Secondary Market and Factoring Flashcards
6 cards from real Structured Settlements practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Secondary Market and Factoring flashcards as text
What is the typical timeline from application to court approval of a structured settlement transfer?
Answer: 45–90 days, depending on state procedural requirements and court calendars
State SSPA procedural requirements, including mandatory waiting periods and court scheduling, typically make the approval process take 45–90 days from application to final order.
What is the role of the independent professional advisor (IPA) in structured settlement transfer transactions in some states?
Answer: The IPA provides the payee with independent legal or financial advice about the proposed transfer before it is executed
Some SSPAs require the payee to receive advice from an independent attorney or financial advisor who has no financial interest in the transaction, ensuring the payee understands the consequences.
What happens to a structured settlement factoring transaction if the court denies the transfer petition?
Answer: The transfer does not occur, the payee retains all future payment rights, and any advance must be repaid if already disbursed
A denied transfer petition means the transaction is void; the payee keeps all future payments and typically must return any advance funds already received from the factoring company.
What distinguishes a 'direct purchase' factoring model from a 'broker' model in the structured settlement secondary market?
Answer: Direct purchasers buy payment rights with their own capital; brokers match payees with investors and earn a fee without taking ownership
In a direct purchase model, the factoring company uses its own funds to buy payment rights; in a broker model, the company connects sellers with third-party funders and earns a fee without itself owning the payments.
What is 'yield' from the perspective of an investor purchasing securitized structured settlement payment rights?
Answer: The annualized return on the investment, based on the price paid for the payment rights relative to the cash flows received
An investor's yield is their internal rate of return: the annualized percentage return earned based on the purchase price and the timing of the cash flows received from the structured settlement payments.
Which of the following best describes why structured settlement payment rights are attractive to institutional investors?
Answer: They provide predictable, fixed cash flows backed by highly rated life insurers, offering portfolio diversification with low correlation to market volatility
Institutional investors value structured settlement payment streams for their predictability, investment-grade insurer backing, and non-correlation with stock or bond market movements.