Title and Settlement Industry- We have a new reporting requirement

Over the past few years I have watched as Geographically Targeted Orders were imposed in areas which were deemed to be at risk for money laundering or other criminal activity. They were typically near major metropolitan areas, and I always thought what a pain in the a$$ it would be to have to do all of that reporting. Well, I guess the bad guys are now everywhere, and effective Dec 1, 2025 everyone must report certain transactions deemed high risk.

The final rule imposes a streamlined suspicious activity report (SAR) filing requirement under which reporting persons, as defined, are required to file a “Real Estate Report” on certain non-financed transfers of residential real property to legal entities and trusts. Transfers to individuals, as well as certain transfers commonly used in estate planning, do not have to be reported. I read a little further into the “rabbit hole” and the ruling defines a non financed transfer to include those transfers which private loans are being utilized if the private lender is not subject to AML program obligations.

Private lending is no longer a cottage industry, there are countless private lending entities available to consumers. The question is how many are obligated to an AML program. I do not have an answer to that question. The rule allows the reporting person to “reasonably rely” on the representation of the lending institution… One thing I learned in law school, was there is no such thing as “reasonable”.
On one listserv which I subscribe to, I have heard that title and settlement providers would start charging more for a reportable transaction, than a non-reportable one, in effect a reporting fee.

I guess its ironic all of this takes place as one government agency is trying to make homeownership more affordable, while another imposes more costs on the providers by requiring reporting, and yet another just settled a major lawsuit which basically added up to 3% of added expenses to a buyer when the seller refuses to pay the commission. One step forward….. then two back. We will figure out how to make this happen effectively and accurately, I just hope the government is talking back and forth and understands why closing costs have got to go up.

©Jaime Kosofsky