For five years, Robert and Vivian Lopes didn't have to pay property taxes on their modest three-bedroom home northeast of Glendale thanks to a program intended to keep retirees from being taxed out of their homes.

Those tax-free days are over, however, for the Lopeses and thousands of other older Oregon homeowners.

State lawmakers, alarmed by the potential for lost tax revenue, changed the rules this year, making the Lopeses and about 5,000 other older Oregon homeowners no longer eligible to defer their taxes.

For the Lopeses, who live on $1,868 a month in Social Security and Vivian's $152 a month pension from Safeway, their tax bill went from zero to $1,073.

“We live on our Social Security. It's all we have,” said Vivian Lopes, 71. “We don't know what we're going to do.”

Revisions to the tax deferral program for senior citizens are causing anguish statewide.

The changes affected about half of the 10,000 homeowners who previously qualified.

In Douglas County, the number of homeowners who qualify dropped from nearly 400 to fewer than 200.

“I've heard from a couple of people who are in dire straits. They don't have the money to pay their bills,” said Michele Nelson with the Douglas County Tax Office.

The program, in place for nearly 50 years, allows senior citizens to defer taxes until they sell their homes. If they die, their heirs are responsible for the taxes, plus 6 percent interest.

The old rules required homeowners to be at least 62 years old and have an annual taxable income of no more than $39,500. Under those rules, some homeowners with high-value houses benefited from rules intended to help the poor. Also, the program developed a $20 million shortfall as property values dropped and home sales failed to recoup the deferred taxes.

The 2011 Legislature borrowed $19 million to meet its obligations to local taxing districts on behalf of homeowners. It also tightened income and asset limits, and other eligibility requirements. Homeowners now have to reside in a home for five years before they can qualify for the program.

But the revision that tripped up the Lopeses and 67 other Douglas County homeowners was a rule barring homeowners with reverse mortgages enrolling in the program.

Of the 2,200 people statewide who applied to defer their taxes this year and were rejected, some 2,000 were denied because of their reverse mortgages, Department of Revenue spokeswoman Rosemary Almond said.

Others were rejected for reasons such as exceeding income limits or not carrying homeowners insurance.

Reverse mortgages allow older homeowners to tap the equity in their homes while they're alive. Lenders recoup their investment when the house is sold.

Rep. Tim Freeman, R-Roseburg, said that with home values declining, the state was in danger of not regaining the deferred taxes.

“The state has been taking a big hit as values have decreased,” Freeman said.

Two weeks ago, a coalition of organizations that represent senior citizens wrote a letter to the Oregon Department of Justice asking the agency to halt implementation of the changes to the deferral law and order the Department of Revenue to reinstate everyone bumped from the program because they have reverse mortgages.

The groups contend the prohibition against reverse mortgages should apply only to new applicants coming into the program, not those with existing deferrals.

The Lopeses, who have been married for 27 years and call each other “babe,” have owned their home, valued at $160,410 for 10 years. In 2006, they took out a $63,000 reverse mortgage.

They bought a pickup and used the rest of the money to make home improvements.

Robert Lopes, an 81-year-old Korean War veteran who served in the U.S. Navy, was a truck driver and operated two small businesses, said he hopes by speaking out it will draw attention to the plight of people who live on a fixed income and who are struggling due to changes they never imagined would be implemented.

He said he hopes lawmakers will be swayed to make changes when the Legislature meets early next year.

“I would like to work to get it stopped someday, not just for me but for everyone else,” Robert Lopes said.

It seems unfair, the Lopes said, that they followed the rules and have been kicked out of the program through no fault of their own. They said the state broke its agreement with them, and they apparently have no recourse.

“That was a contract, and they should have to abide by it,” Robert Lopes said.

Freeman said legislators would likely consider minor changes to the program during the abbreviated legislative session in February.

He said lawmakers may discuss ramping down the percentage of taxes people who formerly qualified for the program must pay or some other temporary fix to reduce tax bills.

“There are clearly going to be people who are going to be negatively impacted by this,” Freeman said.

The Lopeses would be pleased if changes were made that allowed them to receive a deferral again. They said they'd hate to lose their home because they can't afford the taxes.

“We put a lot of work into this place,” Vivian Lopes said. “We figured it would go to someone else when our time here is through. We hope that doesn't come quicker than we planned.”

• You can reach reporter John Sowell at 541-957-4209 or by email at jsowell@nrtoday.com.