Predatory lending is still out there.  This is an interesting article on a single mother in Rhode Island.

http://realtytimes.com/rtpages/20080425_loanshark.htm

Who is to blame, the lender or the homeowner?  This situation is a every extreme. In this case I would say it would be both parties are at at fault.  The lender took advantage of situation, raising the value of the home that much. I am sure they may a good amount of money on that loan.  The homeowner should of realized something when they told her not to make your payments.

Do not sign anything if you don't have a good feeling about it.  Have someone else review it.  Don't ever stop making your mortgage payments. That is the worse thing for your credit.  If a lender tells you that during the refinance process go find a new lender.

If you are applying for a mortgage do your own research on the company and mortgage broker.  Ask them how they get paid? Did you know a lender can be paid at the closing table through closing costs. He can also be paid on the back end when your mortgage is sold to the investor.

A good lender will look out for your best interests not their own.  I work with some of the best in the industry. They will explain the entire process and only place you in a mortgage that is good for you not them.   If you are purchasing or refinancing give me a call or e-mail. I can put you in touch with one of my lenders. Even if you aren't using me as a Realtor.