Effective March 12, 2012, the FHLBNY reduced the cost of MULOCs and Refundable MULOCs from 12.5 bps to 9 bps. 
Refundable Municipal Letters of Credit
| Term: | 2 weeks to 1 year |
| Fees: | $100 Administration Fee (if refund is requested) |
| $100 Draw Fee (if there is a default on the L/C) |
On June 1, 2009, the FHLBNY launched a new type of letter of credit — the Refundable Municipal Letter of Credit (Refundable MULOC). This letter of credit is more flexible in collateralizing municipal transaction accounts, whose balances fluctuate over time.
Regular Municipal Letters of Credit (MULOC) are traditionally used to collateralize fixed-balance and term certificates of deposit. As such, matching the MULOC to the balance in the deposit is easy. With a transaction account, the balance will fluctuate with municipal receipts and disbursements.
To avoid having to issue multiple MULOCs as the balance fluctuates, a member can obtain one Refundable MULOC in an amount equal to an estimated high-balance in the transaction account. A portion of the MULOC fee can be refunded at maturity if the actual high-balance in the transaction account remains below the amount of the Refundable MULOC during its entire term.
In short, the new Refundable MULOC provides all the advantages of a regular MULOC, but it also offers a partial fee reimbursement when the MULOC is not fully utilized.*
Benefits of the Refundable MULOC
In addition to the regular MULOC benefits, Refundable MULOCs:
- Reduce MULOC fees if full MULOC is not utilized
- Eliminate over-collateralization of municipal deposits with fluctuating balances
- Are operationally efficient
*To receive a refund, you must complete and fax the Refundable MULOC Certification Form (HLB-118r) within 5 business days of the L/C’s maturity.
