(a) The Connecticut Housing Finance Authority shall develop, in conjunction with private lenders and the Federal National Mortgage Association, a two-year pilot program to guarantee loans by approved lenders for the rehabilitation or refinancing of buildings with five to twenty-five dwelling units. The authority may fix a fee for the payment of any administrative cost incurred under the provisions of this section. Such fee may be computed as a percentage of the principal of the mortgage outstanding at the beginning of each mortgage year, but shall not be more than one-quarter of one per cent per year of such principal amount. The amount of such fee need not be uniform for all insured loans. Such fee shall be payable by mortgagors or mortgagees in such manner as prescribed by the authority. Such guarantees shall insure the lender against loss not to exceed twenty per cent of the principal due at the time of default.

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(b) The authority shall adopt written procedures in accordance with the provisions of section 1-121 for the application and distribution of loans under this section.