We are subject to capital standards requirements, including requirements of the Dodd-Frank Act and those developed by the Bank's regulators based on the Basel Committee on Banking Supervision, commonly referred to as Basel III. Basel III established a qualifying criteria for regulatory capital, including limitations on the amount of DTAs and MSRs that may be held without triggering higher capital requirements. Effective January 1, 2020, Basel III currently(post-regulatory simplification) limits the amount of MSRs and DTAs each to 1025 percent of CET1, individually, and 15CET1. Volatility of interest rates, market disruption or the financial weakness of some traditional buyers of mortgage servicing rights could cause uncertainty with respect to our ability to sell mortgage servicing rights. Should the level of mortgage servicing rights exceed 25 percent of CET1,common equity tier one capital, we are required to deduct the excess in the aggregate.determining our regulatory capital levels. If we are unable to sell mortgage servicing rights on a timely basis, there could be negative impacts to our regulatory capital or an impact on our pricing for mortgage loans which could negatively impact our mortgage origination business and our financial condition.

As of December 31, 2018,2020, we had $290$329 million in MSRs and a MSR to Common Equity Tier 1 Capital ratio of 23.016.2 percent. We produced, on average, approximately $89$67 million of new MSRs per quarter in 20182020 and we expect to continue to generate MSRs going forward. Considering the volume of MSRs that we generate, we must continually sell MSRs to manage the concentration of this asset. In 2018,2020, we sold $371$71 million in MSRs and as of December 31, 2018,2020, we had pending MSR sales with a fair value of $44$8 million, which closed during the first quarter of 2019.2021. In 2020, we also sold $5.1 billion of outstanding principal via flow sale arrangements, in which Flagstar assigns the servicing right to a third-party investor at the time of sale and the rights, risks, and rewards of holding the MSR asset are never titled in the name of Flagstar. While our established plan to manage our MSR concentration incorporates our production volumes and required sales, no assurance can be given that we will be able to do so. Additionally, to manage our MSR concentration, we may have to sell our MSRs at a price less than their fair value due to market constraints present at the time of sale which could have an adverse effect on our financial condition and results of operations.

On October 27, 2017, the agencies issued a notice of proposed rulemaking (NPR) which would simplify certain aspects of the Basel III capital rules. The agencies expect that the capital treatment    Refer to MD&A - Regulatory Capital Simplification and transition provisionsNote 18 for items covered by this final rule will change once the simplification proposal is finalized and effective. Specifically, the proposal would increase the limit on MSRs to 25 percent of CET1 and eliminate the aggregate 15 percent CET1 deduction threshold for MSRs and temporary difference DTAs. The increase in the limit on MSRs would allow us to hold up to $347 million in MSRs without being punitive to our capital ratios. The regulators have not yet issued their final rule.more detail.

Our ALLL,ACL, which reflects our estimate of suchexpected lifetime losses inherent in the HFI loan portfolio and our reserve for unfunded commitments, at December 31, 2018,2020, may not be adequatesufficient to cover actual credit losses. If this allowance is insufficient, future provisions for credit losses could adversely affect

Our residential mortgage loan portfolio is geographically concentrated in certain states, including California and Michigan which comprise approximately 5255 percent of the portfolio. In addition, our commercial loan portfolio has a concentration of Michigan lendingMichigan-lending relationships. Approximately 4440 percent of our CRE loans are collateralized by properties in Michigan, and 2935 percent of our C&I borrowers are located in Michigan. These concentrations have made, and will continue to make, our loan portfolio particularly susceptible to downturns in thethese local economies and the real estate and mortgage markets in these areas. Adverse conditions that are beyond our control may affect these areas, including unemployment, inflation, recession, natural disasters, declining property values, municipal bankruptcies and other factors which could increase both the probability and severity of defaults in our loan portfolio, reduce our ability to generate new loans and negatively affect our financial results.

At December 31, 2018,2020, our adjustable-rate warehouse lines of credit granted to other mortgage lenders was $3.8$10.5 billion of which $1.5$7.7 billion was outstanding. There may be risks associated with the mortgage lenders that borrow from the Bank, including credit risk, inadequate underwriting, and potential external fraud.fraud against the Bank. At December 31, 2018,2020, our largest borrower had an outstanding advancebalance of $80$180 million. A default by one of our larger warehouse borrowers could result in a large loss.loss relative to our size. Additionally, adverse changes to industry competition, mortgage demand and the interest rate environment may have a negative impact on warehouse lending.

We require substantial liquidity to repay our customers' deposits, fulfill loan demand, meet borrowing obligations, as they come due, and fund our operations under both normal operating environments and unforeseen circumstances causingwhich may cause liquidity stress. Our liquidity could be impaired by our inability to access the capital markets or unforeseen outflows of deposits. Our access to liquidity, including deposits, as well as theand cost of that liquidity is dependent on various factors a number of which could make funding more difficult, more expensive or unavailable on any terms. These factors include: losses orincluding, but not limited to, declining financial results, material changes to operating margins,results; balance sheet and financial leverage on an absolute basis or relative to peers, changes within the organization, specific events that impact our financial condition or reputation,leverage; disruptions in the capital

by our borrowing facilities, then we may have to limit our growth, reduce the number of loans we are able to originate, or take actions that could have other negative effects on our operations.

    

As a holding company with no significant assets other than the capital stock of the Bank and cash on hand, our ability to service our debt, including interest payments on our senior notes and trust preferred securities,securities; pay dividends,dividends; repurchase shares of our common stock,stock; pay for certain services we purchase from the BankBank; and cover operating expenses, depend upon available cash on hand and the receipt of dividends from the Bank. The holding company had cash and cash equivalents of $201$305 million at December 31, 2018,2020, or approximately 3.21.4 years of future anticipated cash outflows, dividend payments, share repurchases, and debt service coverage when excluding the redemption of $250 million of senior notes which mature on July 15, 2021. On January 29, 2019, our Board of Directors approved an accelerated share repurchase ("ASR") agreement with Wells Fargo, N.A. to repurchase up to $50 million of the Company's common stock.coverage. Operating expenses, which include costs paid to the Bank, totaled $34$39 million for the year ended December 31, 2018.2020. On January 22, 2021, we repaid our Senior Notes which reduced the holding company's cash and cash equivalents to $42 million as of January 31, 2021. The declaration and payment of dividends by the Bank on all classes of its capital stock isare subject to the discretion of the Bank's Board of Directors and to applicable regulatory and legal limitations. If the Bank does not, or cannot, make sufficient dividend payments to us, we may not be able to service or repay our debt when it comes due, which could have a materialmaterially adverse effect on our financial condition and results of operations or could cause us to take other actions which could be materially detrimental.detrimental to our shareholders.

The Dodd-Frank Act required the FDIC to substantially revise its regulations for determining the amount of an institution's deposit insurance premiums. Consequently, the FDIC has defined the deposit insurance assessment base for an insured depository institution as average consolidated total assets during the assessment period minus average Tier 1 Capital. Our assessment rate is determined bythrough the use of a scorecard that combines our CAMELS ratings with certain other financial information. Changes in the level and mix of these financial components in the scorecard may result in a higher assessment rate. The FDIC may determine that we present a higher risk to the DIF than other banks due to various factors. These factors include significant risks relating to interest rates, loan portfolio and geographic concentration, concentration of high credit risk loans, increased loan losses, regulatory compliance, existing and future litigation, and other factors. As a result, we could be subject to higher deposit insurance premiums and special assessments in the future that could adversely affect our earnings. The Bank’s deposit insurance premiums

Our businesses are increasingly dependent on our ability to process, record and monitor a large number of complex transactions and data.data efficiently and accurately. If our internal information technology systems fail, we may be unable to conduct business for a period of time, which may impact our financial results if that interruption is sustained. In addition, our reputation with our customers or business partners may suffer, which could have a further, long-term impact on our financial results.

Because we conduct part of our business over the Internetinternet and outsource a significant number of our critical functions to third parties, our operations depend on our third-party service providers to maintain and operate their own technology systems. To the extent these third parties’ systems fail, despite our monitoring and contingency plans, we may be unable to conduct business or provide certain services, and we may face financial and reputational losses as a result.

We rely on the ability of our employees and systems to process a wide variety of transactions. Many of the transactions we process may be of high dollar value, such as those related to mortgage lending and warehouse advances. In 2018,2020, we originated a total of $32.5$48 billion in residential mortgage loans and processed $33.9$115 billion of warehouse lending advances. We face operational risk from, but not limited to, the risk of fraud by employees or persons outside our company, the execution of unauthorized transactions, errors relating to transaction processing and technology, breaches of our internal control systems or failures of those of our suppliers or counterparties, compliance failures, cyber-attacks, technology failures, orsystem failures, vendor failures, unforeseen problems related to system implementations or upgrades, business continuation and disaster recovery issues, and other external

Financial products and services have become increasingly technologically driven.dependent on technology. We may not be able to respond to technological innovations as quickly as our competitors do. Certain of our competitors are making significantly greater investments and allocating significantly more in financial resources toward technological innovations and digital offerings than we historically have. Our ability to meet the needs of our customers and introduce competitive products in a cost-efficient manner depends on our responsiveness to technological advances, investment in new technology as it becomes available, and obtaining and maintaining related essential personnel. Furthermore, the introduction of new technologies and products by financial technology companies and platforms may adversely affect our ability to maintain our customer base, obtain new customers or successfully grow our business. The failure to respond to the product demands of our customers, due to cost, proficiency, or otherwise could have a materialmaterially adverse impact on our business and, therefore, on our financial condition and results of operations.

Cybersecurity related attacks are attempted on an ongoing basis which pose a risk of data breaches relative to the processing of consumer transactions that contain customers’ personally identifiable information.    As a part of conducting our business, we receive, transmit and store a large volume of personally identifiable information and other usersensitive data either on our network, or in the cloud.cloud, or on third party networks and systems. We, and our third-party providers, have been in the past and may in the future be subject to cybersecurity attacks. We, and our third-party providers, are regularly the subject of attempted attacks and the ability of the attackers continues to grow in sophistication. Further, we may not know that an attack occurred until well after the event. Even after discovering an attempt or breach occurred, we may not know the extent of the impact of the attack for some period of time. Such attacks may interrupt our business or compromise the sensitive data of our customers and employees. There can be no assurance that a cybersecurity incident will not have a material impact on our business in the future.

Cybersecurity risks for banking institutions have increased significantly in recent years due to opportunistic threats related to COVID-19, supply chain attacks, foreign actors, new technologies, the reliance on technology to conduct financial transactions and the increased sophistication of organized crime and hackers. A cybersecurity attack, or information security breach, phishing or other social engineering incident could adversely impact our ability to conduct business due to the potential costs for remediation, protection and litigation andas well as reputational damage with customers, business partners and investors.

a third-party provider upon which we rely, fail to comply with applicable privacy policies or federal, state, local or international laws and regulations or experience any compromise of security that results in the unauthorized release of personally identifiable information or other usersensitive data, those events could damage the reputation of our business and discourage potential users from utilizing our products and services. In addition, weinsurance may have to bearnot cover the cost of mitigating identity theft concerns or responding to and mitigating a cybersecurity incident, and we may be subject to fines or legal proceedings by governmental agencies or consumers. Any of these events could adversely affect our business and financial condition.

Servicing revenue makes up approximately 1112 percent of our total revenue and contributed approximately $1.8$7 billion in average custodial deposits during 2018.2020. At December 31, 2018,2020, we had relationships with 7six owners of MSRs, excluding ourselves, infor which we act as servicer or subservicer for the mortgage loans they own. Due to the limited number of relationships, discontinuation of existing agreements with any of those third parties or adverse changes in contractual terms could have a significant negative impact to our mortgage servicing revenue. The terms and conditions in which a master servicer may terminate subservicing contracts are broad and in some instances, could be exercised at the discretion of the master servicer without requiring cause. Additionally, the master servicer directs the oversight of custodial deposits associated with serviced loans and, to the extent allowable, could choose to transfer the oversight of the Bank's custodial deposits to another depository institution. Further, as servicer or subservicer of loans, we have certain contractual obligations, including foreclosing on defaulted mortgage loans or, to the extent applicable, considering alternatives to foreclosure. If we commit a

When mortgage loans are sold by us, we make customary representations and warranties to purchasers, guarantors and insurers, including the Agencies, about the mortgage loans and the manner in which they were originated. Whole loan sale agreements may require us to repurchase or substitute mortgage loans, or indemnify buyers against losses, in the event we breach these representations or warranties. In addition, we may be required to repurchase mortgage loans as a result of early payment default of the borrower or we may be required to pay fees. We may also arebe subject to litigation relating to these representations and warranties which may result in significant costs. With respect to loans that are originated through our broker or correspondent channels, the remedies we have available against the originating broker or correspondent, if any, may not be as broad as the remedies available to purchasers, guarantors and insurers of mortgage loans against us. We also face further risk that the originating broker or correspondent, if any, may not have the financial capacity to perform remedies that otherwise may be available. Therefore, if a purchaser, guarantor or insurer enforces its remedies against us, we may not be able to recover losses from the originating broker or correspondent. If repurchase and indemnity demands increase and such demands are valid claims, our liquidity, results of operations and financial condition may also be adversely affected.

For certain investors and/or certain transactions, we may be contractually obligated to repurchase a mortgage loan or reimburse the investor for credit or other losses incurred on the loan as a remedy for servicing errors with respect to the loan. If we have increased repurchase obligations because of claims for which we did not satisfy our obligations, or increased loss severity on such repurchases, we may have a significant reduction to noninterest income or an increase to noninterest expense. We may incur significant costs if we are required to, or if we elect to, re-execute or re-file documents or take other action in our capacity as a servicer in connection with pending or completed foreclosures. We may incur litigation costs if the validity of a foreclosure action is challenged by a borrower. Any of these actions may harm our reputation or negatively affect our servicing business and, as a result, our profitability.

In 2018,2020, approximately 8670 percent of our residential first mortgage volume depended upon the use of third partythird-party mortgage originators, i.e. mortgage brokers and correspondent lenders, who are not our employees. These third parties originate mortgages andor provide services to many different banks and other entities. Accordingly, they may have relationships with, or loyalties to, such banks and other parties that are different from those they have with or to us. Failure to maintain good relations with such third partythird-party mortgage originators could have a negative impact on our market share which would negatively impact our results of operations.

We rely on third partythird-party mortgage originators to originate and document the mortgage loans we purchase or originate. While we perform due diligence on the mortgage companies with whom we do business andas well as review the loan files and loan documents we purchase to attempt to detect any irregularities or legal noncompliance, we have less control over these originators than employees of the Bank.

Due to regulatory scrutiny, our third partythird-party mortgage originators could choose or be required to either reduce the scope of their business or exit the mortgage origination business altogether. The TILA-RESPA Integrated Disclosure Rule issued by the CFPB establishes comprehensive mortgage disclosure requirements for lenders and settlement agents in connection with most closed-end consumer credit transactions secured by real property. The rule requires certain disclosures to be provided to consumers in connection with applying for and closing on a mortgage loan. The rule also mandates the use of specific disclosure forms, timing of communicating information to borrowers, and certain record keeping requirements. The ongoing administrative burden and the system requirements associated with complying with these rules or potential changes to these rules could impact our mortgage volume and increase costs. In addition, these arrangements with third partythird-party mortgage originators and the fees payable by us to such third parties could be subject to regulatory scrutiny and restrictions in the future.

introduction and development of new lines of business and/or new products or services may not be achieved, and price and profitability targets may not prove feasible, which could result in the public market, or as a result of actions taken by MP Thrift, could adversely affect the trading price of Flagstar’s common stock.

    At any given time, we are involved with a number of risk factors islegal and regulatory examinations as a part of the routine reviews conducted by regulators and other parties, which may involve consumer protection, employment, tort, and numerous other laws and regulations. Proceedings or actions brought against us may result in judgments, settlements, fines, penalties, injunctions, business improvement orders, consent orders, supervisory agreements, restrictions on our business activities, or other results adverse to us, which could materially and negatively affect our business. If such claims and other matters are not exhaustive. Other risk factors are described elsewhere hereinresolved in a manner favorable to us, they may result in significant financial liability and/or adversely affect the market perception of us and our products and services as well as impact customer demand for those products and services. Some of the laws and regulations to which we are subject may provide a private right of action that a consumer or class of consumers may pursue to enforce these laws and regulations. We have been, and may be in the future, subject to stockholder class and derivative actions, which could seek significant damages or other reportsrelief. Any financial liability or reputational damage could have a materially adverse effect on our business, which could have a materially adverse effect on our financial condition and documentsresults of operations. Claims asserted against us can be highly complicated and slow to develop, making the outcome of such proceedings difficult to predict or estimate early in the process. As a participant in the financial services industry, it is likely that we file withwill be exposed to a high level of litigation and regulatory scrutiny relating to our business and operations.

    Although we establish accruals for legal or furnishregulatory proceedings when information related to the SEC. Other factorsloss contingencies represented by those matters indicates both that a loss is probable and that the amount of loss can be reasonably estimated, we do not have accruals for all legal or regulatory proceedings where we face a risk of loss. Due to the inherent subjectivity of the assessments and unpredictability of the outcome of legal and regulatory proceedings, amounts accrued may not represent the ultimate loss to us from the legal and regulatory proceedings in question. As a result, our ultimate losses may be significantly higher than the amounts accrued for legal loss contingencies.

    We are, and will continue to be, dependent upon our management team and other key personnel. Losing the services of one or more key members of our management team or other key personnel could adversely affect our operations. In addition, COVID-19 increases the risk that certain senior executive officers or a member of the Board of Directors could become ill, causing them to be incapacitated or otherwise unable to perform their duties for an extended absence. Furthermore, because of the nature of the disease, multiple people working in close proximity could also cause results to differ from our expectations may not be described herein orbecome ill, potentially resulting in any such report or document.the same department having extended absences simultaneously; a scenario which could negatively impact the efficiency and effectiveness of processes and internal controls throughout the Bank.

None.

    

Not applicable.

Our common stock trades on the NYSE under the trading symbol FBC."FBC". At December 31, 2018,2020, there were 57,749,46452,656,067 shares of our common stock outstanding held by 11,74620,107 stockholders of record.

For information with respect to securities to be issued under our equity compensation plans, see Part III, Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, of which certain information is hereby incorporated by reference.