Foreclosures Costing Some Borrowers Their Jobs

June 8, 2011

Foreclosure can mean more than just a blemish to borrowers’ credit record--it can jeopardize their job too. Federal contractors and employees are finding a foreclosure can cost them their federal security clearance and ultimately their job. It can take years to restore a security clearance so they can work again too.

Many employees who have security clearances are required to report mortgage defaults and other financial issues to their company’s or agency’s security officer.

About 70 security clearance appeals involving foreclosures and other distress sales were reported from January 2006 through January 2010 by the U.S. Defense Department’s Office of Hearings and Appeals. Of those 70 cases, 62 clearances were revoked or denied, according to reports.

"Losing your security clearance is like losing your most marketable aspect for employment," Travis John, a real estate broker, told the Orlando Sentinel.

David P. Price, a lawyer who specializes in security clearance cases, says he’s seen financial related security clearance problems double in recent years.

For borrowers at risk of foreclosure, they usually have more success at keeping their security clearance if they can prove that their mortgage was a sensible loan that did not overextend them at the time and also show they’ve tried to find a work-out solution, such as a short sale. However, Price says that even a short sale doesn’t put borrowers in the clear since it can take a long time to complete such transactions and increase the chance of a foreclosure.

Source: “Foreclosures Put Workers’ Security Clearances at Risk,”Orlando Sentinel (June 7, 2011)