Home equity loan on rental if you live in an apartment?

[Greg Monette Jr]

So we purchased a home partially with cash and partially with a private lender. After rehabbing, we refinanced when we were about 80% complete with the reno. Our lender lent us about 38% of the ARV (we were expecting 80%. Lesson learned, always get terms beforehand!). We accepted and signed and got our refinance funds bc we were desperate and strapped for cash.

After fully completing reno, we tried to refinance again with a new lender that offered 80% so we could keep as a rental and payoff the unsecured debt on it (our home also appraised for 20k higher than with the previous lender). However, two days before closing on the refinance (after the appraisal and all the excitement), we were informed that we couldn't proceed with the refinance since the loan was classified as a home equity loan and we'd have to wait until the loan seasoned for the full 12 months. 

What I didn't understand was that we have signed notarized documents from when we bought the house saying that we would not occupy the house. We never lived there and never claimed to live there and the lender knew that. We were told that if you do not have a homestead and you get a refinance loan, they automatically treat it as if it's your homestead. I just dont understand. It seems like mortgage fraud on the bank's behalf in my opinion. 

Has anyone ever experienced this? I am in Texas.