Final answer:
Earnest money should be deposited in an FDIC insured institution that adheres to consumer protection laws, maintains required reserves, and undergoes FDIC audits. Additional criteria like cosigner and collateral may apply if linked to a credit decision.
Step-by-step explanation:
When earnest money is deposited into a financial institution, there are several important criteria that must be applied to ensure the security and proper handling of these funds. First, the institution should be FDIC insured, providing deposit insurance up to $250,000 per depositor per account category, safeguarding the funds even in the event of a bank failure. Additionally, the institution must comply with various consumer protection laws, including non-discrimination and the requirement for public disclosure of loan information. Furthermore, the bank must maintain a set reserve requirement, and be subject to regular audits by bank examiners from the FDIC to assess the risk level and ensure asset and liability values are correct. The presence of a cosigner, and collateral might also be relevant depending on the context in which the earnest money is deposited, particularly if it relates to a credit decision for a loan.