I appreciate everyone's contribution to the concern, however a few had me much more stressed than needed!!   

If you're considering it, what are your hopes or concerns?

My concern is can they foreclose on these properties now that I own them even though the mortgage contract was in the old owners name?

- Is this something to be concerned about or not?

I’m not necessarily concerned about being able to pay back the HELOC.  

The roof needs to be replaced anyway so I would plan to do that so really in the end, just the black soot coloring.Any issues I should be concerned with?   

The rental income will more than cover the mortgage and still provide positive cash flow, which is rare in the California market, making this a great opportunity for us.However, underwriting has expressed concerns about us moving from a presumably larger home worth $606,000 to a smaller one worth $376,000.

we just got an estimate from a solar company today, they wanted us to go through the hero program. just running the numbers in my head, i figured out i would pay triple the amount of the loan over 25 years, there was a loan fee of three thousand dollars, the 1500 dollar veteran discount was put into the loan, the 1500 dollar rebate was put into the loan, by paying cash i will break even after five years, instead of paying 25 years. as far as im concerned the program is a joke. it will put you in the hole and you may never climb out of it. figure out a better way to pay for your home improvements, this one smells predatory.

I've never owned an ADU and I'm concerned about how it'll influence the primary which I also plan to list and rent. 

I recommend looking at IRS guidelines to ensure you’re capturing the right information.I understand the concern about the complexities of REPS and the risk of audits, especially with the amount at stake.