Hi Julie,(posted 7820 days ago)I am sorry to hear your friend is having such bad luck, at least she is lucky enough to have a friend willing to do some research for her.
I was in a similar situation to your friend. We handed the keys back on our flat (so repo was voluntary), then moved into rented accomodation. I split with my husband and he moved out. The landlord then decided to sell the house from under me, giving me one months notice to move out.
The Council have an obligation to make sure children have a roof over their heads, whatever the reason for being homeless, so your friend will be re-housed (even if they later turn round and say she can re- house herself, which they won't because she doesn't really have an alternative does she?). I went to the council and told them I was being made homeless with a young child (she was 5 at the time). You have to make the application 28 days before you are due to be made homeless. We were re-housed on the same day we had to move out of the rented house, admittedly it was in a really grotty hole, but it was only temporary and because I agreed to housing association I was moved again five months later (council housing is about £20 a week cheaper than housing association, but the waiting list was 4 years). Then I met my boyfriend, and we bought a house together, (I had no problem getting another mortgage) so all came good in the end.
If your friend is not working, she is entitled to benefits, which I know a lot of the women in the housing association houses were claiming, but I can't tell you what or how. (They always seemed better off than I was, even though I worked!)
I can't offer any advice about the old mortgage, but hopefully someone else can.
I certainly hope your friend has a turn on her luck and all works out OK. I can remember what an awful time it was for me and the worry was horrendous. Keep offering your friend support, and be there for her, it is a very difficult time and she needs all the help she can get.
My best wishes to you both.
Tracey