What Private Lenders Actually Need to Know
If you are a private lender making loans secured by residential real estate, you need to read this. Not next quarter. Now.
FinCEN’s Residential Real Estate Rule—originally scheduled for late 2025 and now effective March 1, 2026—has generated a wave of confusion across the settlement industry. Title companies and escrow agents are asking private lenders whether they comply with anti-money laundering requirements. Some are flat-out refusing to close transactions until they get answers. And a lot of the guidance circulating right now is wrong.
I want to cut through the noise and give you the practical picture.
The Rule in 30 Seconds
FinCEN published a final rule that extends AML and Know Your Customer reporting obligations to parties involved in the purchase or sale of residential real estate. The rule targets non-financed and privately financed transfers involving entities or trusts, and requires the filing of a new Real Estate Report with FinCEN disclosing details about the transferor, transferee, beneficial owners, property, and payment structure.
The rule’s purpose is straightforward: all-cash real estate purchases have been a well-documented vehicle for money laundering and fraud, and FinCEN wants to close that gap.
Here’s What Most People Are Getting Wrong
AML compliance for private lenders is not new. This is the part that keeps getting lost in the conversation.
Since 2014, FinCEN has required every company that originates loans secured by residential real estate—including business-purpose loans—to comply with the Bank Secrecy Act’s reporting and recordkeeping framework. That means if you are a private lender originating residential-secured loans, you have been subject to AML/KYC obligations for over a decade.
Specifically, you are required to:
• Maintain a written AML/KYC compliance program
• File Suspicious Activity Reports when you identify indicators of mortgage fraud, money laundering, tax fraud, or identity theft
• Implement documented KYC procedures and records retention policies
The new Residential Real Estate Rule expands these types of obligations to the broader real estate industry for non-financed transactions. It does not create new obligations for lenders who are already compliant under the 2014 framework.
Why Your Title Company Is Calling You
Here is what is happening on the ground: settlement agents across the country are being told that private lenders are not exempt from the new reporting requirements. Some are taking the position that your loans do not qualify as “financed transactions” or that you do not meet the definition of a “financial institution.”
Both positions are incorrect.
The Bank Secrecy Act’s definition of “financial institution” expressly includes loan and finance companies. That is a separate category from banks, credit unions, and insurance companies. FinCEN’s own guidance on Residential Mortgage Company requirements confirms that non-bank lenders making residential-secured loans fall within scope.
If you are a private lender with a compliant AML/KYC program, your financed transactions are not subject to the new Real Estate Reporting
Rule. Full stop.
What You Should Be Doing Right Now
If you already have formal AML/KYC policies and procedures in place, your answer to your settlement agents is simple: “Yes, we maintain an AML compliance program under the BSA.” Be ready to say that clearly and confidently.
If you do not have a formalized program, here is the reality: most private lenders already perform KYC as part of their standard underwriting and fraud prevention workflow. You are verifying borrower identity, checking ownership structures, and reviewing the source of funds. You are just not documenting it as a formal compliance program.
That gap needs to be closed before March 1.
There are third-party compliance consultants who specialize in AML/KYC programs for mortgage companies and private lenders. That said, working with legal counsel who understands both private lending and BSA compliance ensures your program is not just implemented—it is defensible.
The Bottom Line
The Residential Real Estate Rule is generating friction that should not exist for compliant lenders. The key issues to address are:
• Make sure your AML/KYC compliance program is documented and current
• Confirm your policies align with FinCEN’s BSA requirements for Residential Mortgage Companies
• Be prepared to clearly communicate your compliance posture to title companies and escrow agents
• Understand your broader FinCEN reporting obligations, including beneficial ownership and SAR filing requirements
If settlement agents are pushing back on your transactions, point them to the BSA framework governing Residential Mortgage Companies and the fact that your financed transactions are outside the scope of the new reporting rule.
If you need help standing up or auditing your AML/KYC compliance program, or if you are running into resistance from settlement agents who don’t understand how the rules apply to private lenders, our team can help. We’ve been advising private lenders on BSA compliance, licensing, and regulatory matters for over two decades.
Geraci LLP
This advisory is provided for informational purposes only and does not constitute legal advice. Receipt of this communication does not create an attorney-client relationship. Please consult with qualified legal counsel regarding your specific circumstances.
