Our bank who was so excited presented the project to their board and it got flat out DENIED.

Whenever we tell them, they straight up deny even though there’s a cloud of smoke arising from their unit every time we enter the building.

She currently works in travel healthcare and is being told that because she does not have two years of employment history she is being denied the loan.

I've spoken with a few investors who tried to finagle RE Pro status and got that denied by the IRS

We have made a separate entrance to the basement, with fire alarms/parking, etc in place (although first time heard about egress window), and we don't have shared space with the basement (so tenants have their own kitchens and bathrooms, except we share the laundry), so based on Roy's comment, this is still within RTA I guess, so it's more in favor to the tenants (based on Denis' and Frederick's comment).With that being said, we are very interested to know the pro&cons between renting out a basement from our primary residence vs. just regular rental units.

How do we deny her application without running the risk of creating a legal problem for ourselves?  

Here in CT there are laws that, in many cases, force the Association to first put in the claim and then if it is denied, it goes to the unit owners insurance.  

Do you deny them both?

As a rental agent, I have met shady landlords that kept people's security deposits when denying their applications if they lied about prior evictions. 

I don't want to quit my current job, and find one in the other town, just to be denied a loan due to unsteady work history.