If a soldier willingly forecloses on a house due to not being able to afford both rent and a mortgage, how will that impact his career?

SSG Private RallyPoint Member — Sun, 26 Jun 2022 18:13:09 -0400

I have a soldier that was in the process of a foreclosure before enlisting, once he enlisted it stopped the process and he was told by the bank that they could not foreclose on him due to active military service. He was able to get a security clearance once he was in. My question is if he were to foreclose on the house willingly due to not being able to afford both rent and a mortgage will he lose his security clearance, be made to reclass to another MOS that doesnt require a clearance or worse be discharged out of the Army? Please no negative comments please, just looking for some insight to assist this soldier the best way possible going forward.

Response by SGM Erik Marquez made Jun 26 at 2022 7:21 PM

SGM Erik Marquez — Sun, 26 Jun 2022 19:21:58 -0400

SSG Private RallyPoint Member What I think your looking for is a cite from a reg, policy ect.. But you wont find one.
A foreclosure will be considered in a determination for clearance suspension, but its a decision made, not a black or white check box.
Your SM needs to go have a sit down with the BN or BDE G2 security manager and maybe even the G2 manager at Div. The more they know before the issue is forced upon them the more they can do (if the SM deserves the assistance)

Response by SFC Private RallyPoint Member made Jun 26 at 2022 8:28 PM

SFC Private RallyPoint Member — Sun, 26 Jun 2022 20:28:28 -0400

No he probably won't lose his clearance but it needs to get reported to DoD CAF through his S2. If he didn't put this on his SF86 that's another issue, but they likely would have found out during the background investigation and would have not adjudicated it if so.

Also as I have stated before, there's a new DoD policy that has classified military as a "national security position" so everyone in the military has to be able to pass a T3 investigation at minimum and maintain a Secret clearance. Even legal residents have to be able to pass that investigation, they just can't get a clearance until they get citizenship.

You need to go with him to S2 but I don't think he'd get a Letter of Intent to Revoke based on what you've said. As long as he reports it through S2 to CAF.

Response by CPT Lawrence Cable made Jun 27 at 2022 5:44 AM

CPT Lawrence Cable — Mon, 27 Jun 2022 05:44:06 -0400

Has he attempted to work with his bank and sell the property? Most financial institutions don't want the house back if they can find a way around it. If he isn't upside down on his mortgage, a sale would make more sense.

Response by SSgt Christophe Murphy made Jun 27 at 2022 7:56 AM

SSgt Christophe Murphy — Mon, 27 Jun 2022 07:56:57 -0400

As Capt Cable said about the mortgage. Unless the Solider is upside down with the mortgage or some other red tape I would suggest just selling the home outright. Those details also matter in regards to the clearance. The big thing about financial woes and clearances is whether or not the Service Member is open and pursuing a solution. The only time I have seen a clearance pulled for financial risk is when the Service Member pushes against assistance and keeps going deeper into debt.

Response by SFC Private RallyPoint Member made Jun 27 at 2022 11:31 AM

SFC Private RallyPoint Member — Mon, 27 Jun 2022 11:31:17 -0400

I had a similar situation happen to me. I bought a house and PCSed, some meth heads moved in, I was never able to get it rented again and I got divorced. I tried to get my ex to sign and submit paperwork for a short sale but she never would. Every 90 days I would get a foreclosure notice and then another notice saying it was pushed another 90 days. I contacted the company and begged them to just foreclose it and be done so it could finally be off my credit report as a running missed payment every month. On top of that, the HOA was notoriously terrible and had been hitting me with fines and late payments that I couldn't pay after my divorce (I was living on about $200 a month after child support, alimony, and rent), and it had racked up around $15k by that point. They said they couldn't close on someone on active in my state.

This went on for about five years until I just forgot about it. One day, I looked up the house on zillow to see what it was worth because housing was skyrocketing again, and I discovered that it had been sold the year before. They never even told me lol. I guess it made enough money to break even so I didn't owe anything, even with those insane HOA expenses they had hit me with.

Response by SFC Ralph E Kelley made Jun 27 at 2022 10:36 PM

SFC Ralph E Kelley — Mon, 27 Jun 2022 22:36:53 -0400

Best that be up front with your security folks. If he seems to trying to 'hide' the problem then it becomes something a USA enemy might/could blackmail him.

Response by MSG Thomas Currie made Aug 26 at 2022 6:15 PM

MSG Thomas Currie — Fri, 26 Aug 2022 18:15:37 -0400

The bank absolutely COULD HAVE foreclosed on the mortgage he defaulted on before enlisting. The Soldiers and Sailors Civil Relief Act does not block such foreclosures -- the bank might have an internal policy against foreclosing on active military, but there is no federal law preventing it and I doubt there is a state law (although you'd have to check based on whatever state it is).

He cannot "foreclose" willingly or otherwise -- foreclosure is something the bank has to do.

If the house is worth more than he owes, he could sell it and pay off the debt, which would be a good outcome.

If the house is worth almost what he owes, he could try to work with the bank to see if they would allow a Short Sale, where he sells the house for what it is worth, pays that to the bank and still owes the rest -- probably refinanced at a higher rate.

He could ask the bank to foreclose, but that is up to the bank.

If he hasn't been paying the mortgage, his credit is already shot, a foreclosure won't make his credit score much worse but it might wake up someone in the security staff to take a look at him again.

As others have mentioned, it isn't a fixed Yes/No situation, someone in the S2/G2 will look at his overall record to make a decision. Having a foreclosure on his record SHOULD NOT be any worse than his current situation where he is presumably deep in debt.

He needs to realize that getting the bank to foreclose on the house will NOT eliminate the debt he owes for the mortgage. The bank will try to sell the house. Whatever the bank gets for the house will be applied to the amount that he owes -- he will still owe the rest of the amount, including all the interest and penalties that have piled up while he has been twiddling his thumbs and moaning about not being able to afford the mortgage that he took out.

If the security managers decide that he is too irresponsible to keep his clearance, he would be reclassed to an MOS that doesn't require a clearance but he usually won't be discharged -- although he would be forced out eventually from not being able to hold a clearance.