EXHIBIT 10.40
February 14, 2013
Daniel J. Landers

Dear Dan:
As you are aware, Flagstar Bank, FSB (the “Bank”), a wholly owned subsidiary of
Flagstar Bancorp, Inc. (the “Company”) is currently undergoing a change in its
operational structure. During this period, it is critical that the Bank retain
certain employees to continue to provide necessary services to the Bank and its
clients. You have been identified as such an employee.
To ensure your continued commitment to the Bank and its clients, the Bank and
you have mutually decided to modify your employment relationship as set forth
herein.
1.
You hereby confirm your resignation, effective December 31, 2012, as the Bank's
Executive Vice President and Chief Credit Officer. Beginning January 1, 2013,
your position with the Bank is Executive Vice President and Senior Advisor to
the Bank's Chief Executive Officer.

2.
Your compensation and benefits in 2013 shall be the same as you enjoyed as of
December 31, 2012, except for the following adjustments:

A.
Your cash salary will be $24,230.76 bi-weekly, representing an annualized rate
of $630,000; and

B.
Your share salary will be $18,076.92 bi-weekly, representing an annualized rate
of $470,000.

On your next pay date (February 15, 2013), those compensation adjustments will
be made retroactive as of January 1, 2013, subject to the Bank's receipt from
you of a properly signed and executed Release of Claims Agreement, in the form
attached hereto as Exhibit A, and the expiration of the Revocation Period (as
defined therein).
3.
The Bank shall provide you with retention payments specified below (the
“Retention Payment(s)”) designed to encourage you to remain employed by the Bank
through June 30, 2013 and to provide such assistance to the Bank as the Bank's
Chief Executive Officer or President may reasonably request in the following
areas:

A.
Transitional support to Hugh Boyle, who has been appointed the Bank's Chief Risk
Officer (subject to receipt of OCC non-objection) and whose employment with the
Bank commenced on January 22, 2013;

B.
Transitional support to Joseph Redoutey, the Bank's Chief Credit Officer, who
assumed that position effective as of January 1, 2013;

C.
Assistance in the process of resolving by June 30, 2013 all “matters requiring
attention” or MRAs from the OCC that are unresolved as the date of this letter
agreement and that relate to the Bank's ALLL, Rep & Warranty Reserve and Loan
Concentration Limits.

D.
Assistance in providing oversight of, and recommendations regarding, the process
of securing as promptly as practicable the required borrower, agent and consents
required by, and effecting the closings under, (1) the Transaction Purchase and
Sale Agreement, dated as of December 31, 2012, between the Bank and CIT Finance
LLC (the “CIT Agreement”) and (2) the Asset and Portfolio Purchase and Sale
Agreement, dated February 5, 2013, between the Bank and Customers Bank (the
“Customers Agreement”).

E.
It being understood that the Bank's receipt of the consents referenced in
paragraph 3.D are not within your individual control and therefore that Bank's
obligation to make the Retention Payments is not dependent solely upon when such
consents are in fact obtained or when the closings occur, you acknowledge that
the Bank's goals in paragraph 3.D above are to

(i)
Obtain by February 22, 2013 for the CIT Agreement consents for the transfer of
loans and leases representing at least 50% of consents required under that
agreement;

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(ii)
Obtain by March 1, 2013 for the Customer Agreement consents for the transfer of
loans and leases representing at least 50% of consents required under that
agreement;

(iii)
Receive by March 8, 2013 at least 75% of the amount of unpaid principal balances
of loans and leases to be transferred under the CIT agreement;

(iv)
Obtain by March 15, 2013 for each of the CIT Agreement and Customers Agreement
consents for the transfer of loans and leases, representing at least 90% of
consents required under that agreement; and

(v)
Receive by March 22, 2013 at least 95% of the amount of unpaid principal
balances of loans and leases to be transferred under the CIT agreement.

The percentages in clauses (i), (ii) and (iv) of this paragraph 3.E shall be
computed based upon the unpaid principal balance of the loans and leases for
which consent is required.
4.
Subject to the other terms and conditions of this letter agreement, including
without limitation paragraphs 5, 7, 8 and 9, the following Retention Payments
shall be due to you, provided you are actively employed by the Bank on the dates
set forth below (the “Retention Dates”):

A.
A Retention Payment in the gross amount of $30,000.00 with respect to March
payable on April 1, 2013 (or, if later, on the date provided in paragraph 7 of
this letter agreement), if in the discretion of the Bank's Chief Executive
Officer you have provided in all material respects through March 31, 2013 the
transitional support outlined in paragraph 3.D of this letter agreement, taking
into account the Bank's goals specified in paragraph 3.E; and

B.
A Retention Payment in the gross amount of $110,000.00 on June 18, 2013, with
respect to April, May and June, payable on June 18, 2013 (or, if later, on the
date provided in paragraph 7 of this letter agreement), if in the discretion of
the Bank's Chief Executive Officer you have provided in all material respects
through June 14, 2013 the transitional support outlined in paragraph 3.A-D of
this letter agreement.

The Bank's receipt from you of a properly signed and executed Release of Claims
Agreement, in the form attached hereto as Exhibit A, and the expiration of the
Revocation Period (as defined therein), shall be a precondition to the payment
of each Retention Payment.
5.
If your employment by the Bank ceases before either of the respective Retention
Dates, including, without limitation, because the Bank terminates your
employment, with or without Cause, as defined below, or you resign from the
employment relationship with the Bank for any reason or no reason, or if you
otherwise cease to be actively employed by the Bank, you will not receive any
subsequent Retention Payment. For purposes of this letter agreement, “actively
employed” means that you are not on any leave of absence, with or without pay.
If you are on a leave of absence as of a scheduled Retention Date, you will not
be eligible for the subject Retention Payment.

6.
Notwithstanding any other provision of this letter agreement, including the
Bank's undertaking to make the Retention Payments upon the satisfaction of
certain conditions, the nature of your employment relationship with the Bank
shall remain “at-will”, meaning that either you or the Bank may terminate the
employment relationship at any time for any or no reason. Without limiting the
scope of the immediately preceding sentence, you acknowledge and agree that that
the Bank may summarily terminate your employment for Cause.

A.
For purposes of this letter agreement, "Cause" shall mean:

(i)
In rendering the support outlined in paragraph 3 of this letter agreement, your
failure, in the judgment of the Bank's Chief Executive Officer, to follow in all
material respects the instructions provided by the Bank's Chief Executive
Officer, which failure continues for more than ten (10) days after written
notice from the Bank's Chief Executive Officer describing in a summary fashion
the nature of such failure;

(ii)
Your personal dishonesty;

(iii)
Your breach of fiduciary duty involving personal profit;

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(iv)
Your intentional failure to perform your duties;

(v)
Your willful misconduct

(vi)
Your willful violation of any law, rule or regulation (other than minor traffic
violations or similar offenses) or a final cease and desist order from a banking
regulatory agency;

(vii)
Your material breach of any provision of this letter agreement; or

(viii)
The lawful instruction of a bank regulatory agency prohibiting your continued
employment in a financial services institution.

7.
If you qualify for the Retention Payment(s) described herein, such Retention
Payment(s) are subject to customary deductions for applicable taxes and will be
paid to you on the Bank's next regularly scheduled pay day following the later
of (1) the applicable Retention Date, and (2) the third (3rd) business day
following the expiration of the Revocation Period as defined in the applicable
Release of Claims Agreement.

8.
The Bank agrees that it shall make the payments and/or provide the benefits to
you as contemplated in paragraph 2 or paragraph 4, above; not require you to be
based at a location in excess of thirty (30) miles from Milton, Massachusetts;
and not materially fail to comply with any material provision of this letter
agreement.

9.
The parties believe that the provisions of this letter agreement are in
compliance with the Troubled Asset Relief Program under the Emergency Economic
Stabilization Act of 2008, including the Interim Final Rule and any other rules
and regulations thereunder, as amended (the "TARP Requirements"), Section 18(k)
of the Federal Deposit Insurance Act and the FDIC regulations promulgated
thereunder codified at 12 C.F.R. Part 359 (the “Golden Parachute Restrictions”)
and other applicable law, as presently in effect, if and to the extent that such
requirements apply. For so long as the Bank and the Company are subject to the
TARP Requirements and Golden Parachute Restrictions, the provisions of this
letter agreement are subject to and shall be, to the fullest extent possible,
interpreted to be consistent with the TARP Requirements and Golden Parachute
Restrictions, which terms control over the terms of this letter agreement in the
event of any conflict between the TARP Requirements or the Golden Parachute
Restrictions and this letter agreement. Notwithstanding anything in this letter
agreement to the contrary, in no event shall any payment, award or benefit under
this letter agreement vest or be settled, paid or accrued, if any such vesting,
settlement, payment or accrual would be in violation of the TARP Requirements,
the Golden Parachute Restrictions, or other applicable law. In the event of any
such violation, the parties will cooperate in good faith to endeavor to meet the
TARP Requirements, the Golden Parachute Restrictions and other applicable law in
a manner which preserves to the greatest extent possible the intent and purposes
of this letter agreement. If any governmental authority asserts that, or
questions whether, any payment, award or benefit to you, paid or accrued,
violates any of the TARP Requirements, the Golden Parachute Restrictions or
other applicable law, the Bank shall provide reasonable assistance to you to
rebut such assertion or to address such question, provided, however, neither the
Bank nor any of its affiliates shall have any obligation to participate in any
adversarial proceeding (including any civil or administrative matter) or to take
any action that the Bank's Board of Directors determines in the exercise of its
fiduciary duty is not in the Bank's best interest. Without limiting the scope of
this paragraph, you acknowledge and agree that if any Retention Payment covers a
period that also is a “TARP Period” (as that term is defined in the TARP
Standards for Compensation and Corporate Governance in the U.S. Treasury's
interim final rule codified at 31 C.F.R. § 30.1), the Retention Payment shall be
reduced pro rata for each day of the retention period that also is part of the
TARP Period.

10.
The parties believe that the provisions of this letter agreement are in
compliance with the requirements of Section 409A of the Internal Revenue Code
("Section 409A"), as presently in effect, if and to the extent that such
requirements apply. In the event that any of the payment obligations hereunder
will be considered by the Internal Revenue Service not to be in compliance with
the requirements of Section 409A, the parties will cooperate in good faith to
endeavor to meet these requirements in a manner which preserves to the greatest
extent possible the economic benefits intended to be conferred on you under this
letter agreement. However, to the extent such economic benefits exceed the
limits of the law, the Bank shall not be required to make any such payment which
exceeds such legal limit.

11.
You hereby represent and warrant to the Bank that, except as you may have
disclosed in writing to the Bank's Interim General Counsel, with any such
writing making reference to this letter agreement and being delivered prior to
your execution and delivery of this letter agreement, to your knowledge, (i)
since December 31, 2011, there were no significant deficiencies or material
weaknesses in the design or operation of the Company's internal control which
are reasonably likely to adversely affect the Company's ability to record,
process, and summarize financial information; (ii) since your

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employment with the Company began, there has been no fraud, whether or not
material, that involves management or other employees who have a significant
role in the Company's internal control over financial reporting; and (iii) there
exists no credible evidence of (A) a material violation by the Company, the Bank
or any of their respective subsidiaries, or person acting on behalf of one or
more of such entities, of applicable United States federal or state law or
regulations, or (B) a material breach of fiduciary duty arising under United
States federal or Michigan law, including but not limited to misfeasance,
nonfeasance, abdication of duty, abuse of trust, or approval of unlawful
transactions, or (C) any act or omission that could reasonably be expected to be
regarded by the Company's Board of Directors or the Office of the Comptroller of
the Currency as an unsafe or unsound business practice, excluding in the case of
clauses (A), (B) and (C), evidence of possible violations, breaches of fiduciary
duty or business practices occurring prior to the Effective Date of this letter
agreement or with respect to which the Company, the Bank or any of their
respective subsidiaries, to your knowledge, has, as necessary, adopted
appropriate remedial measures. As used in this paragraph 11, the term
“knowledge” means to your actual knowledge as of the date of this letter
agreement (without any duty of investigation).

Please return the original signed copy of this letter agreement to me and retain
a copy for your records.
This letter agreement shall become effective as of the expiration of the
Revocation Period in the Release of Claims Agreement provided to you
contemporaneously with the delivery of this letter agreement (the “Effective
Date”)
We look forward to your continued contribution to the success of Flagstar Bank.
Sincerely,
FLAGSTAR BANK, FSB
Date:
February 18, 2013
/s/ Michael J. Tierney
 
 
Michael J. Tierney
 
 
President and Chief Executive Officer

Terms and conditions of this letter agreement are confidential and are hereby
accepted by:
Date:
February 18, 2013
/s/ Daniel J. Landers
 
 
Daniel J. Landers

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EXHIBIT A
RELEASE OF CLAIMS AGREEMENT
Reference is made to that certain Letter Agreement dated February 14, 2013 (the
"Agreement") between Daniel J. Landers (“you”) and Flagstar Bank, FSB (the
"Bank"). Capitalized terms used herein without further definition shall have the
same meaning assigned to such terms in the Agreement.
Paragraphs 2 and 4 of the Agreement provide that you, as a prerequisite to your
receipt of any benefit pursuant to the Agreement, including the Retention
Payments, will execute this Release of Claims Agreement (this “Release”) in
order to evidence your agreement to the release provisions contained herein.
As of the date you execute this Release in exchange for certain consideration
provided by the Bank, consideration to which you acknowledge that you are not
otherwise entitled, you hereby release and discharge the Bank, Flagstar Bancorp,
Inc. (the “Company”) and all of their past, present and future parents,
divisions, subsidiaries, affiliates, joint venture partners and related
companies and their respective past, present and future officers, directors,
founders, employees, partners, attorneys, investors, shareholders, members,
representatives, agents, predecessors, successors, assigns, and all persons
acting in a fiduciary capacity thereto (collectively, the “Released Parties”)
with respect to any and all claims, rights, demands, causes of action,
obligations, damages or liabilities, whether asserted or unasserted, known or
unknown, contingent or non-contingent, that you had in the past or now have,
against the Released Parties through the date you sign this Release. Without
limitation, this complete waiver and release includes any and all
discrimination, compensation or other claims arising under Federal, State or
local law or regulation including without limitation Title VII of the Civil
Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in
Employment Act of 1967, as amended by the Older Workers Benefit Protection Act
(the “ADEA”), the Americans With Disabilities Act of 1990, the Worker Adjustment
and Retraining Notification Act (the “WARN Act”), the Employee Retirement Income
Security Act of 1974, the Civil Rights Act of 1866, and 42 U.S.C. §1981, and any
amendment thereto or under common law, in contract, tort or other theories of
recovery, relating in any way to the terms or conditions of your employment with
the Bank and any federal or state banking laws or regulations, and/or any
incidents related thereto prior to your execution of this Release.
Notwithstanding the foregoing, this Release shall not affect (a) any rights you
may have under the Agreement or under any Company or Bank retirement or savings
plans, or any medical or dental or other welfare plan in which you are
participating as of the date of this Release, or (b) your eligibility for
indemnification in accordance with the organizational documents of the Company
and its subsidiaries, or applicable laws, or under any applicable insurance
policy, with respect to any liability you incurred or incur in your capacity as
a director, officer or employee of the Company, the Bank or any affiliate of
either.
Nothing in this Release shall prohibit you from initiating or participating in a
proceeding before any state or federal agency involving the Released Parties,
provided that you waive any monetary benefits or other relief against the
Released Parties resulting or arising from any such proceeding.
You are advised in writing to consult with an attorney before executing this
Release. You acknowledge and agree that: (i) after you received a copy of this
Release in writing you had adequate opportunity to review it; (ii) you fully
understand its contents; (iii) you have been advised to consult an attorney
before signing it; and (iv) you enter into this Release knowingly, voluntarily
and after any consultations with your attorney or other advisor, as you deem
appropriate.
You acknowledge that you have had at least twenty-one (21) calendar days from
your receipt of this Release to consider whether to accept its terms.
You must sign, date and return this Release to the attention of Chief Executive
Officer of the Bank at 5151 Corporate Drive, Troy, Michigan 48098.
After signing the Release and properly returning it to the Bank, you shall have
seven (7) calendar days to consider whether to revoke it (the "Revocation
Period"). If you choose to revoke this Release, you must notify Chief Executive
Officer of the Bank, 5151 Corporate Drive, Troy, Michigan 48098, in writing
before the expiration of the Revocation Period.
You acknowledge that this Release shall become effective, fully enforceable and
irrevocable seven (7) days after your signing of said Release (the "Effective
Date").

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IN WITNESS WHEREOF, this Release has been executed by each of the listed parties
below.

Executive
Date:
February 18, 2013
/s/ Daniel J. Landers
 
 
Daniel J. Landers

FLAGSTAR BANK, FSB
Date:
February 18, 2013
/s/ Michael J. Tierney
 
 
Michael J. Tierney
 
 
President and Chief Executive Officer