I’m not an attorney, but, was just wondering since he owed on the home, didn’t the bank technically own it before it was bulldozed? He didn’t have a clear deed.
I think you're correct. It was collateral on a loan, so he owes the difference between what the house is going to be sold for and what he owed. In this case, the whole $160,000. He probably won't do jail time, but I'm sure he's going to be sued and he won't have much luck getting another loan of any kind.
If the guy owes $160,000 on the home, his best legal defense would be to demonstrate that the land itself is worth at least $160,000 even without the house on it. In order to succeed in a civil court case the bank has to demonstrate that they've suffered harm by his actions, and if the property is still worth more than he owes on it then they have no standing to sue him.
If the bank's stake in the asset is the $160,000 mortgage then they can't possibly contend that they've been harmed simply because the demolition of the home has reduced its value from $350,000 to $160,000. The bank never "owned" a $350,000 home . . . they hold a mortgage valued at $160,000.