If you operate in the creditors' rights space, you are already used to alphabet soup: UCC, FDCPA, RESPA, CFPB. Now add one more bowl to the table: the Residential Real Estate Reporting Rule issued by Financial Crimes Enforcement Network (FinCEN).
Effective for closings on or after March 1, 2026, certain non-financed transfers of residential real estate must be reported to FinCEN via a Real Estate Report. If you’re thinking, that sounds like a title company problem, read on. This rule will affect lenders, workout teams, foreclosure counsel, bankruptcy practitioners, and anyone structuring creative real estate resolutions.
Here’s your creditor-focused field guide about the FinCEN reporting requirements; brought to you with minimal regulatory pain.
What is this rule actually trying to do?
In short, prevent bad actors from laundering money through “all-cash” residential real estate deals. FinCEN has long been concerned about illicit funds moving through non-financed real estate purchases, especially where legal entities or trusts are used to obscure ownership. If a deal avoids traditional bank underwriting (and therefore avoids anti-money laundering scrutiny), FinCEN wants visibility. In other words, if there’s no traditional regulated lender involved, someone may have to file a report.
When is a transfer reportable?
A Real Estate Report must be filed when all four of these conditions are met:
- Residential real property is transferred
- The transfer is non-financed
- The transferee is a legal entity or trust
- No exception applies
What counts as residential real property?
The following are all Residential Real Property under the rule: 1–4 family homes, Condos, Co-ops, Townhouses, and certain vacant land intended for 1–4 family development. Yes, even mixed-use properties qualify if they are principally 1–4 family residential. No dollar threshold. A $40,000 distressed property counts just as much as a $4 million one.
What is a non-financed transfer?
A transfer is non-financed unless all transferees receive credit secured by the property and, extended by a financial institution with AML and SAR obligations. In practical terms, traditional bank mortgages and credit union financing are generally not reportable. Although, hard-money lenders, seller financing, and cash purchase by LLC, would be reportable.
Who is a transferee entity or transferee trust?
If you are structuring settlements, REO sales, deed-in-lieu outcomes, or portfolio dispositions, pay attention here.
If the buyer is an LLC, corporation, partnership, or most types of trusts, you are likely in reporting territory. While the rule includes sixteen categories of excepted entities, such as banks, credit unions, and certain securities issuers, most investor-owned LLCs will not qualify for an exemption. One important nuance for creditors: the rule is indifferent to where the entity is formed. Whether domestic or foreign, the reporting analysis is the same.
What kind of disclosure is required?
If a transfer is reportable, the reporting person must identify the beneficial owners of the transferee entity or trust, as well as any signing individuals. For entities, a beneficial owner is any individual who exercises substantial control or owns or controls 25% or more of the ownership interests. For trusts, the definition is broader and may include trustees, certain beneficiaries, grantors with revocation rights, and other individuals with authority or control over trust assets.
This is not a light-touch inquiry. The required information includes each individual’s full legal name, date of birth, complete residential address, country (or countries) of citizenship, and a unique identifying number.
What are the real-world implications for creditors?
If you’re selling REO property and the buyer is an LLC, paying cash, or using seller financing, you may have a reportable transaction. Even low-value distressed sales are not exempt.
If a borrower transfers property to your entity as part of a Deed in Lieu settlement, you likely fall under an exception (court supervision, bankruptcy estate, etc.), but this must be analyzed carefully by counsel. Do not assume “workout” equals “exempt.”
Transfers that are supervised by a court are generally exempt from reporting, which would include traditional judicial foreclosure sales conducted pursuant to a court order and confirmation process. By contrast, non-judicial foreclosure sales, such as those conducted under a power of sale in a mortgage or deed of trust without direct court oversight, do not fall within the court-supervised exemption. In those states where foreclosure occurs outside the judicial system, the transaction must be analyzed independently to determine whether it otherwise meets the criteria for a reportable transfer.
What are some other transactions affected by the rule?
Like-kind exchange (1031) transfers to qualified intermediaries are exempt. However, transfers from intermediaries to entity buyers may still be reportable, even in tax-efficient workouts.
Transfers made to a bankruptcy estate are exempt. That said, have counsel evaluate carefully any post-confirmation asset sales, as these fall into a gray area under the rule, and might not be exempt.
Who is responsible for filing the report?
The “reporting person” follows a reporting cascade (generally title companies, settlement agents, or similar professionals). But creditors should not assume this is someone else’s problem. There is a seven-tier Reporting Cascade that assigns reporting responsibility:
- Closing/Settlement Agent: The person listed on the closing/settlement statement.
- Preparer of Statement: The person who prepares the closing/settlement statement.
- Recorder: The person who files the document recording the transfer.
- Title Underwriter: The person who provides the owner’s title insurance.
- Disbursing Agent: The person who disburses the greatest amount of funds.
- Title Evaluator: The person who provides an evaluation of the title status.
- Deed Preparer: The person who prepares the deed or legal instrument of transfer.
The rule applies to all closings occurring on or after March 1, 2026. Reports are due by the last day of the month following closing or 30 days after closing, whichever is later.
Here’s a short checklist to help you stay ahead of this rule:
- Audit your cash buyer dispositions. REO teams should identify properties being sold to LLCs without institutional financing.
- Review seller financing templates. If you extend secured credit and are not subject to AML/SAR obligations, the deal will likely be reportable.
- Coordinate with title companies early. Ask whether the transaction triggers a FinCEN reporting requirement.
- Clean up entity documentation. If you acquire property into LLC structures, be prepared to provide beneficial ownership disclosures.
- Train workout staff. Creative resolutions to distressed real estate may trigger reporting requirements, even if they feel informal.
This rule is less about paperwork and more about predictability. Deals that look simple, such as cash buyer/quick close, now carry a reporting requirement. The good news? The rule is structured, checklist-driven, and navigable with advance planning. The bad news? Surprises will occur if your team does not check all the boxes. Mistakes can be costly. Civil penalties of up to $500 may be imposed for each day that the violation continues. A person who willfully violates the reporting requirements may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Now is the time to adjust documentation, align with closing partners and train internal staff.
As with most new federal requirements, much about this rule is still unsettled. There are already several lawsuits pending that challenge aspects of the requirements, and it is reasonable to expect further guidance, clarifications, and potentially meaningful changes to these requirements will result.
In short, this is not a set it and forget it development. The compliance landscape may shift before and after the March 1, 2026 effective date.
In short, this is not a set it and forget it development. The compliance landscape may shift before and after the March 1, 2026 effective date.
We will continue to monitor developments closely and will update you as new guidance, court decisions, or regulatory changes become available. If you have questions on this topic or would like to learn more about Weltman’s Real Estate Default solutions, feel free to connect with Shareholder Ben Hoen at any time.
This blog is not a solicitation for business, and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.
