Has a bank ever been sued for giving a highly risky home loan? 
I am interested in learning if there is a precedence for a bank being
sued by a loan recipient down the road because the loan recipient was
high risk (e.g. no stable income, few assets, etc.) and should not
have been given the home loan in the first place.

This wasn't a home loan, but the case might interest you:

"In the present case, an individual received a loan of 650 million yen
from a bank and invested it in securities, but incurred a heavy loss.
The plaintiff, an heir of this individual, sued the bank for extending
excessive loans knowing that in the light of the financial state of
this person, the interest of the loan had to be paid from the proceeds
of the investment in securities. This, according to the plaintiff, was
in breach of the duty to care for the safety of the customer on the
part of financial institutions."

http://www.djjv.org/japrecht/heft9/oda_rechtspr_sc.html

of passing interest?

http://www.tiscali.co.uk/money/guardian/news/2004/10/29/courtfreesmerseysidecouplefromloandebtth.html

Take a look at this:  http://www.ftc.gov/bcp/conline/pubs/homes/32mortgs.htm

Highly risky?  I would pay to see an underwriter sign off on a loan
that was highly risky...  Now, I could "state" your income and your
assets and get you a home loan, but I would need excellent credit
scores.  But that doesn't matter.  Stated programs and other types of
no documentation loans are meant to help qualify those that otherwise
would not qualify.  Not all of us are able to verify a stable income
or have a lot of assets, but would repay the loan.  Why would you sign
something that you knew you couldn't afford?