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                          DEPARTMENT OF DEFENSE    
         DEFENSE OFFICE OF HEARINGS AND APPEALS 
           
             
 
 
In the matter of: ) 
 ) 
  -------------------------- )     ISCR Case No. 09-04727 
 SSN: ------------------ ) 
 ) 
Applicant for Security Clearance ) 
 
 
Appearances 
 
For Government: Candace L. Garcia, Esquire, Department Counsel 
For Applicant: Pro se 
 
 
 
______________ 
 
Decision 
______________ 
 
 
MATCHINSKI, Elizabeth M., Administrative Judge: 
 
Applicant was unable to make his monthly payments on his mortgage loans in 
2008, when he was unemployed. He resolved the debts through a short sale of his 
previous residence in April 2010. Clearance granted. 
 
Statement of the Case 
 
 On February 26, 2010, the Defense Office of Hearings and Appeals (DOHA) 
issued to Applicant a statement of reasons (SOR) detailing the security concerns under 
Guideline F, Financial Considerations, that provided the basis for its preliminary 
decision to deny him eligibility for a security clearance and to refer the matter to an 
administrative judge. 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); Department of Defense Regulation 
5200.2-R, Personnel Security Program (January 1987) as amended; and the 
 
 
 
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adjudicative guidelines (AG) effective within the Department of Defense on September 
1, 2006. 
 
 On March 2, 2010, Applicant answered the SOR allegations and requested a 
hearing. The case was assigned to me on April 30, 2010, to conduct a hearing and to 
determine whether it is clearly consistent with the national interest to grant Applicant 
eligibility for a security clearance. With the agreement of the parties, on April 27, 2010, I 
scheduled a hearing for May 26, 2010. 
 
 I convened the hearing as scheduled. Seven Government exhibits (Ex. 1-7) and 
nine Applicant exhibits (Ex. A-I) were admitted into evidence without objection, and 
Applicant testified, as reflected in a transcript (Tr.) received on June 4, 2010. 
 
 At Applicant‟s request, I held the record open until June 9, 2010, for him to 
submit additional documents. On June 8, 2010, Applicant submitted three exhibits (Ex. 
J-L), which were entered without any objection from the Government. 
 
Findings of Fact 
 
 The SOR alleged under Guideline F, Financial Considerations, that Applicant 
was past due $27,966 on a mortgage in foreclosure with a $319,960 balance (SOR 1.a), 
and that he owed $30,490 on a charged-off second mortgage (SOR 1.b). Applicant 
admitted that his primary mortgage was in foreclosure and that his second mortgage 
had been charged off. However, both lenders had approved a short sale with a closing 
date in April 2010, and the holder of the second mortgage agreed to accept $5,000 to 
release the lien and the debt. After considering the pleadings, exhibits, and transcript, I 
make the following factual findings. 
 
 Applicant is a 35-year-old technical writer, who has worked for his current 
employer, a defense contractor, since December 2008. (Ex. 1.) He seeks a secret-level 
security clearance, never having previously held a security clearance. 
 
Applicant and his spouse married in August 1998, when he was still in college. 
After earning his bachelor‟s degree, Applicant went to work in medical device sales and 
marketing in his spouse‟s home state in September 2000. (Ex. 1.) 
 
In July 2004, Applicant and his spouse purchased a home, taking on a primary 
mortgage of $233,600 and a second mortgage of $58,400. (Ex. 5; Tr. 37.) They paid 
their mortgage loans on time. In June 2006, Applicant was laid off. In August 2006, he 
began working as a national product specialist for a medical device manufacturer. In 
September 2006, Applicant and his spouse‟s home loans were transferred to new 
lenders with balances of $320,000 (SOR 1.a) on the first mortgage and $29,000 (SOR 
1.b) on the second mortgage. (Ex. 2, 5.) 
 
After the birth of their son in February 2007, Applicant‟s spouse was placed on 
medical disability. (Ex. 2.) They managed to make their monthly payments on several 
 
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credit card accounts on Applicant‟s income, and on her disability pay, which was 
comparable to her previous employment income. (Tr. 43.) They relied on consumer 
credit for his travel expenses, which were mostly reimbursed, but also for living 
expenses and car repairs. (Tr. 66-67.) In August 2007, Applicant financed a car through 
a $25,643 loan, to be repaid at $475 per month. (Ex. 5, 6.) In December 2007, Applicant 
switched employers to a start-up medical device manufacturer closer to their home. (Ex. 
1.) He had been commuting 200 miles round trip to his previous job. (Tr. 37.)  
 
Applicant and his spouse began to fall behind on some consumer credit card 
accounts in 2008. (Ex. 5.) They also failed to pay their primary mortgage in March 2008, 
but paid extra in April and May 2008 to bring their loan current. (Ex. 2; Tr. 41-42.) Then 
in July 2008, Applicant resigned from his job with no immediate employment prospects. 
He had been spending 70 to 80 hours a week at work and wanted more time with his 
family. (Tr. 37-38, 46.) Applicant applied for work as well as to graduate schools to 
pursue an MBA degree. He did not anticipate that he would have problems finding a job, 
but he contacted his mortgage lenders immediately out of concern that he would have 
difficulty paying the mortgage loans. He and his spouse were paying on several credit 
card accounts and on a vehicle, and they had no significant savings. (Tr. 50-51, 54-55.) 
In August 2008, his spouse began working for a local school system, having accepted 
an offer of employment that May. (Tr. 42.) Yet with Applicant still out of work, they took 
the advice of their mortgage lenders to pursue a short sale of their home.1 They stopped 
paying on their mortgage loans that summer, and in September 2008, they listed their 
home with a realtor who specialized in short sales. (Ex. 2, F; Tr. 36, 39-41.) 
 
In late December 2008, Applicant and his family relocated across the country for 
his job with his current employer. Applicant‟s spouse worked until the day they left, and 
she was paid unemployment compensation until March 2009. (Tr. 69.) 
 
By early January 2009, Applicant and his spouse were $14,931 past due on their 
primary mortgage and $1,605 past due on their second mortgage on their previous 
residence. (Ex. 5.) In January 2009, foreclosure proceedings were initiated on the 
primary mortgage (Ex. 5, D.), although the lender suspended the process pending a 
successful short sale. (Ex. 2.) Over the next year, Applicant and his spouse had four 
offers for purchase that fell through on the property. (Tr. 36, 40.) 
 
On March 9, 2009, Applicant applied for a security clearance for his employment. 
He disclosed that the mortgages on his previous residence were delinquent, but that he 
and his spouse had recently accepted an offer from a buyer and they were moving 
forward with both mortgage companies to finalize the sale. (Ex. 1.) As of an April 14, 
2009 interview with a government investigator, they had an offer of $150,000 for the 
property (Ex. 2.), but the short sale was subsequently not approved by the primary 
mortgagor. (Tr. 40.) 
                                            
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 Applicant explained that they had savings, but  that after going through all of their bills with their primary 
lender to determine whether they could avoid foreclosure or a short sale, they could afford to send the 
lender only a couple of hundred. In the mortgagor‟s opinion, “it was more important that they use that to 
continue to live and continue to successfully look for a job. . . .” (Tr. 50.) 
 
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In July 2009, Applicant and his spouse‟s second mortgage, which had a 
$28,592.46 balance, was transferred for collection to a company that specialized in the 
recovery and rehabilitation of debt. (Ex. E.) In late February 2010, the current loan 
servicer for their primary mortgage agreed to accept $158,000 for the property in a short 
sale contingent on a closing date no later than April 11, 2010. Under the terms of an 
“AS IS” short sale, the lender was to receive no less than $141,603.20. Applicant and 
his spouse were informed that the note holder could pursue a deficiency judgment for 
the difference between the payment received and the total balance due on the loan. 
(Ex. A.) 
 
On March 8, 2010, Applicant and his spouse paid the loan servicer of the second 
mortgage $2,000 in partial settlement of the delinquent loan (SOR 1.b). (Ex. L; Tr. 44.) 
The debt would be settled and a lien released provided they paid an additional $3,000 in 
the next three weeks. (Ex. B.) On April 6, 2010, the house sold for $158,679.91. The 
primary mortgagor took $141,603.20 in settlement of its loan (SOR 1.a) and $3,000 was 
paid in settlement of the second mortgage (SOR 1.b). (Ex. C, F; Tr. 45.) 
 
As of September 2009, Applicant and his spouse were paying some of their 
credit card accounts under modified terms that they could afford. (Ex. 4, 6; Tr. 55.) They 
were paying $1,120 per month in debt payments, primarily credit cards. (Ex. 4.) As of 
November 2009, Applicant‟s credit report showed outstanding credit card balances 
totaling about $27,493, which included a couple of accounts on which he was an 
authorized user. (Ex. 6.) Applicant was 30 days past due in his car payment in 
December 2009 and January 2010 because his spouse had no income over the 
holidays. (Ex. F; Tr. 56, 64.) 
 
As of May 2010, Applicant was not behind in his credit card payments or their 
rent of $1,800 per month. (Ex. 4; Tr. 44.) He owed about $12,969 in credit card 
balances in his name. (Ex. 6, 7, F; Tr. 65-66.) Applicant and his spouse plan to pay off 
their credit card balances to where they have only or two open credit card accounts 
each for emergencies. (Tr. 66.) Available credit reports indicate Applicant last opened a 
credit card account in March 2007. (Ex. 5-7, F.) They had about $2,500 in savings as of 
May 2010. (Tr. 72.) 
 
 Since August 2009, Applicant has been enrolled in a part-time MBA program. 
(Ex. I; Tr. 34.) He owes about $20,126 in deferred federal student loan debt for his 
master‟s program and $32,790 in deferred student loan debt for his undergraduate 
degree. (Ex. 5, 6, F; Tr. 57-59.) Applicant‟s graduate tuition is subject to reimbursement 
by his employer provided he earns passing grades. (Tr. 58.)  
 
In March 2010, Applicant was given an individual achievement award by his 
employer for his outstanding job performance. (Ex. H.) As of May 2010, his annual 
salary was $68,140.80. (Ex. G.) Applicant‟s spouse has been employed as a certified 
occupational therapy assistant since March 2009.  (Ex. 2; Tr. 52.) She earns around 
$2,800 per month on a contract basis providing part-time rehabilitation services for local 
schools. (Tr. 43-44, 51.) 
 
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Policies 
 
 The U.S. Supreme Court has recognized the substantial discretion the Executive 
Branch has in regulating access to information pertaining to national security, 
emphasizing that “no one has a „right‟ to a security clearance.” Department of the Navy 
v. Egan, 484 U.S. 518, 528 (1988). When evaluating an applicant‟s suitability for a 
security clearance, the administrative judge must consider the adjudicative guidelines 
(AG). In addition to brief introductory explanations for each guideline, the adjudicative 
guidelines list potentially disqualifying conditions and mitigating conditions, which are 
required to be considered 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 the adjudicative process. The administrative judge‟s overall arching 
adjudicative goal is a fair, impartial, and commonsense decision. According to AG ¶ 
2(c), the entire process is a conscientious scrutiny 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 national security.” In reaching this 
decision, I have drawn only those conclusions that reasonable, logical, and based on 
the evidence of record. Under Directive ¶ E3.1.14, the Government must present 
evidence to establish controverted facts alleged in the SOR. Under Directive ¶ E3.1.15, 
the Applicant is responsible for presenting “witnesses and other evidence to rebut, 
explain, extenuate, or mitigate facts admitted by applicant or proven by Department 
Counsel. . . .” The Applicant has the ultimate burden of persuasion to obtain a favorable 
security decision. 
 
 A person who seeks access to classified information enters 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 the Applicant may deliberately or inadvertently fail to safeguard 
sensitive information. Such decisions entail a certain degree of legally permissible 
extrapolation as to potential, rather than actual, risk of compromise of classified 
information. Section 7 of Executive Order (EO) 10865 provides that decisions shall be 
“in terms of the national interest and shall in no sense be a determination as to the 
loyalty of the applicant concerned.” See also EO 12968, Section 3.1(b) (listing multiple 
prerequisites for access to classified or sensitive information). 
 
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Analysis 
 
Guideline F, Financial Considerations 
 
 The security concern about finances is set out in AG ¶ 18: 
 
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 
overextended is at risk of having to engage in illegal acts to generate 
funds. 
 
 Due in part to accumulated credit card debt, Applicant and his spouse were 
financially overextended to where they could not make their mortgage payments when 
he resigned from his job in July 2008. On the advice of their primary lender, they elected 
to pursue a short sale of their home. They stopped paying on their mortgage loans in 
the summer of 2008, and in January 2009 their primary lender initiated foreclosure. 
Potentially disqualifying conditions AG ¶ 19(a) (“inability or unwillingness to satisfy 
debts”), AG 19(c) (“a history of not meeting financial obligations”), and AG ¶ 19(e) 
(“consistent spending beyond one‟s means, which may be indicated by excessive 
indebtedness, significant negative cash flow, high debt-to-income ratio, and/or other 
financial analysis”) apply.  
 
 AG ¶ 20(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,” cannot reasonably 
apply, given the recent mortgage defaults. It is also difficult to apply AG ¶ 20(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.” Applicant lacked control over the job prospects in his area, 
and he may not have anticipated difficulty in securing employment. That said, he 
voluntarily resigned from his job in July 2008 when he and his spouse, who had 
accepted a job but had not yet returned to work, had several outstanding credit card 
debts, a $475 monthly car payment, and no significant savings. Applicant bears primary 
responsibility for the financial difficulties that he and his spouse faced in 2008. 
 
 However, AG ¶ 20(d), “the individual initiated a good-faith effort to repay overdue 
creditors or otherwise resolve debts,” applies. When he left his job in July 2008, 
Applicant notified his primary mortgagor. Together they reviewed Applicant and his 
spouse‟s expenses to see whether they could pay something toward their first 
mortgage. Advised by the lender to pursue a short sale of their home, Applicant and his 
spouse then acted fairly expeditiously in listing their property for sale with a realtor 
experienced in short sales. The delay in selling the home was due to market conditions 
 
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and other factors not within Applicant‟s control. Furthermore, with the April 2010 
settlement of the two mortgage loans, albeit for less than their full balances, Applicant 
also satisfies AG ¶ 20(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,” as to the financial concerns alleged in the SOR. 
 
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 conduct 
and all the relevant circumstances in light of the nine adjudicative process factors listed 
at AG ¶ 2(a).2 Settlement of the two mortgage loans at issue does not fully address the 
financial judgment concerns in this case. Applicant and his spouse relied heavily on 
consumer credit cards in the past, as evidenced by the $27,493 in outstanding balances 
on Applicant‟s credit record as of November 2009. Their debt was sizeable enough that 
his mortgagor told him to pursue a short sale of his home. As of May 2010, Applicant is 
responsible for $12,969 in credit card debt in his name, not including the accounts on 
which he is an authorized user. 
 
 However, Applicant need not be debt free before he can be granted access. 
Applicant and his spouse have been timely in their debt payments since February 2010 
except for the mortgages, which have been resolved. He expressed a credible intent to 
pay down his credit card balances with the goal of eliminating all but one or two 
accounts for emergencies. His income appears to be sufficient to make those 
payments. He has acted responsibly in contacting his creditors when finances were tight 
in the past, and in negotiating affordable repayment terms with some of his creditors. 
While his rent of $1,800 per month is fairly high, there is no evidence that he has fallen 
behind in his rent. His financial situation has improved sufficiently to where it no longer 
presents an unacceptable security risk. 
 
Formal Findings 
 
 Formal findings for or against Applicant on the allegations set forth in the SOR, 
as required by section E3.1.25 of Enclosure 3 of the Directive, are: 
 
 Paragraph 1, Guideline F: FOR APPLICANT 
                                            
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The factors under AG ¶ 2(a) are: 
 
(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 
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.  
 
 
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 Subparagraph 1.a:  For Applicant 
 Subparagraph 1.b:  For Applicant  
 
Conclusion 
  
 In light of the record in this case, it is clearly consistent with the national interest 
to grant Applicant eligibility for a security clearance. Eligibility for access to classified 
information is granted. 
 
 
  
Elizabeth M. Matchinski 
Administrative Judge