If they stayed at a hotel/motel in the interim, the mortgage company must reimburse them for their troubles. Same too, with gas prices, food, etc.
Chances are, that's the only reimbursement your friend would get in a court of law. The police wouldn't be liable, per se, since they were acting on "good faith" on the info given to them by the lender. If it was the mistake of the police, however, they WOULD have to reimburse your friend.
Otherwise, I think it's simply a matter of their getting what they're out of.