UNITED STATES
                   SECURITIES AND EXCHANGE COMMISSION
                         Washington, D.C. 20549

                          --------------------

                                FORM 10-Q


                          --------------------


    (Mark one)
    [x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                   SECURITIES AND EXCHANGE ACT OF 1934

         For the quarterly period ended August 31, 1997

                             OR

    [  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                    SECURITIES EXCHANGE ACT OF 1934

                
                        ----------------------


                      Commission File No. 1-12979

                         HomeSide Lending, Inc.
          (Exact name of registrant as specified in its charter)

                                Florida                                        
      (State or other jurisdiction of incorporation or organization)


                              59-2725415   
                  (I.R.S. Employer Identification No.)


               7301 Baymeadows Way, Jacksonville, FL 32256
           (Address of principal executive offices) (Zip Code)

                            (904) 281-3000
          (Registrant's telephone number, including area code)



Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes _x_ No __



Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

           Class                            Outstanding at September 24, 1997
           -----                            ---------------------------------  
Common stock $1.00 par value                           100 shares






                                       1
<PAGE>




                              FINANCIAL INFORMATION

ITEM 1.  Financial Statements

<TABLE>

                     HOMESIDE LENDING, INC. and SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET

                    (Dollars in Thousands, Except Share Data)

<CAPTION>

                                                                                   (Unaudited)
                                                                               August 31, 1997   February 28, 1997
                                                                               ---------------   -----------------
       <S>                                                                         <C>                <C>

      ASSETS
      
      Cash and cash equivalents                                                    $       31          $   52,691
      Mortgage loans held for sale, net                                             1,029,620             805,274
      Mortgage servicing rights, net                                                1,806,387           1,596,838
      Accounts receivable, net                                                        184,590             157,518
      Early pool buyout advances                                                      368,406                 --
      Premises and equipment, net                                                      32,109              29,515
      Other assets                                                                    121,369              75,485
                                                                                   ----------          ----------
      Total Assets                                                                 $3,542,512          $2,717,321
                                                                                   ==========          ==========

      LIABILITIES AND STOCKHOLDERS' EQUITY

      Notes payable                                                                $1,868,329          $1,818,503
      Accounts payable and accrued liabilities                                        132,651             123,231
      Deferred income taxes                                                           168,260             142,415
      Long-term debt                                                                  725,825              21,128
                                                                                   ----------          ----------
      Total Liabilities                                                             2,895,065           2,105,277
                                                                                   ----------          ----------

      Common stock:
           Common stock,  $1.00 par  value,  10,000  shares  authorized  and 100
               shares issued and outstanding, all pledged as second priority
      collateral
               on the long-term debt of the Parent
      Additional paid-in capital                                                      573,092             573,092
      Retained earnings                                                                74,355              38,952
                                                                                   ----------          ----------
      Total Stockholder's Equity                                                      647,447             612,044
                                                                                   ----------          ----------
      Total Liabilities and Stockholder's Equity                                   $3,542,512          $2,717,321
                                                                                   ==========          ==========

</TABLE>



The  accompanying  notes are an integral part of these financial statements.



                                       2
<PAGE>

<TABLE>

                     HOMESIDE LENDING, INC. and SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

                             (Dollars in Thousands)



<CAPTION>

                                                   For the Three        For the Three        For the Six       For the Period from
                                                   Months Ended         Months Ended         Months Ended       March 16, 1996 to
                                                   August 31, 1997      August 31, 1996      August 31, 1997     August 31, 1996
                                                   ---------------      ---------------      ---------------     ---------------   
<S>                                                <C>                  <C>                   <C>                <C>
                            
REVENUES:

Mortgage servicing fees                            $      102,479              $82,179      $       200,817     $        123,664 
Amortization of mortgage servicing rights                 (53,824)             (39,753)            (101,318)             (56,195)
                                                   ----------------     ----------------    -----------------    -----------------
    Net servicing revenue                                  48,655               42,426              99,499               67,469

Interest income                                            26,642               22,270              45,884               34,989
Interest expense                                          (19,811)             (17,684)            (37,873)             (30,276)
                                                   ----------------     ----------------    -----------------    -----------------
    Net interest revenue                                    6,831                4,586               8,011                4,713

Net mortgage origination revenue                           20,584               16,273              38,510               27,083
Other income                                                  260                  355               1,037                  462
                                                   ----------------     ----------------    -----------------    -----------------
    Total Revenues                                         76,330               63,640             147,057               99,727

EXPENSES:

Salaries and employee benefits                             19,546               21,177              39,282               32,657
Occupancy and equipment                                     3,821                3,084               7,627                4,930
Servicing losses on investor-owned loans
   and foreclosure-related expenses                         5,757                4,058              10,509                7,996
Other expenses                                             10,308               12,196              19,468               17,541
                                                   ----------------     ----------------    -----------------    -----------------
    Total Expenses                                         39,432               40,515              76,886               63,124

Income before income taxes                                 36,898               23,125              70,171               36,603
Income tax expense                                         14,391                9,481              27,369               15,007
                                                   ----------------     ----------------    -----------------    -----------------

Net Income                                                $22,507              $13,644             $42,802              $21,596
                                                   ================     ================     ================    =================

</TABLE>


The  accompanying  notes are an integral part of these financial statements.



                                       3
<PAGE>


<TABLE>

                     HOMESIDE LENDING, INC. and SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)

                             (Dollars in Thousands)

<CAPTION>
                                                                                                                    For the Period
                                                                  For the Three    For the Three    For the Six     from March 16,
                                                                  Months Ended     Months Ended     Months Ended        1996 to
                                                                 August 31, 1997  August 31, 1996  August 31, 1997  August 31, 1996
                                                                 ---------------  ---------------  ---------------  ---------------
       <S>                                                       <C>              <C>              <C>              <C>

       CASH FLOWS USED IN OPERATING ACTIVITIES:

       Net income                                                $      22,507    $      13,644    $      42,802          $21,596
       Adjustments to reconcile net income to net cash used in
             operating activities:
         Amortization of mortgage servicing rights                      53,824           39,753          101,318           56,195
         Depreciation and amortization                                   2,607            3,701            3,957            4,389
         Servicing losses on investor-owned loans expenses               3,382            4,058            6,565            7,996
         Deferred income tax expense                                    14,391            9,481           27,369           15,007
         Capitalized excess servicing rights                               --            (6,526)             --            (9,240)
                                                                                                    
         Mortgage loans originated and purchased for sale           (7,150,009)      (3,238,600)     (12,522,481)      (5,554,807)
         Proceeds and principal repayments of mortgage loans held                                             
           for sale                                                  6,926,778        2,909,492       12,298,135        5,136,890
         Change in accounts receivable                                  12,598          (17,638)         (33,637)         (19,106)
         Changes in other assets and accounts payable and accrued       (4,747)          71,756           (4,840)           3,503
           liabilities
                                                                 ---------------  ---------------  ---------------  ---------------
       Net cash used in operating activities                          (118,669)        (210,879)         (80,812)        (337,577)

       CASH FLOWS USED IN INVESTING ACTIVITIES:

       Purchase of premises and equipment, net                          (1,452)            (920)          (5,215)          (2,758)
       Acquisition of mortgage servicing rights                       (138,246)        (166,615)        (258,306)        (247,649)
       Net purchases of risk management contracts                      (51,268)         (37,902)         (80,913)         (78,889)
       Early pool buyout advances                                     (368,406)                         (368,406)
       Acquisition of BancBoston Mortgage Corp.,                           --               --               --          (133,392)
         net of cash acquired
       Acquisition of Barnett Mortgage Corp.,                              --               --               --          (106,244)
         net of cash acquired        
                                                                 ---------------  ---------------  ---------------  ---------------
       Net cash used in investing activities                          (559,372)        (205,437)        (712,840)        (568,932)

       CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:

       Net borrowings from banks                                       210,895          186,753           49,826          603,899
       Issuance of notes payable                                       455,000              --           705,000              --
       Payment of debt issue costs                                      (4,445)            (321)          (6,132)         (13,620)
       Repayment of long-term debt                                        (152)            (148)            (303)            (269)
       Capital contribution from parent                                    --               100              --           352,765
       Dividends paid to parent                                            --              (491)          (7,399)          (8,275)
                                                                 ---------------  ---------------  ---------------  ---------------
       Net cash provided by financing activities                       661,298          185,893          740,992          934,500

       Net (decrease) increase in cash and cash equivalents            (16,743)        (230,423)         (52,660)          27,991
       Cash and cash equivalents at beginning of period                 16,774          258,414           52,691              --
                                                                 ===============  ===============  ===============  ===============
       Cash and cash equivalents at end of period                          $31          $27,991              $31          $27,991
                                                                 ===============  ===============  ===============  ===============
</TABLE>


The  accompanying  notes are an integral part of these financial statements.



                                       4
<PAGE>

                     HOMESIDE LENDING, INC. and SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)



1.  BASIS OF PRESENTATION

      The accompanying  consolidated  financial statements have been prepared in
accordance with generally accepted  accounting  principles for interim financial
information and with the  instructions to Form 10-Q and Rule 10-01 of Regulation
S-X.  Accordingly,  they do not include  all of the  information  and  footnotes
required by generally  accepted  accounting  principles  for complete  financial
statements. In the opinion of management,  all adjustments (consisting of normal
recurring  adjustments)  considered  necessary for a fair presentation have been
included.  Operating  results for the three and six months ended August 31, 1997
are not  necessarily  indicative  of the results  that may be  expected  for the
fiscal year ending  February 28,  1998.  For further  information,  refer to the
consolidated   financial  statements  and  footnotes  thereto  included  in  the
Prospectus dated May 15, 1997 filed with the Securities and Exchange  Commission
("SEC") as part of the Registration  statement on Form S-1 (Registration  Number
333-21193,  the  "Shelf  Registration  Statement")  of  HomeSide  Lending,  Inc.
("HomeSide Lending" or the "Company") and the annual report on Form 10-K for the
fiscal year ended February 28, 1997 of HomeSide, Inc. (the "Parent").

      HomeSide   Lending,   Inc.  (the  "Company")  and  collectively  with  its
consolidated subsidiaries ("HomeSide Lending"), the primary operating subsidiary
of the Parent, is one of the largest full service  residential  mortgage banking
companies in the United States,  formed through the  acquisition of the mortgage
banking  operations of  BankBoston,  N.A.,  formerly known as The First National
Bank of Boston ("Bank of Boston"), and Barnett Banks, Inc. ("Barnett"). HomeSide
Lending is a  wholly-owned  subsidiary  of HomeSide  Holdings,  Inc.  which is a
wholly-owned subsidiary of the Parent. The Parent has no operations and its only
significant  assets are its  investments in HomeSide  Holdings,  Inc.,  HomeSide
Lending and certain capitalized debt issuance costs. The Parent has $130 million
in outstanding  long-term debt. All of the stock of HomeSide Holdings,  Inc. and
HomeSide Lending is pledged as collateral on the debt of the Parent.  The Parent
is dependent upon dividends from HomeSide  Holdings,  Inc. and HomeSide  Lending
for the cash flow necessary to service the Parent's debt.

2.  MORTGAGE SERVICING RIGHTS

The rollforward of mortgage servicing rights is as follows (in thousands):


Balance, February 28, 1997                             $1,596,838
Additions                                                 258,306
Deferred hedge loss                                        52,561
Amortization                                            (101,318)

                                                   ---------------

Balance, August 31, 1997                               $1,806,387
                                                   ===============

3.  NOTES PAYABLE

    HomeSide  Lending  borrows  funds  on a  demand  basis  from an  independent
syndicate  of  banks  under  a  $2.5  billion  credit  facility.  Under  certain
circumstances set forth in the credit agreement,  borrowings under the agreement
become  collateralized  by substantially all of HomeSide  Lending's assets.  The
line of credit is used to  provide  funds for  HomeSide  Lending's  business  of
originating, acquiring and servicing mortgage loans. The line of credit includes
both a warehouse credit  facility,  which is limited to 98% of the fair value of
eligible mortgage loans held for sale, and a servicing-related  facility,  which
is capped at $950.0  million.  At August 31, 1997,  $1.9 billion is  outstanding
under the credit line.  On February 14, 2000 the line of credit will  terminate.
The bank line of credit agreement contains covenants that impose limitations and
restrictions on HomeSide Lending, including the maintenance of certain net worth
and ratio requirements.  HomeSide Lending is in compliance with all requirements
relating to the credit agreement.  Amounts  outstanding at August 31, 1997 under
the bank line of credit are  comprised  of a warehouse  credit  facility of $1.0
billion and a servicing-related  credit facility of $0.9 billion.  The amount of
the unused bank line of credit was $0.6 billion as of August 31, 1997.



                                       5
<PAGE>
    Borrowings  under the bank line of credit bear  interest at rates per annum,
based on, at  HomeSide  Lending's  option (A) the highest of (i) the lead bank's
prime rate,  (ii) the secondary  market rate of certificates of deposit plus 100
basis  points and (iii) the federal  funds rate in effect from time to time plus
0.5%,  or (B) a  eurodollar  rate.  At August 31,  1997,  the  weighted  average
interest rate on the amounts  borrowed under the bank credit facility was 5.98%,
and the weighted  average interest rate during the three months ended August 31,
1997 was 6.06%.

4.  LONG-TERM DEBT

     On May 14,  1996,  the Parent  issued  $200.0  million of 11.25% notes (the
"Parent Notes")  maturing on May 15, 2003, and paying  interest  semiannually in
arrears on May 15 and November 15 of each year, commencing on November 15, 1996.
The Parent  Notes are  redeemable  at the option of the  Parent,  in whole or in
part, at any time on or after May 15, 2001, at certain fixed redemption  prices.
The indenture  contains  covenants  that impose  limitations  and  restrictions,
including  the  maintenance  of  certain  net worth and ratio  requirements.  In
addition,  the Parent  Notes are secured by a second  priority  pledge of common
stock of HomeSide  Lending.  The Parent is in compliance  with all net worth and
ratio  requirements  included in the indenture relating to the Parent Notes. The
Parent used a portion of the  proceeds  from its  February  5, 1997  offering of
common stock to pre-pay  $70.0  million of the Parent Notes at a premium of $7.9
million. The amount outstanding at August 31, 1997 is $ 130.0 million.

     As of August 31,  1997,  outstanding  medium-term  notes issued by HomeSide
Lending under a  registration  statement  filed with the Securities and Exchange
Commission (SEC) were as follows (in thousands):

Issue Date        Outstanding Balance      Interest Rate       Maturity Date
------------      -------------------      -------------       -------------  
May 20, 1997           $250,000               6.890%           May 15, 2000
June 30, 1997          $200,000               6.883%           June 30, 2002
June 30, 1997          $ 40,000               6.820%           July  2, 2001
July  1, 1997          $ 15,000               6.860%           July  2, 2001
July 31, 1997          $200,000               6.818%           August 1, 2004
                       --------

     Total             $705,000
                       ========

     As of August 31, 1997, $650.0 million of the outstanding  medium-term notes
had been effectively converted by interest rate swap agreements to floating-rate
notes. The weighted  average  borrowing rates on medium-term note borrowings for
the three and six month periods  ended August 31, 1997,  including the effect of
the interest rate swap  agreements,  were 6.184% and 5.983%,  respectively.  Net
proceeds  from  the  issuances   were  primarily  used  to  reduce  the  amounts
outstanding  under  the  bank  credit   agreement.   Amounts  were  subsequently
reborrowed to fund an early pool buyout program,  which involves the purchase of
delinquent government loans from pools early in the foreclosure process, thereby
reducing  the  carrying  cost of  servicing  such loans.  As of August 31, 1997,
$295.0 million was available for future  issuances under the Shelf  Registration
Statement.

5.  EARLY POOL BUYOUT ADVANCES

     HomeSide  Lending  initiated an early pool buyout  program during the three
months  ended  August 31,  1997,  which  involves  the  purchase  of  delinquent
government loans from pools early in the foreclosure  process,  thereby reducing
the  unreimbursed  interest  expense that  HomeSide  Lending  incurs.  Scheduled
interest  payments  made to the  investor for  delinquent  loans are recorded as
early pool buyout advances with a reserve for advances which will not ultimately
be  collected.  The funding of the purchases of these  delinquent  loans for the
early pool buyout program is recorded as interest  expense,  and interest income
earned from the guarantor  agency during the  foreclosure  process is accrued to
match the funding expense incurred.



                                       6
<PAGE>
6.  COMMITMENTS AND CONTINGENCIES

     HomeSide  Lending  announced  in August an  agreement  with a  wholly-owned
subsidiary  of  Barnett,   whereby   Barnett  intends  to  transfer  its  broker
origination  operations outside of Florida and Georgia,  which operate under the
name Loan America,  to HomeSide in exchange for the exclusive right to refinance
mortgages  and  sell  mortgage-related  products  to  its  Florida  and  Georgia
customers  serviced by HomeSide.  If this agreement is  consummated,  management
believes that the impact on HomeSide will be immaterial.

     On August  29,  1997,  NationsBank  Corporation  and  Barnett  Banks,  Inc.
announced a definitive  agreement for  NationsBank  to merge the two  companies.
HomeSide's  management has not determined what impact,  if any, this merger will
have on HomeSide.

7.  SUBSEQUENT EVENTS

     On September  15, 1997,  an  additional  $45.0 million of 6.77% medium term
notes  maturing on September 17, 2001 were issued by HomeSide  Lending under the
Shelf  Registration  Statement.  Interest is payable  semiannually in arrears on
June 30 and  December 30 of each year,  commencing  on December  30,  1997.  Net
proceeds were used for working capital and general corporate purposes.


ITEM 2.  Management's Discussion and Analysis of Financial  Condition and
         Results of Operations

General

      HomeSide   Lending,   Inc.  (the  "Company")  and  collectively  with  its
consolidated  subsidiaries  ("HomeSide  Lending"),  the primary and wholly-owned
operating  subsidiary  of  the  Parent,  is  one of  the  largest  full  service
residential mortgage banking companies in the United States,  formed through the
acquisition of the mortgage  banking  operations of BankBoston,  N.A.,  formerly
known as The First  National  Bank of Boston  ("Bank of  Boston"),  and  Barnett
Banks, Inc.  ("Barnett").  HomeSide Lending's strategy  emphasizes variable cost
mortgage  origination and low cost  servicing.  Headquartered  in  Jacksonville,
Florida,  HomeSide  Lending  ranks  as the 5th  largest  originator  and the 7th
largest  servicer in the United States for calendar 1996 based on data published
by National Mortgage News.

       HomeSide Lending plans to build its core operations  through (i) improved
economies  of  scale in  servicing  costs;  (ii)  increased  productivity  using
proprietary  technology;  and  (iii)  expanded  and  diversified  variable  cost
origination channels. In addition, HomeSide Lending intends to pursue additional
loan portfolio  acquisitions and strategic origination  relationships similar to
the existing Bank of Boston and Barnett arrangements.

  Forward-Looking Statements

      The  Private  Securities  Litigation  Reform Act of 1995  provides a "safe
harbor" for certain  forward-looking  statements.  This Quarterly Report on Form
10-Q contains  forward-looking  statements  which reflect the Company's  current
views  with  respect  to  future   events  and  financial   performance.   These
forward-looking  statements  are  subject  to certain  risks and  uncertainties,
including  those  identified  below,  which could cause actual results to differ
materially from historical  results or those  anticipated.  The words "believe,"
"expect,"   "anticipate,"  "intend,"  "estimate"  and  other  expressions  which
indicated future events and trends identify  forward-looking  statements,  which
speak only as of their dates.  The Company  undertakes no obligation to publicly
update or  revise  any  forward-looking  statements  whether  as a result of new
information,  future  events or  otherwise.  The  following  factors could cause
actual  results  to  differ   materially  from   historical   results  or  those
anticipated:  (1) the Company's  ability to grow which depends on its ability to
obtain additional  financing in the future for originating loans,  investment in
servicing  rights,  working capital,  capital  expenditure and general corporate
purposes,   (2)  economic   downturns  may   negatively   affect  the  Company's
profitability  as the  frequency  of loan  default  tends  to  increase  in such
environments  and (3)  changes in  interest  rates may affect the volume of loan
originations and acquisitions,  the interest rate spread on loans held for sale,
the  amount of gain or loss on the sale of loans and the value of the  Company's
servicing  portfolio.  These risks and  uncertainties are more fully detailed in
the Company's filings with the Securities and Exchange Commission ("SEC").



                                       7
<PAGE>
   Loan Production Activities

      As a multi-channel loan production lender, HomeSide Lending has one of the
industry's largest correspondent lending production  operations,  a full-service
brokered  loan  program and a national  production  center for  consumer  direct
mortgage  lending.  By  focusing on  production  channels  with a variable  cost
structure,   HomeSide  Lending   eliminates  the  fixed  costs  associated  with
traditional  mortgage  branch  offices.  Without  the  burden of high fixed cost
origination  overhead,  HomeSide Lending is well positioned to weather a variety
of interest rate environments.

      The  following   information  regarding  loan  production  activities  for
HomeSide Lending is presented to aid in understanding  the results of operations
and  financial  condition of HomeSide  Lending for the three months ended August
31, 1997,  the three months ended August 31, 1996,  and for the six months ended
August  31,  1997 and the period  ended  March 16,  1996 to August 31,  1996 (in
millions):

<TABLE>
<CAPTION>

                                   For the Three      For the Three       For the Six     For the Period from
                                   Months Ended       Months Ended       Months Ended      March 16, 1996 to
                                  August 31, 1997    August 31, 1996    August 31, 1997     August 31, 1996
                                  ---------------    ---------------    ---------------     --------------- 
<S>                               <C>                <C>                <C>                 <C>
Correspondent                           $3,802             $2,950             $7,024              $4,843
Co-issue                                 1,486              2,208              2,677               3,627
Broker                                     307                155                696                 375
                                      ---------          ---------          ---------           ---------
Total wholesale                          5,595              5,313             10,397               8,845
Direct                                      75                179                144                 427
                                      ---------          ---------          ---------           ---------
Total production                         5,670              5,492             10,541               9,272
Bulk acquisitions                        1,480              4,073              1,981               4,073
                                      =========          =========          =========           =========
Total production and acquisitions       $7,150             $9,565            $12,522             $13,345
                                      =========          =========          =========           =========
</TABLE>


      Total loan production,  excluding bulk acquisitions,  was $5.7 billion for
the three months  ended  August 31, 1997  compared to $5.5 billion for the three
months ended August 31, 1996.  Loan  production  for the six months ended August
31, 1997,  excluding bulk acquisitions,  increased $1.2 billion to $10.5 billion
from $9.3  billion for the period from March 16,  1996 to August 31,  1996.  The
increases  were  primarily  due to growth in  HomeSide  Lending's  correspondent
lending channel,  which increased 29% to $3.8 billion for the three months ended
August 31, 1997 from $3.0  billion for the three  months  ended August 31, 1996,
and  increased 45% to $7.0 billion for the six months ended August 31, 1997 from
$4.8 billion for the period from March 16, 1996 to August 31, 1996. In addition,
the May 31,  1996  acquisition  of  Barnett  Mortgage  Company,  a  wholly-owned
subsiary of Barnett ("BMC") and the preferred partnership agreement with Barnett
under which all loans originated by Barnett are sold to HomeSide  contributed to
the growth in production for the six month period ended August 31, 1997 compared
to the period from March 16, 1996 to August 31, 1996. HomeSide Lending also made
bulk servicing acquisitions of $1.5 billion during the three months ended August
31, 1997 and $4.1 billion during the three months ended August 31, 1996.

      HomeSide  Lending  continues to examine a number of ways to diversify  and
grow revenue sources from its existing and new customer base.  HomeSide  Lending
is also nearing  completion of an alliance with a sub-prime  mortgage  lender to
create a B&C mortgage product line for HomeSide Lending's production network.

   Servicing Portfolio

      Management  believes  that HomeSide  Lending is one of the most  efficient
mortgage  servicers in the industry based on its servicing cost per loan and the
number of loans serviced per employee.  The servicing  operation makes extensive
use  of  state-of-the-art   technology,   process   re-engineering  and  expense
management. With a portfolio size of over $95 billion, HomeSide Lending services
the loans of over one million  homeowners  from across the United  States and is
committed to protecting  the value of this  important  asset by a  sophisticated
risk management strategy. HomeSide Lending anticipates its low cost of servicing
loans will continue to maximize the bottom-line  impact of its growing servicing
portfolio.  HomeSide  Lending's  focus on  efficient  and low cost  processes is
pursued  through  the  selective  use of  automation  as well  as the  strategic
outsourcing   of  selected   servicing   functions  and  effective   control  of
delinquencies  and  foreclosures.  Following  a  national  and  seasonal  trend,
delinquencies and foreclosure  expenses  increased during the three months ended
August 31,  1997;  however,  the direct  servicing  cost-per-loan  continued  to
decline during this period.



                                       8
<PAGE>
      The  following  information  on the dollar  amounts of loans  serviced  is
presented  to aid in  understanding  the  results of  operations  and  financial
condition  of HomeSide  Lending for the three months and six months ended August
31, 1997,  the three months ended August 31, 1996, and for the period from March
16, 1996 to August 31, 1996 (in millions):

<TABLE>
<CAPTION>

                                          For the Three        For the Three       For the Six         For the Period from
                                          Months Ended         Months Ended        Months Ended         March 16, 1996 to
                                         August 31, 1997      August 31, 1996     August 31, 1997        August 31, 1996
                                         ---------------      ---------------     ---------------        ---------------  
<S>                                      <C>                  <C>                 <C>                    <C>
Balance at beginning of period               $91,469               $77,351               $89,218               $41,844
Acquisition of BMC                               --                    --                    --                 33,082
Other additions                                7,150                 9,842                12,522                13,944
                                         ------------          ------------          ------------          ------------
     Total additions                           7,150                 9,842                12,522                47,026
                                         ------------          ------------          ------------          ------------
Scheduled amortization                           533                   470                 1,064                   682
Prepayments                                    2,508                 1,702                 4,846                 3,023
Foreclosures                                     141                   137                   312                   267
Sales of servicing                                 8                    65                    89                    79
                                         ------------          ------------          ------------          ------------
     Total reductions                          3,190                 2,374                 6,311                 4,051
                                         ============          ============          ============          ============
Balance at end of period                     $95,429               $84,819               $95,429               $84,819
                                         ============          ============          ============          ============
</TABLE>


     The number of loans serviced at August 31, 1997 was 1,138,329,  compared to
1,041,000  at August  31,  1996.  HomeSide  Lending's  strategy  is to build its
mortgage servicing  portfolio by concentrating on variable cost loan origination
strategies,  and as a result, benefit from improved economies of scale. A key to
HomeSide Lending's future growth is the proprietary servicing software purchased
from Barnett.  This system will allow  HomeSide to double its current  servicing
capacity on a single system.  During the next quarter,  HomeSide Lending expects
to transfer  approximately  one-third of the loans to its proprietary  servicing
software.  Once the initial  transfer is  complete,  over half of the  servicing
portfolio will be serviced on the proprietary system.

Results of Operations

Three  months  ended  August 31, 1997  compared to three months ended August 31,
1996

   Summary

      HomeSide Lending's net income increased 65% to $22.5 million for the three
months  ended  August 31,  1997 from $13.6  million for the three  months  ended
August 31,  1996.  Total  revenues  for the three  months  ended August 31, 1997
increased  20% to $76.3  million  from $63.6  million for the three months ended
August 31, 1996.  The  increases in net income and revenues for the three months
ended  August 31, 1997  compared to the three  months ended August 31, 1996 were
primarily  attributable  to increases of $6.3 million in net servicing  revenue,
$4.3  million  in net  mortgage  origination  revenue,  and $2.2  million in net
interest revenue,  while total expenses decreased by $1.1 million.  The increase
in net servicing  revenue was mainly a result of a $10.6 billion increase in the
servicing  portfolio to $95.4  billion at August 31, 1997 from $84.8  billion at
August  31,  1996.  Net  mortgage  origination  revenue  increased  due to  loan
production volume increases while mortgage origination expenses decreased mainly
as a result of the integration of the BMC mortgage servicing operations acquired
on May 31, 1996. Net interest revenue increased primarily as a result of reduced
borrowing  costs from the bank line of credit from improved  credit  ratings and
the issuance of medium-term notes which expanded borrowing capacity.

    Net Servicing Revenue

      Net servicing  revenue was $48.7 million for the three months ended August
31, 1997  compared to $42.4  million for the three months ended August 31, 1996.
Net  servicing  revenue is  comprised  of  mortgage  servicing  fees,  ancillary
servicing revenue, and amortization of mortgage servicing rights.

      Mortgage  servicing  fees  increased  25% to $102.5  million for the three
months  ended  August 31,  1997 from $82.2  million for the three  months  ended
August 31,  1996,  primarily  as a result of growth of the  servicing  portfolio
through loan production channels and bulk servicing acquisitions.  The servicing
portfolio  increased  to $95.4  billion at August  31,  1997  compared  to $84.8
billion at August 31, 1996, a 13% increase.  HomeSide Lending's weighted average
interest  rate of the mortgage  loans in the  servicing  portfolio  was 7.89% at
August 31, 1997 and 7.92% August 31, 1996. The weighted  average  servicing fee,
including  ancillary income,  for the servicing  portfolio was 0.436% and 0.405%
for the three months ended August 31, 1997 and the three months ended August 31,
1996, respectively.  The increase in the weighted average servicing fee from the
three months ended August 31, 1997 to the three months ended August 31, 1996 was
due  to   growth  of   ancillary   revenues   including   late  fees  and  other
mortgage-related  products and higher  proportions of government  loans serviced
which  typically  have a higher  servicing  fee.  During the three  months ended
August 31, 1997, HomeSide Lending entered into an agreement with First USA Bank,
one of the nation's  leading  credit card  issuers,  which  permits first USA to
market a HomeSide Visa card to HomeSide  Lending  customers for a non-refundable
fee.  Amortization expense increased to $53.8 million for the three months ended
August 31, 1997 from $39.8  million for the three  months  ended August 31, 1996
mainly as a result of a higher average balance of mortgage  servicing rights and
a decrease of 56 basis points in average mortgage  interest rates from the three
months ended August 31, 1996 to the three months ended August 31, 1997.



                                       9
<PAGE>
   Net Interest Revenue

      Net  interest  revenue  is  driven  by the level of  interest  rates,  the
direction in which rates are moving and the spread  between  short and long-term
interest rates.  These factors  influence the size of the  residential  mortgage
origination market,  HomeSide Lending's loan production volumes and the interest
rates HomeSide Lending earns on loans and pays to its lenders.

      Loan refinancing levels are the largest contributor to changes in the size
of the mortgage  origination market. To reduce the cost of their home mortgages,
borrowers  tend to refinance  their loans during  periods of declining  interest
rates, increasing the size of the origination market and HomeSide Lending's loan
production  volumes.  Higher loan  production  volumes  result in higher average
balances  of loans  held for sale and  consequently  higher  levels of  interest
income from interest earned on such loans prior to their sale. This higher level
of interest  income due to increased  volumes is  partially  offset by the lower
rates earned on the loans.

      Overall  borrowing  costs also fluctuate  with changes in interest  rates.
Currently,  the interest expense HomeSide Lending pays to finance mortgage loans
held for sale and other net assets is  generally  calculated  with  reference to
short-term  interest  rates. In addition,  because  mortgage loans held for sale
earn  interest  based on longer term interest  rates,  the level of net interest
revenue  is also  influenced  by the spread  between  long-term  and  short-term
interest rates.

      Net interest revenue  increased $2.2 million to $6.8 million for the three
months ended August 31, 1997 from $4.6 million for the three months ended August
31, 1996,  primarily due to improved  funding rates  obtained  through  improved
credit ratings, the issue of medium-term notes and the adoption of an early pool
buyout program.  During the three months ended August 31, 1997, HomeSide Lending
issued $455 million of medium-term notes to the public market at an average cost
of 5.932% as of August 31,  1997.  The proceeds  were used to pay down  existing
bank debt,  increasing  HomeSide's  borrowing capacity.  An immediate benefit of
this  increased  borrowing  capacity was the  initiation of an early pool buyout
program,  which involves the purchase of delinquent  government loans from pools
early in the foreclosure  process,  thereby reducing the  unreimbursed  interest
expense that HomeSide incurs.

Net Mortgage Origination Revenue

      Net  mortgage  origination  revenue  is  comprised  of fees  earned on the
origination of mortgage loans,  gains and losses on the sale of loans, gains and
losses resulting from hedging of secondary marketing activities and fees charged
to review loan documents for purchased loan production.

      Net mortgage  origination  revenue was $20.6  million for the three months
ended  August 31, 1997  compared to $16.3  million  for the three  months  ended
August 31,  1996,  a 26%  increase.  The  increase in net  mortgage  origination
revenue  during the three  months ended August 31, 1997 as compared to the three
months ended August 31, 1996  reflects an increase in loan  production  volumes,
primarily  through HomeSide  Lending's  correspondent  lending  channel,  and an
increase in gains from secondary marketing activities.

   Salaries and Employee Benefits

      Salaries and  employee  benefits  expense was $19.5  million for the three
months  ended  August 31, 1997  compared to $21.2  million for the three  months
ended  August  31,  1996  due  to the  continuing  integration  of BMC  mortgage
servicing  operations  acquired on May 31, 1996. The average number of full-time
equivalent  employees  decreased  to 1,734 for the three months ended August 31,
1997 from 1,879 for the three months ended August 31, 1996.

   Occupancy and Equipment Expense

      Occupancy and equipment expense primarily includes rental expense, repairs
and maintenance  costs,  certain computer  software expenses and depreciation of
HomeSide Lending's  premises and equipment.  Occupancy and equipment expense for
the three months ended August 31, 1997 was $3.8 million compared to $3.1 million
for the three months  ended August 31, 1996.  The increase in expense was mainly
due to the increase in information  systems costs required to handle the growing
mortgage servicing portfolio.



                                       10
<PAGE>
   Servicing Losses on Investor-Owned Loans and Foreclosure-related Expenses

      Servicing  losses on  investor-owned  loans represent  anticipated  losses
primarily  attributable  to  servicing  FHA and VA loans  for  investors.  These
amounts   include   actual   losses   for  the  final   disposition   of  loans,
non-recoverable  foreclosure costs,  accrued interest for which payment has been
curtailed  and  estimates  for  potential  losses  based on  HomeSide  Lending's
experience as a servicer of government loans.

      During the three months ended August 31,  1997,  the  servicing  losses on
investor-owned  loans and  foreclosure-related  expenses  totaled  $5.8  million
compared  to $4.1  million  for the three  months  ended  August 31,  1996.  The
increase  was  largely  attributable  to the growth of the  servicing  portfolio
resulting  from loan  production  and increased  foreclosure  losses,  which are
likely to continue at this level as the servicing portfolio ages.

      Included  in the balance of accounts  payable and accrued  liabilities  at
August 31, 1997 is a reserve for estimated  servicing  losses on  investor-owned
loans of $21.7 million.  The reserve has been  established for potential  losses
related to the  mortgage  servicing  portfolio.  Increases  to the  reserve  are
charged to earnings as servicing losses on investor-owned  loans. The reserve is
decreased  for  actual  losses  incurred  related  to  the  mortgage   servicing
portfolio.  HomeSide Lending's  historical loss experience on VA loans generally
has been consistent with industry experience.  Management believes that HomeSide
has  an  adequate  level  of  reserve  based  on  servicing  volume,   portfolio
composition,  credit  quality and  historical  loss rates,  as well as estimated
future losses.

The  following   table  sets  forth   HomeSide's   delinquency  and  foreclosure
experience:

                        Servicing Portfolio Delinquencies
                             (percent by loan count)


                                                 For the Three   from March 16, 
                                                 Months Ended        1996 to 
                                                August 31, 1997  August 31, 1996
                                                ---------------  ---------------
Servicing Portfolio Delinquencies, excluding    
  bankruptcies (at end of period)
          30 days                                    3.45%            3.08%
          60 days                                    0.73%            0.64%
          90+ days                                   0.55%            0.48%
                                                ---------------  ---------------
               Total past due                        4.73%            4.20%
                                                ===============  ===============
          Foreclosures pending                       0.70%            0.66%
                                                ===============  ===============



   Other Expenses

      Other  expenses  consist  mainly  of  professional  fees,   communications
expense,  advertising and public relations, data processing expenses and certain
loan origination expenses.  The level of other expenses fluctuates in part based
upon the level of  HomeSide  Lending's  mortgage  servicing  portfolio  and loan
production volumes.

      Other  expenses  during the three  months ended August 31, 1997 were $10.3
million  compared to $12.2  million for the three  months ended August 31, 1996,
primarily  due to the  continuing  integration  of the  BMC  mortgage  servicing
operations acquired on May 31, 1996.

   Income Tax Expense

      HomeSide  Lending's  income tax  expense  was $14.4  million for the three
months  ended August 31, 1997 and $9.5 million for the three months ended August
31, 1996.  The effective  income tax rates for the three months ended August 31,
1997 and the three months ended August 31, 1996 were  approximately 39% and 41%,
respectively.



                                       11
<PAGE>
Results of Operations

Six months  ended  August 31,  1997  compared  to period  from March 16, 1996 to
August 31, 1996

   Summary

      HomeSide  Lending's net income  increased 98% to $42.8 million for the six
months  ended  August 31, 1997 from $21.6  million for the period from March 16,
1996 to August 31, 1996. Total revenues for the six months ended August 31, 1997
increased 48% to $147.1 million from $99.7 million for the period from March 16,
1996 to August 31,  1996.  The  increases in net income and revenues for the six
months  ended  August 31,  1997  compared  to the period  from March 16, 1996 to
August 31, 1996 were primarily attributable to the acquisition of BMC on May 31,
1996 and increases of $32.0 million in net servicing  revenue,  $11.4 million in
net mortgage  origination revenue, and $3.3 million in net interest revenue. The
BMC servicing  portfolio  was $33.1 billion at May 31, 1996 and its  acquisition
increased HomeSide Lending's  servicing portfolio by 75% on that date, which was
a major factor in the increase in net servicing revenue. In addition, subsequent
increases in the size of the servicing  portfolio  contributed  to the increased
revenue.  The servicing  portfolio increased to $95.4 billion at August 31, 1997
from $84.8  billion  at August  31,  1996,  a 13%  increase.  As part of the BMC
acquisition,  Barnett agreed to sell HomeSide  Lending the loans produced by the
loan production networks retained by Barnett,  which contributed to the increase
in net mortgage origination revenue. Net interest revenue increased primarily as
a result of reduced  borrowing  costs from the bank line of credit from improved
credit  ratings and the issuance of medium-term  notes which expanded  borrowing
capacity.

    Net Servicing Revenue

      Net  servicing  revenue was $99.5  million for the six months ended August
31, 1997  compared to $67.5 million for the period from March 16, 1996 to August
31,  1996.  Net  servicing  revenue is  comprised  of mortgage  servicing  fees,
ancillary  servicing  revenue,  and  amortization of mortgage  servicing  rights
expense.

      Mortgage servicing fees increased 62% to $200.8 million for the six months
ended August 31, 1997 from $123.7  million for the period from March 16, 1996 to
August 31, 1996,  primarily as a result of the BMC acquisition and growth of the
servicing   portfolio  through  loan  production  channels  and  bulk  servicing
acquisitions.  The servicing  portfolio increased to $95.4 billion at August 31,
1997 compared to $84.8 billion at August 31, 1996.  HomeSide  Lending's weighted
average interest rate of the mortgage loans in the servicing portfolio was 7.89%
at August 31, 1997 and 7.92% August 31, 1996.  The  weighted  average  servicing
fee,  including  ancillary  income,  for the servicing  portfolio was 0.436% and
0.429% for the six months  ended  August 31,  1997 and the period from March 16,
1996 to August 31, 1996,  respectively.  The  increase in the  weighted  average
servicing  fee for the six months  ended  August 31,  1997 from the period  from
March 16,  1996 to August  31,  1996 was due to  growth  of  ancillary  revenues
including  late fees and  revenues  from other  mortgage-related  products,  and
higher  proportions of government  loans serviced which  typically have a higher
servicing  fee.  Amortization  expense  increased to $101.3  million for the six
months  ended  August 31, 1997 from $56.2  million for the period from March 16,
1996 to  August  31,  1996  mainly as a result of a higher  average  balance  of
mortgage  servicing rights and a decrease of 26 basis points in average mortgage
interest rates from the period from March 16, 1996 to August 31, 1996 to the six
months ended August 31, 1997.

 Net Interest Revenue

      Net  interest  revenue  is  driven  by the level of  interest  rates,  the
direction in which rates are moving and the spread  between  short and long-term
interest rates.  These factors  influence the size of the  residential  mortgage
origination market,  HomeSide Lending's loan production volumes and the interest
rates HomeSide Lending earns on loans and pays to its lenders.

      Loan refinancing levels are the largest contributor to changes in the size
of the mortgage  origination market. To reduce the cost of their home mortgages,
borrowers  tend to refinance  their loans during  periods of declining  interest
rates, increasing the size of the origination market and HomeSide Lending's loan
production  volumes.  Higher loan  production  volumes  result in higher average
balances  of loans  held for sale and  consequently  higher  levels of  interest
income from interest earned on such loans prior to their sale. This higher level
of interest  income due to increased  volumes is  partially  offset by the lower
rates earned on the loans.

      Overall  borrowing  costs also fluctuate  with changes in interest  rates.
Currently,  the interest expense HomeSide Lending pays to finance mortgage loans
held for sale and other net assets is  generally  calculated  with  reference to
short-term  interest  rates. In addition,  because  mortgage loans held for sale
earn  interest  based on longer term interest  rates,  the level of net interest
revenue  is also  influenced  by the spread  between  long-term  and  short-term
interest rates.



                                       12
<PAGE>
      Net  interest  revenue  increased  $3.3  million for the six months  ended
August 31, 1997 to $8.0  million from $4.7 million for the period from March 16,
1996 to August 31,  1996,  primarily  due to  improved  funding  rates  obtained
through improved credit ratings, the issue of medium-term notes and the adoption
of an early pool buyout  program.  During the six months  ended August 31, 1997,
HomeSide  Lending issued $705 million of medium-term  notes to the public market
at an average  cost of 5.953% as of August 31, 1997.  The proceeds  were used to
pay down existing bank debt,  increasing  HomeSide Lending's borrowing capacity.
An immediate benefit of this increased  borrowing capacity was the initiation of
an early  pool  buyout  program,  which  involves  the  purchase  of  delinquent
government loans from pools early in the foreclosure  process,  thereby reducing
the unreimbursed interest expense that HomeSide Lending incurs.

   Net Mortgage Origination Revenue

      Net  mortgage  origination  revenue  is  comprised  of fees  earned on the
origination of mortgage loans,  gains and losses on the sale of loans, gains and
losses resulting from hedging of secondary marketing activities and fees charged
to review loan documents for purchased loan production.

      Net  mortgage  origination  revenue  was $38.5  million for the six months
ended  August 31, 1997  compared to $27.1  million for the period from March 16,
1996  to  August  31,  1996,  a 42%  increase.  The  increase  in  net  mortgage
origination  revenue  during the six months ended August 31, 1997 as compared to
the period from March 16,  1996 to August 31,  1996 is due in part to  increased
production  resulting  from  the  preferred  seller  relationship  with  Barnett
established  as part of the BMC  acquisition.  Barnett  agreed to sell  HomeSide
Lending loans produced by the loan production networks retained by Barnett.  The
increase also reflects an increase in loan production  volumes primarily through
HomeSide Lending's  correspondent  lending channel and an increase in gains from
secondary marketing activities.

   Salaries and Employee Benefits

      Salaries  and  employee  benefits  expense  was $39.3  million for the six
months ended August 31, 1997 compared to $32.7 million for the period from March
16, 1996 to August 31, 1996 due to the  purchase of the BMC  mortgage  servicing
operations acquired on May 31, 1996. The average number of full-time  equivalent
employees decreased to 1,734 for the six months ended August 31, 1997 from 1,879
for the period from March 16, 1996 to August 31, 1996.

   Occupancy and Equipment Expense

      Occupancy and equipment expense primarily includes rental expense, repairs
and maintenance  costs,  certain computer  software expenses and depreciation of
HomeSide Lending's  premises and equipment.  Occupancy and equipment expense for
the six months ended  August 31, 1997 was $7.6 million  compared to $4.9 million
for the period from March 16, 1996 to August 31,  1996.  The increase in expense
was mainly due to the premises and equipment acquired in the BMC acquisition and
an increase in information systems costs required to handle the growing mortgage
servicing portfolio.

   Servicing Losses on Investor-Owned Loans and Foreclosure-related Expenses

      Servicing  losses on  investor-owned  loans represent  anticipated  losses
primarily  attributable  to  servicing  FHA and VA loans  for  investors.  These
amounts  include actual losses for final  disposition of loans,  non-recoverable
foreclosure  costs,  accrued  interest  for which  payment  has been  denied and
estimates  for  potential  losses based on HomeSide  Lending's  experience  as a
servicer of government loans.

      During the six months  ended  August 31,  1997,  the  servicing  losses on
investor-owned  loans and  foreclosure-related  expenses  totaled  $10.5 million
compared to $8.0  million for the period from March 16, 1996 to August 31, 1996.
The increase was largely  attributable to the growth of the servicing  portfolio
resulting  from loan  production  and increased  foreclosure  losses,  which are
likely to continue at this level as the servicing portfolio ages.

      Included  in the balance of accounts  payable and accrued  liabilities  at
August 31, 1997 is a reserve for estimated  servicing  losses on  investor-owned
loans of $21.7 million.  The reserve has been  established for potential  losses
related to the  mortgage  servicing  portfolio.  Increases  to the  reserve  are
charged to earnings as servicing losses on investor-owned  loans. The reserve is
decreased  for  actual  losses  incurred  related  to  the  mortgage   servicing
portfolio.  HomeSide Lending's  historical loss experience on VA loans generally
has been consistent with industry experience.  Management believes that HomeSide
has  an  adequate  level  of  reserve  based  on  servicing  volume,   portfolio
composition,  credit  quality and  historical  loss rates,  as well as estimated
future losses.




                                       13
<PAGE>
The  following   table  sets  forth   HomeSide's   delinquency  and  foreclosure
experience:

                        Servicing Portfolio Delinquencies
                             (percent by loan count)

                                                                 For the Period
                                                For the Six      from March 16, 
                                               Months Ended         1996 to 
                                              August 31, 1997    August 31, 1996
                                              ---------------    ---------------
Servicing Portfolio Delinquencies, excluding
  bankruptcies (at end of period)
          30 days                                  3.45%             3.08%
          60 days                                  0.73%             0.64%
          90+ days                                 0.55%             0.48%
                                              ===============   ================
               Total past due                      4.73%             4.20%
                                              ===============   ================
          Foreclosures pending                     0.70%             0.66%
                                              ===============   ================


   Other Expenses

      Other  expenses  consist  mainly  of  professional  fees,   communications
expense,  advertising and public relations, data processing expenses and certain
loan origination expenses.  The level of other expenses fluctuates in part based
upon the level of  HomeSide  Lending's  mortgage  servicing  portfolio  and loan
production volumes.

      Other  expenses  during the six months  ended  August 31,  1997 were $19.5
million  compared to $17.5  million for the period from March 16, 1996 to August
31,  1996,  primarily  due to the  acquisition  of the  BMC  mortgage  servicing
operations on May 31, 1996.

   Income Tax Expense

      HomeSide Lending's income tax expense was $27.4 million for the six months
ended  August 31,  1997 and $15.0  million for the period from March 16, 1996 to
August 31, 1996. The increases were attributable to increases in net income. The
effective  income tax rates for the six  months  ended  August 31,  1997 and the
period from March 16, 1996 to August 31,  1996 were  approximately  39% and 41%,
respectively.

Risk Management Activities

      HomeSide  Lending has a risk  management  program  designed to protect the
economic value of its mortgage servicing portfolio from declines in value due to
increases in estimated loan prepayment speeds, which are primarily influenced by
declines in interest rates. When loans prepay faster than anticipated,  the cash
flow HomeSide  Lending  expects to receive from servicing such loans is reduced.
The value of mortgage servicing rights is based on the present value of the cash
flows to be received over the life of the loans and therefore,  the value of the
servicing portfolio declines as prepayments increase.

      Since its  formation,  HomeSide  Lending  has  purchased  options  on U.S.
Treasury  bond futures to protect a  significant  portion of the market value of
its mortgage  servicing  portfolio from a decline in value. The option contracts
used by HomeSide Lending have characteristics such that they tend to increase in
value as interest  rates  decline.  Conversely,  these option  contracts tend to
decline in value as interest rates rise. Accordingly,  changes in value of these
securities  will  tend to move  inversely  with  changes  in value  of  HomeSide
Lending's mortgage servicing rights.

      These option  contracts are  designated as hedges on the purchase date and
such  designation  is at a level  at  least as  specific  as the  level at which
mortgage servicing rights are evaluated for impairment. The option contracts are
marked-to-market  with changes in market value  deferred as an adjustment to the
carrying  value of the related  mortgage  servicing  right  asset being  hedged.
Changes in market  value that are  deferred  are  amortized  and  evaluated  for
impairment  in the same manner as the related  mortgage  servicing  rights.  The
effectiveness  of HomeSide  Lending's  hedging  activity  can be measured by the
correlation between changes in the value of the options and changes in the value
of HomeSide Lending's mortgage servicing rights. This correlation is assessed on
a quarterly basis to ensure that high correlation is maintained over the term of
the hedging program. During each of the periods presented,  HomeSide Lending has
experienced  a high  measure  of  correlation  between  changes  in the value of
mortgage  servicing  rights and the  option  contracts.  However,  in periods of
rising interest rates,  the increase in value of mortgage  servicing  rights may
outpace  the  decline in value of the option  contracts  because the loss on the
options is limited to the premium paid.



                                       14
<PAGE>
         The  option-based  hedge strategy  designed to protect the value of the
servicing  asset  continued to perform as expected during the three months ended
August 31, 1997 and proved especially effective as long-term rates reached their
lowest level since November of 1996. For the three months ended August 31, 1997,
the value of the hedge was largely unchanged as HomeSide incurred losses on risk
management  contracts of $0.2 million.  During the three months ended August 31,
1996,  the loss on risk  management  contracts  was $42.1  million.  For the six
months  ended  August 31,  1997 and the period from March 16, 1996 to August 31,
1996, HomeSide incurred losses of $52.6 million and $74.7 million, respectively.
The  increase  in the  estimated  fair value of the  mortgage  servicing  rights
approximated  the net losses on risk  management  contracts  for these  periods.
HomeSide's  future  cash needs as they  relate to its  hedging  program  will be
influenced by such factors as long-term  interest rates,  loan production levels
and  growth in the  mortgage  servicing  portfolio.  The fair value of open risk
management  contracts at August 31, 1997 was $73.6  million,  which was equal to
their carrying amount because the options are marked-to-market at each reporting
date.


Liquidity and Capital Resources

      The  Company's  principal  financing  needs  are  the  financing  of  loan
origination  activities  and the investment in servicing  rights.  To meet these
needs, the Company currently  utilizes funding from an independent  syndicate of
banks,  including a warehouse credit facility and a servicing-related  facility,
medium-term  notes, and cash flow from operations.  In the past, the Company has
also utilized short-term credit facilities and public offerings of common stock.
HomeSide   Lending   continues  to  investigate   and  pursue   alternative  and
supplementary  methods to finance its growing  operations through the public and
private  capital  markets.  These may  include  methods  designed  to expand the
Company's  financial  capacity and reduce its cost of capital.  In addition,  to
facilitate the sale and  distribution  of certain  mortgage  products,  HomeSide
Mortgage Securities,  Inc., a wholly owned subsidiary of HomeSide Lending, Inc.,
may issue mortgage backed securities.

   Operations

      Net cash used in  operations  was $80.8  million for the six months  ended
August 31,  1997.  Proceeds  from the  issuance  of the  medium-term  notes were
primarily used to fund loan originations. These uses of cash were offset by cash
provided from servicing fee income,  loan sales and principal  repayments.  Cash
flows from loan originations are dependent upon current economic  conditions and
the level of long-term  interest  rates.  Higher cash demands to meet  increased
loan production levels are primarily met through borrowings and loan sales.

    Investing

      Net cash used in  investing  activities  was  $712.8  million  for the six
months ended August 31, 1997.  Cash used in investing  activities  was primarily
used for the purchase and origination of mortgage servicing rights, the purchase
of options of U.S.  Treasury bond futures as part of HomeSide  Lending's hedging
program,  and the funding of the early pool buyout program.  Future uses of cash
for investing  activities will be dependent on the mortgage  origination  market
and HomeSide  Lending's hedging needs.  HomeSide Lending is not able to estimate
the timing and amount of cash uses for  future  acquisitions  of other  mortgage
banking entities, if such acquisitions were to occur.

   Financing

      Net cash provided by financing  activities  was $741.0 million for the six
months  ended  August  31,  1997.  The  primary  source of cash  from  financing
activities during the period was $705.0 million from the issuance of medium-term
notes and net borrowings  from HomeSide  Lending's line of credit.  Cash used in
financing activities was used for the payment of debt issue costs.

      During the six months ended August 31, 1997,  net cash used in  operations
was $80.8 million,  net cash used in investing activities was $712.8 million and
net cash provided by financing activities was $741.0 million, resulting in a net
decrease in cash of $52.7 million.  HomeSide  Lending expects that to the extent
cash generated from operations is inadequate to meet its liquidity needs,  those
needs can be met  through  financing  from its bank  credit  facility  and other
facilities  which may be  entered  into  from time to time,  as well as from the
issuance of debt securities in the public markets. Accordingly, HomeSide Lending
does not currently anticipate that it will make sales of servicing rights to any
significant degree for the purpose of generating cash. Nevertheless, in addition
to its cash and  mortgage  loans  held for  sale  balances,  HomeSide  Lending's
portfolio of mortgage  servicing  rights provides a potential source of funds to
meet liquidity requirements, especially in periods of rising interest rates when
loan origination volume slows. Repurchase agreements also provide an alternative
to the bank line of credit for  mortgages  held for sale.  Future cash needs are
highly  dependent on future loan  production  and servicing  results,  which are
influenced by changes in long-term interest rates.



                                       15
<PAGE>
                           PART II - OTHER INFORMATION

ITEM 1.  Legal Proceedings

      HomeSide Lending is a defendant in a number of legal  proceedings  arising
in the normal course of business.  HomeSide Lending, in management's estimation,
has  recorded  adequate  reserves  in  the  financial   statements  for  pending
litigation.  Management,  after  reviewing all actions and  proceedings  pending
against or involving HomeSide Lending, considers that the aggregate liability or
loss, if any,  resulting  from the final outcome of these  proceedings  will not
have a material effect on the financial position of HomeSide Lending.

      In recent years,  the mortgage  banking industry has been subject to class
action  lawsuits  which  allege   violations  of  federal  and  state  laws  and
regulations,  including the propriety of collecting  and paying various fees and
charges.  Class action  lawsuits may be filed in the future against the mortgage
banking industry.


ITEM 6.  Exhibits and Reports on Form 8-K

    (a) The following documents are filed as a part of this Report:

              Number       Description
                  12       Computation of Ratio of Earnings to Fixed Charges
                  27       Financial Data Schedule


      (b)   Reports on form 8-K

          HomeSide  Lending filed no reports on form 8-K during the three months
ended August 31, 1997.






                                   SIGNATURES

    Pursuant to the  requirements  of the  Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                        HomeSide Lending, Inc.
                                        (Registrant)

Date: October 10, 1997                  By:   /s/Joe K. Pickett
                                              -----------------  
                                                Joe K. Pickett
                                        Chairman and Chief Executive Officer


Date: October 10, 1997                   By:  /s/Kevin D. Race 
                                             -----------------
                                               Kevin D. Race
                                        Executive Vice President,
                                        Chief Financial and Accounting Officer