Bank is required to reverse if fraud is reported.

If you want your LLC to be respected for liability purposes, it should have an operating agreement, bank account (so an EIN) (this will also require disclosures to the bank on your identity), and for you to full respect it as a separate entity from yourself. 

Few years later I heard the guy he partnered with had been brought up on fraud charges or something.Anyway, the sales guy for the ACTS keeps calling me and trying to get $1000 out of me for a lease option program.

If you rent it out from day 1, you are committing mortgage fraud, which is serious offense and you do not want to go down that road.

Report fraud to my credit card co.?

Took me a minute but while we may disagree with some of this I guess your basic premise from your last sentence that foreclosures are based on fraud is one I can't argue.

The existence of fraud, wrongdoing, or injustice to third parties.2.

Mortgage occupancy fraud is at an all-time high right now and lenders are watching this like a hawk.

Some things that might be a concern:1) Obviously have to make sure things are all permitted first2) I don't want the room to "feel" like an addition, so flooring has to be same level/standardized with the rest of the house3) Unlike the rest of the house that has an identically-shaped 2200sqft basement underneath, this added space will not have a basement directly underneath it -- I'm not sure if this poses major cons for some reason that I'm not aware of4) Especially given the lack of basement underneath, I have to make sure that the HVAC can still somehow be piped into this room#2 and #3 are probably my biggest concerns (#1 and #4 I can find out relatively easily)Any tips/thoughts or other experience would be greatly appreciated. 

Also if you plan on only living in it in a year and then renting it out, you will most definitely need to refinance that FHA into a conventional loan or else you will be doing mortgage fraud.