Yes, he's just being idiotic - taking the $3k out of the 401k is by far the best answer, won't affect his current cash flow at all,and then he can get his paper saying the car loan was a "gift" and get his refi - where's the problem?
(Btw - he still has a car payment, though, even if on paper he doesn't).
I don't see anything irregular in saying that as long as he's in a home with both of your names on the mortgage, he must keep up the payments and tax payments - otherwise those become YOUR liabilities too.
