Got it, thanks for the additional details. Makes me wonder if the arbitrators had encountered such situations before.
Glad it worked out for you!
(Full disclosure - I'm a current and happy USAA customer.
I use them for banking and insurance, and finance the 328i with them for 1.6%. Mortgage is through local credit union, however - I've never found USAA to be especially competitive on fees and APR for mortgages.)