You hit the nail SQUARE on the head, Amber! You're damn right they BOTH hid it this long because the BM knew FULL WELL that this would be a justifiable reason for a change in custody! Goes directly to the general attitude of a PBFH, you know??!!
You've got to file for modification based on what the judge said last time, or BOTH those babies will be lost. Only with you and DH will your SD ever be able to face the reality of what it really takes to be a parent. With a mother like hers, it's no wonder she has no clue! And just maybe you can talk about adoption with her, after she gets hit broadside with the financial and physical realities of parenthood. Time for some Tough Love, I think. Cuz if I were you, as soon as she's safe in your home, take her 'shopping' and make a running list of the 'necessities', both initial and recurring, needed to take care of a baby, then add it all up and ask her what job that either a 15 y.o. or a HS drop-out could afford the cost. Sometimes they just can't see the light till it blinds them, you know??