I used to charge for classes in this stuff, and was paid by some colleges to teach it....not anymore, sorry, just to jaded, would tell the truth and they would evict me from the faculty.....
Again they know what you did with that money....that is what MERS/MIN is for....and the credit report....we do a rather interesting investigation as to what is what and where did it go and for what purpose....
Since the funds were used as a down payment in the present property that you reside in...I take the side of your attorney and say, the offer they gave you is quite generous. I realize that now you have hardship, however, that is short term and short lived financially.
If I were in your shoes, if they come back again with the same figures......yeah, that would be what I would do. Better the 23K than the 175K, I think that is more than a generous offer.