BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, DC 20551

LEGAL Division

November 4, 2022

Mark J. Menting, Esq.
Sullivan & Cromwell LLP
125 Broad Street

New York, New York 10004

Dear Mr. Menting:

This responds to your correspondence, dated May 19, 2022, and
September 29, 2022, requesting determinations that (1) no filing under section 3 of
the Bank Holding Company Act of 1956 (“BHC Act”),! would be required for
New York Community Bancorp, Inc. (“NYCB”), Hicksville, New York, a bank
holding company, to acquire the bank resulting from the conversion of Flagstar
Bank, FSB (“Flagstar Bank”), Troy, Michigan, into a national bank and (2) no
filing under section 4 of the BHC Act? would be required for NYCB to indirectly
acquire certain subsidiaries of Flagstar Bank (“Flagstar Bank Subsidiaries”).

NYCB has submitted a notice pursuant to section 4 of the BHC Act
to acquire Flagstar Bancorp, Inc. (“Flagstar”), Troy, Michigan, and thereby
indirectly acquire Flagstar Bank (“Notice”). The proposed transaction would
proceed as follows: (1) 615 Corp. (“Merger Sub”), a wholly owned subsidiary of
NYCB, would merge with and into Flagstar, with Flagstar as the surviving entity,
(2) Flagstar would merge with and into NYCB, with NYCB as the surviving

' 12US.C. § 1842.
2 12 U.S.C. § 1843.

3 In particular, the relevant subsidiaries of Flagstar Bank are: Flagstar
Investment, LLC; Flagstar Mortgage Securities, LLC; Flagstar REO, LLC;
Flagstar Real Estate Holdings, Inc.; Grass Lake Insurance Agency, Inc; Lenderful
LLC; Long Lake REIT; and Long Lake MSR, Inc.

www.federalreserve.gov


2

entity, (3) Flagstar Bank would convert to a national bank (“Bank Conversion”),*
and (4) New York Community Bank, Hicksville, New York, a wholly owned state
nonmember bank subsidiary of NYCB, would merge with and into Flagstar Bank,
with Flagstar Bank as the surviving entity (“Bank Merger’). You have
represented that the mergers of Merger Sub and Flagstar and Flagstar and NYCB
would occur shortly before midnight on one calendar day and the Bank
Conversion and Bank Merger would occur shortly after midnight on the
immediately following calendar day. Furthermore, you have represented that
NYCB would not operate both New York Community Bank and Flagstar Bank as
separate entities during business hours and that NYCB would operate Flagstar
Bank only as the survivor of the Bank Merger.

Section 3 of the BHC Act and the Board’s Regulation Y require the
approval of the Board before a bank holding company may acquire direct or
indirect ownership or control of more than 5 percent of the voting shares of a
bank.> In addition, section 4 of the BHC Act and the Board’s Regulation Y
generally require a bank holding company to give prior notice to the Board before
acquiring more than five percent of the voting shares of any nonbanking company,
including nonbanking subsidiaries of a savings association. Through the
transaction described above, NYCB would acquire control of a national bank and
certain nonbanking subsidiaries of Flagstar Bank. Accordingly, NYCB would be
required to (1) obtain the Board’s prior approval under section 3 of the BHC Act
and Regulation Y before the Bank Conversion and (2) provide the Board with
prior notice under section 4 of the BHC Act and Regulation Y before acquiring the
Flagstar Bank Subsidiaries. However, the Board’s review of an application in
connection with the Bank Conversion would be duplicative of the Board’s review
of the Notice.’ Additionally, you have represented that NYCB would hold the
Flagstar Bank Subsidiaries for only a short period of time before the Bank
Conversion occurs.

4 Following the Bank Conversion, Flagstar Bank would change its name to
Flagstar Bank, National Association.

5 12 U.S.C. § 1842(a); 12 CFR 225.11.
6 12 U.S.C. § 1843(c)(8) & (j); 12 CFR 225.21 (a) & 225.24(a)(2).

7 In addition, the Bank Merger is subject to the approval of the Office of the
Comptroller of the Currency (“OCC”) under section 18(c) of the Federal Deposit
Insurance Act (“Bank Merger Act”) and the Bank Conversion is also subject to
OCC approval. The OCC approved the Bank Merger Act and Bank Conversion
applications on October 27, 2022.


3

Based on a review of these and other facts presented, the Legal
Division believes that no regulatory purpose would be served by requiring NYCB
to file an application under section 3 of the BHC Act with respect to the Bank
Conversion or file a prior notice under section 4 of the BHC Act with respect to
the acquisition of the Flagstar Bank Subsidiaries for the short period of time prior
to the Bank Conversion. The Legal Division, therefore, would not recommend
that the Board take action to require the filing of (1) an application by NYCB in
connection with the Bank Conversion or (2) a prior notice by NYCB in connection
with the acquisition of the Flagstar Bank Subsidiaries while they remain
subsidiaries of Flagstar Bank prior to the Bank Conversion. This opinion is
subject to the receipt by NYCB, Merger Sub, New York Community Bank,
Flagstar, and Flagstar Bank of all other necessary regulatory approvals and
compliance with any terms and conditions that may be imposed in connection with
those approvals.

This opinion is based on all the facts and representations presented
to Federal Reserve staff. Any material change in those facts or representations
should be communicated immediately to Federal Reserve staff and may cause this
opinion to be reconsidered. This opinion is limited to this proposal and does not
apply to any other transaction.

If you have any questions regarding this matter, please contact
Brian Phillips (202-452-3321) or Evan Hechtman (202-263-4810), of the
Legal Division staff.

Sincerely,

Mab Du

Mark Van Der Weide
General Counsel

cc: Office of the Comptroller of the Currency