Leading Lenders: How Mechanics Bank Built a High-Touch, High-Tech Lending Machine

HousingWire

In this episode of Leading Lenders, Daniel Watt, Executive Vice President and Director of Mortgage and Consumer Lending at Mechanics Bank, shares how the company is reinventing the mortgage experience. With a hybrid lending model and a tech stack built for scale, Watt’s team is breaking records — even in a high-rate environment.  From implementing best-in-class pricing tools to rethinking underwriting and fulfillment processes, Daniel unpacks how Mechanics Bank built a modern platform without sacrificing human connection. Learn how leaning into high-tech and high-touch strategies keeps Mechanics Bank competitive against the biggest players in the industry.  Each episode of Leading Lenders: Risk, Reward, and Reinvention dives into how industry leaders are embracing change, overcoming challenges, and driving innovation in today’s market. Click here to navigate to the series page for videos 1-4.   Episode 4 of Leading Lenders: Risk, Reward, and Reinvention is powered by Polly.

Transcript

00:00I would say that we are gaining a lot of great market share, we are gaining a lot of great

00:05clients throughout all of our lending areas, and we've done that with a very, very professional

00:11team that are very highly focused on doing the right activities that will allow them to originate

00:17great volume regardless of the interest rate environment.

00:28Hi, my name is Daniel Watt and I'm our Executive Vice President, Director of Mortgage and Consumer

00:34Lending for Mechanics Bank. The vision when I came to Mechanics Bank a little over two years ago was to

00:39build a true hybrid bank that has a strong desire for a portfolio as well as has all of the other

00:46lending capabilities from FHA, VA, Fannie Mae, Freddie Mac, USDA and so forth. We recently announced a

00:54definitive merger agreement to combine with Home Street Bank. The great news about that merger is

01:01that it really has no redundancy. We actually are mainly a portfolio lender, we do a little bit of

01:07Fannie Mae lending. Home Street is mainly a lender that works with Fannie Mae, Freddie Mac, FHA financing,

01:15VA, USDA and so forth. So the combined group will be a very formidable organization in which we can

01:22really help more clients throughout the west coast. We compete very well against the big banks and the

01:28beauty of my role as the Director of Mortgage and Consumer Lending, I have direct oversight of all things

01:35including production, pricing, products, sales, fulfillment, underwriting. Our model is very unique is that

01:43we are as competitively priced as the big banks but we desire to deliver an exceptional experience that

01:51rivals the speed of brokers as well as independent mortgage bankers. Upon coming to Mechanics Bank,

01:58one of the things I looked to do was to truly automate as well as to get very efficient in what we did.

02:03Some of the big things we did is really try to build a best-in-class tech stack. So as a good example,

02:10one of our partners, Polly, from a pricing engine perspective has been really instrumental in

02:15streamlining our operations and making sure that our originators have really best-in-class pricing

02:22opportunities as well as making sure that we stay compliant to make sure that we're providing all

02:27the things that we need for our clients as well as our originators. When I first got here, much of the

02:33pricing exercises daily are very manual. So obviously that leaves room for user error, input error.

02:39When we leaned into the Polly pricing engine, it really allowed us to remove much of that. So

02:45not only was it a faster process to get pricing out, but it left less room for operator error,

02:51whereby we literally can set our base pricing and then everything else was calculated, including APR.

02:57That really helps us because once again, we want to make sure that we're being compliant. As we work

03:01very closely with our regulators, with our compliance team, risk and audit, they've been really pleased

03:07with what they've seen with all of this tech stack that we've been able to build out.

03:14While a lot of the industry has really had challenges in this higher for longer rate environment,

03:19our team actually continues to exponentially grow our volume, our pipelines, our fundings and applications,

03:26are continuing to break all time records. That's been really for us, creating an environment and

03:33a platform that is automated, leveraging once again, great technology such as Polly, but doing so with

03:40removing a lot of the layers of kind of red tape and things that really concern originators. We really

03:46keep it simple. We tell our team, we need to be compliant. We're going to do things the right way,

03:50but we're going to remove as much as we can, as far as obstacles that get in the way

03:54of you truly originating and taking care of the client and your customers. We really try to make

04:00sure all areas of the business are streamlined as possible from marketing to the overall loan

04:07manufacturing process. We hire the right individuals and really trust them to do the right thing.

04:12Everything from making sure that we are looking at our loan underwriting from a make sense perspective,

04:18not necessarily being in the box for every deal, to allowing very creative marketing. Things that we

04:24really lean into is having our originators really make sure that they can focus on the dollar

04:30producing activities and the things that get in the way. We really try to minimize those as much as

04:35possible. One of the many things we talk about is, you know, we're going to be as high tech as

04:38possible, but that doesn't take the place of being high touch. We want our team to really focus on the

04:44high touch activities, spending that extra 20 or 30 minutes that you save on a file, really

04:51understanding your client, building trust, rapport, getting to know them and creating value versus,

04:57you know, what's your name, what's your social, what's your date of birth, and inputting that information.

05:01In order to streamline our workflows, we really worked closely to first understand what was happening

05:06within the organization. Then what we did was really look to rethink everything. One of the things that

05:11we've talked to our team about is it's never acceptable to say, well, we've always done it

05:16this way. We really asked and challenged our team to look at everything to say, is that something that

05:21we really need to do? And how can we be more efficient? How can we make sure we're doing things

05:26better? So a lot of what we've done is really gotten voice to the associate, spent time with the

05:31individuals who are client facing, spent time with the individuals who are actually doing the work

05:37to talk to them about where their areas of frustration are, where their areas of kind

05:42of bottlenecks are, and really done our best to remove those. With the build out of our efficiency

05:48model really leaning into automation and digital, we've seen our turn times go from probably about 45%

05:58on the average close time to we're moving at the speed of the transactions. One of the main initiatives

06:03are we will close the transaction of purchase as fast as the transaction needs to be. So we're

06:08seeing very regularly our loan docs going out in the teens. We're closing transactions within the

06:14teens as well. So we'll do whatever's necessary to make sure we can deliver for our clients and our

06:19partners, because we understand that it's not always going to be a 30 day purchase transaction. And we're

06:24seeing that every single day. Prior to us implementing Poly, we used a daily rate sheet and it was very

06:36old school. You have to manually adjust, calculate your adjusters. Today with Poly, everything is

06:42automated, which really allows our originators to not have to worry about manually calculating the final

06:48rate, factoring in the loan level rate adjustments or price adjustments. Poly's been a huge difference

06:55maker in the ability for us to make it less, you know, user prone to error, as well as create a rate

07:02quote very quickly versus our previous model of it being very manual through an old school rate sheet.

07:07Since we made the change to Poly, we've seen great efficiencies. At first, we're all creatures of habit.

07:13Originators will struggle with a change. But as we actually talked to recruits, as we talked to new

07:20hires and they fully vetted us of what we use for a PPE and we told them Poly, a lot of them said,

07:26you know what, I'm used to Poly. I used Poly at my previous company. And so for us, the transition

07:32to Poly was very smooth. We didn't have really any challenges from our originators. And on a day-to-day

07:38basis, it's allowed them to truly be able to streamline their processes as they work to price

07:43loans, as well as provide great quotes compliantly to their customers. What I really tried to do in

07:50all of what we built was be very efficient in our cost structure. And so the relationship's been great

07:56with Poly. They've agreed to grow with us. And I believe it's going to be very beneficial for both

08:01Poly as well as Mechanics Bank. With this pro forma new company, as we combine with Home Street,

08:07will be a much larger organization, not just in the state of California, but throughout the West

08:12Coast. I think one of the best pieces of Poly that our team now has the ability to do is to be able

08:18to quote rates on the go. They can actually be on their phone and not have to tell a customer,

08:24well, let me fire my laptop up so that I can get in and get you a rate quote. They can actually quote

08:29rates to clients on the go from their cell phones, or even if they're in a meeting, if they're out at a

08:35customer's home, that is just a much more seamless way versus having to print a rate sheet and carry

08:40that around with you and then manually calculate your your final rates. We at Mechanics Bank continue

08:47to want to get better every day. So we'll continue to evaluate our tech stack. We'll continue to look

08:54at all of the capabilities out there. Obviously, right now, AI is a big thing in the industry. The future for us will

09:00continue to be doing our best to be state of the art, do our best to be a very efficient, productive

09:06organization that leans into technology, using technology for efficiency and productivity,

09:12and making sure that our team can really focus on the things that technology can't do, which once again

09:17is the human aspect of the business of being the advisor, being the relationship builder, as well as

09:24making sure that we understand what the needs of the clients are and deliver on those needs.

09:28I've been in the industry for over 25 years. What I love about working in the mortgage industry is

09:33it's such a fulfilling opportunity to really help clients with one of the largest transactions of

09:39their life. Now we work really hard. It's a lot of long hours. I start early and I end late, but it's

09:45truly gratifying in the role that I have because I love to really help individuals achieve their goals,

09:53achieve their full potential. So for me, at this stage in my career, I really look to go to an

09:58organization that I can make a great impact, that I could really help individuals achieve production

10:05levels that they can never imagine, that we could take even fulfillment underwriting individuals who

10:10have aspirations to do other things and really help them reach their full potential. So for me,

10:15I can just share my story being raised in Richmond, California, the same place that Mechanics Bank was

10:20formed and founded, showing what hard work home ownership can do to really change your life for

10:27the better. I believe customers will buy homes no matter what interest rates are. So that has been

10:33highly successful for us. We don't desire to be the Starbucks of the mortgage industry. We don't want

10:39loan officers on every corner. We're being very selective in who we hire and it's really served us

10:44well. We are gaining a lot of great market share. We are gaining a lot of great clients throughout all

10:51of our lending areas. And we've done that with a very, very professional team that are very highly

10:58focused on doing the right activities that will allow them to originate great volume regardless of the

11:03interest rate environment.

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