Citibank (charge off) - mission impossible

[Nika]

Hi-

I'm sorry if there's already an existing thread explaining a similar situation, though I could not find it; and for the length of this question.
I thank you all in advance for your help and guidance.

LONG STORY SHORT:
Based on my credit score and Chase's requirements, I'm 15 points shy of getting a really attractive re-fi rate (mortgage).
I have a charge off on my credit report, associated with Citibank, which is killing my credit score.
(I had a balance with Citibank, they sent it to collections, unbeknownst to me, "Citibank" contacts me (it was really the collection agency), the debt amount is reduced, I pay in full and am assured that this would not have any negative repercussions on my credit. It absolutely does.)

THE DILEMMA:
when I contact Citibank, I am told there's nothing they can do, as they don’t own the debt.
I am told: (1) call the collection agency and resolve it with them; they should remove it.
or (2) to fax over a letter of explanation to Citibank, which I have, to no avail.
Response (from Citibank):
"Based on the information reflected in the inquiry received, we are unable to determine the nature of your dispute" (I am also being asked to supply: (1) copy of credit report(s), (2) my demographic info, (3) detailed description of dispute, (4) details regarding derogatory information being reported.)

MORE DILEMMA:
When I call the collection agency, I am being told to submit the paid receipt to the Credit Reporting Agency, and they will remove it, as the debt is resolved.
Problem:
Citibank is the one who is reporting it to the CRAs.
It seems Citibank has to remove it because it's associated with Citibank.

NEXT STEPS:
Based on the letter Citibank sent me, should I reply indicating that the burden of proof is on them and they have not been able to provide me with any documentation, therefore this derogatory information should be removed? Thoughts?

Any advice you can offer would be great.......they are impossible.

THANK YOU!!!!