The lender requires whatever amount of downpayment and writes a note for the remainder in exchange for the mortgage on the property.In the case of a wholesaler, your payment is usually layered as a markup on the price of the property, so I guess you would need to ensure the downpayment made by the buyer was sufficient to cover both the downpayment requirements of the vendor and your markup.When you start doing this, it kinda makes your payment look more like a fee for service or commission.  

We have read some good reviews on 1st Choice Management.

Speaking to one person in a small town with a real estate license is not sufficient research. 

I prefer not to be a pushover though just out of principle which may not always be the right choice.

I have had property managers for 12 years and have been very happy with tenant choices.

That does mean that you'd likely need to foreclose on the new owner, unless there is sufficient equity and the new owner "willingly" took on your mortgage-not usually the case. 

While both of these could occur in conjunction with being over-leveraged, neither on its own is sufficient to conclude the borrower is over-leveraged.

I personally already have security deposits in my separate account, however I have to make a choice on taking or not taking deposits from now.This interpretation of the law is opening up Pandora's box.

In other words, I had no choice, I had to make a change and I could not possibly afford to fail.

Can't really advise on your choices though.