Hoard Your Cash

I'm hearing from a few clients that their phones are so quiet that they are going into crisis mode. They have asked me what the effects of breaking vendor contracts and leases would be or if they should file for bankruptcy to get out of their contracts.

While bankruptcy may be an acceptable option in other industries, in the mortgage industry, it is a huge problem. After all, if you cannot manage your own finances, how can you advise a borrower which is the best mortgage for him? If you cannot make the rent, what will stop you from dipping into fees that you receive in advance from borrowers?

This is why every license application contains a question as to whether the company or any of its principals have ever filed for bankruptcy. If you file for bankruptcy after you receive your license, you must immediately notify the banking department. The banking departments want to make sure that a licensee has enough financial smarts to know how to weather the tough times, such as we are experiencing right now.

I have been in the mortgage industry for over 15 years. I have seen real estate booms and real estate busts. I have always advised my clients to enjoy the good times but to also set aside savings for the difficult years. I also tell them to watch the overhead. Do not set up multiple branch offices with rent, utilities, and equipment to pay for unless you can sustain these expenses when the applications dry up.

So hoard your cash. And negotiate with your contract vendors, don't break your contracts and open yourself up to lawsuits and bad credit ratings.