The whole thing feels criminal to me.

Part of your application needs to explicitly give you permission to check their credit and criminal history (this part is important).  

This is due to a number of factors like age, death, power of attorney, divorce, criminal cases, loss of job, drug use, disability, emotions, intelligence, bills, liquidity, etc.

Mortgage Insurance Companies aren't stupid.The servicers have to go by the pooling and servicing agreement for that loan.All options have to be documented that were tried before foreclosure and filing an insurance claim.If protocols were not followed the mortgage insurance can deny the claim.Mortgage Insurance wants to pay out as least as possible and deny as much as possible just like any other type of insurance company.The servicer can also face a lawsuit from the investor on the loan if the servicer cannot document that they tried less damaging workouts than a foreclosure.The servicers make more money extending the loan than foreclosing with fees.I think with the short sale foreclosure guidelines the government released less short sales are happening with certain types of loans.The government dumps all the liability on the seller and makes them jump through all of these hoops now.For example it says documents submitted can be seen by other arms of the government and that you are subject to criminal prosecution and heavy fines.Some sellers instead of doing that will just buy time and let it foreclose.

The only exception would be due to criminal activity that the tenant had no part in as substantiated by a police report.

Youtube might be mankinds greatest invention. This gentleman has 7000 doors in the Boston area. Check this video of his first property and how he got the bad tenants to vacate in 30 days after his purchase. Would you ...

There are a huge number of dishonest (and downright criminal) people in real estate and I believe that most of them started down that path by making small, seemingly insignificant compromises at first. 

Marketing and advertising your property: Through long experience, a property manager will know exactly where to market your property and how to craft compelling advertising materials.Finding the right tenants: Experienced property managers are experts at finding good tenants, and will take care of all the details, including the securing all criminal background and security checks, running credit reports, verifying employment, and collecting previous landlord references.Managing tenants: The property manager will handle both routine and emergency maintenance, take care of routine inspections, and manage any situations where conflict resolution is required.Managing vendor relationships: Property management companies have relationships with maintenance workers, tradesmen, contractors, suppliers, and vendors that it's almost impossible for an independent landlord to duplicate.Ensuring that you're in compliance with regulations and property laws: There are a multitude of applicable laws and regulations to abide by when renting and maintaining your rental property.

I know it's hard to believe as it was single digit weather yesterday but we have a fair share of homeless people here and "stone cold criminals" LOL.

I use Keycheck to run a criminal, eviction and credit check.