If a customer has become disabled and causing a significant loss of income can we freeze the HELOC based on Material change in financial circumstances?

Sure, if you have proof that has happened and you believe they will no longer be able to pay because of it. It is a two prong test. A decrease in income alone might not do it, if they have other liquid assets to draw from. It would be adverse action and you would follow that protocol.

7. Material change in financial circumstances. Two conditions must be met for §1026.40(f)(3)(vi)(B) to apply. First, there must be a “material change” in the consumer's financial circumstances, such as a significant decrease in the consumer's income. Second, as a result of this change, the creditor must have a reasonable belief that the consumer will be unable to fulfill the payment obligations of the plan. A creditor may, but does not have to, rely on specific evidence (such as the failure to pay other debts) in concluding that the second part of the test has been met. A creditor may prohibit further advances or reduce the credit limit under this section if a consumer files for or is placed in bankruptcy.