I don't know exactly how Ohio foreclosure law works, but what you're describing doesn't really make sense as I've interacted with foreclosure law. It sounds like what you're saying is that whoever he was sued by (his brother?) attached his home then got a judgment against this guy, and placed a lien on the property for the amount of the judgment (or however much of the judgment wasn't otherwise satisfied). The homeowner could then either pay off the judgment to release the lien, or the judgment creditor (the plaintiff in the lawsuit) could eventually foreclose on the home. Note that the bank wouldn't be the party foreclosing. The bank would get paid first from the proceeds of the sale, because it issued and presumably recorded the mortgage prior to the lien being recorded. But the party that won the lawsuit against the homeowner would be the one deciding whether to foreclose, not the bank.
If the bank was calling the shots, what likely happend was the bank paid off the amount of the judgment lien, and then the ball would be in its court. The trouble is, the bank just essentially paid to release the judgment lien on the property, so of course they're still going to want to sell the house for the full amount. If they only sold it for $170k--well below market value--and $160k was still owed on the mortgage, the bank would probably lose money, given that it also has to account for what it spent to pay off the judgment creditor. By the way, under such a scenario, had the dumbass not bulldozed the house, he would have kept any proceeds that remained from the sale after the judgment creditor and remaining portion of the mortgage were satisfied. It's not as if the bank would receive a windfall.
Either that, or the factual scenario was that the home was used as collateral for some sort of loan for the business, in which case the plaintiff in the underlying lawsuit was the bank. But, in such a scenario, I don't see how the bank could foreclose if he hadn't missed any payments.
