A bill entitled: the "Modified Agricultural Debt Recovery Act of 1985".

Amends the Consolidated Farm and Rural Development Act to authorize additional funds for FY 1985 Agricultural Credit Insurance Fund or Rural Development Insurance Fund loan guarantees.

Modifies the approved lender program to: (1) require lender applications to be approved or disapproved within ten days; (2) set maximum interest rates at two and one-half percent above the Federal Reserve rate; (3) extend the maximum loan repayment period to 15 years; (4) permit lenders to convert loans to federally guaranteed or insured loans (caps insured loans at 35 percent, and insured and guaranteed loans at 60 percent guarantees); and (5) entitle the lender and the Secretary of Agriculture to prorated shares of any defaulted loan liquidation.