Should I just cut my losses and say it was simply the cost of doing business (the expenses listed above) or pursue?

All standard accounting still applies, the question is will those numbers on paper ever convert to actual payments or at time of actual expiration will a new relief order suspending/waiving any associated fee's/charges come into play, I have a feeling there is a good chance of such as we are living in the age of governmental over-reach (I would be pleasantly surprised if it actually considered property owners finances vs being told all are simply required to write it off as a business loss). 

Lehighton itself has changed little except for the Walmart moving out farther down 443 and Lowes coming in...and a few fast food places... not much. 

A family I know may soon be forced to foreclose due to job loss and high mortgage payments.

Due to the unique layout of the home, and the fact that it has two principal doors on either side, I decided to convert the garage and wall off part of the family room in order to create an "in-law" suite with full/partial amenities (kitchenette, bathroom, etc) that could be rented out.My grandmother has given her blessing for the project and I'm hoping to pocket some rental income from this, but the obvious question remains: once I do the ReFi and mortgage the home, I would be taking monthly losses as my rental income wouldn't be enough to cover the mortgage.

Yes, you cut your losses and sell, @John Pfeifer.

If so,2c) Besides the potential loss of your earnest money, is there anything else to be made aware of?

Basically, as we worked it up the food chain, we were told that the bank never wants to be in the middle of a dispute regarding the legitimacy of a POA.

We are not capable of a 20k loss at this point.  

I'd be digging in to WHY the owner is cutting his losses rather than finishing the rehab.