I am not sure how to handle this situation. Loan officer took an application for a fixed rate refinance that customer marked as primary residence. Before credit was pulled or any underwriting done, it was discovered that this customer operates an inn/guesthouse in their home. That type of property is not eligible for refinancing through the company we sell fixed rates to. Is this a denial with reason being Other-We do not offer fixed rate financing on investment property and then reported as a denial on HMDA Lar?

It's a denial. It cannot be a withdrawal because only the borrower can withdrawal.