Sounds like old wine in new bottles -- Mom gets her nursing home paid by the taxpayers, while kids get to go on a cruise.  I would guess that this is some Eastern state with archaic property laws.  It allows a contract that says "I don't own the house, but you have to pay me the net rental income until I die."  

The bank accepted the house as collateral for a loan to the kids, because the kids now own it.  Theirs are the only names on the mortgage, right?  And you're the mother's tax pro, right, not just a family member?  Did they ask you about any of this before they did it?  Have you asked the lawyer who wrote it up, since it was done?