Insights

Report: Unlocking the Future of Federal Lending

May 13, 2025

Hosted by the DC Chapter of AGA and Sponsored by Allocore

May 13, 2025 | Washington, DC

The federal government is facing a defining moment in how it manages its loan and credit programs. Federal agencies administer over 130 loan and loan guarantee programs—totaling more than $4.6 trillion in outstanding credit across a fragmented web of legacy systems that often operate in silos, driving up costs, complicating oversight, and delaying delivery of funds to borrowers. With program expansion outpacing modernization and recent workforce reductions compounding decades of underinvestment in infrastructure, today’s federal lending ecosystem is both overextended and under-resourced. It is also rife with fraud. Despite this, there are practical and proven ways to reimagine the delivery of federal credit if we can commit to action.

To discuss the federal credit program landscape and its future, Allocore and AGA’s DC Chapter convened a cross-sector roundtable of government and commercial lending experts in Washington, DC. Participants brought deep experience from government, technology, and policy backgrounds and approached the conversation with urgency, candor, and optimism. The roundtable focused on four central themes: efficiency and consolidation, administrative shared services, technology modernization, and data sharing. Below are key insights from the discussion.

Efficiency and Consolidation

Capacity Crisis

Participants highlighted the impact of a talent gap in loan programs across the federal government. Recent activities have extended a longstanding trend in reduced resources that have destabilized federal credit programs, many of which rely on institutional memory. One participant complained that loan programs are often in a position of surviving rather than innovating. They used to work on new models and data partnerships, but are now just trying to stay afloat.

Agencies have lost the internal capacity to both manage operations and chart forward-looking reforms. At the same time, legacy technology systems and administrative bottlenecks have left many loan programs unable to scale or pivot to new priorities.

Rebuilding Requires Clear Prioritization

There was broad consensus the current disruption presents a rare opportunity to rebuild systems that were never designed for modern lending. Participants warned, however, that rebuilding cannot simply mean propping up outdated frameworks. It must involve rethinking delivery models from the ground up. Now is the moment to rebuild it right was a common sentiment.

Shared Services – Administration and Operations

A Marketplace, not a Mandate

Of the 130+ federal credit programs, many use a patchwork of systems individually owned and operated. Participants felt this missed the mark and created unnecessary complexities and system redundancies. Support for shared services was strong, particularly in areas such as loan servicing, analytics, call centers, and accounting. However, the conversation emphasized that successful adoption depends on creating voluntary, well-scoped offerings, not centrally mandated models.

One approach the group discussed was one modeled after Treasury’s Quality Service Management Organization (QSMO), where agencies can shop for administrative services tailored to their needs. Others see the opportunity to migrate loan program administration to agencies with more advanced, effective loan management platforms. Either way, continuing the disjointed approach of letting a thousand flowers bloom among loan programs was not the preferred option.   

The Missing Piece: Willing Providers

While many agencies are willing to adopt shared services, few are willing to host them because they fear taking on the risk posed by other programs. This supply-side challenge is a major roadblock. Even when functions are not inherently governmental, few are willing to take on the burden of another agency’s backlog or risk. Finding buyers of shared services has often been a challenge, but finding providers has also been a challenge.

Aligning Incentives to Encourage Participation

Without dedicated funding or the right kind of incentives, shared services often appear as additional risk rather than opportunity. Participants discussed options such as offsetting collections, revenue-sharing models, or third-party partnerships to better align incentives and reduce the burden on early adopters.

Technology and Shared Services

Legacy Systems Are at a Breaking Point

Many federal lending programs still operate on systems that are 25 to 30 years old or more. Additionally, fewer people are trained to operate these systems. Homegrown platforms are difficult to scale, poorly documented, and reliant on shrinking pools of dedicated staff who are close to retirement.

Participants noted while commercial banks use just five core systems to service nearly all commercial loans in the United States, federal agencies each run bespoke tools that often cannot interoperate even across programs housed in the same department.

Time to Shift from Custom to Configured

There was strong support for adopting commercial-first technology strategies, configuring off-the-shelf products rather than building from scratch. SBA’s modernization success during the pandemic (supported by Allocore and others) was cited as a case study in how commercial platforms can support even trillion-dollar portfolios if implemented strategically.

Administrative Budgeting Is Not Keeping Up

Unlike loan subsidies, which are paid upfront, administrative funding is doled out annually. Participants emphasized the misalignment this creates for long-term investments in technology, infrastructure, or process improvements. New financing models like fee-for-service or multiyear appropriations are needed to make modernization viable.

Data Sharing

Outdated Legal Frameworks Hinder Data Sharing

Federal credit programs continue to face major obstacles to real-time data sharing due to obsolete statutes like the Computer Matching Act and outdated privacy laws. Although recent executive orders have promoted greater interagency collaboration, significant legal, cultural, and operational barriers persist. Participants emphasized the need to modernize these frameworks in a way that safeguards privacy while enabling effective data use, noting current laws and regulations often fail to achieve either goal.

No Shared Requirements, No Shared Progress

Without a centralized set of financial, analytical, or operational requirements for loan systems, agencies are left to develop their own tools independently. This duplication of effort leads to wasted resources and slows progress on modernization. To address this, participants recommended forming a cross-agency working group to identify and document common business needs and technical specifications to support shared and common solutions across federal lending programs.

Centering on the Borrower Experience

Across federal loan programs, borrowers often encounter redundant paperwork, fragmented systems, and unclear processes. From the applicant’s perspective, distinctions between agencies like USDA and FHA are invisible. What they experience is a single, often confusing interaction with the government. To address this, participants emphasized the need to redesign lending systems around a unified, borrower-centered approach that prioritizes ease, clarity, and consistency throughout the application and servicing journey.

One speaker asked, “Why should someone applying for a mortgage have to repeat the entire process when switching between agencies that both issue government-backed loans?”

Key Takeaways from the Roundtable Discussion

  • Modernization must focus on borrower experience, not just compliance. Agencies should think about design from the citizen’s point of view.
  • Shared and common solutions work best when they are modular, voluntary, and clearly scoped.
  • Commercial-first technology strategies offer a proven path forward, particularly in large-scale lending programs.
  • Data sharing requires statutory reform, standardized system requirements, and cultural change across agencies.
  • Political and financial support may be needed to enable a shared solution provider to shoulder start-up costs and efforts.
  • This moment of disruption is also a window of opportunity if approached with urgency and intent.

Actionable Next Steps Identified

  • Launch a cross-agency effort to develop shared system requirements and define standard administrative needs.
  • Build out a lending-focused QSMO or center of excellence to act as a shared service provider and/or marketplace.
  • Engage OMB and GSA to align administrative budgeting and acquisition tools with modernization goals.
  • Develop an interagency borrower experience initiative that applies the Evidence Act to loan program design.

Policy and Legislative Solutions Identified

Several policy proposals were discussed:

  • Establish a Lending QSMO or Credit Center of Excellence. Create a centralized hub to offer shared and common solutions for lending programs, modeled after Treasury’s Quality Service Management Organization, or, alternatively, designate one agency as a Credit Center of Excellence to which agencies could migrate. Either approach would help standardize and streamline back-office operations across agencies.
  • Authorize Offsetting Collections and User Fees. Encourage agencies, providing statutory support where necessary, to assess small borrower fees to fund administrative operations through self-sustaining mechanisms, reducing dependency on annual appropriations and allowing for longer-term modernization efforts.
  • Align Subsidy and Administrative Budgeting Reform budget models. This ensures administrative costs can be planned and funded alongside loan subsidies, enabling long-term modernization investments.
  • Modernize Legal and Regulatory Frameworks. Repeal or update outdated and duplicative statutes that limit adoption of commercial technology and shared solutions as envisioned by the recent Executive Order, Ensuring Commercial, Cost-effective Solutions in Federal Contracts. Leverage AI tools to identify and eliminate inefficiencies.
  • Expand Use of the Evidence Act. Apply customer experience mandates under the Evidence Act to drive borrower-centric system design and integrate overlapping loan and disaster assistance programs.
  • Standardize and Streamline Procurement. Create dedicated procurement vehicles, pathways, and marketplaces to make it easier for agencies to adopt shared technology platforms with minimal customization.

Challenges to Reform

  • Workforce and Capacity Constraints. Significant staff attrition and the loss of institutional knowledge have left agencies without the internal capacity needed to design, implement, or sustain modernization efforts.
  • Budget and Funding Misalignment. Administrative costs are funded annually, unlike upfront loan subsidies, making it difficult to plan for long-term investments. Political resistance to user fees further limits sustainable funding options.
  • Regulatory and Legal Barriers. Outdated statutes and unique agency regulations restrict the use of commercial technologies, prevent data sharing, and complicate shared and common solution adoption. Legal reform would be required to remove these obstacles.
  • Lack of Coordination and Leadership. No clear entity is responsible for driving shared service models or credit modernization across agencies. This results in fragmentation, siloed efforts, and missed opportunities for collaboration.
  • Cultural and Perception Challenges. Individual agencies often view shared solutions as presenting risk to agency budgets or a loss of program control. Urgency-driven political leadership prioritizes short-term gains over infrastructure improvements, while entrenched legacy systems resist change.

Conclusion

Federal credit programs face growing demand while being constrained by outdated systems, reduced staffing, and rigid budget structures. Yet clear solutions exist – particularly ones proven in the private sector. Prioritizing commercial-first technology, enabling flexible and modular shared solutions, and aligning administrative funding with long-term modernization goals can unlock meaningful progress. Streamlining data sharing frameworks, centering the borrower experience, and adopting marketplace models for operational support offer scalable pathways forward. With lending now a growing, central tool of federal policy, modernizing its delivery infrastructure is essential to ensuring effectiveness, equity, and resilience in the years ahead.

Roundtable Panelists

Tom Coleman, EVP, Allocore

Tom Coleman is a public finance expert specializing in federal lending and grant programs, administrative law, and government efficiency initiatives. He currently serves as the EVP of Loan and Grant Programs for Allocore. Tom previously served in a variety of leadership positions at the U.S. Treasury, including CFO for the Federal Financing Bank (FFB). As FFB’s CFO, Tom served as FFB’s head of agency and oversaw numerous federal credit programs supporting rural finance, affordable housing, and clean energy. Before joining Allocore, Tom was COO and General Counsel of RiverNorth, Inc., where he led an advisory practice for public and private-sector clients related to the design and administration of government loan and grant programs.

Doug Criscitello, Fellow, Arnold Ventures

Doug Criscitello is a public finance expert focused on improving the effectiveness of government programs and safeguarding taxpayer dollars. He currently leads agency-level research at Arnold Ventures to advance solutions that reduce waste, fraud, and abuse. His career spans senior roles in both federal and local government, including positions at the Office of Management and Budget, the Congressional Budget Office, and as founding director of the New York City Independent Budget Office. He also served as executive director of MIT’s Golub Center for Finance and Policy, where he led research on federal credit, insurance programs, and evidence-based budgeting.

Sarah Cunningham, Partner, Summit Consulting

Sarah Cunningham is a public sector finance expert with deep experience in federal credit, budgeting, and financial management. She spent over a decade at the Office of Management and Budget, where she led oversight of a $5 trillion loan and guarantee portfolio. She later served as Assistant CFO for Budget at HUD, driving reforms across $3 trillion in loan guarantees and launching the agency’s first Working Capital Fund. Most recently, she was CFO of a major North Carolina county, managing a $1.9 billion budget and leading core financial operations.

Ben Wallace, Founder & Board Chair, Allocore

Ben Wallace is a Technology and Operations professional with extensive experience in large-scale banking conversions and integration projects, specializing in consumer banking. With a growing focus on cybersecurity, he helps develop solutions and frameworks for community and regional financial institutions. His background includes significant legal and financial expertise, particularly in entity formation, small business taxation, and corporate tax planning. Ben has also worked within the Delaware Court of Chancery and the Pennsylvania Courts of Common Pleas, bringing a unique legal perspective to financial and operational challenges in the banking sector.

About Allocore

Allocore powers leading government loans, grants, and fraud prevention programs with a unified platform built for efficiency and security. With trillions in loans and grants processed and billions in fraud prevented, Allocore brings the precision of commercial banking technology to the public sector.