Under the current rule if in a telephone application the applicant selects “I do not wish to provide” but fills in some of the required information regarding ethnicity, race and sex; does this information have to be reported?

Yes. If they partially fill out the 3 things, report what you have and mark the rest as "info not provided."

How does a borrower partially select in a 'TELEPHONE' application?

The LO asks the question and marks what the borrower tells him.
If the borrower says 'I do not wish to provide the information' then the LO is done. (S)he shouldn't continue to push for more answers.

It happens. The borrower will provide his/her ethnicity but when asked about race they do not wish to provide. I try to get the Loan Officer to make a note on the application so it doesn't look like the loan officer took a guess.