Hispanic with negative home equity and low-income – reason for loan approval?

A home-equity loan was approved even though the home had negative-equity and the family was low-income(both can be proven). Lender did not consider the children as liabilities, even though the 1040 shows them. Husband is Hispanic and employed, wife is non-hispanic and she is unemployed. Wife was required to sign on mortgage and note as a condition of the loan, and she was listed as Hispanic even though she told the lender not to (lender then said he would have to do all paperwork over if he had to correct it). Lender overappraised the home and borrowers didn’t realize this until much later. I think that maybe the lender had some kind of racial quota to make, and didn’t care if the borrower could repay or not, since the Lender could take the property if the borrowers didn’t pay.
I am looking for reasons that a lender would have for doing this, and whether there is there are specific laws that prohibits it. It caused the borrower to default and lose the home, as they were not able to sell and repay the lender. Can someone cite any authority on this?

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