ISCR Case 15-03610.h1

Case Headnote

ISCR Case No. 15-03610.h1

deniedSep 7, 2017· Hon. Darlene Lokey Anderson· hearing

Summary

A 41-year-old defense contractor, holding a Bachelor's degree in Medical Technology, was denied a security clearance due to financial considerations under Guideline F. The Administrative Judge, Darlene D. Lokey Anderson, found that the applicant had five delinquent debts, including a strategic default on a rental property, which raised concerns about his reliability and trustworthiness. This outcome occurred despite the applicant's professional commendations and assets in the Philippines.

Key allegations included a 2006 investment rental property that was strategically defaulted on in 2009 after the rental market became difficult and the property sustained damage. The first mortgage lender forgave a balance of $150,239.09 in 2013, and the property was foreclosed upon in 2015. A $28 debt to the city was paid. A home equity loan with Navy Federal Credit Union, used for a divorce settlement, was 120 days past due for approximately $4,326, with a principal balance of $51,089. The applicant has been making $75 monthly payments since 2009, reducing the debt to about $3,975.

Additionally, a second lien on the foreclosed rental property, originally for $25,000, was charged off for approximately $18,962. After the first lien holder sold the property, about $20,000 was used to pay down this second lien. The applicant believes he still owes about $27,000, including fees, but the lender has indicated no intention of pursuing collection. The denial was based on the strategic default, the applicant's perceived ability to pay the mortgage but choosing not to, and overall financial conduct that raised doubts about his judgment, reliability, and moral character.

Why the Applicant Was Denied

Applicant strategically defaulted on a rental property mortgage, indicating poor judgment and lack of reliability.
Applicant had the financial means to pay the mortgage but chose not to, raising questions about his trustworthiness.
The applicant's financial conduct was viewed unfavorably, leading to doubts about his moral character.

Conditions Referenced

Disqualifying

AG ¶ 19(a)appliedInability to Satisfy Debts
AG ¶ 19(b)appliedUnwillingness to Satisfy Debts Regardless of the Ability to Do So
AG ¶ 19(c)appliedHistory of Not Meeting Financial Obligations

Mitigating

AG ¶ 20(a)rejectedBehavior Happened Long Ago or InfrequentlyThe applicant's financial issues were recent and significant.
AG ¶ 20(d)rejectedGood-faith Effort to Repay DebtsThe applicant's strategic default undermined claims of good faith.

Key Rule Quoted

“Failure 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 or sensitive information.”
— AG ¶ 18

Procedural Posture

SOR issuedMar 24, 2016
Answer filedApr 22, 2016
Hearing heldSep 15, 2016Hearing convened as scheduled.
Decision dateSep 7, 2017

Cite For

Strategic Defaults Viewed Unfavorably Under Guideline F
Financial Considerations Impacting Security Clearance Eligibility
Importance of Demonstrating Good Judgment in Financial Matters for Security Clearance

Editorial summary generated for research. Not legal advice; not a prediction. Verify against the full decision before relying on any quoted language.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	In 2006, Applicant purchased a rental property for investment purposes. In the beginning he was receiving enough rent to cover the mortgage cost. By 2009, the rental market became more difficult, and he could not find a renter. There was damage to the property, and Applicant decided that he could not afford to continue to maintain the property and pay the mortgage without a renter. Applicant stopped paying the mortgage, and allowed the house to be foreclosed upon in 2015. Applicant received a letter from the lender dated May 30, 2013, indicating that they have agreed to forgive all of the balance on his first mortgage lien in the amount of $150,239.09. $150,239	Against Applicant	Mortgage or Home Loan Debt	Admitted	(b) unwillingness to satisfy debts regardless of ability (c) a history of not meeting financial obligations	—	—
1.b	A debt to the city for an account placed for collection in the amount of $28 has been paid. $28	For Applicant	Unspecified Financial	Admitted	—	—	—
1.c	A debt to Navy Federal Credit Union on a home equity loan account was 120 days or more past due in the approximate amount of $4,326 with a principal balance of $51,089. Applicant explained that he used these funds to compensate his ex-wife during their divorce settlement. This loan pertains to Applicant’s primary residence at the time. As a result of the divorce, he eventually had to short sale the property. Since 2009, Applicant has been making payments of $75 monthly toward the payment of the debt which was agreed upon by the lender. At this point, Applicant has reduced the debt to about $3,975. $4,326	For Applicant	Mortgage or Home Loan Debt	Admitted	—	—	—
1.d	A debt owed to a CLC CONSUMER/DITECH on a home equity loan account was charged off in the approximate amount of $18,962. Applicant explained that this was the second lien on the rental property that was foreclosed upon in allegation 1(a) of the SOR. This equity loan or second mortgage was originally for $25,000 and was sold to another lender which is NLO Funding, the same lender set forth in allegation 1(d) of the SOR. When the rental house was sold by the lender holding the first lien, about $20,000 was used to pay the second lien holder. He states that after the proceeds were used to pay down the second, Applicant believes that he owes about $27,000 which include later fees, reasonable attorney fees, costs, election demands, receivership and the like. Applicant states that he has not been contacted by the lender, but has reached out to their attorneys. Applicant was informed by e-mail that the lender has no intention of pursuing the collection account. Applicant is willing and capable of paying the debt if the lender contacted him and told him to do so. $18,962	Against Applicant	Mortgage or Home Loan Debt	Admitted	(b) unwillingness to satisfy debts regardless of ability (c) a history of not meeting financial obligations	—	—
1.e	specific text not stated in this decision	Against Applicant	Unspecified Financial	Unknown	(b) unwillingness to satisfy debts regardless of ability (c) a history of not meeting financial obligations	—	—

Allegation

Finding

Type

Response

Disqualifying (¶19)

Mitigating applied (¶20)

Mitigation

1.a

In 2006, Applicant purchased a rental property for investment purposes. In the beginning he was receiving enough rent to cover the mortgage cost. By 2009, the rental market became more difficult, and he could not find a renter. There was damage to the property, and Applicant decided that he could not afford to continue to maintain the property and pay the mortgage without a renter. Applicant stopped paying the mortgage, and allowed the house to be foreclosed upon in 2015. Applicant received a letter from the lender dated May 30, 2013, indicating that they have agreed to forgive all of the balance on his first mortgage lien in the amount of $150,239.09.

$150,239

Against Applicant

Mortgage or Home Loan Debt

Admitted

(b) unwillingness to satisfy debts regardless of ability

(c) a history of not meeting financial obligations

—

1.b

A debt to the city for an account placed for collection in the amount of $28 has been paid.

$28

For Applicant

Unspecified Financial

Admitted

—

1.c

A debt to Navy Federal Credit Union on a home equity loan account was 120 days or more past due in the approximate amount of $4,326 with a principal balance of $51,089. Applicant explained that he used these funds to compensate his ex-wife during their divorce settlement. This loan pertains to Applicant’s primary residence at the time. As a result of the divorce, he eventually had to short sale the property. Since 2009, Applicant has been making payments of $75 monthly toward the payment of the debt which was agreed upon by the lender. At this point, Applicant has reduced the debt to about $3,975.

$4,326

For Applicant

Mortgage or Home Loan Debt

Admitted

—

1.d

A debt owed to a CLC CONSUMER/DITECH on a home equity loan account was charged off in the approximate amount of $18,962. Applicant explained that this was the second lien on the rental property that was foreclosed upon in allegation 1(a) of the SOR. This equity loan or second mortgage was originally for $25,000 and was sold to another lender which is NLO Funding, the same lender set forth in allegation 1(d) of the SOR. When the rental house was sold by the lender holding the first lien, about $20,000 was used to pay the second lien holder. He states that after the proceeds were used to pay down the second, Applicant believes that he owes about $27,000 which include later fees, reasonable attorney fees, costs, election demands, receivership and the like. Applicant states that he has not been contacted by the lender, but has reached out to their attorneys. Applicant was informed by e-mail that the lender has no intention of pursuing the collection account. Applicant is willing and capable of paying the debt if the lender contacted him and told him to do so.

$18,962

Against Applicant

Mortgage or Home Loan Debt

Admitted

(b) unwillingness to satisfy debts regardless of ability

(c) a history of not meeting financial obligations

—

1.e

specific text not stated in this decision

Against Applicant

Unspecified Financial

Unknown

(b) unwillingness to satisfy debts regardless of ability

(c) a history of not meeting financial obligations

—

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Case Profile

Summary

Why the Applicant Was Denied

Conditions Referenced

Key Rule Quoted

Procedural Posture

Cite For

Full decision

DEFENSE OFFICE OF HEARINGS AND APPEALS

HEARING

APPEARANCES

STATEMENT OF CASE

FINDINGS OF FACT

POLICIES

ANALYSIS

WHOLE PERSON CONCEPT

FORMAL FINDINGS

CONCLUSION