Some short sale settlements include language "forgiving all deficiencies" meaning the lender gives up the right to sue you later for their losses.

Settlement is still an issue if the homeowner is still in the house b/c they won't let you in to do the inspection and appraisal that is required by the lender in order to settle.

You can refinance with a HML after settlement.

They normally don't have an eviction history because everything gets erased through "settlements" when the previously screwed landlords get tired of spending $5k+ to try to get them out and recover $800 in rent.

From my understanding as long as the finders fee / wholesale fee is disclosed to all parties at closing on the settlement statement there is no issue.Illegal kickbacks, acting as an agent without a license etc is a different story and heavily regulated as well.

Sounds like you'll either need his ink (plan for extra $ for a notary to visit the jail) or a court order recorded among the land records (or however it works where you are located for enforcing an agreement pursuant to a divorce/settlement), i.e. court involvement. 

Loan docs should be under the control of the settlement agent. 

Pull out your closing docs and find the settlement statement.

There could be a co-insurance penalty or the loss settlement might be actual cash value if you are not rebuilding. 

The bank only has to pay 1% of the original loan balance, or 12 months of dues, whichever is less as Full settlement of the debt.