Need advice on a short sale where the 2nd cancelled the request, charged off?

[Cliff Durrett]

Ok, so I have someone doing a short sale of sorts in florida
The first mtg is with a co out of CA that bought the NPL from Fannie a few years ago
The 2nd is with Mr Cooper, and is a Fannie 2nd (didnt know fannie even did 2nds?)

Anyway, the first is getting 100% payoff
The 2nd, after jumping through Coopers hoops, came back with "the short sale has been cancelled" and "this loan has been charged off by the lender"

Now the 2nd hasnt been paid in 13+ years, but what happens when a 2nd is charged off? There is no cancellation of mtg filed, no sat filed, so how do you proceed with something like this?

Ive never seen this before, anyone have an idea how to proceed or dealt with this?

Thanks