So then it should be safe to assume that the calculator is warning me that this isn't the best deal.

This meant many people didn't buy deals in the run up to one of the fastest surges in pricing in a generation, if not ever.Regardless, the point is: there are some warning flags.  

And I have issued Steve an official warning notice.

That would be his issue with his lender.You would have the option of forcing him to complete the deal, he then has to work out the problems between himself and his lender, that is none of your problem or business.Have your attorney or the real estate agent's broker send a strongly worded letter as a warning about the consequences ( a lawsuit he is unlikely to win).

I've also been warning wholesalers about this for about 2 years.

While I agree with what has been said to warn you, let me build on it and see what you COULD do instead.

If you do, you risk getting bad reviews even if you warn people. 

"we are fair and firm" "we issue one warning" "we follow the lease to the t" etc..

Quote from @Kevin Sobilo: I would just warn that it's not advisable to connect two circuits to one breaker.

Usually, a warning is provided first.