The Washington Report

The Financial Crimes Enforcement Network (FinCEN), a bureau within the Treasury Department, recently issued an impact statement regarding the Corporate Transparency Act (CTA), and the Beneficial Ownership Information Reporting (BOIR) in light of a recent nationwide preliminary injunction issued by the Texas federal court on December 3, 2024.

Given the recent injunction, FinCEN issued the following statement:

"In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.

"The Corporate Transparency Act (CTA) plays a vital role in protecting the U.S. and international financial systems, as well as people across the country, from illicit finance threats like terrorist financing, drug trafficking, and money laundering.  The CTA levels the playing field for tens of millions of law-abiding small businesses across the United States and makes it harder for bad actors to exploit loopholes in order to gain an unfair advantage.

"On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), a federal district court in the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction that: (1) enjoins the CTA, including enforcement of that statute and regulations implementing its beneficial ownership information reporting requirements, and, specifically, (2) stays all deadlines to comply with the CTA’s reporting requirements. The Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on December 5, 2024.

"Texas Top Cop Shop is only one of several cases in which plaintiffs have challenged the CTA that are pending before courts around the country. Several district courts have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury. The government continues to believe—consistent with the conclusions of the U.S. District Courts for the Eastern District of Virginia and the District of Oregon—that the CTA is constitutional.

"While this litigation is ongoing, FinCEN will comply with the order issued by the U.S. District Court for the Eastern District of Texas for as long as it remains in effect. Therefore, reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. Nevertheless, reporting companies may continue to voluntarily submit beneficial ownership information reports."

On December 10, 2024, NAR issued a comment letter to the Federal Housing Finance Agency (FHFA) asking them to halt the recently announced expansion of the Fannie Mae’s and Freddie Mac’s (the GSEs) appraisal waiver programs in lieu of further analysis and public input.  

NAR policy supports independent valuations of real property performed by state credentialed appraisers as best practice, however in some low-risk situations, the amount of existing data and technological advances have led to the offer of appraisal waivers. When the risk level prompts the GSEs to require verification of that existing data, they are now offering inspection-based waivers, where a property data collection (PDC) is gathered and submitted to the GSEs. 

The expansion of these programs, slated to begin January 1, raises the eligibility for these products from 80% loan-to-value (LTV) to 90% LTV for appraisal waivers with no PDC and 97% LTV for inspection-based appraisal waivers. The inspection-based waiver program is fairly new, with little published data about the program or results thus far. More concerning is the silence from the GSEs on any efforts for data security or other avenues of systematic abuse of these programs.

Read the comment letter to the FHFA.