What is the role of Hub Business Trust?
The Hub Business Trust is the entity named in our transfer process. SMA Hub at no time holds the right to receive the cash flows from our inventory. As the court order approving the transfer is a matter of public record, utilizing the trust provides an important layer of confidentiality for your client.
When the “irrevocable assignment of cash flows” is executed by SMA Hub, as trustee of Hub Business Trust, and your client, Hub Business Trust no longer has any right or title to the payments. At that point, the cash flows are irrevocably assigned to your client. The servicing agreement directs how the payments are made.
At what point does your client take possession of the SMA?
The Hub Business Trust is the named buyer of the cash flows and commits its capital to buy each case that SMA Hub offers for sale. Therefore, it is not just prudent but imperative that SMA Hub, as trustee of Hub Business Trust, performs a rigorous review of each case prior to any purchase.
The payment streams are only available to your client after they have been meticulously reviewed and the insurance carrier has acknowledged the transfer. Your client’s funds are not committed at any time prior.
Once the due diligence process is complete, Hub Business Trust executes an agreement to irrevocably assign the cash flows to your client.
At that time, your client takes ownership of the cash flows.
Who conducts the legal review?
SMA Hub’s internal legal department reviews all of the supporting documentation to ensure the cash flow is conveyed to the purchaser absolutely and irrevocably. The review includes a thorough examination of the court order and supporting court documents, verification that the cash flow is free of any liens and attachments, and review of the transfer and assignment documents.
Should I hire an outside attorney?
Though not required in our process, you are welcome to hire your own counsel to provide an independent review of the supporting materials. Our legal department can help familiarize your attorney with the asset class and answer any questions he or she might have.
Is it preferable to be named directly in the court order?
No, there are a number of disadvantages to being named in the court order. Court orders are public records and your personal details and those of your purchase will be visible to all.
Also, the court order does not transfer title or guarantee payments to the purchaser. The court has a duty only to verify that the sale of the payments is in the best interest of the seller– they have no duty, and take no action, to verify if the payments are in fact valid or if there are any claims to the payments. This verification is done outside of court, and title is transferred by contract.
A distinction should be made between the court process and the contractual assignment in the secondary market for structured settlements. Federal and state law requires that a court approve any transfer of a structured settlement. But the court order alone is not sufficient to convey title. The end purchaser’s right to receive payments is actually conveyed by a contract between the seller and the end purchaser. In some cases, the seller is the original annuitant. But in many cases, the seller is an entity acting as an intermediary. In either case, it is the contractual agreement between the seller and buyer that conveys title.
When do I transfer funds?
Only after the payment stream is fully vetted and completely transferred to the Hub Business Trust do we ask for funds. At funding, a purchaser executes a single document that irrevocably assigns the payments from the Trust to the purchaser.
With In Stock cases, funding can move as quickly as 48 hours. With Pre-Order cases, the date of funding depends on the case; our anticipated close date is indicated on each case.
In either case, funds must be transferred to the Hub Business Trust within two business days after you receive the closing book. The case can close immediately upon mutual execution of the irrevocable assignment of cash flows, transferring full title to your client.
What’s in the Closing Book?
After SMA Hub has completed its legal review of the case, a Closing Book will be prepared and sent electronically to you, the agent. Funding is required within two days of receipt of this Closing Book. The amortization schedule showing the final purchase price will be enclosed along with wiring instructions.
The contents of the Closing Book show the complete chain of title to your client and are as follows:
- Summary Cover Page
- Wiring Instructions, Final Purchase Price
- Review Checklist
- Legal Review Letter & Specific Case Findings
- Amortization Schedule
- Specific Transferred Payment Stream
- Irrevocable Assignment
- Between Hub Business Trust and Purchaser
- Servicing Agreement
- How Cash Flows Are Handled
- Acknowledgement Letter or Stipulation Agreement
- Carrier Confirms Transfer of Payments and Court Order
- Court Order
- Approves Seller’s Transfer to Hub Business Trust
- Purchase & Assignment Agreement/SMA Purchase Agreement
- Between Factoring Company and Hub Business Trust
- Purchase Agreement/Absolute Assignment Agreement
- Between Original Seller and Factoring Company
- Current Benefits Letter
- Carrier Confirms Currently Available Payments