Unfortunately, there is nothing that can be done from a tax perspective.
- The interest paid is not deductible because it was not used to buy, improve, etc. of her home.
- Repayment of COVID forbearance is not deductible. However, if part of the forbearance repayment was deferred interest that occurred on a loan that was used for qualified reasons, then your daughter could deduct the interest portion if she itemizes.
- And if the terms of the loan specify that forbearance and First Time Homebuyer Credit must be repaid, then that's the terms. However, you might want to check with an attorney if the terms were upheld correctly.
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