Seeking advice to help my elderly parents

[Al Davis]

Hello,

This is my first post here at Biggerpockets and I first want to say hello to all members of this incredible, resourceful site. After spending days researching solutions for my unique problem, I stumbled across this site. I desperately need some advice! I currently live in Philly but originally from upstate NY. Here’s my story:

Last week I called home to say hello to my mother who lives in upstate New York in a 2 family house. She wasn’t there but my Step dad answered the phone. He didn’t sound so like his normally happy self so I asked what was going on. He didn’t want to tell me but he finally broke down and explained to me their situation. 

So, a few years ago, my Mom and stepdad had a private mortgage on their property that was thru a good friend who passed away 2 years ago. The friends estate reached out to m Mom and stepdad and told them that they owed the balance on the home. They were in shock because they made payments to their friend for a few years, but unfortunately, did not keep track of what they paid the friend ( I know, pretty naive move but this how they did business). To make a long story short, they went to court and lost because they had no proof of payments being made. The home was going into foreclosure. 

They somehow made an agreement with this friends estate (another private mortgage) which includes the 2 family house they live in AND the home next door that they also own as an rental investment. They’re paying over $1500 in interest only payments with a balloon payment of $135k due in 5 years (15% interest). One mortgage, both properties. 

Needless to say, I was crushed to find out that they're in such a deep mess. They get rental income from the upstairs unit in the home they're in PLUS rental income from the home next door. Their credit is fair and they have limited reserves. I looked into a VA loan (Mom is a veteran) but the rental income reserves are too much. I tried a couple of mortgage lenders but they're not able to help much. Does anyone have an idea of a refi program that might help them lower the rate/ payment? Any help would be appreciated - it's such a complex situation, that I'm completely stuck!

One more thing - the homes are in good condition but I’m not sure how the whole appraisal situation would work with 2 properties under one private mortgage. Not much equity in either home...