What is he doing to reduce his risk of relapse? 

It reduces the amount you can charge in rent and may make it sit a little longer, but it's not the end of the world.

Also, if there is anyone in Springfield Missouri that I could offer my energy and motivation to in return for information, I would love to talk with you!     

My initial thought was going to be to purchase a 100k or so house for my folks with cash, (and have them pay me a reduced rate for rent) but now I'm not so sure that is the best way to go about it.  

Waive it, reduce it? 

Or at least it would mean longer for needing to save up to get the foam insulation done, which alone would increase the value of the home by at least 25% for the energy savings.

If the actual third party fees at closing are lower than stated on the GFE, may the loan originator reduce the amount of the credit to matchwhat is needed to pay the actual third party and loan originator fees?

You are not licensed to do loan workouts with home owners.If you are trying to list for a short sale or something they might not want to sell their property but do a loan modification to reduce payments etc.

I work with one agent in particular whose preferred tactic is to list a property high enough to attract a certain buyer type then reduce every two weeks until sold. 

Fewer worries about new sprinklers, energy regs, etc..