I believe the reserves on the 5th mortgage and later have to include covering 6 months of  all mortgage debt - as opposed to just the one on each of the first 4.

I believe the lower unit tenant would want to stay there for a couple more years, whereas the upper unit tenants have told me that they would like to buy a house maybe in the next year or two.  

Our client filed a complaint with the BBB and would you believe that within 2 weeks the appraiser had a change of heart and re-adjusted the value to $99,900 !!

For that reason, they only pencil for loans of 3M and more (which fits your big complex, but not your small.)Fannie also has a small balance loan for your smaller deal, and I believe they can do longer terms.I have a company that i've talked to about both.

I believe I would need a guarantor for the loan but I'm not sure if I can go around this if the loan will be recourse.Any thoughts ?

I can't believe they told you about it. 

Why wouldn't they believe this is their opportunity to make even more out of you?

However, this was illegally converted to a single family residence I believe sometime back in the 90s or early 2000s.

Yes, I believe you can indeed have them manually stamped as returned- be sure to also get a receipt of payment.

@Brian Schmelzlen that may have been the case before, but I do believe rentals still qualify (that's not the case for some other energy credits, like geothermal, which went away anyhow).