NPRM

FinCEN’s proposed reporting rule targets residential real estate cash closings

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On February 7, the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a Notice of Proposed Rulemaking for the stated purpose of combatting money laundering in residential real estate transactions. You can review the proposed rule and a related fact sheet here.

The proposed rule would require certain professionals, including attorneys, involved in real estate closings to report information to FinCEN about cash transfers of residential real estate to legal entities and trusts. The agency’s press release indicates the proposal is tailored to target transfers that are high-risk for money laundering. No reporting would be required for transfers to individuals.

The information to be reported would include:

  • Beneficial ownership information for the legal entity or trust receiving the property;
  • Information about individuals representing the transferee legal entity or transferee trust;
  • Information about the business filing the report;
  • Information about the real property being sold or transferred;
  • Information about the seller; and
  • Information about any payments made.

A Geographic Targeting Order program has been in place for several years requiring this type of reporting in certain high-priced locations. The new rule would replace the Geographic Targeting Order with nationwide reporting.

FinCEN recognizes that the beneficial ownership information required under this proposed rule is also collected under the new Corporate Transparency Act, but states that the information will serve two different purposes.

The proposed rule would require reporting on single-family houses, townhouses, condominiums and buildings designed for occupancy by one to four families. It would also require reporting on transfers on unimproved land that is zoned or permitted for occupancy by one to four families.

Transfers would be reportable regardless of price. Gifts and other transactions where no consideration is exchanged are reportable. Exempted transactions include easements, transfers resulting from the death of the property owner, transfers resulting from divorce, and transfers made to a bankruptcy estate.

The agency encourages written comments in response to the proposed rule for 60 days. Closing lawyers, I encourage you to read the information at the links above and to make comments.    

CFPB Announces TRID Clarity in the Works

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Cordray signals notice of new rule expected late July

cfpb-logoIn an April 28 letter addressed to several industry trade groups and their members, Director Richard Cordray of the Consumer Financial Protection Bureau, said his agency has begun drafting a notice intended to provide “greater certainty and clarity” in the Know Before you Owe Rule.

The letter stated the CFPB is working hard to understand industry concerns and recognized there are places in the regulation text and commentary where adjustments would be useful.

In a press release, also dated April 28, American Land Title Association said its primary goal for the proposed adjustments is to insure consumers receive clear information about their title insurance costs on the Closing Disclosure. As we have all experienced, TRID requires a very odd negative number as the cost for owner’s title insurance in most situations. ALTA has been arguing against this strange result for many months.

The Director’s letter stated that the Bureau has begun drafting a Notice of Proposed Rulemaking (NPRM) that should be available for comments in late July. It also suggested that one or two meetings will be arranged with industry participants before the NPRM is issued. In the meantime, the letter encouraged continued feedback.

The text of the letter can be accessed here.