If so, I would always go that direction. 

I understand what the regulations say, my question was more directed to the enforcement of said regulations.

Also, what is a good 'rule of thumb' when it comes to an Earnest Money Deposit?? 

The answer is stick to your numbers, and look for deals via every avenue you can think (MLS, FSBO, CL, wholesalers, direct mail...).

Can someone point me in the right direction by sharing contact information for a representative who works in their group overseeing bank owned properties?  

When presenting ensure the topics address larger apartment owners issues but come from your own direct experience.

To answer your question directly my advice is don't jump into deep water without adequate life preservers.

Did you refund the entire security deposit?

Depending on your state's requirements, I usually will buy decapitated ugly homes directly from the public with no agent involved and in those situations I have a disclosure that states specifically that the seller is selling the home significantly below market value (I also wrote the the ARV in there so theres no evidence that the seller or buyer didn't know what they were buying/selling).

Are you paying a early withdrawal penalty or are you about to do self directed investments?