The director of finance may, and as far as practicable shall, contract with lending institutions for the processing of applications for loans of state funds and the servicing of these loans. The servicing shall be performed only by the lending institution which makes the loan for the principal cost of construction. In furtherance of the purposes of this part the contract may provide for the loan of state funds to be repaid after the funds of the lending institution are repaid in full and for payment to lending institutions for servicing the State’s portion of the total loan and may include other terms deemed appropriate by the director of finance.