The current purchase price of the annuity is $111,552.00; the aggregate amount of the transfer payments is $174,000.00. The discounted present value based upon a rate of 4.2% is $149,608.30. An annual discount rate of 13.1% was utilized in calculating the sale price of $111,553.00. No fees, costs, penalties, or liquidated damages would be assessed and passed along to Mr. EV. Conspicuously missing from these submissions, however, was an affidavit from a financial expert explaining the current discount rate ranges predicated upon prevailing market place factors and whether the proposed purchase price in the instant transfer is fair, reasonable, and consistent with the applicable market rate. To be fair, the petitioner did fax two additional sample structures, utilizing in one sample the applicable rate of return and the costs of purchasing an annuity to produce a similar amount of structure settlement payments which the transferee seeks to purchase.
Both in his affidavit and in his appearance at the various conference and hearing in Court, Mr. EV gave three reasons for seeking to sell his structure: 1.) to convert his one family home into a legal two-family income producing property 2.) to pay-off high interest balances on his credit card debt and 3.) to avoid impending foreclosure. Mr. EV acknowledged that he was advised to seek independent professional advise with regard to the transfer. However, he waived such advice claiming to understand the transaction and the resulting economic consequences. Regrettably this contention, designed no doubt to satisfy the statutory requirements of § 5-1706, is belied by Mr. EV’s financial predicament.
Reasons for Sale: 1.) Home Conversion: Mr. EV’s home is located in an area of the Bronx, known as the Country Club section. The area is predominantly comprised of single family and some two-family homes, which tend to retain value since they are highly sought after.
The submitted papers include a certificate of occupancy which reflects the zoning district and the house’s designation as a one family unit. Also included is a copy of a letter from an architect documenting money received from Mr. EV and the cost for processing architectural plans presumably, for two-family conversion with the Department of Buildings. Significantly missing from these documents, however, is proof that the zoning district wherein Mr. EV’s house is sited allows for two-family homes.
Assuming arguendo that there is no prohibition to Mr. EV successfully obtaining a variance, what would the costs be for such a conversion and how much of the $111,553.00 would be used to that end this critical information is not provided.
2.) Credit Card Debt: As of the submission date, Mr. EV and his wife (who is marginally employed) had between 13 (thirteen) and 16 (sixteen) active credit cards.
The total amount of such debt running between $96,952.00 and $ 101,875.55. The monthly minimum amount due on the smallest balance is $24.00 and $621.00 on the largest balance. The corresponding annual percentage rates run from 4.9% on only one card, but primarily range from 15.99% to a staggering 29.49%. The monthly household expenses are approximately $7,151.74. That amount when added to his minimal credit card payments, increases to approximately $9,842.87 per month.
3.) Impending Foreclosure: As of the hearing date, Mr. EV had been delinquent in his mortgage payments since September 1, 2008. His monthly mortgage is in the amount of $4,407.80. His total delinquency, including late charges, is approximately $ 35,960.00.
In addition to providing the Court with some bills for his monthly expenses, Mr. EV also provided the Court with copies of recent employment pay stubs, mortgage delinquency notices from his mortgage servicing company (including critical information regarding financial hardship assistance options and foreclosure relief and retention programs) and copies of his state and federal income tax returns.
In an effort to protect recipients of personal injury structured settlements which were designed to provide future tax-free funds for medical care, education, housing, etc. from the abuses of finance companies which purchase the future payments in exchange for sharply discounted advances, the New York State Legislature enacted Title 17 of the General Obligations Law (“GOL”), in 2002. Therefore, notwithstanding that the parties to this agreement have both signed on the proverbial dotted line, this Court must ascertain the propriety of this transfer within the framework of the SSPA.