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            DEPARTMENT OF DEFENSE 
DEFENSE OFFICE OF HEARINGS AND APPEALS 
 
 
 
 
In the matter of: ) 
) 
  )   ISCR Case No. 15-01850 
 ) 
Applicant for Security Clearance ) 
 
 
Appearances 
 
For Government: Eric H. Borgstrom, Esq., Department Counsel 
For Applicant: Pro se 
 
 
______________ 
 
Decision 
______________ 
 
 
MATCHINSKI, Elizabeth M., Administrative Judge: 
 
Applicant and his wife bought a home in March 2004 while on temporary duty for 
their employer for three years. In 2006, they opened a home-equity loan for home 
improvements. They deeded the property in 2007 to a limited liability company, which paid 
the mortgage for them until 2010. The home was taken in foreclosure and sold in 2011 to 
cover the defaulted mortgage. The home-equity loan was charged off for $45,014, but 
there is no evidence Applicant is being pursued for the debt. He has no record of other 
delinquency. His poor judgment appears to be an aberration not likely to be repeated. 
Clearance is granted. 
 
Statement of the Case 
 
 On October 22, 2015, the Department of Defense Consolidated Adjudications 
Facility (DOD CAF) issued a Statement of Reasons (SOR) to Applicant, detailing the 
security concerns under Guideline F, Financial Considerations, and explaining why it was 
unable to find it clearly consistent with the national interest to grant or continue security 
clearance eligibility for him. The DOD CAF took the action under Executive Order 10865, 
Safeguarding Classified Information within Industry (February 20, 1960), as amended; 
DOD Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program 
 
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(January 2, 1992), as amended (Directive); and the adjudicative guidelines (AG) effective 
within the DOD on September 1, 2006. 
 
On November 9, 2015, Applicant answered the lone SOR allegation and requested 
a hearing before an administrative judge from the Defense Office of Hearings and Appeals 
(DOHA). On January 15, 2016, the case was assigned to me to conduct a hearing to 
determine whether it is clearly consistent with the national interest to grant or continue a 
security clearance for him. On January 18, 2016, I scheduled a hearing for February 9, 
2016. 
 
I convened the hearing as scheduled. Five Government exhibits (GEs 1-5) and two 
Applicant exhibits (AEs A-B) were admitted into evidence without objection. Applicant 
testified on his behalf, as reflected in a transcript (Tr.) received on February 16, 2016. 
 
I held the record open until March 10, 2016, for post-hearing documentary 
submissions from Applicant. On March 2, 2016, Applicant submitted two documents, which 
were entered into evidence without objection as AEs C and D. On March 4, 2016, I 
received documentation (AE E) from an attorney who had represented Applicant regarding 
the financial matter at issue. On March 8, 2016, Department Counsel indicated he had no 
objection to its admission. Accordingly, AE E was admitted into evidence. No additional 
documents were received by the March 10, 2016 deadline for submissions, so the record 
closed on that date. 
 
Findings of Fact 
 
 The SOR alleges that Applicant owed a charged-off debt of $45,014 as of October 
22, 2015. In response, Applicant provided a copy of a letter sent to a debt resolution law 
firm in which he requested that a mortgage and the home-equity loan (SOR ¶ 1.a) be 
removed from his credit record. About the loan in SOR ¶ 1.a, Applicant explained that it 
was a charge-off the creditor expected him to pay “while someone else owned it.” After 
considering the pleadings, exhibits, and transcript, I make the following findings of fact. 
 
Applicant is a 66-year-old high school graduate who served in the military from 1969 
to 1972, including a combat tour in Vietnam. (GE 1; Tr. 19-20.) Applicant was married to 
his first wife from June 1974 to February 1976. He and his second wife have been married 
since January 1994. Applicant has no biological children, although he adopted his nephew, 
now age 46 from whom he is estranged. (GE 1; Tr. 21.) 
 
Applicant has worked for his current employer, a defense contractor, on and off 
since he graduated from high school in 1969. Lengthier periods of previous employment 
with the company include from January 1979 until a strike in 1988 and from January 2001 
to February 2007. His recent employment has been since February 2009. (GEs 1, 2; Tr. 
22- 24.) Applicant held DOD security clearances over the years for his work with the 
defense contractor, including a secret clearance granted around November 2002. (GEs 1, 
5.) 
 
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In February 2004, Applicant and his spouse began three-year assignments in 
another state (state X) for their employer. They bought a home in state X in April 2004 with 
a mortgage of $164,247. (GE 4.) They kept their previous home, which was apparently a 
mobile home, and their employer covered the mortgage for the three years they were 
away. (Tr. 25, 57-58.) 
 
The mortgage on their home in state X was transferred in October 2004. In 
November 2005, Applicant and his spouse refinanced their mortgage for $169,600. In the 
refinancing, they obtained a home-equity loan of $42,400 (SOR ¶ 1.a) for upgrades to the 
house and to pay off a car loan. (GEs 4, 5; Tr. 28.) 
 
Applicant and his spouse finished out their contract in state X in February 2007. In 
anticipation of their return to their current locale, Applicant tried to sell the home, but it did 
not sell. Applicant and his spouse did not try to rent the property after they moved. They 
paid the mortgage on the property for six months using credit cards. (AE A; Tr. 26-27.)  
 
Applicant responded to a flyer from a limited liability company in state X (hereafter 
Purchaser),1 who indicated that it could sell the property in state X and complete all the 
paperwork for Applicant’s and his spouse’s signatures. Applicant did not seek the advice of 
a realtor or attorney. Nor did he conduct any research into the company’s business 
practices. (Tr. 29.) On May 22, 2007, the Purchaser generated a contract of purchase for 
the property, which Applicant and his spouse signed on May 25, 2007. Under the terms of 
the contract, Applicant and his spouse agreed to sell the property for $225,000 to the 
Purchaser in return for a $10 cash deposit. Applicant and his spouse did not receive 
$215,000 to pay off their mortgage on the property. Instead, the existing mortgage of 
$220,000 encumbering the property was taken subject to a $4,990 purchase-money loan 
to Applicant and his spouse as seller. In an addendum to the contract executed by 
Applicant and his spouse on May 24, 2007, they agreed that the mortgage encumbering 
the property would stay in their name until it was satisfied or assumed by a future buyer. 2 
They legally acknowledged that the Purchaser had no intentions of assuming the mortgage 
and that no promises had been made to them that the loan would be assumed or paid by 
the company. In the event that the Purchaser defaulted, Applicant and his spouse as 
sellers would retain the deposit ($10) as full settlement of any claim. On July 7, 2007, 
Applicant and his spouse conveyed the deed to the property to the Purchaser. (AE E.)  
 
The Purchaser obtained tenants for the property and paid the mortgage for 
Applicant and his spouse with the rental income, which exceeded the mortgage. Applicant 
believes the Purchaser collected a percentage of the rental income. (Tr. 34.) Applicant now 
claims that he thought he entered into a two-year contract with the Purchaser to sell the 
house for him; that in the meantime, the Purchaser could lease the property to tenants 
                                                 
1 An attorney that Applicant and his spouse retained after they began having issues with the mortgage on the 
property indicates that Applicant and his spouse were approached by the Purchaser. (AE E.) Applicant 
discrepantly testified that he “got a hold of a flyer” from the company and called them. (Tr. 26.) 
 
2 The contract does not mention the home-equity loan, which appears to have been tied into the mortgage. 
See AE C. 
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already under contract to purchase; and that he had sold the property to the tenants living 
in the property. (Tr. 31-33.) Around March 2009, Applicant and his spouse retained a local 
attorney who demanded of the Purchaser that the property be immediately re-conveyed to 
them. The mortgage was paid on time until November 2009. No payments were made on 
the mortgage after January 2010. With the mortgage in default, the Purchaser agreed to 
re-convey the property to Applicant and his spouse on payment of reasonable expenses. 
Before those expenses could be determined, Applicant’s counsel received in April 2010 a 
letter from an attorney (suspected to be the principal for the Purchaser) indicating that the 
mortgage gets paid when the tenants pay the rent. Should Applicant choose to have the 
tenant evicted, the Purchaser would not be able to make the payment on a vacant 
property. On May 17, 2010, the Purchaser offered to transfer title to Applicant and his 
spouse on payment of $5,636.21, half of what the Purchaser had invested in the property, 
and them assuming payment at $62.50 per month on a $5,000 lien on the property. 
According to Applicant’s attorney, Applicant did not have the funds to pay the settlement. 
(AE E.) Applicant testified that he would not pay because he owed the Purchaser nothing 
and that all he did was sign papers and the Purchaser took his home. (Tr. 34.) The creditor 
holding the note secured by the deed of trust executed in November 2005 foreclosed on 
the loan and redeemed the property, and sold it in March 2011 to settle the defaulted 
mortgage. (AEs B, E.) Applicant understands that he made a mistake in not consulting with 
a lawyer before selling the house in state X. (Tr. 56.)  
 
In May 2012, the home-equity loan was charged off in the amount of $45,014 for 
nonpayment since August 2010. (GE 4; AE B.) Applicant had called the bank holding the 
home-equity loan around May or June 2010 and asked to restructure it to a personal loan 
not tied to the home in state X so that he could make payments.3 The bank advised him 
that there were no options. (AE B; Tr. 37-38.) 
 
On September 17, 2012, Applicant completed and certified to the accuracy of a 
Questionnaire for National Security Positions (SF 86). In response to inquiries into any 
delinquency involving routine accounts, Applicant disclosed the charged-off home-equity 
loan for $42,000 in May 2012, and stated, “HOUSE WAS SOLD AND THE HOME EQUITY 
WAS TAKEN AWAY FROM IT. I MADE SEVERAL ATTEMPTS TO TALK WITH THE 
[BANK].” (GE 1.) A check of Applicant’s credit on September 20, 2012, revealed that the 
home-equity loan had been charged off and was in collection for $45,014, but that he owed 
nothing on the mortgage for the property in state X after it was redeemed in a foreclosure. 
(GE 4.) 
 
Applicant was on medical leave from his job from September 2012 to December 
2012 related to an injury at work sustained in May 2012. Shortly after he returned to work 
on light duty, he was interviewed by an authorized investigator for the Office of Personnel 
Management (OPM) on December 14, 2012. Applicant indicated that he had sold his home 
and the home-equity loan to the Purchaser through a sales contract, and that the bank 
turned to Applicant for payment after the Purchaser stopped paying the mortgage. The 
                                                 
3 Applicant inaccurately recalled that the bank informed him that he had no options before he retained legal 
counsel. (Tr. 41.) Records from his attorney (AE E) show that he was retained more than a year before the 
June 2010 letter from the bank. 
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bank then took the property and sold the house for the debt balance. However, the bank 
continued to pursue Applicant for the home-equity loan, which Applicant claimed had been 
bought by the Purchaser. Applicant claimed that the home-equity loan should have been 
paid through the sale of the property. He had no explanation for how the bank was able to 
separate the mortgage from the home-equity loan and pursue him for the balance. 
Applicant denied any financial problems and attributed the mortgage and home-equity loan 
defaults to the actions of the Purchaser. (GE 5.)   
 
In May 2014, Applicant and his spouse bought a new home with a mortgage of 
$189,039. Applicant sold their mobile home to his cousin for $1,500. (Tr. 57-58.) Before 
they were approved for the mortgage, their lender verified that they were not being held 
liable for the balance of the home-equity loan in that the $45,014 charged-off balance had 
been included in the foreclosure and that no deficiency balance was owed. (AE C; Tr. 44-
45.) As of February 3, 2015, Equifax Mortgage Solutions was still reporting a $45,014 
balance owed on the account, but as of May 2012. (GE 3.) 
 
In May 2015, Applicant requested verification of the listing of the foreclosed 
mortgage account on his credit report. He retained the services of a law firm to dispute with 
the credit reporting agencies the listing of the derogatory mortgage and home-equity loan 
information on his credit record and to monitor his credit. (AE D; Tr. 49.) He did nothing to 
verify its business practices before paying them. He responded to an advertisement on 
television. When asked by Department Counsel how he knew that he could trust the law 
firm, Applicant responded, “Shot in the dark.” (Tr. 49.) As of February 2016, Applicant and 
his spouse were paying the law firm only for credit monitoring. (Tr. 49.) 
 
As of September 9, 2015, Trans Union was reporting that it had verified the $45,014 
charged-off balance on the home-equity loan as Applicant’s debt. In contrast, Applicant 
reportedly owed nothing on the mortgage loan after foreclosure and then sale of the 
collateral. (AE B.) As recently as January 5, 2016, the bank that held the mortgage on the 
home in state X was still in the process of reviewing his inquiry about the mortgage loan. 
(AE A.) Applicant has not received a cancellation of debt (1099-C) for the home-equity 
loan. (Tr. 52.) 
 
Applicant has been making timely payments on the mortgage for his new home and 
on an automobile loan obtained in October 2014 for $40,697. His car payments are $634 
per month. (GE 3; Tr. 55.) 
 
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. 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 
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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 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 are reasonable, logical, and based on the evidence 
contained in the 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 
that the applicant may deliberately or inadvertently fail to safeguard classified information. 
Such decisions entail a certain degree of legally permissible extrapolation about potential, 
rather than actual, risk of compromise of classified information. Section 7 of Executive 
Order 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). 
 
Analysis 
 
Guideline F, Financial Considerations 
 
 The security concerns about financial considerations are set forth 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. 
 
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 Applicant and his spouse signed a contract of purchase agreeing to sell a property 
that served as their residence while on a long-term assignment in state X for their 
employer. For a purchase price of $215,000, they received $10 and a promissory note of 
$4,990 in return for the Purchaser making the payments on the mortgage encumbering the 
property. Applicant and his spouse contractually acknowledged that the mortgage would 
not be assumed by the Purchaser and would remain in their names. Consequently, they 
and not the purchaser defaulted when the Purchaser stopped making payments on their 
mortgage for them in 2010. Applicant now claims that he thought that he entered into a 
two-year contract with the Purchaser to sell the home for them, and that he had sold the 
property to the tenant. However, records filed in circuit court show that Applicant and his 
spouse signed over the deed to the Purchaser for $10 consideration in July 2007. 
Applicant knowingly accepted the risk that the Purchaser would default on the payments. 
Applicant was notified by his mortgage lender around April 2010 that the mortgage 
payment was late. The home-equity loan was considered delinquent as of July 2010. 
Applicant made no effort to pay the mortgage or home-equity loans after learning that the 
payments were delinquent. Presumably because Applicant owed no deficiency on the 
mortgage after the foreclosure sale, the mortgage default was not alleged in the SOR. 
However, disqualifying conditions AG ¶ 19(a), “inability or unwillingness to satisfy debts,” 
and AG ¶ 19(c), “a history of not meeting financial obligations” are established because of 
the home-equity loan, which, as alleged, was charged off for $45,014. 
 
 Concerning potentially mitigating conditions, 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,” applies in that the loan default at issue was an aberration. Applicant has 
otherwise managed his finances responsibly. That being said, Applicant exercised such 
poor financial judgment regarding the sale of his home in state X to cast doubt on his 
judgment, reliability, and trustworthiness. He now claims that he “unknowingly” signed a 
contract that gave ownership of the property to a limited liability company. About the 
charged-off home-equity loan, Applicant indicated that his lender wanted him to pay the 
debt when someone else owned the home. Applicant was naive and assumed facts not 
borne out in the contract. The evidence shows that he and his spouse signed a brief, 
straightforward addendum in which they legally acknowledged that the Purchaser would 
not assume the mortgage. There is no evidence that Applicant and his spouse were 
pressured into signing the contract or, six weeks later, into deeding the house to Purchaser 
for $10 in consideration. The contract does not mention the home-equity loan. Even so, 
Applicant and his spouse benefitted from the relationship in that the Purchaser made two 
years of payments on the mortgage before falling behind when the tenant had problems 
paying the rent. It was only then that Applicant contacted a lawyer, who told him he had 
little legal recourse. 
 
 There is conflicting evidence with respect to whether Applicant still owes the 
$45,014 charged-off balance of the home-equity loan. All the credit reports in evidence list 
the debt as having an unpaid balance of $45,014 with no payment since August 2010. 
However, Applicant submitted evidence after his hearing showing that he was granted a 
mortgage in May 2014 to purchase his current residence only after the lender verified that 
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he had a zero balance on the home-equity loan. Account information and the letter from his 
current mortgage provider indicate that the charged-off home-equity loan was verified as 
included in a foreclosure and that no deficiency balance is owed. See AE C.  Applicant’s 
post-hearing evidence tends to indicate that the home-equity loan was tied to the mortgage 
and the foreclosure and sale of the property resolved both loans. There is a basis to apply 
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.” AG ¶ 
20(d), “the individual initiated a good-faith effort to repay overdue creditors or otherwise 
resolve debts,” has limited applicability. When the loans came into default in 2010, 
Applicant contacted his lender about possible restructuring the home-equity loan so that he 
could make payment. However, after he was informed in June 2010 that there were “no 
available workout options,” he made no efforts to pay the debt. While Applicant’s credit 
score may be adversely affected by the $45,014 charged-off balance on his credit record, 
there is no evidence that he is being pursued for any or all of the debt. Without other 
evidence of financial overextension, there is little risk that Applicant will engage in illegal 
acts to generate funds. 
 
Whole-Person Concept 
 
Under the whole-person concept, the administrative judge must consider the totality 
of an applicant’s conduct and all relevant circumstances in light of the nine adjudicative 
process factors in AG ¶ 2(a).4 The analysis under Guideline F is incorporated in my whole-
person analysis. Some of the factors in AG ¶ 2(a) were addressed under that guideline, but 
some warrant additional comment. 
 
 A determination of an applicant’s eligibility for a security clearance should not be 
made as punishment for specific past conduct, but on a reasonable and careful evaluation 
of the evidence to determine if a nexus exists between established facts and a legitimate 
security concern. The concern in this case is whether the poor judgment Applicant 
exercised with respect to the sale of property X is likely to recur. To that end, Applicant 
understands that he made a costly mistake. He lost a home on which he made payments 
for three years with adverse consequences to his own credit. Some concern arises 
because Applicant is currently paying a law firm to monitor his credit, and he did nothing to 
verify its business practices before paying them. He responded to an advertisement on 
television. When asked by Department Counsel how he knew that he could trust the law 
firm, Applicant responded, “Shot in the dark.” However, there is no evidence that Applicant 
                                                 
4 The factors under AG ¶ 2(a) 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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is not meeting his current financial obligations. Applicant’s financial situation is sufficiently 
stable to grant or continue his security clearance eligibility. 
 
Formal Findings 
 
Formal finding for or against Applicant on the allegation set forth in the SOR, as 
required by section E3.1.25 of Enclosure 3 of the Directive, is: 
 
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 or continue Applicant’s eligibility for a security 
clearance. Eligibility for access to classified information is granted. 
 
_____________________ 
Elizabeth M. Matchinski 
Administrative Judge