(1) The applicant shall choose a financial institution to consider his loan request and shall provide the department's letter of authorization for loan consideration to the lender.

(2) The department will participate in a loan made by a financial institution only if the applicant submits to the department:

(a) written evidence that the financial institution has investigated and analyzed the applicant's loan request and related materials in the same manner as its other loan requests and consistent with the standard practices of financial institutions considering the type, size, risk, and complexity of the loan requested and the type of applicant, and

(b) a signed servicing agreement the terms and conditions of which have previously been approved by the department evidencing the financial institution's intent to originate the loan under the conditions previously described by the department.

(3) The department will indicate its decision to participate in a loan by executing the servicing agreement and providing the financial institution with a completed standard participation agreement the terms and conditions of which have been approved by the department.

(4) When the financial institution executes and delivers the completed participation agreement to the department, the department is bound to participate in the loan.