Family overstepping

Ma

My husband and I are expecting a little girl in 10 weeks. My husband has a family in his life that he is really close with but they are not blood to him. Overtime, they have pushed themselves into being his “replacement parents” since his parents had moved a couple hours away. His dad recently moved back and we are now realizing the parental role the couple has put on themselves has gone a little too far and is making his actual parents upset. The couple is wanting our baby to call them grandma and grandpa, but my husband and I feel like this is not very appropriate given the circumstances and out of respect for his parents.

What do you think we should have the baby call that couple? Or if we should approach the situation, how should we go about it?