The Red Hat Enterprise Linux operating system must be configured so that all local interactive users have a home directory assigned and defined in the /etc/passwd file.
If local interactive users are not assigned a valid home directory, there is no place for the storage and control of files they should own.
In addition, if a local interactive user has a home directory defined that does not exist, the user may be given access to the / directory as the current working directory upon logon. This could create a Denial of Service because the user would not be able to access their logon configuration files, and it may give them visibility to system files they normally would not be able to access.
How this relates to the STIG checklist: STIG vs SCAP benchmark.