Thanks for your question.
Yours seems to be a very unusual situation, to say the least.
Your 2nd lender is about to make a serious money-losing mistake. This will be a career ending move for the mid-management type responsible for the decision to FC.
However, that's irrelevant if you were to lose your home. If you're unable to show your lender their valuation is way off, and have them cancel the TS, you may want to do the following.
Accept (with tongue in cheek) their mod offer, make the trial payments until January when they've promised they'll cancel the TS. Then, when the TS is cancelled, default on the loan again and make no more payments.
FYI, that's only a suggestion but all I can think of now. Perhaps others will chime in with ideas.