An 18-year-old, understood to be suspected of planting the device on a tube train, and a 21-year-old were both arrested under the Terrorism Act following Friday’s blast.
Both are believed to have spent time in the care of Penelope and Ronald Jones, aged 71 and 88 respectively, who previously received MBEs for services to children and families.
The 21-year-old, reported to be from Syria, has since left their care and was arrested in Hounslow on Saturday night, while his home in Stanwell, Surrey was searched by police on Sunday.
A local politician said he understood an 18-year-old Iraqi orphan was living with the couple, having moved to Britain aged 15 after his parents died.
The couple’s home was subject to an armed raid on Saturday morning and is still being scoured by counter-terrorism investigators.
Leader of Spelthorne Borough Council Ian Harvey, whose ward is Sunbury East, said he learnt about the boy’s background from neighbours of Mr and Mrs Jones and information available publicly.
• READ MORE: Parsons Green: Two held as terro alert downgraded
He told the Press Association: “One thing I understand is that he was an Iraqi refugee who came here aged 15 - his parents died in Iraq.”
Of the other suspect, he added: “I think it is widely known that this person who lives at (the Stanwell) property was a former foster child at the property which was raided yesterday.”
As the vast probe into the rush-hour explosion, which injured 30, continued, the UK’s terror threat level was lowered from its highest point.
The de-escalation from critical to severe by the Joint Terrorism Analysis Centre suggested a confidence that any further threat from the bomber’s network had subsided.
The 18-year-old man was detained on Saturday morning in the departure area of Dover ferry port, which is the busiest ferry hub in Europe and a gateway to the French coast.
Home Secretary Amber Rudd said police had made “good progress” in the investigation as she announced the move.
Meanwhile, CCTV images have emerged appearing to show a person walking with a Lidl bag on the morning of Friday’s rush hour Tube attack.
The footage, acquired by ITV News, is reported to have been filmed near a house in Sunbury-on-Thames, Surrey, which is at the centre of one of two police raids.
Images posted on social media following the Parsons Green attack appeared to show wires protruding from a flaming bucket inside a plastic Lidl carrier bag on the floor of a carriage.
Dave Solway, who lives opposite Mr and Mrs Jones, said they were currently caring for two people - a Somali teenager and Iraqi man.
He said the Iraqi, who he thought was 18 or 19, had been living with them “for a couple of years”.
“He has been there ages, he is a good little lad, he is,” he said.
“I’ve said hello to him and asked him how he is - he is a good kid making a life for himself.”
The Somali boy, who told Mr Solway he was 15, showed signs that he wished to leave, the neighbour said.
“When he arrived, he refused to go into the house, point blank refused to go in,” Mr Solway said.
“He was a 15-year-old, that is what he was saying, he didn’t want to go in their house - he was saying ‘get me my clothes’, ‘I want to go to London’, that is all he kept saying, over and over.
“He had just been dropped off when they had their altercation, I don’t know whether he had gone back to the house.
“He was arguing with Ron, that is why I came out, to calm him down and to make sure that Ron was OK.”
In nearby Stanwell, neighbours said the man living at the property in Lowlands Drive was a light-skinned man of Arabic appearance.
According to a couple, who asked not to be named, he habitually stayed up late at night and was often visited by two male companions, who appeared to be in their late teens.
The husband said: “He seemed a really, really nice chap, we have sat there and had a drink with him, but he didn’t drink alcohol.
“He was from North Africa, I think, perhaps Morocco or Algeria, but he had family from Scotland.
“I think he moved in about 14 months ago, he was very quiet, he was on his own.
“He had two guys there that used to be there all the time with him, he would have them there through the night and they were always playing games.
“But they never had the TV on and there wasn’t a lot of furniture, his friends were about 18 or 19.”
His wife added: “To me he just kept himself to himself, he wasn’t involved with us or the neighbours, but he seemed to be up at unusual hours.”