What You Need to Know

If you buy, sell, or close on residential real estate, or advise clients who do, you may have heard about a new federal rule requiring the reporting of beneficial ownership information in certain all-cash transactions. That rule took effect on March 1, 2026. Eighteen days later, a federal judge struck it down entirely.

What Is the FinCEN Real Estate Reporting Rule?

In August 2024, the Financial Crimes Enforcement Network (“FinCEN”) finalized a rule requiring certain professionals involved in residential real estate closings (primarily title companies, settlement agents, escrow officers, and closing attorneys) to file reports with the federal government whenever residential property is transferred to a legal entity or trust without traditional mortgage financing.

The rule grew out of FinCEN’s Geographic Targeting Orders, which since 2016 had required title insurance companies in select metropolitan areas to report the “beneficial owners” (meaning any individual who exercises substantial control over, or owns or controls 25% or more of, the transferee entity) behind all-cash residential purchases. Those orders revealed that a significant percentage of flagged transactions involved individuals with prior suspicious activity reports. The new rule expanded this targeted program into a permanent, nationwide obligation.

Under the rule, the designated “reporting person,” determined through a priority cascade that typically lands on the settlement agent or closing attorney, must file an electronic Real Estate Report with FinCEN within 30 days of closing. The report requires detailed information about the purchasing entity, its beneficial owners, the seller, the property, and the payment method. Penalties for willful noncompliance include fines of up to $70,000 per violation and potential criminal liability.

What Happened in Court?

The rule faced legal challenges almost immediately. The most consequential was Flowers Title Companies, LLC v. Bessent, filed in the Eastern District of Texas by a family-owned title company represented by the Pacific Legal Foundation. On March 19, 2026, Judge Jeremy D. Kernodle granted summary judgment for the plaintiff and vacated the rule in its entirety under the Administrative Procedure Act.

Judge Kernodle’s Order was not a temporary hold or preliminary injunction. It was a final ruling on the merits. The court found that FinCEN exceeded its authority under the Bank Secrecy Act on two independent grounds. First, the BSA’s “suspicious transaction” provision does not authorize blanket reporting of an entire category of transactions simply because some bad actors have used that transaction type. Second, the BSA’s “procedures” provision authorizes FinCEN to require institutions to maintain reporting procedures, not to impose a freestanding, substantive reporting obligation.

Not every court has agreed. In February 2026, a federal court in the Middle District of Florida upheld the rule in Fidelity National Financial, Inc. v. Bessent, finding that FinCEN acted within its statutory authority. This split between courts makes an appeal to the Fifth Circuit virtually certain, and the issue could ultimately reach the Supreme Court.

Where Does the Rule Stand Today?

As of March 25, 2026, the rule is not in effect anywhere in the country. The vacatur from the Eastern District of Texas operates nationwide under Fifth Circuit precedent. FinCEN’s own website confirms that reporting persons are not required to file Real Estate Reports and face no liability for failing to do so while the court order remains in force. Additionally, the prior Geographic Targeting Orders also lapsed when the new rule took effect on March 1. FinCEN has not reissued them, which means neither the old GTO framework nor the new rule is currently operative. There is, at this moment, no federal beneficial ownership reporting requirement for residential real estate transactions.

Sound Familiar?

If this story feels like déjà vu, it should. The Corporate Transparency Act’s beneficial ownership reporting requirement, which we covered in a previous series, followed a remarkably similar path. That rule also faced a cascade of injunctions, including a nationwide preliminary injunction from the same Eastern District of Texas. The Trump administration ultimately gutted the CTA for domestic entities through a March 2025 interim final rule that narrowed reporting to foreign-formed companies only.

What Should You Do Now?

• Do not file reports. There is no current obligation to submit Real Estate Reports, and FinCEN has confirmed there is no penalty exposure for not filing while the vacatur is in place.
• Do not dismantle your compliance infrastructure or stop collecting data. The rule could be reinstated relatively quickly if FinCEN obtains a stay pending appeal. Continue collecting beneficial ownership information for pending closings so you can resume reporting on short notice if required.
• Monitor Gross McGinley’s website. An appeal is widely expected. If FinCEN seeks and obtains a stay of the vacatur, the reporting obligation could snap back into effect during the appellate process. We will continue to keep you informed on the litigation as it moves through the Fifth Circuit.

If you have questions about how the FinCEN real estate reporting rule affects your business or your clients’ transactions, contact your Gross McGinley attorney today.