DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
)
                                                                      )                                                          
           ----------------------------------                  )     ISCR  Case No.   09-07338          
                                                               )
)
Applicant for Security Clearance )
Appearances
For Government: Daniel Crowley, Esquire, Department Counsel
For Applicant: Matthew J. Werner, Esquire
______________
 Decision
______________
WESLEY, Roger C., Administrative Judge:
Based upon a review of the pleadings, exhibits, and testimony, I conclude that
Applicant mitigated the security concerns regarding his finances. Eligibility for access to
classified information is granted. 
 
Statement of Case
On May 21, 2010, the Defense Office of Hearings and Appeals (DOHA) issued a
Statement of Reasons (SOR) detailing reasons why DOHA could not make the
preliminary affirmative determination of eligibility for granting a security clearance, and
DOHA recommended referral to an administrative judge to determine whether a security
clearance should be granted, continued, denied, or revoked. 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 Adjudicative Guidelines (AGs) implemented by the
Department of Defense on September 1, 2006. 
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Applicant responded to the SOR on July 14, 2010, and requested a hearing. The
case was assigned to me on September 27, 2010, and was scheduled for hearing on
October 28, 2010. The hearing was convened on that date. At hearing, the
Government's case consisted of 10 exhibits (GEs 1-10). Applicant relied on four
witnesses (including himself) and 16 exhibits (AEs A-K, M, T, and X-Z). The transcript
(Tr.) was received on November 5, 2010.
Procedural Rulings
      
Before the close of the hearing, Appellant requested leave to supplement the
record with a documented settlement arrangement with the holder of the second trust
deed of trust on the EP property; identification of the entity with a deficiency claim in
connection with the EP first trust deed foreclosure, and explore settlement
arrangements with the remaining unresolved creditors. For good cause shown,
Applicant was granted 30 days to supplement the record. Department Counsel was
afforded seven days to respond. Within the time permitted, Applicant supplemented the
record with the following: (a) a letter from a bankruptcy attorney counseling Applicant on
his Chapter 13 petition (AE A-3); (b) compilation of documents covering the EP
foreclosure and sale in February 2008 (AE C-4); an Applicant letter to the lender’s agent
inquiring about any deficiency balance (AE C-5); compilation of documents concerning
the foreclosure of the first trust deed on the HC property (AE D-3); a printout of the EP
lender doing business in another name (AE D-4); Applicant letters to potential creditors
holding claims on the second trust deed covering the HC property (AE E-3); a check for
$2,400 settling the creditor 1.g debt (AE G-3); and a creditor letter confirming the
settlement of the creditor 1.k debt. (AE K-3)
With his submission of his post-hearing exhibits in November 2010, Applicant
requested his first extension to December 28, 2010, to further explore settlement of
potential deficiency claims.  For good cause shown, Applicant was granted an extension
to December 28, 2010 to further supplement the record.
On December 20, 2010, Applicant supplemented the record with a letter of
December 8, 2010 from the law firm representing the second trust deed holder on the
HC property, and confirming the second trust deed holder’s use of another company
name. (AE D-5) Applicant asked for a second extension to January 31, 2011, to
continue his efforts to identify and resolve the two remaining deficiency claims. For good
cause shown, Applicant was granted his second continuance request, this one to
January 31, 2011.  Applicant’s AE D-5 was admitted.
In February 2011, Applicant faxed a copy of his February 2011 letter to the
servicing agent of the first trust deed holder regarding the EP property with an attached
1099-A form. (AE C-6) With this submission, Applicant timely requested a third
extension to February 28, 2011. For good cause shown, Applicant was granted his third
extension request to February 28, 2011.  Applicant’s proposed AE C-6 was admitted.  
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Applicant made a fourth request for an extension on February 28, 2011. He
asked for an extension to April 18, 2011 to identify and resolve potential deficiency
claims with the trust deed holders associated with the EP and HC properties. In March
2011, Department Counsel objected to Applicant’s fourth extension request. Noting
Department Counsel’s objection, I granted Applicant a more limited extension to March
29, 2011 to supplement the record.
On March 29 ,2011, Applicant provided a supplemental letter (AE C-7), in which
he detailed his telephone efforts to contact and attempt to resolve the potential
deficiency claims of his two remaining creditors.  He asked for a continued extension to
April 18, 2011 to further his attempts to identify and resolve the potential deficiency
claims. Department Counsel continued his objection. On April 21, 2011, I granted
Applicant’s extension request and admitted AE C-7 before closing the record without
any additional submissions from Applicant.
Summary of Pleadings
Under Guideline F, Applicant allegedly (a) petitioned for Chapter 13 protections in
January 2007 (dismissed April 2007) and (b) accumulated 10 debts exceeding
$650,000, inclusive of four mortgage-related debts. In his response to the SOR,
Applicant admitted one of the allegations (his Chapter 13 petition and dismissal), but
denied the remaining allegations without explanation. 
                     
Findings of Fact
Applicant is a 43-year-old senior consultant for a defense contractor who seeks a
security clearance. The allegations covered in the SOR and admitted by Applicant are
incorporated and adopted as relevant and material findings. Additional findings follow.
Background
Following an extended courtship, Applicant married his first and only identified
wife in August 1999; he has a daughter from this marriage. (GE 1; Tr. 94-95). He and
his wife each brought one child to the marriage. (GE 2; Tr. 95) Applicant’s wife filed for
divorce in October 2006. 
Applicant and his wife completed a court-approved settlement agreement in
March 2007, and their marriage was dissolved at that time.  See AEs F, G, K, and M; Tr.
94-95. Because of ongoing contentious issues over parenting rights and responsibilities,
their divorce proceedings remain pending. (AEs M, T, and Y; Tr. 121) Currently,
Applicant has primary custody of his eight-year-old daughter. (Tr. 122)
Applicant earned a bachelor of science degree in electrical engineering from an
accredited local university in February 2006 and has been employed by his current
employer as an engineering consultant since August 2003. (GE 2) He has no military
service.
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Applicant’s finances
Following their marriage, Applicant generally relied on his wife to pay the bills and
manage their finances. (Tr. 96) Together, they purchased their first home in June 2001.
(GEs 6, 7, and 10; AE T; Tr. 94-95) They financed their purchase of their home at EP
with a first trust deed of $162,000 with creditor 1.c (GEs 6, 7, and 10); Tr. 94) Credit
reports reflect that Applicant and his wife refinanced their EP home with creditor 1.f in
June 2003 with a $189,000 first trust deed. (GEs 6, 7, and 10) The servicing agent on
this mortgage is listed as creditor 1.c in the SOR. Creditors 1.c and 1.f cover the same
mortgage obligation on the property. See AE C-1.  
In June 2004, Applicant and his wife refinanced their EP property for a second
time. The same 1.c/1.f creditor placed a new first trust deed on the property in the
amount of $213,000. (GEs 6, 7, and 10; AEs C-1 and C-2) 
In April 2005, Applicant and his wife purchased their second home (the HC
property).  They placed a first trust deed on this property with creditor 1.d in the amount
of $224,000. (GEs 6, 7, and 10) At the same time, they arranged for a second trust
deed on the EP property in the amount of $56,000 with the same lender. (GEs 6, 7, and
10)  
After they completed their purchase of the HC property, Applicant and his wife
moved into the HC home and tried to rent out the EP property. (Tr. 96) Faced with a poor
rental market, the EP property “sat empty for maybe six months” (Tr. 96) This
unexpected revenue shortfall required Applicant to pay both the EP mortgage ($1,450 a
month) and the HC mortgages ($2,050 a month) simultaneously without the benefit of
any rental revenue. (Tr. 97) 
After their purchase of the HC property, Applicant continued to rely on his wife to
pay the mortgage accounts and other bills and manage their finances. (Tr. 113)
Unbeknownst to Applicant, his wife did not make payments on the HC property as he
had expected, and Applicant had to borrow funds from his family (around $17,000) to
cure the default in the HC loan. (Tr. 98)  In February 2006, he self-referred himself to a
psychotherapist to explore his family’s financial issues that were troubling him. (AEs T
and Z) Applicant continues to spend considerable time in psychotherapy sessions with
this psychotherapist to discuss his marriage and financial decisions. (AE Z)  
Several months after his wife filed for divorce in October 2006, Applicant received
a notice of foreclosure on the HC property and notification that his EP tenants had
vacated their tenancy. (AE T; Tr. 100) Because of poor resale conditions and the timing
of the foreclosure notices, the use of a short sale mechanism to dispose of the HC
property was not a viable option for him. (Tr. 125-126) Instead, he followed the advice of
his real estate attorney and petitioned for Chapter 13 relief in January 2007. (Tr. 102)
In his Chapter 13 petition, Applicant listed real property located at EP (valued at
$280,000) and HC (valued at $220,000). He listed a first mortgage of $221,006 on the
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HC property with creditor 1.d, a second mortgage of $56,000 on the HC property with
creditor 1.e, and a $216,000 first mortgage on the EP property with creditor 1.c. (GE 4)
Applicant scheduled $31,000 in unsecured non-priority claims (GE 4). Court minutes
note that several creditors objected to Applicant’s proposed plan; whereupon, Applicant
acquiesced with the objecting creditors in April 2007 and proposed filing a motion to
dismiss his petition. (GE 4) Acting on the trustee’s motion in April 2007 to dismiss
Applicant’s petition, the court dismissed his Chapter 13 plan the same month. (GE 7; Tr.
101)  
Applicant and his wife completed a separation agreement in March 2007. See
AEs F, G, K, and M; Tr. 121-122. Under the terms of their separation agreement,
Applicant’s wife accepted all of the rights and responsibilities for the EP property. (AEs
F-1 and M; Tr. 105-106) Applicant, in turn, agreed to make spousal maintenance
payments to his wife in the amount of $1,500 a month. (AE F-1 and M) Applicant’s
attorney who represented Applicant in mediation meetings with his wife opined that these
monthly payments, together with the wife’s own funds from her work, provided more than
enough resources to make the scheduled mortgage payments with creditors 1.c and 1.f
(AE Y) Her assessments are logical and reasonable and warrant acceptance.  
Applicant’s separation agreement also allocated payment responsibility for the
creditor 1.g ($7,244) and creditor 1.k ($2,000) accounts to Applicant’s wife.  See AEs F,
G-2 and K-1; Tr. 115. Applicant’s initial documented inquiries to the creditors did not
produce any written or oral responses. (AEs G-2 and K-1; Tr. 113-120) Applicant
documented his payoffs of the three smaller debts covered by creditors 1.b ($321), 1.h
($579), and 1.i ($115). See AEs B, H, and I; Tr. 113-118. He also provided payment
documentation of the library debt covered by creditor 1.j. (AE J) And in his post-hearing
submissions, he documented his settled payoffs of the two remaining non-real estate
debts covered in the SOR. Applicant’s exhibits G-3 and K-3 document payments in full
satisfaction of monies owed to creditors 1.g and 1.k.   
In May 2007 (just two months after completing his separation agreement with his
wife), the HC property was sold at public auction. (AEs D and T) County records
document that the property was sold to the highest bidder for $238,087. (AE D-1) This
was enough to satisfy the first trustee holder’s interest (AE D-1), but it was not sufficient
to satisfy any of the $56,000 balance remaining on the same creditor’s (creditor 1.e)
second trust deed.  Despite Applicant’s good-faith efforts to identify the creditor currently
holding this account to try to resolve the deficiency balance, he has been unsuccessful.
(AEs C-5 and E-3) Telephonic responses he has received to date from entities
previously associated with this loan used such phrases as “paid off,” “inactive on
system,” “closed August 2007,” “closed and paid off,” and “conveyed” to describe the
status of the HC loan. (AE C-7)
Following his completion of his separation agreement with his wife, Applicant
deferred to his wife to make the necessary mortgage payments on the EP property. Six
months later, he received a notice of foreclosure of the property. (AE 1; Tr. 108) Once he
received the foreclosure notice, he contacted a real estate attorney to explore his options
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on the EP property. (Tr. 108) Advised that it would take $10,000 up front to bring the
mortgage account current and avert a foreclosure by the first trust holder, he declined.
(Tr. 109-110) His wife, who continued to reside in the residence after foreclosure
proceedings were initiated, refused to work out sharing arrangements to cover any
deficiency balance on the property. (AE Y)
Foreclosure proceedings continued on the EP property by the first trustee deed
holder in February 2008 and were reported by Applicant in the incident report he
furnished his employer’s facility clearance officer. (GE 5; Tr. 94, 107) County records
confirm that the EP property was sold at public auction in February 2008 for $199,700.
(AE F-2) This left a deficiency balance owing on the EP first trust deed in the amount of
$36,044. (AE F-2) Applicant’s efforts to identify and resolve this potential deficiency claim
have been unsuccessful to date. Creditor responses to Applicant overtures have
produced no written debt acknowledgments or expressions of interest in working with
Applicant to resolve any potential claims associated with the EP first trust deed
foreclosure. The only substantive written response that Applicant received came from a
former servicing agent of the first trust deed holder who confirmed the sale of the
property back to the beneficial holder of the loan. (AE C-6) Asked whether a cancellation
of debt (Form 1099-C) had been issued, this servicing agent indicated it had not
generated a 2008 1099-C for the loan. Telephonic responses Applicant has received to
date from this servicing agent and its predecessor characterized the account as “closed.”
(AE C-7)
Applicant currently nets around $4,640 a month. (AE X-2; Tr. 122-123) He reports
monthly expenses of $3,897 and a net monthly remainder of $743. (AE X-1) His child
support payments are automatically deducted from his pay checks every month.
Applicant has a 15-year-old vehicle and lives within his means. (AE X-2; Tr. 124) His
landlord reports him to be in good standing with his rent. (AE X-3)   
Endorsements
Applicant is well regarded by his employer’s managers and colleagues as an
information systems administrator. (Tr. 56-64) They consider him very skilled, diligent,
and trustworthy in his consulting assignments. Applicant’s friend of over 20 years
described Applicant as highly responsible with his finances. (Tr. 82-89) She expressed
familiarity with Applicant’s ex-wife and considered her to be extravagant with money. (Tr.
84-85)  
Policies
         The AGs list guidelines to be used by administrative judges in the decision-making
process covering DOHA cases. These guidelines take into account factors that could
create a potential conflict of interest for the individual applicant, as well as considerations
that could affect the individual’s reliability, trustworthiness, and ability to protect classified
information. 
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These guidelines include "[c]onditions that could raise a security concern and may
be disqualifying” (disqualifying conditions), if any, and many of the "[c]onditions that
could mitigate security concerns.” They must be considered before deciding whether or
not a security clearance should be granted, continued, revoked, or denied. The
guidelines do not require administrative judges to place exclusive reliance on the
enumerated disqualifying and mitigating conditions in the guidelines in arriving at a
decision. Each of the guidelines is to be evaluated in the context of the whole person in
accordance with AG ¶ 2(c) 
In addition to the relevant AGs, administrative judges must take into account the
pertinent considerations for assessing extenuation and mitigation set forth in AG ¶ 2(a)
of the revised AGs, which are intended to assist the judges in reaching a fair and
impartial commonsense decision based upon a careful consideration of the pertinent
guidelines within the context of the whole person. The adjudicative process is designed
to examine a sufficient period of an applicant’s life to enable predictive judgments to be
made about whether the applicant is an acceptable security risk. 
When evaluating an applicant’s conduct, the relevant guidelines are to be
considered together with the following AG ¶ 2(a) factors: 
(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 chances; (7) the
motivation for the conduct; (8) the potential for pressure, coercion,
exploitation, or duress; and (9) the likelihood of continuation or
recurrence.
       Viewing the issues raised and evidence as a whole, the following adjudication policy
factors are pertinent herein:
Financial Considerations
The Concern: “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.  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.” 
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Adjudication Guidelines, ¶ 18.
Burden of Proof
By virtue of the precepts framed by the AGs, a decision to grant or continue an
applicant's security clearance may be made only upon a threshold finding that to do so is
clearly consistent with the national interest. Because the Directive requires
Administrative Judges to make a common sense appraisal of the evidence accumulated
in the record, the ultimate determination of an applicant's eligibility for a security
clearance depends, in large part, on the relevance and materiality of that evidence.  As
with all adversary proceedings, the Judge may draw only those inferences which have a
reasonable and logical basis from the evidence of record.  Conversely, the Judge cannot
draw factual inferences that are grounded on speculation or conjecture.
The Government's initial burden is twofold: (1) It must prove any controverted
facts alleged in the Statement of Reasons and (2) it must demonstrate that the facts
proven have a material bearing  to the applicant's eligibility to obtain or maintain a
security clearance.  The required showing of material bearing, however, does not require
the Government to affirmatively demonstrate that the applicant has actually mishandled
or abused classified information before it can deny or revoke a security clearance.
Rather, consideration must take account of cognizable risks that an applicant may
deliberately or inadvertently fail to safeguard classified information.
Once the Government meets its initial burden of proof of establishing admitted or
controverted facts, the burden of persuasion shifts to the applicant for the purpose of
establishing his or her security worthiness through evidence of refutation, extenuation or
mitigation of the Government's case.
Analysis  
Applicant is a well regarded engineering consultant  for a defense contractor who
financed two homes with his wife following their marriage in 1999. Faced with foreclosure
notices from the lenders holding trust deeds on both of his homes after his wife failed to
pay the mortgage obligations on one of the properties during their marriage and the
mortgage on the second property she held for herself following their marriage dissolution
in March 2007, Applicant made concerted efforts to avert foreclosures of both properties,
but without success. All of the remaining debts covered in the SOR have since been paid
by Applicant.
By defaulting in their three mortgages (i.e., the first and second mortgages on the
HC property and the first mortgage on the EP property, Applicant and his wife exposed
themselves to non-judicial foreclosure and ensuing deficiency claims by the first and
second trust deed holders. Without resolution these two major mortgage balances still
owing on the two outstanding debts with creditors 1.c and 1.e, respectively, create the
potential for deficiency liability and raise security concerns over the risks of future
enforcement actions by the senior and junior mortgage holders, or their assignees, on
these two foreclosed properties.  
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In May 2007, the first mortgagee on the HP property (creditor 1.d) foreclosed on its
first mortgage and sold the property at the scheduled foreclosure sale for $238,600. While
the sale produced enough proceeds to satisfy the first trust deed holder’s mortgage debt,
it did not generate enough to satisfy the second trust deed holder’s outstanding second
trust deed. As a consequence, the HP second mortgagee was left with no security in the
property and became a legally-characterized sold-out junior lien holder with a potential
deficiency claim against Applicant.
Months later (in February 2008), creditor 1.c foreclosed on its first trust deed
interest in the EP property. The sale produced only $199,700, well short of the $235,000
necessary to satisfy the security interests of the first trust deed holder. (creditor 1.c) As a
result, the sale left creditor 1.c with a deficiency balance owing in the amount of $36,044.
Potential deficiency claims of creditors 1.c and 1.e could not be practically resolved by
short sales or loan modifications and prompted Applicant to petition for Chapter 13 relief
in November 2006 after his wife abruptly separated and ceased paying on any of the
mortgages.
       Security concerns are raised under the financial considerations guideline of the AGs
where the individual applicant is so financially overextended as to indicate poor self-
control, lack of judgment, or unwillingness to abide by rules and regulations, which can
raise questions about the individual’s reliability, trustworthiness, and ability to protect
classified information, and place the person at risk of having to engage in illegal acts to
generate funds. Applicant’s accumulation of delinquent debts and his past inability to pay
these debts warrant the application of two of the disqualifying conditions (DC) of the
Guidelines¶ DC 19(a), inability or unwillingness to satisfy debts, and ¶19(c) “a history of
not meeting financial obligations.”
Applicant’s debts are attributable in part to his wife’s abandoning her financial
responsibilities during and after their separation and leaving Applicant to essentially fend
for himself. By the time he was alerted to the major loan defaults on both of his
mortgages, it was too late to explore short sale options or make any repayment
arrangements with the lenders that did not involve full payment of the delinquent
balances. Foreclosure of both properties became unavoidable for Applicant.
Because Applicant’s state does not have an anti-deficiency statute, both senior
and junior mortgagees (i.e., creditors 1.c and 1.e) are entitled to pursue deficiency claims
against Applicant, provided they do so within the time allowances covered by the state’s
relevant statute of limitations for written contracts and claims involving real estate. In
Applicant’s state, the pertinent statute of limitations is six years (C Rev. Stat. ¶ 13-80-102,
et seq.) Between them, these two sold-out senior and junior mortgagees hold deficiency
claims that have over two years to run and encompass claims exceeding $90,000 in the
aggregate. 
Once the foreclosed property at issue in a particular case is sold at public auction
for less than the value necessary to cover the claims of the junior mortgage holders, the
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creditors may seek deficiency relief through independent court actions within six-year
windows. Whether creditors 1.c and 1.e will ever institute suits to recover deficiency
balances owed to them is still uncertain at this time. But the stakes and risks associated
with each junior mortgagee seeking judgment relief against Applicant are still
considerable and cannot be fully discounted under current market conditions in
Applicant’s local region and state.
Based on his evidentiary showing, extenuating circumstances certainly contributed
to Applicant’s inability to resolve his mortgage obligations in his community.  A confluence
of heavy mortgage debts on both properties, overextended personal finances, failure of
Applicant’s spouse to discharge her payment responsibilities during their marriage and in
accordance with their settlement agreement, poor real estate sales conditions, and
insufficient resources to withstand his wife’s breaches, hampered his ability to cure the
loan defaults on the two properties and avert foreclosures. Available to Applicant is ¶ MC
20(b) of the financial considerations guideline, “the conditions that resulted in the behavior
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 responsibility.” While some judgment problems persist over Applicant’s taking on so
much debt with his joint purchases of both homes without more cash reserves at the
outset, his actions are considerably extenuated by unforeseen economic and marital
conditions and his inability to cure the defaults once foreclosure proceedings were
already under way with the properties. 
In recognition of the considerable good-faith efforts Applicant made to resolve his
mortgage debts and his smaller debts, mitigation credit is available to him. All of the
smaller debts have since been paid (viz., creditors 1.b and creditors 1,g through 1.k). And
most importantly, Applicant has mounted major communication initiatives with the
creditors last reported to be holding potential deficiency claims, and has not received any
encouraging responses to his persistent inquires.  The most he has been able to learn is
the identity of a firm doing business in behalf of the second trust deed holder on the HC
property and that he does not owe any money to one of the servicing agents of the EP
property. None of his contacts have led to any productive settlement discussions.  
Applicant’s use of financial counseling and good-faith repayment efforts to date
certainly merit the application of three of the mitigating conditions for financial
considerations: ¶ MC 20(a), “the behavior happened so long ago, was so infrequent, or
occurred under circumstances that it is unlikely to recur and does not cast doubt on the
individual’s reliability, trustworthiness, or good judgment,” ¶ MC 20(c), “the person has
received counseling for the problem and/or there are clear indications that the problem is
being resolved or is under control,” and ¶ MC 20(d), “the individual initiated a good-faith
effort to repay overdue creditors or otherwise resolve debts.    
                                                    
Holding a security clearance involves the exercise of important fiducial
responsibilities, among which is the expectancy of consistent trust and candor.  Financial
stability in a person cleared to access classified information is required precisely to inspire
trust and confidence in the holder of the clearance. While the principal concern of a
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clearance holder’s demonstrated financial difficulties is vulnerability to coercion and
influence, judgment and trust concerns are implicit in financial cases (as here).
Consideration of Applicant’s background and circumstances surrounding his
situation permits extenuation and considerable mitigation of his accumulated delinquent
mortgage and consumer debts.  Extenuating conditions associated with his taking on his
mortgage debts associated with his purchases of his two homes following his 1999
marriage, his wife’s failure to assume her fiducial responsibilities towards Applicant, poor
real estate marketing conditions, and his failure to learn of the defaults in time to cure
them himself all contributed to his inability to meet  his financial obligations with his
lenders.
Judgment lapses and economic choices do play some role in Applicant’s situation.
Between 2003 and 2004, Applicant twice refinanced his EP home, raising the debt ceiling
on his first mortgage from $162,000 to $213,000. By the evidence presented, Applicant
and his wife had no established track record or resources to carry such a large mortgage
without the use of both of their incomes. When they purchased a more expensive home
(the HC property) in 2005 without first selling their EP property they were forced to rely
almost exclusively on the rent from their EP home to cover the new mortgage on the
home. Within two years, both home loans were in default and targeted for foreclosure. 
Applicant may be faulted some for not making more aggressive efforts earlier to
resolve the deficiency claims of his two major creditors with lump sums or other forms of
payment measures. With his available resources, several options were potentially
available to him. Individually negotiated payment plans, debt consolidation, and refiling for
Chapter 13 bankruptcy relief comprise just a few examples of possible resolution
measures open to him.
To be sure, Applicant is aware of the time limits of his state’s statute of limitations
(six years), and the substantial possibilities that neither creditor will pursue him to enforce
their deficiency entitlements. By recommitting to paying them with his letter inquiries, he
risks validating any enforcement claims of the creditors or their assignees and tolling the
statute’s potential bar to collection. Standing pat and letting the statute of limitations run
on the two claims that approach $100,000 in overall debt makes some economic sense.
But reliance on such an enforcement bar, while available to Applicant, is not a substitute
for good-faith efforts to address outstanding debts. Applicant recognizes his dilemma and
has taken active steps to identify his lenders holding potential deficiency claims and
resolve any remaining balances.  
Statutes of limitation, while considered important policy tools for discouraging
plaintiffs from pursuing stale claims and promoting finality in litigation, have never been
equated by the Appeal Board with good-faith efforts to repay overdue creditors. See, e.g.,
ISCR Case No. 02-30304 at 3 (App. Bd. April 2004)(quoting ISCR Case No. 99-9020 at
5-6 (App. Bd. June 2001)). What constitutes a “good-faith” effort to repay overdue
creditors requires a showing that “a person acts in a way that shows reasonableness,
prudence, honesty, and adherence to duty or obligation” See id.  In sum, an applicant
12
must establish some kind of concrete plan for repaying the debt in issue besides relying
on a legally permissible option like filing for Chapter 7 bankruptcy or taking advantage of
a statute of limitations.
When addressing repayment efforts generally, the Appeal Board has not required
an applicant to establish “that he has paid off each and every debt listed in the SOR.”
See ISCR Case no. 07-06482 at 2-3 (App. Bd. May 21, 2008)(internal citations omitted).
All that the Board has required is that the “applicant demonstrate he has a plan to resolve
his financial problems and has taken significant actions to implement that plan.”  See id. 
In Applicant’s case, it was incumbent upon him to demonstrate some tangible
steps to satisfy his listed delinquent debts (including his two major lending creditors
holding potential deficiency entitlements) with the resources he has available every
month. This he has demonstrated in discrete ways: paying off several of the small
creditors and documenting his diligent efforts to contact his remaining creditors to explore
repayment plans. While not voluntary, his two largest real estate delinquencies were
resolved by foreclosure actions by the lenders holding first trust deeds on his two
residences (i.e., creditors 1.c/1.f and creditor 1.d).  
From a whole-person standpoint, there is ample evidence presented that Applicant
has mounted good-faith efforts to resolve the remaining deficiency balances with his two
primary lenders and his other smaller debts. Since the dissolution of his marriage in 2007,
Applicant has lived frugally and is able to maintain a small surplus every month. While he
retains some exposure to enforcement actions by the two lenders still holding deficiency
balances, the risks of debt enforcement against him appear to be low, based on the
responses of his potential claimants to his inquiries. In his favor are the vigilant efforts he
has taken to date to identify and resolve the debts of creditors holding potential claims
against him, as well as his ex-wife. So far, the responses he has received to date from
these potential creditors have ranged from documentary silence to verbal responses of
disinterest. 
Taking into account all of the extenuating facts and circumstances surrounding
Applicant’s two mortgage debt obligations, deficiency enforcement risks extant, and the
good-faith efforts he has mounted to resolve his outstanding debts, Applicant successfully
mitigates judgment, reliability and trustworthiness concerns related to his debts.
Favorable conclusions warrant with respect to the allegations covered by the financial
considerations guideline. 
        
Formal Findings
In reviewing the allegations of the SOR and ensuing conclusions reached in the
context of the findings of fact, conclusions, conditions, and the factors listed above, I
make the following formal findings:
GUIDELINE F: (FINANCIAL CONSIDERATIONS): FOR APPLICANT
13
Subparagraphs 1.a through 1.k: For Applicant
Conclusions
In light of all the circumstances presented by the record in this case, it is clearly
consistent with the national interest to grant or continue Applicant’s security clearance.
Clearance is granted.
                                          
Roger C. Wesley
Administrative Judge