To clear up confusion on the reverse mortgage option:
Reverse mortgages are only available for homes in which the owner, over age 65 lives. So the assumption is that they would get a reverse mortgage on the home in which they live, not on the rental. That money could be used to improve the loan to value ratio on the rental, making re-financing easier. Or they could move back into the rental and get a reverse mortgage on the property.
Once a reverse mortgage is on the property, it does not have to be paid back till the owner dies or moves out of the property.
As I mentioned in my previous answer, they are probably eligible for a HARP2 re-finance. If not, then we need to look at alternatives. You or they can give me a call at 408-639-0211.