I'm assuming ... it's a lady who is newly divorced and has a $300,000 settlement and is buying a new pad. You don't get much for $320,000 so a 3 bed unit only 10 years old is good buying here.
A lenders 1st priority is ability to repay then credit history and then security. For a lender to forclose on a property for $25k would be bad advertising especially if it involves a PPOR. The borower needs to be able to demonstrate a capacity to service.
As the original lender was CBA it could be an age issue or any damn thing. It the client has some type of gov't benifits they should be able to source finance. They must have income coming from somewhere to cover general living expenses as a minimum.
Maybe they could look at purchasing it as an IP and include the rental income.