FinCEN Appeals Ruling Against Residential Real Estate Rule in Texas

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The Financial Crimes Enforcement Network (FinCEN) filed a notice of appeal to a ruling by the Eastern District of Texas that vacated the agency’s Residential Real Estate Rule in its entirety. The court found that FinCEN exceeded its statutory authority under the Bank Secrecy Act and ordered the rule be set aside.

In its March 19 decision in Flowers Title Company v. Bessent, the court granted the plaintiff’s motion for summary judgment, denied FinCEN’s motion of summary judgment and ordered that the rule be vacated. Reporting for the rule went into effect March. 1.

In its lawsuit, Flowers Title Company challenged the legality of rule, claiming it was unlawful under the Administrative Procedure Act and that it exceeded FinCEN’s statutory authority under the Bank Secrecy Act.

U.S. District Judge Jeremy Kernodle agreed in the opinion and order, saying, “Neither provision of the [Bank Secrecy] Act cited by FinCEN authorizes the final rule. The first provision, 31 U.S.C. § 5319(g)(1), permits FinCEN to require reports of ‘any suspicious transaction.’ But the agency fails to explain or show how non-financed residential real estate transactions are categorically ‘suspicious.’ The second provision, 31 U.S.C. § 5318(a)(2), gives FinCEN the authority to require financial institutions to maintain ‘procedures’ to comply with the act, not the authority to require the reports covered by the final rule.”

Judge Kernodle called FinCEN’s explanations “vague, conclusory and unpersuasive.”

“The fact that some bad actors have conducted non-financed real estate transactions does not make such transactions categorically ‘suspicious.’ If it did, then nearly every type of transaction imaginable would be ‘suspicious,’ and § 5318(g)(1) would grant FinCEN far-reaching powers no one has contemplated,” Kernodle wrote.

Meanwhile, in Florida, Fidelity National Financial Inc. and Fidelity National Title Insurance Co. in April asked the U.S. Court of Appeals for the Eleventh Circuit to review a lower court decision that denied the company’s motion for summary judgment and instead ruled in favor of FinCEN.

Fidelity’s appeal stems from a case in the Middle District of Florida, where the court upheld FinCEN’s authority to issue the rule under the Bank Secrecy Act. Judge Wendy Berger adopted a magistrate judge’s recommendation, granting summary judgment to the Treasury and dismissing Fidelity’s challenge, allowing the AML regulations to proceed. Fidelity is now seeking appellate review of both the February ruling and the final judgment entered the following day.

Another lawsuit filed in the U.S. District Court for the District of Puerto Rico challenges FinCEN’s rule on similar procedural and constitutional grounds (Puerto Rico v. FinCEN, No. PRD-191360). This complaint alleges that the rule exceeds statutory authority, violates the Administrative Procedure Act (APA) and imposes unreasonable compliance burdens. These arguments mirror those made in the other cases. The plaintiffs seek declaratory and injunctive relief to prevent enforcement of the rule as applied to transfers within Puerto Rico.

Following the decision in the Flowers case, FinCEN issued guidance stating that reporting entities are not currently required to file real estate reports and will not face liability for failing to do so while the order remains in effect.

A survey conducted by ALTA found the rule, while in effect, introduced complex requirements that disrupted workflows, created friction with consumers and raised fundamental questions about responsibility and risk. Drawing responses from nearly 1,300 professionals nationwide, the survey captures a cross-section of title agents, underwriters, attorneys and settlement providers working across a range of markets and transaction volumes.

ALTA Advocacy

Sharing concerns with FinCEN’s rule is one of the core discussion points attendees of the 2026 ALTA Advocacy Summit will have with members of Congress during Capitol Hill Day on May 13.

ALTA continues to engage with FinCEN and is pushing for more clarity around the rule, urging that any future changes come with adequate notice and a reasonable implementation period.

ALTA submitted a letter to FinCEN Director Andrea Gacki outlining recommendations to reduce the Rule’s burden on title professionals. Specific changes ALTA would like FinCEN to make to the rule include:

• Impose a nominal dollar threshold, as included in other anti-money laundering regulations, to exclude gratuitous and low-value transfers and focus reporting on higher-value transactions.
• Exempt transfers from a seller to an entity the seller controls, such as a single-member LLC or revocable living trust, which represent a change in the form of title not beneficial ownership.
• Exempt transfers that are the result of foreclosure proceedings, whether judicial or otherwise.
• Limit payment information collection to what settlement agents can realistically obtain, such as information available on a wire transfer receipt or on the face of a check.
• Eliminate seller and transferor information collection. Collecting seller tax identification numbers and financial details adds significant workflow burden while its law enforcement value remains unclear.

Get Involved

• Join the Title Action Network to make sure you’re responding to developments around the FinCEN rule or weighing in on pending legislation or regulation.

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Contact ALTA at 202-296-3671 or communications@alta.org.