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                           DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
)
) ISCR Case No. 14-04871
          )
Applicant for Security Clearance )
Appearances
For Government: Alison O’Connell, Esq., Department Counsel
For Applicant: C. Lowell Crews, Esq.
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Decision
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CURRY, Marc E., Administrative Judge:
The deficiency that Applicant owes to a junior mortgagor,  stemming from a 2009
home foreclosure, is non-collectible. This is not the controlling factor when assessing
the financial considerations security concern under the Adjudicative Guidelines (AG);
however, when considered in tandem with the circumstances surrounding the
foreclosure, Applicant’s efforts through his realtor to avoid foreclosure, and later, with
his attorney, to ascertain whether he remained responsible for any deficiency, together
with Applicant’s current financial stability, I conclude that he has mitigated the security
concern. Clearance is granted. 
Statement of the Case
On November 24, 2014, the Department of Defense Consolidated Adjudications
Facility (DOD CAF) issued a statement of reasons (SOR) to Applicant detailing security
concerns under Guideline F, financial considerations. The action was taken under
Executive Order 10865, Safeguarding Classified Information within Industry (February
20, 1960), as amended; Department of Defense (DOD) Directive 5220.6, Defense
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Industrial Personnel Security Clearance Review Program (January 2, 1992), as
amended (Directive); and the AGs implemented by the DOD on September 1, 2006.
 On December 30, 2014, Applicant answered the SOR, denying the sole
allegation. He requested a hearing whereupon the case was assigned to me on March
10, 2015. DOHA issued a notice of hearing on March 19, 2015, scheduling the hearing
for April 15, 2015. On March 23, 2015, Applicant’s attorney entered his appearance and
requested a continuance. I granted the continuance and rescheduled the hearing for
May 13, 2015. On May 4, 2015, Applicant’s counsel moved for another continuance. On
May 6, 2015, I denied his motion, but extended the record, giving Applicant’s counsel
until June 1, 2015 to submit any document that he was unable to obtain before the May
13, 2015 hearing date, and giving Department Counsel through June 5, 2015 to file
objections to any post-hearing submissions.
The hearing was held on May 13, 2015, as scheduled. At the hearing, I took
administrative notice of one document, a discovery letter written from Department
Counsel to Applicant, dated March 2, 2015 (Hearing Exhibit (HE) I), and  received two
Government exhibits (GE 1 and GE 2) together with the testimony of Applicant and a
character witness. Also, I received 11 exhibits marked as Applicant’s Exhibits (AE) A
through L. On June 1, 2015, Applicant’s counsel submitted an additional document that
I marked and received as AE M. Department Counsel did not file any objection,
whereupon I closed the record. The transcript was received on May 21, 2015.
Findings of Fact
Applicant is a 58-year-old single man. He graduated from high school in 1975
and joined the U.S. Marine Corps in the early 1980s. (Tr. 65) After being honorably
discharged in 1985, he began working for a defense contractor as an aviation systems
analyst. (Tr. 64) He has been working with the same Government client for multiple
employers since then. (Tr. 64) He has continuously held a security clearance for 30
years. (Tr. 65) 
In May 2005, Applicant purchased a home with his fiancee and her son. Under
their agreement, the fiancee’s son was to pay the principal mortgage, totalling
$480,000, and Applicant and his fiancee were to pay the junior mortgage, totalling
$112,000. (Tr. 46) The payment of the principal mortgage was financed with an
adjustable rate mortgage (ARM). (Tr. 21) Legally, the mortgages were only in
Applicant’s name. (Tr. 47) The plan was for Applicant and his fiancee to delegate
responsibility for both mortgages to her son after two years, then move out of the house.
(Tr. 47) The mortgage company reassured them that if his fiancee’s son made
consistent payments in that time, improving his poor creditworthiness, that it would allow
the delegation to occur. (Tr. 47)
In June 2005, Applicant began making the mortgage payments on the junior
mortgage, totalling $960 monthly, as agreed. (AE A; Tr. 18) In November 2005,
Applicant’s fiancee died. (Tr. 20) In approximately January 2006, her son, unbeknownst
Applicant’s late fiancee’s son and his family moved out of the home in July 2006, at Applicant’s request. (Tr.1
53) Applicant had moved out shortly after he discovered that his late fiancee’s son had not been making the
payments on the principal mortgage.
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to Applicant, stopped making mortgage payments. (Tr. 20) Applicant did not discover
this until April 2006. By then, the principal mortgage was delinquent in the amount of
$4,979. Applicant paid the delinquency. (AE A at 37)
Applicant’s late fiancee’s son never made any more mortgage payments. Unable
to afford both mortgages, Applicant tried to refinance them. (Tr. 21) These efforts were
unsuccessful. Applicant then tried to negotiate a freeze on the interest rate on the ARM,
which was scheduled to increase significantly. (Tr. 21) After this failed, Applicant
attempted to sell the property. (Tr. 22) By then, the real estate market was beginning to
collapse, and the home value was less than what Applicant owed on the mortgages. (Tr.
23) 
Applicant then attempted to short sell the home, consulting with his realtor on a
weekly basis. These efforts also proved unsuccessful. Although Applicant never made
any payments on the principal mortgage after April 2006, he continued to make the
payments on the second mortgage through June 2007.  By then, payments had become1
unsustainable.  (Tr. 49)
In September 2007, the bank initiated the foreclosure process. (AE B) In October
2008, the home was sold through the court. (AE B at 3) Per the auditor’s account, the
sale price covered the primary mortgage. (AE B at 2) 
The auditor’s report did not account for the money that Applicant owed the junior
mortgagor. The court auditor served the junior mortgagor with a copy of the auditor’s
account. The junior mortgagor did not file any exceptions to the omission. In November
2009, the court ratified the auditor’s account. (AE F)
Applicant contacted the junior mortgagor both before and after the foreclosure
about the status of his debt. (Tr. 56-58) He was told to “stand by” while the junior
mortgagor negotiated a division of the sale proceeds with the principal mortgagor. (Tr.
57) Before the foreclosure, Applicant waited for the junior mortgagor to enter the
foreclosure proceedings and file a deficiency judgment. It did not. (Tr. 56)
On April 8, 2015, Applicant formally disputed the debt. He contends that the debt
is invalid because the junior mortgagor neither filed a foreclosure judgment after
receiving notification of the foreclosure action, nor took exceptions to the final court
order. (AE E -  AE G) On April 20, 2015, the account was deleted from his credit report.
(AE L)
Applicant earns $84,000 annually. He has approximately $2,500 of discretionary
monthly income and about $120,000 invested in a 401(k) account. (Tr. 66-67) 
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Policies
The adjudicative guidelines list potentially disqualifying conditions and mitigating
conditions. These guidelines are not inflexible rules of law. Instead, recognizing the
complexities of human behavior, they are applied together with the factors listed in the
adjudicative process. 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.” 
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 for obtaining a favorable security
decision.
Analysis
Guideline F, Financial Considerations
Under this guideline, “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.”
(AG ¶ 18) Applicant’s inability to keep up with his mortgage payments led to the
foreclosure of his home in 2008. AG ¶ 19(a), “inability or unwillingness to satisfy debts,”
applies.
Applicant never had any financial problems before buying the home. He did not
begin to struggle with the mortgage payments until his late fiancee’s son reneged on his
agreement to make monthly payments on the principal mortgage. Applicant tried to
maintain these mortgage payments, making a payment of nearly $5,000, covering the
four months of payments that his late fiancee’s son had missed. Also, recognizing that
he could not sustain payments on both mortgages, Applicant made efforts to either
refinance or modify the home. When these efforts were unsuccessful, he attempted to
sell the home, but was stymied by the beginning of the real estate market collapse
which caused the value to decrease to an amount less than what he owed on the
mortgages. Under these circumstances, 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,” and
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20(d), “the individual initiated a good-faith effort to repay overdue creditors or otherwise
resolve debts,”  apply.
Applicant’s home was sold through the foreclosure process. His first mortgage
was satisfied through the sale, leaving a $112,000 deficiency, the amount remaining on
the second mortgage. He disputes responsibility for this deficiency, contending that the
failure of the junior mortgagor to enter the foreclosure action and file a deficiency
judgment within the time period prescribed under state law rendered the debt invalid.
Further, he argued that the statutory invalidity of the debt is analogous to a discharged
debt in bankruptcy, and as such, is more significant in weighing mitigation than a debt
that is uncollectible because of the expiration of a statute of limitations. 
Applicant provided all of the documents supporting his dispute, which he
submitted to the credit reporting agencies, including a copy of the state law, and all of
the court documents establishing that the junior mortgagor received notice of
foreclosure. As of the hearing date, one of the credit reporting agencies had responded
to his dispute by deleting the deficiency from the credit report.
Department Counsel contends that a security clearance issue exists
notwithstanding whether the deficiency is statutorily invalid or non-collectible under state
law, because Applicant incurred the mortgage debt and did not satisfy it. Department
Counsel is correct. Nevertheless, the legal basis of Applicant’s argument and the steps
that he took to get the debt removed from his credit report are sufficient to trigger the
application of AG ¶ 20(e), “the individual has a reasonable basis to dispute the
legitimacy of the past-due debt which is the cause of the problem and provides
documented proof to substantiate the basis of the dispute or provides evidence of
actions to resolve the issue.” 
Applicant earns $84,000 annually, has $120,000 invested in a 401(k) plan, and
has $2,500 of discretionary monthly income. There is no record evidence that he may
be struggling financially. AG ¶ 20(c), “. . . there are clear indications that the problem is
being resolved or is under control,” applies.
Whole-Person Concept
Under the whole-person concept, the administrative judge should consider the
nine adjudicative process factors listed at AG ¶ 2(a). They are as follows: 
(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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Defaulting on a mortgage is a significant indicator of financial instability.
Conversely, Applicant’s failure to pay his mortgage was neither part of a historical
pattern of debt default, nor the result of any irresponsible money management or foolish
real estate speculation. Instead, it was an isolated episode caused by an unusual
combination of circumstances - the death of Applicant’s fiancee, her son’s subsequent
breach of their agreement to help make mortgage payments, and the collapse of the
real estate market.
Applicant has successfully disputed the debt, arguing that it is statutorily invalid.
This alone does not mitigate the security concern. However, the invalidity of this debt
renders it highly unlikely that it could render Applicant vulnerable to pressure, coercion,
exploitation, or duress in the future.
In the unlikely event that the mortgagor was to successfully pursue this debt, six
years after receiving notice of foreclosure, Applicant has ample discretionary income,
and investment income that he could liquidate in order to make payment arrangements.
Considering this case in the context of the whole-person concept, I conclude
Applicant has mitigated the security concern. In reaching this decision, I also considered
Applicant’s strong character reference and the length of time that he has held a security
clearance. 
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
Subparagraph 1.a: For Applicant
Conclusion
In light of all of the circumstances presented by 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.
MARC E. CURRY
Administrative Judge