Homes in limbo, jobs at risk
Thursday, October 21, 2010
The sudden moratorium on many foreclosures across the country has unexpectedly put some federal workers and contractors in jeopardy of losing their security clearances because of the heightened uncertainty clouding their finances, according to lawyers who handle these cases.
Employees with security clearances are monitored by the government for financial problems that would make them vulnerable to bribery or blackmail. And with many financial companies adopting some form of foreclosure freeze in recent weeks, it's taking longer for some delinquent borrowers to resolve their mortgage cases and put their troubles behind them, the lawyers said.
This problem is especially acute in the Washington region, home to nearly a third of the the nation's 854,000 employees with top-secret clearances.
"Resolving debt is more complicated when the lenders are in paralysis," said Dennis Sysko, a national security lawyer in Glen Burnie. "The longer it is unresolved, the longer the cloud remains."
Lawyers in the Washington area said they are starting to field inquiries about foreclosure delays from workers who have security clearances or are trying to get them. Many don't know whether they should be elated or concerned by the turn of events.
"I'm just really confused because nobody has made clear to me what this foreclosure delay means," said Brian Young, a federal employee from Capitol Heights.
Young bought his first home in October 2007 with a first and second mortgage from Bank of America. At the time, he had the interim secret clearance he needed to do his electrical engineering job at a Defense Department agency, he said. He applied for a permanent clearance soon thereafter.
When the permanent clearance did not come through as quickly as he'd hoped, Young said, his pay was cut, and he fell behind on his mortgage in August. He was engaged in talks with his lender to modify his loan when his security clearance was revoked. His supervisors suspended him from his job, citing him as a financial risk, mostly because of his mortgage problems, he said.
Young is appealing the decision. But as he waits, he's fallen further behind on his mortgage and other bills, including child support payments. Bank of America informed him that it would expedite foreclosure and seize his home, but then the lender suddenly announced a halt to all its foreclosure sales nationwide. This week, the bank said that it would restart foreclosures in some states, but not yet in the Washington region.
"This is just dragging everything out, and my credit keeps taking more hits," Young said. "If it helps me in some way, cool. But I just don't know if it does."
The moratorium comes to D.C.
Foreclosure delays started when Ally Financial, formerly GMAC, suspended evictions last month after concerns arose about flaws in court documents used to seize homes. The firm limited its freeze to the 23 states where lenders have to win a court order to initiate a foreclosure. Other major lenders, including J.P. Morgan Chase and Bank of America, also suspended foreclosures in those states.
Virginia, Maryland and the District were not immediately affected by the lenders' actions. But then Bank of America suspended foreclosures nationwide. Others have since selectively halted foreclosures here. And at least two area circuit courts - in Prince George's and Montgomery counties - are reviewing cases for paperwork flaws.