Just off the top of my head, this is one of Ron LeGrand's favorite strategies (and he has many, many, many students) ... lock down a property by clouding the title with an Option to Purchase, sandwich LTO the property, and then charge a lien release fee (if they ever actually attempt to purchase/transfer the property).If you don't operate this way, good for you ... honestly.  

If they sold it, or if they service released it to "Bank of B" and the borrower subsequently defaults, does "Bank of B" have the assignment of the note from "Bank of A" to "Bank of B" so they can foreclose?

It is paid to the escrow agent, who holds that money in escrow, until closing, default or written release of contingencies.I don't know what contract you're using, but if you use the standard TREC contract, use Section 23 (Cancellation Option).  

idk about Kentucky but I tried to get the list in my area and they wouldn't release it to me.

I have ordered a  BPO and am about to have the owners sign a release of information letter so I can start negotiating with the bank to purchase the property.

why don't you just request an extended escrow and maybe release a portion of your earnest money deposit?

The buyer has to make sure to check off either of the 3 options... option 1 says the buyer may assign and thereby be released from any further liability under this contract or option 2 may assign but not be released from liability under this contract and third option may not assign this contract. 

Also, gives me the added security of inspectors from bank checking contractors work before payment released.

They will do 1-4 family loans.A portfolio loan is a pain if you try to sell one of the  properties if they do not write a deed release into the loan.Then you are left with the 5 unit and that will need a commercial loan. 

Both parties have agreed to move on but my Broker says I need a release from them because theirs was a VA loan.