The last one. The cable stops or ferrules at the ends of the top tube will prevent the first one, and quality housing is pretty similar in flexibility anyway.

This means, of course, you will need to replace the truncated cable with a new one. I find an old spoke to be invaluable for fishing out the end of the cable and threading it through the hole in the frame. Also, you can get plastic "cable liner" tubing to guide the new cable through the frame. And while you have the brake cable disconnected, clean the caliper pivots thoroughly, lubricate with a couple drops of light oil, and center the centering screw(s).