I wouldn't feel discouraged about applying for next year. I didn't even make it to the third round of reviews my first two times, and got the award this year. If you got HM you're very close. It's true you can't redo your undergrad, but if that really sunk you, you wouldn't even have HM. If you're getting good grades in your graduate program, that will help.
If there is a reason you struggled in undergrad, you can make that a focus of your personal statement and actually spin it into a positive. For example if you had an (undiagnosed?) learning disability, you can talk about how that makes you more aware and sensitive to the struggles of students with disabilities. Make sure you take actual, positive action based on this - follow the rule of show, don't tell. In this example, you could work with your services for students with disabilities office to identify accessibility barriers, and make changes that allow a student with a disability to conduct undergraduate research.
This is the big change I made between my prior, unsuccessful applications. Instead of trying to downplay weaknesses in my undergrad, I cast them in a positive light and took action based on this. I don’t have my review sheets back, so I can’t say whether this is what made the difference or not, though.