The main reason to set up an LLC is to protect your personal assets from harm in the event that you are sued. 

I'm listening to a Podcast that has someone from Ridge Lending Group on there and it was said that as long as someone has a single member LLC that they own 100% (or if husband/wife each own 50% of multiple member LLC) and they do a quit claim deed to the LLC for asset protection, that this is allowed (which implies the due-on-sale clause would not apply).

That should protect you personally and not put you personally in any business legal lawsuits.  

What are their strategies and how many deals are the processing2) Are you also familiar with asset protection concepts?

I figured they could pay my mortgage until spring, when I understand sales conditions are better.However, now I'm thinking about renting it out on a more permanent basis, and I want to make a decision on what to do before they move out, and also if that decision is the rent it out, I want to have a plan in place for a more structured application and contract process that better protects me.I have worked up a list of inputs that I can share and hopefully have critiqued, but I guess I'll stop there for now and see if other people would recommend doing this, and if so, what preconditions do more experienced folks think should be met before you would make a decision to rent the house out?

Since cash is very important and you should always protect your cash and use as much leverage as possible I would choose 2nd option any day.

you never know what else may come up so you want to protect your assets as much as possible.

Does the umbrella policy provide protection or just a means to pay out to someone if they sue?

However, the modification may invoke some sort of trigger in the second, but it's up to the second to protect their interest.

Adam,Just a guess, but maybe the mortgagee (or another party with an interest) on the property was partway through a foreclosure action, and bought it at auction to protect their interest.