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                            DEPARTMENT OF DEFENSE
             DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
)
----------, ------- ------- )       ISCR Case No. 09-01367
SSN: ------ ---- -------- )
)
Applicant for Security Clearance )
Appearances
For Government: Melvin A. Howry, Esquire, Department Counsel
For Applicant: David I. West, Esquire
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Decision
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WHITE, David M., Administrative Judge:
Applicant bought a home in 2004 after retiring from the Navy. He was laid off
eight months later, through no fault of his. He had to relocate to find work, and was
unable to either sell or rent the home due to the depressed real estate market. His first
mortgage debt was fully resolved by foreclosure, he repaid the second loan, and had no
other delinquent debts. Based upon a thorough review of the case file, pleadings,
exhibits, and testimony, eligibility for access to classified information is granted. 
Applicant submitted his security clearance application on September 29, 2008.
On July 24, 2009, the Defense Office of Hearings and Appeals (DOHA) issued a
Statement of Reasons (SOR) to Applicant detailing security concerns under Guideline F
(Financial Considerations). The action was taken under Executive Order 10865,
Safeguarding Classified Information within Industry (February 20, 1960), as amended;
Department of Defense Directive 5220.6, Defense Industrial Personnel Security
Clearance Review Program (January 2, 1992), as amended (Directive); and the revised
adjudicative guidelines (AG) promulgated by the President on December 29, 2005, and
effective within the Department of Defense (DoD) for SORs issued after September 1,
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2006. Applicant acknowledged receipt of the SOR on August 5, 2009. He answered the
SOR in writing (AR) on August 19, 2009, and requested a hearing before an
administrative judge. Department Counsel was prepared to proceed on October 27,
2009, and DOHA assigned the case to me on November 2, 2009.
DOHA issued a Notice of Hearing on December 8, 2009, and I convened the
hearing as scheduled on January 5, 2010. Department Counsel offered Government
Exhibits (GE) 1 through 7, which were admitted without objection. Applicant testified on
his own behalf, and offered Applicant Exhibits (AE) A through C, which were also
admitted without objection. Three additional witnesses testified on Applicant’s behalf.
DOHA received the transcript of the hearing (Tr.) on January 13, 2010.
Findings of Fact
Applicant is a 52-year-old employee of a defense contractor, for whom he has
worked since 2005. He retired in 2004 after serving for 20 years in the Navy, with an 8-
year break in service. He held a high-level security clearance throughout his naval
service without any adverse incidents. He is married with two children, ages 19 and 17.
His 17-year-old son has cerebral palsy, with the mental development of a 2-year-old,
and recurrent serious respiratory problems. (GE 2 at 6, 12, 18-22, 26-27, 32-33; Tr. at
52-53, 72-74.) In his answer to the SOR, Applicant denied the allegation set forth in ¶
1.a, and admitted the allegation in ¶ 1.b, with explanations. (AR at 1-2.) His admissions
and explanations are incorporated into the following findings of fact.
Applicant’s last Navy duty station was in State One, close to where his family and
his wife’s family reside. He lived in Navy housing there for 11 years, until his retirement
from active duty. He was hired by a small local defense contractor and began working
immediately after leaving the service. He and his wife bought a home by taking out a
$304,000 first mortgage loan and a $38,000 home equity line of credit. (GE 4 at 10, 15;
GE 3 at 4; Tr. at 55-57, 74-75.)
Eight months later, Applicant’s employer lost the contract under which he was
working and he was laid off. He unsuccessfully searched for another job in the area for
several months. He was finally hired by another company to work in State Two, on the
other coast. The area where he started working did not have adequate special
education programs to meet his son’s needs, so his wife and children remained in their
home and he rented a room. He continued to work as a geographic bachelor, and after
six months he was hired directly by the major defense contractor for whom his State
Two employer performed subcontract work. About a year after he first moved to State
Two, his new employer transferred him to work in State Three. This was back on the
original coast, and in an area with good special education programs. (GE 2 at 9-10, 12-
15; Tr. at 57-59, 75-78.)
Applicant and his wife listed their home for sale once he left State Two, and also
attempted to rent it. They were unsuccessful in both efforts. After another year of living
apart, the family separation became too difficult to endure. Applicant’s wife is unable to
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work outside their home due to their son’s extensive needs for care and attention. He
continued growing bigger and stronger, making it increasingly difficult for her to care for
him alone. In March 2007, Applicant’s wife and children moved north to join him and
they rented a house to live in. (Tr. at 59-62, 78-81.) 
Applicant and his wife continued to try to sell their home, but the State One real
estate market had become very bad and they were unsuccessful. They remained
current on their mortgage payments, and all other debts, throughout this time. From
June through August 2007, Applicant communicated the situation to the mortgage
lender (the same company held both loans), and sought permission to pursue a “short
sale” since the market value had fallen to substantially less than the loan balances. The
lender was also put on notice that Applicant’s savings would only permit continued
payments for several more months at the original rate, but no assistance was offered. In
late November 2007, still without success in either selling or renting the house,
Applicant notified the lender in writing that he could no longer afford to make payments
toward the mortgage loans. Applicant promptly informed his supervisor and his
company’s security officer about the situation because he knew defaulting on his
mortgage could raise security concerns. (GE 4 at 21-30; AE C; Tr. at 82-88.) 
During the winter and spring of 2008, Applicant and his wife actively worked with
their real estate agency to try to sell the house. The agency communicated several
offers to purchase the house in “short sales” to the lender, but received no authority to
proceed and each offer was eventually withdrawn. (GE 4 at 34-37.) Finally, the agency
assigned a “short sale” specialist to work with Applicant’s property. In late July 2008, he
received, and forwarded to the lender, a signed offer to purchase the property for
$205,000. The agent attempted to work with the lender to obtain approval for the “short
sale” without success until September 2008. The lender, a large national financial
institution with very high exposure due to a large portfolio of bad mortgage loans, was
taken over by another major financial institution around this time. Applicant received
demands for payment in full of his mortgage loans, and the creditor began foreclosure
proceedings against the property. (GE 4 at 36-53, 57-58; AE B; Tr. at 81-82.) 
 On September 29, 2008, Applicant’s house was auctioned in a foreclosure sale.
The new creditor on his loans submitted the high bid, and bought the property from itself
for $149,000. (GE 4 at 54-55; Tr. at 28-30.) I took administrative notice of the section of
State One law known as the Anti-deficiency Act. (See HE II; Tr. at 27-28.) This law
eliminates any remaining deficiency debt after a lien holder sells the collateral real
property securing the loan. While it remains unresolved whether such a sale would
cancel the debt represented by the second mortgage/home equity line of credit,
Department Counsel agreed that it clearly applied to the first mortgage, and the sale of
the property fully resolved the debt alleged in SOR ¶ 1.b. Applicant’s two most recent
credit reports reflect a zero balance owed on this debt. (GE 3 at 4; GE 5 at 1; GE 6 at 2;
Tr. at 27-30, 114-117.)
Applicant’s creditor transferred his home equity loan/second mortgage debt to a
collection agency. Applicant consulted with an attorney concerning available options for
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resolving this debt during early 2009. The attorney advised him that the debt could be
fully discharged through a bankruptcy proceeding, but Applicant wanted to repay as
much of this loan as he could rather than avoid it. From March through May 2009, he
negotiated with the collection agency. On April 28, 2009, they reached an agreement
that he could fully satisfy this debt through a one-time payment of $23,690. Applicant
took $5,490 from his savings account, obtained a $9,000 signature loan from his credit
union, and took a cash advance of $8,200 on a credit card to obtain the funds needed to
pay this debt. On May 23, 2009, Applicant’s credit union paid the agreed amount to the
collection agency through wire transfer. (AR at 1-2, 6, 9-14; Tr. at 89-92.)
Applicant submitted budget documents demonstrating that he and his wife are
living within their means, and can afford to make the payments on his credit card debt
and signature loan while still maintaining a monthly income surplus of more than $500.
Applicant has not incurred any delinquent debt other than the two loans discussed
above for the purchase of the home in California. He and his wife have no intention of
buying another home. (AR at 15-18; Tr. at 92-104.) 
 
Applicant’s two supervisors testified to his excellent work performance,
trustworthiness, and reliability. They both have long experience working with classified
information, and trust Applicant to safeguard such information and comply fully with
security procedures. (Tr. at 31-50.) Applicant’s former pastor, who has known him well
since 1998, wrote a letter expressing his high opinion of Applicant’s honesty,
responsibility, commitment and honor. (AE A.) Applicant’s testimony and demeanor
during the hearing reflected candor and sincerity in his desire and intent to avoid future
financial problems and continue serving the interests of national security with integrity.
Policies
When evaluating an applicant’s suitability for a security clearance, the
administrative judge must consider and apply the revised adjudicative guidelines (AG).
In addition to brief introductory explanations for each guideline, the adjudicative
guidelines list potentially disqualifying conditions and mitigating conditions, which are to
be used in evaluating an applicant’s eligibility for access to classified information.
These guidelines are not inflexible rules of law. Instead, recognizing the
complexities of human behavior, these guidelines are applied in conjunction with the
factors listed in AG ¶ 2, describing the adjudicative process. The administrative judge’s
overarching adjudicative goal is a fair, impartial, and commonsense decision. According
to AG ¶¶ 2(a) and (c), the entire process is a conscientious scrutiny of applicable
guidelines in the context of a number of variables known as the whole-person concept.
The administrative judge must consider all available, reliable information about the
person, past and present, favorable and unfavorable, in making a decision.
The protection of the national security is the paramount consideration. AG ¶ 2(b)
requires that “[a]ny doubt concerning personnel being considered for access to
classified information will be resolved in favor of the national security.” In reaching this
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decision, I have drawn only those conclusions that are reasonable, logical and based on
the evidence contained in the record. Likewise, I have avoided drawing inferences
grounded in mere speculation or conjecture.
Under Directive ¶ E3.1.14, the Government must present evidence to establish
controverted facts alleged in the SOR. Under Directive ¶ E3.1.15, “[t]he applicant is
responsible for presenting witnesses and other evidence to rebut, explain, extenuate, or
mitigate facts admitted by the applicant or proven by Department Counsel, and has the
ultimate burden of persuasion as to obtaining a favorable clearance decision.” Section 7
of Executive Order 10865 provides, “[a]ny determination under this order adverse to an
applicant shall be a determination in terms of the national interest and shall in no sense
be a determination as to the loyalty of the applicant concerned.” 
A person applying for access to classified information seeks to enter into a
fiduciary relationship with the Government predicated upon trust and confidence. This
relationship transcends normal duty hours and endures throughout off-duty hours. The
Government reposes a high degree of trust and confidence in individuals to whom it
grants access to classified information. Decisions include, by necessity, consideration of
the possible risk that the applicant may deliberately or inadvertently fail to protect or
safeguard classified information. Such decisions entail a certain degree of legally
permissible extrapolation as to potential, rather than actual, risk of compromise of
classified information.
Analysis
Guideline F, Financial Considerations
AG ¶ 18 expresses the security concern pertaining to financial considerations:
Failure or inability to live within one's means, satisfy debts, and meet
financial obligations may indicate poor self-control, lack of judgment, or
unwillingness to abide by rules and regulations, all of which can raise
questions about an individual's reliability, trustworthiness and ability to
protect classified information. An individual who is financially over-
extended is at risk of having to engage in illegal acts to generate funds.
Compulsive gambling is a concern as it may lead to financial crimes
including espionage. Affluence that cannot be explained by known sources
of income is also a security concern. It may indicate proceeds from
financially profitable criminal acts.
AG ¶ 19 describes conditions that could raise a security concern and may be
disqualifying. Department Counsel argued for the applicability of two of these potentially
disqualifying conditions in this case: (a) “inability or unwillingness to satisfy debts;” and
(c) “a history of not meeting financial obligations.” (Tr. at 112.) 
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Applicant purchased a home that he could afford in 2004. However, he was laid
off about eight months later through no fault of his own. He worked diligently to find new
work, but that required him to relocate to Florida due to a deteriorating job market. After
a year, he was transferred to a more permanent position in the Northwest, and he tried
to sell or rent his house so his family could join him. Eventually, family separation was
no longer tenable and his wife and children moved north to join him, leaving the home
vacant. He continued to make payments on both mortgage loans for eight more months,
until he could no longer afford to do so in November 2007. At that point, he was unable
to satisfy those two debts, raising potential security concerns under AG ¶ 19(a). He was
subsequently able to satisfy the first mortgage through the lender’s repossession of the
property in a foreclosure sale in September 2008. He then negotiated a settlement of
the second loan with the collection agency, which he paid in May 2009. He lives easily
within his means, paid all of his other debts throughout the time in question, and is no
longer unable or unwilling to satisfy any debts. 
This 18-month period when Applicant’s mortgage loans were in default
constitutes a relatively brief, and minor, history of not meeting financial obligations. The
circumstances under which it arose were not his fault, and neither support concerns
about poor self-control, lack of judgment, or unwillingness to abide by rules and
regulations, nor raise questions about his reliability, trustworthiness, and ability to
protect classified information. AG ¶ 19(c) was minimally established in this case.
AG ¶ 20 provides conditions that could mitigate security concerns arising from
the foregoing financial considerations. Potentially applicable mitigating conditions are:
(a) the behavior happened so long ago, was so infrequent, or occurred
under such circumstances that it is unlikely to recur and does not cast
doubt on the individual's current reliability, trustworthiness, or good
judgment;
(b) the conditions that resulted in the financial problem were largely
beyond the person's control (e.g., loss of employment, a business
downturn, unexpected medical emergency, or a death, divorce or
separation), and the individual acted responsibly under the circumstances;
(c) the person has received or is receiving counseling for the problem
and/or there are clear indications that the problem is being resolved or is
under control;
(d) the individual initiated a good-faith effort to repay overdue creditors or
otherwise resolve debts; and
(e) the individual has a reasonable basis to dispute the legitimacy of the
past-due debt which is the cause of the problem and provides
documented proof to substantiate the basis of the dispute or provides
evidence of actions to resolve the issue.
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Applicant established mitigation under AG ¶ 20(a) because his inability to sell or
rent his home in a depressed real estate market, combined with the necessity to move
for employment and to reunite the family to care for their special-needs son, were one-
time events. He has stable, long-term employment and no intention to buy another
house. He responded to these challenges in a most responsible manner, and kept his
creditor informed and involved in his attempts to resolve the debts. The problems he
confronted and resolved were not attributable to his conduct, and do not cast any doubt
on his current reliability, trustworthiness, or good judgment.
Mitigation under AG ¶ 20(b) was also clearly established. Applicant left Navy
housing when he retired, and bought a home he could afford. He was laid off when the
company he joined lost the contract under which he worked, and he could find no other
local employment at the beginning of the big economic downturn. The real estate
market subsequently and unexpectedly crashed, making his home impossible to sell or
rent despite vigorous efforts to do so by Applicant and his wife. As noted above, he kept
his lender, his supervisor, and his security manager informed of the pending inability to
continue paying the mortgage loans, and acted as responsibly as possible under the
circumstances. 
Applicant engaged both real estate specialists and an attorney to counsel him on
options to best resolve his mortgage debt problems. The creditor chose to disregard the
“short sale” offer arranged by Applicant and his real estate agent that would have paid
them $205,000. Instead, the creditor bought the property from itself as the high bidder in
a foreclosure auction for $149,000. By this foreclosure action, the creditor knowingly
voided any remaining deficiency debt, and has since reported a zero balance due on
the loan to the credit bureaus. Applicant rejected the bankruptcy option suggested by
his attorney because he wanted to pay his creditors as best he could. He actively
negotiated a mutually agreeable payment with the collection agency to which his second
loan had been transferred, and paid it in full. Thus, both debts that initially gave rise to
some security concerns have been fully resolved, and Applicant has no other delinquent
debt. He is also living within his means and is highly unlikely to incur new delinquencies.
Any remaining security concerns are thus fully mitigated under AG ¶¶ 20(c) and (d).
Applicant did not dispute either of his former delinquencies under AG ¶ 20(e), and in
fact admitted that they were valid debts. 
Whole-Person Concept
Under the whole-person concept, the administrative judge must evaluate an
applicant’s eligibility for a security clearance by considering the totality of the applicant’s
conduct and all relevant circumstances. The administrative judge should consider the
nine adjudicative process factors listed at AG ¶ 2(a): 
(1) the nature, extent, and seriousness of the conduct; (2) the
circumstances surrounding the conduct, to include knowledgeable
participation; (3) the frequency and recency of the conduct; (4) the
individual’s age and maturity at the time of the conduct; (5) the extent to
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which participation is voluntary; (6) the presence or absence of
rehabilitation and other permanent behavioral changes; (7) the motivation
for the conduct; (8) the potential for pressure, coercion, exploitation, or
duress; and (9) the likelihood of continuation or recurrence. 
Under AG ¶ 2(c), the ultimate determination of whether to grant eligibility for a security
clearance must be an overall commonsense judgment based upon careful consideration
of the applicable guidelines and the whole-person concept. 
I considered the potentially disqualifying and mitigating conditions in light of all
the pertinent facts and circumstances surrounding this case. Applicant’s conduct of
security concern was falling behind on two mortgage loans for reasons largely beyond
his control, and to which he responded in an engaged and responsible manner. Both
debts are now fully resolved, and new delinquencies are highly unlikely. Applicant is a
mature and responsible individual, with a long track record of excellent performance
while holding a very high level security clearance. He is now free of home ownership
and mortgage obligations, and intends to remain that way. Any potential for pressure,
coercion, exploitation, or duress has been fully alleviated by his resolution of the former
debts. 
Applicant fully mitigated security concerns arising from his brief history of failing
to meet financial obligations, and his temporary inability to pay his delinquent mortgage
debts. The record generates significant confidence, and no doubts, as to his present
eligibility and suitability for a security clearance. 
Formal Findings
Formal findings for or against Applicant on the allegations set forth in the SOR,
as required by ¶ E3.1.25 of Enclosure 3 of the Directive, are:
Paragraph 1, Guideline F: FOR APPLICANT
Subparagraph 1.a: For Applicant
Subparagraph 1.b: For Applicant
Conclusion
In light of all of the circumstances presented by the record in this case, it is
clearly consistent with the interests of national security to grant Applicant eligibility for a
security clearance. Eligibility for access to classified information is granted.
                                  
DAVID M. WHITE
Administrative Judge