Legal Question in Real Estate Law in California

Re: Bank forcing equity line loan payoff, or foreclosure.

First, Penal Code section 532a makes false statements on a credit application a misdemeanor punishable by a fine of up to $1,000 and/or up to six months' jail time. It is also civil fraud, but the lender doesn't have much of a case if it cannot prove damages (such as a default that cost it money). Possibly the bank could claim that it was damaged when it was unable to package and sell your loan after it became aware of the application fraud.

Additionally, the bank probably has rights under the express terms of its contract with you. A material false statement in the application is probably a default and probably triggers a right to accelerate the due date of all the principal.

So, that's a summary of WHAT they can do - declare a default and, if they choose, make a criminal complaint. The question as to WHY they are doing this is another matter, and I'm not sure I can help you with that. Maybe they are just being jerks. It seems to me that if you were always on time with your payments, nothing would cause them to verify your reported income. Was there anything unusual in your recent personal history such as a divorce, sudden drop in FICO score, civil or criminal action, filing of a homestead declaration, etc.? Do you have personal enemies who might be ratting on you? If none of the above applies, or suggests a reason, then I'd guess it is a change of management or policies at the lender, brought about by the collapse of subprime lending, that has triggered a general internal review of its loan portfolio. Hard to imaging that calling in performing loans on technicalities makes sense, however.