Rubio claims that among more than 1.3 million temporary mortgage modifications, more than half defaulted

Foreclosures are a rampant problem in Florida, and the next U.S. senator will be expected to help tackle the national crisis.

In the final debate Oct. 26, 2010, between Florida's U.S. Senate candidates on NBC, moderator David Gregory asked Republican Marco Rubio "what would you do to solve the foreclosure problem?"

During his answer, Rubio bashed the efforts of the current administration.

"Over 1.3 million temporary work-outs, over half have now defaulted,'' he said.

Gregory clarified what Rubio meant by "work-outs:" "Those are called mortgage modifications?"

Rubio: "The temporary modifications. There have been 500,000 permanent (modifications). We just found out yesterday of the 500,000 permanent (modifications), 11 percent already defaulted."

For this Truth-O-Meter we wanted to explore, did Rubio get his numbers right on the larger figure -- have there been more than 1.3 million temporary mortgage modifications of which more than half have defaulted?

An Oct. 25 Associated Press article provides some answers. The article focused on comments by Neil Barofsky, special inspector general for the Troubled Asset Relief Program, a $700 billion Wall Street bailout in 2008 that includes a mortgage modification program launched in 2009. According to the AP, Barofsky concluded that the administration's "foreclosure-prevention effort has been ineffective in tackling the foreclosure crisis."

Barofsky issued a 338-page quarterly report about TARP to Congress on Oct. 26, the day of the debate.

The report states on Page 6: "Finally, the most specific of TARP's Main Street goals, 'preserving homeownership,' has so far fallen woefully short with TARP's portion of the Administration's mortgage modification program yielding only approximately 207,000 ... ongoing permanent modifications since TARP's inception, a number that stands in stark contrast to the 5.5 million homes receiving foreclosure filings and more than 1.7 million homes that have been lost to foreclosure since January 2009."

Funded through TARP, the Home Affordable Mortgage Modification Program is intended to help prevent foreclosure by modifying mortgages. By the end of September 2010, HAMP spent about $483 million in TARP money.

The report shows a chart on page 74 that 1,369,414 mortgage modification trials had started by the end of September 2010. The chart states that 699,924 trials had been cancelled -- so note that is slightly more than half. The chart doesn't use the word "temporary" for any of the trials -- but it is clear that the 699,924 figure refers to temporary because another line on the chart shows that nearly 500,000 trials were converted to "permanent." Of those permanent modifications, the majority survived while almost 29,000 were cancelled.

Rubio stated that the more than 1.3 million mortgage modifications were temporary. While all of the more than 1.3 million started out as temporary, about 500,000 became permanent.

Rubio also said that more than half of those 1.3 million had "defaulted." But the chart doesn't state that they defaulted -- it says cancelled.

We sent Rubio's claim to Matthew Anderson, spokesman for the U.S. Department of Treasury that oversees the mortgage modification program.

"It is not accurate, however, to say that all canceled trials are the result of 'default,'" Anderson wrote in an e-mail. "Trial plans may be canceled for a number of reasons, only one of which is failure to make payments."

Anderson pointed us to the September 2010 HAMP report that contains data from the largest service providers, which indicates the top three reasons, in order, for cancellation. Anderson listed them for us: "Borrowers not providing sufficient documentation to servicers, trial plan payment default, or a homeowner who is ineligible because their housing expense is already below the program's 31% threshold." 

We called and e-mailed Rubio spokesman Alex Burgos on Oct. 27. He sent us back a link to an Oct. 18, 2010, Government Sponsored Enterprises report, a publication done by the Washington, D.C., consulting firm Canfield and Associates. The GSE report stated:

"As of August, only 449,000 borrowers have received permanent modifications through HAMP—34% of the 1.3 million borrowers who have enrolled in the program, while 680,000 borrowers have fallen out of the program (51%)."

That report also stated that through July, incomplete requests (28 percent) and trial plan default (21 percent) were the top two reasons that trial modifications failed to convert to permanent.

Rubio is familiar with the housing crisis personally. An Oct. 22 St. Petersburg Times article about his personal finances stated that Rubio's "Tallahassee home, which he bought with fellow legislator David Rivera, nearly went into foreclosure before Rivera came up with $9,525 for missed payments and fees. Rubio said the delay was over a dispute with the mortgage company."

In the final full week of the U.S. Senate race, how did Rubio fare on his numbers about the mortgage modification program? Rubio said "over 1.3 million temporary work-outs, over half have now defaulted,'' referring to a temporary mortgage modification program. His claim requires some clarification -- of the more than 1.3 million mortgage modifications that started out as temporary, nearly 700,000 in the trial phase were cancelled -- or 51 percent. So Rubio is correct on "over half" but wrong to conclude that all of those had "defaulted." Defaulting was the second most common reason for cancellation, therefore we rate this claim Half True. 

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