@TomD8
@NCperson
There is language in the code about making an election to treat a mortgage as not secured by a home. That election can only be reversed by the approval of the Secretary (of the Treasury -- i.e. the IRS). To treat the mortgage as a loan to buy an investment, you have to treat is as not secured by the personal home. Once the loan is treated as not secured, it is ineligible for schedule A, and since there is no practical procedure to get IRS approval to reverse the election, the election is permanent, at least on a practical basis.
I'm traveling and can't look up the exact citation, but we have discussed the situation here before several times (I can't look that up either, sorry).
I also have not read the Nolo article but @NCperson 's explanation makes sense to me for the scenario described. In the B scenario, there was never an election to treat the B mortgage as not secured by the B property, so when the B property becomes a personal home, the mortgage is secured by the home and is eligible for the schedule A deduction.
