It is in the contract that you signed when you took out the HELOC. Just like the current credit card situation where they can raise the interest rate on your balance and make tons of money while squezzing everyone. Bitter? No just a realist.

If you take out a copy of your initial credit line agreement, you may find it in there. This is no different than credit card companies who are lowering credit limits on cards regardless of payment history and how much is owed on the account. What is important to realize about home equity lines of credit is that these are all second position loans. What that means is that when a home goes into foreclosure or is sold as a short sale, that is the loan that is second in line to be paid. Let's say you bought your house for $500,000, and did 100% financing with an 80-20 loan. The 80% is your first mortgage, the 20% is your home equity line that is in second position. Values drop and you can't pay your loans or sell, so you allow your home to go into foreclosure. The house can now be sold for only $400,000. The first mortgage holder gets their money, the second mortgage holder gets nothing. I hope this picture give you a better understanding of why banks choose to do this.

Regulation Z... one of the following three has to occur:

The home experiences a significant decline in value.

The borrower's financial situation changes significantly, and the lender believes that the borrower won't be able to meet financial obligations.

The borrower is in default of the home equity line of credit agreement.