(1) A financial institution when making a loan to an applicant authorized for loan consideration by the department, may set the rate of interest on its share of a loan.  The financial institution may charge a fixed or a variable rate on its share.

(2) The department shall charge a fixed interest rate on its share of a loan.  The rate of interest the department charges on its loan share shall be equal to the federal reserve discount rate on the day the loan closes.

(3) The effective interest rate to the applicant will be the weighted average based on the respective prorata participation of the financial institution and the department.