Waking up a sleeping giant. Will the bank foreclose?

[Michal Sypolka]

A teacher in my son's daycare asked me to help her with with a default mortgage situation. They live in PA now, but kept their house in Suffolk County, NY (Long Island). They have an ARM mortgage on it with a balance of close to or exceeding the ARV of the home. They have not been making payments on it for few years now, and the bank is not foreclosing on them. They also have a small ($14,000) home equity loan, which is also in default. She doesn't want the house and is not looking to get any money out of it. She just wants these loans to be gone. The house needs a complete renovation.

Here are two options I could think of:

1. Do nothing and wait for the bank to come to you with a foreclosure notice, and then find an investor/flipper and work with the bank on a short sale.

2. Find an investor/flipper and work with the bank on a short sale. The fear here is that the bank may not want to take a low offer, and proceed with a foreclosure.

The house is not in an area I invest in, so I would just serve as a wholesaler here, and help her find a flipper and deal with the bank.

What would you do? Any other options?