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Executive Summary

Hiring competent loan review staff today is an onerous task for banks and outsourcing vendors alike in a very competitive environment. Both need to source seasoned credit staff who can adapt their mindset and practices to meet the specific needs of loan review analysis.

Many bank loan review department staff not only perform credit analysis but also navigate and socialize their findings with the bank’s business lines. In addition, many bank loan review models involve deep re underwriting and elaborate narrative analyses.

Loan review outsourcing vendors prioritize hires who can perform efficient, succinct credit analysis – typically former commercial lenders and credit officers who have made loans and can produce concise, time bound reviews. Vendors rely heavily on remote and part time talent (including second career professionals) to manage seasonality and control costs. Remote work is a strategic enabler that broadens the candidate pool but requires specialized management and productivity monitoring.

In most banks, the chances for advancement and formal careers in loan review are very limited, which can lead to staff leaving the bank, or moving to other bank departments, creating on-going turnover.

The following explores today’s dynamics and contrasts of loan review staff hiring for banks and loan review outsourcing firms.

Bank Loan Review Department Case Study

A commercial financial institution with $35 billion in assets employs 20 people in their Loan Review department, which includes ops/data people, managers, team leaders and administrative positions. There are about 10 staff members who only perform review work.

The Bank has hired six new review staff in the last year (which was more than usual). Some of the former staff had retired, others moved to better paying positions in the bank and still others to better positions in loan review departments at other banks. Bank management understands that typically there isn’t that much of an internal career path within the Bank’s loan review department and realizes that people may leave for more money.

The Bank feels that their success in hiring good people is directly related to creating detailed job descriptions for each position and lending specialty. They find this to be particularly helpful when looking for people with specialty lending/credit experience (like leveraged lending, agriculture, consumer, etc.). The Bank has created several different templates for the different credit analysis specialties.

The Bank has found success by hiring staff with workout experience and ex-regulators with credit backgrounds (there are other agency tracks where they don’t work directly with loans, and the Bank finds that their level of credit analysis usually isn’t sufficient). Hiring candidates with underwriting experience can be good, though the Bank feels that most underwriters are trained to “sell the deal,” so they tend to create very long write ups. Many new hires from other related disciplines must change their mindset to perform loan review effectively, and for some, the transition is hard. They don’t generally hire ex-auditors unless they are from a bank where the lines between loan review and internal audit are blurred. In those banks, the auditors may have some relevant credit experience. In the Bank’s experience the best candidates are those with a varied and mixed credit/lending background.

The Bank has successfully hired some people from other loan review departments, but they are careful where to hire them from – as they have to come from a bank with a good credit culture. The Bank’s management looks for candidates with experience in institutions that are – more or less – their size and complexity.

The Bank has a hybrid remote work policy but made an exception for both internal loan review and internal audit, due to the “independent” nature of their work. Staff in these departments can work remotely full time. They only hire seasoned people, who can generally handle a remote position.

They don’t hire trainees that can be a drag on the team. Their hires are expected to already have credit training and have the expertise for analyzing more sophisticated credits. Candidates with those skills are costly and management is willing to pay for them.

In the vetting process, the bank utilizes “case studies” which detail the borrower and loan situation and describe the terms and conditions of the borrower/deal. They ask the candidates to create a risk grade for the loan and explain why. They give the candidates three or four case studies 24 hours in advance of the interview.

The bank uses several different types of case studies based on loan products, but no financial or other loan documents are provided. They are looking at their candidate’s thought process, their observations of the case study and their analytical thinking. The process takes about 45 minutes, which they currently remotely, (they used to be concerned that candidates might use AI to create the analysis, but they have found that the AI responses just aren’t that good, so there is no advantage to the candidate that use it).

Outsourced Loan Review Service Provider Case Study

This loan review provider has been in business for over 30 years and has served hundreds of banks from $250 million to over $50 billion in assets. They employ over 50 people in their loan review line of business which includes loan review analysts, operations, quality control, and report writing specialists.

This firm’s loan review staff’s current average time in banking is 29 years with experience in positions like C-Level, Lenders/Relationship Managers (60+%), Chief Credit Officers/Credit Officers (38%), Regional/Market Presidents (37%) and other positions like Underwriter, Credit Review Consultants, Risk Officers and Special Assets.

Most candidates hired have come from submissions to the company website. While they do get referrals from their staff, a higher percentage of outside applicants are hired.

Based on the loan review firm’s experience, the number one attribute for a good loan review analyst hire is commercial lending and/or commercial credit experience. These people are more easily able to understand what the outsourced service is and how and why it is delivered. People with prior bank loan review department experience can find it difficult to retool to a service provider’s more succinct approach.

In this firm’s experience, hiring ex-examiners or regulators can be less productive, as they may have no actual lending experience. Similarly, hiring auditors can be problematic as they typically don’t have the same type of analytical and credit background as a good bank lending or credit officer.

Underwriters can be a good source for a loan review hire depending on how they are trained, as the best hires are those that have worked directly with the lenders on specific deals. Those that are in “underwriting farms” are less likely to understand the nuances and type of analysis needed for loan review.

For vendors, part-time/second career staff can be a great fit as they can work seasonally, which fits the outsourced model. Leveraging part-time staff doesn’t work so well for a bank unless they use a hybrid model (partially outsourced) or there is a seasonal aspect to their portfolio. Part-time staff must be trained, managed and scheduled in a different way than full-time bank staff. This is a somewhat specialized process, since part-time staff may have specific limitations on availability, total hours desired, remote work limitations, etc.

Allowing remote work is a key to successful staffing for a loan review firm. Allowing work from home is particularly important for part-time staff, as it works with their lifestyle. Many of the part-time second career reviewers would not be working at all if they weren’t able to work remotely. Banks that can’t hire remote staff have the “double whammy” of dealing with the expectations many candidates have for remote work and forced sourcing of candidates from the local market. Training and managing remote workers are special skill sets.

This loan review firm has a dedicated hiring/training manager (who also sometimes works in loan review jobs at client banks). The firm’s hiring process includes being interviewed by the hiring manager, then again by recently hired Loan Review Analysts. The new hires best understand the skills needed and can relate to the candidate’s potential on-boarding/transition process.

This loan review firm doesn’t “credit test” their candidates, though some vendor firms can ask them to read a write-up, look at financials and provide a credit analysis. The firm typically only considers senior people with deep banking experience, so there is little value in testing their credit skills. The hiring manager can usually determine what the candidate knows by reviewing their resume and through the interview. The firm does not teach “credit” to their candidates, that skill set is an expectation for all new hires.

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