The ""Justice Department"":http://www.justice.gov/ has reached a deal with ""Flagstar Bancorp, Inc. (FBC)"":http://www.flagstar.com/[IMAGE]
The agency recently announced that the two entities have struck an agreement that pertains to underwriting practices related to loans insured by the ""Federal Housing Administration"":http://www.fha.gov/ and ""HUD"":http://www.hud.gov/.
FBC will revise its fourth quarter and full year financial results for 2011 as per the terms of the transaction. Additionally, FBC will reaffirm its forward looking statements for 2012, made by the company during its earnings call for fourth quarter findings in 2011.
Other key aspects of the Justice Department's deal encompass FBC's continued compliance with all FHA and HUD rules, establishment of a $15 million initial payment within 30 business days of the agreement's effective date, conditional obligations to make payments of up to $118 million pending ""the occurrence of certain future events,"" and a comprehensive monitoring period by an independent third party as chosen by FBC and approved by HUD.
Commenting on the nature of the agreement, FBC's chairman, president, and CEO, Joseph P. Campanelli, said, ""Flagstar Bank is one of the leading originators and servicers of FHA-insured loans, and we remain committed to continuing in that capacity. This agreement with the Department of Justice allows us to move forward, and to continue to focus on core operations and on serving our customers.""
The agreement elaborated on the specific nature of ""future events,"" and such potential instances were described in detail. Related events covered by the deal include allowances for FBC's possible generation of ""positive income for a sustained period, such that part or all of its Deferred Tax Asset (DTA) is likely to be realized as evidenced by the reversal of the DTA Valuation Allowance in accordance with US GAAP""; the ability to apply ""capital derived from the reversal of the DTA Valuation Allowance in its Tier 1 capital""; and the adjustment of the company's repayment obligation of ""$266.7 million in preferred stock held by the ""Treasury Department"":http://www.treasury.gov/ under the TARP program, which can now be extinguished or excluded from Tier 1 capital for purposes of calculating the Tier 1 capital ratio.""
The Justice Department went on to add that, ""Upon the occurrence of each of the future events described above, and provided doing so would not violate any banking regulatory requirement or the ""Office of Comptroller of Currency (OCC)"":http://www.occ.treas.gov/ does not otherwise object, FBC will begin making additional payments provided that (i) each annual payment would be equal to the lesser of $25 million or the portion of the additional payments that remains outstanding after deducting prior payments; and (ii) no obligation arises until FBC's call report as filed with the OCC, including any amendments thereto, for the period ending at least six months prior to the making of such additional payments, reflects a minimum Tier 1 capital ratio, after excluding any un-extinguished portion of TARP, of 11 percent (or higher ratio if required by regulators).""