Make that "you MIGHT have $200,000 in assets." Whether they would get $200,000 out of a sale depends, first, on whether the house actually sells for $1 million, and, second, what selling costs, court costs, legal expenses, etc. get deducted from the proceeds of the sale. Selling at a foreclosure sale is about the least cost-effective way of selling a property. The couple would have done better if they had conceded their inability to afford the house and sold it on their own before the bank foreclosed.
That said, they will get whatever portion of the sale proceeds remains after the mortgage and selling expenses are paid off.