- Dr. Andy Schell, DBA (Ph.D.), MSML, MBA, CPA/CFF, CMB
The Mini-Corr's Fallacy
A mini-correspondent (mini-corr) transaction is not a brokered transaction.
Brokers deliver applications to wholesale companies. Sometimes, brokers may choose to launch a mini-corr transaction with the same investor.
The end result is a fee to the broker, but the legal and regulatory risks are significantly different.
does not create an asset
does not create a liability
does not hold a borrower's escrow funds
A mini-corr does them all.
The unrecorded asset and liability may create certain challenges, but the biggest risk is the failure to record the escrow liability and segment the escrow cash, which is a regulatory violation for each occurrence.
When a borrower brings escrow funds for taxes and insurance to the loan closing, even if the mini-corr uses the borrower's funds to reduce the funding amount from the warehouse lender and does not receive cash from the title agent, the mini-corr receives and is holding the borrower's funds.
Holding borrower funds require compliance with the rules for fiduciary funds.
Brokers thinking that the regulatory and accounting process for a broker is the same as a mini-corr is the fallacy held by some brokers that could result in a significant regulatory fine.
The only solution is to account for all mini-corr loans (held for sale) at each month-end, identify the amount of the escrow fund for each loan, and transfer enough cash to the escrow cash account at the warehouse bank that is enough to cover the escrow liability.
Brokers are familiar with receiving a check or wire for each brokered loan and may think this is all that is required of a mini-corr transaction when the mini-corr complexity is significantly different.
Be aware of the mini-corr complexity to avoid the mini-corr fallacy.
Dr. Schell and his team at MBS offer services in the following areas:
Growth Strategy – Dr. Schell can help you plan and execute a growth strategy.
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Dr. Andy Schell, DBA (Ph.D.), MSML, MBA, CPA/CFF, CMB
Dr. Schell is CEO, Managing Partner, and Co-Founder of Mortgage Banking Solutions and MBS Financial Services ("MBS"), based in Austin, Texas. Dr. Schell is known for his ability to turn "vision into reality" and "chaos into order" as he finds creative solutions to the challenges his clients face addressing Revenue Stability, Technology Enhancement, Financial Management, and Workflow Efficiency.
He has 4 decades of experience as a strategist directing the activity of both small and large groups of employees including mortgage lending activity at Bank of America. His leadership knowledge extends from his hands-on experience and his doctoral academic pursuits in communication, strategy, and finance.
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