Interest Only pilot results Shared with CML interest Only Group December 2012

1. HML
interest only pilot 2012
Strictly confidential
© HML 2012. All rights reserved .

2. High level benefits
 Helping customers to remain in their own home after the end of their mortgage term.
 Evidence to FSA pro-active action taken in contacting customers – regulatory risk is
mitigated. Quality customer contact as opposed to just making contact.
 Enable you to better understand the interest only risk within your portfolio.
 27 customers (mortgage value £3.9m) actively progressing amendments to part &
part/ C & I as a result of this pilot – improving credit risk of portfolio.
 Achieve measurable customer response data - over 34% say they have a full
repayment in place/ 4.2% have a partial repayment strategy – self-certified.
 Raised awareness with customers some of whom are now instigating action that will
help repay their mortgage.
© HML 2012. All rights reserved . 2

3. Interest only client activity
Client 1 Client 2 Client 3
Approach: Approach:
Approach:
’Customer response data ‘Regular customer contact
‘Options letter with access
gathering exercise (letter (letter and calls), gathering
to a client branded
and calls) that will support repayment strategy
repayment/ part & part
and inform follow up evidence. Instruct field
affordability calculator.’
strategies.’ agents near term expiry
where no contact
achieved.’
© HML 2012. All rights reserved . 3

4. Interest only pilot – contact strategy
500 customers
Initial contact by letter, posing two questions:
 Do they have a repayment strategy in place ? and if so,
 What type of repayment strategy was being used ?
 If no response was received,
 three outbound call attempts were made two-three weeks later to ask the same two questions.
 All conversations were scripted to prevent the risk of providing advice.
 Where customers were unsure or did not have a repayment strategy in place, the HML
Consultant was able to provide the customer with
 A list of repayment strategy options.
 Details on how to contact some independent financial advisers where the customer could discuss the
options in more detail.
 Information that other IFA’s were available.
© HML 2012. All rights reserved . 4

5. High level results
Full Repayment
0% 0%
Partial Repayment
35% 34%
Not able to pay
Unsure/ will look in to call
18% back
4% 4% Contact details not valid
5%
No contact
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6. Successful contact strategy results
‘Only received 3 responses by letter - but no pre-paid envelope included.’
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7. Outbound calls – successful contact times
‘305 successful contacts with customers = 61%’
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8. Customers with ‘Full repayment strategy in place’
Most common repayment strategies
Sale of Property 26.74%
Multiple Repayment Strategies 26.16%
Sale of another asset 15.70%
Long Term Savings Plan 10.47%
‘172 customers in this sample said they have a repayment strategy that will fully
repay their mortgage balance’ = 34.4% of 500 customers
© HML 2012. All rights reserved . 8

9. Customers with ‘Partial repayment strategy in place’
‘21 customers in this sample said they have a repayment strategy that will
partially repay their mortgage balance’ = 4.2% of 500 customers
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10. No repayment strategy or unsure customers –
Risk Profile
‘111 customers (£202.6m) from this
sample have no repayment strategy or
unsure of what they intend to do’ =
22%
© HML 2012. All rights reserved . 10

11. Customer feedback
Response LTV Term Remaining Age Balance
‘Plans to switch to C & I next year’ 88% 16 years 42 £233,400
‘Plans to pay with inheritance, savings and will look in
78% 17 years 47 £84,000
to repayment next year’
‘Will be selling property near the end of term’ 93% 10 years 55 £124,500
‘Unsure what to do and will speak to an adviser’ 103% 23 years 40 £59,500
‘Mr is already overpaying (credit arrears balance of
93% 19 years 46 £64,000
£8,800)’
Customer feedback: “I’m impressed by your pro-active approach to
contacting your interest only customers. ”
© HML 2012. All rights reserved . 11

12. Customers ‘moving to C & I’ following contact
Monthly payment
increase from
interest only to
repayment
Part and part or term extensions may need to be considered as options to support
these customers.
© HML 2012. All rights reserved . 12

13. HML - Key facts
• HML is a leading specialist financial outsourcer
providing solutions to the mortgage, savings and
loans markets
• Over 20 years’ experience managing customer
accounts for some of the world’s biggest financial
institutions
• Over £43bn residential and commercial mortgages
currently under management
• 1,300 employees based across 3 UK sites, including
a 450 seat call centre handling up to 13,000 calls per
day
• A technology platform that has undergone a multi
million investment to enhance functionality, control,
compliance and stability
© HML 2012. All rights reserved . 13

14. Contacts
• Ben.Chambers@hml.co.uk
• John.grimbaldeston@hml.co.uk
© HML 2009. All rights reserved. 14