The private lending industry has watched the rollout and then recission of the Financial Crimes Enforcement Network (FinCEN) Residential Real Estate Rule with understandable concern, if not outright whiplash. A federal-district court has temporarily taken the rule off the table, but other real (yet manageable) regulatory matters remain for private lenders.

Let’s explore where things stand now, what might come next, and why. Regardless of the fate of the rule, you should be familiar with Bank Secrecy Act (BSA) anti-money laundering (AML) compliance if you are in the business of lending on 1- 4-unit residential properties.

The Rule Is Suspended but appealed

FinCEN’s Residential Real Estate Rule had created a new requirement as of March 1, 2026, for certain “reporting persons” (primarily title companies, settlement agents, and similar real estate professionals) to file a Real Estate Report with FinCEN for every cash and non-financed transfer of residential property to an entity or trust. Shortly thereafter, on March 19, the U.S. District Court for the Eastern District of Texas held in Flowers Title Companies, LLC v. Bessent, that FinCEN had exceeded its statutory authority under the BSA and vacated the rule, thereby suspending the Real Estate Report obligation.

The bottom line: Although the Flowers order remains in effect, no one is required to file the Real Estate Report, and there is no federal penalty for not filing it.

As of the date of this writing, FinCEN, in conjunction with the DOJ, has filed an appeal seeking to have the Rule reinstated (two other federal district courts had already upheld the Rule). At this time, there is no certainty that the Rule will be resurrected in its current form, or at all, or perhaps in a narrowed or modified version. FinCEN has issued further guidance that, if it is successful and the court’s order is overturned, it will not enforce the Rule retroactively. Rather, it will provide a timeline for when the reports would again be required.

Your Loans Probably Weren’t Covered

But it likely doesn’t matter: The rule rarely reached your typical private lender loan.

Even before Flowers, most private lender loans secured by residential property were outside the parameters of the Residential Real Estate Rule. The rule was designed to capture cash and nonfinanced transfers of residential real estate to entities and trusts. Many in the industry interpreted “nonfinanced” to mean any financing outside of traditional banks, such as hard-money or private lender loans.

The rule defined a non-financed transfer in a very specific way. A transfer was treated as non-financed if all transferees received an extension of credit that was both:

Secured by the property being transferred.

Extended by a financial institution subject to AML program and SAR obligations.

Put differently, a non-financed transfer included a transfer whereby the lender was not already subject to the BSA’s AML/SAR regime.

RMLOs Are Already Subject to BSA

Your private lender loan transactions are not non-financed transfers when you are an RMLO subject to the BSA’s AML/SAR rules.

Under a separate FinCEN rule that predates the Residential Real Estate Rule, many nonbank lenders are already treated as Residential Mortgage Lenders and Originators, or RMLOs. This rule, called the Anti-Money Laundering Program and Suspicious Activity Report Filing Requirements for Residential Mortgage Lenders and Originators, has been in effect since 2012; it can be found at 31 C.F.R. § 1029.100 et seq. Under this rule, you are an RMLO if you are a nonbank business that:

Extends loans secured by 1–4-unit residential property or related residential land.

Or

Takes applications for, or offers or negotiates terms of, such loans.

Crucially, the definition of “residential mortgage loan” for these purposes is based on the collateral alone and not the stated purpose of the loan, unlike the various consumer protection laws that capture only loans for personal, household, or family purposes.

Whether you label the loan business purpose, investment purpose, or consumer purpose is not the key question here. If the loan is secured by a 1–4-unit residential property (or land for such a property) and you are making or originating those loans, you are very likely operating as an RMLO, even if your loans are business purpose.

And once you are an RMLO, from FinCEN’s point of view, your loans are part of a financed transfer market that is already subject to BSA oversight via your own obligations, not via the Residential Real Estate Rule’s reporting regime for cash and non-financed transactions.

AML and SARs Still Required

Regardless of the rule’s fate, if you are an RMLO, you should have an AML program and file SARs.

Here is the most important takeaway for private lenders: neither Flowers nor the Rule’s temporary recission (nor a successful appeal by the government) changes the already existing obligations of RMLOs under the law. Those rules currently generally require:

A written anti-money laundering (AML) program. The program should include internal controls, a designated compliance officer, ongoing training, and independent testing; and

Suspicious Activity Reports (SARs). These must be filed with FinCEN when you detect transactions that may involve fraud, money laundering, or certain other violations of law.

Whether the rule is resurrected in whole or in part, private lenders that (1) extend loans secured by 1-4-unit residential properties, or (2) take applications for or offer or negotiate the terms of such loans, should assume they fall under the RMLO rule and act accordingly. That means putting in place a written AML program and building SAR reporting into your regular risk and compliance routines.

Compliance Is Within Reach

BSA compliance is manageable, and you’re probably already doing at least part of it. If you don’t already have one in place, implementing a basic RMLO-level AML program may not be as burdensome as you think, especially if your lending operation is relatively streamlined.

The core elements you need are:

Written policies and procedures tailored to your products and borrower base.

A named person who is responsible for AML compliance.

Steps for onboarding borrowers, identifying beneficial owners of entity borrowers, and screening for red flags.

Training for your origination, underwriting, and operations staff on what to watch for and how to escalate concerns.

Periodic testing.

In April 2026, FinCEN issued a new Notice of Proposed Rulemaking to fundamentally reform AML/CFT program requirements for all financial institutions with BSA program obligations, which includes RMLOs. The new rules, if and when they become effective, may change how existing AML programs are written or implemented and the elements.

There are a number of service providers that can help you comply with the BSA rules. Many of these firms offer:

Template AML policies customized to your risk profile.

Outsourced BSA officer services or support.

Training and SAR preparation assistance.

According to some private lenders, implementing a compliant AML program is relatively inexpensive, with ongoing maintenance costs that are equally modest relative to overall lending volumes. Further, you can likely get into compliance within a few weeks.

More Rules Are Coming

More regulation is almost certainly coming; proactive compliance demonstrates that we can police ourselves.

For years, FinCEN and others have highlighted residential real estate as a channel for potential money laundering. To combat and deter money laundering, regulators want better visibility into who is buying and financing U.S. residential properties, especially through entities and trusts and with nontraditional financing. When FinCEN adopted the 2012 Rule for RMLOs, it emphasized that this was the first step in an incremental approach to cover a broader universe of non‑bank finance companies going forward. The Residential Real Estate Rule/Flowers litigation is just one chapter in this larger story.

As an industry, we have an opportunity to demonstrate we are good financial citizens by embracing reasonable AML controls and SAR reporting. You can show policymakers that additional heavy-handed regulation is unnecessary because the private lending sector is already identifying and reporting suspicious activity. At the same time, you can further protect your own business from being misused by bad actors.

Now is the right time for private lenders to tighten their anti-money laundering practices, not only because the federal rules require it, but because doing so is both good business and good for private lending.

The information presented is for general informational purposes only and should not be construed as legal advice, nor is it intended to be a substitute for legal counsel on this or any subject matter. The information presented is not legal advice, is not to be acted on as such, may not be current, and is subject to change without notice. No attorney-client relationship is created by your receipt or use of this information.