A federal district court has vacated a 2024 residential real estate reporting rule that applied to most non-financed transactions. The rule had been delayed from its original start date of December 1, 2025, and ultimately took effect on March 1, 2026. Flowers Title Companies, LLC brought the lawsuit against the United States Treasury Department, challenging the reporting requirements issued by the Financial Crimes Enforcement Network (FinCEN).
Rule Background
FinCEN adopted a final rule requiring reports for most non-financed residential real estate transactions involving transfers to or from legal entities or trusts. The rule applied broadly across the United States, with no minimum dollar threshold or geographically targeted areas, and required reporting of detailed information about the transaction and the parties.
The agency claimed that the challenged rule was adopted to increase transaction transparency and to address perceived money laundering risks in all-cash or non-cash covered residential real estate transactions. The rule imposed new compliance obligations on parties involved in closings and settlements of covered transactions, including title companies and other real estate professionals such as attorneys conducting closings.
Some types of transactions that might otherwise be subject to the reporting requirements are exempt, including those incident to divorce and transfers in estate distributions. Nonetheless, FinCEN argued that covered non-financed real estate transactions were categorically “suspicious” within the meaning of the Bank Secrecy Act of 2001 (the Act), as amended. The new rule would have applied to all covered transactions whether or not the specifics of the transaction remotely raised any objective basis for suspicion.
As noted by the court, transaction parties proceed without institutional financing for a variety of reasons. Motivations include saving money on loan origination fees and closing costs, and shaping tax, liability and wealth transfer planning arrangements in ways that meet the transaction participants’ needs instead of having to comply with requirements of commercial lenders.
The numerical impact scope of the rule was, by FinCEN’s own estimation, substantial, and would cover more than 800,000 transactions annually with an overall annual compliance cost of about $500 million. Reporting parties would be required to provide comprehensive information, including parties’ name, address, Tax ID or Social Security number, date of birth for individuals and full identification of any trust involved in the transaction.
The Rule is Overturned
On March 19, 2026, a federal district court in Texas vacated the rule in its entirety, with full nationwide effect of its decision. The court held that FinCEN exceeded its statutory authority under the Bank Secrecy Act. Disagreeing with FinCEN’s primary justification for the rule, the court concluded that the statute permits reporting requirements only for “suspicious” transactions, and FinCEN failed to adequately justify treating all covered non-financed residential real estate transactions as being inherently suspicious. The court also rejected FinCEN’s alternative argument that it had broader statutory authority to impose general reporting requirements.
FinCEN has publicly confirmed on its website that, in light of the court’s order, reporting persons are not currently required to file otherwise-required transaction reports and will not be subject to liability for failing to do so while the order remains in force. Whether or not the agency plans to appeal is unknown as of the date of this alert.
Impact
FinCEN’s current stay on enforcement may only be temporary if the court’s decision is overturned on appeal (if any appeal is taken). Transactions closing while the order is in effect currently do not need to comply with the reporting requirements, but that situation will change if the rule is reinstated prior to the closing of a pending transaction. Whether any successful appeal may result in retroactive enforcement efforts by FinCEN cannot presently be predicted.
The enforcement status of the rule should be tracked until this case is finally resolved or until FinCEN itself vacates the rule or significantly restricts it, as was done with the Corporate Transparency Act in 2025. Anyone with questions about the lawsuit and the rule, and potential implications to their specific situation, should contact a Dinsmore attorney.