Luckily, if you have lived in this home for at least two years, you can sell the property and use Section 121 to exempt up to $250K in capital gains (or $500K if you are married filing jointly). 

Also, in the OP example since the living spouse sold within 2 years, can't they claim the husband and her lived in the house for 2 of the 5 years and get $500K exemption.

I am a home owner already and have a career in the medical field which I am trying to leave after 14 years.

You have have given notice to the tenants that the property they reside in is exempt.

While we are exemption from this ordinance because we only have one rental unit, we don't want trouble.

As for you SEC exemption, I would talk with an attorney about pro's and cons of various structures.  

She said she has been missing her medical appointments back home and was overwhelmed by everything.

Assisted living - for those that may have medical conditions that require them to have assistance.

As opposed to another property in the 60-80k range that's not as nice rehab wise but is in a much better area that is known to have medical job types that would still have decent cash flow.

To elaborate, there are statutes and administrative regulations (found in Fannie/Freddie guidelines) that provide a laundry list of exemptions from them calling the loan due to a transfer in title (EG divorce, death, inheritance, asset protection/estate planning).It sounds like they misunderstood your question as you asking that you wanted to transfer the loan, which you've obviously clarified on here.