Do I really need a lawyer to get rid of a squatter in California?

in 2005 my parents bought a house in Palmdale, CA.; Assuming that since the real estate company we went to was owned by a cousin of ours and since my sister was working with the company at the time, I have little knowledge of the transaction that was made to buy the house. From what I have understood, however, was that the mortgage that my parents bought into was a fraud, as many were at the time because they were pressured to finance the house without knowing the fine print of the contract; this resulted in them paying high prices for a house that depreciated in value over time. In any case, the damage was done and they resolved to put the first house in short sale while they bought another house for a low price, which is a house that we live in now.

About 3 months later, the first house they owned never sold and they found out at the time that there were squatters in the house. I don’t know how these scammers did it, but someone found a way to list the first house in a different website, forged the documents to the first house (I can’t say how they did it, since we shred any papers that have our personal information), and they might have found a key that they duplicated and "rented" this house, online, to a family that is on welfare.

My sister confronted these squatters, the police came to our place of residence and took copies of the fraudulent paperwork. The squatters had the nerve to ask my parents for electricity and water, but my parents never complied with their requests. When it came time for my parents to file the report at the police station, all of a sudden the police say we have to get a lawyer and to pay money to file the paperwork so that we can take these squatters to court (who still seemed to live in the first house we bought). These squatters, as a result, refused to let anyone see the house and the short sale never happened.

Because we dont have enough money ourselves due to high medical bills, the resigned on the pursuit to evict these people from our first house, but I can’t accept this (My parents are practically receiving calls everyday from a collection agency, but they decided to let the bank take the house and go to foreclosure, which will leave them in bankruptcy and ruin their credit).

I would have assumed that the police would have evicted these people, given they have the evidence right in front of them, but is there any low cost community resources that we can refer to get this nightmare taken care of or do my parents have a reason in just letting go letting the bank take the house?

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