Federal Court Vacates FinCEN Residential Real Estate Reporting Rule

On March 19, 2026, the U.S. District Court for the Eastern District of Texas issued a Memorandum Opinion and Order in Flowers Title Companies, LLC v. Bessent vacating the Financial Crimes Enforcement Network’s (FinCEN) Anti-Money Laundering Regulations for Residential Real Estate Transfers (the Rule).¹ In that ruling, the court granted the plaintiff’s motion for summary judgment and denied FinCEN’s cross-motion, holding that the Rule exceeded FinCEN’s statutory authority under the Bank Secrecy Act (BSA) and ordering it vacated in its entirety.² Although FinCEN appears likely to appeal, the court’s ruling under the Administrative Procedures Act (APA) could have broad implications for both the U.S. government’s efforts to track questionable real estate transactions and private parties’ AML reporting obligations.

Background

Since taking effect on December 1, 2025, the Rule required parties involved in real estate closings to report the details of any non-financed transfer of residential real property involving a transferee entity or trust to FinCEN. This reporting requirement applied regardless of dollar threshold or geographic location.³ These reporting obligations fell primarily on real estate closing and settlement agents, title insurance underwriters, and others in the closing chain, requiring these parties to disclose beneficial ownership, payment method, and other transaction details.⁴

The Rule represented a significant expansion from FinCEN’s historic use of Geographic Targeting Orders (GTOs) to gather information regarding real estate transactions. These GTOs were limited to specific metropolitan areas and real estate transactions above a certain price threshold.⁵ The Rule, by comparison, would likely have covered between approximately 800,000 and 850,000 real estate transactions annually, with an estimated compliance cost between $428.4 million and $690.4 million in the first year alone.⁶

The Court’s Ruling

The court’s analysis began and ended with a single question: whether the BSA authorized FinCEN to promulgate the Rule. It found that the Rule failed that test on two independent grounds. The first concerns the BSA’s suspicious transaction provision. The second involves the act’s procedures provision. We address each of these grounds briefly below.

• The “Suspicious Transaction” Provision. FinCEN’s argument for the Rule’s constitutionality predominantly relied upon 31 U.S.C. § 5318(g)(1), which authorizes FinCEN to require financial institutions to report “any suspicious transaction relevant to a possible violation of law or regulation.”⁷ The court rejected FinCEN’s position that all non-financed residential real estate transfers to entities or trusts are categorically “suspicious,” finding FinCEN’s explanations “vague, conclusory, and unpersuasive,” and noting that the mere fact that some bad actors have conducted such transactions does not render the entire category suspicious.⁸ The court also discounted FinCEN’s reliance on its statistic that 42% of GTO-covered transactions were associated with Suspicious Activity Report (SAR) filers, finding that this figure drew on a narrow, pre-selected subset of transactions in targeted geographic markets and did not justify a nationwide, threshold-free mandate.⁹ The court further observed that individuals with sufficient assets often purchase property without financing for wholly legitimate reasons, including avoiding interest costs, and that holding residential property through an LLC or trust for liability and tax purposes is routine and unremarkable in the larger real estate environment.¹⁰
• The “Procedures” Provision. FinCEN alternatively argued that 31 U.S.C. § 5318(a)(2), which authorizes the Secretary of the Treasury to require financial institutions to “maintain appropriate procedures, including the collection and reporting of certain information,” independently authorized the Rule.¹¹ The court rejected this argument as well, holding that the phrase “including the collection and reporting of certain information” modifies “procedures,” meaning FinCEN may require institutions to maintain reporting procedures but may not impose a freestanding substantive reporting obligation.¹² Importantly, it found that FinCEN’s broader reading of Section 5318(a)(2) would render the more targeted suspicious transaction reporting authority in Section 5318(g)(1) superfluous, which is a result courts are bound to avoid, and that would allow FinCEN to circumvent the express congressional limitation that these reports be tied to suspicious transactions.¹³

Nationwide Vacatur

Having found the Rule unlawful under the APA, the court vacated it in full.¹⁴ Under Fifth Circuit precedent, vacatur under the APA is not limited to the parties and operates universally.¹⁵ The court considered whether to depart from vacatur as the default remedy but declined, finding both that the Rule’s deficiencies are serious enough that FinCEN would be unlikely to justify the Rule on remand and that returning to the pre-Rule status quo would not be unduly disruptive given that the Rule had only been in effect since December 1, 2025.¹⁶

What This Means Now

Effective immediately, the Rule is vacated and no longer in effect. Reporting persons, including title companies, settlement agents, and closing attorneys, are therefore not currently required to file Real Estate Reports under 31 C.F.R. § 1031.320. The practical effect is a return to the pre-December 2025 operating environment, in which FinCEN’s GTO program, with its geographic limitations and price thresholds, remains the primary governance tool for non-financed real estate transaction reporting.¹⁷ Title insurance underwriters and other related companies operating in major U.S. metropolitan markets can expect FinCEN to resume issuing GTOs to close the anticipated AML reporting gaps.

There is currently a split among federal courts on the use of GTOs, however. A federal magistrate judge in the Middle District of Florida previously recommended granting FinCEN’s cross-motion for summary judgment in a parallel challenge brought by Fidelity National Financial, which the district court adopted in February 2026.¹⁸ The existence of conflicting rulings makes FinCEN’s real estate sector authorities an active and developing area. Given these circumstances, it is reasonable to anticipate that the U.S. Government will appeal the Texas court’s decision, seek a stay or, alternatively, revisit the Rule through a revised or narrower regulatory approach.¹⁹

Looking Ahead

While the Rule is vacated for now, the underlying policy interest in greater transparency around non-financed, entity-based real estate transactions has not disappeared, and a future rule with a more targeted statutory basis or clearer congressional authorization cannot be ruled out. Clients should continue to monitor this space, as the compliance landscape could shift again depending on the outcome of any appeal or revised rulemaking effort.

We are actively monitoring these developments and will provide updates as the situation evolves. If you have questions about how this decision affects your operations or compliance obligations, please contact any of the authors of this client alert or your Foley relationship attorney.