They're incredibly strict and require many redundancies that go above and beyond what is code.

and of course I've read the laws on evictions and such, but I'm looking for some firsthand stories of evictions.

Where laws require "just cause" such just cause shall be so stated on said notice. 

We checked both federal and state laws and what we took away is that our responsibilities as owners and lessors are to: 1.

I strongly suggest you get an attorney.From my understanding of contract law, the lease should transfer to you, upon sale of the home.

Are you familiar with landlord-tenant laws in that state?

So how do I go about finding lenders without the strict overlays?

All that is required by federal law is the pamphlet you are describing be provided. 

Please be aware that separate Baltimore County law prohibits more than two unrelated adults from living together unless the unit is authorized by the county as a rooming or boarding house.I thought the rule was the you can have more than two unrelated adults if you just register your house as a rental unit.Do you have any details on how difficult it would be to get a house authorized as a rooming/boarding house for college students or is it pretty much impossible to do?

Stick with your state landlord tenant laws on this and suggest he ask family for help if needed. that you understand he may have to relocate and it would be better for you to let him out of his lease than have him not pay and you have to pay more money to file eviction..