The math is unassailable, provided you can reduce your screening evaluation to a single "fitness score".

There have been a rash of shortsales in my area but nothing alarming, definitely a decent quiet neighborhood with very little crime.

What is he doing to reduce his risk of relapse? 

It reduces the amount you can charge in rent and may make it sit a little longer, but it's not the end of the world.

My initial thought was going to be to purchase a 100k or so house for my folks with cash, (and have them pay me a reduced rate for rent) but now I'm not so sure that is the best way to go about it.  

Waive it, reduce it? 

If the actual third party fees at closing are lower than stated on the GFE, may the loan originator reduce the amount of the credit to matchwhat is needed to pay the actual third party and loan originator fees?

But even if the police are overzealous and (like some) feel they know everything about everything and try to look into his crystal ball to find all laws and who the suspects are at this big scene of the crime - keep your cool. 

You are not licensed to do loan workouts with home owners.If you are trying to list for a short sale or something they might not want to sell their property but do a loan modification to reduce payments etc.

I work with one agent in particular whose preferred tactic is to list a property high enough to attract a certain buyer type then reduce every two weeks until sold.