There is a painful lesson for the smaller players of mortgage finance to learn on the back of the OCC sideswiping Allonhill last week.

Denver-based Allonhill was yanked from the list of qualified reviewers for the OCC consent orders on mortgage servicer foreclosure process.

The OCC cites conflict of interest, something Allonhill denies. Anyone who knows Sue Allon and how she runs her business would be shocked to find a conflict of interest.

As a third-party due diligence provider, her entire firm's purpose is to weed out conflict of interest in the form of fraud from mortgage filings. So it seems the perfect business to provide this service to the OCC.

Yet, the OCC is unwavering, and Allonhill noted this in an email:

"In response to last week’s development, we laid off most of the team members who were working on the foreclosure lookback reviews. We have retained many of them to help service other client portfolios, for which we now have dozens of open requisitions remaining. We are hosting a job fair ... to help those affected find new positions in the industry. Allonhill remains as committed as ever to its many clients outside of this single contract."

It is counterintuitive for the federal government to pose such a threat to small businesses. Allon is passionate about her people and proud of the great work environment at Allonhill.

Still, it is hard to know how damaging this OCC announcement is; how many people let go was not disclosed.

Allon's PR firm tells me the layoffs didn't come under the Worker Adjustment and Retraining Notification Act, known by its acronym WARN, which would have provided numbers and more detail, because the event was "unforeseen."

We must remember the federal government can do this to any entrepreneur in the mortgage finance space. Regardless of the lofty claims of the administration that it will provide tools to support small to medium enterprises, remember it also wields an ax.

jgaffney@housingwire.com