How to help a widowed, elderly mother with bad credit who needs housing?

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My parents home, located in a rural area far away from family & friends, was re-financed by my father before he died to the point where the debt is higher than the value of the home. My 84 yr old mother cannot manage living there alone so has been living with my sister for over a year now and it is causing strife within my sister's family. I don't have the room to take her in and none of us are financially well off. Mom's income from Dad's pension is barely enough to get into a retirement community apartment. However, she is not eligible because her debt ratio is too high from the house mortgage, despite her continuing to make payments on time and not having any other debt. The house won't sell because it needs a new well that she can't afford to pay for. Even if it did, Mom would have to pay thousands of dollars difference in what is owed compared to the selling price which she doesn't have. We are trying to work out something with the bank who is going to wind up taking the house. Her credit will take a big hit once a deal is made with the bank and that will prevent her from buying or renting anywhere. How can we get her into her own place under the circumstances?

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Keeping House is bad investment. There is no up side for her. 
Walking away from a property underwater on a loan totally makes sense. Keeping a property underwater with limited income to the point of being unable to pay for maintenance does NOT make sense. She should mail the keys certified mail with the return registered card to the mortgage co and be done with that place. Certified with registered is about $8.00 from uspo and can be considered a legal document.

Would paying her sister rent to live with sisters family be somewhat of a solution to the strife? If so, mom can do a rental or a personal care agreement with Sis to pay each month for her stay. She’ll have the pension $. You really want an atty to draw this document up so there’s no fallout from Medicaid should she apply within the next 5 years. Mom will have the $ to pay atty as well as Sis as she now no longer is paying that useless mortgage. I’d suggest you set a time frame on her renting (6-8 mos). so it’s easier agreed to by Sissy’s family and get mom onto rent controlled low income housing lists so she can hopefully move within 6-8 mos.

Or try to find a board & care home for her, it will be less than an AL place & not require the housing furnishings set up than IL would. At 84 she’s still pretty young & if she’s still good on her ADLs a smaller board & care might be a good fit. ALs & ILs tend to be in larger cities as there’s a market for them. B&Cs often in more rural areas. Smaller B&Cs may not have to be certified by the state so it will be a word of mouth to find them. Your Area on Aging might have a list or try community outreach organization of religious groups. 

If she walks on house, do keep any receipts or other records on the property to offset a tax filing to be done for whatever tax year she end up getting the 1099-C cancellation of debt on the house.

Also if she’s walking on house, it will snowball into all sorts of mail related to everything “house”.... utilities, taxes, insurance, whatever. If Sis’s family have issues with mom now, they will hate getting all this new mail. I’d suggest as a first step in all this that you go and rent a mail box in your & mom’s name. You rent it as they will need your Drivers license to get one. USPO and UPS stores rent mail boxes. If there’s a package shipping store in your town, they too make rent mail boxes. This becomes mom’s new address so you can go couple of times a month and get all things momand deal with them easier. Good luck. Aging in America isn’t easy or simple and for those living in really rural areas is even a more daunting task.
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Reply to igloo572
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Be very careful - as Mom's circumstances will take a lot of your time & energy. Financially, there is no advantage to her keeping it, making payments etc. But somewhere in her heart it is "home" or "our house", making it very difficult to separate herself from the property. She is part of a group that went through wars, natural disasters, Depression & Recession. The house was the prize they did not want to part with. The bank will allow all the payments she can make. Then when she dies, it forecloses, and the bank has the extra few thousand your mom paid monthly until death. In the meantime I would also try to get her into the income based housing. In our community, HUD has actually torn down many old & bad apartments and rebuilt with modern, handicap accessible, housing units for seniors. Keep records on all efforts to dispose of her underwater house.
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Reply to Houseplant102
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Check with your area agency  on aging. They can put you in touch with income based housing. There is generally not a credit report done. You will have to give them an explanation as to why she cannot stay in her own home and why the house is not sold. Expect to be on a waiting list for awhile. 
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Reply to anonymous439773
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