1The SOR is undated.  Department Counsel’s Appeal Brief states that DOHA issued the SOR on September
14, 2010.  
KEYWORD: Guideline F
DIGEST: Record evidence demonstrated that Applicant acquired mortgage debts under
circumstances that undermined his trustworthiness, reliability, and good judgment.  Record
evidence was not sufficient to show that Applicant’s deficiency judgements were uncollectable
and/or that the creditors had cancelled the debts.  In any event, such evidence, even if available,
would, under the facts of this case, be entitled to limited weight, in light of the circumstances
under which Applicant’s financial problems originated.  Favorable decision reversed.
CASE NO: 10-01978.a1
DATE: 08/24/2011
DATE: August 24, 2011
In Re:
----------------
 
Applicant for Security Clearance
)
)
)
)
)
)
)
)
ISCR Case No. 10-01978
APPEAL BOARD DECISION
APPEARANCES
FOR GOVERNMENT
Caroline H. Jeffreys, Esq., Department Counsel
FOR APPLICANT
Pro se
The Defense Office of Hearings and Appeals (DOHA) declined to grant Applicant a security
clearance.  DOHA issued a statement of reasons (SOR) advising Applicant of the basis for that
decision–security concerns raised under Guideline F (Financial Considerations) of Department of
Defense Directive 5220.6 (Jan. 2, 1992, as amended) (Directive).1  Applicant requested a hearing.
On May 20, 2011, after the hearing, Administrative Judge Claude R. Heiny granted Applicant’s
request for a security clearance.  Department Counsel appealed pursuant to Directive ¶¶  E3.1.28
and E3.1.30.
Department Counsel raised the following issues on appeal: whether the Judge erred in his
application of pertinent mitigating conditions and whether the Judge’s whole-person analysis was
erroneous.  Consistent with the following, we reverse the Judge’s decision.
Facts
The Judge made the following pertinent findings of fact: Applicant is a 31-year-old senior
engineer for a Defense contractor.  He has worked at this job since 2009.
Applicant owned three houses, in two different states.  These houses all went into
foreclosure.  He bought the first one, which was located in State A, in 2003, when he was 24 years
old.  He lived in the house until 2005, at which time he moved to State B due to requirements of his
job.  He refinanced the house with a $175,000 adjustable rate mortgage (ARM) and rented it out.
He used the equity to pay off a vehicle, make payments on credit cards, and for property
maintenance.  His monthly payments increased at the same time that his tenants moved out without
prior notification.  He was not able either to make his mortgage payments or to sell the house.   The
house went into foreclosure.  The mortgage company forgave the debt, and issued Applicant a Form
1099-A.  The lender’s customer service web site lists the unpaid balance of this loan as zero.
In September 2005, Applicant purchased a home in State B to serve as his residence.  He
financed the purchase with first and second mortgages of $308,000 and $76,000 respectively, both
ARMs.  His salary at the time was $75,000 and his monthly mortgage payment was $3,500.  In
2006, this payment increased to $4,500.  Because he had no renter in his house in State A, and
because of another real estate purchase, he was unable to make his mortgage payments.  Living on
credit cards, he attempted to persuade the lender to freeze his ARM.  He tried to sell the property,
but the lender would not agree to a short sale.  The property went into foreclosure.  
Also in September 2005, Applicant and a friend purchased another home together.  Applicant
co-signed the loan, with the agreement that they would split any profit when the house sold.  They
financed this purchase with two ARMs, totaling $550,000.  The house was to be rented out, and, at
one point, Applicant himself moved in, renting out the house referenced in the preceding paragraph.
However, when the tenants moved out, Applicant had to leave the co-owned home, stop paying his
share of the rent, and move back to his other home.  This house eventually went into foreclosure.
It sold for $299,000.  
As the housing market declined, the co-owned house declined in value by 30 % and the
ARM increased by 25%.  Due to a glut of rental properties, Applicant and his friend had a difficult
time finding renters.  In June of 2007, he left the state and moved in with his parents.  He has
returned neither to State A nor State B.
In State B, the law precludes lenders from recovering deficiency judgments from the sale of
personal dwellings.  Neither he nor his friend have received communications from the lenders
demanding payment.
2The Judge noted Applicant’s testimony that “he was married in the church so there are no legal documents
regarding his marriage.”  Decision at 4, note 7.  It is not clear from the record why a marriage valid under the law of the
state where it was solemnized would not be evidenced by a license or certificate.   
3Directive, Enclosure 2 ¶ 19(a): “inability or unwillingness to satisfy debts[.]” 
4Directive, Enclosure 2 ¶ 19(c): “a history of not meeting financial obligations[.]”  
Applicant has experienced some periods of unemployment–June through August 2007; April
through September 2008; and January through April 2009.  At the time the three mortgages were
incurred, Applicant was single and his annual salary was between $58,000 and $75,000.  His wife’s
annual salary is $37,000 and her credit is excellent.2  He has received financial counseling, does
online financial research, and has an emergency fund for contingencies.  
When Applicant purchased these properties, he was in his mid-twenties and had no
experience as a landlord.  He failed to understand the real estate market.  He realizes now that he
needs guidance before making investments.  
Discussion 
Once a concern arises regarding an Applicant’s security clearance eligibility, there is a strong
presumption against the grant or maintenance of a security clearance.  See Dorfmont v. Brown, 913
F. 2d 1399, 1401 (9th Cir. 1990), cert. denied, 499 U.S. 905 (1991).  After the Government presents
evidence raising security concerns, the burden shifts to the applicant to rebut or mitigate those
concerns.  See Directive ¶ E3.1.15.  In rendering a final decision, an “agency must examine the
relevant data and articulate a satisfactory explanation for” the decision, “including a ‘rational
connection between the facts found and the choice made.’” Motor Vehicle Mfrs. Ass’n of the United
States v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)(quoting Burlington Truck Lines,
Inc. v. United States, 371 U.S. 156, 168 (1962)).  The standard applicable in security clearance
decisions “is that a clearance may be granted only when ‘clearly consistent with the interests of the
national security.’” Department of the Navy v. Egan, 484 U.S. 518, 528 (1988).  “Any doubt
concerning personnel being considered for access to classified information will be resolved in favor
of the national security.”  Directive, Enclosure 2 ¶ 2(b). 
In deciding whether the Judge's rulings or conclusions are erroneous, the Board will review
the Judge's decision to determine whether:  it does not examine relevant evidence; it fails to
articulate a satisfactory explanation for its conclusions, including a rational connection between the
facts found and the choice made; it does not consider relevant factors; it reflects a clear error of
judgment; it fails to consider an important aspect of the case; it offers an explanation for the decision
that runs contrary to the record evidence; or it is so implausible that it cannot be ascribed to a mere
difference of opinion.  See ISCR Case No. 03-22861 at 2-3 (App. Bd. Jun. 2, 2006).
In his analysis of the case, the Judge stated that Applicant’s three foreclosures raised
Financial Considerations Disqualifying Conditions 19(a)3 and (c).4  Department Counsel concurs
with this assessment.  However, she also asserts that the Judge’s favorable findings as to mitigation
are not sustainable.  
5The Judge stated “If the creditor issued an IRS Form 1099-A, the creditor does not intend to pursue further
collection of the debt.”  However, this form shows only that a creditor has acquired an interest in the property that
secured the debt.  The 1099-A is used by a taxpayer to determine gain or loss.  If a lender cancels part of the debt, he
must file a Form 1099-C, Cancellation of Debt.  IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions,
and Abandonments, April 20, 2011. As Department Counsel notes, none of Applicant’s creditors issued him a 1099-C.
Department Counsel argues that DOHA is “not in a position to resolve the factual and legal issues surrounding the
applicability of state anti-deficiency laws as they relate to an applicant’s particular situation, nor are DOHA security
clearance hearings well-suited to this.  Absent evidence that an anti-deficiency statute actually was applied to the specific
facts of an applicant’s indebtedness, an Administrative Judge cannot speculate on the applicability of such a statute.”
Department Counsel Brief at 9.  
The security concern under Guideline F views financial problems as possible indicia of
habits or traits inconsistent with holding a security clearance: 
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.  Directive,
Enclosure 2 ¶ 18.  
Department Counsel’s appeal argument relies in large measure upon the Judge’s findings and
record evidence that Applicant obtained three ARMs in the mid-2000s, of a total amount in excess
of $1,000,000 and with total mortgage payments that exceeded his annual salary of $75,000.
Department Counsel persuasively argues that Applicant’s having done so significantly impugns his
self-control and judgment.  Even given his relatively young age, at the time he bought the houses
Applicant was a university graduate, having received a degree in electrical engineering cum laude.
Applicant Exhibit 8, Undergraduate Transcript.  There is no basis in the record to conclude that
Applicant lacked the ability to appreciate the nature of his transactions or to foresee their
consequences.  
Department Counsel persuasively argues that Applicant’s circumstances are similar to those
of an earlier case, ISCR Case No. 08-11940 (App. Bd. Dec. 2, 2010).  There  the applicant, who
earned under $100,000 annually, purchased two homes with ARMs, the total amount of the loans
exceeding $1,000,000.  We concluded that the fact of acquiring debt of such magnitude, with such
a relatively limited income, undermined the applicant’s contention that he had demonstrated the
trustworthiness, reliability, and good judgment essential for access to classified information.  Even
if the applicant’s claim that his deficiency judgments were uncollectable as a matter of law were
correct, that would not, under the facts of his case, have been sufficient to mitigate security concerns
arising from significantly profligate conduct.  
In the case under consideration here, Applicant has also asserted that state law precludes the
lenders from collecting the deficiency judgments (which may not necessarily be the same as
extinguishing the debt).  We note Department Counsel’s argument that the record does not provide
clear evidence that the state law has actually been favorably applied to Applicant.  The lenders have
not issued 1099-Cs.5  However, even assuming that Applicant’s debts had been extinguished, such
evidence would be entitled to limited weight  in light of the circumstances under which he acquired
6“Simply because a debt is extinguished through bankruptcy or other means not involving actual payment, this
does not lead to the conclusion that the concerns are mitigated . . . It is well-established that while elimination of a debt
may reduce vulnerability to coercion, it does not mitigate concerns over an applicant’s poor judgment as evidenced by
the manner in which an applicant accumulated and addressed their debt.”  Department Counsel Brief at 17.    
7Directive, Enclosure 2 ¶ 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[.]”  
8Directive, Enclosure 2 ¶ 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[.]”  
9Directive, Enclosure 2 ¶ 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[.]”  
10Applicant testified that he listened to a radio program devoted to financial matters.  He also stated, “I do a lot
of online research . . . Web sites like Yahoo Finance, Google Finance are excellent sources for me.  We have internal,
within the company, resources . . . . so I’ve looked at those, used those.  And just a lot of--just reading from online
resources and articles that I find throughout the Internet.”  Tr. at 114.  
them.6  See, e.g., ISCR Case No. 01-09691 at 3  (App. Bd. Mar. 27, 2003) (“Even if a delinquent
debt is legally unenforceable under state law, the federal government is entitled to consider the facts
and circumstances surrounding an applicant’s conduct in incurring and failing to satisfy the debt in
a timely manner”).  We also note Department Counsel’s  argument that there is a paucity of record
evidence corroborating Applicant’s claims to have engaged in discussions with his creditors in an
effort to resolve his problems, and we find the argument to be persuasive.
 Accordingly, we conclude that the Judge’s favorable application of Mitigating Conditions
20(a),7 (b),8 and (c)9 is not sustainable.  As we stated in a previous similar case:
 In the first place, the fact of incurring this debt under the circumstances of this case
is not consistent with responsible behavior.  Second, there is no evidence, other than
the fact that the property is subject to foreclosure, to demonstrate what action
Applicant proposes to discharge a facially valid debt to the mortgagee.  ISCR Case
No. 08-08435 at 5 (App. Bd. Jul. 16, 2009). 
The record does not support a conclusion that Applicant’s circumstances do not cast doubt on his
reliability, trustworthiness or good judgment, or that his decision to walk away form the debts
demonstrates the responsible action contemplated by the Directive.  As Department Counsel argues,
Applicant’s financial problems do not appear to have resulted from circumstances beyond his
control.  Rather, that his interest rates under an ARM would rise and that he might have a hard time
keeping tenants were foreseeable ab initio.  Moreover, the record does not support a conclusion that
Applicant has actually secured the services of a financial counselor or has otherwise received
financial advice tailored to his specific circumstances.10   Favorable application per se of Mitigating
Condition 20(c) is not sustainable on this record.  
   
11Directive, Enclosure 2 ¶ 20(e).  
12“Actually, we bought the home after the marriage . . . We’re not legally married.  We’re only married through
church and so there are no legal documents.”  Tr. at 130.  
The Judge extended favorable application to Mitigating Condition 20(e).11  This provision
mitigates security concerns when “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.”  In applying this
mitigating condition, the Judge relied upon Applicant’s testimony that he owed no deficiency
judgements resulting from his foreclosures.  However, in this case, the security significant conduct,
as the Judge himself found, was the acquisition of the three mortgages themselves, not simply any
resulting deficiency judgements.  There is no evidence at all that these mortgage debts were not
legitimate or that the lenders were failing to demonstrate acceptable business practices in insisting
that they be repaid under the terms to which Applicant had agreed.  
 We have examined the Judge’s whole-person analysis.  In that portion of the Decision, he
stated Applicant’s debts “were not the type that indicates poor self-control, lack of judgment, or
unwillingness to abide by rules and regulations.  Money was not spent frivolously.”  Decision at 9.
In light of record evidence and the Judge’s findings that Applicant obligated himself to repay loans
totaling over $1,000,000 with a $75,000 annual salary, this statement is not supportable, nor is it
even consistent with the Judge’s earlier conclusion that the evidence raised Guideline F
disqualifying conditions.  While there is evidence that Applicant’s current circumstances are more
stable than they were in the mid-2000s, it is not clear how these circumstances mitigate a history of
significant financial poor judgment.   For example, we note the Judge’s observation that Applicant
is not on the mortgage note for the current house, only the wife.  Decision at 10;  Applicant Exhibit
7, Financing Documents.  However, Applicant testified that the couple bought the home after the
marriage.12  Assuming the marriage satisfied the legal requirements of the state in which it occurred,
a reasonable person could believe that Applicant had an enforceable right in real estate purchased
during the marriage and that he could have some liability in the event of default.  The whole-person
analysis does not provide an independent basis for the Judge’s favorable decision.
In summary, the record and the Judge’s findings demonstrate that Applicant acquired three
adjustable rate mortgages under circumstances which raise concerns about his reliability and
trustworthiness and that he walked away from them when, as he reasonably should have foreseen,
he became unable to make his payments.  Under the facts of this case, the Judge’s conclusion that
Applicant had demonstrated mitigation under the Egan standard is not supportable.  The Judge
cannot reasonably have concluded that the Applicant has resolved doubts about his fitness to hold
a security clearance.  “Any doubt concerning personnel being considered for access to classified
information will be resolved in favor of the national security.”  Directive, Enclosure 2 ¶ 2(b). 
Order
The Judge’s favorable security clearance decision is REVERSED.  
Signed: Michael Y. Ra’anan        
Michael Y. Ra’anan
Administrative Judge
Chairperson, Appeal Board
Signed: Jeffrey D. Billett                
Jeffrey D. Billett
Administrative Judge
Member, Appeal Board
Signed: James E. Moody               
James E. Moody
Administrative Judge
Member, Appeal Board