Written violation notice with a deadline to correct and a penalty for failing to do so."

We got the first 12 months interest only, 5.5 interest rate, 25 year AM, no prepayment penalty, and $50K of renovation funds 5/1 ARM How did you add value to the deal?

The bank typically sets the opening bid at what is owed on the loan + late penalties/legal fees.

Do you have pre-payment penalties?

Even though she's wrong it sounds like she just doesn't want you to overstate deductions and then possibly be on the hook for fines and penalties! 

You can park it elsewhere but you’ll need to consider how liquid is it when it’s parked and ease of access to it (will you be hit with taxes/penalties if you need it to put back into another deal?).

This is not like making a mistake on your taxes where you pay for the error plus interest and penalty.

But I do max out my 401k because with my day job I will be able to access that before age 59 1/2 upon retirement without penalty. 

You change the figure privately.C.  401k even paying the early payout penalties you would make far more investing it into REI. 

I would notify the cosigner, reminding them of what the penalties are.