I would never ever consider it in a state like NY were foreclsoures are measured in years not months.. this is a financial disaster.If the OP does not care about his credit and thinks the lender won't go for a deficiency then he can just walk away.. although he may end up with a 1099C and have to pay ordinary income tax on his debt relief.. this is how I am seeing it.... unless he posts otherwise. 

Seek knowledge about the property condition and then address the deficiencies.

(b) Notice of hearing shall be served in a manner authorized in subsection (a) upon:(1) Any person to whom the security interest instrument itself directs notice to be sent in case of default.(2) Any person obligated to repay the indebtedness against whom the holder thereof intends to assert liability therefor, and any such person not notified shall not be liable for any deficiency remaining after the sale.(3) Every record owner of the real estate whose interest is of record in the county where the real property is located at the time the notice of hearing is filed in that county.

If so, how were those handled and were underwriting deficiencies a factor?  

You can ask for deficiencies but I haven't seen alot given out lately, its a strong market and banks know it.

. :)    Just read your post to me, I'd probably not foreclose, get a deed in lieu if the owner walked away, the Trustee will most likely approve that on a secured debt, means there can't be any deficiency judgment post foreclosure.Actually, I wasn't invited to play, but that's okay, LOL, :)) 

Depending on the wording of their note, they might have a large deficiency balance due after the foreclosure.

The former owner would only have an issue if the bank pursues a deficiency against them.

If you can't get a loan for a purchase through conventional means, anyone willing to lend money in spite of those deficiencies is only going to lend you money on the premise that you fail.

Have you had the building inspected for deficiencies?