Well they are saying to talk to a banker / lender, I am that.
First I would need to understand what you mean by this. It sounds like your client had a line of credit that was secured by the home that they had foreclosed on. If that is the case, then the 2nd became personal debt and yes they still owe it. This would have truly messed up your credit unless they made payments. If that is true then your only hope is to negotiate a settlement with the current owner of the 2nd.
So first realize that it sounds like you are past the statute of limitations. That means the debt is still valid, they just cannot take your customers to court and sue them. This gives you a lot of leverage and they are hoping you do not know this.
The customers have come at them like this: They can wait for another 3 years when it is completely gone from the credit and buy then. On the other hand if the lender will agree to take a lesser amount ($5000 seems to be the magic number by the way.) and are willing to remove the derogatory credit from the account, then at least they can have that lesser amount. Otherwise you will need to wait and give them nothing.
Be prepared to hear the current holder claim they cannot do this. They can at least remove the derogatory credit they put on, and the original lender's derogatory may be old enough to do the mortgage anyway. Be prepared for some tough negotiations. Make your offer in writing and if you get a counter, then counter back.
Now i have told you the right way to do it, I should also point out the wrong way. You can get this cleaned from the credit. Then their loan would be approved but at closing this thing could come back up again and kill the deal. Of course the title companies wait to the last second to do this which ensures that a lot of people will be very angry that your deal will not close.