FinCen § 1031.320 Client Update

Most of you are aware that changes have been made to 31 CFR 1031.320 (“the Rule”), effective March 1, 2026, which require additional reporting in the event a “[n]on-financed transfer to a transferee entity or a transferee trust of an ownership interest in residential real property” occurs as defined by 1031.320 in a nonjudicial foreclosure. Under this Rule there are enhanced reporting requirements and significant penalties for non-compliance.

The applicability of the Rule to quasi-judicial foreclosures which are subject to later Court Ratification remains unclear. Although the rule states that a, “[t]ransfer supervised by a court in the United States” falls under an exemption to the reporting requirements under the Rule at least one title insurer has indicated that it does apply. The Firm therefore recommends its’ clients proceed as if it does apply.

The Rule requires reporting persons, which include but are not limited to settlement agents, attorneys, trustees, and title insurers, to file a report with FinCEN whenever there is a non-financed transfer of residential real property to a legal entity or trust or an otherwise non-exempt entity. This means the reporting requirement applies to third party sales where the purchaser is a non-exempt entity. Notably, it also potentially applies to buy-back sales where the vesting name is not an exempt entity under the Rule and even to Deed in Lieu transactions.

In third-party purchases and non-exempt entity transfers which fall under the purview of the Rule the Firm will require the attached form to be completed to meet the reporting requirements. If the property is sold to a third party purchaser, we will obtain the information from the purchaser but in the instances where they do not provide the information we will have to rescind the sale which may impact meeting first legal on FHA files.

The firm is dedicated to ensuring adherence to the rule for all applicable transactions and providing our clients with updates as to its effects.

Please reach out to Jianna Jaquez Santos, Esq. at jjaquezsantos@mccabeesq.com with any questions you may have regarding this update