Bank Ownership vs. Mortgage Co. ownership of REO Few Q's

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Just joined great site. 1st question: I have seen several references that banks are not allowed to keep investment property/buildings unless they are used in the course of their principle business. Therefore they must sell the property. Is this true of mortgage companies as well? I was turned onto this whole opportunity by chance. I was tring to help a family member buy a foreclosed parcel of land from a bank. Bank could not find records of ownership despite what I provided for them. Lo and behold it went to auction with a private firm repping the bank. Foreclosure was for about 500,000. Opening bid 25,000, auctioneer announced as sold to whomever the high bidder is at 110,000. High bid was 200,000 we won. I realized there may be some opportunities here. Question 2: How long is a lender allowed to hold onto a property before it becomes a regulatory problem and they are truly forced to clear it from the books? Question 3: Would it make more sense to wait and try to pick up REO's at final auction or should I try to make aggressive offers and just stay in touch?