(a) Any participant may permit the seller of a single family residence being financed with a mortgage loan, or any other person, to buy down the interest rate on such mortgage loan as an inducement to an eligible borrower to purchase the residence, but only upon approval by the mortgage loan insurer selected by the Agency, and in accordance with certain other conditions, including:

1. (1) the term of the buy-down may not be less than one year nor more than three years;
2. (2) reduction in the amount of the buy-down may only occur annually and the amount of such reduction may not exceed that amount which would produce an increase in the monthly principal and interest payments by the borrower greater than 7 1/2% of such monthly payments for the preceding annual period;
3. (3) the mortgage loan shall make no reference to or adjustment for the buy-downs;
4. (4) prior to purchase by the Agency of the mortgage loan, monies sufficient to effectuate the buy-down in a timely manner shall have been deposited into an escrow passbook savings account (insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation) maintained by the participant, with scheduled monthly releases which shall supplement the borrower's mortgage loan payments during the term of the buy-down; and
5. (5) the monies in such account shall not be used to pay any overdue mortgage loan payments.