Sandra,

The Catholic Church recognizes both the existence of mental illness and also the existence of demonic possession or obsession, which often has similar symptoms. Careful, expert discernment can help distinguish between the two.

If the problem is not resolvable by standard medical treatment, it could well be demonic possession, especially if occultism, witchcraft, Satanism, spiritualism, seances, Ouija board, or similar things have been involved. I can't comment on the mental retardation portion of things; I am unfamiliar with that being a symptom or similarity to demonic influence but it could be biological mental retardation coupled with genuine demonic influence. (It's also possible to have both genuine biological mental illness and genuine demonic possession.)

I recommend the book Hauntings, Possessions, and Exorcisms by Adam C. Blai for a good understanding of symptoms of possession/obsession versus mental illness.

Blai is an expert in religious demonology.

Eric