Non-profit perference over owner occupant?

[Ben Visser]

*preference, sorry for the misspelling*

I'm trying to figure out how the system works...or should work.

3 doors down from my home is a property that was just listed as a HUD. The remarks said it was only open to government and non-profit bids for the first 5 days. It should have opened up yesterday to all, but was taken off the market. We had planned to do an owner occupant 203k loan for my partner to live in.
I called the listing agent and was told the property was under contract. He said a non-profit had contracted to buy. When pushed for more info he said it was common for many HUDs to not even hit the market listings. They typically just sent HUD lists to the non-profits directly instead of the MLS and they typically bought them at a 50% discount off listing price. He said this home being listed was unusual. He was told to list this last property but under the 5 day gov't/non-profit only rule. In researching what I can, I'm under the impression that owner occupants were supposed to have first dibs. We had an offer planned and pre-approval in hand for 203k.
Have you heard of this practice of not listing HUDs and/or only allowing non-profits to bid first? Am I off on my thinking? If I'm not, is there recourse? This isn't the only property in the world, but it seems that my partner and I are at a severe disadvantage if everything is being fed to a select group of community developers first. I get the rule putting investors off for a bit, but we would be own occupants. Any insights?