I think it will hold up, and doesn't set any precedent aside from punishing a bank who tries to bend over and screw it's customers more than is socially acceptable.

see, I was all prepared to go in with a whole "read the fine print, if you make a deal hold up to it even if it's a bad deal, yadda yadda yadda", but it does seem like the bank was really putting the screw on these people. I mean, come on, almost half the debt was in interest and penalties. That right there is a good indication something is out of line.

And just wait until he finds out he still owes that $160,000.

That's not so much a "screw you" to the bank. The bank doesn't want the house, it wants it's money back. Since it won't make as much from the land, it's coming out of someone else's pocket. Guess who's?