Instead, to comply with the sellers regulations and also protect our end buyer, we have 2 different ways to do the assignment. 1.

I am aware that this is not a FNMA regulation, but knowing this does me little good if the lender has an overlay with a stiffer requirement. 

If you go to the link below and go to page 10 of the PDF, HUD regulations make it clear that the "gift" has to be a true gift and there can be no expectation of repayment (i.e., making a private loan). 

Just that it is not the point of my warning below.Selling shares to members of the public is highly regulated by the SEC (in the USA) and by the state equivalent.

Yeah, I checked w/ our local Fire Marshal's Office but was told they only regulate commercial properties, not private.

All unlawful detainers - no matter the state- are highly procedurally driven so even the smallest thing can get it kicked and you really don't want that to happen.

What is the procedure they have to go thru to see that it is not fake?

They CAN become a passive investment, but only if you really get the processes/procedures down.

I can find lots of opportunities for $100k houses in Florida, New Mexico, Texas and other southern red states with low regulations and lots of sun and heat. 

That seems like a rather ambitious way to get started in real estate - new development, of a type of property/residence in which the regulations and zoning are unclear.