This is old ground ... but I suppose it's worth covering again.
And, Raider 1 .... chief moderator or not .... you're simply wrong regarding the testing of GFCI's. The use of a plug-in tester is a recognized, perfectly proper way to test GFCI's. UL says so, and lists GFCI 'testers' for this exact purpose. This is quite different from the UL (and manufacturer) position on the newer AFCI's, where the test button is the only true 'test.' The reasons for the distinction are a topic for another thread.
Yet, for complete disclosure, I must point out that the plug-in testers will not work in this situation .... and you are limited to using the test button. The plug-in testers require a ground path, and 2-wire houses have no such path. The test button on the device does not need that ground path in order to work- just as the GFCI does not need a ground wire to work.
Back to the OP ....
HUD has its' standards, and it's very possible that this house will NEVER meet their standards. The owner needs to know this; odds are he already does, and is looking for a way to cheat, to fool the HUD inspector. I, for one, will not discuss how to cheat. Here's why I think the house is a lost cause:
If the house is wired with 2-wire Romex, then there is no ground path, and you need GFCI protection in order to use 3-prong receptacles. Contrary to what another poster said, there's no limit to the number of receptacles on a GFCI (though nuisance trips can become a problem).
OK, so just put in GFCI breakers. Not so fast; odds are that the house either has a fusebox, or an obsolete panel for which GFCI breakers are not available. That means a service change is needed.
It's also very likely that the place was wired with multi-wire branch circuits (where two circuits share a neutral), which doubles your breaker cost- $120 for a single 2-pole breaker, rather than $60 for a pair of 1-pole breakers.