Regarding the auction, Its a law that the bank has to follow. As far as the value, that's a relative issue. To you the property may be worth $76K but to the next investor or even first time homebuyer it could be a steal at $80K. What makes you think its only worth $76K? Or $170K on the other?
Where did you get your value of the property number? Did you find a Real Estate agent to get an update of the comps in the area where the home in question is?
The bank can bid up to the mortgage amount at no cost to them, but they do not always do so. Sometimes they stop bidding if a reasonable bid comes in. Whats the point of the bank winning the auction, taking ownership and liability, only to get the same price as the bid later on MLS.