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Find the course with the item you want to remove and click on it in the Courses list.
In the Items section, find the reserve item and click copy the barcode.
Click the trash can icon. The item is removed from the course and the temporary location is removed. The Temporary Loan Type must be removed manually.
In the Inventory App, search for the Item by barcode. Click on the holdings accordion to open the items and click on the barcode to open the item.
Select Edit from the Actions menu.
Scroll to the Loan and availability section and change the Temporary loan type to Select loan type.
Click Save and close.
See the FOLIO community documentation here.