Rural Development Lending Reform Update

Broydrick & Associates continues its work towards reforming and enhancing RD lending to create robust markets for lenders and borrowers alike. Today, we brought our FY2020 RD lending initiatives to Puerto Rico at the National Rural Lenders’ Roundtable!

Here are a few items on our RD lending reform agenda:

1. Increase loan authorization levels in USDA rural lending programs, including Community Facilities, Business & Industry Loan Program, and the Rural Water and Waste Disposal Loan Program to expand rural funding opportunities.
2. OneRD Rule: Establish a comprehensive and streamlined rule that will combine four USDA guaranteed loan programs. Working with one consolidated regulation will alleviate any inconsistencies that currently exist within the Community Facilities Guaranteed Loan Program, Rural Water & Waste Disposal Guaranteed Loan Program, Business & Industry Loan Guarantee Program and Rural Energy for America Program. This rule will provide clarity to both lenders and borrowers alike.
3. Mandate a zero subsidy for the Business & Industry Loan Program and the Rural Energy for America Program. The 2018 Farm Bill Conference Report directed the Secretary to submit to the Senate & House Agriculture Committees a zero-subsidy report that analyzes the Community Facilities, Water and Waste Disposal, Broadband Access, Business and Industry, and Rural Energy for America programs to determine how to achieve a level of zero subsidies and how the programs would function in the marketplace.  
4. Establish Guaranteed Construction Loans in the Community Facility Program. Currently, loan guarantees are not available until after the completion of construction. This hindrance often times creates financial strain for those seeking a guarantee before and throughout the construction phase. 
5. Abolish the use of net tangible balance sheets. This is not a generally accepted accounting principle or standard practice for underwriting loans and is confusing to both lenders and borrowers.
6. Begin expanding lending portfolios in accordance with the new definition of “rural” to now include communities with a population of up to 50,000. This expanded definition will create a broader pool of eligibility to rural communities in need of RD lending support and create an expanded portfolio for lenders.
7. Enter into the market of rural telecommunications/broadband guaranteed loan programs. The 2018 Farm Bill provides USDA with the authority to guarantee private sector loans. Regulations are still in the works, but will likely mirror other guarantee lending programs like Community Facilities and Business & Industry ~FY2020.