1033012--3/15/2010--FLAGSTAR_BANCORP

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Defaults by another larger financial institution could adversely affect financial markets generally. We may be required to raise capital at terms that are materially adverse to our stockholders. If we cannot effectively manage the impact of the volatility of interest rates our earnings could be adversely affected. If we do not meet the NYSE continued listing requirements, our common stock may be delisted. Current and further deterioration in the housing market, as well as the number of programs that have been introduced to address the situation by government agencies and government sponsored enterprises, may lead to increased costs to service loans which could affect our margins or impair the value of our mortgage servicing rights. Current and further deterioration in the housing and commercial real estate markets may lead to increased loss severities and further increases in delinquencies and non-performing assets in our loan portfolios. Consequently, our allowance for loan losses may not be adequate to cover actual losses, and we may be required to materially increase our reserves. Changes in the fair value or ratings downgrades of our securities may reduce our stockholders equity, net earnings, or regulatory capital ratios Certain hedging strategies that we use to manage our investment in mortgage servicing rights may be ineffective to offset any adverse changes in the fair value of these assets due to changes in interest rates and market liquidity. Our ability to borrow funds, maintain or increase deposits or raise capital could be limited, which could adversely affect our liquidity and earnings. Our business is highly regulated and subject to change. We are subject to the restrictions and conditions of supervisory agreements with the OTS. Failure to comply with the supervisory agreements could result in further enforcement action against us. Increases in deposit insurance premiums and special FDIC assessments will adversely affect our earnings. We are subject to heightened regulatory scrutiny with respect to bank secrecy and anti-money laundering statutes and regulations. Future dividend payments and common stock repurchases may be restricted. We depend on our institutional counterparties to provide services that are critical to our business. If one or more of our institutional counterparties defaults on its obligations to us or becomes insolvent, it could have a material adverse affect on our earnings, liquidity, capital position and financial condition. We use estimates in determining the fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation. Our HELOC funding reimbursements have been negatively impacted by loan losses. Our secondary market reserve for losses could be insufficient Our home lending profitability could be significantly reduced if we are not able to resell mortgages. Our holding company is dependent on the Bank for funding of obligations and dividends. We may be exposed to other operational and reputational risks. We have many new members of our executive team. The potential loss of key members of senior management or the inability to attract and retain qualified relationship managers in the future could affect our ability to operate effectively. The network and computer systems on which we depend could fail or experience a security breach. Our loans are geographically concentrated in only a few states. We are subject to environmental liability risk associated with lending activities. Severe weather, natural disasters, acts of war or terrorism and other external events could significantly impact our business. General business, economic and political conditions may significantly affect our earnings. We are a controlled company that is exempt from certain NYSE corporate governance requirements. Our controlling stockholder has significant influence over us, including control over decisions that require the approval of stockholders, whether or not such decisions are in the best interests of other stockholders.

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1033012--3/15/2010--FLAGSTAR_BANCORP_INC