WASHINGTON — The Office of the Comptroller of the Currency has dismissed one of the consultants overseeing a massive foreclosure review after it discovered a conflict of interest in outside work the company has performed.

The OCC said Friday that it has directed Allonhill to cease reviewing any loan files related to the independent foreclosure review, which was required under the April 2011 consent orders with the 14 largest mortgage servicers.

Allonhill was the primary independent consultant for Aurora Bank FSB, and had also reviewed Wells Fargo loan files as a subcontractor for Promontory Financial Group.

The OCC said it made the determination after Allonhill disclosed that it had performed work for "third parties," including reviewing loan files that are part of the same pool of loans that the company was reviewing as part of the foreclosure review.

The agency said it "determined [the work] to be inconsistent with the independence requirements for independent consultants, prescribed by the OCC."

"The decision does not reflect on the quality of work performed to date by Allonhill but is necessary to ensure the independence of the loan review process going forward," the OCC said in a press release.

The OCC's stated reason for removing Allonhill was remarkable given that concerns about Allonhill's previous work for Aurora were raised more than six months ago. Michael Olenick spotted the due diligence firm's previous work for Aurora shortly after the OCC contractors were announced, and his discovery received significant attention from financial blogs like Naked Capitalism and from Gretchen Morgenson at the New York Times.

In its press release Friday, the agency did not say when Allonhill reported the work to the OCC, when it performed the work in question or how long it took the agency to make the determination that there was a conflict.

An OCC spokesman said the agency would have no additional comment at this time.

He would not elaborate on the nature of the work beyond what was described in the release, or whether Aurora had hired a replacement consultant.

Allonhill, a Denver company specializing in mortgage due diligence and credit risk management, said the OCC's action was "wholly without merit."

"At Allonhill, we have always been committed to the highest levels of integrity and transparency," Sue Allon, the company's founder and chief executive, said in the statement released Friday. "While we have the utmost regard for the objectives of the independent foreclosure review process and its positive impact on the mortgage industry, we are profoundly disappointed by the OCC's decision."

"We look forward to continuing to provide the highest quality of services to our clients and helping this country recover from the mortgage crisis."

A spokeswoman for Promontory, which will also lose Allonhill's services as a subcontractor, said Friday, "We are fully compliant with the OCC directive and this action will have no significant impact on our review work."

A spokesman for Aurora Bank did not immediately respond to a request seeking comment.

The OCC has been dogged by questions from lawmakers and consumer advocates about the independence of the review process.

Under the consent orders, the servicers are required to hire an independent consultant to conduct "look back" reviews and to identify how many borrowers may have been harmed by a variety of foreclosure errors.

In January, four Congressional Democrats asked the Government Accountability Office to investigate the potential conflicts between the banks and the consultants they hired to review past foreclosure practices. They also criticized the OCC and the Federal Reserve, which regulates two of the 14 banks, for allowing servicers to choose their own consultants.

"We need the GAO's independent assessment to ensure the process is fair to homeowners — especially since regulators are letting the big banks pick their own auditors," Sen. Robert Menendez, D-N.J., said in a press release at the time. "That's like letting the fox watch the henhouse."

Some have also raised concerns about other consultants, including Deloitte, which is the primary consultant for JPMorgan Chase, and PricewaterhouseCoopers, which is doing reviews for Citigroup, U.S. Bank and SunTrust.

The OCC has maintained that regulators carefully screened the consultants, and had the ability to, and in some cases did, reject the banks' choices of consultants and law firms based on a review of their past work.

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