Question

Which of the following statements is false?

A. If a bank meets at least three of the five criteria for a depository financial institution, it must comply with HMDA.
B. A mortgage-lending institution must meet both the location test and the loan-volume threshold in order to be a nondepository financial institution.
C. A financial institution must originate at least 100 closed-end mortgage loans or 500 open-end lines of credit in each of the two preceding calendar years to meet the loan-volume threshold.
D. A financial institution is either a depository financial institution or a nondepository financial institution.

Answer 1

A mortgage-lending institution does not need to meet both the location test and the loan-volume threshold to be a nondepository financial institution.

Step-by-step explanation:

The false statement is option B: A mortgage-lending institution must meet both the location test and the loan-volume threshold in order to be a nondepository financial institution.

A nondepository financial institution is a financial institution that does not accept deposits but provides financial services such as lending and investing. Mortgage-lending institutions fall under the category of nondepository financial institutions and are subject to regulations such as the Home Mortgage Disclosure Act (HMDA).

The location test and the loan-volume threshold are criteria used to determine if a financial institution is required to comply with HMDA. However, the statement in option B is false because a mortgage-lending institution only needs to meet either the location test or the loan-volume threshold, not both, to be classified as a nondepository financial institution.