In what I'm interpreting from your description is that you are looking recapture any money used from your HELOC which is exactly what a well executed BRRRR is intended to do. 

Case by case seems like a reasonable interpretation of one's rules. 

That IS the agreement.The way you interpreted is exactly what the deal was.

I think she's interpreting that constructive feedback in the wrong way.

And if we interpret it wrong?

You may have a justifiable reason for accepting a tenant with a credit score below your typical threshold, but you leave yourself open to the interpretation of an angry future rejected applicant or (hopefully it doesn't get that far) a judge.

That is his opinion and interpretation.

Tenants heard the "good news" from the government and they made their own interpretation of them.

There are always limits and how the law is normally interpreted when it's not clear is - would a reasonable person think it's reasonable.So, would a reasonable person think it was reasonable to charge a tenant $800 for breaking a month to month agreement before a year was up? 

Protecting Tenant at Foreclosure Act was re-instated in 2018:https://www.federalreserve.gov/supervisionreg/caletters/caltr1804.htmhttps://www.nolo.com/legal-encyclopedia/protections-for-tenants-after-a-landlord-s-foreclosure.htmlhttps://nlihc.org/article/congress-permanently-authorizes-protecting-tenants-foreclosure-acthttps://www.nhlp.org/wp-content/uploads/2018/01/6-Cases-of-Note-Interpreting-the-PTFA.pdf