Mortgage refi puzzlement: can somebody please explain this to me?

So I know someone who owns a house in another state who took out a 20-year conventional mortgage three years ago, intending to live in the house forever.

Which meant of course that they had to move.

Spouse took a job in a different state, and family moved there last summer. They are renting a home in the new state while they wait for their home in the other state to sell.

It’s been more than a year now, and their home hasn’t sold. They have been religious about keeping up on their mortgage payments as well as on their house rental payments in the new state…..needless to say, after a year of living like this, they are stretched pretty thin and their credit cards are nothing short of mind-boggling.

Hoping for some relief, homeowners contacted their lender, asking to refinance into a 30 year loan to take some of the pressure off. Lender told them they couldn’t refinance the house because they live in another state.

But they don’t own a home in the state they live in….they own their home in the state they DON’T live in… why can’t they refinance? Thinking their lender must be delusional, they called another lender and were told the same thing…they can’t refinance.

They put 20% down on the home in the other state when they bought it almost 4 years ago….they are not upside down.

What they ARE is in serious financial doo-doo, and just would like a little room to breathe.

They are hesitant to go the short sale route though they probably could since they are in financial distress.

So all you mortgage types out there, could you please help me understand this? Why can’t they refinance into a 30 year conventional mortgage?  Is the only option available to them to default on a few payments to get lender’s attention?

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