625 is too low for me.So "partner" owns property where proposed tenant now lives?

I am surprised that your bank will even let you do what you are proposing. 

They are working on a proposal to actively allow it in the ordinances.

I need advice about the insurance coverage and proposal for insurance. 

Look at the  refinance  options for your  owner  occupied  2 plex  ....depending on the PMI amount /  the  value of the proeprty now and the  amount you would need  to  refinance  - your  resulting  payment  may not be  too  much  different than your payment  now  ......Plus  you  will be able to   elimiante the  mortgage ins on a conv  loan  at soem point in the  future  which you  wouldnt  with the  FHA loan ..... of couse if the new conv refinance   LTV is  way  high or the  new proposed  #s are   way higher than  what you pay now - this idea  wont be a good one  ....freeing up the  FHA  will be very important to  do  asap so you can  utilize this  program  again for the  future  4 plex  option 

Jason,Call my buddy Greg Sanders 405-607-6014 (Insurance Broker) in OKC.

Interested in converting my units into this type of model if the right group presented a viable proposal.

Edit: looks like if we do commit to living in the proposed ADU we can build: https://www.reubenlaw.com/new-...

Obviously, there are many variables within the hospitality space and asset class that need to be filtered, so please feel free to reach out to me for a discussion of both the property and the proposed guarantors. 

The custodians really just do some paperwork, and maybe will shut you down if you're proposing a prohibited transaction.