This whitepaper details HML's journey to a total quality concept in the mortgage servicing industry, where the customer is placed at the centre of everything we do. We continue to strive towards a completely safe and fair environment for customers, and we aim to shift our and the industry's mindset to 100%.

1. The evolutionary journey to
a total quality concept in the
mortgage servicing sector
Destination
100%
99%
98%
97%
96%

2. 2
Contents
Section 1:
Section 2:
Section 3:
Section 4:
Section 5:
About this paper
A brief introduction to HML
Quality – A vision for the 21st century
Reinventing the wheel
Definitions

3. 3
This white paper, Destination 100%:
the evolutionary journey to a total quality
concept in the mortgage servicing
sector, details HML’s continued drive
to achieve total customer and client
interaction quality at all times. Of course,
hitting 100% all of the time is unlikely to
happen, but it does not mean that we
have to accept anything less - and that
is the key message; we aim to shift our
and the industry’s mindset to 100%.
Using the analogy of an airline, we see how HML is
moving from its current individualistic quality frameworks
to a single total quality concept; we believe we already
have the right attitude, culture and capability to achieve
this, however, the execution of this concept needs refining.
An airline should never expect anything less than 100%
quality for its passengers due to the safety consequences;
similarly, we want to ensure our clients and customers
enjoy a completely safe and fair environment when
interacting with us.
What is the impetus for this total quality concept where
the consumer is placed at the centre of everything we do?
Not just professional pride and a strategic competitive
differentiator, but a regulatory need. With the Financial
Conduct Authority pushing conduct risk and its five key
areas of focus - with one being producing appropriate
outcomes for consumers - it is clear that everything
possible needs to be done to meet and exceed these
benchmarks.
This white paper will allow you to join HML on the journey
to Destination 100%, and enable you to see how, and
why, we aim to have a 0% appetite for quality risk -
something that is perhaps an unusual concept in the
wider financial services sector and one that is driven
by Treating Customers Fairly in practice.
Section 1:About this paper

4. 4
Tom Jeffery
Tom is a quality assurance manager at HML and National
Outsourcing Association certified. He is responsible for the
Line 1 quality assurance within HML’s operational centres,
including the management of Training and Competency
schemes. He collaboratively engages with clients to
ensure best practice is applied by front-line staff.
Tom has worked at HML since 2001.
Rachel Bayley
Rachel is a marketing executive at HML. After completing
a journalism degree at the University of Sheffield, she went
straight into the content marketing industry, where she
worked at an agency for five years before moving to HML
at the start of 2013. Her main responsibility is to produce
external marketing copy, including white papers, press
releases and blogs.
Section 1:About the authors

5. 5
HML is a third-party mortgage
administration company that operates
in the financial services sector. It has 25
years of experience in the outsourcing
industry and is based at three sites - it
is headquartered in Skipton, and also
has offices in Glasgow and Derry, with
approximately 1,300 employees in total.
It currently has approximately £44 billion of managed
assets and 50 major clients, including banks and building
societies. Mortgage administration and servicing is HML’s
main service at present, although it also offers standby
servicing and securitisation, business intelligence and
asset trading, among other services.
In November 20101
, Fitch affirmed HML’s primary servicer
ratings of RPS2+ Prime and RPS2+ Sub-prime (which
were last affirmed in August 2012), and also awarded
HML a double upgrade of its special servicing rating from
RSS3- to RSS3+, a rating which has received further
upgrades in 2011 and 2012 and is currently RSS22
.
In August 20133
, S&P upgraded HML’s primary servicing
of residential mortgages in the UK from stable to positive.
It also affirmed the above average rankings for HML as a
primary and special servicer of UK residential mortgages,
and as a primary servicer of residential mortgages in
Ireland.
In addition, HML’s stable outlook was affirmed for the
special servicing of UK mortgages and the primary
servicing of Irish residential mortgages.
1
http://www.hml.co.uk/news/2010/11/30/hml-achieves-unprecedented-
double-upgrade-from-fitch
2
http://www.hml.co.uk/news/2012/08/17/fitch-removes-hml-from-rwn-
upgrades-special-servicer-rating-and-assigns-irish-rating
3
www.hml.co.uk/news/2013/08/06/hml-receives-s-p-outlook-upgrade-
from-stable-to-positive-for-the-primary-servicing-of-residential-
mortgages-in-the-uk
Section 2:A brief introduction to HML
SKIPTON HQ
(opened 2010)
GLASGOW
(opened 2007)
DERRY
(opened 2004)

6. 6
Executive summary: The FCA has
placed urgency on the need for
companies in the financial services
sector to produce appropriate outcomes
for consumers, which builds on Treating
Customers Fairly. HML is aware of
its responsibility to avoid regulatory
conduct risk, but is also clear for the
need to ensure customers are treated in
a safe, fair and dignified environment.
In addition, the Financial Ombudsman Service regularly
publishes the number of complaints it receives and the
percentage resolved in favour of the consumer. The
figures for mortgages show that between 2010 and 2013,
the number of complaints rose, suggesting consumers
are increasingly aware of their rights and are less willing
to accept a poor customer experience. Much like the UK
Civil Aviation Authority (CAA) is responsible for enhancing
aviation safety performance, improving choice for
customers and pursuing continuous targeted
improvement in systems, culture, processes and
capability, the Financial Conduct Authority (FCA)
has similar remit in the financial sector.
On April 1st
2013, the Financial Services Authority split into
the FCA and the Prudential Risk Authority, with the FCA’s
business plan and risk outlook for 2013/14 clear4
.
One of its five key areas of focus is ensuring that firms’
strategies are geared towards producing appropriate
outcomes for consumers.
While our current quality frameworks and stringent
adherence to Treating Customers Fairly (TCF) strive to
put customers at the centre of everything we do, we
know that more can be done. Much like an airline plans
to constantly achieve 100% quality and doesn’t aim for
anything less, HML strives to ensure a high-quality service
for our clients and customers at all times. We might not
always achieve 100%, but we will do everything possible
to try and meet this.
In effect, organisations within the financial services sector,
including third-party administrators, should strive for
0% appetite for customer service failures and conduct
risk. This sentiment is made even more pertinent when
you consider the stress that an individual’s financial
situation can cause - with even the smallest of issues
often magnified. It is clear how important it is to place
customers at the centre of everything we do and be
aware at all times that a poor-quality service could prove
detrimental to them.
Section 3:Quality – A vision for the 21st
century
4
http://www.fsa.gov.uk/library/communication/pr/2013/027.shtml
5
http://www.creditaction.org.uk/helpful-resources/debt-statistics.html
“Firms need to ensure that they are putting the consumer and the integrity of markets at the heart of their
business models and strategies. This includes making cultural changes which promote good conduct;
establishing oversight around the design and innovation of products and services; and ensuring they are
transparent in their dealings with consumers.” 5
Martin Wheatley, chief executive officer of the FCA

7. 7
A look at the June 2013 Credit Action UK Personal Debt
report highlights the situation that many households are
in. The average amount each UK adult owes, including
mortgages, stood at £28,980 in April, representing around
120% of typical earnings. Between January and March,
1,534 people were made redundant each day, and every
16 minutes and 26 seconds a property is repossessed5
.
Of course, it is not only important to avoid customer
service and conduct risk issues due to the emotional and
regulatory impact this could have, but customers have
also become increasingly savvy about their rights and their
service expectations have grown.
Figures from the Financial Ombudsman Service (FOS)
show that for the full year 2010/2011, it received 7,060
complaints about mortgages. This climbed to 9,530
the following year and stood at 11,915 for the full year
2012/2013. Between April and June 2013 alone, 2,941
complaints were received about mortgages6
.
The FOS also revealed the percentage of complaints it
upheld for mortgages. It upheld 36 per cent of complaints
for 2010/2011, 28 per cent in 2011/2012 and 26 per cent
for 2012/2013. Between April and June 2013, 27 per cent
of mortgage complaints were upheld.
The twin drivers of customers expecting a better service
and the FCA regulating to a higher degree for conduct risk
and service delivery means the financial services sector
will have to focus more on consumer rights. At HML, we
want to get things right from the offset, rather than have
to take remedial action further down the line. The recent
Libor and PPI mis-selling scandals are good examples
of unacceptable wider market behaviour that will not
be easily forgotten by both the public and the regulator.
Rebuilding trust in the sector will need radical new thinking
– such as a 100% quality goal.
A study by Which? found that 42% of consumers think
it is unlikely that banks will take the right action against
employees who breach good banking standards. However,
it’s important that criticism isn’t solely directed towards the
big banks, and that unscrupulous operators are policed
with a heavy hand that isn’t automatically felt across the
entire industry.
Section 3:Continued
5
http://www.creditaction.org.uk/helpful-­resources/debt-­statistics.html
6
http://www.financial-­ombudsman.org.uk/publications/ombudsman-­
news/110/1stquarter-­chart.pdf
7
http://www.financial-­ombudsman.org.uk/publications/ombudsman-­
news/110/1stquarter-­chart.pdf
“Delivering the right customer outcome is key.
Ensuring this is done with professionalism,
dignity and respect separates us from the rest.
I recently observed a customer experience
whereby on the day of the customer’s eviction,
whilst understandably, they were not happy with
their financial situation, they were adamantly
thankful for the help and support we had provided
them with their personal financial
circumstances during this difficult time.”
Tom Jeffery, operational quality assurance
manager at HML
Q1 (Apr-June) 2013/2014
0 4000 8000 12000
Full Year 2012/2013
Full Year 2011/2012
Full Year 2010/2011
Number of mortage complaints to FOS

8. 8
Executive summary: HML’s total quality
concept or ‘wheel’ provides team leaders
with all of the information they require
to assess an individual’s performance
as a whole, helping to prevent customer
detriment from occurring in the first
place. The financial services sector is
traditionally reactionary, rather than
preventative, and this needs to change
if the customer is to be placed at the
centre of everything companies do.
Only then, can a 0% appetite for risk
be truly realised.
HML operates numerous quality frameworks that detail
best practice criteria employees should follow when
carrying out different processes and against which they are
scored. We will use our Customer Experience Monitoring
Programme quality framework as an example, which can
be seen on the wheel on the next page as ‘call quality’.
This details the credit management telephony process and
interaction criteria and the consultant is scored against
these. HML has invested in semi-independent quality
assurance teams made up of quality associates across
our sites, who are responsible for frontline performance
assessments of credit management telephony consultants
and are equipped to provide developmental feedback and
coaching to improve their performance.
HML adopts a risk approach to call assessments, meaning
those considered underperforming (less than 90%
effective against our Customer Experience Monitoring
Programme) or within their probation receive more
development support than those performing (above
90%). This method provides quick-loop feedback to
individuals to ensure quick learnings can be applied to
benefit future customer service interactions. Any customer
that is impacted by poor service identified through the
programme is then managed through a ‘We Will Always’
programme that ensures swift remedial action if there is
evidence of potential or material detriment.
However, to ensure best practice is achieved end-to-
end, more focused key performance indicators (KPIs)
and management information is required to gain a wider
picture of a customer’s experience and whether the
right outcomes are delivered. Our vision for the future
of quality in the third-party mortgage servicing sector is
one which is centred on the consultant and the customer
and which brings together all KPIs to provide a complete
overview of individual performance, customer outcomes
and experience, as well as the impact on internal controls.
Although this capability currently exists now, the primary
concept of the wheel is to bring these KPI’s collectively
together for frontline management and their teams.
This will involve a continual journey to refine, improve
and assess; doing so will enable us to ensure that the
customer continues to remain at the centre of everything
we do. Much like passengers have to go through various
checkpoints at an airport, such as security and passport
control, before they can board the plane, our total
quality concept will provide team leaders with all of the
quality indicator information at once so they can see an
individual’s performance as a whole. It is no use only
checking passengers’ security credentials once the plane
is in the air; similarly, it is no use to a consultant telling
them they have performed well when processing a piece
of post when only to learn two weeks later the customer
has had a complaint upheld about the consultants attitude
over the phone.
We believe our ‘new wheel concept’ is an innovative
way to manage operational performance quality within
the financial services sector, which traditionally reacts to
events, rather than prevents customer detriment. HML
is currently on the journey to realise our vision for a total
quality concept. If the concept was rolled out tomorrow,
the initial month’s data would be reactionary because most
indicators are received after the event, for example, upheld
customer service-related complaints. The development of
the wheel will lead to a redesign of our existing Training
Competency Schemes to take more account of the
elements making up the wheel. With the appropriate
quality operations, you can cultivate an environment
whereby the following month, having given the individual
their feedback through an ongoing loop, they will have
improved their performance. Thus, the ‘wheel’ leads to a
preventative total quality concept.
Section 4:Reinventing the wheel

9. 9
HML has equipped itself for the journey to Destination
100% by arming itself with a culture, data and
measurement processes, which all place the customer
at the centre of a total quality service. The different quality
frameworks are pulled together for the first time, moving
from a linear approach to a holistic consultant-based
assessment. Much like every aspect of a flight must be a
good experience for the passenger - from departing on
time and quality meals to polite cabin crew and a range
of in-flight entertainment - every part of a customer’s
contact with HML must be of a high quality.
This concept aligns to our attitude of “right first time”
so we envisage a future for the third-party administration
sector and wider financial services industry whereby
a quality experience and appropriate outcomes for
customers are achieved from the outset. This vision
is shared by the FCA, and while it will no doubt be a
continual journey, it is one HML is serious about
equipping itself to be a success and will carry on
championing the 100% quality goal.
Individual
O
perational
Q
uality
Diary
Quality
Call
Quality
EndtoEnd
Reviews
Conduct
Performance against
Objectives
AuditCSAFailures
Actionsleadingto
AuditFailures
Near
Misses
Actionsleading
toNearMisses
Actions leading
to Info Sec breaches
Actions contributed
to Ops Losses
Actionscontributed
toOpsLosses
Complaints
Trans-
actional
Quality
Operational
Losses
Impact
Frequency
Instances
Im
pact
Frequency
Instances
Overall
Transactional
Performance
Conduct Risk
Transactional
Performance
We Will
Always
Appropriate
Outcome
CR
M
easures
C
TQ
M
easures
%
Passed
AvgQuality
Collecting
Skills
CRMeasures
%Passed
AvgQuality
Productivity
TimeKeeping
Behaviours
Attendance
Instances
Frequency
Impact
Instances
Frequency
Im
pact
Instances
Frequency
Impact
Info SecBreaches
Section 4:Continued

10. 10
Treating Customers Fairly (TCF): TCF
was introduced by the FCA in 2006 in
order to produce improved outcomes
for retail consumers. There are six
outcomes within TCF:
Outcome 1:
Consumers can be confident that they are dealing with
firms where the fair treatment of customers is central to
the corporate culture.
Outcome 2:
Products and services marketed and sold in the retail
market are designed to meet the needs of identified
consumer groups and are targeted accordingly.
Outcome 3:
Consumers are provided with clear information and are
kept appropriately informed before, during and after the
point of sale.
Outcome 4:
Where consumers receive advice, the advice is suitable
and takes account of their circumstances.
Outcome 5:
Consumers are provided with products that perform as
firms have led them to expect, and the associated service
is of an acceptable standard and as they have been led
to expect.
Outcome 6:
Consumers do not face unreasonable post-sale barriers
imposed by firms to change product, switch provider,
submit a claim or make a complaint.
TCF helps HML achieve quality consistency.
Quality frameworks:
A framework which details the best practice criteria
employees should follow when carrying out different
processes and against which they are scored.
Conduct risk:
This is the potential risk that detriment is caused to
customers as a result of the inappropriate execution
of business operations.
Operational losses:
In the context of this white paper, operation losses
are financial or reputational damage caused due to an
individual, system or process failure, while losses can
also come from external events and threats.
Training Competency
(TC) Schemes:
TC Schemes detail the skills employees need to possess
and the tasks they need to be able to complete in order for
them to be classed as competent. Under FCA regulations,
the aim of such schemes is to ensure that customers are
dealt with by employees who are competent.
The three main areas of TC are assessing competence,
maintaining competence and record keeping.
Section 5:Definitions
“Customers are the most important aspect of
what we do. Staff interact with customers in
many different ways. It is essential that all of
those touchpoints, not just some, are fed into
analysis of both individual staff and overall
business performance. HML can only reach
Destination 100% if we are fully equipped for
the journey ahead.”
Mark Metcalfe, director of operations control
and governance at HML

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