Simple answer as to pros/cons:Pros: easier to get approved than conventional without your personal income/employment/taxes/assets/DTI being evaluated, i.e. lighter paperwork and more flexibility, usually faster too.

You cannot (legally) exclude your capital gain when you sell your NJ house next year. 

Legal action- no attorney is willing to take this on?

At most, while getting approved for the next loan, underwriters might ask you a series of additional questions as to why you're moving especially if the new unit is relatively the same size, area, value. 

First, Andrew Holmes decided to remove me from the program because I followed my real estate lawyer's advice, and "disobeyed" Andrew's legal advice: I didn't file a foreclosure on my paying borrower.

Making the basement a legal unit is costly but can be done as an ADU depending on your exact location (ADU zone maps are on City of Chicago site).

Considering they quoted you $200-$250 but are billing you $550, first inform them you did not agree to that amount and any change orders need to be discussed with you prior to approval.

We are currently working through town approvals on a small mixed use development.  

@Zhenyang Jin A DBA is generally not necessary for your LLC in California unless you plan to operate under a name different from the LLC’s legal name. 

Here's another idea.There should be a legal publication in your area (ask an attorney) that has this info too.