The payments and interest are high.

It sounds like you need a reliable and trustworthy partner to help you navigate this transition seamlessly while keeping your solo 401(k) on track.I’d highly BiggerPockets Partner for this, Equity Trust, a top-tier custodian in the industry.

Perhaps we "buy" the house from them for the $328K balance to satisfy the lender and don't need a large down payment and then have a separate contract with them to pay $x per month until we've paid the full $172K amount.

As long as the rents can cover both the current PITI and proposed P&I payment, credit is at least 680. you should be able to qualify. 

In addition this fire storm started when payments stopped or payments were returned to the bank NSF.

I still remember the first loan payment coming due and wondering where that money was going to come from!

By house hacking, you're immediately positioned as a landlord, which will adequately pressure you to learn how to structure your leases, screen applications, collect rental payments, resolve the nuances of managing tenants and addressing property issues, etc.

Also we felt we were going to make more self managing than with the payments they were offering.

It’s a cleaner, more reliable solution, and while the higher subscription cost can feel like a drawback, it’ll save you a lot of headaches and time in the long run.

Start by serving proper notice of the management change and request payment details.