As others have said, this is largely a legal question.
The first issue is, did your mother sign the loan documents, or give your sister a power of attorney? If not, the loan may be fraudulent. If your sister did not have any legal title to the home, well, I'm not a lawyer, but I don't see how she could legally take out a mortgage against property that she doesn't own. If your mother never signed a relevant legal document, I don't see how she could be liable.
If she DID sign the loan papers or a power of attorney, but your sister misled her about what these were for, she might still have legal recourse.
So step 1: Find a lawyer. Bring the loan documents, any paperwork you've received from the bank, and the deed to the property. Let him tell you where you stand. I don't know what country you live in, but here in the U.S. you can usually have such an initial meeting with a lawyer for a modest cost or even free -- I've paid between $0 and $50 for such meetings. Then go from there.