I contacted the bank again, this time in an attempt to replace the insurance policy at a minimum or to assume the loan in a best case scenario.They responded by sending a letter addressed to the original borrower stating that they may accelerate the loan unless the property changes title back to the original borrowers, they refinance, or a qualified person assumes the loan.

I've done a lot of listening about it on the sidelines and finally decided to make an attempt based on conversations with other investors.

FWIW, the proper place to have attempted xfer of maintenance is in the option contract not the lease, but don't recommend it.Good you didn't mention rent credits.  

Is this simply the last "counter offer" from the bank, during a previous negotiation? 

This is simply due to overall population growth.Sources:http://www.calculatedriskblog.com/2015/10/lehner-is-2015-peak-renter.htmlhttp://oregoneconomicanalysis.com/2015/10/12/2015peakrenter/Thanks for your insights!

Simply put, do we qualify?  

And people keep moving here to fill the jobs and there are simply not enough single family homes to meet the demand.

Would any experienced investors have any ideas on how I could attempt to purchase this home using alternate means?  

The rental license shows it to be "4 dwelling units + office (low-rise)" but the county is showing it simply as a 4 unit residential. 

Should I attempt to pay off more of my debt before I attempt to purchase something?