Could use some advice: Short Sale to Loan Mod?

[quattrospider]

Quick Details: Owe $490,000 on House
First loan: $389,000 (ING)
Second loan: $99,000 ( BOA/Countrywide )

House sold for $345,000 via short sale in April.

In Early August, the short sale was approved by both banks verbally on a friday afternoon, however, that morning the buyers backed out.

We got new buyers within 3 days with a $355,000 offer ($10K higher).

4 Weeks ago, ING told us they had worked out a deal with BOA and we would owe $5,000 to payoff the 2nd and be all fine (new buyers agreed to split that).

Current status: ING negotiator has been MIA for 2 weeks, BOA is saying that cant just swap out the buyers, they have to start over from scratch.

I got my notice of default in the mail yesterday, meaning I believe they will set an auction date for 90 days out (correct?).

So, what is my best option? Do I wait and hope that the short sale goes through in less then 3 months?

After going through the short sale process for nearly 7 months now, do I try to do a loan mod? Is there any chance of agreeing with ING to keep their loan maybe with a lower interest rate (mine is in low 6%) and have them pay off BOA $5-10K to close that account? Is that dreaming?

Thanks!