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Summary

The applicant, a 59-year-old former U.S. Army member, faced security clearance denial under Guideline F due to significant unresolved financial issues, including multiple foreclosures and delinquent debts totaling approximately $758,365. Despite some efforts to address his financial situation, the judge found insufficient evidence of effective debt management or financial counseling, leading to concerns about the applicant's judgment and reliability.

Under Guideline F (Financial Considerations), the Statement of Reasons alleged the following: Satellite cable company, $310 – Applicant disputed what he believed to be an overcharge. He worked with the creditor, and negotiated a settlement. On May 17, 2012, he paid $201.87. He provided proof that the balance was zero as of that date (1.a). Mortgage, $122,000. In the early 1990s, Applicant purchased this property as an investment. In 2008, he rented it out for $1,750 per month. In 2009, he started to have problems keeping up with the mortgage payments, and was delinquent three times. In 2011, he dropped the rent to $1,350 because of the soft rental market. Also in 2011, he hired a realtor who was unsuccessful in negotiating either a mortgage loan modification or a short sale. The realtor submitted a letter dated April 2012, noting that he received no assistance from either the mortgage company or the bank. However, Applicant's credit reports of June and December 2011 show that the loan was modified. His August 2012 credit report shows the property was foreclosed (1.b). Home equity loan, $50,000; and 1.c-2: Home equity loan, $76,000. In March 2007, Applicant obtained two home equity loans from the same lender, both secured by the property listed in allegation 1.b. Applicant requested a payment plan, and in July 2011, the lender offered “long term repayment plan agreements” for each loan. The lender stated that it, “agreed to allow you to cure your default and reinstate your account, by making a ‘partial reinstatement payment’…and by complying with the payment plan set forth below, in order to complete the total reinstatement.” Applicant was required to pay $607 per month on the $50,000 loan, and $1,105 monthly on the $76,000 loan, with both plans to start on July 20, 2011. Applicant provided evidence of three payments between April and June 2011 of approximately $306 each on the $50,000 loan. On the $76,000 loan, Applicant documented payments of $507 in February, 2011; $603 in April, May, and June 2011; and $1,105 in July 2011. Applicant's August 2012 credit report shows that both loans are charged off, with outstanding balances of $50,582 and $76,515 (1.c-1). Home equity loan, $76,000. In March 2007, Applicant obtained two home equity loans from the same lender, both secured by the property listed in allegation 1.b. Applicant requested a payment plan, and in July 2011, the lender offered “long term repayment plan agreements” for each loan. The lender stated that it, “agreed to allow you to cure your default and reinstate your account, by making a ‘partial reinstatement payment’…and by complying with the payment plan set forth below, in order to complete the total reinstatement.” Applicant was required to pay $607 per month on the $50,000 loan, and $1,105 monthly on the $76,000 loan, with both plans to start on July 20, 2011. Applicant provided evidence of three payments between April and June 2011 of approximately $306 each on the $50,000 loan. On the $76,000 loan, Applicant documented payments of $507 in February, 2011; $603 in April, May, and June 2011; and $1,105 in July 2011. Applicant's August 2012 credit report shows that both loans are charged off, with outstanding balances of $50,582 and $76,515 (1.c-2). Home equity loan, $78,000. In January 2007, Applicant bought a single-family house for $398,000, to use as a rental property. The monthly payments were $2,100. He later obtained this home equity loan, secured by the property. Eventually, he could not obtain renters, and could not afford the mortgage payments. In 2009, he tried to sell it through the company discussed previously, which he states engaged in fraudulent practices. Applicant provided an Internal Revenue Service (IRS) Form 1099-A (Acquisition or Abandonment of Secured Property), dated January 28, 2010, which indicated the property was foreclosed on July 6, 2009. The 1099-A notes that the outstanding balance was $78,721.79, and “the borrower was personally liable for repayment of debt.” However, Applicant also received a Form 1099-C (Cancellation of Debt), dated January 26, 2010. It shows that on July 6, 2009, the debt of $78,721.79 was cancelled, and “the borrower was not personally liable for repayment of debt.” Applicant's August 2012 credit report shows no outstanding balance on this loan (1.d). First mortgage loan, $351,000; and Home equity loan, $81,055. In May 2007, Applicant purchased an investment property for $438,000. His mortgage loan was $351,000, and he obtained a home equity loan of $87,795. He rented out the property for $2,200 per month. In 2009, he could not find renters, and could not afford the monthly payments. He failed in his efforts to short-sell the property through the investment company discussed previously. He then sought a loan modification, with the assistance of the attorney discussed above. After Applicant paid $5,400, the attorney lost his license to practice. By November 2009, the first mortgage was in foreclosure and the home equity loan was more than four months late. The collateral was subsequently sold. Applicant received a 1099-A from the IRS, dated April 4, 2011, showing foreclosure on the $351,000 loan on February 10, 2010. It lists a fair market value of $207,000; however, the file does not provide information on the amount the lender may have received through a sale. Applicant did not provide evidence that he received a 1099-C for this property, which would have cancelled the mortgage debt (1.e). Home equity loan, $81,055. In May 2007, Applicant purchased an investment property for $438,000. His mortgage loan was $351,000, and he obtained a home equity loan of $87,795. He rented out the property for $2,200 per month. In 2009, he could not find renters, and could not afford the monthly payments. He failed in his efforts to short-sell the property through the investment company discussed previously. He then sought a loan modification, with the assistance of the attorney discussed above. After Applicant paid $5,400, the attorney lost his license to practice. By November 2009, the first mortgage was in foreclosure and the home equity loan was more than four months late. The collateral was subsequently sold. Applicant received a 1099-A from the IRS, dated April 4, 2011, showing foreclosure on the $351,000 loan on February 10, 2010. It lists a fair market value of $207,000; however, the file does not provide information on the amount the lender may have received through a sale. Applicant did not provide evidence that he received a 1099-C for this property, which would have cancelled the mortgage debt (1.f).

The judge denied the clearance. The government raised disqualifying conditions AG ¶ 19(a), AG ¶ 19(c). The judge applied mitigating conditions AG ¶ 20(b), AG ¶ 20(d). The decision turned on the following: The applicant has unresolved debts totaling approximately $600,000, including multiple foreclosures and delinquent loans; The applicant did not provide evidence of financial counseling or a current plan to resolve his debts; The applicant's financial difficulties stemmed from poor judgment in assuming excessive debt during a market downturn.

Why the Applicant Was Denied

• The applicant has unresolved debts totaling approximately $600,000, including multiple foreclosures and delinquent loans.
• The applicant did not provide evidence of financial counseling or a current plan to resolve his debts.
• The applicant's financial difficulties stemmed from poor judgment in assuming excessive debt during a market downturn.

Conditions Referenced

Key Rule Quoted

“A security clearance decision is intended only to resolve whether it is clearly consistent with the national interest for an applicant to either receive or continue to have access to classified information.”

Procedural Posture

• SOR issuedMay 22, 2012
• Answer filedJun 26, 2012Applicant requested a decision without a hearing.
• Hearing held—Decision made based on the record.
• Decision dateNov 6, 2012

Cite For

• Denial of Security Clearance Due to Unresolved Financial Obligations Under Guideline F
• Impact of Poor Financial Management on Security Clearance Eligibility
• Consideration of Market Conditions in Financial Assessments for Security Clearance