ORLANDO, Fla. – June 7, 2011 – Foreclosure means more than losing a house and ruining a credit rating for a select group of Central Florida property owners who rely on federal security clearances for their livelihood.

“Losing your security clearance is like losing your most marketable aspect for employment,” said real estate broker Travis John, a local distressed-property specialist who already this year has worked with about a half-dozen sellers facing the loss of their security clearances if their banks foreclose on their properties.

Bank takeovers have particularly harsh consequences for employees of Lockheed Martin Corp., NASA and other federal contractors and agencies in Central Florida. Depending on how a foreclosure is handled, it can cost a wage earner his or her security clearance – and job. And it usually takes years for such people to obtain a new clearance so they can work again.

“There is a very good reason for them to be concerned,” said Virginia lawyer David P. Price, who specializes in security-clearance cases after serving 25 years in the U.S. Navy Judge Advocate General’s Corps.

Price said he has seen the number of financial-related security-clearance problems double in recent years. Though no reports have closely tracked security problems tied to mortgage defaults, federal officials have noted an increase in revocations and denials of security clearances for financial reasons, such as foreclosure.

Debt is one of more than a dozen potential pitfalls for someone with security clearances, along with problems such as criminal arrests and drug or alcohol use. They can prevent a prospective employee from gaining clearance, jeopardize the clearance of an existing employee or stand in the way of an employee seeking a higher-level clearance.

Personal finances come into play largely because of concerns that a contractor or employee could turn to selling confidential information to generate cash for unpaid bills, Price said.

Most employees with security clearances are required to report mortgage defaults and other financial and legal issues to their company’s or agency’s security officer. If they don’t volunteer the information relatively quickly, Price said, it can come back to haunt them during periodic reviews of their finances.

“If you fall behind on the house today, you don’t necessarily have to report today, but take action as soon as possible to mitigate any concerns the government may have,” he said.

Struggling homeowners are better able to keep their clearances if they can document that their mortgage was a sensible loan that didn’t overextend them at the time. They also need to demonstrate that they have taken reasonable and responsible steps to terminate the financial obligation – such as arranging a “short sale” of the property – and that they won’t be burdened with substantial debt once the process plays out.

“There are lending institutions that will write off debt on foreclosures, but the short sale is the better way to go,” Price said, though he cautioned that a short sale – selling a house for less than is owed on the loan – can take a long time, increasing the chances of a foreclosure.

John, the local broker, said his clients with security clearance have been able to sell their homes in short sales and walk away with little or no outstanding debt.

One of them, a 24-year Air Force veteran who spoke only on the condition of anonymity for fear of further damaging her clearance, said she and her husband live in Maryland but bought a vacant subdivision lot in Polk County several years ago with the intention of retiring there.

“It wasn’t necessarily that we couldn’t pay for it,” she said. The problem was that the developer gave them a deadline to start building a home, and by the time that date approached, the property had lost much of its value. Meanwhile, the couple’s Maryland house was “underwater,” meaning it was worth less than the mortgage on it.

“Basically, my livelihood was at stake, and I was looking at not taking care of my family and not making it to retirement,” said the woman, who has experience processing security clearances.

The couple worked with John to list the property as a short sale and continued making payments until they had a purchase offer. Expecting a sale, they stopped making payments, and their lender initiated foreclosure proceedings. At that point, the Air Force veteran said, she confided to John what was at stake if the bank took the property.

The land recently sold in a short sale, and the woman kept her clearance.

“I needed to take steps to prevent what could have happened,” she said during an interview last week. “I knew that nothing good could have come of it.”

According to a General Accounting Office report filed earlier this year, federal security officials have seen an increase in financial problems among workers with clearances, particularly problems with mortgages and foreclosures, though they did not report specific figures.

In Las Vegas, another U.S. metro area hard-hit by foreclosures, one survey found 740 airmen underwater with their mortgages. Two-hundred sixty-three reported they were unable to sell their homes, and 30 were in some stage of foreclosure.

The U.S. Defense Department’s Office of Hearings and Appeals is one of the few government agencies that report security-clearance revocations and denials. From January 2006 through June 2010, it reported considering about 70 security-clearance appeals involving foreclosures and other distress sales. Clearances were revoked or denied in 62 of those cases, according to one Washington lawyer.

Once a clearance is denied, the employee will lose his or her job, Price said, and must begin searching for a prospective employer that will sponsor that person for another security review.

“When your clearance is denied or revoked, it literally can be two years before you’re able to get clearance,” Price said – and that is under the best of circumstances.

Copyright © 2011, The Orlando Sentinel, Fla., Mary Shanklin; Knight Ridder/Tribune Business News. Distributed by McClatchy-Tribune Information Services.