Navigating Wetlands in Coastal North Carolina Real Estate Development
The landscape of coastal real estate development in North Carolina has undergone a seismic shift following major regulatory changes over the last few years.
For developers eyeing coastal properties, understanding the recent evolution of wetlands regulation is crucial for project planning and risk assessment.
This guide explores how the transformed regulatory framework affects coastal development projects and provides strategies for successful navigation of the current environment.
The Path to Today’s Regulatory Framework
The current regulatory landscape emerged through significant changes in 2023, followed by a year of practical implementation and adjustment in 2024. Early 2023 marked the first major shift when the United States Environmental Protection Agency (EPA) and Army Corps of Engineers (Corps) implemented a revised definition of “Waters of the United States” (WOTUS), the fifth iteration in eight years, aiming to clarify which water resources qualify for federal protection under the Clean Water Act (Act). Some states challenged the 2023 WOTUS Rule, resulting in nearly half the states remaining under the pre-2015 regulatory regime. North Carolina is the sole state in the southeast in which the 2023 WOTUS Rule is applied.
In May 2023, the landscape changed dramatically when the United States Supreme Court released its Sackett v. EPA decision. This ruling altered the interpretation of Clean Water Act federal protection of wetlands, limiting it to only those “wetlands with a continuous surface connection to bodies that are ‘waters of the United States’ in their own right,” such that they are “indistinguishable” from those waters. While federal regulatory oversight of wetlands has fluctuated for over two decades, the Sackett decision represents what many consider the most significant shift in the Clean Water Act’s history. By September 2023, the EPA and Corps issued a conforming rule to align the 2023 WOTUS Rule with Sackett.
Meanwhile, in North Carolina the General Assembly overrode a gubernatorial veto to pass Senate Bill 582, “An Act to Make Various Changes to the Agricultural and Wastewater Laws of the State” (the 2023 NC Farm Act). The 2023 NC Farm Act restricts the state definition of “wetlands” to those “that are waters of the United States as defined by 33 C.F.R. § 328.3 and 40 C.F.R. § 230.3,” i.e., only those protected by the Act and regulated by the EPA and Corps. This definition of “wetlands” is effective until the Environmental Management Commission (EMC), which directs and creates rules for several divisions under the North Carolina Department of Environmental Quality (NCDEQ), formally adopts a permanent rule to amend the existing definition of wetlands. Until then, wetlands in North Carolina are only those the federal government recognizes and protects as WOTUS, unless a state statute, such as the Coastal Area Management Act (CAMA), specifically provides otherwise.
Implementation Realities in 2024
The past year revealed several key implementation patterns and challenges in North Carolina. The Wilmington District office of the Corps has developed specific regional guidance for coastal areas, particularly focusing on the unique characteristics of North Carolina’s coastal plain wetlands and referring complex jurisdictional calls to EPA headquarters, particularly were drawing a line where a WOTUS ends and an adjacent wetland begins to establish the “continuous surface connection” proves difficult.
Implementation also highlighted practical challenges in the field. Environmental consultants report that determining what constitutes “indistinguishable” wetlands has proven complex, particularly in areas with seasonal hydrologic connections or where discrete features create artificial separations between wetlands and navigable waters. The permitting process evolved to include more detailed documentation requirements for wetland delineations, often requiring multiple site visits during different seasons to establish or rule out continuous surface connections.
More Changes in 2025
Three months into 2025, shifts in implementation continue. On March 12, 2025, the EPA, now led by Administrator Lee Zeldin of the second Trump Administration, issued a joint memorandum with the Corps providing new guidance to clarify the implementation of the Act and application of “continuous surface connection” to adjacent wetlands consistent with Sackett. The memorandum sets out a two-part process to determine whether adjacent wetlands are regulated WOTUS and protected under the Act. First, the wetland must be directly adjacent to or abutting a body of water that is a WOTUS in its own right (generally a traditional navigable water or a relatively permanent body of water connected to a traditional navigable water). Second, the wetland must have its own continuous surface connection to the covered water making it difficult to determine where the water ends and wetland begins.
Under the guidance, discrete features, such as non-jurisdictional ditches, manmade or natural swales, berms, pipes, culverts, etc., cannot create the continuous surface connection between the WOTUS and adjacent wetland to trigger federal protection. Wetlands that are physically separated from a jurisdictional water by a discrete feature will not be considered a jurisdictional WOTUS under the Act. As a result, certain guidance and training materials that assumed a discrete feature established a continuous surface connection have been rescinded. The agencies plan to utilize public notice and stakeholder engagement opportunities and to address implementation challenges and may issue additional guidance or rulemaking.
On March 13, 2025, separately and without discussion of the new federal WOTUS guidance, the EMC voted to send to public notice and hearing its proposed amendment to “clarify the definition of wetlands” in the state’s administrative code in accordance with the 2023 Farm Act by inserting into the definition of wetlands a sentence that aligns the state’s definition of wetlands to the federal definition. The public comment period and subsequent rules review process will continue into 2026, although the NCDEQ has been implementing the definition since 2023 as directed by the General Assembly.
Impact on Coastal Development Projects
The evolution of the “continuous surface connection” standard will transform how wetlands are evaluated in coastal areas. Previously, many wetlands received federal protection due to their ecological connection to nearby waters, even without a visible surface connection. Now, the analysis will focus on observable surface connections unbroken by non-jurisdictional discrete features. For instance, a wetland separated from a tidal creek by a man-made berm may no longer qualify for federal protection, even if it floods during high tides.
While some wetlands may no longer fall under federal jurisdiction, developers must still consider jurisdictional issues raised by state and local regulations. The NCDEQ Division of Coastal Management maintains oversight of development activities in areas of environmental concern that contain estuarine waters and coastal wetlands through CAMA. This means that while federal permitting requirements might be reduced in the 20 coastal counties, state-level scrutiny could increase.
Of particular importance for coastal developers is regulation of specific coastal wetland species under CAMA. The state specifically protects wetlands containing any of ten plant species listed in the administrative code, including salt marsh cordgrass, black needlerush, sea lavender, bulrush, and cattail. Any of these species in a coastal wetland triggers CAMA jurisdiction, regardless of federal wetland status under the post-Sackett framework. This means that even if a wetland loses federal protection due to lack of a continuous surface connection, these species will maintain state-level regulatory oversight and require CAMA permitting.
The NCDEQ Division of Water Resources protects vegetative buffers along streams and rivers, which often include wetlands, in river basins like the Neuse and Tar-Pamlico and the Jordan Lake watershed. Development impacts to the first 50 feet from the high-water line are highly regulated. It also oversees permitting and compliance with state surface water quality standards that can include projects that impact wetlands. And at the local level, governments may have additional zoning regulations, floodplain ordinances, or conservation measures that affect development activities on or near wetlands.
Practical Strategies for Coastal Developers
Before purchasing coastal property, developers should conduct thorough due diligence, including a preliminary survey of wetlands under the new guidance, assessment of potential state and local regulations, evaluation of historical wetlands documentation, and analysis of potential mitigation requirements and costs. Site analysis by trained wetlands professionals continues to be highly recommended.
When designing coastal projects, developers should consider incorporating features that address both current requirements and the potential effects of fewer regulatory protections for wetlands. This includes stormwater management systems that account for current permit requirements and the potential future increase in runoff volume from development footprints with reduced wetlands available to counteract nuisance flooding from increasing rain events and storm surges, regardless of jurisdictional status. Risk management strategies should account for the effects of increased development eliminating wetlands that will result in increased flooding to the surrounding area during hurricanes and other storms. Voluntary protection measures can be a part of the development strategy for long term success and risk mitigation after the project is complete.
Conclusion
The transformed regulatory landscape for wetlands presents both opportunities and challenges for coastal development in North Carolina. Success requires understanding the current requirements and anticipating changes in state and local regulations. The implementation experiences of 2024 have demonstrated the need for flexibility and comprehensive planning in approaching coastal development projects.
Developers who adopt a proactive approach to wetlands, considering both immediate requirements and potential effects of future regulations, will be best positioned for success. Working closely with environmental consultants, legal counsel, and regulatory agencies, particularly remains essential for navigating this complex landscape. Evolving regulatory interpretations signal that adaptability and forward-thinking planning will continue to be essential components of successful coastal development strategies.
Maryland Enacts Law Exempting Passive Trusts from Mortgage and Installment Loan Licensing Requirements
In January 2025, the Maryland Office of Financial Regulation (the “OFR”) issued a guidance stating that assignees of residential mortgage loans, including certain passive trusts, were required to hold a Maryland mortgage lender license and, in certain circumstances, an installment loan license (previously discussed here). In response to this, the Maryland House and Senate passed separate but identical bills known as the Maryland Secondary Market Stability Act of 2025 (the “Act”). The Act was signed into law by Maryland Governor Wes Moore on April 22, and became effective immediately.
The Act addressed the OFR guidance on licensing for secondary market assignees by enacting an exemption from both the Maryland Mortgage Lender Law and the Maryland Installment Loan Law for “passive trusts.” The Act defines a “passive trust” as a trust that acquires or is assigned a mortgage loan but does not (i) make mortgage loans, (ii) act as a mortgage broker or a mortgage servicer, or (iii) engage in the servicing of mortgage loans. The original bills introduced in response to the OFR guidance would have exempted any assignee of mortgage loans or installment loans from licensing, including a trust, but the final Act more narrowly exempts only passive trusts.
Putting It Into Practice: The OFR’s guidance can now be considered abrogated, at least to the extent that it applied to passive trusts. However, secondary market purchasers of loans that do not use passive trusts to acquire or take assignment of residential mortgage loans in Maryland must become licensed as Maryland mortgage lenders by July 6, 2025. In addition, it is worth noting that the Act does not apply to loans made under the Maryland Consumer Loan Law, which provides that an assignee of a loan made under that law must hold a consumer loan license in order to enforce the loan.
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Ohio AG Sues Mortgage Lender for Illegal Broker Steering Scheme
On April 17, Ohio Attorney General Dave Yost announced that the state has filed a lawsuit against a wholesale mortgage lender, alleging that the company engaged in a statewide scheme to mislead borrowers and inflate mortgage costs through deceptive broker steering practices. The AG’s office is seeking a jury trial on all claims.
The complaint alleges that the lender violated the Ohio Consumer Sales Practices Act, the Ohio Residential Mortgage Lending Act, and the Ohio Corrupt Practices Act. The lawsuit accuses the lender of conspiring with brokers to funnel borrowers into high-cost loans under the guise of independent shopping, despite internal agreements that allegedly prohibited brokers from presenting more affordable alternatives.
Specifically, the allegations include:
Restricting broker competition. The lender contractually prohibited referrals to two major competitors, even when cheaper options were available.
Marketing misrepresented broker independence. Brokers used lender-supplied marketing materials that described them as “independent” despite contractual restrictions limiting their ability to shop around.
Rewarding loyalty with exclusive perks. Brokers who funneled loans to the lender received increased exposure on borrower search engines, faster underwriting times, and access to promotional products, all tied to volume metrics.
Charging borrowers significantly higher costs. The AG asserts that borrowers working with high-funneling brokers paid hundreds more per loan than those using brokers who independently shopped the market.
Putting It Into Practice: Ohio’s lawsuit continues a trend of increased state-level enforcement targeting financial services practices, particularly in the mortgage space (previously discussed here). Lenders and brokers who operate in this space should ensure their compliance procedures align with best practices, especially when it comes to referrals.
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Pushback of Deadline for SNFs to Submit Significantly More Detailed Ownership and Control Information in New “SNF Attachment” to CMS Form 855A
With newly confirmed Dr. Mehemet Oz at its helm, the Centers for Medicare & Medicaid Services (CMS) maintained but delayed the deadline for its requirement that Skilled Nursing Facilities (SNFs) to report significantly expanded information to CMS about the ownership, management and relationships with private equity (PE) and real estate investment trusts (REIT), and newly defined “additional reportable parties” (ADPs).
Scheduled to take effect on May 1, 2025, CMS recently announced a three-month reprieve, pushing the deadline back to August 1, 2025. This comes at the same time that CMS is seeking suggestions on lowering the Medicare regulatory burden and simplifying Medicare reporting requirements.
The delay announcement came as a surprise since, as recently as Friday, April 11, CMS reminded SNFs about the May 1 deadline that was fast-approaching for the Off-cycle SNF Revalidation of all Medicare-enrolled SNFs. Originally issued on October 1, 2024, every SNF was required to complete the new Form 855A that was designed to improve transparency and accuracy in SNF enrollment data under new reporting rules that were finalized by CMS in the Medicare and Medicaid Programs; Disclosures of Ownership and Additional Disclosable Parties Information for Skilled Nursing Facilities and Nursing Facilities; Medicare Providers’ and Suppliers’ Disclosure of Private Equity Companies and Real Estate Investment Trusts, on November 17, 2023.
Effective October 1, 2024, CMS added the new “SNF Attachment” to Form 855A, the Medicare Enrollment Application for Institutional Providers. All SNFs must now revalidate CMS enrollment by submitting the updated form by August 1, 2025. Medicare-enrolled SNFs should have received a revalidation notice by the end of the calendar year 2024. Even if the letter got lost in the mail, CMS expects every Medicare enrolled SNF to contact their Medicare Administrative Contractor (MAC) to ensure they revalidate their enrollment before August 1, 2025, or risk what will be serious consequences.
CMS set the bar for disclosures high, and the consequences will be swift and painful for SNFs that fail to report enrollment information fully and accurately. Penalties may include notice of dis-enrollment or revocation of Medicare enrollment, which could result in a lapse in enrollment, leaving a non-compliant SNF unable to submit claims or receive reimbursements.
The updated 855A requires SNFs to disclose all ownership interest and managing control information on the new SNF Attachment, rather than in Sections 5 and 6 as previously required. SNFs will no longer fill out Sections 5 and 6 and instead must check a box in each section which states “Check here if you are a Skilled Nursing Facility and skip this section.”
The new SNF Attachment requires far more information and detail than previously required by Sections 5 and 6. While some of the disclosures previously required in these sections have carried over to the new SNF Attachment, there are several additional requirements. SNFs must now disclose:
All members of their governing body irrespective of business type;
If the SNF is an LLC, all owners must be reported regardless of ownership percentage;
If the SNF is a trust, all trustees;
All Additional Disclosable Parties (ADPs); and
Certain additional information about each ADP.
An Additional Disclosable Party (ADP) is defined broadly to include any person or entity that:
Exercises operational, financial, or managerial control over any part of the SNF,
Provides policies or procedures for any of the SNF’s operations,
Provides financial or cash management services to the SNF,
Leases or subleases real property to the SNF or owns a whole or part interest equal to at least 5% of the total value of property leased by the SNF,
Provides management or administrative services to the SNF,
Provides clinical consulting services to the SNF, and/or
Provides accounting or financial services to the SNF.
There is no minimum threshold for how long the ADP must have furnished the services, the extent of involvement with the SNF’s operations, or the volume of furnished services. If a person or entity performed any of the above-listed services, for any period of time, they must be disclosed as an ADP.
Furthermore, CMS has made it abundantly clear that SNFs should err on the side of disclosure if they are uncertain as to whether a party qualifies as an ADP. Additional information can be found in CMS Guidance for SNF Attachment on Form CMS-855A.
At approximately the same time SNFs were expected to be gathering the information to complete the new disclosures, CMS posted an appeal for regulatory relief titled “Unleashing Prosperity Through Deregulation of the Medicare Program Request for Information” (Medicare Deregulation RFI). Through this RFI, CMS asks for input “on approaches and opportunities to streamline regulations and reduce administrative burdens on providers, suppliers, beneficiaries, Medicare Advantage and Part D plans, and other stakeholders participating in the Medicare program . . . [in an] effort[ ] to reduce unnecessary administrative burdens and costs, and create a more efficient healthcare system. . .” Commenters are asked to identify “specific Medicare administrative processes, quality, or data reporting requirements, that could be automated or simplified to reduce the administrative burden on facilities and providers,” “changes [that could] be made to simplify Medicare reporting and documentation requirements without affecting program integrity,” and “documentation or reporting requirements within the Medicare program that are overly complex or redundant.” Some SNF industry stakeholders are looking at the RFI as an opportunity to get the Trump Administration to at least decrease the complexity of the increased SNF reporting requirements, if not eliminate as a redundant, duplicative and unnecessary administrative burden that will create financial strain on SNFs.
Nevada Supreme Court: Judge, Not Jury, Decides Unambiguous Contract
In 2011, a local water district in Nevada entered into a lease agreement with Paradise Canyon, LLC to provide shares of water for irrigating the Wolf Creek Golf Club. The lease agreement granted Paradise Canyon a right of first refusal with respectrenewing the agreement, but unambiguously provided the district with sole and absolute discretion in rate-setting during the renewal period. When it came time to renew, the district notified Paradise Canyon that it intended to raise its rates. Paradise Canyon responded by suing the district for declaratory relief and damages, alleging a bad faith breach of the lease agreement. The trial court allowed some of the claims to got to a jury.
Yesterday, the Nevada Supreme Court found that the trial court had erred:
Given that the relevant provision here was unambiguous, the trial court erred in failing to find that the District had sole and absolute discretion to set the rental rate after January 1, 2020. Sending that question to the jury was error, and thus the verdict resulting from the jury’s mistaken reading of the lease and the trial court’s judgment resting on that jury verdict are in error.
Virgin Valley Water Dist. v. Paradise Canyon, LLC, 141 Nev. Adv. Op. 19 (April 25, 2025). Nevada does imply a covenant of good faith and fair dealing into contracts but this covenant “may not be used to supply additional terms to the lease or to fault conduct exercised under an authority expressly provided by the lease absent conduct that intentionally interferes with the intent and spirit of the lease.”
Florida Legislature Will Need Extra Time to Negotiate Budget & Tax Relief
Today, the President of the Florida Senate announced that tax relief has stalled the budget negotiations for the 2025 Regular Session. This means the Florida legislature will likely have to return in a Special Session to resolve tax and budget bills before the start of the state fiscal year on July 1, 2025.
The Senate announced they had offered a tax relief package of nearly $3B in the first year and $1.3B in future years. That relief would include a temporary elimination of certain motor vehicle fees, a permanent sales tax exemption on clothing under $75, a 1% reduction of the business rent tax (to 1%), and the historic sales tax holidays. See Senate Bill 7034.
The House’s current legislation would result in a $5B tax reduction in the first year and a $5.48B recurring reduction thereafter. Cornerstones of House Bill 7033 are a permanent 0.75% reduction of all sales tax rates and a redirection of tourist development tax (bed taxes) to offset local property taxes. The House bill will be considered on the floor of the full House tomorrow morning.
Mitigation Grant Program Offers Benefits to Homeowners and Communities
The Federal Home Loan Bank (FHLB) of Dallas FORTIFIED Fund Grant Program is entering its third year of operation with more capacity than ever before. The program provides grants through FHLB Dallas members to help income-qualified homeowners install FORTIFIED Roof systems designed to prevent damage from hurricanes, high winds, and other severe weather events.
Funding
The FORTIFIED Fund Grant Program began in 2023 with FHLB Dallas making $1.75 million in grant funds available. In 2024, FHLB Dallas increased the amount to $4 million. Both years, the funds were exhausted. This year, $10 million has been allocated to the FORTIFIED Fund. As of April 18, 2025, $9,131,285 remained available.
Application Process
FHLB Dallas began accepting grant applications on April 15, and the offering will remain open until June 13. Applications are reviewed on a first-come, first-served basis. In the event funds remain available, a second offering will open July 7 and remain open until October 31, or until funds are exhausted. All applications must be submitted by FHLB Dallas member institutions and may request up to $500,000 for up to 50 preapproved households. Grants are capped at $15,000 per home for roof renovations and $7,500 per home for new construction. Members may work with an intermediary organization to identify and qualify households, find roofers and evaluators, and facilitate payments to appropriate parties. Alternatively, members may assume these responsibilities themselves. Application forms and required documentation are available from FHLB Dallas.
FORTIFIED Roof Standards
The FORTIFIED Fund Grant Program helps homeowners replace or upgrade their roofs to meet FORTIFIED Roof standards established by the Insurance Institute for Business & Home Safety (IBHS), an independent, nonprofit scientific research and communications organization. IBHS’s building safety research helps to create more resilient communities. FORTIFIED is a nationally recognized set of construction methods to retrofit or build a home, business, or multifamily development designed to prevent damage that commonly occurs during high winds, hurricanes, hailstorms, severe thunderstorms, and tornadoes up to EF-2. FORTIFIED is based on decades of research, testing, and observations by IBHS. FORTIFIED Roof standards have specific requirements beyond what is required by most building codes that provide a high level of protections from storms.
FORTIFIED Benefits
It is well recognized within the construction and insurance industries that regardless of the type of roof — shingles, metal, or tile — FORTIFIED Roof requirements (including stronger edges, better attachment, sealed roof deck, and impact-resistant shingles) make a home stronger. It has been proven effective repeatedly in real-world severe weather events, lowering insurance premiums and adding financial value. For example, during the record-breaking 2020 hurricane season (hurricanes Laura, Sally, Delta, and Zeta), approximately 95% of the nearly 17,000 FORTIFIED homes impacted by hurricanes experienced little to no damage and had no insurance claims. Additionally, homes with a FORTIFIED designation generally receive discounts/credits on the wind portion of their homeowner’s insurance premium that could be as great as 55% in some states. Furthermore, studies have shown that FORTIFIED homes sell for nearly 7% more than non-FORTIFIED homes.
Eligibility Criteria
The FORTIFIED Fund Grant Program targets owner-occupied, income-qualified primary residences within the FHLB Dallas District, Arkansas, Louisiana, Mississippi, New Mexico, and Texas. Households must meet specific income limitations (120% or less of Area Median Income) and comply with IBHS standards for FORTIFIED Roof systems. All homes included in applications must be precertified as eligible to receive a FORTIFIED Roof by an IBHS-certified evaluator. Documentation requirements include proof of income, homeownership, and compliance with FORTIFIED standards.
Grant Funds
Grant funds are disbursed to FHLB Dallas member institutions prior to renovations for the member to disburse to contractors and evaluators as roofs are completed and certified. FORTIFIED Fund grants can cover costs associated with the pre- and post-construction evaluations to verify that FORTIFIED compliance standards are met. Also, grant funds can be used to cover intermediary fees for roof renovations. Intermediary fees are paid to organizations for their work in sourcing applicants and identifying contractors. These fees are included in the $15,000-per-home maximum grant. Any funds not used in accordance with program requirements must be returned to FHLB Dallas.
Conclusion
While the FORTIFIED Fund Grant Program application process and rules may at first glance appear somewhat daunting, it may be worth the time and effort to consider the opportunities presented by the program. Members not already participating in the program may wish to start with a modest number of homes and plan for greater participation in subsequent years, as indications are that FHLB Dallas will continue the program in the future.
The Latest OFSI Property and Related Services Threat Assessment
The United Kingdom’s Office of Financial Sanctions Implementation (OFSI) has published a report detailing suspected breaches of UK financial sanctions involving UK property and related services firms since February 2022 and ongoing threats to sanctions compliance (the Assessment).
Why Did OFSI Focus on Property and Related Services?
Under the United Kingdom’s financial sanctions regime, property is an “economic resource”. Individuals and entities designated by OFSI (DPs) are prohibited from using UK financial services to execute property transactions and may also be subject to asset freezes, which include economic resources such as property.
Property and related services firms captured in the Assessment include UK firms and sole practitioners involved in the sale, maintenance or upkeep of properties. OFSI’s Assessment is a broad cross-sector assessment that considers a range of actors including: estate agents; letting agents; landlords; tenants; property managers; property investors; property developers; UK firms dealing with overseas properties; and overseas firms dealing with UK customers.
OFSI confirmed that almost half of suspected breaches related to UK residential property owned or let by DPs. The remainder of suspected breaches were linked to UK commercial properties, investments into UK properties, the use of UK property firms by DPs to facilitate overseas business interests and client relationships, and the renewal or continuation of property-related contracts (including insurance) on behalf of or for the benefit of DPs.
OFSI’s Key Findings
The Assessment sets out five key findings relevant to UK property and related services firms from February 2022 to present.
Underreporting of Breaches
OFSI found it was almost certain that UK property and related services firms have underreported suspected breaches of financial sanctions to OFSI. OFSI also observed significant delays in the identification and reporting of suspected breaches.
Noncompliance With Licence Conditions
OFSI stated it was almost certain that DPs have breached UK financial sanctions by making or facilitating transactions for the benefit of their UK properties without or outside the scope of an OFSI licence or applicable exception (further information on OFSI licencing can be found here).
OFSI found that the vast majority of suspected breaches of licence conditions related to payments made by DPs or connected entities for the maintenance of UK properties.
Russian DPs and Their Enablers
OFSI identified the use of professional and nonprofessional “enablers” who assist DPs in concealing their beneficial ownership or control of UK properties.
OFSI reports it was highly likely that property-related breaches of sanctions have been enabled by UK property firms facilitating the payment of household staff payments, council tax, utility bills, property maintenance services, letting services and more, without an applicable licence. This is particularly the case for small-scale property or related services firms or sole practitioners with high-risk appetites and longstanding relationships with DPs.
Family and Associates
OFSI found it was highly likely that DPs have used nonprofessional enablers, such as family and close associates, to frustrate UK financial sanctions by transferring ownership or control of property assets to family/associates to disguise beneficial ownership. Key giveaways are the use of family members of associates of DPs making payments for services relating to properties owned or controlled by a DP, e.g., through direct debits to settle insurance contracts, or for the maintenance of a property, or to pay for a subscription service at an address linked to a property.
OFSI encourages all UK firms to report any suspicious changes to the ownership or control of property assets linked to a Russian DP, particularly when properties are considered super prime properties, i.e., at the top 5% end of the property market.
Professional Enablers
OFSI considered it was almost certain that UK property and related services firms have acted as professional enablers for DPs, thereby facilitating sanctions breaches. Since February 2022, most professional enabler activity includes concierge and personal security services, other property-management services, or lifestyle-management services. Without a relevant OFSI licence, these payments could breach UK financial sanctions.
OFSI recommends staying alert to changes in ownership or control of a DP’s property asset, particularly if it has been recently divested to a percentage below 50% to bypass the basic due diligence checks.
Intermediary Jurisdictions
The Assessment also encouraged vigilance when “red flags” arise in conjunction with an intermediary jurisdiction nexus (i.e., a jurisdiction other than the United Kingdom or the jurisdiction to which UK financial sanctions apply). The Assessment found that Russian DPs structured their financial interests through a number of intermediary jurisdictions, some of which offer greater privacy in legal and financial systems. OFSI reported that since 2022, 22% of suspected breaches involved actors in intermediary jurisdictions including: Austria, Azerbaijan, the British Virgin Islands, the Republic of Cyprus, Jersey, Guernsey, Luxembourg, Switzerland, Türkiye, the United Arab Emirates and the United States.
Reporting
Property and related services are obliged to make Suspicious Activity Reports (SARs) to the National Crime Agency under Part 7 of the Proceeds of Crime Act 2002 and the Terrorism Act 2000 if money laundering or terrorist financing activities are known or suspected. Guidance on SARs is available here.
As of 14 May 2025, letting firms will join estate agents and other relevant firms in being required to report to OFSI if they know or have reasonable cause to suspect that a person is a DP or if a person has breached financial sanctions regulations, if the information or other matter on which the knowledge or cause for suspicion is based came to it in the course of carrying on its business. This applies regardless of the rental value of properties handled by letting agents and includes all forms of tenancies.
Practical Steps
To ensure compliance with your reporting obligations, the following practical steps are advised:
Monitor and identify any red flags as indicated in the Assessment.
Update client due diligence beyond basic ID checks to check beneficial owners and connected parties.
Remind yourself of your specific reporting obligations under the Sanctions and Anti-Money Laundering Act 2018 by reading the guidance published by His Majesty’s Revenue and Customs.
Complete a tailored risk assessment incorporating the above findings.
Identify and comply with any applicable licence requirements.
Conclusion
OFSI’s Assessment builds on previous and related publications issued by OFSI and UK government partners, including the Financial Services Threat Assessment published by OFSI in February 2025 (see our corresponding alert here) and the Legal Services Threat Assessment published by OFSI in April 2025 (see our corresponding alert here).
Will the Shift from Renewable Energy to Oil and Gas Result in Cheaper Energy Prices?
There is clearly a shift in the Trump Administration’s energy policy from renewable energy to foster and sustain more fossil fuel energy. This shift is being promoted by the auctioning of government oil and gas leases.
Public Land Leases
The Interior Department announced in late March that in the first 3 months of 2025, the federal government brought in nearly $40 million in revenue from oil and gas lease sales on public land.
The leases have a one-decade lifespan and as long thereafter as they produce oil and gas in paying quantities.
The U.S. will hold an oil and gas lease sale in the Gulf of Mexico, as planned by the Biden administration. A proposed notice for the auction will be published in June. The Biden administration had planned for 3 Gulf leases (permitting production and drilling rights), a historically low number that angered the oil and gas industry and drilling states.
The Energy Shift
It is likely that the Trump Administration will expand the number of leases from the 3 proposed by the Biden Administration. Doug Burgum, who heads Trump’s energy council, said that “unleashing U.S. energy will lower gasoline and grocery store prices while boosting national security.” Consistent with the shift in energy policy, the Trump administration removed the U.S. from the Paris Agreement on climate change and aims to slash regulations on planet warming emissions from oil, gas, and coal operations.
Different Outcome?
Will this energy policy shift result in cheaper energy prices for the consumer? Some speculate that many oil companies operating in the Gulf of Mexico will likely continue to do what they’ve done for years, which is sit on hundreds of untapped oil leases on millions of acres. The market is saturated with oil, making energy companies reluctant to spend more money drilling because the added product will likely push prices down, cutting into profits. As stated by Exxon Mobil CEO Darren Woods in the previously cited LA Illuminator article, “So, I don’t know that there’s an opportunity to unleash a lot of production in the near term, because most operators in the U.S. are [already] optimizing their productions today.”
Leases have been sold too quickly and cheaply in recent decades, according to a 2021 report by the U.S. Department of the Interior, which oversees BOEM. This fast and loose approach “shortchanges taxpayers” and encourages speculators to purchase leases with the intent of waiting for increases in resource prices, adding assets to their balance sheets, or even reselling leases as profit rather than attempting to produce oil or gas.
Others argue that if you want to slash energy prices, then renewable energy is the way to go, but we are shipping overseas. Shipping LNG overseas contributes to higher electricity and natural gas prices in the U.S., according to a recent U.S. Department of Energy report.
Only time will tell what the future holds for energy prices. Hopefully we will not have a Horizon Deepwater disaster in the meantime.
5 Real-Life Scenarios That Call for Legal Guidance
Much of life involves situations that may require legal expertise to assist one in knowing and ensuring that their rights have been protected for the future. For example, many will require help when launching their new business venture or when going through personal crisis or issues with ailments. The following are five critical circumstances in […]
FHFA Has Fraud on Its Mind
In recent days, Federal Housing Finance Agency (FHFA) Director Bill Pulte has made it clear that he believes fraud is a rampant problem at FHFA. In a stream of related activities, Pulte has called on the public to report fraud via email and a new Hotline, terminated over 100 FHFA employees for alleged fraud, and taken aim at a political rival for alleged mortgage fraud.
Fraud Hotline Encourages Reporting of Fraud Concerns
On April 15, 2025, Pulte posted an invitation on X for any person to “Please submit any alleged criminal mortgage tips or mortgage fraud tips to [email protected].” This message coincides with FHFA’s new Hotline for Reporting Alleged Fraud, Waste, Abuse, or Mismanagement at Hotline | FHFA-OIG. The hotline website encourages federal employees and the public to “report information about those, whether inside or outside of the federal government, who waste, steal, or abuse government funds in connection with the Agency, Fannie Mae and Freddie Mac (the Enterprises), any of the Federal Home Loan Banks (FHLBanks), or the FHLBanks’ Office of Finance, or about mismanagement within FHFA.” The Hotline website is now seeking information on any of the following:
Possible waste, fraud, abuse, mismanagement, or other misconduct involving FHFA employees, programs, operations, contracts or subcontracts;
Possible violations of Federal laws, regulations, rules, or policies pertaining to FHFA or to any of the regulated entities; or
Possible unethical activities involving employees of FHFA or of the regulated entities.
This effort marks a significant step in Pulte’s broader campaign to foster transparency, accountability, and a culture of integrity across the federal housing finance system.
FHFA Cleans House
Following an internal investigation launched under Pulte’s anti-fraud campaign, Fannie Mae recently terminated over 100 employees for unethical behavior, including involvement in fraud. This internal investigation reflects Pulte’s zero-tolerance stance on fraud and commitment to restoring integrity at government-sponsored enterprises like Fannie Mae and Freddie Mac.
In a release by the Federal Housing Finance Agency on April 8, 2025, Pulte stressed that “there is no room for fraud, mortgage fraud, or any other deceitful act that can jeopardize the safety and soundness of the housing industry.” Further, Fannie Mae CEO Priscilla Almodovar thanked Pulte for “empowering of Fannie Mae to root out unethical conduct,” emphasizing that “we hold our employees to the highest standards, and we will continue to do so.”
Although the agencies have not released further details about the terminations, Pulte reaffirmed his commitment to combating misconduct in a post on his personal X account, stating, “We are turning around Fannie Mae and Freddie Mac, slowly but surely.”
Referral of New York Attorney General Letitia James for Mortgage Fraud
As a part of Pulte’s crackdown on alleged mortgage fraud, he has referred New York Attorney General Letitia James for federal prosecution for her alleged mortgage fraud. Pulte alleges James “has, in multiple instances, falsified bank documents and property records to acquire government-backed assistance and loans and more favorable loan terms.” Director Pulte alleges that most recently, James committed fraud by claiming a Virginia home would be her primary residence in 2023, while James is the sitting Attorney General of New York. James’s office has maintained that the Virginia residence is the primary residence of her niece, with whom she purchased the property.
Pulte further alleges fraud connected to a home purchase in Brooklyn in 2001, where James used a loan that was only available to purchase four-unit properties to purchase an alleged five-unit property. However, popular real estate sites such as StreetEasy, Trulia, and Redfin have categorized the property as a four-unit building.
Lastly, Pulte has alleged fraud in connection with a 1983 home purchase by James’s father, where the mortgage states James is her father’s wife instead of his daughter. It is unclear whether or not this was a clerical error in drafting the Mortgage or whether it was an intentional act by James and her father. While the criminal referral references the 2001 and 1983 purchases, any alleged fraud in connection with these purchases appears to be well beyond the statute of limitations.
James has initially responded that the allegations are “baseless.” She has said the “allegations are nothing more than a revenge tour” related to his civil fraud case against President Trump, which resulted in a $454 judgment from a New York Court in 2024, which he is currently appealing.
Expect Fraud Related Repurchases
Pulte’s interest in fraud is also likely to trigger new repurchase demands to the industry. One of the critical representations and warranties that lenders make when selling loans to the GSEs is that the loan meets all the requirements of the Lender Contract, including that it has not been obtained via misrepresentation or fraud. “Because the selling warranties are not limited to matters within a seller/servicer’s knowledge… the action or inaction (including misrepresentation or fraud) of the borrower, or a third party, as well as the action or inaction (including misrepresentation or fraud) of the seller/servicer will constitute the seller/servicer’s breach of a selling warranty.” Fannie Mae Guide A1-1-02, Representation and Warranty Requirements (08/16/2017), see also Freddie Mac Guide 1301.8 – Warranties and representations by the Seller (8/2/2023).
The GSEs have always maintained the ability to demand repurchase of any mortgage loans that do not meet the many qualifications of their Seller Guidelines. See Freddie Mac Guide 3602.2 – Repurchases (8/17/2016) and Fannie Mae Guide A1-3-02, Fannie Mae-Initiated Repurchases, Indemnifications, Make Whole Payment Requests and Deferred Payment Obligations (10/11/2023). During the Biden Administration, the industry experienced a sharp uptick in repurchase demands from the GSEs. As a November 2023 white paper from the Urban Institute noted, the “GSEs have become more aggressive, forcing more repurchases earlier in the life of the loan than was the case in earlier vintages. In the first few years of the mortgages’ life, there have been more repurchases for the 2018–22 origination years than there were in the 2005–08 origination years.” GSE Repurchase Activity and its Chilling Effect on the Market. Overall, the GSEs have been proactive about their repurchase rights both in recent years and prior to the Trump Administration.
With that background in mind, Pulte’s April 16, 2025, post on X that “FHFA, Fannie Mae, and Freddie Mac will be evaluating ways to ‘recall loans’ that have been obtained fraudulently” is not groundbreaking news, but it does emphasize the recent focus on fraud. Pulte’s use of “recall” instead of “repurchase” may relate to his homebuilding background, but the intent is the same. Apparently, neither Pulte nor the FHFA have responded to the National Mortgage News’ request for clarification on the post. However, some believe the X post may directly relate to the FHFA referral to the U.S. Attorney General regarding Attorney General James.
This renewed emphasis on enforcing repurchase rights—particularly in cases involving fraud—signals that lenders should prepare for heightened scrutiny and further increase in repurchase demands as the FHFA doubles down on accountability under Pulte’s leadership.
Going Forward
Taken together, these actions paint a clear picture: under Bill Pulte’s leadership, the FHFA is aggressively pivoting toward a hardline stance on fraud, ethics, and accountability. From employee terminations and public tip lines to high-profile referrals and the reinforcement of repurchase remedies, Pulte is sending a strong message that misconduct at any level—whether inside the agency, among its regulated entities, or even among political figures—will be met with swift and serious consequences. As the housing finance system braces for increased oversight, stakeholders should expect this aggressive posture to define the agency’s direction for the foreseeable future.
Updates to the Updates of FHA’s Servicing, Loss Mitigation, and Claims Processes
At the tail end of the Biden administration, the Federal Housing Administration (FHA) published Mortgagee Letter 2025-06, which was tilted Updates to Servicing, Loss Mitigation, and Claims. The 251-page mortgagee letter outlines various changes to FHA’s servicing requirements in Handbook 4000.1, such as updated requirements for forbearances and extending the availability of COVID-19 Recovery Options to February 1, 2026. However, on April 15, 2025, FHA published Mortgagee Letter 2025-12, which replaced the content and implementation of Mortgagee Letter 2025-06.
Mortgagee Letter 2025-12 is titled Tightening and Expediting Implementation of the New Permanent Loss Mitigation Options. The title of the mortgagee letter is reflective of some of the major differences between it and Mortgagee Letter 2025-06. For example, FHA highlighted the following impacts of Mortgagee Letter 2025-12 in its announcement titled FHA INFO 2025-21:
Ending the availability of COVID-19 Recovery Options on September 30, 2025, as opposed to February 1, 2026;
Moving up the effective date of FHA’s new permanent loss mitigation options to October 1, 2025, as opposed to February 2, 2026;
Officially ending the FHA-HAMP option on September 30, 2025;
Limiting a borrower to one permanent loss mitigation option every 24 months, as opposed to 18 months; and
Reversing scheduled increases in borrower and/or servicer incentives related to certain loss mitigation options.
In addition to these published changes, there are some notable differences between Mortgagee Letters 2025-12 and 2025-06 that FHA did not highlight in its announcement. For example, Mortgagee Letter 2025-12 completely deletes the language accessibility requirements Mortgagee Letter 2025-06 proposed for Handbook 4000.1.III.A.1.a.ii.(D). The language accessibility requirements would have required mortgagees to include a disclosure on all notices sent to borrowers addressing the availability of language access services for borrowers with limited English proficiency (LEP). The LEP disclosure would have been required to be sent, at a minimum, in English and Spanish. Additionally, Mortgagee Letter 2025-12 removes any reference to discrimination based on “sexual orientation or gender identity” from the Nondiscrimination Policy in Handbook 4000.1.III.A.1.a.ii.(C).
From a mortgage servicer’s point of view, the biggest challenge in Mortgagee Letter 2025-12 is the faster deadline for phasing out COVID-19 Recovery Options. Servicers must adjust to updated FHA servicing rules more quickly and cannot offer certain COVID-19 Recovery Options after September 30, 2025.
Finally, looking ahead, it is important to note that FHA’s announcement of Mortgagee Letter 2025-12 appears to call into question the future of the Payment Supplement Program. While there is nothing definitive at this point, the announcement does state that FHA is conducting an “overall evaluation… to determine if it should remain a part of HUD’s loss mitigation program.” Given the current administration’s recent “tightening” of other aspects of the FHA servicing program through Mortgagee Letter 2025-12, it is likely that there are more FHA servicing changes to come.
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