That's mortgage fraud.

I only caution everyone should remain vigilant and don't be willingly blind.In the world of criminology and fraud sometimes people change, they make a bad decision under pressures that didn't exist when you first met them. 

If you aren't, you're committing tax fraud and eventually the IRS will catch up to you.If you are reporting the rental income but not reporting the depreciation expense, then you are paying too much in income taxes today.

The idea is that after verifying their identity, I could just provide the code to the lockbox and people can show themselves around the unit without my presence and lock up once they leave.

I'm in an area where FHA and Freddie/Fannie limits are identical, so I can't speak to that from experience. 

What up @Garvin Yu, I'm on an identical path as yourself.

You would have to prove outright fraud with the inspector, or collusion between the inspector and the seller, to have a case.There's also the possibility that the quotes are being alarmist to get your business.

@Andrew Johnson the area is known for it's skiing and mountain biking too, but the region has been dealing with some fraud/money issues.

I've done the math in the past, and generally it plays out such that going FHA is mathematically identical to having a normal 30YF at 80% LTV, and a hard money 2nd position loan at an interest rate north of 10% for 16.5% LTV (CLTV 96.5%, which most FHA loans are).

See also New Jersey Foreclosure Rescue Fraud Prevention Act