general vesting provisions provided in the Agreement and this Plan.

(b)

Within the first 90 days of the year, but in no event later than completion of 25% of the Performance Period or such earlier date as required under Section 162(m), the Committee must establish performance goals (in accordance with subsection (e) below) in writing (including but not limited to Committee minutes) for Covered Employees who will receive Grants that are intended as qualified performance‑based compensation. The outcome of the goal must be substantially uncertain at the time the Committee actually establishes the goal.

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(c)	The performance goal must state, in terms of an objective formula or standard, the method for computing the Grant payable to the Participant if the goal is attained.

(d)	The terms of the objective formula or standard must prevent any discretion being exercised by the Committee to later increase the amount payable that otherwise would be due upon attainment of the goal, but may allow discretion to decrease the amount payable.

(e)

The material terms of the performance goal must be disclosed to and subsequently approved in a separate vote by the stockholders before the payout is executed, unless they conform to one or any combination of the following goals/targets, each determined in accordance with generally accepted accounting principles or similar objective standards (and/or each as may appear in the annual report to stockholders, Form 10K or Form 10Q) as applied to the Company's activities or performance or relative to comparison companies and as applied to the Company as a whole or business units or divisions: revenue; revenue growth; earnings (including earnings per share, earnings before interest, taxes, depreciation and amortization, earnings before interest and taxes, and earnings before or after taxes); operating income; gross profit; net income; profit margins; earnings per share; return on assets; return on equity; return on invested capital; economic value‑added; efficiency ratio (other expenses as a percentage of other income plus net interest income); stock price; gross dollar volume; cost containment or reduction; total shareholder return; market share; asset growth; deposit growth; book value; expense deposit ratios; management; cash flow; customer satisfaction; regulatory compliance metrics; CAMELS rating; and loan originations.

(f)	A combination of the above performance goals may be used with a particular Agreement evidencing a Grant.

(g)

The Committee in its sole discretion in setting the goals/targets in the time prescribed above may provide for the making of equitable adjustments (singularly or in combination) to the goals/targets in recognition of unusual or nonrecurring events for the following qualifying objective items: asset impairments under Statement of Financial Accounting Standards No. 121, as amended or superseded; acquisition‑related charges; accruals for restructuring and/or reorganization program charges; merger integration costs; merger transaction costs; any profit or loss attributable to the business operations of any entity or entities acquired during the period of service to which the performance goal relates; tax settlements; any extraordinary, unusual‑in‑nature, infrequent‑in‑occurrence or other nonrecurring items (not otherwise listed) as described in Accounting Principles Board Opinion No. 30; any extraordinary, unusual‑in‑nature, infrequent‑in‑occurrence or other nonrecurring items (not otherwise listed) in management's discussion and analysis of financial condition results of operations, selected financial data, financial statements and/or in the footnotes, each as appearing in the annual report to stockholders; unrealized gains or losses on investments; charges related to derivative transactions contemplated by Statement of Financial Accounting Standards No. 133, as amended or superseded; and compensation charges related to FAS 123 (Revised) or its successor provision.

(h)

The Committee must certify in writing prior to payout that the performance goals and any other material terms were in fact satisfied. In the manner required by Section 162(m) of the Code, the Committee shall, promptly after the date on which the necessary financial and other information for a particular Performance Period becomes available, certify the extent to which performance goals have been achieved with respect to any Grant intended to qualify as “performance‑based compensation” under Section 162(m) of the Code. In addition, the Committee may, in its discretion, reduce or eliminate the amount of any Grant payable to any Participant, based on such factors as the Committee may deem relevant.

(i)	Limitation on Grants.

(i)	If a Grant is canceled, the canceled Grant continues to be counted against the maximum number of shares for which Grants may be awarded to the Participant under the Plan, but not towards the total number of shares reserved and available under the Plan pursuant to Section 5.1.

(ii)	During any fiscal year, the maximum aggregate number of shares of Common Stock for which Options and Stock Appreciation Rights may be granted to any Covered Employee shall not exceed 1,300,000 shares.

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(iii)	During any fiscal year, the maximum aggregate numbers of shares of Common Stock for which Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares and Other Awards may be granted to any Covered Employee shall not exceed 1,300,000 shares.

(iv)	During any fiscal year, the maximum cash payment hereunder for performance‑based compensation purposes under Code Section 162(m) to any Covered Employee shall not exceed $6,000,000.

(v)	In the case of an outstanding Grant intended to qualify for the performance‑based compensation exception under Section 162(m), the Committee shall not, without approval of a majority of the shareholders of the Company, amend the Plan or the Grant in a manner that would adversely affect the Grant's continued qualification for the performance‑based exception.

(vi)

Effective for any Performance Period beginning after January 1, 2009, notwithstanding any provision of the Plan to contrary, a Covered Employee whose employment with the Company terminates mid‑Performance Period, other than a termination because of death or Disability, shall not be entitled to a payout of a performance‑based Grant in any amount greater than the amount payable based on actual performance during the Performance Period, prorated based on the number of days during the Performance Period the Covered Employee was in employment with the Company.

(a)

Ability. Within the limitations of the Plan, including the limits of Sections 8.2(f) and 12.9, the Committee may modify, extend or renew outstanding Grants, accept the cancellation of outstanding Grants (to the extent not previously exercised) to make new Grants in substitution therefor, accelerate vesting and waive any restrictions, forfeiture provisions or other terms and conditions on Grants, unless such action would not satisfy any applicable requirements of Rule 16b‑3 of the Exchange Act; provided, however, no such action shall result in an adjustment to the performance goals of any Grant intended to be exempt under Code Section 162(m) if the action results in such Grant not being deductible or increases the amount of compensation otherwise payable to a Participant. The foregoing notwithstanding, no such action shall apply to a Grant without the consent of the Participant if it would alter or impair any rights or obligations under any Grant previously made.

(b)

Code Section 409A Limitation. Any action taken under subsection (a) hereunder to any Grant that is considered “deferred compensation” within the meaning of Section 409A of the Code shall be made in compliance with the requirements of Code Section 409A. Any action taken under subsection (a) hereunder to any Grant that is not considered “deferred compensation” within the meaning of Code Section 409A shall be made in a manner to ensure that after such action, the Grant either continues not to be subject to Code Section 409A or complies with the requirements of Code Section 409A.

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(a)	Legality of Issuance. The issuance of any Common Stock in connection with a Grant shall be contingent upon the following:

(i)	the obligation of the Company to sell Common Stock with respect to Grants shall be subject to all applicable laws, rules and regulations, including all applicable federal and state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Committee;

(ii)	the Committee may make such changes to the Plan as may be necessary or appropriate to comply with the rules and regulations of any government authority or to obtain tax benefits; and

(iii)

each Grant is subject to the requirement that if at any time the Committee determines, in its discretion, that the listing, registration or qualification of Common Stock issuable pursuant to the Plan is required by any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the Grant or the issuance of Common Stock, no Grants shall be granted or payment made or Common Stock issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions in a manner acceptable to the Committee.

(b)

Restrictions on Transfer. Regardless of whether the offering and sale of Common Stock under the Plan has been registered under the Act or has been registered or qualified under the securities laws of any state, the Company may impose restrictions on the sale, pledge or other transfer of shares of Common Stock (including the placement of appropriate legends on stock certificates) if, in the judgment of the Company and its counsel, such restrictions are necessary or desirable in order to achieve compliance with the provisions of the Act, the securities laws of any state or any other law. In the event that the sale of Common Stock under the Plan is not registered under the Act but an exemption is available which requires an investment representation or other representation, each Participant shall be required to represent that such shares of Common Stock are being acquired for investment, and not with a view to the sale or distribution thereof, and to make such other representations as are deemed necessary or appropriate by the Company and its counsel. Any determination by the Company and its counsel in connection with any of the matters set forth in this Section shall be conclusive and binding on all persons.

(c)	Registration or Qualification of Securities. The Company may, but shall not be obligated to, register or qualify the issuance of Grants and/or the sale of Common Stock under the Act or any other applicable law. The Company shall not be obligated to take any affirmative action in order to cause the issuance of Grants or the sale of Common Stock under the Plan to comply with any law.

(d)	Exchange of Certificates. If, in the opinion of the Company and its counsel, any legend placed on a stock certificate representing Common Stock sold under the Plan is no longer required, the holder of such certificate shall be entitled to exchange such certificate for a certificate representing the same number of shares of Common Stock but lacking such legend.

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(a)	It is the intention of the Company that no Grant shall be “deferred compensation” subject to Section 409A of the Code, unless and to the extent that the Committee specifically determines otherwise as provided below, and the Plan and the terms and conditions of all Grants shall be interpreted accordingly.

(b)

The terms and conditions governing any Grants that the Committee determines will be subject to Section 409A of the Code, including any rules for elective or mandatory deferral of the delivery of cash or Common Stock pursuant thereto and any rules regarding treatment of such Grants in the event of a Change in Control, shall be set forth in the applicable Agreement and shall comply in all respects with Section 409A of the Code.

(c)	Following a Change in Control, no action shall be taken under the Plan that will cause any Grant that the Committee has previously determined is subject to Section 409A of the Code to fail to comply in any respect with Section 409A of the Code without the written consent of the Participant.

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(1)	The election of directors: Walter Carter, Alessandro DiNello, Jay J. Hansen, John D. Lewis, David J. Matlin, James A. Ovenden, Peter Schoels, Michael J. Shonka, and David L. Treadwell.

(3)	To hold an advisory (non-binding) vote on the frequency of future advisory votes on named executive officer compensation.

(4)	To reapprove the performance criteria set forth in the Flagstar Bancorp, Inc. 2006 Equity Incentive Plan.

(5)	To approve an amendment to the Flagstar Bancorp, Inc. 2006 Equity Incentive Plan to increase the number of shares available for awards and the individual award limits thereunder.

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(6)	To ratify the appointment of Baker Tilly Virchow Krause, LLP as the Company's independent registered public accountants for the year ending December 31, 2013.

(7)	The transaction of such other business as may properly come before the Annual Meeting or any adjournments thereof.