Maryland housing officials said yesterday that they are developing an innovative $1 million pilot program to help elderly homeowners borrow against their home equity to supplement monthly income, make needed improvements to their houses and even pay their medical costs.

"Many elderly have built up an enormous equity in their home," said Ardath Cade, deputy housing secretary in Maryland. "They have a fixed income, but they have a need for cash out of that home. They are not in a position to make immediate repayment."

The housing proposal, which Virginia and District officials are also studying, was applauded by the United Seniors Health Cooperative, a nonprofit organization that helped design the "reverse mortgage" model under consideration.

Under the model, a homeowner could borrow against the accumulated equity in the house and also be guaranteed lifetime occupancy, with the debt paid only after the owner's death or sale of the property.

In the Washington area, an estimated 65,000 homeowners over age 65 have a total of more than $6 billion in equity tied up in their properties, housing statistics indicate.

"While the reverse mortgage concept is not for all older homeowners, it can be of great help to some," said James Firman, chief executive officers of the health cooperative.

The reverse mortgage concept, Firman said, allows an elderly homeowner to draw cash either in regular monthly payments or in a lump sum for emergencies. The amount of the advances are limited to the amount of the homeowner's equity. Any cash difference between the sale price of the house and the amount owed to the state would revert to the homeowner or the homeowner's estate.

Although reverse equity mortgages are widely available through private lenders, only two other states, Connecticut and Rhode Island, have public programs under which elderly homeowners can get reverse equity mortgages and added protections against the loss of their homes, housing officials said.

The planned three-year Maryland program could begin making loans to qualified applicants early next year, officials said.

"We do not have a complete program design, but we are actively working on it and eager to move forward," said Jacqueline Rogers, secretary of Maryland's housing and community development division.

Cade said that there are limitations to the program that Maryland envisions offering to elderly homeowners. "You can't let people borrow beyond their equity," she said. "You have to make certain assumptions about age, when they are likely to move out, and you have to have a contingency plan if they don't move. All those things have to be looked at so it isn't a giveaway program."

Cade described the Maryland plan as a "pretty great idea, if it is used carefully."

In Connecticut, the state's Housing Finance Authority has lent nearly $20 million to about 200 elderly homeowners, according to Arnold Pritchard of the state Department on Aging.

One of those homeowners, Pritchard said, is a 75-year-old widow who lives in a $350,000 house east of New Haven, Conn. "On paper she is wealthy, but her monthly income is only $391, and God knows how she was staying alive on that amount," he said.

The woman qualified for a $100,000 reverse mortgage loan, and opted to take $5,000 in a lump sum to pay for home repairs and pay other essentials, he said. In addition, the woman will receive $450 a month for 10 years to supplement the $391 Social Security income.

Despite such success stories, the Connecticut program has grown slowly, Pritchard said. "It is a very, very new idea that violates the very strong desire to keep a home free and clear," he said. "That is not irrational. Because no matter how many safeguards you build in, people are still a little worried."