A key adviser of Democratic presidential candidate Barack Obama has resigned after news reports suggesting a past conflict of interest in obtaining a home mortgage.

Jim Johnson quit his role leading Obama's search for a vice-president due to reports that involved his time as chief executive of mortgage giant Fannie Mae.

"Jim did not want to distract in any way from the very important task of gathering information about my vice presidential nominee, so he has made a decision to step aside that I accept," Obama said in a statement.

"We have a very good selection process underway, and I am confident that it will produce a number of highly qualified candidates for me to choose from in the weeks ahead. I remain grateful to Jim for his service and his efforts in this process," Obama said.

On Saturday the Wall Street Journal reported that Johnson had received preferential home loans from scandal hit lender Countrywide Mortgage while he led Fannie Mae, which provides billions of dollars of cash to the home loan industry.

Republicans quickly jumped on the report to accuse Obama, who has spoken out in defence of beleaguered homeowners amid the US real estate collapse, of hypocrisy.

On Monday Doug Holtz-Eakin, the chief economic adviser of Obama's Republican presidential rival John McCain, attacked Johnson's influential position in the Obama campaign.

"I thought it was remarkable that Senator Obama could talk about housing, talk about ethics, and fail to mention that he entrusted the single most important decision in his campaign, the choice of the vice presidential running mate, to a gentlemen, Mr. Johnson, who benefited from preferential lending at Countrywide and state financial payouts," Holtz-Eakin told reporters.

AFP