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ANALYSIS-For some elderly Americans, mortgage rules herald harder struggle

* Trump administration changed rules on reverse mortgages

* Change cuts the amount of money elderly people receive

AGAWAM, Mass., Oct 2 (Reuters) - Lloyd Nicholas, 82, and his wife Gloria Hitchcock, 69, sat next to each other as they received counseling on a reverse mortgage, a loan that would allow them to cash out the equity in their home, pay off a mountain of bills and live comfortably as they age in the house they built 50 years ago.

But a change in rules on Monday by President Donald Trump's administration will shrink the amount they are set to get by more than $20,000. Without that money, they said, they will not be able to keep up with property taxes that they are already struggling to pay, afford increasingly frequent trips to the hospital and deal with unexpected expenses.

"This past week, I had to get my sewer pumped out for $360 dollars," Hitchcock said. "$360 dollars! It's adding up and we're falling behind."

The couple are among many elderly Americans who scrambled to secure reverse mortgages ahead of new restrictions that could put the loans out of reach for some or deliver substantially less money to others. As a result, more than a dozen mortgage counselors and lenders told Reuters they expect a significant drop in the loans from Monday.

Since emerging in 1990, more than a million seniors have taken out reverse mortgages, according to the U.S. Department of Housing and Urban Development (HUD), making them a popular but risky lifeline for asset-rich, cash-poor elderly Americans.

The loans allow homeowners age 62 or older to borrow against the value of a home, with no need to repay the loan until the borrower dies or sells the home. Borrowers receive payments on a monthly basis, in a lump sum, as a line of credit or a combination of the two -- often to pay bills, manage medical costs and supplement retirement income.

They also have been blamed for a rise in foreclosures among seniors. The uncertainty of home sale prices and rising interest rates, among other factors, have put the program itself under strain. In the 2016 fiscal year, it was valued at negative $7.7 billion.

In response, HUD is raising upfront premiums to 2 percent of the amount of a home's value, from 0.5 percent. The amount of money seniors can borrow against their home falls by about 10 percent.

Paul Cornell, president of the American Seniors Association conservative advocacy group, sees the change as positive for most seniors: annual mortgage premiums will fall to 0.5 percent from 1.25 percent, reducing payments and preserving more equity for seniors down the road.

"It will be much less of a burden for everyone," Cornell said.

But near term, the change will be painful for many seniors.

Back at Cambridge Credit Counseling in Agawam, Massachusetts, Nicholas, cane in his right hand, turned to Hitchcock, who was connected to an oxygen tank as a result of advanced lung disease.

"Why worry about it?" Nicholas said playfully. "We're going to die soon anyway."

THE SCRAMBLE

For more than two years, Nick Kelly, 75, has debated whether or not to seek a reverse mortgage. Kelly, who has lived in his home in Baraboo, Wisconsin for 25 years, said headlines about foreclosures and warnings by family members about the risks "freaked me out completely."

But like many seniors, Kelly faces significant financial strain.

The $1,739-a-month he earns from the Social Security retirement program and teaching piano barely cover his bills, said the retired graphic designer. When an email alerted him to the changes in early September, he picked up the phone and made a counseling appointment, a legal requirement for the loans. He wanted to sign up, he said, before the new rules took effect and reduced the amount he can borrow.

"I don't want to buy a yacht or vacation around the world. I need a financial product that will give me an extra four or five hundred dollars a month to pay the bills." Those bills, he said, add up to about $1,500 per month.

Many counseling offices were booked through September.

Patrick Noonan, housing coordinator at the Colorado Housing Connects group, said some seniors even offered to pay money for what are free counseling services just to get in ahead of the cutoff.

"There's a good percentage of folks that would not even qualify after these changes," said Cliff Auerswald, president of All Reverse Mortgage Inc, a lender in Orange County, California, adding that his company's application requests have more than doubled since HUD's announcement.

"After October 2nd, we're not even talking to those people, really," Auerswald said.

LIFE REVAMPED

The new rules dashed Evette Bissett's hopes to make a bid on an Austin, Texas home with a reverse mortgage.

"I mean it just literally pulled the rug out from underneath me," said Bissett, 68, who left Texas 11 years ago to care for her ailing mother in Denver.

When her mother died, she inherited the home but could not afford the bills. "My monthly income and my monthly expenses are pretty close together right now,"' the retired accountant said.

Before the new changes, Bissett planned to take out a reverse mortgage that would have allowed her to purchase a home in Texas, where she spent most of her life, using funds from the loan and the sale of her Colorado home.

Under the new terms, the amount Bissett can borrow dwindles by about $32,000 to $82,000. "That does not leave me in a position where I can do it," Bissett said, adding that she has no family to fall back on. "I've burned out my calculator just trying to figure out what my options are."

The net worth of 65 to 74 year olds, Bissett's age group, has declined over the last three years on median basis, counter to trends in other age groups, according to a Federal Reserve survey published in September.

"I really was depending on that loan to put me in a better financial position, and now I can't do it," Bissett said. "I've got to revamp my life all over again."

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(Reporting by Melissa Fares; Editing by Jason Szep and Will Dunham)