@brandi n,
Unfortunately, your agreement for living there is with HER not her bank. If you want to live in her house, you have to pay her.
Her agreement is with her bank. If she wants to keep her house she has to pay the bank.
Her failure to pay the bank does not negate your agreement to pay her (especially for a month where you actually lived in the apartment).
You of course could try to sue and you may get a sympathetic judge, but I don't think the law is on your side. It rarely ever is for renters.
You're not alone though, this has been happening all over the country.