This would give you the info you need to either talk to the HOA about the situation (since it was a modification to the property that was done after the tenant moved in) or for her to hire a mover to do the work because she either cant or won't.  

An attorney attempted to arrange a loan modification, and advised my mother to stop paying the mortgage payments.One thing I did understand correctly was the gentrifying trend of the neighborhood, and the house has since appreciated in value to around 890K(adjusted comps analysis).  

They might be able to just get an appraisal on the updated property and do a loan modification which might be cheaper.3) You might not like this option as it could cost more, but look at refinancing all three properties with conventional financing.

I had some ups and downs were I had to do loan modifications, the worst of all I had to file for Chapter 13 to keep my Home from previous Ch 7 filed.

But pls note, they usually look for more bedrooms so that can make some profit and you may need to do some house modifications to align with their interests as well as to make it ALF compliant. 

Will they be taking into consideration any modifications to the property since the original report?

(Last comment here- Florida is a hardest hit state- many of the funds from TARP that were not used for modification are now made available for down payment assistance in some instances. 

Is it common that when they look at modification and working out the loans, they would not have looked that far ahead to see she would be getting steady income?

Unfortunately I did not word my rental agreement modification carefully enough.

If 2nd lien wasn't released then it has priority over all other liens recorded after 2nd lien.If the third lien references the 1st lien as an extension (or modification), then it is very likely that either someone made a mistake releasing first mortgage or they released 2nd mortgage.I am sure title co can help you out decipher this