Need advice on odd HOA foreclosure with underlying mortgage

[Chad Benedict]

Hey BP,

I'm trying to help a seller out of a bad situation. The current owner bought a house dirt cheap at a foreclosure auction several years ago in Dallas. It was an HOA foreclosure, so the underlying mortgage stayed in place. The new owner felt bad for the original owner and let her continue to live in the property while she paid her mortgage and also paid him some nominal rent, I think.

Now the women has stopped paying him rent and also stopped paying the HOA fees, so the HOA is threatening to foreclose again, but this time on the new owner. The guy just wants out.

In addition, the woman living in the house actually refinanced her original mortgage last year. After running comps, the new loan appears to be 30-50% above the home's current market value. I don't know how this happened, and I didn't realize you could refinance a loan and pull out money if the collateral property is no longer in your own name? The deed is in the new owner's name who wasn't even aware of the refinance. 

Anyway, I feel like this guy's just out of luck, so any thoughts from y'all would be appreciated. I've already told him he needs to get an attorney.

Thanks!

Chad