Here is a workaround I discovered...
- Open Yahoo web mail, log in, then log out
- Restart the browser
- Open Yahoo web mail again, log back in
This resolved a similar issue (auth failure, error code OCF12) when both my app and stock Android Email 4.2 ran into it.
It might also help to change the incoming server from "android.imap.mail.yahoo.com" to just "imap.mail.yahoo.com".
( stock Email uses the former, K-9 uses the latter... both should work in theory, and I'm not sure what the difference is, but it's just another thing to try )