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                           DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
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[NAME REDACTED] )       ISCR Case No. 09-08089
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Applicant for Security Clearance )
Appearances
For Government: John Glendon, Esquire, Department Counsel
For Applicant: Greg D. McCormack, Esquire
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Decision
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MALONE, Matthew E., Administrative Judge:
In 2007, due to an unforeseen decline in the housing market, Applicant defaulted
on two mortgages for an investment property acquired in 2006. The first mortgage was
resolved through foreclosure and Applicant owes nothing more on that obligation. The
second mortgage was recently resolved through an agreement with the lender.
Applicant’s finances are otherwise sound and not likely to be a security concern in the
future. Based upon a review of the pleadings, exhibits, and transcript, Applicant’s
request for a security clearance is granted.
Statement of the Case
On August 10, 2009, Applicant submitted an Electronic Questionnaire for
Investigations Processing (E-QIP) to obtain or renew a security clearance required for
her job with a defense contractor. After reviewing the results of the ensuing background
investigation, adjudicators for the Defense Office of Hearings and Appeals (DOHA)
1 Authorized by DoD Directive 5220.6 (Directive), Section E3.1.2.2.
2 Required by Executive Order 10865, as amended, and by DoD Directive 5220.6 (Directive), as amended.
3 The adjudicative guidelines were implemented by the Department of Defense on September 1, 2006. These
guidelines were published in the Federal Register and codified through 32 C.F.R. § 154, Appendix H (2006).
Pending official revision of the Directive, they take precedence over the guidelines listed in Enclosure 2 to the
Directive.
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issued to Applicant interrogatories1 to clarify or augment information obtained in her
background investigation. Based on all available information, including Applicant’s
responses to the interrogatories, DOHA adjudicators were unable to make a preliminary
affirmative finding2 that it is clearly consistent with the national interest to grant or
continue Applicant’s access to classified information. On June 10, 2010, DOHA issued
to Applicant a Statement of Reasons (SOR) alleging facts which, if proven, raise
security concerns addressed in the adjudicative guidelines (AG)3 for financial
considerations (Guideline F).
Applicant timely answered the SOR and requested a hearing. The case was
assigned to an administrative judge on October 7, 2010, and a hearing was set for
December 6, 2010. At Applicant’s request, the hearing was re-scheduled for January
11, 2011. On January 6, 2011, that hearing also was continued. The case was
transferred to me on February 3, 2011. 
Pursuant to a Notice of Hearing issued on February 16, 2011, I convened a
hearing in this matter on March 29, 2011. The parties appeared as scheduled. DOHA
received a transcript (Tr.) of the hearing on April 6, 2011. The Government presented
five exhibits that were admitted without objection as Government Exhibits (Gx.) 1 - 5.
Applicant testified and submitted five exhibits that were admitted without objection as
Applicant Exhibits (Ax.) A - E. (Tr. 28 - 30) I left the record open after the hearing so that
Applicant could submit additional relevant information. (Tr. 99 - 100) The record closed
on April 28, 2011, when I received additional information that has been admitted into the
record without objection as Ax. F.
Findings of Fact
Under Guideline F, the Government alleged that Applicant owed $158,341 for a
single delinquent debt owed as a second mortgage. (SOR 1.a). Applicant denied the
allegation; however, at hearing, she admitted the debt was hers. (Tr. 23 - 24)
Applicant’s admission is incorporated in my findings of fact. Having also reviewed the
transcript and exhibits, I make the following additional findings of relevant fact.
Applicant is 43 years old and is employed by a defense contractor as a financial
management analyst. She was hired for that position in August 2007 after working for
five months at a small defense contracting company owned by her sister. (Gx 1; Tr. 37 -
38) From July 1985 until March 2007, Applicant was a budget and program analyst
employed by the federal government. She was first granted a secret clearance in
January 1995.
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Applicant and her husband, a retired Marine Corps Gunnery Sergeant, have
been married since September 1998. Applicant was previously married from September
1989 until January 1997. She has one child, age 19, from that marriage. Applicant’s
current husband was also married before and has two children, ages 25 and 16, from
that marriage. (Gx. 1)
In December 2005, Applicant and her husband obtained two mortgages to buy a
townhouse for little cash out of pocket. The house was near a college they thought her
husband’s older child would be attending. They planned for the child to live there and to
pay the mortgages by renting the house to other students. However, the child
matriculated at a school in a different state. Applicant and her husband rented out the
townhouse and were able to pay the mortgages on the house until 2007. At that time,
they had to evict delinquent tenants. When they tried to find new tenants, they found
that the market value of the house had fallen significantly. This had an adverse effect on
the rental market because prospective tenants were not willing to pay rents high enough
to cover the mortgages obtained when values were higher. (Tr. 40 - 41) In April 2009,
after several months of attempting to re-let or sell the house, it was sold through a short
sale that ended Applicant’s obligations for both mortgages. (Gx. 1; Gx. 2; Tr. 40 - 44)
In 2006, Applicant and her husband purchased a home that a builder had
constructed as part of a housing development. The purchase price was about $485,000.
The builder agreed to rent the property back for two years to use as a model for
prospective buyers. (Applicant characterized this property as a “spec” house.) After the
lease ended, Applicant and her husband planned to sell the property for a profit.
Applicant and her husband obtained a first mortgage of $339,500 and a second
mortgage of $145,945 to finance the purchase of the house with very little cash down.
The rental price the builder agreed to pay was enough to cover monthly payments for
both mortgages. (Gx. 5; Tr. 45 - 50) 
Applicant and her husband were the only borrowers on the mortgages. However,
also on the title to the house was another couple, friends of Applicant and her husband
who were real estate agents, and who advised Applicant and her husband that this
would be a good deal given the real estate market at the time. The other couple had no
apparent financial obligation other than their verbal commitment to help pay the
mortgages should unforeseen events happen. (Tr. 46 - 47)
In about May 2007, the market for new homes had declined quickly and to the
point that the builder who was renting back the “spec” house abandoned the lease and
stopped trying to sell houses in that development. Applicant believes the builder went
out of business. Applicant and her husband, along with the real estate agent couple,
covered the mortgage payments for several months while they tried unsuccessfully to
sell or rent out the house. At that time, they were also trying to resolve the delinquent
mortgages on the townhouse they bought in 2005. Their last payment on either of the
“spec” house mortgages was in October 2007. The first mortgage was foreclosed in
May 2008. The house was sold at auction for $325,000. Applicant and her husband had
no further obligation on the first mortgage, but they still owed approximately $12,544 for
missed payments on the second mortgage. (Gx. 1; Gx. 2; Gx. 3; Tr. 50 - 58)
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In trying to resolve their mortgage deficiencies since 2008, Applicant’s husband
conducted most of the negotiations with creditors for both the townhouse and the “spec”
house. Applicant did not take any action of her own until November 2010, when she
realized the ongoing debt for the second mortgage on the “spec” house might
jeopardize her security clearance. At that time, she wrote to the collection agency to
whom the debt had been referred and offered to settle the debt for a lump sum payment
of $12,544, which was the past-due amount. The collection agency rejected her offer,
but made a counter-offer of $14,500, which represented about 10% of the original loan
amount. The amount alleged at SOR 1.a includes interest and fees since that loan
became delinquent. Applicant accepted the counter-offer, withdrew the funds from her
retirement account, and transferred the funds to her attorney’s trust account for
immediate payment once the agreement was finalized. However, on January 6, 2011,
the collection agency reneged on its acceptance of 10% and demanded a 15%
settlement amount. At the time of her hearing in this matter, Applicant and her attorney
were still trying to negotiate the original 10% settlement Applicant thought had been
agreed upon. (Ax. A; Tr. 52 - 58) On April 25, 2011, the collection agency agreed to
accept the 10% settlement. The debt was resolved on April 27, 2011. (Ax. F)
Applicant’s husband works as a medical supplies sales representative and does
not require a security clearance. He did not take into account the need to resolve these
debts in a more timely fashion so that Applicant could get a security clearance. It is
likely they would have agreed to the 15% demand by the collection agency and
resolved this debt in January 2011 had Applicant’s husband not balked at paying that
amount. (Tr. 67 - 70, 81)
Applicant and her husband earned about $300,000 annually for tax years 2008
and 2009. However, because Applicant does not yet have a security clearance, she is
now working only part-time, earning about $56,000 annually. (Ax. B; Tr. 36) A personal
financial statement submitted while Applicant was still earning approximately $112,000
annually shows that she and her husband had about $4,300 cash remaining after
paying all of their monthly expenses, including debts. (Gx. 2) A personal financial
statement submitted post-hearing shows that since Applicant has been reduced to a
half-time employment, they have less than $200 remaining each month. However, they
are still current on their obligations and have incurred no new delinquent or past-due
debts. (Ax. F)
Applicant is studying for a bachelor’s degree in business management. She
expects to obtain her degree in September 2011. Her work record since 1985 has been
exemplary. Numerous references enthusiastically recommended her for a position of
trust based on close and extended interaction over many years. (Tr. 34 - 35; Ax. C; Ax.
D; Ax. E)
4 See Department of the Navy v. Egan, 484 U.S. 518 (1988).
5 Directive. 6.3.
6 See Egan, 484 U.S. at 528, 531.
7 See Egan; Adjudicative Guidelines, ¶ 2(b).
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Policies
A security clearance decision is intended to resolve whether it is clearly
consistent with the national interest4 for an applicant to either receive or continue to
have access to classified information. Each decision must be a fair, impartial, and
commonsense determination based on examination of all available relevant and
material information,5 and consideration of the pertinent criteria and adjudication policies
in the adjudicative guidelines. Decisions must also reflect consideration of the factors
listed in ¶ 2(a) of the new guidelines. Commonly referred to as the “whole-person”
concept, those factors 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. 
The presence or absence of a disqualifying or mitigating condition is not, by itself,
conclusive. However, specific applicable guidelines should be followed whenever a case
can be measured against them as they represent policy guidance governing the grant or
denial of access to classified information.
The Government bears the initial burden of producing admissible information on
which it based the preliminary decision to deny or revoke a security clearance for an
applicant. Additionally, the Government must be able to prove controverted facts
alleged in the SOR. If the Government meets its burden, it then falls to the applicant to
refute, extenuate, or mitigate the Government’s case. Because no one has a “right” to a
security clearance, an applicant bears a heavy burden of persuasion.6 A person who
has access to classified information enters into a fiduciary relationship with the
Government based on trust and confidence. Thus, the Government has a compelling
interest in ensuring each applicant possesses the requisite judgment, reliability, and
trustworthiness of one who will protect the national interests as his or her own. The
“clearly consistent with the national interest” standard compels resolution of any
reasonable doubt about an applicant’s suitability for access in favor of the Government.7
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Analysis
Financial
The security concern about Applicant’s finances, as stated in AG ¶ 18, is that:
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.
The Government’s information, as well as Applicant’s e-QIP disclosures, and her
admissions and testimony established that, as alleged in SOR 1.a, Applicant owed
$158,341 for a delinquent second mortgage on an investment property. The original
amount borrowed was $145,495, but the balance demanded from the creditor included
interest and fees after default. Although not alleged, it is relevant that Applicant and her
husband also defaulted on the mortgages for a townhouse they bought in 2005 for her
stepchild’s use in college. Available information requires application of the disqualifying
conditions listed at AG ¶ 19(a) (inability or unwillingness to satisfy debts), and AG ¶
19(c) (a history of not meeting financial obligations).
By contrast, the record supports application of the mitigating conditions at 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); 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); 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); and AG
¶20(d) (the individual initiated a good-faith effort to repay overdue creditors or otherwise
resolve debts). Applicant’s mortgages failed, in large measure, because the local real
estate values fell faster and farther than anyone could have expected. As to the
townhouse, despite their child’s change of schools, they were able to rent the property
and cover the mortgages for about two years. However, when they lost rental income
due to delinquent tenants, the value of their townhouse had fallen enough that no one
would pay them sufficient rent to cover the mortgages obtained when values were much
higher. Around the same time, the builder to whom they were renting the “spec” house
withdrew. In trying to sell or rent the “spec” house, they encountered the same
immutable market conditions as they had with the townhouse. Available information
shows that Applicant acted responsibly by trying to sell, rent, or otherwise resolve their
real estate obligations.
Available information also shows that, despite losing half of Applicant’s income,
she and her husband have resolved the debt at SOR 1.a, and they are meeting all of
their current financial obligations. It is not likely they will venture into real estate
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investments in the future. As to AG ¶ 20(d), Applicant and her husband had sufficient
resources to make payments on the SOR 1.a debt before November 2010. Given recent
mortgage market performance, this matter would likely have settled in the same
manner; that is, for a fraction of the loan value. But Applicant deferred to her husband’s
efforts to negotiate their debt resolution until she was forced, by the adjudication of her
security clearance eligibility, to take her own action. Considering all of the facts and
circumstances probative of this issue, I conclude her efforts constituted a good-faith
effort, on her part, to resolve her debt. On balance, Applicant has mitigated the security
concerns about her finances.
Whole-Person Concept
I have evaluated the facts presented and have applied the appropriate
adjudicative factors under Guidelines F. I have also reviewed the record before me in
the context of the whole-person factors listed in AG ¶ 2(a). Applicant is 43 years old,
and has an excellent record of more than 20 years of federal service, and has
established herself as a valuable, reliable employee of a private defense contractor
since 2007. The circumstances that caused Applicant and her husband to experience
financial problems were unforeseen and not due to any misconduct or irresponsibility.
Their debts have been resolved and Applicant will not likely encounter such problems in
the future. Applicant pays her taxes on time and has no new delinquent debts or other
obligations she cannot pay as required. She also enjoys a solid reputation among her
friends and business associates. A fair and commonsense assessment of all of the
available information shows that Applicant has resolved any doubts about her suitability
for access to classified information. 
Formal Findings
Formal findings 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
Subparagraphs 1.a: For Applicant
Conclusion
In light of all of the foregoing, it is clearly consistent with the national interest for
Applicant to have access to classified information. Request for security clearance is
granted.
                                         
MATTHEW E. MALONE
Administrative Judge