Anyone who does a no-money down, interest-only mortgage on a non-primary residence and shortly thereafter takes out an equity loan for cash — then defaults — should immediately be thrown in jail for fraud. Along with their co-conspirator, the loan officer.
In most cases, the loan oficer merely takes the application and documents. The lender decides how they want the info documented. If the LO gives the lender info based on fraudulent or perjured documents, that's a different story.