How to negotiate a 'Paid in Full' vs 'Settled for Less'

[twinsfan]

I recently was approved for a short settlement so I can refinance a HELOC that is currently with BofA. The bank I was planning to refinance with told me they will NOT approve me if I have a Settled mortgage on my credit report no matter how good the credit score. I spoke to 4-5 people in the BofA short sale department and they all assure me there is no way that they would report the account as Paid in Full. They also refuse to not report the account, which would effectively accomplish what I need. The morons in the BofA short sale department actually told me it was "against the law" ro either report it as Paid in Full or not report it at all. I challenged them to point me to this supposed law and they pretty much puked on thier shirt. Where do they find these people?

Any advice from anyone here? This has to be a common problem but I could not find this topic discussed elsewhere in the forums. Thanks!