They may be under the impression you're renting it out or letting it go. You should invite someone from your lenders office to do a walk through to verify that is not the case, you are taking care of it and it's up for sale. Just call them, explain your situation.
You may want to consider getting an agent to help you sell, it will likely help get the bank off your back... Plus agents can help sell a home much quicker than DIY..
Other option is refinancing to a conventional loan, then you can do whatever you want with it, rent it, sell it, live in it, leave it empty - what have you..
Good luck... and I agree, it is absurd. I could see their argument if you've only had a loan w/them a few months, but 11 years of making mortgage payments and that's how they treat you? geeez...
And no, it doesn't mean you have to live there, just means you have to be taking care of the property and not have another mortgage per your income the loan was originally based on..