You have tried the first step - asking the agent and the bank. They had to put everything somewhere. I would keep on that. Beyond that, I am not sure what else can be done. Anything in the nature of a lawsuit, if that is what you are thinking, would require the nephews having the legal standing to sue. If the house was solely in S-I-L's name, on her death it passed to her estate. If she had a will, the house went to whomever it was given in the will, and only that person could sue to recover. If she had no will, the house passed likely 1/2 to brother (if still married to her at time of death) and 1/2 to nephews, or 100% to nephews if divorced. First step would be to probate the estate and have someone, the nephews, appointed the estate's personal representative. the representative then has standing to bring a suit. Nephews might in their own name if they were co-owners of the house, but speak to a local attorney about that. But the next issue is the disposal of the property. If the foreclosing bank gave legal notice and after which could dispose of the property, no case. But if the notice was improper, say only to brother when it should have been to brother & nephews or maybe nephews alone (depending on brother/S-I-L's marital status), maybe, very maybe, there is an opportunity to recover the value of the property if it has been disposed of.
1) Keep on the bank's back about what happened to the property. 2) Seek out a local attorney who handles foreclosure law and who can advise on the law about what to do with property left in a foreclosed house. 3) Whether nephews can do anything will depend on a) title to her house at her death, b) how house is left (will or no will) and c) propriety of having given notice solely to brother.
To questioners from West Virginia & New York: Although I am licensed to practice in your state (in WV, on inactive status as of 9/13), I practice on a day-to-day basis in Massachusetts. I answer questions in your state in areas of the law in which I practice, and in which I feel comfortable trying to offer you assistance based on my knowledge of specific statutes in your state and/or general principles applicable in all states. It is always best, however, to work with attorneys and court personnel in your own area to deal with specific problems and factual situations.