Mechanics Bank in Walnut Creek, Calif., has entered the residential mortgage market and hired a banker to lead the new loan group.

The $3.6 billion-asset Mechanics said it had named Randal Stoller its senior vice president in charge of residential mortgage lending. Stoller previously was managing director at Falcon Bridge Capital. He has also worked for Lehman Brothers and Citigroup.

The market is ripe for a new residential mortgage lender, because it's mostly confined to large national banks with narrow product offerings, said Ken Russell, Mechanics' president and chief executive.

Large banks have "very rigid underwriting criteria and a complex loan origination process that many borrowers find challenging," Russell said in a news release.

"In the current, prolonged low rate environment, and given the bank's strong balance sheet, it makes sense for us to expand our residential mortgage lending effort," Russell said.

Mechanics is also betting on a shift from renting to homeownership as wage growth picks up.

"As the rent/buy equation begins to favor homeownership and with incomes beginning to accelerate at this stage in the economic cycle, the release of this pent-up demand for housing should result in increased mortgage financing opportunities," Stoller said in the release.

Mechanics operates 30 branches in the San Francisco Bay area and other areas of Northern California. The $59 billion-asset First Republic Bank in San Francisco is one of the largest lenders for jumbo mortgages in the high-priced San Francisco and Silicon Valley markets.

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