You should consult a HUD housing counselor. HUD offers free counseling advice. at 1-888-995-HOPE (4673). Banks can change their minds on loan mods with the right documentation. Short sale is better than deed in lieu is better than foreclosure.
Disclaimer: The response given is not intended to create, nor does it create an ongoing duty to respond to questions. The response does not form an attorney-client relationship, nor is it intended to be anything other than the educated opinion of the author. It should not be relied upon as legal advice. The response given is based upon the limited facts provided by the person asking the question. To the extent additional or different facts exist, the response might possibly change.
Attorney Fink's answer is spot on in my opinion. If you have been denied a modification, your next best option would be to sell the property at a price that today's market would bear. A realtor experienced with short sale work could help you. If that doesn't work, then a deed in lieu would be your last resort short of foreclosure.