The Federal Reserve announced last week that it will keep mortgage interest rates low through mid-2013. But the bottom line is, many people still can’t take advantage of the low mortgage rates because of unemployment, underemployment and the rising standards it takes to even qualify for a mortgage or to refinance. Banks are insisting on higher credit scores and larger down payments from applicants and people have too little equity invested in their homes or not enough income to qualify for refinancing.
For former plaintiffs who own structured settlements, the value of that investment also changes with the interest rate environment. When interest rates go down, the present value of a person’s structured settlement on the secondary market goes up and vice versa. So, what does this mean for someone with a structured settlement who is considering selling? It simple terms, it means that they should receive a more favorable discount rate today than in months and years past due to the fact that there are ample investors to purchase the structured settlement on the secondary market . These investors are demanding a lower rate of return on the investment because other investments are offering a lower rate of return in this extraordinary interest rate environment.
Unfortunately, typical factoring companies are still playing the same old games with clients, attempting to bilk uneducated sellers through exorbitantly high discount rates. In other words, the typical factoring company is using this interest rate environment to increase profits rather than treat your former clients selling their structured settlements fairly. Ensuring a fair deal takes a high degree of knowledge of terms such as present value, future value, discount rates, and compound interest, to name a few. This is knowledge the typical plaintiff doesn’t have. Still, the best advice I can give you as a lawyer who facilitates putting clients into structured settlements is to set them on a sound yet realistic financial path at settlement, and leave the door open for them to seek your advice should they have questions in the future.
Jay Fisher is co-founder of Vantage Capital Consultants, a company formed to purchase of structured settlements through a fair and transparent process.