I guess no one else had this issue before...
I opened OSS message, but SAP came back saying it is consulting effort...Yeah, I know 
So I looked at all my available options and figured that the action "Re-set to "In Development" does NOT allow SET_PREDOC to work correctly because of a special container in the method.
So I ended up creating my own action to just set status of ZMHF to E0002 and do nothing else.
And it worked. Now my ZMCR is also reset back to "Being Implemented" from "Pending", when ZMHF is re-set to "In Dev" from Pending.