UPDATE to FinCEN’s New Residential Real Estate Reporting Rule

In last month’s LMICK Minute (Issue 66), Lawyers Mutual provided information about the Financial Crimes Enforcement Network (FinCEN)’s new Residential Real Estate Reporting Rule which went into effect March 1, 2026. Following last month’s LMICK Minute publication, one of LMICK’s valued insureds brought to our attention that on March 19, 2026, the US District Court for the Eastern District of Texas entered a final judgment setting aside and vacating FinCEN’s new Residential Real Estate Reporting Rule in its entirety, including the reporting obligations pursuant thereto. See Flowers Title Companies, LLC v. Bessent, et al., Case No. 6:25-cv-127-JDK (E.D. Tex. Mar. 19, 2026).

As described in last month’s LMICK Minute, the Residential Real Estate Reporting Rule imposed certain reporting requirements in connection with specified "non-financed" transfers of residential real estate. Specifically, the Rule would have required certain individuals, such as title insurance agents, escrow agents, and attorneys, to report information about certain residential real estate conveyances when the buyer is a business entity or trust.

In the Flowers case, FinCEN argued that the Rule was needed to combat money laundering in real estate, but the court found that the agency did not have legal authority to impose it. US District Court Judge Jeremy D. Kernodle determined that the Residential Real Estate Rule exceeded FinCEN’s statutory authority under the Bank Secrecy Act and ordered that the final Residential Real Estate Rule be vacated and set aside.

Parties to transactions within the scope of the rule are questioning the effect of the Flowers case, and FinCEN has since clarified that "[i]n light of a federal court decision, reporting persons are not currently required to file real estate reports with FinCEN and are not subject to liability if they fail to do so while the order remains in force." However, it is important to note that the Flowers judgment is subject to appeal and further procedural developments.

Further procedural and appellate developments may happen quickly or without advance notice, and any changes may or may not include a reinstatement of the Residential Real Estate Rule's reporting requirements. Lawyers Mutual will continue to advise its customers in future LMICK Minutes of further developments on the subject as they may arise.

LMICK would like to thank its valued insured for bringing this update to our attention. We always appreciate it when a LMICK Minute reader brings to our attention any legal updates pertaining to a topic that we discuss in a LMICK Minute Issue so that we can share the information with all of our insureds.

Questions? Contact Jared Burke for more information.