I feel like it's not really fair saying they are "releasing" these jerseys. If they did, I would love to get my hands on one, but no way I'm winning an auction.

The answer is A. The house is collateral. The bank gets the house and the mortgage gets wiped out (impacting the man's credit score).

A short sale allows a sale of the house for less than the balance of the mortgage (with the bank's permission) and the balance is forgiven, preventing foreclosure.