This was an enormous risk that ultimately ruined him financially -- even more so than taking out a large mortgage on the Las Vegas home.
Fortunately, it sounds like he's at least got some time to repair his credit record -- and has another home in which to live.
You have assessed it well. He did the wrong thing for the right reason, and should be alright, for the most part, with a roof overhead (a nice one at that), and they both have good, high-paying jobs. And no credit. I've heard of worse. Time to lick the wounds and get on.