Pay your rent, Find a new place to live, Use the security deposit against the last months rent, And move on. Be glad you didnt find out when the sherriff rolled up.
I say pay your rent because you are still in a contract to do so and it is wrong to break that contract, no matter what the LL did to the bank. I say use the security as last months rent cause the point of the deposit is to cover any damages you made. Since he wont own the house anymore itll be offly hard for him to make a case that he is owed damages on a house he doesnt own. (Please dont damage the house) You get your deposit back, the bank gets its house back, your landlord fullfills both of his contracts. Tell him about it first, but dont think that youll get your money back if you dont just cause he is a nice guy.

Oh and count yourself lucky, you are now one very small step closer to affordable housing, and your credit is just fine.