reverse mortgages. But a federal agency has yet to say it will insure reverse mortgages originated in the state, and even if it does, some of the loans still may have to be structured differently than in other states.

Texas voters on Nov. 2 overwhelmingly approved Proposition 2, which made reverse mortgages feasible in the state. A reverse mortgage is a type of home equity loan geared to the elderly. It enables homeowners to convert their equity into cash. Repayment is generally due when the borrower dies or moves out of the home.

Reverse mortgages had technically been allowed in Texas since the state legalized all forms of home equity lending last year, but the law was vague about when the lender could demand repayment. That lack of clarity made any reverse mortgage originated in Texas unpalatable to the secondary market.

Last week's referendum clarified that if a reverse-loan borrower dies, or vacates the house for 12 months without the lender's approval, the lender can demand repayment. Fannie Mae will begin buying reverse mortgages originated in Texas in January, said Liz Scholz, director of senior products at the secondary marketing giant.

But the Department of Housing and Urban Development has yet to indicate that it will insure reverse mortgages originated in Texas. One guideline of the agency's home equity conversion mortgage program is that borrowers be offered three options for receiving proceeds: lump sum, monthly payment, or line of credit. But Texas law still forbids home equity lines of credit, so any program in Texas could violate the HUD guideline.

HUD did not respond by press time to requests for comment. Market sources said the agency is still deliberating, and they voiced optimism that it would support insuring Texas reverse loans. Fannie Mae buys both HUD-insured reverse mortgages and loans originated under its own Homekeeper program.

According to Roger Reynolds, national coordinator for reverse mortgages at the Norwest Mortgage unit of Wells Fargo & Co., some senior citizens who apply for reverse mortgages live in old homes that would need repairs in order to qualify. Norwest generally finances the repairs with a line of credit -- called a "repair rider" -- that can be drawn upon after the reverse mortgage is closed.

That will not be possible in Texas. Most likely, Mr. Reynolds said, in instances when the home needs fixing up, Norwest would simply set aside cash to cover repair costs, which would be rolled into the loan balance. As a result, whoever pays off the mortgage -- usually the elderly homeowner's heirs -- could end up paying slightly more in interest expense.

"It will probably by different in Texas because there is no line of credit," Mr. Reynolds said. "We're not sure at this point how we're going to finance the repair rider. We're waiting for input from both agencies (HUD and Fannie) to tell us what they want us to do."

There are about 125,000 potential reverse mortgage borrowers in Texas, according to Scott Norman, executive director of the Texas Association of Reverse Mortgage Lenders.

Mr. Norman said the average reverse mortgage is about $100,000 at the time of repayment -- which would give Texas a $12.5 billion market potential.

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