Letters of Credit

Municipal Letters of Credit (MULOCs)

In the past, some financial institutions did not have this alternate way to collateralize municipal/public fund deposits. Now several states and territories, including New York, New Jersey, Puerto Rico and the U.S. Virgin Islands, have amended their laws to permit these institutions to utilize an FHLBNY L/C as eligible collateral.

 

FHLBNY MULOC Benefits for Municipalities

The following are some of the benefits that come with accepting an FHLBNY MULOC as collateral:

  • No cost to you — the MULOC is paid for by the FHLBNY member institution, not the municipality
  • Immediate pay out — in the unlikely event of a default in performance by the member institution, municipalities get paid promptly upon submission of a proper draw certificate, as opposed to selling securities to the market
  • Convenient — municipalities will receive, on the day of the transaction, a one page MULOC via fax with the original transmitted via an overnight delivery service
  • Secure — MULOCs are triple-A-rated and irrevocable, which means they can only be altered or cancelled if all three parties agree in writing to the changes 
  • Operationally efficient for all parties — the MULOC eliminates the need for the depository institution to match securities and monitor margin calls, which reduces operational expenses; eliminates the municipality’s need to monitor third party custodian safekeeping reports or statements; and MULOCs are issued quickly, usually within a few hours

 

How do you request an FHLBNY MULOC?

Only members of the FHLBNY can request a MULOC from the FHLBNY, so third parties must work with a member-lender that participates in the MULOC program.  With over 330 member-lenders, there’s a good chance that your current lender is an FHLBNY member.

Click here for a complete listing of FHLBNY members. Please contact members directly to see if they participate in the MULOC program, or click here to request a list of participating members in your area.

 

 

Calling Officers
(212) 441-6700

 

 
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